Profits for the fourth quarter also reached the highest level for any single quarter in the Bank of Waukegan s 37-year history. The cash dividend was increased for the 17th consecutive year. The Company also experienced higher non-interest income from service fees and trust services. Non-interest expense, primarily general and administrative costs, was a smaller proportion of total income than a year ago, affirming our reputation as an area leader in controlling overhead. Interest income is the primary source of revenue for the Company.
Several factors affect net interest income.
One is changes in interest rates, generally expressed by the prime lending rate. The prime rate was stable during the first half of 1999, but rose gradually in the second half. Another factor was that rates earned on average loans in 1999 decreased, not only because of the decline in the prime rate but because of competitive pressures. A third factor is the percentage of our assets that earn interest. This decline was caused by the upswing in interest rates in the second half that lowered the carrying value of the Bank s securities, which move opposite to the direction of interest rates, as well as potential customer Y2K concerns that caused us to keep higher amounts of cash on hand.