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, 2016

 

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 1, 2016

 

  FOREIGN TRADE BANK OF LATIN AMERICA, INC.
  (Registrant)

 

  By: /s/ Pierre Dulin
     
  Name: Pierre Dulin
  Title:    General Manager

 

   

 

 

Banco Latinoamericano

de Comercio Exterior, S.A.

and Subsidiaries

 

Unaudited condensed consolidated interim statement of financial position as of September 30, 2016 and December 31, 2015, 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 equity and unaudited condensed consolidated interim statements of cash flows for the nine months ended September 30, 2016 and 2015.

 

   

 

 

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 equity   6
     
Unaudited condensed consolidated interim statements of cash flows   7
     
Notes to the unaudited condensed consolidated interim financial statements   8-69

 

  2 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
 
Unaudited condensed consolidated interim statement of financial position
September 30, 2016 and December 31, 2015
(In US$ thousand)

 

     September 30,   December 31, 
   Notes  2016   2015 
Assets             
Cash and cash equivalents  3,13   754,876    1,299,966 
Financial Instruments:  4,13          
At fair value through profit or loss  4.1,4.2, 13   28    53,411 
At fair value through OCI  4.3,13   55,703    141,803 
Securities at amortized cost, net  4.4,13   88,866    108,215 
Loans at amortized cost  4.6   6,393,382    6,691,749 
Less:             
Allowance for expected credit losses  4.6   106,335    89,974 
Unearned interest and deferred fees  4.6   8,695    9,304 
Loans at amortized cost, net      6,278,352    6,592,471 
              
At fair value - Derivative financial instruments used for hedging – receivable  4.8,4.9,13   27,369    7,400 
              
Property and equipment, net      6,654    6,173 
Intangibles, net      3,086    427 
              
Other assets:             
Customers' liabilities under acceptances  13   1,715    15,100 
Accrued interest receivable  13   45,296    45,456 
Other assets  5   25,135    15,794 
Total of other assets      72,146    76,350 
Total assets      7,287,080    8,286,216 
              
Liabilities and stockholders' equity             
Deposits:  6,13          
Noninterest-bearing - Demand      1,325    639 
Interest-bearing - Demand      251,211    243,200 
Time      2,873,469    2,551,630 
Total deposits      3,126,005    2,795,469 
              
At fair value – Derivative financial instruments used for hedging – payable  4.8,4.9,13   34,652    29,889 
              
Financial liabilities at fair value through profit or loss  4.1,4.9,13   -    89 
Securities sold under repurchase agreement  4.9,7,13   101,403    114,084 
Short-term borrowings and debt  8.1,13   1,132,488    2,430,357 
Long-term borrowings and debt, net  8.2,13   1,831,372    1,881,813 
              
Other liabilities:             
Acceptances outstanding  13   1,715    15,100 
Accrued interest payable  13   22,000    17,716 
Allowance for expected credit losses on off-balance sheet credit risk  4.7   5,366    5,424 
Other liabilities  9   21,208    24,344 
Total other liabilities      50,289    62,584 
Total liabilities      6,276,209    7,314,285 
              
Stockholders' equity:  10,11,14          
Common stock      279,980    279,980 
Treasury stock  11   (69,185)   (73,397)
Additional paid-in capital in excess of assigned value of common stock      120,011    120,177 
Capital reserves      95,210    95,210 
Retained earnings      589,239    560,642 
Accumulated other comprehensive loss  4.3,4.8,14   (4,384)   (10,681)
Total stockholders' equity      1,010,871    971,931 
Total liabilities and stockholders' equity      7,287,080    8,286,216 

 

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, 2016 and 2015
(In US$ thousand, except per share amounts)

 

      Three months ended
September 30,
   Nine months ended
September 30,
 
   Notes  2016   2015   2016   2015 
                    
Interest income:  4.8                    
Deposits      1,142    564    3,206    1,484 
At fair value through OCI      457    1,355    1,956    4,944 
At amortized cost      61,218    53,789    179,286    155,758 
Total interest income      62,817    55,708    184,448    162,186 
Interest expense:  4.8                    
Deposits      5,329    3,287    14,970    8,478 
Short-term borrowings and debt      3,642    4,864    12,232    17,344 
Long-term borrowings and debt      14,026    10,488    39,722    28,663 
Total interest expense      22,997    18,639    66,924    54,485 
                        
Net interest income      39,820    37,069    117,524    107,701 
                        
Other income:                       
Fees and commissions, net      3,371    7,461    10,178    12,870 
Derivate financial instruments and foreign currency exchange  4.8   204    (902)   (135)   (397)
(Loss) Gain per financial instrument at fair value through profit or loss      (324)   7,709    (4,091)   8,009 
(Loss) Gain per financial instrument at fair value through OCI      69    (65)   (246)   364 
Gain on sale of loans at amortized cost      87    208    490    720 
Other income      150    498    1,057    1,030 
Net other income      3,557    14,909    7,253    22,596 
                        
Total income      43,377    51,978    124,777    130,297 
                        
Expenses:                       
Impairment (recovery) loss from expected credit losses on loans at amortized cost  4.6   5,077    8,761    17,186    15,380 
Impairment (recovery) loss from expected credit losses on investment securities  4.3,4.4   (210)   (286)   276    543 
(Recovery) Impairment loss from expected credit losses on loans commitments and financial guarantees contracts  4.7   (725)   (6,740)   (59)   (5,069)
Salaries and other employee expenses      6,230    7,466    19,008    23,189 
Depreciation of equipment and leasehold improvements      376    338    1,039    1,063 
Amortization of intangible assets      222    125    425    447 
Professional services      1,290    1,206    2,614    3,182 
Maintenance and repairs      480    376    1,353    1,211 
Other expenses      2,646    3,360    9,234    9,593 
Total expenses      15,386    14,606    51,076    49,539 
                        
Profit for the period      27,991    37,372    73,701    80,758 
                        
Earnings per share:                       
                        
Basic  10   0.72    0.96    1.89    2.08 
Diluted  10   0.71    0.96    1.88    2.07 
Weighted average basic shares  10   39,102    38,969    39,059    38,909 
Weighted average diluted shares  10   39,225    39,095    39,178    39,080 

 

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 nine months ended September 30, 2016 and 2015
(In US$ thousand)

 

   Notes  2016   2015 
            
Profit for the period      73,701    80,758 
Other comprehensive income (loss):             
Items that are or may be reclassified to consolidated statement of profit or loss:             
Net change in unrealized losses on financial instruments at fair value through OCI  14   8,250    (3,582)
Net change in unrealized losses on derivative financial instruments  14   (1,953)   (2,151)
Other comprehensive income (loss)  14   6,297    (5,733)
              
Total comprehensive income for the period      79,998    75,025 

 

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 equity
For the nine months ended September 30, 2016 and 2015
(In US$ thousand)

 

   Common stock   Treasury stock   Additional paid-
in capital in
excess of
assigned value
of common
stock
   Capital
reserves
   Retained
earnings
   Accumulated
other
comprehensive
income (loss)
   Total 
                             
Balances at January 1, 2015   279,980    (77,627)   119,644    95,210    501,669    (7,837)   911,039 
Profit for the period   -    -    -    -    80,758    -    80,758 
Other comprehensive income   -    -    -    -    -    (5,733)   (5,733)
Issuance of restricted stock   -    1,259    (1,259)   -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    2,457    -    -    -    2,457 
Exercised options and stock units vested   -    2,971    (1,504)   -    -    -    1,467 
Dividends declared   -    -    -    -    (30,005)   -    (30,005)
Balances at September 30, 2015   279,980    (73,397)   119,338    95,210    552,422    (13,570)   959,983 
                                    
Balances at January 1, 2016   279,980    (73,397)   120,177    95,210    560,642    (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   -    2,953    (1,387)   -    -    -    1,566 
Dividends declared   -    -    -    -    (45,104)   -    (45,104)
Balances at September 30, 2016   279,980    (69,185)   120,011    95,210    589,239    (4,384)   1,010,871 

 

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, 2016 and 2015
(In US$ thousand)

 

   2016   2015 
         
Cash flows from operating activities          
Profit for the period   73,701    80,758 
Adjustments to reconcile profit for the period to net cash provided by operating activities:          
Activities of derivative financial instruments and hedging   (18,947)   (22,245)
Depreciation of equipment and leasehold improvements   1,039    1,094 
Amortization of intangible assets   425    416 
Impairment loss from expected credit losses   17,408    (10,854)
Net gain (loss) on sale of financial assets at fair value through OCI   246    (363)
Compensation cost - share-based payment   2,480    2,457 
Interest income   (184,453)   (162,186)
Interest expense   66,924    54,485 
Net decrease (increase) in operating assets:          
Net decrease (increase) in pledged deposits   (3,385)   5,355 
Financial instruments at fair value through profit or loss   53,383    (1,850)
Net decrease (increase) in loans at amortized cost   298,665    (55,573)
Other assets   4,044    110,146 
Net increase (decrease) in operating liabilities:          
Net increase due to depositors   330,536    608,814 
Financial liabilities at fair value through profit or loss   (89)     
Other liabilities   (16,850)   (129,390)
Cash provided by operating activities:          
Interest received   184,608    171,631 
Interest paid   (62,640)   (46,812)
Net cash provided by operating activities   747,095    605,883 
           
Cash flows from investing activities:          
Acquisition of equipment and leasehold improvements   (1,520)   (427)
Acquisition of intangible assets   (3,084)   - 
Proceeds from the redemption of of financial instruments at fair value through OCI   77,286    126,090 
Proceeds from the sale of financial instruments at fair value through OCI   107,888    68,099 
Proceeds from maturities of financial instruments at amortized cost   44,075    29,923 
Purchases of financial instruments at fair value through OCI   (91,972)   (87,692)
Purchases of financial instruments at amortized cost   (23,713)   (35,082)
Net cash provided by investing activities   108,960    100,911 
           
Cash flows from financing activities:          
Net decrease in short-term borrowings and debt and securities sold under repurchase agreements   (1,310,550)   (931,125)
Proceeds from long-term borrowings and debt   374,859    811,276 
Repayments of long-term borrowings and debt   (425,301)   (429,004)
Dividends paid   (45,104)   (30,005)
Exercised stock options   1,566    1,467 
Net cash used in financing activities   (1,404,530)   (577,391)
           
Net (decrease) increase in cash and cash equivalents   (548,475)   129,403 
Cash and cash equivalents at beginning of the period   1,267,302    741,305 
Cash and cash equivalents at end of the period   718,827    870,708 

 

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 Superintendency 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 two subsidiaries: Bladex Representacao Ltda. and Bladex Investimentos 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 Brazilian Securities Commission (“CVM”, for its acronym in Portuguese). Bladex Investimentos Ltda. merged with Bladex Representacao Ltda. on April 2016, being the latter 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.

 

  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)

 

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”).

 

The Bank has representative offices in Buenos Aires, Argentina; in Mexico City, and Monterrey, Mexico; 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 18, 2016.

 

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 of 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, 2015, 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.Future changes in applicable accounting policies

 

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Bank financial statements are disclosed below. The Bank intends to adopt these standards, if applicable, when they become effective.

 

IFRS 16 Leases

 

IFRS 16 was issued in January 2016 and sets out the principles for the recognition, measurement, presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant information in a manner that faithfully represents those transactions. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.

 

IFRS 16 is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16.  IFRS 16 supersedes IAS 17 – Leases. The Bank is evaluating the potential impact of this new standard in its consolidated financial statements.

 

  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.Cash and cash equivalents

 

  

September 30,

2016

   December 31,
2015
 
         
Cash and due from banks   287,044    2,601 
Interest-bearing deposits in banks   467,832    1,297,365 
Total   754,876    1,299,966 
           
Less:          
Pledged deposits   36,049    32,664 
Total cash and cash equivalents   718,827    1,267,302 

 

Interest-bearing deposits in banks

 

Demand deposits

 

As of September 30, 2016 and December 31, 2015, cash in banks balances correspond to bank deposits, bearing interest based on the daily rates determined by banks for between 0.01% and 0.40% and 0.01% and 0.35%, respectively.

 

Time deposits

 

As of September 30, 2016 and December 31, 2015, cash equivalents balances correspond to demand deposits (overnight), bearing an average interest rate of 0.50% to 0.57% and 0.40% to 0.52%, respectively.

 

On September 30, 2016 and December 31, 2015 the New York Agency had a pledged deposit with a carrying value of $2.8 million and $3.3 million, respectively, with the New York State Banking Department, as required by law since March 1994.

 

As of September 30, 2016 and December 31, 2015, the Bank had pledged deposits with a carrying value of $33.2 million and $29.3 million, respectively, to secure derivative financial instruments transactions and repurchase agreements.

 

4.Financial instruments

 

4.1Financial instruments at FVTPL - Fair value through profit or loss

 

The fair value of financial liabilities at FVTPL is as follows:

 

  

September 30,
2016

   December 31,
2015
 
Assets        
Foreign exchange forward   28    - 
Total   28    - 
           
Liabilities          
Interest rate swaps   -    15 
Foreign exchange forward   -    74 
Total   -    89 

 

  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)

 

4.Financial instruments

 

4.1Financial instruments at FVTPL - Fair value through profit or loss (continued)

 

As of September 30, 2016 and December 31, 2015, information on the nominal amounts of derivative financial instruments at FVTPL is as follows:

 

   September 30, 2016   December 31, 2015 
   Nominal   Fair Value   Nominal   Fair Value 
   Amount   Asset   Liability   Amount   Asset   Liability 
Interest rate swaps   -    -    -    14,000    -    15 
Foreign exchange forward   1,878    28    -    1,675    -    74 
Total   1,878    28    -    15,675    -    89 

 

4.2Investment Funds at FVTPL - Fair value through profit or loss

 

The Bank maintained an investment in the Alpha4X Feeder Fund (the “Feeder”) which was organized under a “Feeder-Master” structure. Under this structure, the Feeder invested all of its assets in the Master which in turn invested in various assets on behalf of its investor. At December 31, 2015, the investment funds consisted of the net asset value (NAV) of Bladex’s investment in the Feeder and in the Brazilian Fund.

 

The changes of the Bank´s investment in the Feeder were recorded in the consolidated statement of profit or loss of that fund in the “Gain (loss) per financial instruments at fair value through profit and loss” line item. The Feeder is not consolidated in the Bank’s financial statements as a result of the evaluation of control as per IFRS 10 “Consolidated Financial Statements” according to which the existing rights on the fund did not give the Bank the ability to direct the relevant activities of the fund nor the ability to use its power over the investee to affect its return. At December 31, 2015 the Bank had a participation in that fund of 47.71%.

 

Bladex also reported the changes in the NAV of the Brazilian Fund in the “Gain (loss) per financial instruments at fair value through profit and loss" line item, which the Bank did not consolidate, because the existing rights on this fund did not give the Bank the ability to direct its relevant activities nor the ability to use its power over the investee to affect its return. This investment was adjusted to recognize the Bank's participation in the profits and losses of the fund in the line “gain (loss) per financial instruments at fair value through profit or loss” of the consolidated statement of profit or loss.

 

The following table summarizes the balances of investments in investment funds:

 

  

September 30,

2016

   December 31,
2015
 
Alpha4X Feeder Fund   -    49,585 
Alpha4X Latam Fundo de Investimento and Multimercado   -    3,826 
    -    53,411 

 

The Bank remained committed to being an investor of these funds until March 31, 2016 and was later redeemed completely.

 

  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)

 

4.Financial instruments (continued)

 

4.3Securities at fair value through other comprehensive income

 

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

 

   September 30, 2016 
   Amortized   Unrealized     
   Cost   Gain   Loss   Fair Value 
Corporate debt:                    
Brazil   5,253    -    53    5,200 
Peru   4,247    176    -    4,423 
Venezuela   18,265    769    -    19,034 
    27,765    945    53    28,657 
Sovereign debt:                    
Brazil   8,221    -    131    8,090 
Chile   5,241    120    -    5,361 
Colombia   4,509    71    -    4,580 
Trinidad and Tobago   9,389    -    374    9,015 
    27,360    191    505    27,046 
    55,125    1,136    558    55,703 

 

  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)

 

4.Financial instruments (continued)

 

4.3Securities at fair value through other comprehensive income (continued)

 

   December 31, 2015 
   Amortized   Unrealized     
   Cost   Gain   Loss   Fair Value 
Corporate debt:                    
Brazil   31,831    -    3,000    28,831 
Chile   8,205    -    209    7,996 
Colombia   17,815    -    7,110    10,705 
Honduras   7,195    -    61    7,134 
Panama   4,648    -    73    4,575 
Peru   7,339    -    64    7,275 
Venezuela   18,392    -    93    18,299 
    95,425    -    10,610    84,815 
                     
Sovereign debt:                    
Brazil   11,625    -    1,285    10,340 
Chile   10,536    -    323    10,213 
Colombia   12,046    -    670    11,376 
Mexico   17,272    -    681    16,591 
Trinidad and Tobago   9,705    -    1,237    8,468 
    61,184    -    4,196    56,988 
    156,609    -    14,806    141,803 

 

As of September 30, 2016 and December 31, 2015 securities at fair value through OCI with a carrying value of $52.9 million and $87.6 million, respectively, were pledged to secure repurchase transactions accounted for as secured financings.

 

  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)

 

4.Financial instruments (continued)

 

4.3Securities at fair value through other comprehensive income (continued)

 

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

 

   September 30, 2016 
   Less than 12 months   12 months or longer   Total 
   Fair
Value
   Unrealized
Gross Losses
   Fair
Value
   Unrealized
Gross Losses
   Fair
Value
   Unrealized
Gross Losses
 
Corporate debt   -    -    5,200    53    5,200    53 
Sovereign debt   -    -    17,105    505    17,105    505 
Total   -    -    22,305    558    22,305    558 

 

   December 31, 2015 
   Less than 12 months   12 months or longer   Total 
   Fair
Value
   Unrealized
Gross Losses
   Fair
Value
   Unrealized
Gross Losses
   Fair
Value
   Unrealized
 Gross Losses
 
Corporate debt   63,611    1,010    21,204    9,600    84,815    10,610 
Sovereign debt   23,468    846    33,520    3,350    56,988    4,196 
Total   87,079    1,856    54,724    12,950    141,803    14,806 

 

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

 

  

Three months ended

September 30,

  

Nine months ended

September 30,

 
   2016   2015   2016   2015 
Realized gain on sale of securities   72    30    7,544    466 
Realized loss on sale of securities   (3)   (95)   (7,790)   (102)
Net gain (loss) on sale of securities at fair value through other comprehensive income   69    (65)   (246)   364 

 

  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)

 

4.Financial instruments (continued)

 

4.3Securities at fair value through other comprehensive income (continued)

 

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

 

Rating(1)  September 30,
2016
   December 31,
2015
 
1-4   55,703    133,989 
5-6   -    6,224 
7   -    1,590 
8   -    - 
9   -    - 
10   -    - 
Total   55,703    141,803 

 

(1) Current ratings as of September 30, 2016 and December 31, 2015, respectively.

 

The amortized cost and fair value of securities at fair value through other comprehensive income by contractual maturity as of September 30, 2016 and December 31, 2015 are shown in the following tables:

 

   September 30, 2016 
   Amortized Cost   Fair Value 
Due within 1 year   21,188    21,866 
After 1 year but within 5 years   28,639    28,579 
After 5 years but within 10 years   5,298    5,258 
    55,125    55,703 

 

   December 31, 2015 
   Amortized Cost   Fair Value 
Due within 1 year   21,068    20,212 
After 1 year but within 5 years   79,689    69,625 
After 5 years but within 10 years   55,852    51,966 
    156,609    141,803 

 

  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)

 

4.Financial instruments (continued)

 

4.3Securities at fair value through other comprehensive income (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)
(collectively
assessed)
   Stage 2 (2)
(individually
assessed)
   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2015   234    178    -    6,737    7,149 
Transfer to lifetime expected credit losses   (30)   456    -    -    426 
Transfer to credit-impaired financial assets   -    -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    -    - 
Net effect of changes in reserve for expected credit losses   (2)   (107)   -    -    (109)
Financial assets that have been derecognized during the period   (162)   (67)   -    (6,737)   (6,966)
Changes due to financial instruments recognized as of December 31, 2015:   (194)   282    -    (6,737)   (6,649)
New financial assets originated or purchased   28    -    -    -    28 
Allowance for expected credit losses as of September 30, 2016   68    460    -    -    528 

 

   Stage 1 (1)   Stage 2 (2)
(collectively
assessed)
   Stage 2 (2)
(individually
assessed)
   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2014   701    1,408    -    -    2,109 
Transfer to lifetime expected credit losses   (5,507)   5,507    -    -    - 
Transfer to credit-impaired financial assets   -    (6,737)   -    6,737    - 
Transfer to 12-month expected credit losses   -    -    -    -    - 
Financial assets that have been derecognized during the period   (277)   -    -    -    (277)
Changes due to financial instruments recognized as of December 31, 2014:   (5,784)   (1,230)   -    6,737    (277)
New financial assets originated or purchased   5,317    -    -    -    5,317 
Allowance for expected credit losses as of December 31, 2015   234    178    -    6,737    7,149 

 

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

 

  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)

 

4.Financial instruments (continued)

 

4.4Securities at amortized cost

 

The amortized cost, related unrealized gross gain (loss) and fair value of these securities by country risk and type of debt are as follows:

 

   September 30, 2016 
   Amortized   Unrealized     
   Cost (1)  

Gross Gain

  

Gross Loss

   Fair Value 
Corporate debt:                    
Brazil   4,623    -    84    4,539 
Panama   3,000    -    -    3,000 
    7,623    -    84    7,539 
                     
Sovereign debt:                    
Brazil   11,223    18    203    11,038 
Colombia   30,009    378    -    30,387 
Mexico   31,944    -    577    31,367 
Panama   8,721    147    -    8,868 
    81,897    543    780    81,660 
    89,520    543    864    89,199 

 

   December 31, 2015 
   Amortized   Unrealized     
   Cost (2)  

Gross Gain

  

Gross Loss

   Fair Value 
Corporate debt:                    
Brazil   1,484    -    383    1,101 
Costa Rica   5,000    -    -    5,000 
Panama   20,008    45    -    20,053 
    26,492    45    383    26,154 
Sovereign debt:                    
Brazil   21,903    -    3,260    18,643 
Colombia   30,599    -    1,530    29,069 
Mexico   20,871    -    1,684    19,187 
Panama   8,876    4    -    8,880 
    82,249    4    6,474    75,779 
    108,741    49    6,857    101,933 

 

(1)Amounts do not include allowance for expected credit losses of US$654.
(2)Amounts do not include allowance for expected credit losses of US$526.

 

  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)

 

4.Financial instruments (continued)

 

4.4Securities at amortized cost (continued)

 

The amortized cost and fair value of securities at amortized cost by contractual maturity as of September 30, 2016 and December 31, 2015, gross of reserve for expected credit losses, are shown in the following tables:

 

   September 30, 2016 
  

Amortized

Cost

  

Fair

Value

 
         
Due within 1 year   4,009    4,027 
After 1 year but within 5 years   80,206    79,903 
After 5 years but within 10 years   5,305    5,269 
    89,520    89,199 

 

   December 31, 2015 
  

Amortized

Cost

  

Fair

Value

 
         
Due within 1 year   28,454    28,474 
After 1 year but within 5 years   43,236    39,206 
After 5 years but within 10 years   37,051    34,253 
    108,741    101,933 

 

As of September 30, 2016 and December 31, 2015 securities at amortized cost with a carrying value of $79.3 million and $56.3 million, respectively, were pledged to secure repurchase transactions accounted for as secured financings.

 

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

 

Rating(1) 

September 30,

2016

   December 31,
2015
 
1-4   88,037    94,257 
5-6   1,483    14,484 
7   -    - 
8   -    - 
9   -    - 
10   -    - 
Total   89,520    108,741 

 

(1)Current ratings as of September 30, 2016 and December 31, 2015, respectively.

 

  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)

 

4.Financial instruments (continued)

 

4.4Securities 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)
(collectively
assessed)
   Stage 2 (2)
(individually
assessed)
   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2015   348    178    -    -    526 
Transfer to lifetime expected credit losses   (43)   444    -    -    401 
Transfer to credit-impaired financial assets   -    -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    -    - 
Net effect of changes in reserve for expected credit losses   7    (66)   -    -    (59)
Financial assets that have been derecognized during the period   (302)   (28)   -    -    (330)
Changes due to financial instruments recognized as of December 31, 2015:   (338)   350    -    -    12 
New financial assets originated or purchased   116    -    -    -    116 
Allowance for expected credit losses as of September 30, 2016   126    528    -    -    654 

 

   Stage 1 (1)   Stage 2 (2)
(collectively
assessed)
   Stage 2 (2)
(individually
assessed)
   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2014   276    -    -    -    276 
Transfer to lifetime expected credit losses   (178)   178    -    -    - 
Transfer to credit-impaired financial assets   -    -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    -    - 
Financial assets that have been derecognized during the period   (207)   -    -    -    (207)
Changes due to financial instruments recognized as of December 31, 2014:   (385)   178    -    -    (207)
New financial assets originated or purchased   457    -    -    -    457 
Allowance for expected credit losses as of December 31, 2015   348    178    -    -    526 

 

(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)

 

4.Financial instruments (continued)

 

4.5Recognition and derecognition of financial assets

 

During the period ended September 30, 2016 and 2015, the Bank sold certain financial instruments measured at amortized cost. These sales were made on the basis of 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 on sale of loans” in the consolidated statement of profit or loss.

 

   Assignments and
Participations
   Gains 
         
For the period ended September 30, 2016   84,075    435 
For the period ended September 30, 2015   63,938    336 

 

4.6Loans – at amortized cost

 

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

 

  

September 30,

2016

   December 31,
2015
 
Corporations:          
Private   2,895,070    3,254,792 
State-owned   909,145    461,573 
Banking and financial institutions:          
Private   1,709,638    1,974,960 
State-owned   557,163    612,677 
Middle-market companies:          
Private   322,366    387,747 
Total   6,393,382    6,691,749 

 

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

 

  

September 30,

2016

   December 31,
2015
 
Banking and financial institutions   2,266,801    2,587,637 
Industrial   1,163,907    1,142,385 
Oil and petroleum derived products   1,124,504    828,355 
Agriculture   1,034,418    1,140,124 
Services   502,960    670,013 
Mining   60,000    110,655 
Others   240,792    212,580 
Total   6,393,382    6,691,749 

 

  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)

 

4.Financial instruments (continued)

 

4.6Loans – at amortized cost (continued)

 

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.

 

The unearned discount interest and deferred commission amounted to $8,695 and $9,304 at September 30, 2016 and December 31, 2015, respectively

 

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

 

September 30, 2016
   Corporations   Banking and financial
institutions
   Middle-market
companies
     
Rating(1)  Private   State-owned   Private   State-owned   Private   Total 
1-4   1,980,670    748,040    1,456,785    250,304    177,004    4,612,803 
5-6   861,636    161,105    252,853    306,859    110,362    1,692,815 
7   38,400    -    -    -    -    38,400 
8   -    -    -    -    35,000    35,000 
9   10,056    -    -    -    -    10,056 
10   4,308    -    -    -    -    4,308 
Total   2,895,070    909,145    1,709,638    557,163    322,366    6,393,382 

 

December 31, 2015
   Corporations   Banking and financial
institutions
   Middle-market
companies
     
Rating(1)  Private   State-owned   Private   State-owned   Private   Total 
1-4   2,644,758    351,216    1,757,668    309,559    212,746    5,275,947 
5-6   558,612    110,357    217,292    303,118    174,094    1,363,473 
7   46,716    -    -    -    -    46,716 
8   -    -    -    -    -    - 
9   -    -    -    -    -    - 
10   4,706    -    -    -    907    5,613 
Total   3,254,792    461,573    1,974,960    612,677    387,747    6,691,749 

 

(1)Current ratings as of September 30, 2016 and December 31, 2015, 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)

 

4.Financial instruments (continued)

 

4.6Loans – at amortized cost (continued)

 

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

 

  

September 30,

2016

  

December 31,

2015

 
Country:          
Argentina   297,105    142,437 
Belgium   -    12,629 
Bermuda   -    19,600 
Bolivia   19,199    19,911 
Brazil   1,182,946    1,605,497 
Chile   145,177    195,290 
Colombia   673,754    620,547 
Costa Rica   434,363    341,490 
Dominican Republic   179,116    384,353 
Ecuador   194,989    169,164 
El Salvador   117,270    68,465 
France   1,500    6,000 
Germany   65,000    97,000 
Guatemala   374,959    457,700 
Honduras   91,643    118,109 
Jamaica   35,578    16,520 
Mexico   812,691    788,893 
Nicaragua   32,043    16,820 
Panama   480,312    455,405 
Paraguay   113,683    116,348 
Peru   605,923    511,250 
Singapore   50,552    11,655 
Switzerland   38,000    44,650 
Trinidad and Tobago   185,022    200,000 
United States of America   66,557    53,516 
Uruguay   196,000    218,500 
Total   6,393,382    6,691,749 

 

  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)

 

4.Financial instruments (continued)

 

4.6Loans – at amortized cost (continued)

 

The remaining loan maturities are summarized as follows:

 

  

September 30,

2016

  

December 31,

2015

 
Current:          
Up to 1 month   983,436    1,031,608 
From 1 month to 3 months   1,203,625    1,336,901 
From 3 months to 6 months   1,430,788    1,094,885 
From 6 months to 1 year   1,032,822    1,170,114 
From 1 year to 2 years   835,098    1,000,553 
From 2 years to 5 years   783,283    967,416 
More than 5 years   36,566    37,943 
    6,305,618    6,639,420 
Delinquent   4,000    - 
Impaired   83,764    52,329 
Total   6,393,382    6,691,749 

 

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

 

  

September 30,

2016

  

December 31,

2015

 
         
Fixed interest rates   2,964,135    3,177,147 
Floating interest rates   3,429,247    3,514,602 
Total   6,393,382    6,691,749 

 

As of September 30, 2016 and December 31, 2015, 86% and 90%, respectively, of the loan portfolio at fixed interest rates have remaining maturities of less than 180 days.

 

An analysis of credit- impaired balances as of September 30, 2016 and December 31, 2015 is detailed as follows:

 

   September 30, 2016   2016 
   Recorded
investment
   Unpaid
principal
balance
   Related
allowance
Stage 3
   Average
principal
 loan
balance
   Interest
 income
recognized
 
With an allowance recorded:                         
Private corporations   48,764    26,762    33,993    21,591    321 
Middle-market companies   35,000    35,000    8,750    13,103    1,240 
Total   83,764    61,762    42,743    34,694    1,561 

 

  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)

 

4.Financial instruments (continued)

 

4.6Loans – at amortized cost (continued)

 

   December 31, 2015   2015 
   Recorded
investment
   Unpaid
principal
balance
   Related
allowance
Stage 3
   Average
principal
loan
balance
   Interest
income
recognized
 
With an allowance recorded:                         
Private corporations   51,422    4,706    20,703    9,946    230 
Middle-market companies   907    907    448    7,472    49 
Total   52,329    5,613    21,151    17,418    279 

 

The following is a summary of information of interest amounts recognized using the effective interest rate method on the net carrying amount for those financial assets in Stage 3:

 

   Three months ended
September 30,
   Nine months ended
September 30,
 
   2016   2015   2016   2015 
Interest revenue calculated on the net carrying amount(net of credit allowance)   720    75    1,561    215 

 

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

 

September 30, 2016
   91-120
 days
   121-150
 days
   151-180
 days
  

Greater

than 180 days

   Total
Past due
   Delinquent   Current   Total Loans 
Corporations   2,449    1,502    -    32,813    36,764    4,000    3,805,116    3,845,880 
Banking and financial institutions   -    -    -    -    -    -    2,225,136    2,225,136 
Middle-market companies   -    -    -    35,000    35,000    -    287,366    322,366 
Total   2,449    1,502    -    67,813    71,764    4,000    6,317,618    6,393,382 

 

  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)

 

4.Financial instruments (continued)

 

4.6Loans – at amortized cost (continued)

 

December 31, 2015
   91-120
 days
   121-150
 days
   151-180
 days
  

Greater
than 180
days

   Total
Past due
   Delinquent   Current   Total Loans 
Corporations   -    -    -    4,706    4,706    -    3,711,659    3,716,365 
Banking and financial institutions   -    -    -    -    -    -    2,587,637    2,587,637 
Middle-market companies   -    -    -    907    907    -    386,840    387,747 
Total   -    -    -    5,613    5,613    -    6,686,136    6,691,749 

 

As of September 30, 2016 and December 31, 2015 the Bank had credit transactions in the normal course of business with 14% and 16%, 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 of the Bank’s Corporate Governance and control procedures. As of September 30, 2016 and December 31, 2015, approximately 7% and 9%, 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, 2016, 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.

 

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

 

   Stage 1 (1)   Stage 2 (2)
(collectively
assessed)
   Stage 2 (2)
(individually
assessed)
   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2015   59,214    9,609    -    21,151    89,974 
Transfer to lifetime expected credit losses   (8,743)   5,387    3,357    -    1 
Transfer to credit-impaired financial assets   (7)   (3,468)   (2,024)   5,499    - 
Transfer to 12-month expected credit losses   2,038    (2,077)   -    38    (1)
Net effect of changes in reserve for expected credit losses   (37,117)   27,989    1,265    16,962    9,099 
Financial assets that have been derecognized during the period   (52,417)   (8,515)   -    -    (60,932)
Changes due to financial instruments recognized as of December 31, 2015:   (96,246)   19,316    2,598    22,499    (51,833)
New financial assets originated or purchased   69,101    -    -    -    69,101 
Write-offs   -    -    -    (907)   (907)
Allowance for expected credit losses as of September 30, 2016   32,069    28,925    2,598    42,743    106,335 

 

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

 

  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)

 

4.Financial instruments (continued)

 

4.6Loans – at amortized cost (continued)

 

   Stage 1 (1)   Stage 2 (2)
(collectively
assessed)
   Stage 2 (2)
(individually
assessed)
   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2014   37,469    37,564    -    2,654    77,687 
Transfer to lifetime expected credit losses   (9,147)   9,147    -    -    - 
Transfer to credit-impaired financial assets   -    (24,186)   -    24,186    - 
Transfer to 12-month expected credit losses   101    (101)   -    -    - 
Financial assets that have been derecognized during the period   (31,774)   (12,815)   -    -    (44,589)
Changes due to financial instruments recognized as of December 31, 2014:   (40,820)   (27,955)   -    24,186    (44,589)
New financial assets originated or purchased   62,565    -    -    -    62,565 
Write-offs   -    -    -    (5,689)   (5,689)
Allowance for expected credit losses as of December 31, 2015   59,214    9,609    -    21,151    89,974 

 

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

 

4.7Instruments with off-balance sheet credit risk

 

In the normal course of business, to meet the financing needs of its customers, the Bank is party to instruments with off-balance sheet credit risk. These instruments involve, to varying degrees, elements of credit and market risk in excess of 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 instruments with off-balance sheet credit risk are as follows:

 

   September 30,
2016
   December 31,
2015
 
Confirmed letters of credit   103,119    99,031 
Stand-by letters of credit and guaranteed –Commercial risk   138,672    158,599 
Credit commitments   50,958    189,820 
 Total   292,749    447,450 

 

  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)

 

4.Financial instruments (continued)

 

4.7Instruments with off-balance sheet credit risk (continued)

 

As of September 30, 2016 and December 31, 2015 the remaining maturity profile of the Bank’s outstanding instruments with off-balance sheet credit risk is as follows:

 

Maturities 

September 30,

2016

  

December 31,

2015

 
Up to 1 year   257,968    424,687 
From 1 to 2 years   34,203    22,185 
From 2 to 5 years   -    - 
More than 5 years   578    578 
    292,749    447,450 

 

Instruments with off-balance sheet credit risk classified by issuer’s credit quality indicators are as follows:

 

Rating(1) 

September 30,

2016

  

December 31,

2015

 
1-4   112,824    276,860 
5-6   115,513    170,590 
7   64,412    - 
8   -    - 
9   -    - 
10   -    - 
Total   292,749    447,450 

 

(1) Current ratings as of September 30, 2016 and December 31, 2015, respectively.

 

Letters of credit and guarantees

 

The Bank, on behalf of its clients base, advises and confirms letters of credit to facilitate foreign trade transactions. When confirming letters of credit, the Bank adds its own unqualified assurance that the issuing bank will pay and that if the issuing bank does not honor drafts drawn on the letter of credit, the Bank will. The Bank provides stand-by letters of credit and guarantees, which are issued on behalf of institutional clients in connection with financing between its clients and third parties. The Bank applies the same credit policies used in its lending process, and once issued the commitment is irrevocable and remains valid until its expiration. Credit risk arises from the Bank's obligation to make payment in the event of a client’s contractual default to a third party. Risks associated with stand-by letters of credit and guarantees are included in the evaluation of the Bank’s overall credit risk.

 

Credit commitments

 

Commitments to extend credit are binding legal agreements to lend to clients. Commitments generally have fixed expiration dates or other termination clauses and require payment of a fee to the Bank. As some commitments expire without being drawn down, the total commitment amounts do not necessarily represent future cash requirements.

 

  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)

 

4.Financial instruments (continued)

 

4.7Instruments with off-balance sheet credit risk (continued)

 

As of September 30, 2016 and December 31, 2015 the breakdown of the Bank’s off-balance sheet exposure by country risk is as follows:

 

  

September 30,

2016

   December 31
2015
 
Country:          
Argentina   -    10,145 
Bolivia   158    1,261 
Brazil   -    17,291 
Colombia   85,831    96,085 
Costa Rica   4,005    - 
Dominican Republic   5,183    4,527 
Ecuador   90,352    88,585 
El Salvador   25    145 
Guatemala   1,300    - 
Honduras   484    876 
Mexico   13,727    46,994 
Panama   70,368    136,022 
Paraguay   5    43 
Peru   20,241    19,018 
Singapore   -    25,000 
Switzerland   1,000    1,000 
United Kingdom   70    70 
Uruguay   -    388 
Total   292,749    447,450 

 

  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)

 

4.Financial instruments (continued)

 

4.7Instruments with off-balance sheet credit risk (continued)

 

The allowances for credit losses related to instruments with off-balance sheet credit risk at September 30, 2016 and December 31, 2015 are as follows:

 

   Stage 1 (1)   Stage 2 (2)
(collectively
assessed)
   Stage 2 (2)
(individually
assessed)
   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2015   2,914    333    2,177    -    5,424 
Transfer to lifetime expected credit losses   (646)   209    484    -    47 
Transfer to credit-impaired instruments   -    -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    -    - 
Net effect of changes in reserve for expected credit loss   (401)   (216)   1,765    -    1,148 
Instruments that have been derecognized during the period   (2,408)   (252)   -    -    (2,660)
Changes due to instruments recognized as of December 31, 2015:   (3,455)   (259)   2,249    -    (1,465)
New instruments originated or purchased   1,407    -    -    -    1,407 
Allowance for expected credit losses as of September 30, 2016   866    74    4,426    -    5,366 

 

   Stage 1 (1)   Stage 2 (2)
(collectively
assessed)
   Stage 2 (2)
(individually
assessed)
   Stage 3 (3)   Total 
Allowance for expected credit losses as of December 31, 2014   7,079    2,794    -    -    9,873 
Transfer to lifetime expected credit losses   -    (2,177)   2,177    -    - 
Transfer to credit-impaired instruments   -    -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    -    - 
Instruments that have been derecognized during the period   (6,908)   (284)   -    -    (7,192)
Changes due to instruments recognized as of December 31, 2014:   (6,908)   (2,461)   2,177    -    (7,192)
New financial assets originated or purchased   2,743    -    -    -    2,743 
Allowance for expected credit losses as of December 31, 2015   2,914    333    2,177    -    5,424 

 

(1)12-month expected credit losses
(2)Lifetime expected credit losses
(3)Credit-impaired instruments (lifetime expected credit losses)

 

The reserve for expected credit losses on off-balance sheet credit risk reflects the Bank’s Management estimate of expected credit losses on off-balance sheet credit risk items such as: confirmed letters of credit, stand-by letters of credit, guarantees and credit commitments.

 

  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)

 

4.Financial instruments (continued)

 

4.8Derivative financial instruments for hedging purposes

 

As of September 30, 2016 and December 31, 2015, quantitative information on derivative financial instruments held for hedging purposes is as follows:

 

   September 30, 2016 
   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   828,733    9,688    (2,035)   7,420 
Cross-currency interest rate swaps   295,287    11,874    (28,058)   6,882 
Cash flow hedges:                    
Interest rate swaps   465,000    23    (3,952)   (1,937)
Cross-currency interest rate swaps   -    -    -    - 
Foreign exchange forward   370,253    5,784    (456)   3,461 
Net investment hedges:                    
Foreign exchange forward   3,184    -    (151)   (435)
Total   1,962,457    27,369    (34,652)   15,391 

 

   December 31, 2015 
   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   886,631    2,549    1,444    647 
Cross-currency interest rate swaps   214,067    322    23,710    14,731 
Cash flow hedges:                    
Interest rate swaps   870,000    230    2,254    (258)
Cross-currency interest rate swaps   75,889    374    395    215 
Foreign exchange forward   247,869    3,925    2,058    1,867 
Net investment hedges:                    
Foreign exchange forward   3,818    -    28    28 
Total   2,298,274    7,400    29,889    17,230 

 

The hedging instruments presented in the tables above are located 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.

 

  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)

 

4.Financial instruments (continued)

 

4.8Derivative 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 at 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 interest rate swaps   (1,776)  Gain (loss) on foreign currency   -    (86)
                   
Foreign exchange forward   6,517   Interest income – securities at FVOCI   -    - 
        Interest income loans at amortized cost   (1,371)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   496    - 
        Gain (loss) on foreign exchange   (1,375)   - 
Total   5,525       (2,250)   (351)

 

  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)

 

4.Financial instruments (continued)

 

4.8Derivative financial instruments for hedging purposes (continued)

 

   Nine months ended at 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 interest rate swaps   (13)  Gain (loss) on foreign exchange   -    (60)
                   
Foreign exchange forward   4,641   Interest income – securities at FVOCI   -    - 
        Interest income loans at amortized cost   (3,127)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   847    - 
        Gain (loss) on foreign currency exchange   3,259    - 
Total   2,954       979    (1,286)

 

  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)

 

4.Financial instruments (continued)

 

4.8Derivative financial instruments for hedging purposes (continued)

 

   Three months ended at September 30, 2015 
   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   (1,328)  Gain (loss) on interest rate swap   -    - 
Cross-currency interest rate swaps   3,741   Gain (loss) on foreign currency exchange   -    - 
                   
Foreign exchange forward   1,965   Interest income – securities at FVOCI   (159)   - 
        Interest income loans at amortized cost   (498)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   (18)   - 
        Gain (loss) on foreign currency exchange   4,359    - 
Total   4,378       3,684    - 
                   
Derivatives – net investment hedge                  
Foreign exchange forward   533       -    - 
Total   533       -    - 

 

  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)

 

4.Financial instruments (continued)

 

4.8Derivative financial instruments for hedging purposes (continued)

 

   Nine months ended at September 30, 2015 
   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   (1,593)  Gain (loss) on interest rate swap   -    - 
Cross-currency interest rate swaps   6,787   Gain (loss) on foreign currency exchange   -    - 
                   
Foreign exchange forward   3,571   Interest income – securities at FVOCI   (694)   - 
        Interest income loans at amortized cost   (1,161)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   77    - 
        Gain (loss) on foreign currency exchange   10,193    - 
Total   8,765       8,415    - 
                   
Derivatives – net investment hedge                  
Foreign exchange forward   957       -    - 
Total   957       -    - 

 

  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)

 

4.Financial instruments (continued)

 

4.8Derivative financial instruments for hedging purposes (continued)

 

The Bank recognized in the consolidated statement of profit or loss the gain (loss) on derivative financial instruments and the gain (loss) of the hedged asset or liability related to qualifying fair value hedges, as follows:

 

   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 at amortized cost   (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 interest rate swaps  Interest income loans at amortized cost   (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)

 

   September 30, 2015  
   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   (828)   1,133    305 
   Interest income loans at amortized cost   (307)   3,077    2,770 
   Interest expenses – borrowings and debt   4,481    (16,959)   (12,478)
   Derivative financial instruments and hedging   4,504    (4,926)   (422)
Cross-currency interest rate swaps  Interest income at amortized cost   (131)   324    193 
   Interest expenses – borrowings and debt   840    (3,090)   (2,250)
   Derivative financial instruments and hedging   (14,711)   16,701    1,990 
Total      (6,152)   (3,740)   (9,892)

 

  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)

 

4.Financial instruments (continued)

 

4.8Derivative financial instruments for hedging purposes (continued)

 

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 7.44 years.

 

The Bank estimates that during remaining of 2016, approximately $1,052 reported as losses in OCI as of September 30, 2016 related to foreign exchange forward contracts, are expected to be reclassified into interest income as an adjustment to yield of hedged loans during the twelve-month period ending September 30, 2017.

 

The Bank estimates that during remaining of 2016, approximately $465 reported as losses in OCI as of September 30, 2016 related to foreign exchange forward contracts, are expected to be reclassified into interest income as an adjustment to yield of hedged deposits during the twelve-month period ending September 30, 2017.

 

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.

 

In addition to hedging derivative financial instruments, the Bank has derivative financial instruments at FVTPL as disclosed in Note 4.1.

 

  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)

 

4.Financial instruments (continued)

 

4.9Offsetting 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, 2016 
       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-hedging   27,369    -    27,369    -    -    27,369 
Financial instruments at FVTPL   28    -    28    -    -    28 
Total   27,397    -    27,397    -    -    27,397 

 

December 31, 2015 
       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-hedging   7,400    -    7,400    -    (690)   6,710 
Total   7,400    -    7,400    -    (690)   6,710 

 

  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)

 

4.Financial instruments (continued)

 

4.9Offsetting of financial assets and liabilities (continued)

 

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 as of September 30, 2016 and December 31, 2015:

 

   September 30, 2016 
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 - hedging   27,369    -    27,369 
Financial instruments at FVTPL   28    -    28 
Total   27,397    -    27,397 

 

   December 31, 2015 
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 - hedging   7,400    -    7,400 
Total   7,400    -    7,400 

 

  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)

 

4.Financial Instruments (continued)

 

4.9Offsetting of financial assets and liabilities (continued)

 

b)Financial liabilities and derivative financial instruments – liabilities

 

September 30, 2016  
       Gross
amounts
offset in the
   Net amount
of liabilities
presented 
in the
   Gross amounts not offset
in the consolidated
statement of financial
position
     
Description  Gross
amounts
of
liabilities
   consolidated
statement of
financial
position
   consolidated
statement of
financial
position
   Financial
instruments
   Cash
collateral
pledged
   Net Amount 
Securities sold under repurchase agreements   101,403    -    101,403    (100,541)   (862)   - 
Financial liabilities at FVTPL   -    -    -    -    -    - 
Derivative financial instruments - hedging   34,652    -    34,652    -    (32,387)   2,265 
Total   136,055    -    136,055    (100,541)   (33,249)   2,265 

 

December 31, 2015    
       Gross
amounts
offset in the
   Net amount
of liabilities
presented 
in the
   Gross amounts not offset
in the consolidated
statement of financial
position
     
Description  Gross
amounts
of
liabilities
   consolidated
statement of
financial
position
   consolidated
statement of
financial
position
   Financial
instruments
   Cash
collateral
pledged
   Net
Amount
 
Securities sold under repurchase agreements   114,084    -    114,084    (111,620)   (2,463)   1 
Financial liabilities at FVTPL   89    -    89    -    -    89 
Derivative financial instruments - hedging   29,889    -    29,889    -    (26,899)   2,990 
Total   144,062    -    144,062    (111,620)   (29,362)   3,080 

 

  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)

 

4.Financial Instruments (continued)

 

4.9Offsetting of financial assets and 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 as of September 30, 2016 and December 31, 2015:

 

   September 30, 2016 
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
 
Securities sold under repurchase agreements   101,403    -    101,403 
Derivative financial instruments:               
Financial liabilities at FVTPL   -    -    - 
Derivative financial instruments - hedging   34,652    -    34,652 
Total derivative  financial instruments   101,403    -    101,403 

 

   December 31, 2015 
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
 
Securities sold under repurchase agreements   114,084    -    114,084 
Derivative financial instruments:               
Financial liabilities at FVTPL   89    -    89 
Derivative financial instruments - hedging   29,889    -    29,889 
Total derivative  financial instruments   29,978    -    29,978 

 

5.Other assets

 

Following is a summary of other assets as of September 30, 2016 and December 31, 2015:

 

   September 30, 
2016
   December 31,
2015
 
         
Accounts receivable   10,733    6,428 
Equity investment in a private fund (at cost)   530    530 
IT projects under development   4,039    4,952 
Other   9,833    3,884 
    25,135    15,794 

 

  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)

 

6.Deposits

 

The remaining maturity profile of the Bank’s deposits is as follows:

 

   September 30, 
2016
   December 31,
2015
 
Demand   252,536    243,839 
Up to 1 month   1,173,812    1,492,175 
From 1 month to 3 months   727,737    475,611 
From 3 month to 6 months   272,549    319,995 
From 6 month to 1 year   458,804    263,849 
From 1 year to 2 years   190,000    - 
From 2 years to 5 years   50,567    - 
    3,126,005    2,795,469 

 

The following table presents additional information regarding the Bank’s deposits:

 

  

September 30,

2016

   December 31,
2015
 
Aggregate amounts of time deposits of $100,000 or more   3,125,644    2,794,912 
Aggregate amounts of deposits in the New York Agency   259,301    235,203 
Interest expense paid to deposits in the New York Agency   1,429    1,228 

 

7.Securities sold under repurchase agreements

 

The Bank’s financing transactions under repurchase agreements amounted to $101.4 million and $114.4 million, as of September 30, 2016 and December 31, 2015, respectively.

 

During the periods ended September 30, 2016 and 2015, interest expense related to financing transactions under repurchase agreements totaled $835.2 and $176.0, respectively, corresponding to interest expense generated by the financing contracts under repurchase agreements. These expenses are included in the interest expense – short-term borrowings and debt line in the consolidated statements of profit or loss.

 

  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)

 

8.Borrowings and debt

 

8.1Short-term borrowings and debt

 

Borrowings consist of long-term and syndicated loans obtained from international banks. Debt instruments consist of public and private issuances under the Bank's Euro Medium Term Notes Program (“EMTN”) as well as public issuances in the Mexican market. The breakdown of short-term (original maturity of less than one year) borrowings and debt, together with contractual interest rates, is as follows:

 

   September 30, 
2016
   December 31,
2015
 
Short-term Borrowings:          
At fixed interest rates   636,595    983,245 
At floating interest rates   413,093    871,522 
Total borrowings   1,049,688    1,854,767 
           
Short-term Debt:          
At fixed interest rates   82,800    525,590 
At floating interest rates   -    50,000 
Total debt   82,800    575,590 
Total short-term borrowings and debt   1,132,488    2,430,357 
           
Average outstanding balance during the period   1,366,873    2,266,864 
Maximum balance at any month-end   1,876,322    2,856,507 
Range of fixed interest rates on borrowing and debt in U.S. dollars   0.95% to 1.38%    0.53% to 1.21% 
Range of floating interest rates on borrowing in U.S. dollars   0.97% to 1.29%    0.67% to 1.24% 
Range of fixed interest rates on borrowing in Mexican pesos   6.16%   3.76% to 3.98% 
Range of floating interest rate on borrowing in Mexican pesos   5.20%   3.90% to 4.17% 
Range of fixed interest rate on debt in Japanese yens   -    0.31% to 0.33% 
Weighted average interest rate at end of the period   1.18%   0.93%
Weighted average interest rate during the period   1.05%   0.85%

 

The balances of short-term borrowings and debt by currency, is as follows:

 

   September 30, 
2016
   December 31
2015
 
Currency          
US dollar   1,129,300    2,402,701 
Mexican peso   3,188    14,366 
Japanese yen   -    13,290 
Total   1,132,488    2,430,357 

 

  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)

 

8.Borrowings and debt (continued)

 

8.2Long-term borrowings and debt

 

The breakdown of borrowings and long-term debt (original maturity of more than one year), together with contractual interest rates gross of prepaid commission of $5,797 and $7,017 as of September 30, 2016 and December 31, 2015, respectively, is as follows:

 

   September 30, 
2016
   December 31,
2015
 
Long-term Borrowings:          
At fixed interest rates with due dates from December 2016 to September 2021   58,428    113,039 
At floating interest rates with due dates from November 2016 to August 2019   636,919    695,837 
Total borrowings   695,347    808,876 
           
Long-term Debt:          
At fixed interest rates with due dates from October 2016 to March 2024   962,478    929,998 
At floating interest rates with due dates from January 2018 to April 2019   179,344    149,956 
Total long-term debt   1,141,822    1,079,954 
Total long-term borrowings and debt outstanding   1,837,169    1,888,830 
           
Average outstanding balance during the period   1,904,577    1,589,451 
Maximum outstanding balance at any month – end   2,054,138    1,888,830 
Range of fixed interest rates on borrowing and debt in U.S. dollars   1.01% to 3.75%    1.01% to 3.75% 
Range of floating interest rates on borrowing in U.S. dollars   1.30% to 2.38%    0.84% to 1.95% 
Range of fixed interest rates on borrowing in Mexican pesos   4.30% to 7.30%    4.30% to 5.95% 
Range of floating interest rates on borrowing and debt in Mexican pesos   4.98% to 5.54%    3.93% to 5.45% 
Range of fixed interest rate on debt in Japanese yens   0.46% to 0.81%    0.50% to 0.81% 
Range of fixed interest rate on debt in Euros   3.75%   0.40% to 3.75% 
Weighted average interest rate at the end of the period   2.76%   2.62%
Weighted average interest rate during the period   2.92%   2.65%

 

  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)

 

8.Borrowings and debt (continued)

 

8.2Long-term borrowings and debt (continued)

 

The balances of long-term borrowings and debt by currency, is as follows:

 

   September 30, 
2016
   December 31,
2015
 
Currency          
US dollar   1,440,679    1,599,233 
Mexican peso   228,601    153,332 
Japanese yen   108,647    25,035 
Euro   59,242    111,230 
Total   1,837,169    1,888,830 

 

The Bank's funding activities include: (i) EMTN, which may be used to issue notes for up to $2.3 billion, with maturities from 7 days up to a maximum of 30 years, at fixed or floating interest rates, or at discount, and in various currencies. The notes are generally issued in bearer or registered form through one or more authorized financial institutions; (ii) Short-and Long-Term Notes “Certificados Bursatiles” Program (the “Mexico Program”) in the Mexican local market, registered with the Mexican National Registry of Securities maintained by the National Banking and Securities Commission in Mexico (“CNBV”, for its acronym in Spanish), for an authorized aggregate principal amount of 10 billion Mexican pesos with maturities from one day to 30 years.

 

Some borrowing agreements include various events of default and covenants related to minimum capital adequacy ratios, incurrence of additional liens, and asset sales, as well as other customary covenants, representations and warranties. As of September 30, 2016, the Bank was in compliance with all covenants.

 

The future remaining maturities of long-term borrowings and debt outstanding as of September 30, 2016, are as follows:

 

   Outstanding 
Due in     
2016   62,597 
2017   459,609 
2018   542,476 
2019   348,093 
2020   359,389 
2021   5,763 
2024   59,242 
    1,837,169 

 

9.Other liabilities

 

   September 30, 
2016
   December 31,
2015
 
Accruals and other accumulated expenses   5,327    9,676 
Dividends payable   145    146 
Accounts payable   13,138    11,096 
Others   2,598    3,426 
    21,208    24,344 

 

  44 

 

 

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)

 

10.Earnings per share

 

The following table presents a reconciliation of the income and share data used in the basic and diluted earnings per share (“EPS”) computations for the dates indicated:

 

   Three months ended   Nine months ended 
   September 30,   September 30, 
   2016   2015   2016   2015 
Profit for the period   27,991    37,372    73,701    80,758 
                     
Basic earnings per share   0.72    0.96    1.89    2.08 
Diluted earnings per share   0.71    0.96    1.88    2.07 
                     
Weighted average common shares outstanding - applicable to basic   39,102    38,969    39,059    38,909 
                     
Effect of diluted securities:                    
Stock options and restricted stock units plans   123    126    119    171 
Adjusted weighted average common shares outstanding applicable to diluted EPS   39,225    39,095    39,178    39,080 

 

11.Capital and Reserves

 

Common stock

 

The Bank’s common stock is divided into four categories:

 

1)“Class A”; shares may only be issued to Latin American Central Banks or banks in which the state or other government agency is the majority shareholder.
2)“Class B”; shares may only be issued to banks or financial institutions.
3)“Class E”; shares may be issued to any person whether a natural person or a legal entity.
4)“Class F”; may only be issued to state entities and agencies of non-Latin American countries, including, among others, central banks and majority state-owned banks in those countries, and multilateral financial institutions either international or regional institutions.

 

The holders of “Class B” shares have the right to convert or exchange their “Class B” shares, at any time, and without restriction, for “Class E” shares, at a rate of one-to-one.

 

  45 

 

 

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)

 

11.Capital and Reserves (continued)

 

Common stock (continued)

 

The following table provides detailed information on the Bank’s common stock activity per class for each of the periods in the three-month period ended September 30, 2016:

 

(Share units)  “Clase A”   “Clase B”   “Clase E”   “Clase F”   Total 
Authorized   40,000,000    40,000,000    100,000,000    100,000,000    280,000,000 
Outstanding at January 1, 2015   6,342,189    2,479,050    29,956,100    -    38,777,339 
Exchange   -    (4,581)   4,581    -    - 
Restricted stock granted - directors   -    -    57,000    -    57,000 
Exercised stock options - compensation plans   -    -    70,358    -    70,358 
Restricted stock units – vested   -    -    64,208    -    64,208 
Outstanding at September 30, 2015   6,342,189    2,474,469    30,152,247    -    38,968,905 
                          
Outstanding at January 31, 2016   6,342,189    2,474,469    30,152,247    -    38,968,905 
Restricted stock granted - directors   -    -    57,000    -    57,000 
Exercised stock options - compensation plans   -    -    68,409    -    68,409 
Restricted stock units – vested   -    -    65,358    -    65,358 
Outstanding at September 30, 2016   6,342,189    2,474,469    30,343,014    -    39,159,672 

 

The following table presents information regarding shares repurchased but not retired by the Bank and accordingly classified as treasury stock:

 

   “Class A”   “Class B”   “Class E”   Total 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount 
Outstanding at January 1, 2015   318,140    10,708    589,174    16,242    2,295,186    50,677    3,202,500    77,627 
Restricted stock granted - directors   -    -    -    -    (57,000)   (1,259)   (57,000)   (1,259)
Exercised stock options - compensation plans   -    -    -    -    (70,358)   (1,553)   (70,358)   (1,553)
Restricted stock units – vested   -    -    -    -    (64,208)   (1,418)   (64,208)   (1,418)
Outstanding at September 30, 2015   318,140    10,708    589,174    16,242    2,103,620    46,447    3,010,934    73,397 
                                         
Outstanding at January 1, 2016   318,140    10,708    589,174    16,242    2,103,620    46,447    3,010,934    73,397 
Restricted stock granted - directors   -    -    -    -    (57,000)   (1,259)   (57,000)   (1,259)
Exercised stock options - compensation plans   -    -    -    -    (68,409)   (1,510)   (68,409)   (1,510)
Restricted stock units - vested   -    -    -    -    (65,358)   (1,443)   (65,358)   (1,443)
Outstanding at September 30, 2016   318,140    10,708    589,174    16,242    1,912,853    42,235    2,820,167    69,185 

 

  46 

 

 

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)

 

11.Capital and Reserves (continued)

 

Reserves

 

The Banking Law in the Republic of Panama requires banks with general banking license to maintain a total capital adequacy index that shall not be lower than 8% of total assets and off-balance sheet irrevocable contingency transactions, weighted according to their risk; and primary capital equivalent that shall not be less than 4.5% of its assets and off-balance sheet irrevocable contingency transactions, weighted according to their risk. As of September 30, 2016, the Bank’s total capital adequacy ratio is 16.03% which is in compliance with the minimum capital adequacy ratios required by the Banking Law in the Republic of Panama.

 

Restriction on retained earnings

 

As of September 30, 2016 and December 31, 2015, $46.7 million and $38.7 million, respectively of retained earnings are restricted from dividend distribution for purposes of complying with local regulatory requirements.

 

Additional paid-in capital

 

As of September 30, 2016 and December 31, 2015, the additional paid-in capital consists of additional cash contributions to the common capital paid by shareholders.

 

Dividends

 

As of September 30, 2016 and 2015, the dividends provided for or paid were as follows:

 

   First Quarter   Second Quarter   Third Quarter 
Dividends  2016   2015   2016   2015   2016   2015 
Dividends provided for or
paid during the
quarter
   15,000    -    15,052    15,005    15,052    15,000 
Dividend per share   0.385    -    0.385    0.385    0.385    0.385 

 

12.Business segment information

 

The Bank’s activities are managed and executed in two business segments: Commercial and Treasury. The business segment results are determined based on the Bank’s managerial accounting process as defined by IFRS 8 – Operating Segments, which assigns consolidated statement of financial positions, revenue and expense items to each business segment on a systematic basis.

 

The Bank’s net interest income represents the main driver of profits; therefore, the Bank presents its interest-earning assets by business segment, to give an indication of the size of business generating net interest income. Interest-earning assets also generate gains and losses on sales, such as for financial instruments at fair value through OCI and financial instruments at fair value through profit or loss, which are included in net other income, in the Treasury Segment. The Bank also discloses its other assets and contingencies by business segment, to give an indication of the size of business that generates net fees and commissions, also included in net other income, in the Commercial Business Segment.

 

The Commercial Business Segment incorporates all of the Bank’s financial intermediation and fees generated by the commercial portfolio. The commercial portfolio includes book value of loans, acceptances and contingencies. Profits from the Commercial Business Segment include net interest income from loans, fee income, impairment loss from expected credit losses on loans at amortized cost and off-balance sheet financial instruments, and allocated expenses.

 

The Treasury Business Segment incorporates deposits in banks and all of the Bank’s financial instruments at fair value through profit or loss, financial instruments at fair value through OCI and securities at amortized cost. Profits from the Treasury Business Segment include net interest income from deposits with banks, financial instruments at fair value through OCI and securities at amortized cost, derivative financial instruments foreign currency exchange, gain (loss) for financial instrument at fair value through profit or loss, gain (loss) for financial instrument at fair value through OCI, impairment loss for expected credit losses on investment securities, other income and allocated expenses.

 

  47 

 

 

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)

 

12.Business segment information (continued)