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The following table summarizes the prepayment speed assumptions used in the estimation of fair value of mortgage servicing rights as of December 31, 2002 and 2001: 

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A key component in determining the fair value of mortgage servicing rights is the projected cash flows of the underlying loan portfolio. TCF uses projected cash flows and related prepayment assumptions based on management’s best estimate for the estimated life of the loans. The range in prepayment assumptions at December 31, 2002 reflects management’s assumption of higher initial prepayments that decline over time and level off to a constant prepayment speed. The table above summarizes, by interest rate tranche, the range of prepayment speed assump- tions and also includes the weighted average remaining life of the loans by tranche. In 2001, TCF used constant prepayment speed assumptions. 

At December 31, 2002, the sensitivity of the fair value of mortgage servicing rights to a hypothetical immediate 10% and 25% adverse change in prepayment speed and discount rate assumptions is as follows: 

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These sensitivities are theoretical and should be used with cau- tion. As the figures indicate, changes in fair value based on a given variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in the above table, the effect of a vari- ation in a particular assumption on the fair value of the mortgage servicing rights is calculated independently without changing any other assumptions. In reality, changes in one factor may result in 

changes in another (for example, changes in prepayment speed estimates could result in changes in discount rates or market inter- est rates), which might either magnify or counteract the sensitivities. 

During 2002, TCF recognized a gain of $2 million on the sale of a branch with $17.1 million in deposits, compared with a gain of $3.3 million on the sale of a branch with $30 million in deposits during 2001. TCF recognized gains of $12.8 million on the sales of six branches with $95.7 million in deposits during 2000. TCF 

