Nebraska-based TierOne Bank holding company says it needs investor, buyer or merger partner

TierOne seeks investor, buyer or merger partner

OMAHA, Neb. — Federal regulators have rejected a plan Nebraska’s TierOne Bank submitted to improve its balance sheet and ordered the bank to find an investor, buyer or merger partner by the end of April.

TierOne Corp. has been under strict scrutiny from the federal Office of Thrift Supervision since early 2009, after the bank reported four straight quarters of losses due to non-performing loans.

TierOne said in a statement Tuesday it must submit an agreement to improve its capital position to regulators by the end of April, and that the bank must receive an infusion of funds by the end of May, unless regulators extend the deadlines.

TierOne spokesman Ed Swotek said Wednesday that five members of the company’s nine-member board resigned after the board approved the latest agreement with regulators on Tuesday.

Michael Falbo, who was named TierOne’s chairman and chief executive in late January, was among those who resigned, along with his predecessor, Gil Lundstrom, who had been with TierOne since 1994.

The Lincoln, Neb.-based bank said Charles Hoskins was named acting board chairman and that James Laphen was named president and acting CEO. Besides Hoskins and Laphen, only two other TierOne board members remained in place.

As of Wednesday morning, regulators had not posted a copy of the new TierOne enforcement action on the Office of Thrift Supervision Web site.

TierOne tried to sell itself three years ago to commercial lender CapitalSource Inc., but that deal fell apart in 2008 after turmoil in the credit markets and regulatory delays. Falling stock prices trimmed the value from $652 million when it was announced to $322 million when TierOne’s parent company backed out of the deal.

TierOne’s troubles are primarily related to nonperforming loans generated by nine loan offices in other states that TierOne closed in 2008. Those offices were in states — including Arizona, Florida and Nevada — where foreclosure rates on subprime loans have been high.

Last fall, TierOne agreed to sell 32 of its 69 bank branches to Sioux Falls, S.D.-based Great Western Bank to help raise capital. It was not clear whether that sale, which was expected to close in the first quarter of 2010, would go through.

Swotek said the banks were still waiting for regulatory approval of the Great Western deal.

Officials at Great Western did not immediately respond to a message left Wednesday morning.

In early 2009, TierOne signed an agreement with regulators that restricted certain activities and required the bank to keep more capital on hand than is typically required for similar thrifts.

Regulators became concerned about TierOne after the bank reported four consecutive quarters of losses totaling $98.5 million from late 2007 into 2008.

Through the first six months of 2009, TierOne reported a $25.9 million net loss, or $1.53 per share, but the bank has said it plans to amend its second-quarter report because regulators directed TierOne to increase its loan loss provisions.

TierOne has not submitted financial reports for the third or fourth quarters of 2009, but the bank said in a regulatory filing in February that at the end of December it had less than half the capital regulators require.

TierOne is a federally chartered savings bank that holds about $2.9 billion in assets.

On the Net:

TierOne Corp.: www.tieronebank.com