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 May, 2018

 

Commission File Number 1-11414

 

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

(Exact name of Registrant as specified in its Charter)

 

FOREIGN TRADE BANK OF LATIN AMERICA, INC.

(Translation of Registrant’s name into English)

 

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

P.O. Box 0819-08730

Panama City, Republic of Panama

(Address of Registrant’s Principal Executive Offices)

 

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

 

Form 20-F x Form 40-F ¨

 

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

 

Yes ¨ No x

 

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

 

Yes ¨ No x

 

 

  

 

 

SIGNATURES

 

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

 

Date: May 7, 2018

 

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

 

  By: /s/ Ana Graciela de Méndez
     
  Name: Ana Graciela de Méndez
  Title: CFO

 

 

 

 

 

Banco Latinoamericano

de Comercio Exterior, S.A.

and Subsidiaries

 

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

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S.A.

and Subsidiaries

 

Unaudited condensed consolidated interim financial statements

 

Contents   Pages
     
Unaudited condensed consolidated interim statements of financial position   3
     
Unaudited condensed consolidated interim statements of profit or loss   4
     
Unaudited condensed consolidated interim statements of profit or loss and other comprehensive income   5
     
Unaudited condensed consolidated interim statements of changes in equity   6
     
Unaudited condensed consolidated interim statements of cash flows   7
     
Notes to the unaudited condensed consolidated interim financial statements   8-74

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statement of financial position

March 31, 2018 and December 31, 2017

(In US$ thousand)

 

 

      March 31,   December 31, 
      2018   2017 
   Notes  (Unaudited)   (Audited) 
Assets             
Cash and cash equivalents  3,16   560,276    672,048 
Financial Instruments:  4,16          
At fair value through OCI  4,16   24,313    25,135 
Securities at amortized cost, net  4,16   68,112    68,934 
Loans  4   5,225,324    5,505,658 
Less:             
Allowance for expected credit losses  4   82,670    81,294 
Unearned interest and deferred fees  4   5,927    4,985 
Loans, net      5,136,727    5,419,379 
              
Derivative financial instruments used for hedging – receivable  4,14,16   14,682    13,338 
              
Property and equipment, net      7,120    7,420 
Intangibles, net      5,115    5,425 
              
Other assets:             
Customers' liabilities under acceptances  16   4,940    6,369 
Accrued interest receivable  16   34,725    30,872 
Other assets  6   19,035    18,827 
Total of other assets      58,700    56,068 
Total assets      5,875,045    6,267,747 
              
Liabilities and stockholders' equity             
Deposits:  7,15          
Noninterest-bearing - Demand      407    420 
Interest-bearing - Demand      41,594    81,644 
Time      2,772,214    2,846,780 
Total deposits      2,814,215    2,928,844 
              
Derivative financial instruments used for hedging – payable  4,14,16   12,469    34,943 
              
Financial liabilities through profit or loss  4,16   -    - 
Securities sold under repurchase agreement  4,8,16   49,316    - 
Short-term borrowings and debt  9,16   776,967    1,072,723 
Long-term borrowings and debt, net  9,16   1,123,908    1,138,844 
              
Other liabilities:             
Acceptances outstanding  16   4,940    6,369 
Accrued interest payable  16   17,005    15,816 
Allowance for expected credit losses on loan commitments and financial guarantees contracts  5   7,423    6,845 
Other liabilities  10   22,066    20,551 
Total other liabilities      51,434    49,581 
Total liabilities      4,828,309    5,224,935 
              
Stockholders' equity:             
Common stock  12   279,980    279,980 
Treasury stock  13   (60,671)   (63,248)
Additional paid-in capital in excess of assigned value of common stock  12   120,319    119,941 
Capital reserves      95,210    95,210 
Dymanic provision  20   108,756    108,756 
Regulatory credit reserve  20   18,748    20,498 
Retained earnings  20   480,778    479,712 
Accumulated other comprehensive income (loss)  4,14   3,616    1,963 
Total stockholders' equity      1,046,736    1,042,812 
Total liabilities and stockholders' equity      5,875,045    6,267,747 

 

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

 

 3 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of profit or loss

For the three months ended March 31, 2018, 2017 and 2016

(In US$ thousand, except per share amounts)

 

 

   Notes  2018   2017   2016 
                
Interest income:                  
Deposits      2,939    2,001    1,171 
At fair value through OCI      123    170    950 
   Securities at amortized cost      485    533    784 
Loans      53,890    56,427    58,253 
Total interest income      57,437    59,131    61,158 
Interest expense:                  
Deposits      14,004    6,207    4,552 
Short and long-term borrowings and debt      16,843    18,492    17,088 
Total interest expense      30,847    24,699    21,640 
                   
Net interest income      26,590    34,432    39,518 
                   
Other income:                  
Fees and commissions, net      3,059    3,269    2,373 
Loss on derivative financial instruments and foreign currency exchange, net  4   1,666    131    (839)
(Loss) gain per financial instrument at fair value through profit or loss      (62)   (60)   (4,183)
Gain (loss) on sale of securities at fair value through OCI  4   -    114    (285)
Gain on sale of loans  4   (625)   86    100 
Other income      115    354    351 
Net other income      4,153    3,894    (2,483)
                   
Total income      30,743    38,326    37,035 
                   
Expenses:                  
Impairment loss from expected credit losses on loans at amortized cost  4   1,377    3,953    2,143 
(Recovery) impairment loss from expected credit losses on investment securities  4   (25)   (454)   7 
Impairment loss (recovery) from expected credit losses on loan commitments and financial guarantee contracts  5   579    163    (913)
Salaries and other employee expenses      10,094    6,696    7,880 
Depreciation of equipment and leasehold improvements      323    431    329 
Amortization of intangible assets      338    201    113 
Other expenses      3,559    3,878    4,038 
Total expenses      16,245    14,868    13,597 
Profit for the period      14,498    23,458    23,438 
                   
Earnings per share:                  
Basic  11   0.37    0.60    0.60 
Diluted  11   0.37    0.60    0.60 
Weighted average basic shares  11   39,466    39,188    38,997 
Weighted average diluted shares  11   39,492    39,296    39,121 

 

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

 

 4 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of profit or loss and other comprehensive income

For the three months ended March 31, 2018, 2017 and 2016

(In US$ thousand)

 

 

   Notes  2018   2017   2016 
                
Profit for the period      14,498    23,458    23,438 
Other comprehensive income (loss):                  
Items that will not reclassified subsequently to profit and loss:                  
Change in fair value for revaluation by equity instrument to FVOCI, net of hedging  14   (623)   -    - 
                   
Items that are or may be reclassified subsequently to profit and loss:                  
Change in fair value for revaluation y debt instrument, net of hedging  14   1,291    937    1,801 
Reclasification adjustment for gains (losses) included in the profit  14   1,160    (2,485)   207 
Exchange difference in conversion of foreign operating currency      (175)   -    - 
                   
Other comprehensive income (loss)  14   1,653    (1,548)   2,008 
                   
Total comprehensive income for the period      16,151    21,910    25,446 

 

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

 

 5 

 

  

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

 

Unaudited condensed consolidated interim statements of changes in stockholders's equity

For the three months ended March 31, 2018, 2017 and 2016

(In US$ thousand)

 

 

   Common stock   Treasury stock  

Additional paid-
in capital in
excess of
assigned value of

common stock

   Capital reserves   Dymanic
provision
   Regulatory
credit
reserve
   Retained
earnings
  

Accumulated
other
comprehensive

income (loss)

   Total 
Balances at January 1, 2016   279,980    (73,397)   120,177    95,210    30,788    7,920    521,934    (10,681)   971,931 
Profit for the period   -    -    -    -    -    -    23,438    -    23,438 
Other comprehensive income   -    -    -    -    -    -    -    2,008    2,008 
Issuance of restricted stock   -    -    -    -    -    -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    659    -    -    -    -    -    659 
Exercised options and stock units vested   -    1,433    (1,433)   -    -    -    -    -    - 
Repurchase of "Class B" and "Class E" common stock   -    -    -    -    -    -    -    -    - 
Regulatory reserve   -    -    -    -    -    6,381    (6,381)   -    - 
Dymanic provision   -    -    -    -    830    -    (830)   -    - 
Dividends declared   -    -    -    -    -    -    (15,000)   -    (15,000)
Balances at March 31, 2016   279,980    (71,964)   119,403    95,210    31,618    14,301    523,161    (8,673)   983,036 
                                              
Balances at January 1, 2017   279,980    (69,176)   120,594    95,210    43,826    18,633    525,048    (2,801)   1,011,314 
Profit for the period   -    -    -    -    -    -    23,458    -    23,458 
Other comprehensive income   -    -    -    -    -    -    -    (1,548)   (1,548)
Issuance of restricted stock   -    1,005    (1,005)   -    -    -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    419    -    -    -    -    -    419 
Exercised options and stock units vested   -    471    (127)   -    -    -    -    -    344 
Repurchase of "Class B" and "Class E" common stock   -    -    -    -    -    -    -    -    - 
Regulatory reserve   -    -    -    -    -    (10,967)   10,967    -    - 
Dymanic provision   -    -    -    -    983    -    (983)   -    - 
Dividends declared   -    -    -    -    -    -    (15,078)   -    (15,078)
Balances at March 31, 2017   279,980    (67,700)   119,881    95,210    44,809    7,666    543,413    (4,349)   1,018,910 
                                              
Balances at January 1, 2018   279,980    (63,248)   119,941    95,210    108,756    20,498    479,712    1,963    1,042,812 
Profit for the period   -    -    -    -    -    -    14,498    -    14,498 
Other comprehensive income   -    -    -    -    -    -    -    1,653    1,653 
Issuance of restricted stock   -    -    -    -    -    -    -    -    - 
Compensation cost - stock options and stock units plans   -    -    124    -    -    -    -    -    124 
Exercised options and stock units vested   -    2,577    254    -    -    -    -    -    2,831 
Repurchase of "Class B" and "Class E" common stock   -    -    -    -    -    -    -    -    - 
Regulatory reserve   -    -    -    -    -    (1,750)   1,750    -    - 
Dymanic provision   -    -    -    -    -    -    -    -    - 
Dividends declared   -    -    -    -    -    -    (15,182)   -    (15,182)
Balances at March 31, 2018   279,980    (60,671)   120,319    95,210    108,756    18,748    480,778    3,616    1,046,736 

 

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 three months ended March 31, 2018, 2017 and 2016

(In US$ thousand)

 

 

   2018   2017   2016 
             
Cash flows from operating activities               
Profit for the period   14,498    23,458    23,438 
Adjustments to reconcile profit for the year to net cash provided by (used in) operating activities:               
Activities of derivative financial instruments used for hedging   (21,776)   (1,450)   (13,038)
Depreciation of equipment and leasehold improvements   323    431    328 
Amortization of intangible assets   338    201    113 
Loss for disposal of equipment and leasehold improvements   -    4    - 
Loss for disposal of intangible assets   -    -    - 
Impairment loss from expected credit losses   1,931    4,116    1,237 
Net (gain) loss on sale of financial assets at fair value through OCI   -    114    (285)
Compensation cost - share-based payment   124    419    659 
Interest income   (57,437)   (59,131)   (61,159)
Interest expense   30,847    24,699    21,640 
Net decrease (increase) in operating assets:               
Net decrease (increase) in pledged deposits   36,685    7,270    4,125 
Financial instruments at fair value through profit or loss   -    -    (4,084)
Net decrease (increase) in loans at amortized cost   281,276    281,123    157,702 
Other assets   1,221    9,854    (27,216)
Net increase (decrease) in operating liabilities:               
Net increase due to depositors   (114,629)   378,404    277,910 
Financial liabilities at fair value through profit or loss   -    (24)   (89)
Other liabilities   86    (17,073)   11,322 
Cash provided by operating activities   173,487    652,415    392,603 
                
Interest received   53,584    58,870    58,879 
Interest paid   (29,658)   (20,492)   (17,823)
Net cash provided by operating activities   197,413    690,793    433,659 
                
Cash flows from investing activities:               
Acquisition of equipment and leasehold improvements   (21)   (198)   60 
Acquisition of intangible assets   (27)   -    (7)
Proceeds from the redemption of of financial instruments at fair value through OCI   -    -    14,000 
Proceeds from the sale of financial instruments at fair value through OCI   679    6,459    51,449 
Proceeds from maturities of financial instruments at amortized cost   849    11,084    8,600 
Purchases of financial instruments at fair value through OCI   -    -    (124,640)
Purchases of financial instruments at amortized cost   -    -    (8,226)
Net cash provided by investing activities   1,480    17,345    (58,764)
                
Cash flows from financing activities:               
Net decrease in short-term borrowings and debt and securities sold under repurchase agreements   (246,440)   (708,512)   (901,296)
Proceeds from long-term borrowings and debt   95,000    255,547    268,206 
Repayments of long-term borrowings and debt   (109,936)   (29,051)   (281,199)
Dividends paid   (15,183)   (15,077)   14,958 
Exercised stock options   2,577    344    - 
Repurchase of common stock   -    -    - 
Net cash used in financing activities   (273,982)   (496,749)   (899,331)
                
Net (decrease) increase in cash and cash equivalents   (75,089)   211,389    (524,436)
Cash and cash equivalents at beginning of the pereiod   618,807    1,007,726    1,267,302 
Cash and cash equivalents at end of the period   543,718    1,219,115    742,866 

 

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

 

 7 

 

  

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

1.Corporate information

 

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

 

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

 

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

 

Bladex Head Office’s subsidiaries are the following:

 

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

 

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

 

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

 

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

 

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

 

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

 

 8 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

1.Corporate information (continued)

 

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

 

These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on April 10, 2018.

 

2.Basis of preparation of the consolidated financial statements

 

2.1Statement of compliance

 

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

 

3.Cash and cash equivalents

 

   March 31,
2018
   December 31,
2017
 
         
Cash and due from banks   10,190    11,032 
Interest-bearing deposits in banks   550,086    661,016 
Total   560,276    672,048 
           
Less:           
Pledged deposits   16,557    53,241 
Total cash and cash equivalents   543,719    618,807 

 

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

 

   March 31, 2018   December 31, 2017 
   Amount  

Range

Interest rate

   Amount  

Range

Interest rate

 
Interest-bearing deposits in banks:                    
 Demand deposits(1)   550,086    0.25% a 1.68%    661,016    0.25% a 1.55% 
Time deposits(2)   -    -    -    - 
Total   550,086         661,016      
                     
Pledged deposits:                    
 New York(3)   3,000    -    3,000    - 
 Panama(4)   13,557    1.68%   50,241    1.42%
Total   16,557         53,241      

 

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

 

 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)

 

4.Financial instruments

 

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

 

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

 

Equity Investment at FVOCI

 

   March 31, 2018 
       Unrealized     
   Amortized cost   Gain   Loss   Fair value 
Equity investments (1)                    
 Brazil   8,402    -    556    7.846 
    8,402    -    556    7,846 

 

Securities at FVOCI

   March 31, 2018 
       Unrealized     
   Amortized cost   Gain   Loss   Fair value 
Sovereign debt:                    
Brazil   2,940    -    48    2,892 
Chile   5,171    -    135    5,036 
Trinidad and Tobago   8,729    -    190    8,539 
    16,840    -    373    16,467 
    25,242    -    929    24,313 

 

Equity Investment at FVOCI

 

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

 

Securities at FVOCI

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

 

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

 

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

 

Securities at FVOCI (continued)

 

As of March 31, 2018, securities at fair value through other comprehensive income with a carrying value of $ 5.0 million, were pledged to secure repurchase transactions accounted for as secured financings. As of December 31, 2017, there were no securities at fair value through other comprehensive income accounted for as secured financings.

 

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

 

   March 31, 2018 
   Less than 12 months   12 months or longer   Total 
   Fair
value
   Unrealized
gross losses
   Fair
value
   Unrealized
gross losses
   Fair
value
   Unrealized
gross losses
 
Sovereign debt   6,964    150    9,503    223    16,467    373 
Total   6,964    150    9,503    223    16,467    373 

 

   December 31, 2017 
   Less than 12 months   12 months or longer   Total 
   Fair
value
   Unrealized
gross losses
   Fair
value
   Unrealized
gross losses
   Fair
value
   Unrealized
gross losses
 
Sovereign debt   5,147    35    9,616    223    14,763    258 
Total   5,147    35    9,616    223    14,763    258 

  

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

 

   Three months ended March 31st 
   2018   2017   2016 
Realized gain on sale of securities   -    161    39 
Realized loss on sale of securities   -    (47)   (324)
Net gain (loss) on sale of securities at fair value through other comprehensive income   -    114    (285)

 

 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)

 

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

 

Securities at FVOCI (continued)

 

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

 

Rating(1)  March 31,
2018
  

December 31,

2017

 
1-4   16,467    16,733 
5-6   -    - 
7   -    - 
8   -    - 
9   -    - 
10   -    - 
Total   16,467    16,733 

 

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

 

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

 

   March 31, 2018   December 31, 2017 
   Amortized
cost
   Fair value   Amortized
cost
   Fair value 
                 
Due within 1 year   -    -    -    - 
After 1 year but within 5 years   16,839    16,467    16,962    16,733 
After 5 years but within 10 years   -    -    -    - 
    16,839    16,467    16,962    16,733 

 

 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)

 

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

 

Securities at FVOCI (continued)

 

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

 

   Stage 1   Stage 2   Stage 3   Total 
Gross carrying amount as of December 31, 2017   13,779    2,954    -    16,733 
Transfer in book value to stage 2   -    -    -    - 
Transfer to lifetime expected credit losses - credit-impaired   -    -    -    - 
Transfer in book value to stage 1   -    -    -    - 
Financial assets that have been derecognized during the period   (204)   (62)   -    (266)
Changes due to financial instruments recognized
as of December 31, 2017
   (204)   (62)   -    (266)
New financial assets originated or purchased   -    -    -    - 
Write-offs   -    -    -    - 
Gross carrying amount as of March 31, 2018   13,575    2,892    -    16,467 

 

   Stage 1   Stage 2   Stage 3   Total 
Gross carrying amount as of December 31, 2016   27,821    2,786    -    30,607 
Transfer in book value to stage 2   -    -    -    - 
Transfer to lifetime expected credit losses – not credit-impaired   -    -    -    - 
Transfer in book value to stage 1   -    -    -    - 
Financial assets that have been derecognized during the year   (14,042)   168    -    (13,874)
Changes due to financial instruments recognized
as of December 31, 2016
   (14,042)   168    -    (13,874)
New financial assets originated or purchased   -    -    -    - 
Write-offs   -    -    -    - 
Gross carrying amount as of December 31, 2017   13,779    2,954    -    16,733 

 

 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)

 

Securities at FVOCI (continued)

 

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

 

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

Allowance for expected credit losses as of

December 31, 2017

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

Allowance for expected credit losses as of

March 31, 2018

   23    202    -    225 

 

   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
   (6)   (65)   -    (71)
Financial assets that have been derecognized
during the year
   (12)   -    -    (12)
Changes due to financial instruments recognized
as of December 31, 2016:
   (18)   (65)   -    (83)
New financial assets originated or purchased   -    -    -    - 
Write-offs   -    -    -    - 

Allowance for expected credit losses as of

December 31, 2017

   24    198    -    222 

 

(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)

 

Investment securities- at amortized cost

 

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

 

   March 31, 2018 
       Unrealized     
   Amortized
cost (1)
  

 

Gross gain

  

 

Gross loss

   Fair value 
Corporate debt:                    
Brazil   1,486    -    20    1,466 
Panama   9,478    -    -    9,478 
    10,964    -    20    10,944 
                     
Sovereign debt:                    
Colombia   28,799    -    247    28,552 
Mexico   20,116    -    558    19,558 
Panama   8,403    -    49    8,354 
    57,318    -    854    56,464 
    68,282    -    874    67,408 

 

   December 31, 2017 
       Unrealized     
   Amortized
cost (2)
  

 

Gross gain

  

 

Gross loss

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

 

(1)Amounts do not include allowance for expected credit losses of US170.
(2)Amounts do not include allowance for expected credit losses of US$196.

 

As of March 31, 2018, securities at amortized cost with a carrying value of $ 46.5 million, were pledged to secure repurchase transactions accounted for as secured financial liabilities. As of December 31, 2017, there were no securities at amortized cost accounted for as secured financial liabilities.

 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)

 

Investment securities - at amortized cost (continued)

 

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

 

   March 31, 2018   December 31, 2017 
   Amortized
cost (1)
  

Fair

value

   Amortized
cost (2)
   Fair
value
 
                 
Due within 1 year   7,278    7,278    7,978    7,978 
After 1 year but within 5 years   61,004    60,130    61,152    61,028 
After 5 years but within 10 years   -    -    -    - 
    68,282    67,408    69,130    69,006 

 

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

 

Rating(3)  March 31,
2018
   December 31,
2017
 
1-4   57,318    57,667 
5-6   10,964    11,463 
7   -    - 
8   -    - 
9   -    - 
10   -    - 
Total   68,282    69,130 

 

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

 

(1)Amounts do not include allowance for expected credit losses of US170.
(2)Amounts do not include allowance for expected credit losses of US$196.

 

 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)

 

Investment securities- at amortized cost (continued)

 

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

 

   Stage 1   Stage 2   Stage 3   Total 
Gross carrying amount as of December 31, 2017   67,645    1,485    -    69,130 
Transfer in book value to stage 2   -    -    -    - 
Transfer to lifetime expected credit losses - credit-impaired   -    -    -    - 
Transfer in book value to stage 1   -    -    -    - 
Financial assets that have been derecognised during the period   (1,049)   1    -    (1,048)
Changes due to financial instruments recognized
as of December 31, 2017
   (1,049)   1    -    (1,048)
New financial assets originated or purchased   200    -    -    200 
Write-offs   -    -    -    - 
Gross carrying amount as of March 31, 2018   66,796    1,486    -    68,282 

 

   Stage 1   Stage 2   Stage 3   Total 
Gross carrying amount as of December 31, 2016   65,154    12,687    -    77,841 
Transfer in book value to stage 2   -    -    -    - 
Transfer to lifetime expected credit losses – not credit-impaired   -    -    -    - 
Transfer in book value to stage 1   -    -    -    - 
Financial assets that have been derecognized during the year   (7,487)   (11,202)   -    (18,689)
Changes due to financial instruments recognized
as of December 31, 2016
   (7,487)   (11,202)   -    (18,689)
New financial assets originated or purchased   9,978    -    -    9,978 
Write-offs   -    -    -    - 
Gross carrying amount as of December 31, 2017   67,645    1,485    -    69,130 

 

 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)

 

Investment securities- at amortized cost (continued)

 

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

 

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

Allowance for expected credit losses as of

December 31, 2017

   144    52    -    196 
Transfer to lifetime expected credit losses   -    -    -    - 
Transfer to credit-impaired financial assets   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected
credit losses
   (1)   (22)   -    (23)
Financial assets that have been derecognized
during the period
   (6)   -    -    (6)
Changes due to financial instruments recognized
as of December 31, 2017:
   (7)   (22)       -    (29)
New financial assets originated or purchased   2    -    -    2 

Allowance for expected credit losses as of

March 31, 2018

   139    30    -    169 

 

 

   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
   (16)   (29)   -    (45)
Financial assets that have been derecognized
during the year
   (18)   (422)       -    (440)
Changes due to financial instruments recognized
as of December 31, 2016:
   (34)   (451)   -    (485)
New financial assets originated or purchased   79    -    -    79 

Allowance for expected credit losses as of

December 31, 2016

   144    52    -    196 

 

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

 

 18 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

4.Financial instruments (continued)

 

Recognition and derecognition of financial assets

 

During the periods ended March 31, 2018, 2017 and 2016, 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

(losses)

 
         
For the year ended March 31, 2018   41,667    (625)
For the year ended March 31, 2017   64,400    86 
For the year ended March 31, 2016   13,800    56 

 

Loans – at amortized cost

 

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

 

  

March 31,

2018

   December 31,
2017
 
Corporations:          
Private   1,667,575    1,882,846 
State-owned   877,213    723,267 
Banking and financial institutions:          
Private   1,987,807    2,083,795 
State-owned   472,555    573,649 
Middle-market companies:          
Private   220,174    242,101 
Total   5,225,324    5,505,658 

 

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

 

  

March 31,

2018

   December 31,
2017
 
Banking and financial institutions   2,460,362    2,657,444 
Industrial   799,218    772,238 
Oil and petroleum derived products   924,274    735,413 
Agricultural   444,117    501,241 
Services   221,834    430,717 
Mining   224,921    231,687 
Others   150,598    176,918 
Total   5,225,324    5,505,658 

 

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

 

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

 

 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)

 

Loans – at amortized cost (continued)

 

As of March 31, 2018, and December 31, 2017, the unearned discount interest and deferred commission amounted to $5,927 and $4,985, respectively.

 

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

 

March 31, 2018
   Corporations   Banking and financial
institutions
   Middle-market
companies
     
Rating(1)  Private   State-owned   Private   State-owned   Private   Total 
1-4   1,235,700    675,829    1,709,544    313,891    138,965    4,073,929 
5-6   408,116    201,384    278,263    158,664    46,209    1,092,636 
7   -    -    -    -    -    - 
8   19,275    -    -    -    -    19,275 
9   -    -    -    -    -    - 
10   4,484    -    -    -    35,000    39,484 
Total   1,667,575    877,213    1,987,807    472,555    220,174    5,225,324 

 

December 31, 2017
   Corporations   Banking and financial
institutions
   Middle-market
companies
     
Rating(1)  Private   State-owned   Private   State-owned   Private   Total 
1-4   1,336,032    563,877    1,729,592    361,236    147,212    4,137,949 
5-6   523,055    159,390    354,203    212,413    59,889    1,308,950 
7   -    -    -    -    -    - 
8   23,759    -    -    -    -    23,759 
9   -    -    -    -    -    - 
10   -    -    -    -    35,000    35,000 
Total   1,882,846    723,267    2,083,795    573,649    242,101    5,505,658 

 

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

 

 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)

 

Loans – at amortized cost (continued)

 

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

 

   March 31,
2018
   December 31,
2017
 
Country:          
Argentina   345,382    294,613 
Belgium   10,167    11,368 
Bolivia   5,000    15,000 
Brazil   911,948    1,019,466 
Chile   247,641    170,827 
Colombia   660,382    829,136 
Costa Rica   426,632    356,459 
Dominican Republic   176,804    249,926 
Ecuador   76,929    94,315 
El Salvador   41,901    55,110 
Germany   32,500    37,500 
Guatemala   243,362    309,024 
Honduras   48,498    74,476 
Jamaica   21,594    24,435 
Luxembourg   18,029    19,924 
Mexico   801,815    850,463 
Nicaragua   23,690    29,804 
Panama   382,318    500,134 
Paraguay   80,847    59,536 
Peru   312,385    211,846 
Singapore   47,500    54,500 
Switzerland   100,000    3,687 
Trinidad and Tobago   175,000    175,000 
United States of America   20,000    44,109 
Uruguay   15,000    15,000 
Total   5,225,324    5,505,658 

 

 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)

 

Loans – at amortized cost (continued)

 

The remaining loan maturities are summarized as follows:

 

   March 31,
2018
  

December 31,

2017

 
Current:          
Up to 1 month   813,070    846,993 
From 1 month to 3 months   1,302,076    1,079,793 
From 3 months to 6 months   964,120    1,175,801 
From 6 months to 1 year   749,886    922,711 
From 1 year to 2 years   442,023    392,456 
From 2 years to 5 years   875,631    989,222 
More than 5 years   19,759    39,923 
    5,166,565    5,446,899 
           
Impaired   58,759    58,759 
Total   5,225,324    5,505,658 

 

As of March, 31 2018 and December 31, 2017, the range of interest rates on loans fluctuates from 1.75% and 11.73% (2017: 1.35% y 11.52%).

 

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

 

   March 31,
2018
   December 31,
2017
 
         
Fixed interest rates   2,265,935    2,378,509 
Floating interest rates   2,959,389    3,127,149 
Total   5,225,324    5,505,658 

 

As of March 31, 2018, and December 31, 2017, 89% and 85%, 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:

 

   March 31, 2018   2018 
   Recorded
investment
   Past due
principal
balance
  

Related
allowance

Stage 3

   Average
principal
loan
balance
  

Balance

interest
recognized

 
With an allowance recorded:                         
Private corporations   23,759    -    7,676    23,759    438 
Middle-market companies   35,000    35,000    22,564    35,000    3,314 
Total   58,759    35,000    30,240    58,759    3,752 

 

 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)

 

Loans – at amortized cost (continued)

 

   December 31, 2017   2017 
   Recorded
investment
   Past due
principal
balance
  

Related
allowance

Stage 3

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

 

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

 

   Three months ended March 31, 
   2018   2017   2016 
Interest revenue calculated on the net carrying amount (net of credit allowance)   495    490    77 

 

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

 

March 31, 2018
   91-120
 days
   121-150
 days
   151-180
 days
  

Greater

than 180
days

   Total
Past
due
   Delinquent   Current   Total 
Corporations   -    -    -    -    -    -    2,554,183    2,554,183 
Banking and financial institutions     -       -      -    -    -       -    2,450,967    2,450,967 
Middle-market companies   -    -    -    35,000    35,000    -    185,174    220,174 
Total   -    -    -    35,000    35,000    -    5,190,324    5,225,324 

 

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

Greater

than 180
days

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

 

 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)

 

Loans – at amortized cost (continued)

 

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

 

Modified financial assets

 

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

 

Modified financial assets (with loss allowance based on lifetime ECL) modified during the period  March 31, 2018   December 31, 2017 
Gross carrying amount before modification       -    8,855 
Loss allowance before modification   -    (3,344)
Net amortized cost before modification   -    5,511 
Gross carrying amount after modification   -    4,484 
Loss allowance after modification   -    (4,484)
Net amortized cost after modification     -    - 

 

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

 

 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)

 

Loans – at amortized cost (continued)

 

The significant changes in the gross carrying amount of financial assets during the period that contributed to changes in the loss allowance, is provided at the table below:

 

   Stage 1   Stage 2   Stage 3   Total 
Gross carrying amount as of December 31, 2017   4,839,227    607,672    58,759    5,505,658 
Transfer in book value to stage 2                    
Transfer to lifetime expected credit losses - credit-impaired   -    -    -    - 
Transfer in book value to stage 1   13,000    (13,000)   -    - 
Financial assets that have been derecognized during the period   (1,783,568)   (164,866)   -    (1,948,434)
Changes due to financial instruments recognized
as of December 31, 2017
   (1,770,568)   (177,866)   -    (1,948,434)
New financial assets originated or purchased   1,668,100    -    -    1,668,100 
Write-offs   -    -    -    - 
Gross carrying amount as of March 31, 2018   4,736,759    429,806    58,759    5,225,324 

 

   Stage 1   Stage 2   Stage 3   Total 
Gross carrying amount as of December 31, 2016   5,019,368    935,999    65,364    6,020,731 
Transfer in book value to stage 2   (41,167)   41,167    -    - 
Transfer to lifetime expected credit losses – not credit-impaired   -    (46,673)   46,673    - 
Transfer in book value to stage 1   8,000    (8,000)   -    - 
Financial assets that have been derecognized during the year   (4,214,697)   (314,821)   (53,278)   (4,582,796)
Changes due to financial instruments recognized
as of December 31, 2016
   (4,247,864)   (328,327)   (6,605)   (4,582,796)
New financial assets originated or purchased   4,067,723    -    -    4,067,723 
Write-offs   -    -    -    - 
Gross carrying amount as of December 31, 2017   4,839,227    607,672    58,759    5,505,658 

 

 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)

 

Loans – at amortized cost (continued)

 

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

 

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

Allowance for expected credit losses as of

December 31, 2017

   19,821    33,477    27,996    81,294 
Transfer to lifetime expected credit losses – not credit-impaired   -    -    -    - 
Transfer to lifetime expected credit losses - credit-impaired   -    -    -    - 
Transfer to 12-month expected credit losses   1,664    (1,664)   -    - 
Net effect of changes in reserve for expected
credit losses
   (1,625)   4,251    2,245    4,871 
Financial assets that have been derecognized during the period   (5,590)   (5,712)   -    (11,302)
Changes due to financial instruments recognized
as of December 31, 2017
   (5,551)   (3,125)   2,245    (6,431)
New financial assets originated or purchased   7,807    -    -    7,807 
Write-offs   -    -    -    - 
Recoveries of amounts previously written off   -    -    -    - 

Allowance for expected credit losses as of

March 31, 2018

   22,077    30,352    30,241    82,670 

 

   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   (672)   672    -    - 
Transfer to lifetime expected credit losses – not credit-impaired   -    (12,845)   12,845    - 
Transfer to 12-month expected credit losses   1,428    (1,428)   -    - 
Net effect of changes in reserve for expected
credit losses
   (2,900)   18,227    20,257    35,584 
Financial assets that have been derecognized during the year   (24,434)   (11,321)   (8,333)   (44,088)
Changes due to financial instruments recognized
as of December 31, 2016
   (26,578)   (6,695)   24,769    (8,504)
New financial assets originated or purchased   17,363    -    -    17,363 
Write-offs   -    (1,427)   (32,126)   (33,553)
Recoveries of amounts previously written off   -    -    -    - 

Allowance for expected credit losses as of

December 31, 2017

   19,821    33,477    27,996    81,294 

 

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

 

 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)

 

Derivative financial instruments for hedging purposes

 

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

 

   March 31, 2018 
       Carrying amount of the
hedging instrument
     
   Nominal
Amount
   Asset   Liability  

Changes in fair
value used for

calculating hedge
ineffectiveness

 
Fair value hedges:                    
Interest rate swaps   373,500    122    (4,592)   (111)
Cross-currency swaps   241,108    2,925    (8,088)   21,320 
Cash flow hedges:                    
Interest rate swaps   690,000    830    (916)   314 
Cross-currency swaps   23,025    709    -    (170)
Foreign exchange forward   202,035    7,183    (725)   128 
Net investment hedges:                    
Foreign exchange forward   8,427    111    (53)   113 
Total   1,538,095    11,880    (14,374)   21,594 

 

   December 31, 2017 
       Carrying amount of the
hedging instrument
     
   Nominal
Amount
   Asset   Liability  

Changes in fair
value used for

calculating hedge
ineffectiveness

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

 

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

 

 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)

 

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:

 

   March 31, 2018 
   Gain (loss)
recognized in
OCI (effective
portion)
   Classification of gain
(loss)
  Gain (loss)
reclassified from
accumulated OCI
to the
consolidated
statement of
profit or loss
  

Gain (loss)

recognized on
derivatives
(ineffective
portion)

 
Derivatives – cash flow hedge                  
Interest rate swaps   (1,543)  Gain (loss) on interest rate swap   -    - 
Cross-currency swaps   184   Gain (loss) on foreign currency exchange   -    4 
        Interest income – loans   418    - 
Foreign exchange forward   (2,624)  Interest income – securities at FVOCI   -    - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   1,110   - 
        Gain (loss) on foreign currency exchange   (3,374)   - 
Total   (3,983)      (1,846)   4 
                   
Derivatives – net investment hedge                    
Forward foreign exchange   9            
Total   9            
 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)

 

Derivative financial instruments for hedging purposes (continued)

 

   March 31, 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   (384)  Gain (loss) on interest rate swap   -    233 
Cross-currency swaps   (1,419)  Gain (loss) on foreign currency exchange   -    4624 
        Interest income – loans   1,871    - 
Foreign exchange forward   (9,838)  Interest income – securities at FVOCI   -    - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   (800)   - 
        Gain (loss) on foreign currency exchange   (27,169)   - 
Total   (11,641)      (26,098)   268 
                   
Derivatives – net investment hedge              
Forward foreign exchange   (277)             
Total   (277)             
 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)

 

Derivative financial instruments for hedging purposes (continued)

 

   March 31, 2016 
   Gain (loss)
recognized in
OCI (effective
portion)
   Classification of
gain (loss)
 

Gain (loss)
reclassified from

accumulated OCI
to the
consolidated
statement of
profit or loss

   Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
Derivatives – cash flow hedge                  
Interest rate swaps   (1,618)  Gain (loss) on interest rate swap   -    (578)
Cross-currency swaps   2,787   Gain (loss) on foreign exchange   -    (64)
        Interest income – loans   (752)   - 
Forward foreign exchange   (1,214)  Interest income – securities at FVOCI   -    - 
        Interest income – loans   (4,751)   - 
        Interest expense – borrowings and debt   -    - 
        Interest expenses – deposits   1,672    - 
        Gain (loss) on foreign currency exchange   9,097    - 
Total   (45)      6,018    (642)
                   
Derivatives – net investment hedge              
Forward foreign exchange   -              
Total   -              

 

 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)

 

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:

 

   March 31, 2018
   Classification in
consolidated statement
of profit or loss
  Gain (loss) on
derivatives
   Gain (loss) on
hedge item
   Net gain (loss) 
Derivatives – fair value hedge                  
Interest rate swaps  Interest income – securities at FVOCI   (21)   97    76 
   Interest income – loans   -    6    6 
   Interest expenses – borrowings and debt   (167)   (3,049)   (3,216)
   Derivative financial instruments and hedging   102    345    447 
Cross-currency swaps  Interest income – loans   (308)   548    240 
   Interest expenses – borrowings and debt   230    (201)   29 
   Derivative financial instruments and hedging   (2,921)   3,200    279 
Total      (3,085)   946    (2,139)

 

   March 31, 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   (47)   169    122 
   Interest income – loans   10    141    151 
   Interest expenses – borrowings and debt   (261)   (7,058)   (7,319)
   Derivative financial instruments and hedging   (648)   765    117 
Cross-currency swaps  Interest income – loans   (102)   119    17 
   Interest expenses – borrowings and debt   268    (1,837)   (1,569)
   Derivative financial instruments and hedging   13,101    (13,021)   80 
Total      12,321    (20,722)   (8,401)

 

 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)

 

Derivative financial instruments for hedging purposes (continued)

 

   March 31, 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   (198)   426    228 
   Interest income at amortized cost   (36)   831    795 
   Interest expenses – borrowings and debt   1,679    (7,063)   (5,384)
   Derivative financial instruments and hedging   (7,186)   8,208    1,022 
Cross-currency swaps  Interest income loans at amortized cost   (42)   119    77 
   Interest expenses – borrowings and debt   (148)   (1,837)   (1,985)
   Derivative financial instruments and hedging   7,131    (6,801)   330 
Total      1,200    (6,117)   (4,917)

 

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:

 

   March 31, 2018
Fair value hedges  Carrying
amount
   Thereof
accumulated
fair value
adjustments
   Line item in the statement of financial
position
Interest rate risk             
Loans   6,000    -   Loans
Issuances   355,000    (7,358)  Short and long-term borrowings and debt
              
Foreign exchange rate risk and FX             
Securities at FVOCI   11,987    138   Financial instruments at FVOCI
Loans   17,955    104   Loans
Issuances   (219,755)   2,711   Short and long-term borrowings and debt

 

 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)

 

Derivative financial instruments for hedging purposes (continued)

 

Derivatives financial position and performance (continued)

 

   December 31, 2017
Fair value hedges 

Carrying

amount

   Thereof
accumulated
fair value
adjustments
   Line item in the statement of financial
position
Interest rate risk             
Loans   -    -   Loans
Issuances   355,000    (4,411)  Short and long-term borrowings and debt
              
Foreign exchange rate risk and FX             
Securities at FVOCI   12,369    (32)  Financial instruments at FVOCI
Loans   25,027    744   Loans
Issuances   (249,328)   (2,301)  Short and long-term borrowings and debt

 

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

 

   March 31, 2018 
Risk type  Foreign
Exchange risk
   Interest rate
 risk
   Foreign exchange
and Interest
rate risk
   Total 
Up to 1 month   27,520    -    -    27,520 
31 to 60 days   26,105    -    -    26,105 
61 to 90 days   6,233    137,500    -    143,733 
91 to 180 days   5,306    75,000    8,127    88,433 
181 to 365 days   68,952    342,500    -    411,452 
1 to 2 years   154,163    71,500    73,193    298,856 
2 to 5 years   4,413    437,000    31,816    473,229 
More than 5 years   -    -    68,768    68,768 
Total   292,692    1,063,500    181,904    1,538,096 

 

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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)

 

Derivative financial instruments for hedging purposes (continued)

 

Derivatives financial position and performance (continued)

 

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

 

   December 31, 2017 
Risk type  Foreign
Exchange risk
   Interest rate
risk
   Foreign exchange
and Interest
rate risk
   Total 
Up to 1 month   69,459    -    -    69,459 
31 to 60 days   26,104    -    -    26,104 
61 to 90 days   1,729    185,000    16,821    203,550 
91 to 180 days   16,567    137,500    -    154,067 
181 to 365 days   68,952    202,500    8,127    279,579 
1 to 2 years   178,331    21,500    73,193    273,024 
2 to 5 years   4,413    416,000    24,872    445,285 
More than 5 years   -    -    76,049    76,049 
Total   365,555    962,500    199,062    1,527,117 

 

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

 

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

 

The maximum length of time over which the Bank has hedged its exposure to the variability in future cash flows on forecasted transactions is 5.95 years.

 

The Bank estimates that approximately $237 reported as losses in OCI as of March 31, 2018, 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 year ending December 31, 2019.

 

The Bank estimates that approximately $2,524 of losses reported in OCI as of March 31, 2018, 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 year ending December 31, 2019.

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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)

 

Derivative financial instruments for hedging purposes (continued)

 

Types of Derivatives and Foreign Exchange Instruments

 

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

 

Offsetting of financial assets and liabilities

 

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

 

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

 

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

 

a)Derivative financial instruments – assets

 

March 31, 2018
       Gross amounts
offset in the
consolidated
  

Net amount of
assets presented

in the

   Gross amounts not offset in
the consolidated statement
of financial position
     
Description 

Gross

amounts
assets

   statement of
financial
position
   consolidated
statement of
financial position
   Financial
instruments
   Cash
collateral
received
   Net
Amount
 
Derivative financial instruments used for hedging – receivable – at fair value   14,682      -    14,682      -    (30,388)   (15,706)
Total   14,682    -    14,682    -    (30,388)   (15,706)

 

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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)

 

Offsetting of financial assets and liabilities (continued)

 

a)Derivative financial instruments – assets (continued)

 

December 31, 2017
       Gross amounts
offset in the
consolidated
  

Net amount of
assets presented

in the

   Gross amounts not offset in
the consolidated statement
of financial position
     
Description  Gross
amounts
assets
   statement of
financial
position
   consolidated
statement of
financial position
   Financial
instruments
  

Cash
collateral

received

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

 

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

 

   March 31, 2018 
Description  Gross amounts
of assets
  

Gross amounts
offset in the
consolidated

statement of

financial position

  

Net amount of assets
presented

in the consolidated

statement of

financial position

 
Derivative financial instruments used for hedging – receivable – at fair value   14,682        -    14,682 
Total   14,682    -    14,682 

 

   December 31, 2017 
Description  Gross amounts
of assets
  

Gross amounts

offset in the
consolidated
statement of
financial position

  

Net amount of assets
presented

in the consolidated
statement of
financial position

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

 

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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)

 

Offsetting of financial assets and liabilities (continued)

 

b)Financial liabilities and derivative financial instruments – liabilities

 

March 31, 2018
       Gross
amounts
offset in the
  

Net amount
of liabilities

Presented

in the

   Gross amounts not offset
in the consolidated
statement of financial
position
     
Description  Gross
amounts
 of
liabilities
   consolidated
statement of
financial
position
   consolidated
statement of
financial
position
   Financial
instruments
   Cash
collateral
pledged
   Net
Amount
 
Securities sold under repurchase agreements   49,316    -    49,316    (49,316)   -    - 
Derivative financial instruments used for hedging – payable – at fair value   12,469         -    12,469    -    (29,161)   (16,692)
Total   61,785    -    61,785    (49,316)   (29,161)   (16,692)

 

December 31, 2017
       Gross
amounts
offset in the
   Net amount
of liabilities
presented
in the
   Gross amounts not offset
in the consolidated
statement of financial
position
     
Description  Gross
amounts
of
liabilities
   consolidated
statement of
financial
position
   consolidated
statement of
financial
position
   Financial
instruments
   Cash
collateral
pledged
   Net
Amount
 
                         
Derivative financial instruments used for hedging – payable – at fair value   34,943       -    34,943       -    (50,241)   (15,298)
Total   34,943    -    34,943    -    (50,241)   (15,298)

 

 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)

 

Offsetting of financial assets and liabilities (continued)

 

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

 

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

 

   March 31, 2018 
Description  Gross amounts
of liabilities
   Gross amounts
offset in the
consolidated
statement of
financial position
  

Net amount of
liabilities presented

in the consolidated
statement of
financial position

 
Securities sold under repurchase agreements   49,316    -    49,316 
Derivative financial instruments:               
Derivative financial instruments used for hedging – payable – at fair value   12,469          -    12,469 
Total derivative financial instruments   12,469    -    12,469 

 

 

   December 31, 2017 
Description  Gross amounts
of liabilities
   Gross amounts
 offset in the
consolidated
statement of
financial position
  

Net amount of
liabilities presented

in the consolidated
statement of
financial position

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

 

 38 

 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

5.Loans commitments and financial guarantees contracts

 

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

 

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

 

  

March 31,

2018

  

December 31,

2017

 
Confirmed letters of credit   291,172    273,449 
Stand-by letters of credit and guaranteed – Commercial risk   180,053    168,976 
Credit commitments   30,577    45,578 
 Total   501,802    488,003 

 

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

 

Maturities 

March 31,

2018

   December 31,
2017
 
Up to 1 year   471,224    457,168 
From 1 to 2 years   -    257 
From 2 to 5 years   30,000    30,000 
More than 5 years   578    578 
 Total   501,802    488,003 

 

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

 

Rating(1) 

March 31,

2018

   December 31,
2017
 
1-4   178,048    151,934 
5-6   323,754    336,069 
7   -    - 
8   -    - 
9   -    - 
10   -    - 
Total   501,802    488,003 

 

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

 

 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 (continued)

 

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

 

  

March 31,

2018

   December 31,
2017
 
Country:          
Argentina   7,341    7,546 
Bolivia   291    200 
Canada   425    425 
Chile   -    15,000 
Colombia   91,021    91,020 
Costa Rica   18,355    19,848 
Dominican Republic   23,107    - 
Ecuador   243,246    252,800 
El Salvador   585    767 
Guatemala   11,700    11,788 
Honduras   1,110    890 
Mexico   47,769    35,643 
Panama   32,405    31,260 
Paraguay   -    22 
Peru   377    17,618 
Uruguay   24,430    3,176 
Total   501,802    488,003 

 

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.

 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 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, 2017

   1,358    5,487    -    6,845 
Transfer to lifetime expected credit losses   -    -    -    - 
Transfer to credit-impaired instruments   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected
credit loss
   (200)   (17)   -    (217)
Instruments that have been derecognized
during the period
   (827)   -    -    (827)
Changes due to instruments recognized as of December 31, 2017:   (1,027)   (17)   -    (1,044)
New instruments originated or purchased   1,623    -    -    1,623 

Allowance for expected credit losses as of

March 31, 2018

   1,954    5,470    -    7,424 

 

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

Allowance for expected credit losses as of

December 31, 2016

   1,143    4,633    -    5,776 
Transfer to lifetime expected credit losses   (1)   1    -    - 
Transfer to credit-impaired instruments   -    -    -    - 
Transfer to 12-month expected credit losses   -    -    -    - 
Net effect of changes in reserve for expected
credit loss
   (54)   853    -    799 
Instruments that have been derecognized
during the year
   (971)   -    -    (971)
Changes due to instruments recognized as of December 31, 2016:   (1,026)   854    -    (172)
New instruments originated or purchased   1,241    -    -    1,241 

Allowance for expected credit losses as of

December 31, 2017

   1,358    5,487    -    6,845 

 

(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.

 

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Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries

Notes to the unaudited condensed consolidated interim financial statements

(Amounts expressed in thousands of U.S. dollars, unless otherwise indicated)

 

6.Other assets

 

Following is a summary of other assets:

 

  

March 31,

2018

   December 31,
2017
 
Accounts receivable   7,008    6,793 
Real estate owned (1)   5,119    5,119 
IT projects under development   1,531    1,405 
Other (2)   5,377    5,510 
    19,035    18,827 

 

(1) Other real estate owned as dation in payment.

(2) As of March 31, 2018, and December 31, 2017, $1.7 million corresponds to leasing under development.

 

7.Deposits

 

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

 

  

March 31,

2018

   December 31,
2017
 
Demand   42,001    82,064 
Up to 1 month   1,088,761    1,147,772 
From 1 month to 3 months   557,901    492,205 
From 3 months to 6 months   355,430    411,159 
From 6 months to 1 year   591,750    571,500 
From 1 year to 2 years   27,063    76,422 
From 2 years to 5 years   151,309    147,722 
    2,814,215    2,928,844 

 

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

 

  

March 31,

2018

   December 31,
2017
 
Aggregate amounts of time deposits of $100,000 or more   2,813,808    2,928,425 
Aggregate amounts of deposits in the New York Agency   250,941    266,158 

 

   Three months ended March 31st 
  

 

2018

  

 

2017

  

 

2016

 
Interest expense paid to deposits in the New York Agency.   1,153    710    388 

 

8.Securities sold under repurchase agreements

 

The Bank’s financial liabilities under repurchase agreements amounted to $49,316 as of March 31, 2018.

 

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

 

During the periods ended March 31, 2018 and 2016, interest expense related to financing transactions under repurchase agreements totaled $32 and $270, respectively, corresponding to interest expense generated by the financing contracts under repurchase agreements. These expenses are included in the interest expense – short-term and long-termborrowings and debt line in the consolidated statements of profit or loss.

 

As of March 31, 2017, the Bank did not incur in any interest expense generated by financial liabilities under repurchase agreements.

 

 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)

 

9.Borrowings and debt

 

Short-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:

 

  

March 31,

2018

   December 31,
2017
 
Short-term Borrowings:          
At fixed interest rates   125,625    429,069 
At floating interest rates   610,447    633,154 
Total borrowings   736,072    1,062,223 
Short-term Debt:          
At fixed interest rates   13,500    10,500 
At floating interest rates   27,395    - 
Total debt   40,895    10,500 
Total short-term borrowings and debt   776,967    1,072,723 
           
Average outstanding balance during the period   984,930    710,021 
Maximum balance at any month-end   1,057,619    1,072,723 
Range of fixed interest rates on borrowing and debt in U.S. dollars   1.95%   1.60% to 1.95%
Range of floating interest rates on borrowing in U.S. dollars   2.04% to 2.47%   1.77% to 2.08%
Range of fixed interest rates on borrowing in Mexican pesos   8.19% to 8.27%   7.92%
Range of floating interest rate on borrowing in Mexican pesos   8.12% to 8.19%   7.68% to 7.89%
Weighted average interest rate at end of the period   2.93%   2.16%
Weighted average interest rate during the period   2.67%   1.66%

 

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

 

  

March 31,

2018

   December 31,
2017
 
Currency          
US dollar   643,500    1,044,500 
Mexican peso   133,467    28,223 
Total   776,967    1,072,723 

 

 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 (continued)

 

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 $3,760 and $4,211 as of March 31, 2018 and December 31, 2017, respectively, is as follows:

 

  

March 31,

2018

   December 31,
2017
 
Long-term Borrowings:          
At fixed interest rates with due dates from April 2018 to February 2022   73,362    44,011 
At floating interest rates with due dates from August 2019 to March 2021   429,000    379,000 
Total borrowings   502,362    423,011 
Long-term Debt:          
At fixed interest rates with due dates from July 2018 to March 2024   518,164    532,305 
At floating interest rates with due dates from April 2019 to January 2023   107,142    187,739 
Total long-term debt   625,306    720,044 
Total long-term borrowings and debt   1,127,668    1,143,055 
Less: Prepaid commission   (3,760)   (4,211)
Total long-term borrowings and debt, net   1,123,908    1,138,844 
           
Net average outstanding balance during the year   1,111,615    1,477,788 
Maximum outstanding balance at any month – end   1,144,448    2,010,078 
Range of fixed interest rates on borrowing and debt in U.S. dollars   1.35% to 3.25%   1.35% to 3.25%
Range of floating interest rates on borrowing and debt in U.S. dollars   2.62% to 3.49%   2.61% to 3.01%
Range of fixed interest rates on borrowing in Mexican pesos   5.05% to 9.09%   4.89% to 9.09%
Range of floating interest rates on borrowing and debt in Mexican pesos   8.44%   7.99% to 8.00%
Range of fixed interest rate on debt in Japanese yens   0.46% to 0.50%   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   3.73%   3.60%
Weighted average interest rate during the period   3.69%   3.43%

 

 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)

 

Long-term borrowings and debt (continued)

 

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

 

  

March 31,

2018

   December 31,
2017
 
Currency          
US dollar   845,914    753,981 
Mexican peso   110,504    206,750 
Japanese yen   84,419    98,711 
Euro   63,796    60,178 
Australian dollar   23,035    23,435 
Total   1,127,668    1,143,055 

 

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 March 31, 2018, the Bank was in compliance with all covenants.

 

The future payments of long-term borrowings and debt outstanding as of March 31, 2018, are as follows:

 

Payments  Outstanding 
     
2018   17,945 
2019   367,253 
2020   452,723 
2021   200,898 
2022   10,053 
2023   15,000 
2024   63,796 
    1,127,668 

 

 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)

 

10.Other liabilities

 

Following is a summary of other liabilities:

 

  

March 31,

2018

   December 31,
2017
 
Accruals and other accumulated expenses   5,619    8,018 
Accounts payable   13,377    9,307 
Others   3,070    3,226 
    22,066    20,551 

 

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:

 

  

March 31,

2018

  

March 31,

2017

  

March 31,

2016

 
(Thousands of U.S. dollars)               
Profit for the period   14,498    23,458    23,438 
                

 

(U.S. dollars)

               
Basic earnings per share   0.37    0.60    0.60 
Diluted earnings per share   0.37    0.60    0.60 
                
(Share units)               
Weighted average common shares outstanding - applicable to basic   39,466    39,188    38,997 
                
Effect of diluted securities:               
Stock options and restricted stock
units plan
   26    108    124 
Adjusted weighted average common shares outstanding applicable to diluted EPS   39,492    39,296    39,121 

 

 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)

 

12.Capital and additional paid-in capital in excess

 

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-years ended March 31, 2018, 2017and 2016:

 

(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, 2016   6,342,189    2,474,469    30,152,247    -    38,968,905 
Conversions   -    -    -    -    - 
Restricted stock issued – directors   -    -    -    -    - 
Exercised stock options - compensation plans   -    -    -    -    - 
Restricted stock units – vested   -    -    91,454    -    91,454 
Outstanding at March 31, 2016   6,342,189    2,474,469    30,243,701    -    39,060,359 
                          
Outstanding at January 1, 2017   6,342,189    2,474,469    30,343,390    -    39,160,048 
Restricted stock issued – directors   -    -    -    -    - 
Exercised stock options - compensation plans   -    -    1,616    -    1,616 
Restricted stock units – vested   -    -    65,265    -    65,265 
Outstanding at March 31, 2017   6,342,189    2,474,469    30,410,271    -    39,226,929 
                          
Outstanding at January 1, 2018   6,342,189    2,408,806    30,677,840    -    39,428,835 
Conversions   -    (64,386)   64,386        -    - 
Repurchase common stock   -    -    -    -    - 
Restricted stock issued – directors   -    -    -    -    -