UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

 

For the month of November, 2018

 

Commission File Number 1-11414

 

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

(Exact name of Registrant as specified in its Charter)

 

FOREIGN TRADE BANK OF LATIN AMERICA, INC.

(Translation of Registrant’s name into English)

 

Business Park Torre V, Ave. La Rotonda, Costa del Este

P.O. Box 0819-08730

Panama City, Republic of Panama

(Address of Registrant’s Principal Executive Offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F  x    Form 40-F  ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes  ¨   No   x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes  ¨   No   x

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: November 2, 2018

 

  FOREIGN TRADE BANK OF LATIN AMERICA, INC.
  (Registrant)
   
    By: /s/ Ana Graciela de Méndez
       
    Name: Ana Graciela de Méndez
    Title:    CFO

 

 

 

 

Banco Latinoamericano

de Comercio Exterior, S.A.

and Subsidiaries

 

Unaudited condensed consolidated interim statement of financial position as of September 30, 2018 and December 31, 2017, and related unaudited condensed consolidated interim statements of profit or loss, unaudited condensed consolidated interim statements of profit or loss and other comprehensive income, unaudited condensed consolidated interim statements of changes in stockholder’s equity and unaudited condensed consolidated interim statements of cash flows for the nine months ended September 30, 2018, 2017 and 2016

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S.A.

and Subsidiaries

 

Unaudited condensed consolidated interim financial statements

 

Contents Pages
   
Unaudited condensed consolidated interim statements of financial position 3
   
Unaudited condensed consolidated interim statements of profit or loss 4
   
Unaudited condensed consolidated interim statements of profit or loss and other comprehensive income 5
   
Unaudited condensed consolidated interim statements of changes in stockholder’s equity 6
   
Unaudited condensed consolidated interim statements of cash flows 7
   
Notes to the unaudited condensed consolidated interim financial statements 8-82

 

2

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
 
Unaudited condensed consolidated interim statement of financial position
September 30, 2018 and December 31, 2017
(In US$ thousand)

 

      September 30,   December 31, 
      2018   2017 
   Notes  (Unaudited)   (Audited) 
Assets             
Cash and cash equivalents  4,5,18   792,952    672,048 
Financial Instruments:             
Securities at fair value through OCI  5,18   20,971    25,135 
Securities at amortized cost, net  5,18   77,562    68,934 
Loans  5,18   5,724,518    5,505,658 
Less:             
Allowance for expected credit losses  5   139,318    81,294 
Unearned interest and deferred fees  5   7,357    4,985 
Loans, net      5,577,843    5,419,379 
              
Derivative financial instruments used for hedging – receivable  5,16,18   3,391    13,338 
              
Investment properties, net  7   2,289    5,119 
              
Property and equipment, net      6,692    7,420 
Intangibles, net      1,798    5,425 
              
Other assets:             
Customers' liabilities under acceptances  18   24,232    6,369 
Accrued interest receivable  18   45,367    30,872 
Other assets  8   7,661    13,708 
Total of other assets      77,260    50,949 
Total assets      6,560,758    6,267,747 
              
Liabilities and stockholders' equity             
Deposits:  9,18          
Noninterest-bearing - Demand      203    420 
Interest-bearing - Demand      77,928    81,644 
Time      2,699,404    2,846,780 
Total deposits      2,777,535    2,928,844 
              
Derivative financial instruments used for hedging – payable  5,16,18   26,394    34,943 
              
Securities sold under repurchase agreement  5,10,18   39,767    - 
Short-term borrowings and debt  11,18   1,237,603    1,072,723 
Long-term borrowings and debt, net  11,18   1,423,952    1,138,844 
              
Other liabilities:             
Acceptances outstanding  18   24,232    6,369 
Accrued interest payable  18   23,427    15,816 
Allowance for expected credit losses on loan commitments and financial guarantees contracts  6   3,219    6,845 
Other liabilities  12   15,678    20,551 
Total other liabilities      66,556    49,581 
Total liabilities      5,571,807    5,224,935 
              
              
Stockholders' equity:             
Common stock  14   279,980    279,980 
Treasury stock  15   (61,076)   (63,248)
Additional paid-in capital in excess of assigned value of common stock  14   119,523    119,941 
Capital reserves      95,210    95,210 
Dymanic provision  22   108,756    108,756 
Regulatory credit reserve  22   25    20,498 
Retained earnings  22   444,959    479,712 
Accumulated other comprehensive income (loss)  5,16   1,574    1,963 
Total stockholders' equity      988,951    1,042,812 
Total liabilities and stockholders' equity      6,560,758    6,267,747 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

3

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
 
Unaudited condensed consolidated interim statements of profit or loss
For the three and nine months ended September 30, 2018, 2017 and 2016
(In US$ thousand, except earnings per share amounts)

 

      For the three months ended
September 30,
   For the nine months ended
September 30,
 
   Notes  2018   2017   2016   2018   2017   2016 
                            
Interest income:                                 
Deposits      3,129    2,995    1,142    9,293    7,818    3,206 
Securities at fair value through OCI      150    124    457    416    420    1,956 
Securities at amortized cost      599    474    688    1,605    1,448    2,261 
Loans      61,142    51,457    60,530    173,062    160,594    177,025 
Total interest income      65,020    55,050    62,817    184,376    170,280    184,448 
Interest expense:                                 
Deposits      16,767    12,510    5,329    47,160    30,310    14,970 
Short and long-term borrowings and debt      20,957    14,643    17,668    55,441    48,296    51,954 
Total interest expense      37,724    27,153    22,997    102,601    78,606    66,924 
                                  
Net interest income      27,296    27,897    39,820    81,775    91,674    117,524 
                                  
Other income (expense):                                 
Fees and commissions, net      3,692    3,566    3,371    11,783    11,848    10,178 
(Loss) gain on derivative financial instruments and foreign currency exchange      (1,554)   (616)   204    (404)   (12)   (135)
Gain (loss) per financial instrument at fair value through profit or loss      109    3    (324)   (233)   (706)   (4,091)
Gain (loss) on sale of securities at fair value through OCI  5   -    -    69    -    79    (246)
Gain (loss) on sale of loans  5   -    15    87    (625)   113    490 
Loss on investment properties at fair value through profit or loss  7   (412)   -    -    (1,560)   -    - 
Other income, net      564    201    150    1,209    810    1,057 
Total other income, net      2,399    3,169    3,557    10,170    12,132    7,253 
                                  
Total income      29,695    31,066    43,377    91,945    103,806    124,777 
                                  
Expenses:                                 
Impairment loss from expected credit losses on loans  5   53,568    362    5,077    62,509    9,981    17,186 
Impairment loss (recovery) from expected credit losses on investment securities  5   -    75    (210)   (47)   (390)   276 
Impairment loss (recovery) from expected credit losses on loan commitments and financial guarantee contracts  5   1,566    215    (725)   (3,626)   (946)   (59)
Impairment loss in other assets  8   1,724    -    -    3,464    -    - 
Loss on derecognition of intangible assets      2,705    -    -    2,705    -    - 
Salaries and other employee expenses      5,213    5,842    6,230    21,390    20,306    19,008 
Depreciation of equipment and leasehold improvements      315    384    376    957    1,171    1,039 
Amortization of intangible assets      336    174    222    1,011    553    425 
Other expenses      4,987    3,553    4,416    13,177    11,731    13,201 
Total expenses      70,414    10,605    15,386    101,540    42,406    51,076 
(Loss) profit for the period      (40,719)   20,461    27,991    (9,595)   61,400    73,701 
                                  
(Loss) earnings per share:                                 
Basic  13   (1.03)   0.52    0.72    (0.24)   1.56    1.89 
Diluted  13   (1.03)   0.52    0.71    (0.24)   1.56    1.88 
Weighted average basic shares  13   39,540    39,362    39,102    39,544    39,289    39,059 
Weighted average diluted shares  13   39,540    39,413    39,225    39,544    39,319    39,178 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

4

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
 
Unaudited condensed consolidated interim statements of profit or loss and other comprehensive income
For the three and nine months ended September 30, 2018, 2017 and 2016
(In US$ thousand)

 

      For the three months ended
September 30,
   For the nine months ended
September 30,
 
   Notes  2018   2017   2016   2018   2017   2016 
                            
(Loss) profit for the period      (40,719)   20,461    27,991    (9,595)   61,400    73,701 
Other comprehensive income (loss):                                 
Items that will not be reclassified subsequently to profit and loss:                                 
Change in fair value for revaluation by equity instrument to FVOCI, net of hedging  16   866    -    -    (1,653)   -    - 
                                  
Items that are or may be reclassified subsequently to profit and loss:                                 
Change in fair value for debt instrument revaluation, net of hedging  16   (2,304)   (759)   6,017    (2,221)   123    9,070 
Reclasification adjustment for gains (losses) included in the loss or profit  16   1,998    2,449    (2,622)   4,693    935    (2,773)
Exchange difference in conversion of foreign operating currency      (1,071)   -    -    (1,208)   -    - 
                                  
Other comprehensive income (loss)  16   (511)   1,690    3,395    (389)   1,058    6,297 
                                  
Other comprehensive income (loss) for the period      (41,230)   22,151    31,386    (9,984)   62,458    79,998 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

5

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
 
Unaudited condensed consolidated interim statements of changes in stockholders's equity
For the nine months ended September 30, 2018, 2017 and 2016
(In US$ thousand)

 

   Common stock   Treasury stock  

Additional paid-

in capital in

excess of assigned

value of common

stock

   Capital reserves   Dynamic
provision
   Regulatory
reserve
   Retained
earnings
  

Accumulated

other

comprehensive

income (loss)

   Total 
Balances at January 1, 2016   279,980    (73,397)   120,177    95,210    30,788    7,920    521,934    (10,681)   971,931 
Profit for the period   -    -    -    -    -    -    73,701    -    73,701 
Other comprehensive income   -    -    -    -    -    -    -    6,297    6,297 
Issuance of restricted stock   -    1,259    (1,259)   -    -    -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    2,480    -    -    -    -    -    2,480 
Exercised options and stock units vested   -    -    -    -    -    -    -    -    - 
Repurchase of "Class B" and "Class E" common stock   -    -    -    -    -    -    -    -    - 
Regulatory  reserve   -    2,953    (1,387)   -    -    -    2,203    -    3,769 
Dymanic provision   -    -    -    -    -    -    (10,244)   -    (10,244)
Dividends declared   -    -    -    -    -    -    (45,104)   -    (45,104)
Balances at September 30, 2016   279,980    (69,185)   120,011    95,210    30,788    7,920    542,490    (4,384)   1,002,829 
                                              
Balances at January 1, 2017   279,980    (69,176)   120,594    95,210    43,826    18,633    525,048    (2,801)   1,011,314 
(Loss) profit for the period   -    -    -    -    -    -    61,400    -    61,400 
Other comprehensive income (loss)   -    -    -    -    -    -    -    1,058    1,058 
Issuance of restricted stock   -    1,259    (1,229)   -    -    -    -    -    30 
Compensation cost - stock options and stock units plans   -    -    (38)   -    -    -    -    -    (38)
Exercised options and stock units vested   -    3,278    109    -    -    -    -    -    3,387 
Repurchase of "Class B" and "Class E" common stock   -    (28)   -    -    -    -    -    -    (28)
Regulatory  reserve   -    -    -    -    -    -    10,637    -    10,637 
Dymanic provision   -    -    -    -    -    -    (63,566)   -    (63,566)
Dividends declared   -    -    -    -    -    -    (45,384)   -    (45,384)
Balances at September 30, 2017   279,980    (64,667)   119,436    95,210    43,826    18,633    488,135    (1,743)   978,810 
                                              
Balances at January 1, 2018   279,980    (63,248)   119,941    95,210    108,756    20,498    479,712    1,963    1,042,812 
Profit for the period   -    -    -    -    -    -    (9,595)   -    (9,595)
Other comprehensive income   -    -    -    -    -    -    -    (389)   (389)
Issuance of restricted stock   -    1,259    (1,259)   -    -    -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    587    -    -    -    -    -    587 
Exercised options and stock units vested   -    3,355    254    -    -    -    -    -    3,609 
Repurchase of "Class B" and "Class E" common stock   -    (2,442)   -    -    -    -    -    -    (2,442)
Regulatory  reserve   -    -    -    -    -    (20,473)   20,473    -    - 
Dymanic provision   -    -    -    -    -    -    -    -    - 
Dividends declared   -    -    -    -    -    -    (45,631)   -    (45,631)
Balances at September 30, 2018   279,980    (61,076)   119,523    95,210    108,756    25    444,959    1,574    988,951 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

6

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
 
Unaudited condensed consolidated interim statements of cash flows
For the nine months ended September 30, 2018, 2017 and 2016
(In US$ thousand)

 

   2018   2017   2016 
             
Cash flows from operating activities               
(Loss) profit for the period   (9,595)   61,400    73,701 
Adjustments to reconcile profit for the year to net cash provided by (used in) operating activities:               
Activities of derivative financial instruments used for hedging   1,929    (35,559)   (18,947)
Depreciation of equipment and leasehold improvements   957    1,171    1,039 
Amortization of intangible assets   1,011    553    425 
Loss for disposal of equipment and leasehold improvements   840    150    - 
Loss for disposal of intangible assets   2,705    14    - 
Loss on investment properties at fair value through profit or loss   1,560    -    - 
Impairment loss from expected credit losses   58,836    8,645    17,408 
(Loss) gain on sale of financial assets at fair value through OCI   -    (79)   246 
Amortization of premium and discount related to securities at amortized cost   798    601    863 
Gain on sale of property and equipment   18    -    - 
Impairment loss on other assets   3,464    -    - 
Compensation cost - share-based payment   587    (38)   2,480 
Interest income   (184,376)   (170,280)   (184,453)
Interest expense   102,601    78,606    66,924 
Net decrease (increase) in operating assets:               
Net decrease (increase) in pledged deposits   25,320    18,720    (3,385)
Financial instruments at fair value through profit or loss   -    -    53,383 
Net decrease (increase) in loans   (216,489)   676,129    297,758 
Other assets   (15,281)   (2,514)   4,044 
Net increase (decrease) in operating liabilities:               
Net increase due to depositors   (151,309)   200,157    330,536 
Financial liabilities at fair value through profit or loss   -    (24)   (89)
Other liabilities   13,218    (15,842)   (16,850)
Cash provided by operating activities   (363,206)   821,810    625,083 
                
Interest received   169,881    181,598    184,608 
Interest paid   (94,990)   (77,018)   (62,640)
Net cash provided by operating activities   (288,315)   926,390    747,051 
                
Cash flows from investing activities:               
Acquisition of equipment and leasehold improvements   (1,131)   (622)   (1,520)
Acquisition of intangible assets   (45)   (26)   (3,084)
Proceeds from the sale of investment property   1,270    -    - 
Proceeds from the redemption of securities at fair value through OCI   3,244    -    77,286 
Proceeds from the sale of securities at fair value through OCI   -    15,177    107,888 
Proceeds from maturities of securities at amortized cost   6,324    14,240    43,212 
Purchases of securities at fair value through OCI   -    -    (91,972)
Purchases of securities at amortized cost   (15,701)   (8,324)   (23,713)
Net cash provided by investing activities   (6,039)   20,445    108,097 
                
Cash flows from financing activities:               
Increase (decrease) net in short-term borrowings and debt and securities sold under repurchase agreements   204,647    (732,946)   (1,310,550)
Proceeds from long-term borrowings and debt   532,206    220,172    374,859 
Repayments of long-term borrowings and debt   (247,098)   (639,114)   (425,301)
Dividends paid   (45,860)   (45,449)   (45,104)
Exercised stock options   3,609    3,387    1,566 
Repurchase of common stock   (2,442)   (28)   - 
Net cash used in financing activities   445,062    (1,193,978)   (1,404,530)
                
Increase (decrease) net in cash and cash equivalents   146,224    (251,383)   (548,475)
Cash and cash equivalents at beginning of the period   618,807    1,007,726    1,267,302 
Cash and cash equivalents at end of the period   765,031    756,343    718,827 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

7

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

1.Corporate information

 

Banco Latinoamericano de Comercio Exterior, S. A. (“Bladex Head Office” and together with its subsidiaries “Bladex” or the “Bank”), headquartered in Panama City, Republic of Panama, is a specialized multinational bank established to support the financing of trade and economic integration in Latin America and the Caribbean (the “Region”). The Bank was established pursuant to a May 1975 proposal presented to the Assembly of Governors of Central Banks in the Region, which recommended the creation of a multinational organization to increase the foreign trade financing capacity of the Region. The Bank was organized in 1977, incorporated in 1978 as a corporation pursuant to the laws of the Republic of Panama, and officially initiated operations on January 2, 1979. Under a contract law signed in 1978 between the Republic of Panama and Bladex, the Bank was granted certain privileges by the Republic of Panama, including an exemption from payment of income taxes in Panama.

 

The Bank operates under a general banking license issued by the National Banking Commission of Panama, predecessor of the Superintendence of Banks of Panama (the “SBP”).

 

In the Republic of Panama, banks are regulated by the SBP through Executive Decree No. 52 of April 30, 2008, which adopts the unique text of the Law Decree No. 9 of February 26, 1998, modified by the Law Decree No. 2 of February 22, 2008. Banks are also regulated by resolutions and agreements issued by this entity. The main aspects of this law and its regulations include: the authorization of banking licenses, minimum capital and liquidity requirements, consolidated supervision, procedures for management of credit and market risks, measures to prevent money laundering, the financing of terrorism and related illicit activities, and procedures for banking intervention and liquidation, among others.

 

Bladex Head Office’s subsidiaries are the following:

 

-Bladex Holdings Inc. a wholly owned subsidiary, incorporated under the laws of the State of Delaware, United States of America (USA), on May 30, 2000. Bladex Holdings Inc. has ownership in Bladex Representacao Ltda.

 

-Bladex Representaçao Ltda., incorporated under the laws of Brazil on January 7, 2000, acts as the Bank’s representative office in Brazil. Bladex Representacao Ltda. is 99.999% owned by Bladex Head Office and the remaining 0.001% owned by Bladex Holdings Inc.

 

-Bladex Investimentos Ltda. was incorporated under the laws of Brazil on May 3, 2011. Bladex Head Office owned 99% of Bladex Investimentos Ltda., and Bladex Holdings Inc. owned the remaining 1%. This company had invested substantially all of its assets in an investment fund, Alpha 4x Latam Fundo de Investimento Multimercado, incorporated in Brazil (“the Brazilian Fund”), registered with the Securities and Exchange Commission of Brazil (“CVM”, for its acronym in Portuguese). Bladex Investimentos Ltda. merged with Bladex Representacao Ltda. on April 2016, being the former the extinct company under Brazilian law and prevailing the acquiring company Bladex Representacao Ltda.

 

-Bladex Development Corp. was incorporated under the laws of Panama on June 5, 2014. Bladex Development Corp. is 100% owned by Bladex Head Office.

 

-BLX Soluciones, S.A. de C.V., SOFOM, E.N.R. was incorporated under the laws of Mexico on June 13, 2014. BLX Soluciones is 99.9% owned by Bladex Head Office, and Bladex Development Corp. owns the remaining 0.1%. The company specializes in offering financial leasing and other financial products such as loans and factoring.

 

Bladex Head Office has an agency in New York City, USA (the “New York Agency”), which began operations on March 27, 1989. The New York Agency is principally engaged in financing transactions related to international trade, mostly the confirmation and financing of letters of credit for customers in the Region. The New York Agency also has authorization to book transactions through an International Banking Facility (“IBF”).

 

8

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

1.Corporate information (continued)

 

The Bank has representative offices in Buenos Aires, Argentina; in Mexico City; in Lima, Peru; and in Bogota, Colombia.

 

These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on October 23, 2018.

 

2.Basis of preparation of the consolidated financial statements

 

2.1Statement of compliance

 

These unaudited consolidated interim financial statements of Banco Latinoamericano de Comercio Exterior, S. A. and its subsidiaries have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) issued by the International Accounting Standards Board ("IASB"). As all the disclosures required by IFRS for annual period consolidated financial statements are not included herein, these unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2017, contained in the Bank’s annual audited consolidated financial statements. The unaudited condensed consolidated interim statements of profit or loss, profit or loss and other comprehensive income, changes in equity and cash flows for the periods presented are not necessarily indicative of results expected for any future period.

 

2.2Reclassification

 

Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation. These reclassifications had no effect on the previously reported changes in net assets or equity.

 

3.Summary of new significant accounting policies

 

3.1Investment properties

 

Property and Land that is held for long-term rental yields, operating leases and/or for capital appreciation, and that is not occupied by the Bank, is classified as investment property. Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. After initial recognition, investment property is carried at fair value.

 

Fair value is based on active market prices, adjusted, if necessary, for differences in the nature, location or condition of the specific asset. If this information is not available, the Bank uses alternative valuation methods, such as recent prices on less active markets or discounted cash flow projections. Valuations are performed as of the financial position date by professional valuers who hold recognised and relevant professional qualifications and have recent experience in the location and category of the investment property being valued. These valuations form the basis for the carrying amounts in the consolidated financial statements.

 

The fair value of investment property reflects, among other things, rental income from current leases and other assumptions market participants would make when pricing the property under current market conditions.

 

Subsequent expenditure is capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Bank and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised.

 

Changes in fair values are recognised in the income statement. Investment properties are derecognised when they have been disposed.

 

Where the Bank disposes of a property at fair value in an arm’s length transaction, the carrying value immediately prior to the sale is adjusted to the transaction price, and the adjustment is recorded in the income statement within from fair value adjustment on investment property.

 

9

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

3.Summary of new significant accounting policies (continued)

 

3.1Investment properties (continued)

 

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment. Its fair value at the date of reclassification becomes its cost for subsequent accounting purposes.

 

4.Cash and cash equivalents

 

  

September 30,

2018

  

December 31,

2017

 
         
Cash and due from banks   14,214    11,032 
Interest-bearing deposits in banks   778,738    661,016 
Total   792,952    672,048 
           
Less:          
Pledged deposits   27,921    53,241 
Total cash and cash equivalents   765,031    618,807 

 

The following table presents the details on interest-bearing deposits in banks and pledged deposits:

 

   September 30, 2018   December 31, 2017 
   Amount  

Range

Interest rate

   Amount  

Range

Interest rate

 
Interest-bearing deposits in banks:                    
Demand deposits(1)   778,738    0.41% a 5.61%   661,016    0.25% a 1.55%
Time deposits(2)   -    -    -    - 
Total   778,738         661,016      
                     
Pledged deposits:                    
New York(3)   3,500    -    3,000    - 
Panama(4)   24,421    2.18%   50,241    1.42%
Total   27,921         53,241      

 

(1)Demand deposits with bearing interest based on the daily rates determined by banks.
(2)Time deposits “overnight” calculated on an average interest rate.
(3)The New York Agency had a pledged deposit with the New York State Banking Department, as required by law since March 1994.
(4)The Bank had pledged deposits to secure derivative financial instruments transactions.

 

10

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments

 

Financial instruments at fair value through other comprehensive income “FVOCI”

 

The amortized cost, related unrealized gross gain (loss) and fair value of financial instruments at fair value through other comprehensive income by country risk and type of debt are as follows:

 

Equity Investment at FVOCI

 

   September 30, 2018 
       Unrealized     
   Amortized cost   Gain   Loss   Fair value 
Equity investments (1)                    
Brazil   8,402    7,405    10,280    5,527 
    8,402    7,405    10,280    5,527 

 

Securities at FVOCI

 

   September 30, 2018 
       Unrealized     
   Amortized cost   Gain   Loss   Fair value 
Sovereign debt:                    
Brazil   2,946    -    135    2,811 
Chile   5,147    -    136    5,011 
Trinidad and Tobago   8,501    -    879    7,622 
    16,594    -    1,150    15,444 
    24,996    7,405    11,430    20,971 

 

Equity Investment at FVOCI

 

   December 31, 2017 
       Unrealized     
   Amortized cost   Gain   Loss   Fair value 
Equity investments (1)                    
Brazil   8,630    -    228    8,402 
    8,630    -    228    8,402 

 

Securities at FVOCI

 

   December 31, 2017 
       Unrealized     
   Amortized cost   Gain   Loss   Fair value 
Sovereign debt:                    
Brazil   2,937    29    12    2,954 
Chile   5,182    -    35    5,147 
Trinidad and Tobago   8,843    -    211    8,632 
    16,962    29    258    16,733 
    25,592    29    486    25,135 

 

(1)Equity instruments were initially recognized at fair value. These equity instruments correspond to equity securities classified with the irrevocable option of changes in OCI.

 

11

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Financial instruments at fair value through other comprehensive income (continued)

 

Securities at FVOCI (continued)

 

As of September 30, 2018, and as of December 31, 2017, there were no securities at fair value through other comprehensive income accounted for as secured financings.

 

The following table discloses those securities that had unrealized losses for a period less than 12 month and for 12 months or longer:

 

   September 30, 2018 
   Less than 12 months   12 months or longer   Total 
   Fair
value
  

Unrealized

gross losses

   Fair
value
  

Unrealized

gross losses

   Fair
value
  

Unrealized

gross losses

 
                         
Sovereign debt   6,885    210    8,559    940    15,444    1,150 
Total   6,885    210    8,559    940    15,444    1,150 

 

   December 31, 2017 
   Less than 12 months   12 months or longer   Total 
   Fair
value
  

Unrealized

gross losses

   Fair
value
  

Unrealized

gross losses

   Fair
value
  

Unrealized

gross losses

 
                         
Sovereign debt   5,147    35    9,616    223    14,763    258 
Total   5,147    35    9,616    223    14,763    258 

 

The following table presents the realized gains and losses on sale of securities at fair value through other comprehensive income:

 

   Three months ended September 30th 
   2018   2017   2016 
Realized gain on sale of securities   -    -    72 
Realized loss on sale of securities   -    -    (3)
Net gain (loss) on sale of securities at fair value through
other comprehensive income
   -    -    69 

 

   Nine months ended September 30th 
   2018   2017   2016 
Realized gain on sale of securities   -    667    7,544 
Realized loss on sale of securities   -    (588)   (7,790)
Net gain (loss) on sale of securities at fair value through
other comprehensive income
   -    79    (246)

 

12

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Financial instruments at fair value through other comprehensive income (continued)

 

Securities at FVOCI (continued)

 

Securities at fair value through other comprehensive income classified by issuer’s credit quality indicators are as follows:

 

Rating(1) 

September 30,

2018

  

December 31,

2017

 
1-4   15,444    16,733 
5-6   -    - 
7   -    - 
8   -    - 
9   -    - 
10   -    - 
Total   15,444    16,733 

 

(1)Current ratings as of September 30, 2018 and December 31, 2017, respectively.

 

The amortized cost and fair value of securities at fair value through other comprehensive income by contractual maturity are shown in the following tables:

 

   September 30, 2018   December 31, 2017 
  

Amortized

cost

   Fair value  

Amortized

cost

   Fair value 
                 
Due within 1 year   -    -    -    - 
After 1 year but within 5 years   16,594    15,444    16,962    16,733 
After 5 years but within 10 years   -    -    -    - 
    16,594    15,444    16,962    16,733 

 

13

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Financial instruments at fair value through other comprehensive income (continued)

 

Securities at FVOCI (continued)

 

The significant changes in the gross carrying amount of securities at fair value through other comprehensive income during the period that contributed to changes in the allowance for expected credit loss, is provided at the table below:

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Gross carrying amount as of December 31, 2017   13,779    2,954    -    16,733 
Transfer in book value to stage 2   -    -    -    - 
Transfer in financial instruments with credit-impaired   -    -    -    - 
Transfer in book value to stage 1   -    -    -    - 
Financial instruments that have been derecognized during the period   (1,146)   (143)   -    (1,289)
Changes due to financial instruments recognized as of December 31, 2017   (1,146)   (143)   -    (1,289)
New financial assets originated or purchased   -    -    -    - 
Write-offs   -    -    -    - 
Gross carrying amount as of September 30, 2018   12,633    2,811    -    15,444 

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Gross carrying amount as of December 31, 2016   27,821    2,786    -    30,607 
Transfer in book value to stage 2   -    -    -    - 
Transfer in financial instruments with credit-impaired   -    -    -    - 
Transfer in book value to stage 1   -    -    -    - 
Financial instruments that have been derecognized during the year   (14,042)   168    -    (13,874)
Changes due to financial instruments recognized as of December 31, 2016   (14,042)   168    -    (13,874)
New financial assets originated or purchased   -    -    -    - 
Write-offs   -    -    -    - 
Gross carrying amount as of December 31, 2017   13,779    2,954    -    16,733 

 

(1)12-month expected credit losses.
(2)Lifetime expected credit losses.
(3)Credit-impaired financial assets (lifetime expected credit losses).

 

14

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Securities at FVOCI (continued)

 

The allowance for expected credit losses relating to securities at fair value through other comprehensive income, which is recorded in equity under accumulated other comprehensive income (loss), is as follow:

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2017   24    198    -    222 
Transfer to lifetime expected credit losses   -    -    -    - 
Transfer to credit-impaired financial instruments   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected credit losses   (2)   4    -    2 
Financial instruments that have been derecognized during the period   -    -    -    - 
Changes due to financial instruments recognized as of December 31, 2017:   (2)   4    -    2 
New financial assets originated or purchased   -    -    -    - 
Write-offs   -    -    -    - 
Allowance for expected credit losses as of September 30, 2018   22    202    -    224 

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2016   42    263    -    305 
Transfer to lifetime expected credit losses   -    -    -    - 
Transfer to credit-impaired financial instruments   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected credit losses   (6)   (65)   -    (71)
Financial instruments that have been derecognized during the year   (12)   -    -    (12)
Changes due to financial instruments recognized as of December 31, 2016:   (18)   (65)   -    (83)
New financial assets originated or purchased   -    -    -    - 
Write-offs   -    -    -    - 
Allowance for expected credit losses as of December 31, 2017   24    198    -    222 

 

(4)12-month expected credit losses.
(5)Lifetime expected credit losses.
(6)Credit-impaired financial assets (lifetime expected credit losses).

 

15

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Securities at amortized cost

 

The amortized cost, related unrealized gross gain (loss) and fair value of these securities by country risk and type of debt, excluding the amounts of allowance for expected credit losses are as follows:

 

   September 30, 2018 
       Unrealized     
  

Amortized

cost (1)

  

 

Gain

  

 

Loss

   Fair value 
Corporate debt:                    
Brazil   1,489    -    26    1,463 
Mexico   6,787    -    9    6,778 
Panama   12,805    27    -    12,832 
    21,081    27    35    21,073 
                     
Sovereign debt:                    
Colombia   28,389    106    261    28,234 
Mexico   19,944    -    663    19,281 
Panama   8,295    -    24    8,271 
    56,628    106    948    55,786 
    77,709    133    983    76,859 

 

   December 31, 2017 
       Unrealized     
  

Amortized

cost (2)

  

 

Gain

  

 

Loss

   Fair value 
Corporate debt:                    
Brazil   1,485    3    -    1,488 
Panama   9,978    -    -    9,978 
    11,463    3    -    11,466 
Sovereign debt:                    
Colombia   29,006    67    16    29,057 
Mexico   20,203    -    167    20,036 
Panama   8,458    -    11    8,447 
    57,667    67    194    57,540 
    69,130    70    194    69,006 

 

(1)Amounts do not include allowance for expected credit losses of $147.
(2)Amounts do not include allowance for expected credit losses of $196.

 

As of September 30, 2018, securities at amortized cost with a carrying value of $37 million, were pledged to secure repurchase transactions accounted for as secured financings. As of December 31, 2017, there were no securities at amortized cost accounted for as secured financial liabilities.

 

16

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Securities at amortized cost (continued)

 

The amortized cost and fair value of securities at amortized cost by contractual maturity are shown in the following tables:

 

   September 30, 2018   December 31, 2017 
  

Amortized

cost (1)

  

Fair

value

  

Amortized

cost (2)

  

Fair

value

 
                 
Due within 1 year   25,092    25,223    7,978    7,978 
After 1 year but within 5 years   52,617    51,636    61,152    61,028 
After 5 years but within 10 years   -    -    -    - 
    77,709    76,859    69,130    69,006 

 

(1)Amounts do not include allowance for expected credit losses of $147.
(2)Amounts do not include allowance for expected credit losses of $196.

 

Securities at amortized cost classified by issuer’s credit quality indicators are as follows:

 

Rating(3) 

September 30,

2018

  

December 31,

2017

 
1-4   76,220    57,667 
5-6   1,489    11,463 
7   -    - 
8   -    - 
9   -    - 
10   -    - 
Total   77,709    69,130 

 

(3)Current ratings as of September 30, 2018 and December 31, 2017, respectively.

 

17

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Securities at amortized cost (continued)

 

The significant changes in the gross carrying amount of securities at amortized cost during the period that contributed to changes in the allowance for expected credit loss, is provided at the table below:

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Gross carrying amount as of December 31, 2017   67,645    1,485    -    69,130 
Transfer in book value to stage 2   -    -    -    - 
Transfer in financial instruments with credit impaired   -    -    -    - 
Transfer in book value to stage 1   -    -    -    - 
Financial instruments that have been derecognized during the period   (7,363)   4    -    (7,359)
Changes due to financial instruments recognized as of December 31, 2017   (7,363)   4    -    (7,359)
New financial assets originated or purchased   15,938    -    -    15,938 
Write-offs   -    -    -    - 
Gross carrying amount as of September 30, 2018   76,220    1,489    -    77,709 

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Gross carrying amount as of December 31, 2016   65,154    12,687    -    77,841 
Transfer in book value to stage 2   -    -    -    - 
Transfer in financial instruments with credit impaired   -    -    -    - 
Transfer in book value to stage 1   -    -    -    - 
Financial instruments that have been derecognized during the year   (7,487)   (11,202)   -    (18,689)
Changes due to financial instruments recognized  as of December 31, 2016   (7,487)   (11,202)   -    (18,689)
New financial assets originated or purchased   9,978    -    -    9,978 
Write-offs   -    -    -    - 
Gross carrying amount as of December 31, 2017   67,645    1,485    -    69,130 

 

(1)12-month expected credit losses.
(2)Lifetime expected credit losses.
(3)Credit-impaired financial assets (lifetime expected credit losses).

 

18

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Securities at amortized cost (continued)

 

The allowance for expected credit losses relating to securities at amortized cost is as follow:

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2017   144    52    -    196 
Transfer to lifetime expected credit losses   -    -    -    - 
Transfer to credit-impaired financial instruments   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected credit losses   (21)   (22)   -    (43)
Financial instruments that have been derecognized during the period   (50)   -    -    (50)
Changes due to financial instruments recognized as of December 31, 2017:   (71)   (22)   -    (93)
New financial assets originated or purchased   44    -    -    44 
Allowance for expected credit losses as of September 30, 2018   117    30    -    147 

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2016   99    503    -    602 
Transfer to lifetime expected credit losses   -    -    -    - 
Transfer to credit-impaired financial instruments   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected credit losses   (16)   (29)   -    (45)
Financial instruments that have been derecognized during the year   (18)   (422)   -    (440)
Changes due to financial instruments recognized as of December 31, 2016:   (34)   (451)   -    (485)
New financial assets originated or purchased   79    -    -    79 
Allowance for expected credit losses as of December 31, 2017   144    52    -    196 

 

(1)12-month expected credit losses.
(2)Lifetime expected credit losses.
(3)Credit-impaired financial assets (lifetime expected credit losses).

 

19

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Recognition and derecognition of financial assets

 

During the periods ended September 30, 2018, 2017 and 2016, the Bank sold loans measured at amortized cost. These sales were made based on compliance with the Bank's strategy to optimize the loan portfolio.

 

The amounts and gains arising from the derecognition of these financial instruments are presented in the following table. These gains are presented within the line “gain (loss) on sale of loans” in the consolidated statement of profit or loss.

 

  

Assignments and

participations

  

Gains

(losses)

 
         
For the year ended September 30, 2018   71,667    (625)
For the year ended September 30, 2017   72,400    113 
For the year ended September 30, 2016   146,975    490 

 

Loans – at amortized cost

 

The following table set forth details of the Bank’s loan portfolio:

 

  

September 30,

2018

  

December 31,

2017

 
Corporations:          
Private   1,769,868    1,882,846 
State-owned   840,632    723,267 
Banking and financial institutions:          
Private   2,452,756    2,083,795 
State-owned   537,270    573,649 
Middle-market companies:          
Private   123,992    242,101 
Total   5,724,518    5,505,658 

 

The composition of the gross loan portfolio by industry is as follows:

 

  

September 30,

2018

  

December 31,

2017

 
Banking and financial institutions   2,990,026    2,657,444 
Industrial   838,352    772,238 
Oil and petroleum derived products   749,270    735,413 
Agricultural   512,735    501,241 
Services   323,375    430,717 
Mining   90,600    231,687 
Others   220,160    176,918 
Total   5,724,518    5,505,658 

 

Loans are reported at their amortized cost considering the principal outstanding amounts net of unearned interest, deferred fees and allowance for expected credit losses.

 

The amortization of net unearned interest and deferred fees are recognized as an adjustment to the related loan yield using the effective interest rate method.

 

20

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Loans – at amortized cost (continued)

 

As of September 30, 2018, and December 31, 2017, the unearned discount interest and deferred fees amounted to $7,357 and $4,985, respectively.

 

Loans classified by borrower’s credit quality indicators are as follows:

 

September 30, 2018
   Corporations  

Banking and financial

institutions

  

Middle-market

companies

     
Rating(1)  Private   State-owned   Private   State-owned   Private   Total 
1-4   1,321,449    613,743    2,122,932    332,395    56,351    4,446,870 
5-6   364,443    226,889    329,824    204,875    32,641    1,158,672 
7   -    -    -    -    -    - 
8   -    -    -    -    -    - 
9   83,976    -    -    -    -    83,976 
10   -    -    -    -    35,000    35,000 
Total   1,769,868    840,632    2,452,756    537,270    123,992    5,724,518 

 

December 31, 2017
   Corporations  

Banking and financial

institutions

  

Middle-market

companies

     
Rating(1)  Private   State-owned   Private   State-owned   Private   Total 
1-4   1,336,032    563,877    1,729,592    361,236    147,212    4,137,949 
5-6   523,055    159,390    354,203    212,413    59,889    1,308,950 
7   -    -    -    -    -    - 
8   23,759    -    -    -    -    23,759 
9   -    -    -    -    -    - 
10   -    -    -    -    35,000    35,000 
Total   1,882,846    723,267    2,083,795    573,649    242,101    5,505,658 

 

(1)Current ratings as of September 30, 2018 and December 31, 2017, respectively.

 

21

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Loans – at amortized cost (continued)

 

The following table provides a breakdown of loans by country risk:

 

  

September 30,

2018

  

December 31,

2017

 
Country:          
Argentina   541,010    294,613 
Belgium   15,000    11,368 
Bolivia   20,087    15,000 
Brazil   1,175,590    1,019,466 
Chile   158,991    170,827 
Colombia   702,067    829,136 
Costa Rica   312,215    356,459 
Dominican Republic   273,560    249,926 
Ecuador   175,845    94,315 
El Salvador   54,895    55,110 
Germany   22,500    37,500 
Guatemala   253,345    309,024 
Honduras   87,318    74,476 
Jamaica   55,860    24,435 
Luxembourg   19,985    19,924 
Mexico   868,554    850,463 
Nicaragua   24,953    29,804 
Panama   540,394    500,134 
Paraguay   124,917    59,536 
Peru   135,932    211,846 
Singapore   49,700    54,500 
Switzerland   600    3,687 
Trinidad and Tobago   111,200    175,000 
United States of America   -    44,109 
Uruguay   -    15,000 
Total   5,724,518    5,505,658 

 

22

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Loans – at amortized cost (continued)

 

The remaining loan maturities are summarized as follows:

 

  

September 30,

2018

  

December 31,

2017

 
Current:          
Up to 1 month   818,382    846,993 
From 1 month to 3 months   1,024,512    1,079,793 
From 3 months to 6 months   918,042    1,175,801 
From 6 months to 1 year   1,076,886    922,711 
From 1 year to 2 years   534,189    392,456 
From 2 years to 5 years   1,190,185    989,222 
More than 5 years   43,346    39,923 
    5,605,542    5,446,899 
           
Delinquent   2,857    - 
Impaired   116,119    58,759 
Total   5,724,518    5,505,658 

 

As of September 30, 2018, and December 31, 2017, the range of interest rates on loans fluctuates from 0.85% and 11.62% (2017: 1.35% y 11.52%).

 

The fixed and floating interest rate distribution of the loan portfolio is as follows:

 

  

September 30,

2018

  

December 31,

2017

 
         
Fixed interest rates   2,682,659    2,378,509 
Floating interest rates   3,041,859    3,127,149 
Total   5,724,518    5,505,658 

 

As of September 30, 2018, and December 31, 2017, 80% and 85%, of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

 

An analysis of credit-impaired loans is detailed as follows:

 

   September 30, 2018   2018 
  

Recorded

investment

  

Past due

principal

balance

  

Related

allowance

Stage 3

  

Average

principal

loan

balance

  

Balance

interest

recognized

 
With an allowance recorded:                         
Private corporations   83,976    6,248    62,620    40,480    745 
Middle-market companies   35,000    35,000    26,588    35,000    3,838 
Total   118,976    41,248    89,208    75,480    4,583 

 

23

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Loans – at amortized cost (continued)

 

   December 31, 2017   2017 
  

Recorded

investment

  

Past due

principal

balance

  

Related

allowance

Stage 3

  

Average

principal

loan

balance

  

Balance

interest

recognized

 
With an allowance recorded:                         
Private corporations   23,759    -    7,468    5,988    229 
Middle-market companies   35,000    35,000    20,527    35,000    3,028 
Total   58,759    35,000    27,995    40,988    3,257 

 

The following is a summary of information of interest amounts recognized on an effective interest basis on net carrying amount for those financial assets in Stage 3:

 

   Three months ended September 30, 
   2018   2017   2016 
Interest revenue calculated on the net carrying amount (net of credit allowance)   1,187    310    720 

 

   Nine months ended September 30, 
   2018   2017   2016 
Interest revenue calculated on the net carrying amount (net of credit allowance)   2,151    1,173    1,561 

 

The following table presents an aging analysis of the loan portfolio:

 

September 30, 2018
   91-120
 days
   121-150
 days
   151-180
 days
  

Greater

than 180

days

   Total
Past
due
   Delinquent   Current   Total 
Corporations   61,844    -    -    -    61,844    2,857    2,545,799    2,610,500 
Banking and financial institutions   -    -    -    -    -    -    2,990,026    2,990,026 
Middle-market companies   -    -    -    35,000    35,000    -    88,992    123,992 
Total   61,844    -    -    35,000    96,844    2,857    5,624,817    5,724,518 

 

24

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Loans – at amortized cost (continued)

 

December 31, 2017
   91-120
 days
   121-150
 days
   151-180
 days
  

Greater

than 180
days

   Total
Past
due
   Delinquent   Current   Total 
Corporations   -    -    -    -    -    -    2,606,113    2,606,113 
Banking and financial institutions   -    -    -    -    -    -    2,657,444    2,657,444 
Middle-market companies   -    -    -    35,000    35,000    -    207,101    242,101 
Total   -    -    -    35,000    35,000    -    5,470,658    5,505,658 

 

As of September 30, 2018, and December 31, 2017, the Bank had credit transactions in the normal course of business with 16% and 21%, respectively, of its Class “A” and “B” stockholders. All transactions were made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and were subject to all the Bank’s Corporate Governance and control procedures. As of September 30, 2018, and December 31, 2017, approximately 9% and 14%, respectively, of the outstanding loan portfolio was placed with the Bank’s Class “A” and “B” stockholders and their related parties. As of September 30, 2018, the Bank was not directly or indirectly owned or controlled by another corporation or any foreign government, and no Class “A” or “B” shareholder was the registered owner of more than 3.5% of the total outstanding shares of the voting capital stock of the Bank.

 

Modified financial assets

 

The following table refer to modified financial assets, where modification does not result in de-recognition:

 

Modified financial assets (with loss allowance based on

lifetime ECL) modified during the period

  September 30, 2018   December 31, 2017 
Gross carrying amount before modification   -    8,855 
Loss allowance before modification   -    (3,344)
Net amortized cost before modification   -    5,511 
Gross carrying amount after modification   -    4,484 
Loss allowance after modification   -    (4,484)
Net amortized cost after modification   -    - 

 

For the modified financial assets during the year 2017, were received other real estate owned for $ 5,119.

 

25

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Loans – at amortized cost (continued)

 

The significant changes in the gross carrying amount of loans during the period that contributed to changes in the allowance for expected credit loss, is provided at the table below:

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Gross carrying amount as of December 31, 2017   4,839,227    607,672    58,759    5,505,658 
Transfer in book value to stage 2   (38,654)   38,654    -    - 
Transfer in Financial Instruments with credit-impaired   (5,714)   (61,845)   67,559    - 
Transfer in book value to stage 1   39,560    (39,560)   -    - 
Financial instruments that have been derecognized during the period   (3,746,902)   (325,637)   (2,858)   (4,075,397)
Changes due to financial instruments recognized as of December 31, 2017   (3,751,710)   (388,388)   64,701    (4,075,397)
New financial assets originated or purchased   4,298,741    -    -    4,298,741 
Write-offs   -    -    (4,484)   (4,484)
Gross carrying amount as of September 30, 2018   5,386,258    219,284    118,976    5,724,518 

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Gross carrying amount as of December 31, 2016   5,019,368    935,999    65,364    6,020,731 
Transfer in book value to stage 2   (41,167)   41,167    -    - 
Transfer in Financial Instruments with credit -impaired   -    (46,673)   46,673    - 
Transfer in book value to stage 1   8,000    (8,000)   -    - 
Financial instruments that have been derecognized during the year   (4,214,697)   (313,394)   (21,667)   (4,549,758)
Changes due to financial instruments recognized as of December 31, 2016   (4,247,864)   (326,900)   25,006    (4,549,758)
New financial assets originated or purchased   4,067,723    -    -    4,067,723 
Write-offs   -    (1,427)   (31,611)   (33,038)
Gross carrying amount as of December 31, 2017   4,839,227    607,672    58,759    5,505,658 

  

(1)12-month expected credit losses.
(2)Lifetime expected credit losses.
(3)Credit-impaired financial assets (lifetime expected credit losses).

 

26

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Loans – at amortized cost (continued)

 

The allowances for expected credit losses related to loans at amortized cost are as follows:

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2017   19,821    33,477    27,996    81,294 
Transfer to lifetime expected credit losses   (109)   109    -    - 
Transfer to credit impaired financial instruments   (111)   (7,864)   7,975    - 
Transfer to 12-month expected credit losses   4,172    (4,172)   -    - 
Net effect of changes in reserve for expected credit losses   (4,249)   (179)   57,721    53,293 
Financial instruments that have been derecognized during the period   (13,889)   (8,042)   -    (21,931)
Changes due to financial instruments recognized as of December 31, 2017   (14,186)   (20,148)   65,696    31,362 
New financial assets originated or purchased   31,146    -    -    31,146 
Write-offs   -    -    (4,484)   (4,484)
Recoveries of amounts previously written off   -    -    -    - 
Allowance for expected credit losses as of September 30, 2018   36,781    13,329    89,208    139,318 

 

   Stage 1 (1)   Stage 2 (2)   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2016   29,036    41,599    35,353    105,988 
Transfer to lifetime expected credit losses   (672)   672    -    - 
Transfer to credit-impaired financial instruments   -    (12,845)   12,845    - 
Transfer to 12-month expected credit losses   1,428    (1,428)   -    - 
Net effect of changes in reserve for expected credit losses   (2,900)   18,227    20,257    35,584 
Financial instruments that have been derecognized during the year   (24,434)   (11,321)   (8,333)   (44,088)
Changes due to financial instruments recognized as of December 31, 2016   (26,578)   (6,695)   24,769    (8,504)
New financial assets originated or purchased   17,363    -    -    17,363 
Write-offs   -    (1,427)   (32,126)   (33,553)
Recoveries of amounts previously written off   -    -    -    - 
Allowance for expected credit losses as of December 31, 2017   19,821    33,477    27,996    81,294 

 

(1)12-month expected credit losses.
(2)Lifetime expected credit losses.
(3)Credit-impaired financial assets (lifetime expected credit losses).

 

27

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes

 

Quantitative information on derivative financial instruments held for hedging purposes is as follows:

 

   September 30, 2018 
   Nominal  

Carrying amount of the

hedging instrument

  

Changes in fair

value used for

calculating hedge

 
   Amount   Asset   Liability   ineffectiveness 
Fair value hedges:                    
Interest rate swaps   433,500    414    (5,264)   (490)
Cross-currency swaps   227,353    518    (13,670)   11,080 
Cash flow hedges:                    
Interest rate swaps   457,500    1,516    (2,785)   (968)
Cross-currency swaps   23,025    -    (663)   (1,542)
Foreign exchange forward   169,988    943    (3,974)   (11,640)
Net investment hedges:                    
Foreign exchange forward   5,012    -    (38)   (88)
Total   1,316,378    3,391    (26,394)   (3,648)

 

   December 31, 2017 
   Nominal  

Carrying amount of the

hedging instrument

  

Changes in fair

value used for

calculating

hedge

 
   Amount   Asset   Liability   ineffectiveness 
Fair value hedges:                    
Interest rate swaps   367,500    -    (4,361)   (2,394)
Cross-currency swaps   306,961    3,672    (30,154)   15,900 
Cash flow hedges:                    
Interest rate swaps   595,000    127    (428)   995 
Cross-currency swaps   23,025    879    -    2,132 
Foreign exchange forward   225,388    8,610    -    11,835 
Net investment hedges:                    
Foreign exchange forward   9,243    50    -    181 
Total   1,527,117    13,338    (34,943)   28,649 

 

The hedging instruments presented in the tables above are in the line item in the statement of financial position at fair value - Derivative financial instruments used for hedging – receivable or at fair value – Derivative financial instruments used for hedging – payable.

 

28

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

The gains and losses resulting from activities of derivative financial instruments and hedging recognized in the consolidated statements of profit or loss are presented below:

 

   Three months ended September 30, 2018 
  

Gain (loss)

recognized in

OCI (effective

portion)

  

Classification of gain

(loss)

 

Gain (loss)

reclassified from

accumulated OCI

to the

consolidated

statement of

profit or loss

  

Gain (loss)

recognized on

derivatives

(ineffective

portion)

 
Derivatives – cash flow hedge                  
Interest rate swaps   42   Gain (loss) on interest rate swap   -    (3)
Cross-currency swaps   521   Gain (loss) on foreign currency exchange   -    (11)
        Interest income – loans   786    - 
Foreign exchange forward   1,913   Interest income – securities at FVOCI   -    - 
        Interest expenses – deposits   1,135    - 
        Interest expense – borrowings and debt   -    - 
        Gain (loss) on foreign currency exchange   (3,948)   - 
Total   2,476       (2,027)   (14)
                   
Derivatives – net investment hedge                  
Foreign exchange forward   303              
Total   303              

 

29

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

   Nine months ended September 30, 2018 
  

Gain (loss)

recognized in

OCI (effective

portion)

  

Classification of gain

(loss)

 

Gain (loss)

reclassified from

accumulated OCI

to the

consolidated

statement of

profit or loss

  

Gain (loss)

recognized on

derivatives

(ineffective

portion)

 
Derivatives – cash flow hedge                  
Interest rate swaps   (1,969)  Gain (loss) on interest rate swap   -    (3)
Cross-currency swaps   1,561   Gain (loss) on foreign currency exchange   -    (7)
        Interest income – loans   1,204    - 
Foreign exchange forward   9,212   Interest income – securities at FVOCI   -    - 
        Interest expenses – deposits   3,362    - 
        Interest expense – borrowings and debt   -    - 
        Gain (loss) on foreign currency exchange   (6,125)   - 
Total   8,804       (1,559)   (10)
                   
Derivatives – net investment hedge                  
Foreign exchange forward   (1,222)             
Total   (1,222)             

 

30

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

   Three months ended September 30, 2017 
  

Gain (loss)

recognized in

OCI (effective

portion)

  

Classification of gain

(loss)

 

Gain (loss)

reclassified from

accumulated OCI

to the

consolidated

statement of

profit or loss

  

Gain (loss)

recognized on

derivatives

(ineffective

portion)

 
Derivatives – cash flow hedge                  
Interest rate swaps   145   Gain (loss) on interest rate swap   -    (122)
Cross-currency swaps   364   Gain (loss) on foreign currency exchange   -    (20)
        Interest income – loans   (2,068)   - 
Foreign exchange forward   3,752   Interest income – securities at FVOCI   -    - 
        Interest expenses – deposits   (1,444)   - 
        Interest expense – borrowings and debt   -    - 
        Gain (loss) on foreign currency exchange   (1,074)   - 
Total   4,261       (4,586)   (142)

 

31

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

   Nine months ended September 30, 2017 
  

Gain (loss)

recognized in

OCI (effective

portion)

  

Classification of

gain (loss)

 

Gain (loss)

reclassified from

accumulated OCI

to the

consolidated

statement of

profit or loss

  

Gain (loss)

recognized on

derivatives

(ineffective

portion)

 
Derivatives – cash flow hedge                  
Interest rate swaps   (669)  Gain (loss) on interest rate swap   -    162 
Cross-currency swaps   (968)  Gain (loss) on foreign exchange   -    23 
        Interest income – loans   -    - 
Forward foreign exchange   2,622   Interest income – securities at FVOCI   (2,355)   - 
        Interest expenses – deposits   (4,276)   - 
        Interest expense – borrowings and debt   -    - 
        Gain (loss) on foreign currency exchange   (19,649)   - 
Total   985       (26,280)   185 

 

32

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

   Three months ended September 30, 2016 
  

Gain (loss)

recognized in

OCI (effective

portion)

  

Classification of

gain (loss)

 

Gain (loss)

reclassified from

accumulated OCI

to the

consolidated

statement of

profit or loss

  

Gain (loss)

recognized on

derivatives

(ineffective

portion)

 
Derivatives – cash flow hedge                  
Interest rate swaps   784   Gain (loss) on interest rate swap   -    (265)
Cross-currency swaps   (1,776)  Gain (loss) on foreign exchange   -    (86)
        Interest income – loans   (1,371)   - 
Forward foreign exchange   6,517   Interest income – securities at FVOCI   -    - 
        Interest expenses – deposits   496    - 
        Interest expense – borrowings and debt   -    - 
        Gain (loss) on foreign currency exchange   (1,375)   - 
Total   5,525       (2,250)   (351)

 

33

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

   Nine months ended September 30, 2016 
  

Gain (loss)

recognized in

OCI (effective

portion)

  

Classification of

gain (loss)

 

Gain (loss)

reclassified from

accumulated OCI

to the

consolidated

statement of

profit or loss

  

Gain (loss)

recognized on

derivatives

(ineffective

portion)

 
Derivatives – cash flow hedge                  
Interest rate swaps   (1,674)  Gain (loss) on interest rate swap   -    (1,226)
Cross-currency swaps   (13)  Gain (loss) on foreign exchange   -    (60)
        Interest income – loans   -    - 
Forward foreign exchange   4,641   Interest income – securities at FVOCI   -    - 
        Interest income – loans   (3,127)   - 
        Interest expenses – deposits   847    - 
        Interest expense – borrowings and debt   -    - 
        Gain (loss) on foreign currency exchange   3,259    - 
Total   2,954       979    (1,286)

 

For the agreements qualified as fair value hedge, the Bank recognized in the consolidated statement of profit or loss the gain (loss) on the derivative financial instruments and the gain (loss) of the hedged asset or liability related. The details as follows:

 

   Three months ended September 30, 2018
  

Classification in

consolidated statement

of profit or loss

 

Gain (loss) on

derivatives

  

Gain (loss) on

hedge item

   Net gain (loss) 
Derivatives – fair value hedge                  
Interest rate swaps  Interest income – securities at FVOCI   5    97    102 
   Interest income – loans   (65)   870    805 
   Interest expenses – borrowings and debt   (755)   (3,051)   (3,806)
   Derivative financial instruments and hedging   (3,732)   3,835    103 
Cross-currency swaps  Interest income – loans   (151)   345    194 
   Interest expenses – borrowings and debt   (107)   (2,658)   (2,765)
   Derivative financial instruments and hedging   (13,728)   10,850    (2,878)
Total      (18,533)   10,288    (8,245)

 

34

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

   Nine months ended September 30, 2018
  

Classification in

consolidated statement

of profit or loss

 

Gain (loss) on

derivatives

  

Gain (loss) on

hedge item

   Net gain (loss) 
Derivatives – fair value hedge                  
Interest rate swaps  Interest income – securities at FVOCI   (16)   291    275 
   Interest income – loans   (79)   1,030    951 
   Interest expenses – borrowings and debt   (1,310)   (9,150)   (10,460)
   Derivative financial instruments and hedging   (7,157)   7,097    (60)
Cross-currency swaps  Interest income – loans   (639)   1,281    642 
   Interest expenses – borrowings and debt   (9)   (7,193)   (7,202)
   Derivative financial instruments and hedging   (14,900)   13,162    (1,738)
Total      (24,110)   6,518    (17,592)

 

   Three months ended September 30, 2017
  

Classification in

consolidated statement of

profit or loss

 

Gain (loss) on

derivatives

  

Gain (loss) on

hedge item

   Net gain (loss) 
Derivatives – fair value hedge                  
Interest rate swaps  Interest income – securities at FVOCI   (24)   100    76 
   Interest income loans   -    2    2 
   Interest expenses – borrowings and debt   236    (3,013)   (2,777)
   Derivative financial instruments and hedging   (743)   622    (121)
Cross-currency swaps  Interest income loans   (592)   903    311 
   Interest expenses – borrowings and debt   638    (2,805)   (2,167)
   Derivative financial instruments and hedging   2,529    (1,694)   (835)
Total      2,044    (5,885)   (3,841)

 

35

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

   Nine months ended September 30, 2017
  

Classification in

consolidated statement of

profit or loss

 

Gain (loss) on

derivatives

  

Gain (loss) on

hedge item

   Net gain (loss) 
Derivatives – fair value hedge                  
Interest rate swaps  Interest income – securities at FVOCI   (103)   377    274 
   Interest income loans   (12)   160    148 
   Interest expenses – borrowings and debt   1,212    (13,219)   (12,007)
   Derivative financial instruments and hedging   (150)   243    93 
Cross-currency swaps  Interest income loans   (986)   1,619    633 
   Interest expenses – borrowings and debt   1,381    (7,577)   (6,196)
   Derivative financial instruments and hedging   21,746    (22,379)   (633)
Total      23,088    (40,776)   (17,688)

 

   Three months ended September 30, 2016
  

Classification in

consolidated statement of

profit or loss

 

Gain (loss) on

derivatives

  

Gain (loss) on

hedge item

   Net gain (loss) 
Derivatives – fair value hedge                  
Interest rate swaps  Interest income – securities at FVOCI   (145)   407    262 
   Interest income loans   (128)   295    167 
   Interest expenses – borrowings and debt   1,056    (7,067)   (6,011)
   Derivative financial instruments and hedging   (1,965)   2,531    566 
Cross-currency swaps  Interest income loans   (128)   319    191 
   Interest expenses – borrowings and debt   86    (1,911)   (1,825)
   Derivative financial instruments and hedging   1,355    (1,243)   112 
Total      131    (6,669)   (6,538)

 

36

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

   Nine months ended September 30, 2016
  

Classification in

consolidated statement of

profit or loss

 

Gain (loss) on

derivatives

  

Gain (loss) on

hedge item

   Net gain (loss) 
Derivatives – fair value hedge                  
Interest rate swaps  Interest income – securities at FVOCI   (507)   1,243    736 
   Interest income loans   (265)   1,803    1,538 
   Interest expenses – borrowings and debt   3,945    (21,193)   (17,248)
   Derivative financial instruments and hedging   (3,369)   4,329    960 
Cross-currency swaps  Interest income loans   (265)   673    408 
   Interest expenses – borrowings and debt   50    (4,383)   (4,333)
   Derivative financial instruments and hedging   (2,358)   1,970    (388)
Total      (2,769)   (15,558)   (18,327)

 

Derivatives financial position and performance

 

The following tables details the changes of the market value of the underlying item in the statement of financial position related to fair value hedges:

 

   September 30, 2018
Fair value hedges 

Carrying

amount

  

Accumulated

fair value

adjustments

  

Line item in the statement of financial

position

Interest rate risk             
Loans   65,794    (199)  Loans
Issuances   (347,398)   7,296   Short and long-term borrowings and debt
              
Foreign exchange rate risk and interest rate risk:             
Securities at FVOCI   12,060    (761)  Securities at FVOCI
Loans   11,735    (494)  Loans
Issuances   (200,724)   13,656   Short and long-term borrowings and debt
              

 

37

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

Derivatives financial position and performance (continued)

 

   December 31, 2017
Fair value hedges 

Carrying

amount

  

Accumulated

fair value

adjustments

  

Line item in the statement of financial

position

Interest rate risk             
Loans   -    -   Loans
Issuances   355,000    (4,411)  Short and long-term borrowings and debt
              
Foreign exchange rate risk and interest rate risk:             
Securities at FVOCI   12,369    (32)  Securities at FVOCI
Loans   25,027    744   Loans
Issuances   (249,328)   (2,301)  Short and long-term borrowings and debt

 

The following tables details the profile of the timing of the nominal amount of the hedging instrument:

 

   September 30, 2018 
Risk type 

Foreign

Exchange risk

   Interest rate
risk
  

Foreign exchange

and Interest

rate risk

   Total 
Up to 1 month   -    -    -    - 
31 to 60 days   -    77,500    -    77,500 
61 to 90 days   -    -    -    - 
91 to 180 days   52,103    165,000    -    217,103 
181 to 365 days   94,324    96,500    73,193    264,017 
1 to 2 years   101,884    463,000    -    564,884 
2 to 5 years   3,964    89,000    31,142    124,106 
More than 5 years   -    -    68,768    68,768 
Total   252,275    891,000    173,103    1,316,378 

 

38

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

Derivatives financial position and performance (continued)

 

Analysis of maturity of the derivatives by type of risk covered:

 

   December 31, 2017 
Risk type 

Foreign

Exchange risk

  

Interest rate

risk

  

Foreign exchange

and Interest

rate risk

   Total 
Up to 1 month   69,459    -    -    69,459 
31 to 60 days   26,104    -    -    26,104 
61 to 90 days   1,729    185,000    16,821    203,550 
91 to 180 days   16,567    137,500    -    154,067 
181 to 365 days   68,952    202,500    8,127    279,579 
1 to 2 years   178,331    21,500    73,193    273,024 
2 to 5 years   4,413    416,000    24,872    445,285 
More than 5 years   -    -    76,049    76,049 
Total   365,555    962,500    199,062    1,527,117 

 

For control purposes, derivative instruments are recorded at their nominal amount (“notional amount”) in memorandum accounts. Interest rate swaps are made either in a single currency or cross currency for a prescribed period to exchange a series of interest rate flows, which involve fixed for floating interest payments, and vice versa. The Bank also engages in certain foreign exchange trades to serve customers’ transaction needs and to manage foreign currency risk. All such positions are hedged with an offsetting contract for the same currency.

 

The Bank manages and controls the risks on these foreign exchange trades by establishing counterparty credit limits by customer and by adopting policies that do not allow for open positions in the credit and investment portfolio. The Bank also uses foreign currency exchange contracts to hedge the foreign exchange risk associated with the Bank’s equity investment in a non-U.S. dollar functional currency foreign subsidiary. Derivative and foreign exchange instruments negotiated by the Bank are executed mainly over-the-counter (OTC). These contracts are executed between two counterparties that negotiate specific agreement terms, including notional amount, exercise price and maturity.

 

The maximum length of time over which the Bank has hedged its exposure to the variability in future cash flows on forecasted transactions is 5.4 years.

 

The Bank recognized the lifetime associated cost of the foreign exchange forward agreements into interest income, as an adjustment to the yield on hedge items creating an accumulated reserve in OCI, reclassified to profit or loss at its’ maturity. The Bank estimates that approximately $190, are expected to be reclassified into profit or loss during the twelve-month year ending September 30, 2019.

 

The Bank recognized the lifetime associated cost of the foreign exchange forward agreements into interest expense, as an adjustment to the yield on hedge items creating an accumulated reserve in OCI, reclassified to profit or loss at its’ maturity. The Bank estimates that approximately $2,899, are expected to be reclassified into profit or loss during the twelve-month year ending September 30, 2019.

 

39

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Derivative financial instruments for hedging purposes (continued)

 

Types of Derivatives and Foreign Exchange Instruments

 

Interest rate swaps are contracts in which a series of interest rate flows in a single currency are exchanged over a prescribed period. The Bank has designated a portion of these derivative instruments as fair value hedges and a portion as cash flow hedges. Cross currency swaps are contracts that generally involve the exchange of both interest and principal amounts in two different currencies. The Bank has designated a portion of these derivative instruments as fair value hedges and a portion as cash flow hedges. Foreign exchange forward contracts represent an agreement to purchase or sell foreign currency at a future date at agreed-upon terms. The Bank has designated these derivative instruments as cash flow hedges and net investment hedges.

 

Offsetting of financial assets and liabilities

 

In the ordinary course of business, the Bank enters into derivative financial instrument transactions and securities sold under repurchase agreements under industry standards agreements. Depending on the collateral requirements stated in the contracts, the Bank and counterparties can receive or deliver collateral based on the fair value of the financial instruments transacted between parties. Collateral typically consists of cash deposits and securities. The master netting agreements include clauses that, in the event of default, provide for close-out netting, which allows all positions with the defaulting counterparty to be terminated and net settled with a single payment amount.

 

The International Swaps and Derivatives Association master agreement (“ISDA”) and similar master netting arrangements do not meet the criteria for offsetting in the consolidated statement of financial position. This is because they create for the parties to the agreement a right of set-off of recognized amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Bank or the counterparties or following other predetermined events.

 

The following tables summarize financial assets and liabilities that have been offset in the consolidated statement of financial position or are subject to master netting agreements:

 

a)Derivative financial instruments – assets

 

September 30, 2018
      

Gross amounts

offset in the

consolidated

  

Net amount of

assets presented

in the

  

Gross amounts not offset in
the consolidated statement

of financial position

     
Description 

Gross

amounts

assets

  

statement of

financial

position

  

consolidated

statement of

financial position

  

Financial

instruments

  

Cash

collateral

received

  

Net

Amount

 
Derivative financial instruments used for hedging – receivable – at fair value   3,391    -    3,391    -    (2,188)   1,203 
Total   3,391    -    3,391    -    (2,188)   1,203 

 

40

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Offsetting of financial assets and liabilities (continued)

 

a)Derivative financial instruments – assets (continued)

 

December 31, 2017
      

Gross amounts

offset in the

consolidated

  

Net amount of

assets presented

in the

  

Gross amounts not offset in

the consolidated statement of

financial position

     
Description 

Gross

amounts

assets

  

statement of

financial

position

  

consolidated

statement of

financial position

  

Financial

instruments

  

Cash

collateral

received

  

Net

Amount

 
Derivative financial instruments used for hedging – receivable – at fair value   13,338    -    13,338    -    (22,304)   (8,966)
Total   13,338    -    13,338    -    (22,304)   (8,966)

 

The following table presents the reconciliation of assets that have been offset or are subject to master netting agreements to individual line items in the consolidated statement of financial position:

 

   September 30, 2018 
Description 

Gross amounts

of assets

  

Gross amounts

offset in the

consolidated

statement of

financial position

  

Net amount of assets

presented

in the consolidated

statement of

financial position

 
Derivative financial instruments used for hedging – receivable – at fair value   3,391    -    3,391 
Total   3,391    -    3,391 

 

   December 31, 2017 
Description 

Gross amounts

of assets

  

Gross amounts

offset in the

consolidated

statement of

financial position

  

Net amount of assets

presented

in the consolidated

statement of

financial position

 
Derivative financial instruments used for hedging – receivable – at fair value   13,338    -    13,338 
Total   13,338    -    13,338 

 

41

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial instruments (continued)

 

Offsetting of financial assets and liabilities (continued)

 

b)Financial liabilities and derivative financial instruments – liabilities

 

September 30, 2018
   Gross   

Gross

amounts

offset in the

consolidated

  

Net amount

of liabilities

presented

in the

consolidated

  

Gross amounts not offset

in the consolidated

statement of financial

position

     
Description 

amounts

of

liabilities

  

statement of

financial

position

  

statement of

financial

position

  

Financial

instruments

  

Cash

collateral

pledged

  

Net

Amount

 
                         
Derivative financial instruments used for hedging – payable – at fair value   26,394    -    26,394    -    (24,421)   1,973 
Total   26,394    -    26,394    -    (24,421)   1,973 

 

December 31, 2017
   Gross  

Gross

amounts

offset in the

consolidated

  

Net amount

of liabilities

presented

in the

consolidated

  

Gross amounts not offset

in the consolidated

statement of financial

position

     
Description 

amounts

of

liabilities

  

statement of

financial

position

  

statement of

financial

position

  

Financial

instruments

  

Cash

collateral

pledged

  

Net

Amount

 
                         
Derivative financial instruments used for hedging – payable – at fair value   34,943    -    34,943    -    (50,241)   (15,298)
Total   34,943    -    34,943    -    (50,241)   (15,298)

 

42

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Financial Instruments (continued)

 

Offsetting of financial assets and liabilities (continued)

 

b)Financial liabilities and derivative financial instruments – liabilities (continued)

 

The following table presents the reconciliation of liabilities that have been offset or are subject to master netting agreements to individual line items in the consolidated statement of financial position:

 

   September 30, 2018 
Description 

Gross amounts

of liabilities

  

Gross amounts

offset in the

consolidated

statement of

financial position

  

Net amount of

liabilities presented

in the consolidated

statement of

financial position

 
Derivative financial instruments:               
Derivative financial instruments used for hedging – payable – at fair value   26,394    -    26,394 
Total derivative financial instruments   26,394    -    26,394 

 

   December 31, 2017 
Description 

Gross amounts

of liabilities

  

Gross amounts

offset in the

consolidated

statement of

financial position

  

Net amount of

liabilities presented

in the consolidated

statement of

financial position

 
Derivative financial instruments:               
Derivative financial instruments used for hedging – payable – at fair value   34,943    -    34,943 
Total derivative financial instruments   34,943    -    34,943 

 

43

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
Notes to the unaudited condensed consolidated interim financial statements
(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

6.Loans commitments and financial guarantees contracts

 

In the normal course of business, to meet the financing needs of its customers, the Bank is party to loans commitments and financial guarantees contracts. These instruments involve, to varying degrees, elements of credit and market risk more than the amount recognized in the consolidated statement of financial position. Credit risk represents the possibility of loss resulting from the failure of a customer to perform in accordance with the terms of a contract.

 

The Bank’s outstanding loans commitments and financial guarantees contracts are as follows:

 

  

September 30,

2018

  

December 31,

2017

 
Confirmed letters of credit   194,891    273,449 
Stand-by letters of credit and guaranteed –  Commercial risk   145,401    168,976 
Credit commitments   215,548    45,578 
Total   555,840    488,003 

 

The remaining maturity profile of the Bank’s outstanding loans commitments and financial guarantees contracts is as follows:

 

Maturities 

September 30,

2018

  

December 31,

2017

 
Up to 1 year   433,239