Edgar Filing: FOREIGN TRADE BANK OF LATIN AMERICA, INC.

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

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.

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.

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.

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.

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.

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)

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”).

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)

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.

Basis of preparation of the consolidated financial statements

2.1

Statement 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.

2.2

Reclassification

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.

Summary of new significant accounting policies

3.1

Investment 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.

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)

Summary of new significant accounting policies (continued)

3.1

Investment 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.

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.

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)

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.

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)

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	)

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)

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

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)

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).

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)

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).

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)

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.

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)

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.

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)

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).

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)

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).

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)

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.

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)

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.

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)

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

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)

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

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)

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

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)

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.

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)

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).

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)

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).

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)

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.

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)

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

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)

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	)

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)

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	)

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)

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

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)

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	)

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)

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	)

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)

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	)

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)

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	)

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)

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

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)

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

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)

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.

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)

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:

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

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)

Financial instruments (continued)

Offsetting of financial assets and liabilities (continued)

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

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)

Financial instruments (continued)

Offsetting of financial assets and liabilities (continued)

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	)

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)

Financial Instruments (continued)

Offsetting of financial assets and liabilities (continued)

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

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)

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