A change to the loan portfolio mix at Fidelity Bank is being seen as a major factor in reported earnings of nearly $4 million for 2011, an improvement over $2.27 million in the previous year.
This shift over to commercial loans provides higher rates, with credit cards offering interest rates as high as 18 percent and car loans coming in between 12 percent and 14 percent.
Over the course of the year, Fidelity's loan mix shifted, with mortgages moving from 67.15 percent to 54.16 percent.
"They are fairly close to a 50/50 mix of mortgages and other consumer types of loans," said Kevin Burrows, senior vice president at CFAL. "Fidelity has moved towards the Commonwealth Bank model, where the bulk of their books are consumer loans and mortgages are only 25 percent."
The approach has lead to increased profitability and increased margins.
Whereas in the housing market loans tend to have more of a cushion, consumer loans sometimes offer less leeway.
Burrows noted that it can be a riskier business, not to say the approach is not manageable.
Meanwhile, provisions for total loans have taken a noticeable dip, according to the firm's latest financial results. Fidelity's overall provisions represented just 1.98 percent of its total loan portfolio.
"As they transition their book, it'll be interesting to see where that provisioning ends up. It is probably a bit on the low side, although it could be a result of restructuring their lending so quickly," Burrows told Guardian Business. "A lot of the consumer loans are justifiably still current. So they might not feel the need for provision on some consumer loans."
Down the road, the actual experience of the lending mix could cause higher provisions, he added.
Another interesting development at Fidelity is a modest profit of $75,000 from its investment joint venture in the Bahamas Automated Clearing House Limited.
As the first time this investment has entered the black, it could be an encouraging sign now that they are seeing some success in this area.
Total assets at Fidelity rose by $67.7 million, or 23.99 percent.
Meanwhile, deposits increased by $52.1 million to $272 million, along with the bank collectively raising $15 million in redeemable preference shares across two issues during the year.
The bank also resumed its dividend program last December and currently trades slightly below book-value.

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