money market), up $997.8 million, or 23.2%, coupled with growth in higher-yielding loans and leases (commercial, consumer and leas- ing and equipment finance) of $724.6 million, or 14%, and lower borrowing costs. These increases were partially offset by a decrease of $850 million, or 17.1%, for 2002 in lower-yielding residential mortgages and mortgage-backed securities. Interest income decreased by $93.2 million in 2002, reflecting a decrease of $95.4 million due to rate changes, partially offset by an increase of $2.2 million due to volume changes. Interest expense decreased $111.2 million in 2002, reflecting decreases of $75.4 million due to lower cost of funds and $35.8 million due to volume changes. The increase in net interest income due to volume changes reflects decreases in high-cost cer- tificates and short-term borrowings. The decrease in net interest income due to rate changes reflects the impact of declining rates on interest-earning assets greater than the impact of declining rates on interest-bearing liabilities. 

In 2001, TCF’s net interest income increased $42.7 million, or 9.7%, and total average interest-earning assets increased by $592.9 million, or 5.9%, compared with 2000 levels. TCF’s net interest income improved by $46 million due to volume changes and decreased $3.3 million due to rate changes. The increases in 2001, in net interest income and net interest margin were primarily due to the growth in higher yielding commercial and consumer loans and leasing and equipment finance along with the strong growth in low- cost checking, savings and money market deposits, as well as the decrease in interest rates resulting in lower interest paid on certifi- cates and borrowings. These favorable trends were partially offset by the managed reduction in residential real estate loans. Interest income decreased by $72,000 in 2001, reflecting a decrease of $56.7 million due to rate changes, substantially offset by an increase of $56.6 million due to volume changes. Interest expense decreased $42.8 million in 2001, reflecting a decrease of $53.4 million due to a lower cost of funds, partially offset by a $10.6 million increase due to volume changes. The increase in net interest income due to volume changes reflects the increase in total average interest-earning assets and an increase in the balance of non-interest-bearing deposits. The decrease in net interest income due to rate changes in 2001 reflects the impact of declining rates on interest-earning assets greater than the impact of declining rates on interest-bearing liabilities. 

In 2000, TCF’s net interest income increased $14.3 million, or 3.4%, and total average interest-earning assets increased by $578.7 million, or 6.1%, compared with 1999 levels. TCF’s net interest income improved by $32.8 million due to volume changes and decreased $18.4 million due to rate changes. The favorable impact of the growth in consumer lending volumes and rates, leasing and 

equipment finance volumes, and commercial real estate volumes and rates was partially offset by decreased consumer finance automobile loans and securities available for sale balances and increased bor- rowings volumes. Interest income increased $74.6 million in 2000, reflecting increases of $55.2 million due to volume and $19.4 mil- lion due to rate changes. Interest expense increased $60.3 million in 2000, reflecting increases of $37.8 million due to a higher cost of funds and $22.4 million due to volume. The increase in net inter- est income due to volume changes in 2000 reflects the increase in total average interest-earning assets and an increase in the balance of non-interest-bearing deposits. The decrease in net interest income due to rate changes reflects a higher cost of funds in 2000 compared with 1999. 

Provision for Credit Losses TCF provided $22 million for credit losses in 2002, compared with $20.9 million in 2001 and $14.8 million in 2000. Net loan and lease charge-offs were $20 mil- lion, or .25% of average loans and leases in 2002, compared with $12.5 million, or .15% of average loans and leases in 2001 and $3.9 million, or .05% of average loans and leases in 2000. The increase in the provision from 2001 reflects the impact of the growth in the consumer, commercial business, commercial real estate and leasing and equipment finance portfolios, coupled with increased charge- offs in these portfolios. Commercial lending net charge-offs were $5.9 million in 2002, compared with net charge-offs of $236,000 for 2001. Included in the commercial lending charge-offs for 2002 was $4.3 million related to $7.4 million of loans to a banking cus- tomer who is dependent on the transportation industry, which has been severely impacted by the economic slowdown. Leasing and equip- ment finance net charge-offs were $8 million, or .80% of related average loans and leases during 2002, compared with $9.1 million, or 1% of average loans and leases in 2001. The provision for credit losses is calculated as part of the determination of the allowance for loan and lease losses. The determination of the allowance for loan and lease losses and the related provision for credit losses is a criti- cal accounting policy which involves a number of factors such as net charge-offs, delinquencies in the loan and lease portfolio, value of collateral, general economic conditions and management’s assess- ment of credit risk in the current loan and lease portfolio. The allowance for loan and lease losses totaled $77 million at December 31, 2002, compared with $75 million at December 31, 2001, and was 176% of non-accrual loans and leases compared with 144% at December 31, 2001. See “Consolidated Financial Condition Analysis – Allowance for Loan and Lease Losses” on page 35. 

