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 August, 2017

 

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: August 1, 2017

  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 June 30, 2017 and December 31, 2016, 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 six months ended June 30, 2017, 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 8-72

 

2 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
 
Unaudited condensed consolidated interim statement of financial position
June 30, 2017 and December 31, 2016
(In US$ thousand)

 

      June 30,   December 31, 
      2017   2016 
   Notes  (Unaudited)   (Audited) 
Assets             
Cash and cash equivalents  3,14   819,390    1,069,538 
Financial Instruments:  4,14          
At fair value through profit or loss  4.1,4.7,14   13    - 
At fair value through OCI  4.2,14   16,435    30,607 
Securities at amortized cost, net  4.3,14   62,791    77,214 
Loans at amortized cost  4.5   5,570,315    6,020,731 
Less:             
Allowance for expected credit losses  4.5   115,607    105,988 
Unearned interest and deferred fees  4.5   6,723    7,249 
Loans at amortized cost, net      5,447,985    5,907,494 
              
At fair value - Derivative financial instruments used for hedging – receivable  4.6,4.7,14   6,497    9,352 
              
Property and equipment, net      8,001    8,549 
Intangibles, net      2,577    2,909 
              
Other assets:             
Customers' liabilities under acceptances  14   5,194    19,387 
Accrued interest receivable  14   33,466    44,187 
Other assets  6   19,813    11,546 
Total of other assets      58,473    75,120 
Total assets      6,422,162    7,180,783 
              
Liabilities and stockholders' equity             
Deposits:  7,14          
Noninterest-bearing - Demand      455    1,617 
Interest-bearing - Demand      126,522    125,397 
Time      3,226,578    2,675,838 
Total deposits      3,353,555    2,802,852 
              
At fair value – Derivative financial instruments used for hedging – payable  4.6,4.7,14   33,946    59,686 
              
Financial liabilities at fair value through profit or loss  4.1,4.7,14   27    24 
Short-term borrowings and debt  9.1,14   487,056    1,470,075 
Long-term borrowings and debt, net  9.2,14   1,485,707    1,776,738 
              
Other liabilities:             
Acceptances outstanding  14   5,194    19,387 
Accrued interest payable  14   12,953    16,603 
Allowance for expected credit losses on loan commitments and financial guarantees contracts  5   4,615    5,776 
Other liabilities  10   14,969    18,328 
Total other liabilities      37,731    60,094 
Total liabilities      5,398,022    6,169,469 
              
Stockholders' equity:  11,12,14          
Common stock      279,980    279,980 
Treasury stock  12   (64,732)   (69,176)
Additional paid-in capital in excess of assigned value of common stock      118,898    120,594 
Capital reserves      95,210    95,210 
Retained earnings      598,217    587,507 
Accumulated other comprehensive loss  4.2,4.6,15   (3,433)   (2,801)
Total stockholders' equity      1,024,140    1,011,314 
Total liabilities and stockholders' equity      6,422,162    7,180,783 

 

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 six months ended June 30, 2017, 2016 and 2015
(In US$ thousand, except per share amounts)

 

      For the three months ended
June 30,
   For the six months ended
June 30,
 
   Notes  2017   2016   2015   2017   2016   2015 
                            
Interest income:                                 
Deposits      2,822    894    489    4,823    2,064    920 
At fair value through OCI      126    548    1,728    296    1,499    3,589 
At amortized cost      53,151    59,032    50,607    110,111    118,068    101,969 
Total interest income      56,099    60,473    52,824    115,230    121,631    106,478 
Interest expense:                                 
Deposits      11,593    5,089    2,738    17,800    9,641    5,191 
Short-term borrowings and debt      2,487    3,735    5,837    6,055    8,590    12,480 
Long-term borrowings and debt      12,674    13,463    9,442    27,598    25,696    18,175 
Total interest expense      26,754    22,287    18,017    51,453    43,927    35,846 
                                  
Net interest income      29,345    38,186    34,807    63,777    77,704    70,632 
                                  
Other income:                                 
Fees and commissions, net      5,013    4,434    3,109    8,282    6,807    5,409 
Derivate financial instruments and foreign currency exchange      473    500    (339)   604    (339)   505 
(Loss) gain per financial instrument at fair value through profit or loss      (649)   416    (2,205)   (709)   (3,767)   300 
Gain (loss) per financial instrument at fair value through OCI      (35)   (30)   133    79    (315)   429 
Gain on sale of loans at amortized cost      12    303    305    98    403    512 
Other income      255    556    284    609    907    532 
Net other income      5,069    6,179    1,287    8,963    3,696    7,687 
                                  
Total income      34,414    44,365    36,094    72,740    81,400    78,319 
                                  
Expenses:                                 
Impairment loss (recovery) from expected credit losses on loans at amortized cost  4.5   5,666    9,966    11,649    9,619    12,109    6,619 
(Recovery) impairment loss from expected credit losses on investment securities  4.2,4.3   (11)   479    1,659    (465)   486    829 
Impairment loss (recovery) from expected credit losses on loans commitments and financial guarantees contracts  5   (1,324)   1,579    (3,434)   (1,161)   666    1,671 
Salaries and other employee expenses      7,768    4,898    7,368    14,464    12,778    15,723 
Depreciation of equipment and leasehold improvements      356    334    345    787    663    725 
Amortization of intangible assets      178    91    173    379    203    322 
Other expenses      4,300    4,746    4,816    8,178    8,785    9,044 
Total expenses      16,933    22,093    22,576    31,801    35,690    34,933 
Profit for the period      17,481    22,272    13,518    40,939    45,710    43,386 
                                  
Earnings per share:                                 
Basic  11   0.44    0.57    0.35    1.04    1.17    1.12 
Diluted  11   0.44    0.57    0.35    1.04    1.17    1.11 
Weighted average basic shares  11   39,317    39,078    38,954    39,252    39,037    38,880 
Weighted average diluted shares  11   39,347    39,198    39,073    39,280    39,120    39,015 

 

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 six months ended June 30, 2017, 2016 and 2015
(In US$ thousand)          

 

   Notes  2017   2016   2015 
                
Profit for the period      40,939    45,710    43,386 
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  15   116    7,400    3,248 
Net change in unrealized losses on derivative financial instruments  15   (748)   (4,498)   200 
Other comprehensive income (loss)  15   (632)   2,902    3,448 
                   
Total comprehensive income for the period      40,307    48,612    46,834 

 

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 six months ended June 30, 2017, 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   -    -    -    -    43,386    -    43,386 
Other comprehensive income   -    -    -    -    -    3,448    3,448 
Issuance of restricted stock   -    (1,514)   (17)   -    -    -    (1,531)
Compensation cost - stock options and stock units plans   -    1,653    2,377    -    -    -    4,030 
Exercised options and stock units vested   -    1,673    (2,746)   -    -    -    (1,073)
Repurchase of "Class B" and "Class E" common stock   -    -    -    -    -    -    - 
Dividends declared   -    -    -    -    (15,000)   -    (15,000)
Balances at June 30, 2015   279,980    (75,815)   119,258    95,210    530,055    (4,389)   944,300 
                                    
Balances at January 1, 2016   279,980    (73,397)   120,177    95,210    560,642    (10,681)   971,931 
Profit for the period   -    -    -    -    45,710    -    45,710 
Other comprehensive income   -    -    -    -    -    2,902    2,902 
Issuance of restricted stock   -    1,259    (1,259)   -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    1,689    -    -    -    1,689 
Exercised options and stock units vested   -    1,538    (1,449)   -    -    -    89 
Repurchase of "Class B" and "Class E" common stock   -    -    -    -    -    -    - 
Dividends declared   -    -    -    -    (30,052)   -    (30,052)
Balances at June 30, 2016   279,980    (70,600)   119,158    95,210    576,299    (7,779)   992,268 
                                    
Balances at January 1, 2017   279,980    (69,176)   120,594    95,210    587,507    (2,801)   1,011,314 
Profit for the period   -    -    -    -    40,939    -    40,939 
Other comprehensive income   -    -    -    -    -    (632)   (632)
Issuance of restricted stock   -    1,259    (1,259)   -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    644    -    -    -    644 
Exercised options and stock units vested   -    3,213    (1,081)   -    -    -    2,132 
Repurchase of "Class B" and "Class E" common stock   -    (28)   -    -    -    -    (28)
Dividends declared   -    -    -    -    (30,229)   -    (30,229)
Balances at June 30, 2017   279,980    (64,732)   118,898    95,210    598,217    (3,433)   1,024,140 

 

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 six months ended June 30, 2017, 2016 and 2015
(In US$ thousand)

 

   2017   2016   2015 
             
Cash flows from operating activities               
Profit for the period   40,939    45,710    43,386 
Adjustments to reconcile profit for the period to net cash provided by (used in) operating activities:               
Activities of derivative financial instruments used for hedging   (23,616)   (5,790)   (14,666)
Depreciation of equipment and leasehold improvements   787    663    725 
Amortization of intangible assets   379    203    322 
Impairment loss from expected credit losses   7,993    13,261    9,119 
Net loss (gain) on sale of financial assets at fair value through OCI   (79)   (30)   (429)
Compensation cost - share-based payment   644    1,007    1,491 
Interest income   (115,230)   (121,631)   (106,478)
Interest expense   51,453    43,927    35,846 
Net decrease (increase) in operating assets:               
Net (increase) decrease in pledged deposits   13,615    (4,850)   6,649 
Financial instruments at fair value through profit or loss   (13)   53,167    3,658 
Net decrease (increase) in loans at amortized cost   449,890    170,666    (224,996)
Other assets   5,925    5,013    96,840 
Net increase (decrease) in operating liabilities:               
Net increase due to depositors   550,703    410,831    730,251 
Financial liabilities at fair value through profit or loss   3    (89)   7 
Other liabilities   (17,486)   (18,809)   (61,042)
Cash provided by operating activities:               
Interest received   125,951    120,777    116,283 
Interest paid   (55,103)   (46,217)   (35,689)
Net cash provided by operating activities   1,036,755    667,809    601,277 
                
Cash flows from investing activities:               
Acquisition of equipment and leasehold improvements   (346)   (89)   (277)
Acquisition of intangible assets   (4)   (7)   - 
Proceeds from disposal of equipment and leasehold improvements   64    -    - 
Proceeds from the redemption of of financial instruments at fair value through OCI   -    70,341    94,557 
Proceeds from the sale of financial instruments at fair value through OCI   14,488    78,450    47,035 
Proceeds from maturities of financial instruments at amortized cost   14,879    29,075    13,335 
Purchases of financial instruments at fair value through OCI   -    (83,627)   (88,224)
Purchases of financial instruments at amortized cost   -    (24,071)   (21,929)
Net cash provided by investing activities   29,081    70,072    44,497 
                
Cash flows from financing activities:               
Net (decrease) increase in short-term borrowings and debt and securities sold under repurchase agreements   (983,019)   (1,234,527)   (583,565)
Proceeds from long-term borrowings and debt   219,587    464,969    405,513 
Repayments of long-term borrowings and debt   (510,618)   (299,607)   (220,994)
Dividends paid   (30,294)   (29,722)   (29,863)
Exercised stock options   2,003    -    1,382 
Net cash (used in) financing activities   (1,302,369)   (1,098,887)   (427,527)
                
Net (decrease) increase in cash and cash equivalents   (236,533)   (361,006)   218,247 
Cash and cash equivalents at beginning of the period   1,007,726    1,267,302    741,305 
Cash and cash equivalents at end of the period   771,193    906,296    959,552 

 

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 (until April 5, 2017); in Lima, Peru; and in Bogota, Colombia.

 

These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on July 18, 2017.

 

2.Basis of preparation of the unaudited condensed consolidated interim financial statements

 

2.1Statement of compliance

 

These unaudited consolidated condensed 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, 2016, 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.

 

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

 

   June 30,
2017
   December 31,
2016
 
         
Cash and due from banks   20,684    89,656 
Interest-bearing deposits in banks   798,706    979,882 
Total   819,390    1,069,538 
           
Less:          
Pledged deposits   48,197    61,812 
Total cash and cash equivalents   771,193    1,007,726 

 

Interest-bearing deposits in banks

 

Demand deposits

 

As of June 30, 2017 and December 31, 2016, cash in banks balances correspond to bank deposits, bearing interest based on the daily rates determined by banks for between 0.25% to 1.30% and 0.01% to 0.77%, respectively.

 

Time deposits

 

As of June 30, 2017 and December 31, 2016, cash equivalents balances correspond to demand deposits (overnight), bearing an average interest rate of 1.30% and 0.83% to 0.88%, respectively.

 

Pledged deposits

 

   June 30,
2017
   December 31,
2016
 
Pledged deposits:          
New York(1)   3,000    2,800 
Panama(2)   45,197    59,012 
Total   48,197    61,812 

 

(1)The New York Agency had a pledged deposit with the New York State Banking Department, as required by law since March 1994.
(2)The Bank had pledged deposits to secure derivative financial instruments transactions.

 

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:

 

   June 30,
2017
   December 31,
2016
 
Assets        
Foreign exchange forward   13    - 
Total   13    - 
           
Liabilities          
Foreign exchange forward   27    24 
Total   27    24 

 

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 (continued)

 

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

 

The information on the nominal amounts of derivative financial instruments at FVTPL is as follows:

 

   June 30, 2017   December 31, 2016 
   Nominal   Fair Value   Nominal   Fair Value 
   Amount   Asset   Liability   Amount   Asset   Liability 
Foreign exchange forward   3,095    13    27    1,274    -    24 
Total   3,095    13    27    1,274    -    24 

 

4.2Securities 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:

 

   June 30, 2017 
       Unrealized     
   Amortized
Cost
   Gain   Loss   Fair Value 
Sovereign debt:                    
Brazil   2,931    -    40    2,891 
Chile   5,206    -    18    5,188 
Trinidad and Tobago   9,063    -    707    8,356 
    17,200    -    765    16,435 

 

   December 31, 2016 
       Unrealized     
   Amortized
Cost
   Gain   Loss   Fair Value 
Corporate debt:                    
Brazil   3,144    -    62    3,082 
Venezuela   10,810    20    3    10,827 
    13,954    20    65    13,909 
                     
Sovereign debt:                    
Brazil   2,926    -    140    2,786 
Chile   5,229    -    59    5,170 
Trinidad and Tobago   9,283    -    541    8,742 
    17,438    -    740    16,698 
    31,392    20    805    30,607 

 

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)

 

4.2Securities at fair value through other comprehensive income (continued)

 

As of June 30, 2017 and December 31, 2016, there were no securities at fair value through OCI guaranteeing repurchase transactions.

 

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

 

   June 30, 2017 
   Less than 12 months   12 months or longer   Total 
   Fair
Value
   Unrealized
Gross Losses
   Fair
Value
   Unrealized
Gross Losses
   Fair
Value
   Unrealized
Gross Losses
 
Sovereign debt   7,115    25    9,320    740    16,435    765 
Total   7,115    25    9,320    740    16,435    765 

 

   December 31, 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   1,805    3    3,082    62    4,887    65 
Sovereign debt   5,170    59    11,528    681    16,698    740 
Total   6,975    62    14,610    743    21,585    805 

 

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

 

   Three months ended June 30, 
   2017   2016   2015 
Realized gain on sale of securities   130    7,432    140 
Realized loss on sale of securities   (165)   (7,462)   (7)
Net (loss) gain on sale of securities at fair value through other comprehensive income   (35)   (30)   133 

 

   Six months ended June 30, 
   2017   2016   2015 
Realized gain on sale of securities   667    7,471    436 
Realized loss on sale of securities   (588)   (7,786)   (7)
Net gain (loss) on sale of securities at fair value through other comprehensive income   79    (315)   429 

 

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)

 

4.2Securities 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)  June 30,
2017
   December 31,
2016
 
1-4   16,435    30,607 
5-6   -    - 
7   -    - 
8   -    - 
9   -    - 
10   -    - 
Total   16,435    30,607 

 

(1) Current ratings as of June 30, 2017 and December 31, 2016, respectively.

 

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

 

   June 30, 2017   December 31, 2016 
   Amortized
Cost
   Fair Value   Amortized
Cost
   Fair Value 
                 
Due within 1 year   -    -    -    - 
After 1 year but within 5 years   14,269    13,544    17,656    16,994 
After 5 years but within 10 years   2,931    2,891    13,736    13,613 
    17,200    16,435    31,392    30,607 

 

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)

 

4.2Securities 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)    Stage 3 (3)   Total 

Allowance for expected credit losses as of December 31, 2016

   42    263    -    305 
Transfer to lifetime expected credit losses   -    -    -    - 
Transfer to credit-impaired financial assets   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected credit losses   (1)   3    -    2 
Financial assets that have been derecognized during the period   (11)   -    -    (11)
Changes due to financial instruments recognized as of December 31, 2016:   (12)   3    -    (9)
New financial assets originated or purchased   -    -    -    - 
Write-offs   -    -    -    - 

Allowance for expected credit losses as of

June 30, 2017

   30    266    -    296 

 

   Stage 1 (1)   Stage 2 (2)    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   (31)   456    -    425 
Transfer to credit-impaired financial assets   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected credit losses   (15)   (168)   -    (183)
Financial assets that have been derecognized during the year   (174)   (203)   -    (377)
Changes due to financial instruments recognized as of December 31, 2015:   (220)   85    -    (135)
New financial assets originated or purchased   28    -    -    28 
Write-offs   -    -    (6,737)   (6,737)

Allowance for expected credit losses as of

December 31, 2016

   42    263    -    305 

 

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

 

14 

 

 

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

 

4.Financial instruments (continued)

 

4.3Securities 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:

 

   June 30, 2017 
       Unrealized     
   Amortized
Cost (1)
   Gross Gain   Gross Loss   Fair Value 
Corporate debt:                    
Brazil   4,597    34    61    4,570 
    4,597    34    61    4,570 
                     
Sovereign debt:                    
Colombia   29,408    213    -    29,621 
Mexico   20,370    -    314    20,056 
Panama   8,564    304    -    8,868 
    58,342    517    314    58,545 
    62,939    551    375    63,115 

 

   December 31, 2016 
       Unrealized     
   Amortized
Cost (2)
   Gross Gain   Gross Loss   Fair Value 
Corporate debt:                    
Brazil   4,614    -    146    4,468 
Panama   3,000    -    -    3,000 
    7,614    -    146    7,468 
Sovereign debt:                    
Brazil   11,179    37    194    11,022 
Colombia   29,812    34    280    29,566 
Mexico   20,541    -    1,059    19,482 
Panama   8,670    198    -    8,868 
    70,202    269    1,533    68,938 
    77,816    269    1,679    76,406 

 

(1)Amounts do not include allowance for expected credit losses of US$148.
(2)Amounts do not include allowance for expected credit losses of US$602.

 

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 amortized cost (continued)

 

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

 

   June 30, 2017   December 31, 2016 
   Amortized
Cost
   Fair
Value
   Amortized
Cost
  

Fair

Value

 
                 
Due within 1 year   -    -    3,988    4,025 
After 1 year but within 5 years   62,939    63,115    68,537    67,358 
After 5 years but within 10 years   -    -    5,291    5,023 
    62,939    63,115    77,816    76,406 

 

As of June 30, 2017 and December 31, 2016, there were no securities at amortized cost, guaranteeing repurchase transactions.

 

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

 

Rating(1)  June 30,
2017
   December 31,
2016
 
1-4   61,455    76,333 
5-6   1,484    1,483 
7   -    - 
8   -    - 
9   -    - 
10   -    - 
Total   62,939    77,816 

 

(1)Current ratings as of June 30, 2017 and December 31, 2016, respectively.

 

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)

 

4.3Securities at amortized cost (continued)

 

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

 

   Stage 1 (1)   Stage 2 (2)    Stage 3 (3)   Total 

Allowance for expected credit losses as of December 31, 2016

   99    503    -    602 
Transfer to lifetime expected credit losses   -    -    -    - 
Transfer to credit-impaired financial assets   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected credit losses   1    (22)   -    (21)
Financial assets that have been derecognized during the period   (11)   (422)   -    (433)
Changes due to financial instruments recognized as of December 31, 2016:   (10)   (444)   -    (454)
New financial assets originated or purchased   -    -    -    - 

Allowance for expected credit losses as of June 30, 2017

   89    59    -    148 

 

   Stage 1 (1)   Stage 2 (2)    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   (5)   (91)   -    (96)
Financial assets that have been derecognized during the year   (317)   (28)   -    (345)
Changes due to financial instruments recognized as of December 31, 2015:   (365)   325    -    (40)
New financial assets originated or purchased   116    -    -    116 

Allowance for expected credit losses as of December 31, 2016

   99    503    -    602 

 

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

 

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)

 

4.4Recognition and derecognition of financial assets

 

During the periods ended June 30, 2017, 2016 and 2015, the Bank sold certain financial instruments in the secondary market 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 at amortized cost” in the consolidated statement of profit or loss.

 

   Assignments and
Participations
   Gains 
         
For the period ended June 30, 2017   70,400    98 
For the period ended June 30, 2016   53,900    326 
For the period ended June 30, 2015   41,020    227 

 

4.5Loans – at amortized cost

 

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

 

   June 30,
 2017
   December 31,
2016
 
Corporations:        
Private   2,369,870    2,655,910 
State-owned   868,755    786,900 
Banking and financial institutions:          
Private   1,629,497    1,738,999 
State-owned   456,093    544,877 
Middle-market companies:          
Private   246,100    294,045 
Total   5,570,315    6,020,731 

 

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

 

   June 30,
 2017
   December 31,
2016
 
Banking and financial institutions   2,085,590    2,283,876 
Industrial   1,111,020    1,242,441 
Oil and petroleum derived products   975,877    788,186 
Agricultural   698,428    1,007,139 
Services   341,187    419,440 
Mining   195,000    54,000 
Others   163,213    225,649 
Total   5,570,315    6,020,731 

 

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)

 

4.5Loans – 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 $6,723 and $7,249 at June 30, 2017 and December 31, 2016, respectively.

 

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

 

June 30, 2017
   Corporations   Banking and financial
institutions
   Middle-market
companies
     
Rating(1)  Private   State-owned   Private   State-owned   Private   Total 
1-4   1,622,796    714,589    1,331,663    260,589    140,934    4,070,571 
5-6   667,245    154,166    297,834    195,504    70,166    1,384,915 
7   55,465    -    -    -    -    55,465 
8   6,000    -    -    -    -    6,000 
9   -    -    -    -    -    - 
10   18,364    -    -    -    35,000    53,364 
Total   2,369,870    868,755    1,629,497    456,093    246,100    5,570,315 

 

December 31, 2016
   Corporations   Banking and financial
institutions
   Middle-market
companies
     
Rating(1)  Private   State-owned   Private   State-owned   Private   Total 
1-4   1,714,936    646,797    1,457,984    259,981    174,107    4,253,805 
5-6   863,937    140,103    281,015    284,896    84,938    1,654,889 
7   58,673    -    -    -    -    58,673 
8   4,000    -    -    -    -    4,000 
9   -    -    -    -    35,000    35,000 
10   14,364    -    -    -    -    14,364 
Total   2,655,910    786,900    1,738,999    544,877    294,045    6,020,731 

 

(1)Current ratings as of June 30, 2017 and December 31, 2016, respectively.

 

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)

 

4.5Loans – at amortized cost (continued)

 

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

 

   June 30,
2017
  

December 31,
2016

 
Country:          
Argentina   195,785    325,321 
Belgium   13,055    4,180 
Bolivia   -    18,318 
Brazil   1,039,084    1,163,825 
Chile   220,798    69,372 
Colombia   585,193    653,012 
Costa Rica   350,706    400,371 
Dominican Republic   79,311    243,696 
Ecuador   178,845    129,269 
El Salvador   86,578    104,723 
Germany   45,000    50,000 
Guatemala   273,195    315,911 
Honduras   50,497    72,319 
Jamaica   60,177    7,399 
Luxembourg   18,078    14,722 
Mexico   1,034,610    927,041 
Nicaragua   41,515    36,949 
Panama   425,626    498,651 
Paraguay   56,628    108,068 
Peru   484,064    467,408 
Singapore   33,293    70,204 
Switzerland   -    46,000 
Trinidad and Tobago   190,500    184,389 
United States of America   73,277    73,083 
Uruguay   36,500    36,500 
Total   5,570,315    6,020,731 

 

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)

 

4.5Loans – at amortized cost (continued)

 

The remaining loan maturities are summarized as follows:

 

   June 30,
2017
  

December 31,
2016

 
Current:          
Up to 1 month   748,711    896,310 
From 1 month to 3 months   1,351,784    1,300,675 
From 3 months to 6 months   1,045,355    1,267,194 
From 6 months to 1 year   648,984    551,794 
From 1 year to 2 years   570,492    631,629 
From 2 years to 5 years   1,068,104    1,211,847 
More than 5 years   74,236    95,918 
    5,507,666    5,955,367 
           
Impaired:          
Delinquent with impairment   6,000    - 
Past due with impairment   56,649    65,364 
Total   5,570,315    6,020,731 

 

As of June 30, 2017 and December 31, 2016, the range of interest rates on loans fluctuates from 1.29% and 13.86% (2016: 1.21% y 12.69%).

 

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

 

   June 30,
2017
  

December 31,
2016

 
         
Fixed interest rates   2,554,714    2,709,555 
Floating interest rates   3,015,601    3,311,176 
Total   5,570,315    6,020,731 

 

As of June 30, 2017 and December 31, 2016, 93%, for both periods, of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

 

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

 

   June 30, 2017   2017 
   Recorded
investment
   Past due
principal
balance
   Related
allowance
Stage 3
   Average
principal
loan
balance
   Interest
income
recognized
 
With an allowance recorded:                         
Private corporations   27,649    24,364    25,654    15,223    90 
Middle-market companies   35,000    35,000    19,942    35,000    763 
Total   62,649    59,364    45,596    50,223    853 

 

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)

 

4.5 Loans – at amortized cost (continued)

 

   December 31, 2016   2016 
   Recorded
investment
   Past due
principal
balance
   Related
allowance
Stage 3
   Average
principal
loan
balance
   Interest
income
recognized
 
With an allowance recorded:                         
Private corporations   30,364    18,364    23,174    12,500    408 
Middle-market companies   35,000    35,000    12,179    17,705    1,679 
Total   65,364    53,364    35,353    30,205    2,087 

 

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

 

   Three months ended June 30, 
   2017   2016   2015 
Interest revenue calculated on the net carrying amount (net of credit allowance)   359    585    84 

 

   Six months ended June 30, 
   2017   2016   2015 
Interest revenue calculated on the net carrying amount (net of credit allowance)   853    662    140 

 

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

 

June 30, 2017
   91-120
 days
   121-150
 days
   151-180
 days
   Greater
than 180
days
   Total
Past
due
   Delinquent   Current   Total 
Corporations   -    -    3,285    18,364    21,649    6,000    3,210,976    3,238,625 
Banking and financial institutions   -    -    -    -    -    -    2,085,590    2,085,590 
Middle-market companies   -    -    -    35,000    35,000    -    211,100    246,100 
Total   -    -    3,285    53,364    56,649    6,000    5,507,666    5,570,315 

 

December 31, 2016
   91-120
 days
   121-150
 days
   151-180
 days
  

Greater

than 180
days

   Total
Past
due
   Delinquent   Current   Total 
Corporations   -    -    4,000    14,364    18,364    -    3,424,446    3,442,810 
Banking and financial institutions   -    -    -    -    -    -    2,283,876    2,283,876 
Middle-market companies   -    -    -    35,000    35,000    -    259,045    294,045 
Total   -    -    4,000    49,364    53,364    -    5,967,367    6,020,731 

 

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)

 

4.5 Loans – at amortized cost (continued)

 

As of June 30, 2017 and December 31, 2016, the Bank had credit transactions in the normal course of business with 16%, for both periods, respectively, of its Class “A” and “B” stockholders. All transactions were made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and were subject to all of the Bank’s Corporate Governance and control procedures. As of June 30, 2017 and December 31, 2016, approximately 8% and 10%, respectively, of the outstanding loan portfolio was placed with the Bank’s Class “A” and “B” stockholders and their related parties. As of June 30, 2017, 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)    Stage 3 (3)   Total 

Allowance for expected credit losses as of December 31, 2016

   29,036    41,599    35,353    105,988 
Transfer to lifetime expected credit losses – not credit-impaired   (19)   19    -    - 
Transfer to lifetime expected credit losses - credit-impaired   -    (1,110)   1,110    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected credit losses   (912)   9,740    9,133    17,961 
Financial assets that have been derecognized during the period   (27,222)   (4,347)   -    (31,569)
Changes due to financial instruments recognized as of December 31, 2016:   (28,153)   4,302    10,243    (13,608)
New financial assets originated or purchased   23,227    -    -    23,227 
Write-offs   -    -    -    - 
Recoveries of amounts previously written off   -    -    -    - 

Allowance for expected credit losses as of June 30, 2017

   24,110    45,901    45,596    115,607 

 

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)

 

4.5 Loans – at amortized cost (continued)

 

   Stage 1 (1)   Stage 2 (2)    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 – not credit-impaired   (9,117)   9,119    -    2 
Transfer to lifetime expected credit losses – not credit-impaired   (7)   (6,317)   6,324    - 
Transfer to 12-month expected credit losses   2,038    (2,077)   38    (1)
Net effect of changes in reserve for expected credit losses   (39,621)   48,021    26,491    34,891 
Financial assets that have been derecognized during the year   (65,640)   (16,756)   -    (82,396)
Changes due to financial instruments recognized as of December 31, 2015:   (112,347)   31,990    32,853    (47,504)
New financial assets originated or purchased   82,169    -    -    82,169 
Write-offs   -    -    (18,807)   (18,807)
Recoveries of amounts previously written off   -    -    156    156 

Allowance for expected credit losses as of December 31, 2016

   29,036    41,599    35,353    105,988 

 

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

 

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)

 

4.6 Derivative financial instruments for hedging purposes

 

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

 

   June 30, 2017 
   Nominal   Carrying amount of the
hedging instrument
   Changes in fair
value used for
calculating
hedge
 
   Amount   Asset   Liability   Ineffectiveness 
Fair value hedges:                    
Interest rate swaps   367,700    -    (1,636)   329 
Cross-currency interest rate swaps   318,067    1,902    (27,601)   16,684 
Cash flow hedges:                    
Interest rate swaps   342,500    246    (1,173)   369 
Cross-currency interest rate swaps   23,025    264    -    1,518 
Foreign exchange forward   321,930    4,050    (3,524)   3,750 
Net investment hedges:                    
Foreign exchange forward   1,964    35    (12)   154 
Total   1,375,186    6,497    (33,946)   22,804 

 

   December 31, 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   796,202    40    (2,005)   (2,199)
Cross-currency interest rate swaps   291,065    2,561    (44,944)   (19,316)
Cash flow hedges:                    
Interest rate swaps   752,000    323    (1,699)   696 
Cross-currency interest rate swaps   23,025    -    (1,254)   (1,313)
Foreign exchange forward   352,553    6,428    (9,653)   (5,093)
Net investment hedges:                    
Foreign exchange forward   3,780    -    (131)   (415)
Total   2,218,625    9,352    (59,686)   (27,640)

 

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.

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

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

 

   Three months ended at June 30, 2017 
   Gain (loss)
recognized in
OCI (effective
portion)
   Classification of gain
(loss)
  Gain (loss)
reclassified from
accumulated OCI
to the
consolidated
statement of
profit or loss
   Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
Derivatives – cash flow hedge                  
Interest rate swaps   (431)  Gain (loss) on interest rate swap   -    51 
Cross-currency interest rate swaps   86   Gain (loss) on foreign currency exchange   -    18 
        Interest income loans at amortized cost   (2,158)   - 
Foreign exchange forward   8,708   Interest income – securities at FVOCI   -    - 
        Interest income loans at amortized cost   (2,032)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   8,594    - 
        Gain (loss) on foreign currency exchange   -    - 
Total   8,363       4,404    69 

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

   Six months ended at June 30, 2017 
   Gain (loss)
recognized in
OCI (effective
portion)
   Classification of gain
(loss)
  Gain (loss)
reclassified from
accumulated OCI
to the
consolidated
statement of
profit or loss
   Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
Derivatives – cash flow hedge                  
Interest rate swaps   (815)  Gain (loss) on interest rate swap   -    284 
Cross-currency interest rate swaps   (1,333)  Gain (loss) on foreign currency exchange   -    43 
        Interest income loans at amortized cost   (287)   - 
Foreign exchange forward   (1,130)  Interest income – securities at FVOCI   -    - 
        Interest income loans at amortized cost   (2,832)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   (18,575)   - 
        Gain (loss) on foreign currency exchange   -    - 
Total   (3,278)      (21,694)   327 

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

   Three months ended at June 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   (840)  Gain (loss) on interest rate swap   -    (383)
Cross-currency interest rate swaps   (1,025)  Gain (loss) on foreign exchange   -    89 
        Interest income – loans at amortized cost   (1,003)   - 
Forward foreign exchange   (661)  Interest income – securities at FVOCI   220    - 
        Interest income – loans at amortized cost   -    - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   173    - 
        Gain (loss) on foreign currency exchange   694    - 
Total   (2,526)      84    (294)

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

   Six months ended at June 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   (2,458)  Gain (loss) on interest rate swap   -    (961)
Cross-currency interest rate swaps   1,762   Gain (loss) on foreign exchange   -    26 
        Interest income – loans at amortized cost   -    - 
Forward foreign exchange   (1,876)  Interest income – securities at FVOCI   -    - 
        Interest income – loans at amortized cost   (1,755)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   350    - 
        Gain (loss) on foreign currency exchange   4,634    - 
Total   (2,572)      3,229    (935)

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

   Three months ended at June 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   875   Gain (loss) on interest rate swap   -    - 
Cross-currency interest rate swaps   2,087   Gain (loss) on foreign exchange   -    - 
        Interest income – loans at amortized cost   -    - 
Forward foreign exchange   194   Interest income – securities at FVOCI   (338)   - 
        Interest income – loans at amortized cost   (417)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   95    - 
        Gain (loss) on foreign currency exchange   2,805    - 
Total   3,156       2,145    - 
                   
Derivatives – net investment hedge                  
Forward foreign exchange   (416)      -    - 
Total   (416)      -    - 

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

   Six months ended at June 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   (264)  Gain (loss) on interest rate swap   -    - 
Cross-currency interest rate swaps   3,046   Gain (loss) on foreign exchange   -    - 
        Interest income – loans at amortized cost   -    - 
Forward foreign exchange   1,607   Interest income – securities at FVOCI   (535)   - 
        Interest income – loans at amortized cost   (663)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   95    - 
        Gain (loss) on foreign currency exchange   5,833    - 
Total   4,389       4,730    - 
                   
Derivatives – net investment hedge                  
Forward foreign exchange   424       -    - 
Total   424       -    - 

 

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)

 

4.6 Derivative 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:

 

   June 30, 2017
   Classification in
consolidated statement
of profit or loss
  Gain (loss) on
derivatives
   Gain (loss) on
hedge item
   Net gain (loss) 
Derivatives – fair value hedge               
Interest rate swaps  Interest income – securities at FVOCI   (79)   277    198 
   Interest income at amortized cost   (12)   158    146 
   Interest expenses – borrowings and debt   976    (10,206)   (9,230)
   Derivative financial instruments and hedging   593    (379)   214 
Cross-currency interest rate swaps  Interest income loans at amortized cost   (394)   716    322 
   Interest expenses – borrowings and debt   743    (4,772)   (4,029)
   Derivative financial instruments and hedging   19,217    (20,685)   (1,468)
Total      21,044    (34,891)   (13,847)

 

   June 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   (362)   836    474 
   Interest income – loans at amortized cost   (137)   1,508    1,371 
   Interest expenses – borrowings and debt   2,889    (14,126)   (11,237)
   Derivative financial instruments and hedging   (1,404)   1,798    394 
Cross-currency interest rate swaps  Interest income – loans at amortized cost   (137)   354    217 
   Interest expenses – borrowings and debt   (36)   (2,472)   (2,508)
   Derivative financial instruments and hedging   (3,713)   3,213    (500)
Total      (2,900)   (8,889)   (11,789)

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

   June 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   (599)   753    154 
   Interest income at amortized cost   (215)   2,080    1,865 
   Interest expenses – borrowings and debt   2,540    (8,097)   (5,557)
   Derivative financial instruments and hedging   (3,179)   3,420    241 
Cross-currency interest rate swaps  Interest income loans at amortized cost   (122)   288    166 
   Interest expenses – borrowings and debt   813    (2,359)   (1,546)
   Derivative financial instruments and hedging   (13,353)   15,023    1,670 
Total      (14,115)   11,108    (3,007)

 

Derivatives financial position and performance

 

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

 

   June 30, 2017
Fair value hedges  Carrying
amount
   Thereof
accumulated
fair value
adjustments
   Line item in the statement of financial
position
Interest rate risk             
Loans   200    0.20   Loans at amortized cost
Issuances   353,339    (1,661)  Short and long term borrowings and debt
              
Foreign exchange rate risk and FX             
Securities at FVOCI   12,336    (186)  Financial instruments at FVOCI
Loans   (1,042)   (191)  Loans at amortized cost
Issuances   (25,760)   (57)  Short and long term borrowings and debt
              

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

Derivatives financial position and performance (continued)

 

   December 31, 2016
Fair value hedges  Carrying
amount
   Thereof
accumulated
fair value
adjustments
   Line item in the statement of financial
position
Interest rate risk             
Loans   18,514    12   Loans at amortized cost
Issuances   752,910    2,089   Short and long term borrowings and debt
              
Foreign exchange rate risk and FX             
Securities at FVOCI   22,468    (232)  Financial instruments at FVOCI
Loans   1,469    (618)  Loans at amortized cost
Issuances   45,647    1,189   Short and long term borrowings and debt
              

 

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

 

   June 30, 2017 
Risk type  Foreign
Exchange risk
   Interest rate
risk
   Foreign exchange
and Interest
rate risk
   Total 
Up to 1 month   43,574    -    -    43,574 
31 to 60 days   27,107    39,000    -    66,107 
61 to 90 days   113,533    26,000    63    139,596 
91 to 180 days   62,430    120,200    -    182,630 
181 to 365 days   64,775    67,500    16,821    149,096 
1 to 2 years   150,561    37,000    81,320    268,881 
2 to 5 years   3,206    417,500    23,025    443,731 
More than 5 years   -    3,000    78,571    81,571 
Total   465,186    710,200    199,800    1,375,186 

 

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)

 

4.6 Derivative financial instruments for hedging purposes (continued)

 

Derivatives financial position and performance (continued)

 

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

 

   December 31, 2016 
Risk type  Foreign
Exchange risk
   Interest rate
risk
   Foreign exchange
and Interest
rate risk
   Total 
Up to 1 month   66,149    -    -    66,149 
31 to 60 days   33,393    85,000    -    118,393 
61 to 90 days   24,093    60,000    -    84,093 
91 to 180 days   71,533    745,080    -    816,613 
181 to 365 days   109,228    160,422    189    269,839 
1 to 2 years   92,115    50,000    24,948    167,063 
2 to 5 years   73,311    434,500    96,218    604,029 
More than 5 years   -    13,200    79,246    92,446 
Total   469,822    1,548,202    200,601    2,218,625 

 

The following tables detail the sources of ineffectiveness for our cash flow hedge positions:

 

   June 30, 2017 
Type of risk hedge  USD-OIS   Tenor   Xccy basis   Credit spread   Total
Ineffectiveness
 
Interest rate risk   9    301    -    (16)   294 
Foreign exchange risk   (3)   -    5    -    2 
Total   6    301    5    (16)   296 

 

   December 31, 2016 
Type of risk hedge  USD-OIS   Tenor   Xccy basis   Credit spread   Total
Ineffectiveness
 
Interest rate risk   19    -    -    604    623 
Foreign exchange risk   25    -    (4)   (5)   16 
Total   44    -    (4)   599    639 

 

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)

 

4.6Derivative 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 6.69 years.

 

The Bank estimates that approximately $733 reported as losses in OCI as of June 30, 2017, 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 June 30, 2018.

 

The Bank estimates that approximately $1,041of losses reported in OCI as of June 30, 2017, related to forward foreign exchange contracts are expected to be reclassified into interest expense as an adjustment to yield of hedged available-for-sale securities during the twelve-month period ending June 30, 2018.

 

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 held for trading purposes as disclosed in Note 4.1.

 

4.7 Offsetting of financial assets and liabilities

 

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

 

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

 

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)

 

4.7Offsetting of financial assets and liabilities (continued)

 

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

 

June 30, 2017
       Gross amounts
offset in the
consolidated
   Net amount of
assets presented
in the
   Gross amounts not offset in
the consolidated statement
of financial position
     
Description  Gross
amounts
assets
   statement of
financial
position
   consolidated
statement of
financial position
   Financial
instruments
   Cash
collateral
received
   Net
Amount
 
Financial assets at FVTPL   13    -    13    -    -    13 
Derivative financial instruments-hedging   6,497    -    6,497    -    (13,704)   (7,207)
Total   6,510    -    6,510    -    (13,704)   (7,194)

 

December 31, 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   9,352    -    9,352    -    -    9,352 
Total   9,352    -    9,352    -    -    9,352 

 

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)

 

4.7Offsetting of financial assets and liabilities (continued)

 

a)Derivative financial instruments – assets (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:

 

   June 30, 2017 
Description  Gross amounts
of assets
   Gross amounts
offset in the
consolidated
statement of
financial position
   Net amount of assets
presented
in the consolidated
statement of
financial position
 
Financial assets at FVTPL   13    -    13 
Derivative financial instruments - hedging   6,497    -    6,497 
Total   6,510    -    6,510 

 

   December 31, 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 used for hedging   9,352    -    9,352 
Total   9,352    -    9,352 

 

b)Financial liabilities and derivative financial instruments – liabilities

 

June 30, 2017
   Gross   Gross
amounts
offset in the
consolidated
   Net amount
of liabilities
presented
in the
consolidated
   Gross amounts not offset
in the consolidated
statement of financial
position
     
Description  amounts
of
liabilities
   statement of
financial
position
   statement of
financial
position
   Financial
instruments
   Cash
collateral
pledged
   Net
Amount
 
                         
Financial liabilities at FVTPL   27    -    27    -    -    27 
Derivative financial instruments - hedging   33,946    -    33,946    -    (45,197)   (11,251)
Total   33,973    -    33,973    -    (45,197)   (11,224)

 

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)

 

4.7 Offsetting of financial assets and liabilities (continued)

 

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

 

December 31, 2016
   Gross   Gross
amounts
offset in the
consolidated
   Net amount
of liabilities
presented
in the
consolidated
   Gross amounts not offset
in the consolidated
statement of financial
position
     
Description  amounts
of
liabilities
   statement of
financial
position
   statement of
financial
position
   Financial
instruments
   Cash
collateral
pledged
   Net
Amount
 
                         
Financial liabilities at FVTPL   24    -    24    -    -    24 
Derivative financial instruments - hedging   59,686    -    59,686    -    (59,012)   674 
Total   59,710    -    59,710    -    (59,012)   698 

 

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:

 

   June 30, 2017 
Description  Gross amounts
of liabilities
   Gross amounts
offset in the
consolidated
statement of
financial position
   Net amount of
liabilities presented
in the consolidated
statement of
financial position
 
             
Derivative financial instruments:               
Financial liabilities at FVTPL   27    -    27 
Derivative financial instruments used for hedging   33,946    -    33,946 
Total derivative financial instruments   33,973    -    33,973 

 

   December 31, 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
 
             
Derivative financial instruments:               
Financial liabilities at FVTPL   24    -    24 
Derivative financial instruments used for hedging   59,686    -    59,686 
Total derivative financial instruments   59,710    -    59,710 

 

39 

 

 

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

 

5.Loans commitments and financial guarantees contracts

 

In the normal course of business, to meet the financing needs of its customers, the Bank is party to loans commitments and financial guarantees contracts. These instruments involve, to varying degrees, elements of credit and market risk 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 loans commitments and financial guarantees contracts are as follows:

 

   June 30,
2017
   December 31,
2016
 
Confirmed letters of credit   254,071    216,608 
Stand-by letters of credit and guaranteed –
Commercial risk
   2,342    176,177 
Credit commitments   7,438    10,250 
Total   263,851    403,035 

 

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

 

Maturities  June 30,
2017
   December 31,
2016
 
Up to 1 year   246,713    399,257 
From 1 to 2 years   13,000    - 
From 2 to 5 years   578    3,200 
More than 5 years   3,560    578 
    263,851    403,035 

 

Loans commitments and financial guarantees contracts classified by issuer’s credit quality indicators are as follows:

 

Rating(1)  June 30,
2017
   December 31,
2016
 
1-4   95,181    145,255 
5-6   168,670    193,368 
7   -    64,412 
8   -    - 
9   -    - 
10   -    - 
Total   263,851    403,035 

 

(1)Current ratings as of June 30, 2017 and December 31, 2016, respectively.

 

40 

 

 

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

 

5.Loans commitments and financial guarantees contracts (continued)

 

The breakdown of the Bank’s loans commitments and financial guarantees contracts exposure by country risk is as follows:

 

   June 30,
2017
  

December 31,
2016

 
Country:          
Argentina   141    - 
Bolivia   62    190 
Canada   200    160 
Colombia   81,020    78,815 
Costa Rica   9,556    2,250 
Dominican Republic   -    26,787 
Ecuador   87,890    172,522 
El Salvador   1,339    1,305 
Guatemala   1,700    7,000 
Honduras   1,202    1,170 
Mexico   11,738    11,118 
Panama   40,283    39,756 
Paraguay   29    - 
Peru   27,946    42,764 
Switzerland   -    1,000 
United Kingdom   -    70 
Uruguay   745    18,128 
Total   263,851    403,035 

 

Letters of credit and guarantees

 

The Bank, on behalf of its client’s 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.

 

41 

 

 

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

 

5.Loans commitments and financial guarantees contracts (continued)

 

The allowances for credit losses related to loans commitments and financial guarantees contracts are as follows:

 

   Stage 1 (1)   Stage 2 (2)    Stage 3 (3)   Total 

Allowance for expected credit losses as of December 31, 2016

   1,144    4,632    -    5,776 
Transfer to lifetime expected credit losses   (6)   6    -    - 
Transfer to credit-impaired instruments   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected
credit loss
   (707)   (254)   -    (961)
Instruments that have been derecognized during the period   (838)   (370)   -    (1,208)
Changes due to instruments recognized as of December 31, 2016:   (1,551)   (618)   -    (2,169)
New instruments originated or purchased   1,008    -    -    1,008 

Allowance for expected credit losses as of June 30, 2017

   601    4,014    -    4,615 

 

   Stage 1 (1)   Stage 2 (2)    Stage 3 (3)   Total 

Allowance for expected credit losses as of December 31, 2015

   2,914    2,510    -    5,424 
Transfer to lifetime expected credit losses   (646)   693    -    47 
Transfer to credit-impaired instruments   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected
credit loss
   (748)   1,756    -    1,008 
Instruments that have been derecognized during the year   (2,631)   (326)   -    (2,957)
Changes due to instruments recognized as of December 31, 2015:   (4,025)   2,123    -    (1,902)
New instruments originated or purchased   2,254    -    -    2,254 

Allowance for expected credit losses as of December 31, 2016

   1,143    4,633    -    5,776 

 

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

 

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

 

6.Other assets

 

Following is a summary of other assets:

 

   June 30,
2017
   December 31,
2016
 
Accounts receivable   5,815    5,413 
IT projects under development   4,751    4,199 
Other (1)   9,247    1,934 
    19,813    11,546 

 

(1)As of June 30, 2017, $7.6 million corresponds to financial leasing under development.

 

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)

 

7.Deposits

 

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

 

   June 30,
2017
   December 31,
2016
 
Demand   126,977    127,014 
Up to 1 month   1,229,202    1,201,328 
From 1 month to 3 months   546,026    463,479 
From 3 month to 6 months   593,547    336,627 
From 6 month to 1 year   591,268    436,884 
From 1 year to 2 years   215,131    190,000 
From 2 years to 5 years   51,404    47,520 
    3,353,555    2,802,852 

 

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

 

   June 30,
2017
   December 31,
2016
 
Aggregate amounts of time deposits of $100,000 or more   3,353,099    2,802,474 
Aggregate amounts of deposits in the New York Agency   261,652    250,639 

 

   Three months ended June 30, 
   2017   2016   2015 
Interest expense paid to deposits in the New York Agency.   847    464    310 

 

   Six months ended June 30, 
   2017   2016   2015 
Interest expense paid to deposits in the New York Agency.   1,557    853    602 

 

8.Securities sold under repurchase agreements

 

As of June 30, 2017 and December 31, 2016, the Bank does not have financing transactions under repurchase agreements.

 

As of June 30, 2017, the Bank did not incur interest expense generated by financing transactions under repurchase agreements. During the periods ended June 30, 2016 and 2015, interest expense related to financing transactions under repurchase agreements totaled $554 and $223, 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.

 

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)

 

9.Borrowings and debt

 

9.1Short-term borrowings and debt

 

The breakdown of short-term (original maturity of less than one year) borrowings and debt, together with contractual interest rates, is as follows:

 

   June 30,
2017
   December 31,
2016
 
Short-term Borrowings:          
At fixed interest rates   192,256    788,075 
At floating interest rates   277,500    657,000 
Total borrowings   469,756    1,445,075 
           
Short-term Debt:          
At fixed interest rates   17,300    25,000 
At floating interest rates   -    - 
Total debt   17,300    25,000 
Total short-term borrowings and debt   487,056    1,470,075 
           
Average outstanding balance during the period   839,856    1,348,230 
Maximum balance at any month-end   1,070,070    1,876,322 
Range of fixed interest rates on borrowing and debt in U.S. dollars   1.30% to 1.75%    1.10% to 1.50% 
Range of floating interest rates on borrowing in U.S. dollars   1.55% to 1.82%    1.14% to 1.48% 
Range of fixed interest rates on borrowing in Mexican pesos   6.16% to 7.49%    6.16%
Range of floating interest rate on borrowing in Mexican pesos   -    5.72%
Weighted average interest rate at end of the period   1.70%   1.30%
Weighted average interest rate during the period   1.43%   1.10%

 

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

 

   June 30,
2017
   December 31,
2016
 
Currency          
US dollar   477,800    1,470,000 
Mexican peso   9,256    75 
Total   487,056    1,470,075 

 

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)

 

9.Borrowings and debt (continued)

 

9.2 Long-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 borrowings and long-term debt (original maturity of more than one year), together with contractual interest rates gross of prepaid commission of $6,156 and $5,133 as of June 30, 2017 and December 31, 2016, respectively, is as follows:

 

   June 30,
2017
   December 31,
2016
 
Long-term Borrowings:          
           
At fixed interest rates with due dates from September 2017 to February 2022.   76,817    61,148 
At floating interest rates with due dates from November 2017 to March 2021.   682,098    631,326 
Total borrowings   758,915    692,474 
           
Long-term Debt:          
           
At fixed interest rates with due dates from March 2018 to March 2024.   530,975    921,479 
At floating interest rates with due dates from January 2018 to March 2022.   201,973    167,918 
Total long-term debt   732,948    1,089,397 
Total long-term borrowings and debt outstanding   1,491,863    1,781,871 
           
Average outstanding balance during the period   1,652,208    1,881,085 
Maximum outstanding balance at any month – end   2,010,078    2,054,138 
Range of fixed interest rates on borrowing and debt in U.S. dollars   1.35% to 3.25%    2.85% to 3.75% 
Range of floating interest rates on borrowing in U.S. dollars   2.07% to 2.75%    1.66% to 2.49% 
Range of fixed interest rates on borrowing in Mexican pesos   4.75% to 9.09%    4.75% to 8.90% 
Range of floating interest rates on borrowing and debt in Mexican pesos   7.57% to 8.06%    6.19% to 6.54% 
Range of fixed interest rate on debt in Japanese yens   0.46% to 0.81%    0.46% to 0.81% 
Range of fixed interest rate on debt in Euros   3.75%   3.75%
Range of fixed interest rate on debt in Australian dollar   3.33%   3.33%
Weighted average interest rate at the end of the period   3.34%   2.98%
Weighted average interest rate during the period   3.32%   2.84%

 

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)

 

9.Borrowings and debt (continued)

 

9.2Long-term borrowings and debt (continued)

 

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

 

   June 30,
2017
   December 31,
2016
 
Currency          
US dollar   1,076,609    1,392,995 
Mexican peso   236,888    219,347 
Japanese yen   98,771    95,238 
Euro   56,534    52,574 
Australian dollar   23,061    21,717 
Total   1,491,863    1,781,871 

 

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 June 30, 2017 the Bank was in compliance with all covenants.

 

The future maturities of long-term borrowings and debt outstanding as of June 30, 2017, are as follows:

 

Due in  Outstanding 
2017   55,983 
2018   426,363 
2019   363,837 
2020   378,199 
2021   200,893 
2022   10,054 
2024   56,534 
    1,491,863 

 

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)

 

10.Other liabilities

 

Following is a summary of other liabilities:

 

   June 30,
2017
   December 31,
2016
 
Accruals and other accumulated expenses   2,928    4,170 
Accounts payable   9,662    11,179 
Others   2,379    2,979 
    14,969    18,328 

 

11.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   Six months ended 
   June 30,   June 30, 
   2017   2016   2015   2017   2016   2015 
Profit for the period   17,481    22,272    13,518    40,939    45,710    43,386 
                               
Basic earnings per share   0.44    0.57    0.35    1.04    1.17    1.12 
Diluted earnings per share   0.44    0.57    0.35    1.04    1.17    1.11 
                               
Weighted average common shares outstanding - applicable to basic   39,317    39,078    38,954    39,252    39,037    38,880 
                               
Effect of diluted securities:                              
Stock options and restricted stock units plans   30    120    119    28    83    135 
Adjusted weighted average common shares outstanding applicable to diluted EPS   39,347    39,198    39,073    39,280    39,120    39,015 

 

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.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.

 

The following table provides detailed information on the Bank’s common stock activity per class for each of the periods in the three-year period ended June 30, 2017, 2016 and 2015:

 

(Share units)  “Class A”     “Class B”         “Class E”   “Class 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 
Conversions   -    -    -    -    - 
Repurchase common stock   -    -    -    -    - 
Restricted stock issued – directors   -    -    57,000    -    57,000 
Exercised stock options - compensation plans   -    -    70,358    -    70,358 
Restricted stock units – vested   -    -    64,208    -    64,208 
Outstanding at June 30, 2015   6,342,189    2,479,050    30,147,666    -    38,968,905 
                          
Outstanding at January 1, 2016   6,342,189    2,474,469    30,152,247    -    38,968,905 
Conversions   -    -    -    -    - 
Restricted stock issued – directors   -    -    57,000    -    57,000 
Exercised stock options - compensation plans   -    -    -    -    - 
Restricted stock units – vested   -    -    69,678    -    69,678 
Outstanding at June 30, 2016   6,342,189    2,474,469    30,278,925    -    39,095,583 
                          
Outstanding at January 1, 2017   6,342,189    2,474,469    30,343,390    -    39,160,048 
Repurchase common stock   -    (1,000)   -    -    (1,000)
Restricted stock issued – directors   -    -    57,000    -    57,000 
Exercised stock options - compensation plans   -    -    74,995    -    74,995 
Restricted stock units – vested   -    -    70,519    -    70,519 
Outstanding at June 30, 2017   6,342,189    2,473,469    30,545,904    -    39,361,562 

 

48 

 

 

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.Capital and Reserves (continued)

 

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 
Repurchase of common stock   -    -    -    -    -    -    -    - 
Restricted stock issued – directors   -    -    -    -