TCF has been notified by its supermarket partners that seven addi- tional supermarket branches will be closed involuntarily when TCF’s supermarket partners in Michigan, Colorado and Wisconsin close stores and discontinue TCF’s license agreements for these loca- tions. At December 31, 2002, these seven branches had total deposits of $36.3 million which will transfer to other TCF branches. TCF is subject to the risk, among others, that in addition to the seven branches mentioned above, its license for additional loca- tions may be terminated in the future, upon the sale or closure of a location by its supermarket partners. Performance Summary TCF reported diluted earnings per common share of $3.15 for 2002, compared with $2.70 for 2001 and $2.35 for 2000. Net income was $232.9 million for 2002, up from $207.3 million for 2001 and $186.2 million for 2000. The 2002 results included a $1.3 million after-tax gain on sale of a branch, or 2 cents per common share, compared with a $2.1 million after- tax gain on sale of a branch, or 3 cents per common share in 2001 and a $7.9 million after-tax gain on sales six of branches, or 10 cents per common share in 2000. Return on average assets was 2.01% in 2002, compared with 1.79% in 2001 and 1.72% in 2000. Return on average realized common equity was 25.82% in 2002, compared with 23.18% in 2001 and 21.53% in 2000. In 2002, new account- ing rules under generally accepted accounting principles (“GAAP”) eliminated the amortization of goodwill. Goodwill amortization reduced net income by $7.6 million and $7.5 million, or 10 cents and 9 cents per diluted common share in 2001 and 2000, respectively. Operating Segment Results Banking , comprised of deposits and investment products, commercial banking, small business banking, consumer lending, residential lending and treasury services, reported net income of $201.1 million for 2002, up 11.4% from $180.5 mil- lion in 2001. Banking net interest income for 2002 was $435.9 mil- lion, compared with $423 million for 2001. The provision for credit losses totaled $12.8 million in 2002, up from $7.4 million in 2001. The increase in provision for credit losses is primarily a result of increased net charge-offs and growth in the loan portfolio. Non- interest income (excluding gains on sales of branches and securities available for sale) totaled $345.5 million, up 11.7% from $309.3 million in 2001. This improvement was driven by increased fees, ser- vice charges and debit card and ATM revenues generated by TCF’s expanding branch network and customer base. Non-interest expense (excluding the amortization of goodwill) totaled $470.8 million, up 8.9% from $432.3 million in 2001. The increase was primarily due to the costs associated with new branch expansion, and the addi- tion of lenders and sales representatives in the banking operations. Beginning in 1998, TCF significantly expanded its retail bank- ing franchise and had 395 retail banking branches at December 31, 2002. Since January 1, 1998, TCF has opened 220 new branches, of which 191 were supermarket branches. TCF continued expanding its retail banking franchise by opening 27 new branches during 2002. TCF anticipates opening 24 new branches during 2003 consisting of 18 new traditional branches, including eight in Colorado, six in Michigan and four in Illinois, and six new supermarket branches, including four in Minnesota and two in Illinois, and plans to con- tinue expanding in future years. In 2002, one Colorado super- market branch was closed involuntarily when TCF’s supermarket partner in Colorado sold a store and discontinued TCF’s license agreement for this location. Subsequent to December 31, 2002, Mortgage Banking activities include the origination and purchase  of residential mortgage loans, generally for sale to third parties with servicing retained. This operating segment reported net income of $2.7 million for 2002, compared with $5.9 million for 2001. Non- interest income totaled $8.3 million, down 46.1% from $15.4 mil- lion in 2001. TCF’s mortgage banking operations funded $2.9 billion in loans during 2002, up from $2.6 billion in 2001, primarily as a result of a resurgence in refinancing activity driven by lower mort- gage interest rates. Mortgage applications in process (mortgage pipeline) decreased $74.7 million from December 31, 2001, to $532 million at December 31, 2002. The lower mortgage interest rates led to sharply higher prepayments and assumed future prepayments in TCF’s servicing portfolio and led to impairment and amortization expense on mortgage servicing rights of $35.4 million for 2002, up from $21 million during 2001. The increased amortization and impairment were partially offset by the increased loan production activity and the related increase in gains on sales of loans. Mortgage Banking’s non-interest expense totaled $24.8 million for 2002, up 18.7% from $20.9 million for 2001. Contributing to the increase in non-interest expense during 2002 were increased expenses result- ing from higher levels of production and prepayment activity and increased compensation.  Leasing And Equipment Finance , an operating segment comprised of TCF’s wholly-owned subsidiaries Winthrop and TCF Leasing, pro- vides a broad range of comprehensive lease and equipment finance products. This operating segment reported net income of $27.5 mil- lion for 2002, up 34.4% from $20.4 million in 2001. Net interest income for 2002 was $41.4 million, up 4.9% from $39.4 million in 2001. The provision for credit losses for this operating segment totaled $9.2 million in 2002, down from $13.5 million in 2001, primarily as a result of decreased delinquencies and net charge-offs. Non- interest income totaled $51.8 million in 2002, up 13.3% from $45.7 million in 2001, primarily due to high levels of sales-type lease trans- actions. The volume of sales-type lease transactions and resulting  revenues fluctuate from period to period based on customer-driven factors not within the control of TCF. Non-interest expense (exclud- ing the amortization of goodwill) totaled $41 million in 2002, up 6.8% from $38.4 million in 2001, primarily a result of the growth experienced in TCF Leasing. Results of Operations page 22