As previously noted, TCF also utilizes simulation models to esti- mate the near-term effects (next twelve months) of changing interest rates on its net interest income. Net interest income simulation involves forecasting net interest income under a variety of scenarios, including the level of interest rates, the shape of the yield curve, and spreads between market interest rates. At December 31, 2002, net interest income is estimated to increase by 2.6%, compared with the base case scenario, over the next twelve months if interest rates were to sustain an immediate increase of 100 basis points. At December 31, 2001, net interest income was estimated to increase by .7%, com- pared with the base case scenario, assuming a similar change in inter- est rates. If interest rates were to decline by 100 basis points, net interest income is estimated to decrease by 2.8%, compared with the base case scenario, over the next twelve months. Simulations at December 31, 2001 projected a decrease in net interest income of 2%, compared with the base case scenario, assuming a similar change in interest rates. 

Management exercises its best judgment in making assumptions regarding loan prepayments, early deposit withdrawals, and other non-controllable events in estimating TCF’s exposure to changes in interest rates. These assumptions are inherently uncertain and, as a result, the simulation models cannot precisely estimate net interest income or precisely predict the impact of a change in interest rates on net interest income. Actual results will differ from simulated results due to the timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors. 

Recent Accounting Developments In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Account- ing for Asset Retirement Obligations,” which addresses the recogni- tion and measurement of obligations associated with the retirement of tangible long-lived assets. SFAS No. 143 is effective January 1, 2003, with early adoption permitted. The Company plans to adopt SFAS No. 143 effective January 1, 2003 and does not expect the adoption of the statement to have a material effect on the financial statements. 

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which addresses financial accounting and reporting for costs associated with exit or disposal activities. Under SFAS No. 146, such costs will be recognized when the liability is incurred, rather than at the date of commitment 

to an exit plan. SFAS No. 146 is effective for exit or disposal activi- ties that are initiated after December 31, 2002, with early applica- tion permitted. Management is currently evaluating the impact of the adoption of SFAS No. 146 on its financial statements. 

In October 2002, the FASB issued SFAS No. 147, “Acquisitions of Certain Financial Institutions, an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9,” which addresses accounting for purchases of certain financial institutions. SFAS No. 147 is effective October 1, 2002, with early application permitted. TCF does not have any goodwill that was subject to Statement No. 72 and therefore the provisions of Statement No. 147 required no change in classification or treatment of recorded goodwill. 

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123,” which provides alterna- tive methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensa- tion. In addition, this Statement amends the disclosure require- ments of SFAS No. 123 to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has adopted the requirements of SFAS No. 123 in January 2000 and SFAS No. 148 effective December 31, 2002 with no material effect on its financial statements. 

Fourth Quarter Summary In the fourth quarter of 2002, TCF had net income of $59.8 million, up 10.3% from $54.2 million in the fourth quarter of 2001. Diluted earnings per common share was 82 cents for the fourth quarter of 2002, compared to 72 cents for the fourth quarter of 2001. TCF opened 12 new branches in the fourth quarter of 2002, of which four were supermarket branches. 

Net interest income was $126.6 million and $125.7 million for the quarter ended December 31, 2002 and 2001 respectively. The net interest margin was 4.59% and 4.74% for the fourth quarter of 2002 and 2001, respectively. TCF’s net interest income improved by $877,000, or .7% over the fourth quarter of 2001. TCF’s net interest income improvement was due to an increase of $12.3 mil- lion due to volume changes, partially offset by a decrease of $11.4 million due to lower interest rates over the 2001 fourth quarter. 

