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Many of our competitors are reducing or eliminating their supermar- ket branch networks. However, it is clear to us that we have a winning supermarket banking strategy and it is a major factor in making TCF the most convenient bank in our markets. We plan to open approximately six new supermarket branches in 2003 and more in the future. 

TCF competes against financial institutions that are, in many cases, much larger and have far greater resources. This has both good and bad ramifications. The consolidation that we’ve seen in the banking industry has in many cases created huge, lethargic organizations that cannot react quickly to changing competition. On the other hand, when you walk with elephants, you sometimes get stepped on. 

We are competing in an industry that in many cases is still in a consol- idation cost-take-out mode, a strategy that over time has proven to decrease customer service and slow down revenue growth. However, we have recently seen some banks come to realize the value of top-line revenue growth and core earnings, and we believe they may become more competitive in the future. Several of our large competitors have announced plans for future de novo branch expansion. In order to succeed, TCF must be swifter than they are to create, design and implement innovative and customized prod- ucts. We must continue to focus on giving great, convenient service. Our basic philosophy of banking has not changed. We must continue planting seeds for the future by finding and nurturing good management and staff, and grow by taking reasonable and measured risks in the process. 

TCF has been very successful over the past fifteen years of extensive change in the banking industry, and in a strong U.S. economy. We are still in an economic slowdown with very low interest rates. These very low interest rates had a major impact on TCF in 2002. Low rates caused increased prepayments on loans and mortgage-backed securities and accel- erated the write-off of mortgage servicing rights. Many banks are report- ing “restructuring charges” resulting from increased loan charge-offs or other losses. We believe that we are more insulated from these risks than most of the industry, but we are not immune. 

