By VERNON CLEMENT JONES, Guardian Business Editor

Fidelity Bank is grappling with an 800 percent increase in provisioning for loan losses, an expense piled atop other contributors to its $1.3 million rise in total expenses and likely of concern to investors worried that tough times for Bahamians may have only just begun.

The extra cash set aside to cover bad or doubtful loans stood at only $37,128 for the six months ended June 30, 2007. It's a remarkably different amount than the $299,244 the bank had set aside to deal with potential and already non-performing loans on its books. Provisioning is also meant to cover any re-negotiated terms attached to existing accounts.

Fidelity, the smallest of the local commercial institutions, is by no means the only one grappling with a shift in Bahamian economic performance and its telling effects on the ability of borrowers to make good on their obligations.

Still, in Fidelity's case, it is also faced with significant growth in expenses across the board with salaries and staff benefits now taking an additional $6m in the first six months of the year. The BISX-listed company also suffered a $4m increase in general and administrative expenses.

Fidelity did not return Guardian Business calls Friday.

But, the bank — again like its competitors — may not have turned the corner on any growth in delinquencies it's now confronted with given the absence of any real turnaround in the U.S. economy predicted for the next 18 months.

Things may in fact worsen.

In Fidelity's case, it increased its total loan amount — mortgages, consumer loans and others — by a whopping $30 million at the close of the six months ending June 30, 2008. That's compared to the year-ago period when that book stood at $152.7m. It's net income however rose only by 2,324 over.

The growth in loans on Fidelity's balance sheet coincides with surging caution on the part of most commercial banks as they look to protect their profitability. They've largely anticipated the pinching effect our own slowdown would have on a borrower's ability to keep on top of loan payments and toughened up lending terms in addition to raising the qualifying bar prospects now have to jump.

That prudence is all the more key given the returns on their own investments many banks have seen fall as the local securities exchange realizes a near-13 percent dip in the value of its All Share Index, year to date.

The value of Fidelity's investment securities had slid $283k to sit at $38.3m by June's end relative to what now seem like the good ole days of summer 2007.