accumulated other comprehensive income and the $9.8 million repay- ment of all outstanding loans to the officers’ and directors’ deferred compensation plans, partially offset by the repurchase of 3.1 million shares of TCF’s common stock at a cost of $148 million and the pay- ment of $86.4 million in dividends on common stock. Since January 1, 1998, the Company has repurchased 21.7 million shares of TCF’s common stock at an average cost of $31.71 per share. For the year ended December 31, 2002, average total equity to average assets was 7.91% compared to 7.78% for the year ended December 31, 2001. Dividends paid to common shareholders on a per share basis totaled $1.15 in 2002, an increase of 15% from $1.00 in 2001. TCF’s div- idend payout ratio was 36.51% in 2002 and 37.04% in 2001. The Company’s primary funding sources for common dividends are  dividends received from its subsidiary bank. At December 31, 2002, TCF and TCF National Bank exceeded their regulatory capital requirements and are considered “well-capitalized” under guidelines established by the Federal Reserve Board and the Office of the Comptroller of the Currency. See Notes 15 and 16 of Notes to Consolidated Financial Statements. TCF does not have any trust pre- ferred securities or other quasi-equity instruments. TCF has used stock options as a form of employee compensation only to a limited extent. At December 31, 2002, the amount of stock options outstanding was .41% of total shares outstanding. Market Risk – Interest-Rate Risk TCF’s results of opera- tions are dependent to a large degree on its net interest income and its ability to manage its interest rate risk. Although TCF manages other risks, such as credit and liquidity risk, in the normal course of its business, the Company considers interest rate risk to be its most significant market risk. Since TCF does not hold a trading portfolio, the Company is not exposed to market risk from trading activities. The mismatch between maturities, interest rate sensitivities and pre- payment characteristics of assets and liabilities results in interest rate risk. TCF, like most financial institutions, has a material interest rate risk exposure to changes in both short-term and long-term interest rates as well as variable interest rate indices (e.g., prime).  TCF’s Asset/Liability Management Committee manages TCF’s interest-rate risk based on interest rate expectations and other fac- tors. The principal objective of TCF’s asset/liability management activities is to provide maximum levels of net interest income while maintaining acceptable levels of interest rate risk and liquidity risk and facilitating the funding needs of the Company.  Although the measure is subject to a number of assumptions and is only one of a number of measurements, management believes that interest rate gap (difference between interest-earning assets and TCF’s consumer and commercial loans (excluding loans at their floor rate) tied to a floating interest rate (prime or LIBOR) have increased $703 million in 2002. This is primarily due to TCF interest-bearing liabilities repricing within a given period) is an important indication of TCF’s exposure to interest rate risk and the related volatility of net interest income in a changing interest rate environment. While the interest rate gap measurement has some lim- itations, which include no assumptions regarding future asset or  liability production and the possibility of a static interest rate envi- ronment which can result in large quarterly changes due to changes of the above items, interest rate gap calculates the net asset or liabil- ity sensitivity at a point in time. In addition to the interest rate gap analysis, management also utilizes a simulation model to measure and manage TCF’s interest rate risk, relative to a base case scenario. The amounts in the maturity/rate sensitivity table on page 42 represent management’s estimates and assumptions. The amounts could be significantly affected by external factors such as prepay- ment rates other than those assumed, early withdrawals of deposits, changes in the correlation of various interest-bearing instruments, competition, a general rise or decline in interest rates, and the pos- sibility that TCF’s counterparties will exercise its option to call  certain of TCF’s longer-term callable borrowings. Decisions by management to purchase or sell assets, or retire debt could change the maturity/repricing and spread relationships. In addition, TCF’s interest-rate risk will increase during periods of rising interest rates due to slower prepayments on loans and mortgage-backed securi- ties. TCF’s one-year adjusted interest rate gap was a positive $1.1 billion, or 9% of total assets, at December 31, 2002, compared with a positive $241.8 million, or 2% of total assets, at December 31, 2001. A positive interest rate gap position exists when the amount of inter- est-earning assets maturing or repricing, including assumed pre- payments, within a particular time period exceeds the amount of interest-bearing liabilities maturing or repricing. The increase in the one-year gap reflects the current low interest rate environment in which TCF, and the banking industry as a whole, has experienced sharp increases in actual and forecasted prepayments of mortgage- backed securities, residential real estate loans, fixed-rate consumer and commercial real estate loans. Also impacting the gap is signifi- cant customer demand for variable-rate consumer and commercial loan products, in addition to the growth in deposits. TCF has man- aged this change by repositioning the balance sheet for a rising short- term interest rate environment. If interest rates remain at current levels or fall further, the net interest margin may compress and net interest income may decline. page 41