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, 2013

 

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 whether the registrant by furnishing the information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g-3-2(b) under the Securities Exchange Act of 1934.)

 

Yes ¨ No x

 

(If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b). 82__.)

 

 
 

 

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, thereto duly authorized.

 

May 7, 2013.

 

  FOREIGN TRADE BANK OF LATIN AMERICA, INC.  

 

  By: /s/ Pedro Toll
     
  Name: Pedro Toll
  Title: General Manager

 

 
 

 

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

 

Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012, and Related Consolidated Statements of Income, Comprehensive Income, Stockholders’ Equity and Cash Flows (Unaudited) for the Three Months Ended March 31, 2013 and 2012 

 

 

  

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

 

Consolidated Financial Statements

 

Contents Pages
   
Consolidated balance sheets – March 31, 2013 (Unaudited) and December 31, 2012 1
   
Consolidated statements of income (Unaudited) - For the three months ended March 31, 2013 and 2012 2
   
Consolidated statements of comprehensive income (Unaudited) - For the three months ended March 31, 2013 and 2012 3
   

Consolidated statements of changes in stockholders’ equity and redeemable noncontrolling interest (Unaudited) - For the three months ended March 31, 2013 and 2012

4
   
Consolidated statements of cash flows (Unaudited) - For the three months ended March 31, 2013 and 2012 5
   
Notes to consolidated financial statements (Unaudited) 6–54

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries
 
Consolidated balance sheets
March 31, 2013 and December 31, 2012
(in US$ thousand, except share amounts)

 

   Notes  March 31,
2013
(Unaudited)
   December 31, 
2012
(Audited)
 
Assets             
Cash and due from banks  4,19   3,410    6,718 
Interest-bearing deposits in banks (including pledged deposits of $6,542 in 2013 and $14,519 in 2012)  4,19   577,630    700,312 
Trading assets (including pledged securities to creditors of  $1,618 in 2013 and $1,262 in 2012)  5,18,19   5,084    5,265 
Securities available-for-sale (including pledged securities to creditors of $235,391 in 2013 and $ $152,340 in 2012)  6,19   299,210    183,017 
Securities held-to-maturity (fair value of $39,217 in 2013 and $34,149 in 2012) (including pledged securities to creditors of $13,010 in 2013 and $19,453 in 2012)  6,19   39,237    34,113 
Investment fund  7,19   105,544    105,888 
Loans  8,19   5,848,775    5,715,556 
Less:             
Allowance for loan losses  9,19   70,808    72,976 
Unearned income and deferred fees      5,572    7,100 
Loans, net      5,772,395    5,635,480 
              
Customers' liabilities under acceptances  19   2,728    1,157 
Accrued interest receivable  19   36,115    37,819 
Premises and equipment (net of accumulated depreciation and amortization of $12,412 in 2013 and $11,688 in 2012)      12,194    12,808 
Derivative financial instruments used for hedging - receivable  16,18,19   26,240    19,239 
Other assets      14,055    14,580 
Total assets      6,893,842    6,756,396 
              
Liabilities and stockholders' equity             
Deposits:  10,19          
Noninterest-bearing - Demand      624    580 
Interest-bearing - Demand      159,254    131,295 
Time      2,431,663    2,185,385 
Total deposits      2,591,541    2,317,260 
              
Trading liabilities  5,18,19   7,871    32,304 
Securities sold under repurchase agreement  4,5,6,11,18,19   240,827    158,374 
Short-term borrowings  12,19   1,536,497    1,449,023 
Acceptances outstanding  19   2,728    1,157 
Accrued interest payable  19   23,855    17,943 
Borrowings and long-term debt  13,19   1,617,811    1,905,540 
Derivative financial instruments used for hedging - payable  16,18,19   7,715    11,747 
Reserve for losses on off-balance sheet credit risk  9   7,278    4,841 
Other liabilities      10,401    28,348 
Total liabilities      6,046,524    5,926,537 
              
Commitments and contingencies  15,19,20          
              
Redeemable noncontrolling interest      1,896    3,384 
              
Stockholders' equity:  14,17,21          
Class A common stock, no par value, assigned value of $6.67 (Authorized 40,000,000; outstanding 6,342,189)      44,407    44,407 
Class B common stock, no par value, assigned value of $6.67 (Authorized 40,000,000; outstanding 2,529,851 in 2013 and 2,531,926 in 2012      20,683    20,683 
Class E common stock, no par value, assigned value of $6.67 (Authorized 100,000,000; outstanding 29,529,970 in 2013 and 29,271,067 in 2012)      214,890    214,890 
Additional paid-in capital in excess of assigned value of common stock      118,617    121,419 
Capital reserves      95,210    95,210 
Retained earnings      438,342    422,048 
Accumulated other comprehensive loss  6,17   (942)   (730)
Treasury stock      (85,785)   (91,452)
Total stockholders' equity      845,422    826,475 
Total liabilities and stockholders' equity      6,893,842    6,756,396 

 

The accompanying notes are an integral part of these consolidated financial statements (Unaudited)

 

-1-
 

 

Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries
 
Consolidated statements of income (Unaudited)
For the three months ended March 31, 2013 and 2012
(in US$ thousand, except per share amounts)

 

   Notes  2013   2012 
Interest income:  17          
Deposits with banks      296    584 
Trading assets      -    69 
Investment securities:             
Available-for-sale      1,286    2,619 
Held-to-maturity      229    175 
Investment fund      64    603 
Loans      46,529    44,329 
Total interest income      48,404    48,379 
Interest expense:  17          
Deposits      3,131    3,072 
Investment fund      30    14 
Short-term borrowings      5,267    7,019 
Borrowings and long-term debt      13,957    8,644 
Total interest expense      22,385    18,749 
Net interest income      26,019    29,630 
              
Reversal of provision for loan losses  9   2,171    3,508 
              
Net interest income, after reversal of provision for loan losses      28,190    33,138 
              
Other income (expense):             
(Provision) reversal of provision for losses on off-balance sheet credit risk  9   (2,437)   903 
Fees and commissions, net      2,399    2,298 
Derivative financial instruments and hedging  16   (516)   440 
Net gain from investment fund trading      1,269    2,809 
Net gain from trading securities      4,776    8,430 
Net gain on sale of securities available-for-sale  6   115    4,306 
Net loss on foreign currency exchange      (4,596)   (7,950)
Other income, net      585    935 
Net other income      1,595    12,171 
              
Operating expenses:             
Salaries and other employee expenses      7,769    7,302 
Depreciation and amortization of premises and equipment      722    457 
Professional services      644    828 
Maintenance and repairs      386    426 
Expenses from the investment fund      748    967 
Other operating expenses      3,183    2,664 
Total operating expenses      13,452    12,644 
              
Net income from continuing operations      16,333    32,665 
              
Net loss from discontinued operations  3   (27)   (304)
              
Net income      16,306    32,361 
              
Net income attributable to the redeemable noncontrolling interest      12    140 
              
Net income attributable to Bladex stockholders      16,294    32,221 
              
Amounts attributable to Bladex stockholders:             
              
Net income from continuing operations      16,321    32,525 
Net loss from discontinued operations      (27)   (304)
       16,294    32,221 
              
Earning per share from continuing operations:             
Basic  14   0.43    0.87 
              
Diluted  14   0.43    0.87 
              
Loss per share from discontinued operations:             
Basic  14   (0.00)   (0.01)
              
Diluted  14   (0.00)   (0.01)
              
Earning per share:             
Basic  14   0.43    0.86 
              
Diluted  14   0.43    0.86 
              
Weighted average basic shares  14   38,218    37,281 
              
Weighted average diluted shares  14   38,313    37,566 

 

The accompanying notes are an integral part of these consolidated financial statements (Unaudited).

 

-2-
 

 

Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries
 
Consolidated statements of comprehensive income (Unaudited)
For the three months ended March 31, 2013 and 2012
(in US$ thousand, except per share amounts)

 

   Notes  2013   2012 
            
Net income     16,306   32,361 
              
Other comprehensive income (loss):             
              
Unrealized gains (losses) on securities available-for-sale:             
Unrealized (losses) gains arising from the period  17   (492)   7,710 
Less: reclassification adjustments for net gains included in net income  17   (117)   (3,841)
Net change in unrealized gains (losses) on securities available for sale      (609)   3,869 
              
Unrealized gains (losses) on derivative financial instruments:             
Unrealized gains arising from the period  17   233    140 
Less: reclassification adjustments for net (gains) losses included in net income  17   165    (926)
Net change in unrealized losses (gains) on derivative financial instruments      398    (786)
              
Foreign currency translation adjustment, net of hedges:             
Current period change      94    (101)
Change in foreign currency translation adjustment      94    (101)
              
Other comprehensive (loss) income      (117)   2,982 
              
Comprehensive income      16,189    35,343 
              
Comprehensive income attributable to the redeemable noncontrolling interest      107    131 
              
Comprehensive income attributable to Bladex stockholders      16,082    35,212 

 

The accompanying notes are an integral part of these consolidated financial statements (Unaudited).

 

-3-
 

 

Banco Latinoamericano de Comercio Exterior, S. A. and Subsidiaries
 
Consolidated statements of changes in stockholders' equity and redeemable noncontrolling interest (Unaudited)
For the three months ended March 31, 2013 and 2012
(in US$ thousand, except per share amounts)

 

   Stockholders' equity     
       Additional                         
       paid-in capital                         
       in excess of           Accumulated             
       assigned value           other       Total   Redeemable 
   Common   of common   Capital   Retained   comprehensive   Treasury   stockholders'   noncontrolling 
   stock   stock   reserves   earnings   income (loss)   stock   equity   interest 
                                 
Balances at January 1, 2012   279,980    130,177    95,210    372,644    (3,112)   (115,617)   759,282    5,547 
Net income   -    -    -    32,221    -    -    32,221    140 
Redeemable noncontrolling interest - redemptions   -    -    -    -    -    -    -    744 
Other comprehensive income   -    -    -    -    2,991    -    2,991    (9)
Compensation cost - stock options and  stock units plans   -    587    -    -    -    -    587    - 
Exercised options and stock units vested   -    (6,288)   -    -    -    12,122    5,834    - 
Dividends declared   -    -    -    (18,588)   -    -    (18,588)   - 
Balances at March 31, 2012   279,980    124,476    95,210    386,277    (121)   (103,495)   782,327    6,422 
                                         
Balances at January 1, 2013   279,980    121,419    95,210    422,048    (730)   (91,452)   826,475    3,384 
Net income     -    -    -    16,294    -    -    16,294    12 
Redeemable noncontrolling interest - redemptions   -    -    -    -    -    -    -    (1,595)
Other comprehensive loss   -    -    -    -    (212)   -    (212)   95 
Compensation cost - stock options and  stock units plans   -    700    -    -    -    -    700    - 
Exercised options and stock units vested   -    (3,502)   -    -    -    5,667    2,165    - 
Dividends declared   -    -    -    -    -    -    -    - 
Balances at March 31, 2013   279,980    118,617    95,210    438,342    (942)   (85,785)   845,422    1,896 

 

The accompanying notes are an integral part of these consolidated financial statements (Unaudited).

 

-4-
 

 

Banco Latinoamericano de Comercio Exterior, S.A. and Subsidiaries
 
Consolidated statements of cash flows (Unaudited)
For the three months ended March 31, 2013 and 2012
(in US$ thousand, except per share amounts)

 

   2013   2012 
Cash flows from operating activities:          
Net income   16,306    32,361 
Adjustments to reconcile net income to net cash provided by operating activities:          
Activities of derivative financial instruments and hedging   (9,872)   (14,036)
Depreciation and amortization of premises and equipment   722    457 
Reversal of provision for loan losses   (2,171)   (3,508)
Provision (reversal of provision) for losses on off-balance sheet credit risk   2,437    (903)
Net gain on sale of securities available-for-sale   (115)   (4,306)
Compensation cost - compensation plans   700    587 
Amortization of premium and discounts on investments   998    1,282 
Net decrease (increase) in operating assets:          
Trading assets   281    13,239 
Investment fund   343    (1,989)
Accrued interest receivable   1,704    (820)
Other assets   (995)   (2,426)
Net increase (decrease) in operating liabilities:          
Trading liabilities   (24,433)   (5,573)
Accrued interest payable   5,912    3,645 
Other liabilities   (4,939)   (4,197)
Net change from discontinued operating activities   28    (92)
Net cash (used in) provided by operating activities   (13,094)   13,721 
           
Cash flows from investing activities:          
Net decrease in pledged deposits   7,977    8,106 
Net decrease in deposits with original maturities greater than three months   -    30,000 
Net increase in loans   (149,744)   (141,798)
Proceeds from the sale of loans   15,000    2,180 
Acquisition of equipment and leasehold improvements   (109)   (17)
Proceeds from the redemption of securities available-for-sale   277    - 
Proceeds from the sale of securities available-for-sale   5,260    186,968 
Purchases of investments available-for-sale   (123,961)   (17,944)
Purchases of investments held-to-maturity   (5,260)   - 
Net change from discontinued investing activities   (3)   - 
Net cash (used in) provided by investing activities   (250,563)   67,495 
           
Cash flows from financing activities:          
Net increase in due to depositors   274,170    90,413 
Net increase (decrease) in short-term borrowings and securities sold under repurchase agreements   169,927    (513,313)
Proceeds from borrowings and long-term debt   5,000    216,608 
Repayments of borrowings and long-term debt   (292,729)   (136,197)
Dividends paid   (11,340)   (9,265)
Subscriptions of redeemable noncontrolling interest   -    744 
Redemptions of redeemable noncontrolling interest   (1,595)   - 
Exercised stock options   2,165    5,834 
Net cash provided by (used in) financing activities   145,598    (345,176)
           
Effect of exchange rate fluctuations on cash and cash equivalents   46    197 
           
Net decrease in cash and cash equivalents   (118,013)   (263,763)
Cash and cash equivalents at beginning of the period   692,511    789,490 
Cash and cash equivalents at end of the period   574,498    525,727 
           
Supplemental disclosures of cash flow information:          
Cash paid during the year for interest   16,473    15,104 

 

The accompanying notes are an integral part of these consolidated financial statements (Unaudited).

 

-5-
 

 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

1.Organization

 

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 supranational bank established to finance trade 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 signed in 1978 between the Republic of Panama and Bladex, the Bank was granted certain privileges by the Republic of Panama, including an exemption from payment of income taxes in Panama.

 

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

 

In the Republic of Panama, banks are regulated by the SBP through Executive Decree No. 52 of April 30, 2008, which adopts the 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., is 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. exercises control over Bladex Asset Management Inc., incorporated on May 24, 2006, under the laws of the State of Delaware, USA, which serves as investment manager for Bladex Offshore Feeder Fund (the “Feeder”) and Bladex Capital Growth Fund (the “Fund”). In February 2012, Bladex Asset Management Inc., was registered with the Securities and Exchange Commission (“SEC”) as an investment adviser. On September 8, 2009, Bladex Asset Management Inc. was registered as a foreign entity in the Republic of Panama, to establish a branch in Panama, which is mainly engaged in providing administrative and operating services to Bladex Asset Management Inc. in USA.

 

-The Feeder is an entity in which Bladex Head office owns 98.74% and 98.06% as of March 31, 2013 and December, 31, 2012, respectively. The Feeder was incorporated on February 21, 2006 under the laws of the Cayman Islands, and invests substantially all its assets in the Fund, which is also incorporated under the laws of the Cayman Islands. The Feeder and the Fund are registered with the Cayman Island Monetary Authority (“CIMA”), under the Mutual Funds Law of the Cayman Islands. The objective of the Fund is to achieve capital appreciation by investing in Latin American debt securities, stock indexes, currencies, and trading derivative instruments.

 

-6-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

-Bladex Representacao 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 owns 99% of Bladex Investimentos Ltda. and Bladex Holdings Inc. owns the remaining 1%. This company has invested substantially all its assets in Bladex Latam Fundo de Investimento Multimercado, which was also incorporated under the laws of Brazil on July 26, 2011.

 

The objective of Bladex Latam Fundo de Investimento Multimercado (the “Brazilian Fund”) is to achieve capital gains by dealing in the interest, currency, securities, commodities and debt markets, and by trading instruments available in the spot and derivative markets. Bladex Latam Fundo de Investimento Multimercado is registered with the Brazilian Securities Commission (“CVM”). This fund is a variable interest entity (“VIE”), and has been consolidated in these consolidated financial statements. As of March 31, 2013 and December 31, 2012, Bladex Investimentos Ltda. holds 92.38% and 82.90%, respectively, of the Brazilian Fund’s net asset value.

 

-BLX Brazil Ltd., was incorporated under the laws of the Cayman Islands on October 5, 2010. Bladex Head Office owns 99.80% of BLX Brazil Ltd. In turn, BLX Brazil Ltd. owns 99.9999% of Bladex Asset Management Brazil – Gestora de Recursos Ltda. and Bladex Asset Management Inc. owns the remaining 0.0001%. Bladex Asset Management Brazil – Gestora de Recursos Ltda. was incorporated under the laws of Brazil on January 6, 2011, and provides investment advisory services to Bladex Latam Fundo de Investimento Multimercado.

 

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 of the Region. The New York Agency is also licensed by the State of New York Banking Department, USA, to operate an International Banking Facility (“IBF”).

 

The Bank has representative offices in Buenos Aires, Argentina, in Mexico City, D.F. and Monterrey, Mexico, in Porto Alegre, Brazil, in Lima, Peru, in Bogota, Colombia, and an international administrative office in Miami, Florida, USA.

 

Bladex Head Office owns 50% of the equity shares of BCG PA LLC, a company incorporated under the laws of the State of Delaware, USA. This company owns “Class C” shares of the Fund that entitle it to receive a performance allocation on third-party investments in the Feeder and in the Fund.

 

-7-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

2.Summary of significant accounting policies

 

a)Basis of presentation

 

These consolidated financial statements have been prepared under accounting principles generally accepted in the United States of America (“U.S. GAAP”). All amounts presented in the consolidated financial statements and notes are expressed in dollars of the United Stated of America (“US$”), which is the Bank’s functional currency. The accompanying consolidated financial statements have been translated from Spanish to English for users outside of the Republic of Panama.

 

The Accounting Standards Codification (the “ASC”) issued by the Financial Accounting Standards Board (the FASB) constitute the single official source of authoritative, non-governmental GAAP, other than guidance issued by the Securities and Exchange Commission (“SEC”). All other literature is considered non-authoritative.

 

b)Principles of consolidation

 

The consolidated financial statements include the accounts of Bladex Head Office and its subsidiaries. Bladex Head Office consolidates its subsidiaries in which it holds a controlling financial interest. The usual condition for a controlling financial interest is ownership of a majority voting interest. All intercompany balances and transactions have been eliminated for consolidation purposes.

 

When Bladex holds an interest in investment companies under the “Feeder-Master” structure where the Feeder’s shareholding is diluted and such entity is registered as a mutual fund with a regulatory body, it is considered an investment company. In those cases, the Feeder, and thereby Bladex indirectly, consolidates its participation in the Fund in one line item in the balance sheet, as required by the specialized accounting in the ASC Topic 946 - Financial Services – Investment Companies.

 

c)Variable interest entities

 

Variable interest entities (“VIE”) are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest. Investors that finance the VIE through debt or equity interests or other counterparties that provide other forms of support, such as guarantees, or certain types of derivative contracts, are variable interest holders in the entity.

 

The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. The Bank would be deemed to have a controlling financial interest and be the primary beneficiary if it has both of the following characteristics:

 

-power to direct the activities of a VIE that most significantly impact the entity’s economic performance; and

 

-8-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

-obligation to absorb losses of the entity that could potentially be significant to the VIE or right to receive benefits from the entity that could potentially be significant to the VIE.

 

d)Equity method

 

Investments in companies in which Bladex Head Office exercises significant influence, but not control over its financial and operating policies, and holds an equity participation of at least 20% but not more than 50%, are initially accounted for at cost, which is subsequently adjusted to record the participation of the investment in gains (losses) of the investee after the acquisition date.

 

e)Specialized accounting for investment companies

 

The Feeder and the Fund are organized under a “Feeder-Master” structure. Under this structure, the Feeder invests all its assets in the Fund which in turn invests in various assets on behalf of its investor. Specialized accounting for investment companies requires the Feeder to reflect its investment in the Fund in a single line item equal to its proportionate share of the net assets of the Fund, regardless of the level of Feeder’s interest in the Fund. The Feeder records the Fund’s results by accounting for its participation in the net interest income and expenses of the Fund, as well as its participation in the realized and unrealized gains or losses of the Fund.

 

As permitted by ASC Topic 810-10-25-15 – Consolidation, when Bladex consolidates its investment in the Feeder, it retains the specialized accounting for investment companies applied by the Feeder in the Fund, reporting it within the “Investment fund” line item in the consolidated balance sheet, and presenting the third party investments in the Feeder in the “Redeemable noncontrolling interest” line item between liabilities and stockholders’ equity. The Bank reports interest income and expense from the Fund in the Investment fund line item within interest income and expense, realized and unrealized gains and losses in the “Net gain (loss) from investment fund trading” line item, and expenses from the Fund are reported in “Expenses from the investment fund” line item in the consolidated statements of income.

 

f)Use of estimates

 

The preparation of the consolidated financial statements requires Management to make estimates and use assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Material estimates that are particularly susceptible to significant changes relate to the determination of the allowances for credit losses, impairment of securities available-for-sale and held-to-maturity, and the fair value of financial instruments. Actual results could differ from those estimates. Management believes these estimates are adequate.

 

g)Cash equivalents

 

Cash equivalents include demand deposits in banks and interest-bearing deposits in banks with original maturities of three months or less, excluding pledged deposits.

 

-9-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

h)Repurchase agreements

 

Repurchase agreements are generally treated as collateralized financing transactions. When the criteria set forth in the following paragraph are met to account for the transaction as secured financing, the transaction is recorded at the amounts at which the securities will be subsequently reacquired including interest paid, as specified in the respective agreements. Interest is recognized in the consolidated statement of income over the life of the transaction. The fair value of securities to be repurchased is continuously monitored, and additional collateral is obtained or provided where appropriate, to protect against credit exposure.

 

The Bank’s policy is to relinquish possession of the securities sold under agreements to repurchase. Despite such relinquishment of possession, repurchase agreements qualify as secured financings if and only if all of the following conditions are met: the repurchase agreement must grant the transferor the right and obligation to repurchase or redeem the transferred financial assets; the assets to be repurchased are the same or substantially the same as those transferred; the agreement is to repurchase or redeem them before maturity, at a fixed and determinable price; and the agreement is entered into concurrently at the transfer date.

 

When repurchase agreements do not meet the above-noted conditions, they qualify as sales of securities, for which the related security is removed from the balance sheet and a forward purchase agreement is recognized for the obligation to repurchase the security. Changes in fair value of the forward purchase agreement as well as any gain or loss resulting from the sale of securities under repurchase agreements are reported in earnings of the period within net gain (loss) from trading securities.

 

i)Trading assets and liabilities

 

Trading assets and liabilities include bonds acquired for trading purposes, and receivables (unrealized gains) and payables (unrealized losses) related to derivative financial instruments which are not designated as hedges or which do not qualify for hedge accounting. These amounts include the derivative assets and liabilities net of cash received or paid, respectively, under legally enforceable master netting agreements.

 

Trading assets and liabilities are carried at fair value. Unrealized and realized gains and losses on trading assets and liabilities are recorded in earnings as net gain (loss) from trading securities.

 

j)Investment securities

 

Securities are classified at the date of purchase based on the ability and intent to sell or hold them as investments. These securities consist of debt securities such as: negotiable commercial paper, bonds and floating rate notes.

 

Interest on securities is recognized based on the interest method. Amortization of premiums and discounts are included in interest income as an adjustment to the yield.

 

Securities available-for-sale

 

These securities consist of debt instruments that the Bank buys with the intention of selling them prior to maturity and are subject to the same approval criteria as the rest of the credit portfolio. These securities are carried at fair value. Unrealized gains and losses are reported as net increases or decreases to other comprehensive income (loss) (OCI) in stockholders’ equity until they are realized. Realized gains and losses from the sale of securities which are included in net gain on sale of securities are determined using the specific identification method.

 

-10-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Securities held-to-maturity

 

Securities classified as held-to-maturity represent securities that the Bank has the ability and the intent to hold until maturity. These securities are carried at amortized cost and are subject to the same approval criteria as the rest of the credit portfolio.

 

Impairment of securities

 

The Bank conducts periodic reviews of all securities with unrealized losses to evaluate whether the impairment is other-than-temporary. Impairment of securities is evaluated considering numerous factors, and their relative significance varies case by case. Factors considered in determining whether unrealized losses are temporary include: the length of time and extent to which the fair value has been less than cost, the severity of the impairment, the cause of the impairment and the financial condition of the issuer, activity in the market of the issuer which may indicate adverse credit conditions, the intent and ability of the Bank to retain the security for a sufficient period of time to allow of an anticipated recovery in the fair value (with respect to equity securities) and the intent and probability of the Bank to sell the security before the recovery of its amortized cost (with respect to debt securities). If, based on the analysis, it is determined that the impairment is other-than-temporary, the security is written down to its fair value, and a loss is recognized through earnings as impairment loss on assets.

 

In cases where the Bank does not intend to sell a debt security and estimates that it will not be required to sell the security before the recovery of its amortized cost basis, the Bank periodically estimates if it will recover the amortized cost of the security through the present value of expected cash flows. If the present value of expected cash flows is less than the amortized cost of the security, it is determined that an other-than-temporary impairment has occurred. The amount of this impairment representing credit loss is recognized through earnings and the residual of the other-than-temporary impairment related to non-credit factors is recognized in other comprehensive income (loss).

 

In periods subsequent to the recognition of the other-than-temporary impairment, the difference between the new amortized cost and the expected cash flows to be collected is accreted as interest income. The present value of the expected cash flows is estimated over the life of the debt security.

 

The other-than-temporary impairment of securities held-to-maturity that has been recognized in other comprehensive income (loss) is accreted to the amortized cost of the debt security prospectively over its remaining life.

 

Interest accrual is suspended on securities that are in default, or on which it is likely that future interest payments will not be received as scheduled.

 

-11-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

k)Investment Fund

 

The Feeder records its investment in the Fund at fair value, which is the Feeder’s proportionate interest in the net assets of the Fund. The Fund invests in trading assets and liabilities that are carried at fair value. The Fund reports trading gains and losses from negotiation of these instruments as realized and unrealized gains and losses on investments.

 

l)Other investments

 

Other investments that mainly consist of unlisted stock are recorded at cost and are included in other assets. The Bank determined that it is not practicable to obtain the fair value of these investments, as these shares are not traded in a secondary market. Performance of these investments is evaluated periodically and declines that are determined to be other-than-temporary are charged to earnings as impairment on assets.

 

m)Loans

 

Loans are reported at their amortized cost considering the principal outstanding amounts net of unearned income, deferred fees and allowance for loan losses. Interest income is recognized using the interest method. The amortization of net unearned income and deferred fees are recognized as an adjustment to the related loan yield using the effective interest method.

 

Purchased loans are recorded at acquisition cost. The difference between the principal and the acquisition cost of loans, the premiums and discounts, is amortized over the life of the loan as an adjustment to the yield. All other costs related to acquisition of loans are expensed when incurred.

 

The Bank identifies loans as delinquent when no debt service and/or interest payment has been received for 30 days after such payments were due. The outstanding balance of a loan is considered past due when the total principal balance with one single balloon payment has not been received within 30 days after such payment was due, or when no agreed-upon periodical payment has been received for a period of 90 days after the agreed-upon date.

 

Loans are placed in a non-accrual status when interest or principal is overdue for 90 days or more, or before if the Bank’s Management believes there is an uncertainty with respect to the ultimate collection of principal or interest. Any interest receivable on non-accruing loans is reversed and charged-off against earnings. Interest on these loans is only recorded as earned when collected. Non-accruing loans are returned to an accrual status when (1) all contractual principal and interest amounts are current; (2) there is a sustained period of repayment performance in accordance with the contractual terms of at least six months; and (3) if in the Bank Management’s opinion the loan is fully collectible.

 

A modified loan is considered a troubled debt restructuring when the debtor is experiencing financial difficulties and if the restructuring constitutes a concession to the debtor. A concession may include modification of terms such as an extension of maturity date, reduction in the stated interest rate, rescheduling of future cash flows, and reduction in the face amount of the debt or reduction of accrued interest, among others. Marketable securities received in exchange for loans under troubled debt restructurings are initially recorded at fair value, with any gain or loss recorded as a recovery or charge to the allowance, and are subsequently accounted for as securities available-for-sale.

 

-12-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

A loan is considered impaired, and also placed on a non-accrual basis, when based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to original contractual terms of the loan agreement. Factors considered by the Bank’s Management in determining impairment include collection status, collateral value, and economic conditions in the borrower’s country of residence. Impaired loans also include those modified loans considered troubled debt restructurings. When current events or available information confirm that specific impaired loans or portions thereof are uncollectible, such impaired loans are charged-off against the allowance for loan losses.

 

The reserve for losses on impaired loans is determined considering all available evidence, including the present value of expected future cash flows discounted at the loan's original contractual interest rate and/or the fair value of the collateral, if applicable. If the loan’s repayment is dependent on the sale of the collateral, the fair value considers costs to sell.

 

The Bank maintains a system of internal credit quality indicators. These indicators are assigned depending on several factors which include: profitability, quality of assets, liquidity and cash flows, capitalization and indebtedness, economic environment and positioning, regulatory framework and/or industry, sensitivity scenarios and the quality of debtor’s management and shareholders. A description of these indicators is as follows:

 

  Rating   Classification   Description
  1 to 6   Normal  

Clients with payment ability to satisfy their financial commitments.

 

  7   Special Mention  

Clients exposed to systemic risks specific to the country or the industry in which they are located, facing adverse situations in their operation or financial condition. At this level, access to new funding is uncertain.

 

  8   Substandard  

Clients whose primary source of payment (operating cash flow) is inadequate and who show evidence of deterioration in their working capital that does not allow them to satisfy payments on the agreed terms, endangering recovery of unpaid balances.

 

  9   Doubtful  

Clients whose operating cash flow continuously shows insufficiency to service the debt on the originally agreed terms. Due to the fact that the debtor presents an impaired financial and economic situation, the likelihood of recovery is low.

 

  10   Unrecoverable   Clients with operating cash flow that does not cover their costs, are in suspension of payments, presumably they will also have difficulties to fulfill possible restructuring agreements, are in a state of insolvency, or have filed for bankruptcy, among others.

 

In order to maintain a periodical monitoring of the quality of the portfolio, loans with ratings between 1 and 5 are reviewed annually, ratings 6 are reviewed semi-annually, and those with ratings above 6 are reviewed quarterly.

 

The Bank's lending portfolio is summarized in the following segments: corporations, sovereign, middle-market companies and banking and financial institutions. The distinction between corporations and middle-market companies depends on the client’s level of annual sales in relation to the country risk, among other criteria. Except for the sovereign segment, segments are broken down into state-owned and private.

 

The Bank's lending policy is applicable to all classes of loans.

 

-13-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

n)Transfer of financial assets

 

Transfers of financial assets, primarily loans, are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Bank even in bankruptcy or other receivership; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or does not have the right to cause the assets to be returned. Upon completion of a transfer of assets that satisfies the conditions described above to be accounted for as a sale, the Bank recognizes the assets as sold and records in earnings any gain or loss on the sale. The Bank may retain interest in loans sold in the form of servicing rights. Gains or losses on sale of loans depend in part on the carrying amount of the financial instrument involved in the transfer, and its fair value at the date of transfer.

 

o)Allowance for credit losses

 

The allowance for credit losses is provided for losses derived from the credit extension process, inherent in the loan portfolio and off-balance sheet financial instruments, using the reserve method of providing for credit losses. Additions to the allowance for credit losses are made by debiting earnings. Credit losses are deducted from the allowance, and subsequent recoveries are added. The allowance is also decreased by reversals of the allowance back to earnings. The allowance attributable to loans is reported as a deduction of loans and the allowance for off-balance sheet credit risk, such as, letters of credit and guarantees, is reported as a liability.

 

The allowance for possible credit losses includes an asset-specific component and a formula-based component. The asset-specific component, or specific allowance, relates to the provision for losses on credits considered impaired and measured on a case-by-case basis. A specific allowance is established when the discounted cash flows (or observable fair value of collateral) of the credit is lower than the carrying value of that credit. The formula-based component, or generic allowance, covers the Bank’s performing credit portfolio and is established based in a process that estimates the probable loss inherent in the portfolio, based on statistical analysis and management’s qualitative judgment. The statistical calculation is a product of internal risk classifications, probabilities of default and loss given default. The probability of default is supported by Bladex’s historical portfolio performance complemented by probabilities of default provided by external sources, in view of the greater robustness of this external data for some cases. The loss given default is based on Bladex’s historical losses experience and best practices. The reserve balances, for both on and off-balance sheet credit exposures, are calculated applying the following formula:

Reserves = ∑(E x PD x LGD); where:

 

-Exposure (E) = the total accounting balance (on and off-balance sheet) at the end of the period under review.
-Probabilities of Default (PD) = one-year probability of default applied to the portfolio. Default rates are based on Bladex’s historical portfolio performance per rating category, complemented by Standard & Poor’s (“S&P”) probabilities of default for categories 6, 7 and 8, in view of the greater robustness of S&P data for such cases.
-Loss Given Default (LGD) = a factor is utilized, based on historical information, same as based on best practices in the banking industry. Management applies judgment and historical loss experience.

 

-14-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Management can also apply complementary judgment to capture elements of prospective nature or loss expectations based on risks identified in the environment that are not necessarily reflected in the historical data.

 

The allowance policy is applicable to all classes of loans and off-balance sheet financial instruments of the Bank.

 

p)Fees and commissions

 

Loan origination fees, net of direct loan origination costs, are deferred, and the net amount is recognized as revenue over the contractual term of the loans as an adjustment to the yield. These net fees are not recognized as revenue during periods in which interest income on loans is suspended because of concerns about the realization of loan principal or interest. Underwriting fees are recognized as revenue when the Bank has rendered all services to the issuer and is entitled to collect the fee from the issuer, when there are no contingencies related to the fee. Underwriting fees are recognized net of syndicate expenses. In addition, the Bank recognizes credit arrangement and syndication fees as revenue after satisfying certain retention, timing and yield criteria. Fees received in connection with a modification of terms of a troubled debt restructuring are applied as a reduction of the recorded investment in the loan. Fees earned on letters of credit, guarantees and other commitments are amortized using the straight-line method over the life of such instruments.

 

q)Premises and equipment

 

Premises and equipment, including the electronic data processing equipment, are carried at cost less accumulated depreciation and amortization, except land, which was carried at acquisition cost. Depreciation and amortization are charged to operations using the straight-line method, over the estimated useful life of the related asset. The estimated original useful life for furniture and equipment is 3 to 5 years and for improvements is 3 to 15 years. The building was depreciated in a period of 40 years.

 

The Bank defers the cost of internal-use software that has a useful life in excess of one year in accordance with ASC Topic 350-40 - Intangibles – Goodwill and Other – Internal-Use Software. These costs consist of payments made to third parties related to the use of licenses and installation of both, software and hardware. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. Capitalized internal use software costs are amortized using the straight-line method over their estimated useful lives, generally consisting of 5 years.

 

r)Borrowings and debt

 

Short and long-term borrowings and debt are accounted for at amortized cost.

 

s)Capital reserves

 

Capital reserves are established as a segregation of retained earnings and are, as such, a form of retained earnings. Even though the constitution of capital reserves is not required by the SBP, their reductions require the approval of the Bank’s Board of Directors and the SBP.

 

-15-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

t)Stock-based compensation and stock options plans

 

The Bank applies ASC Topic 718 – Compensation - Stock Compensation to account for compensation costs on restricted stock and stock option plans. Compensation cost is based on the grant date fair value of both stock and options and is recognized over the requisite service period of the employee, using the straight-line method. The fair value of each option is estimated at the grant date using a binomial option-pricing model.

 

When options and stock are exercised, the Bank’s policy is to reissue shares from treasury stock.

 

u)Derivative financial instruments and hedge accounting

 

The Bank uses derivative financial instruments for its management of interest rate and foreign exchange risks. Interest rate swap contracts, cross-currency swap contracts and forward foreign exchange contracts have been used to manage interest rate and foreign exchange risks associated with debt securities and borrowings with fixed rates, and loans and borrowings in foreign currency. These contracts can be classified as fair value and cash flow hedges. In addition, forward foreign exchange contracts are used to hedge exposures to changes in foreign currency in subsidiary companies with functional currencies other than US dollar. These contracts are classified as net investment hedges.

 

The accounting for changes in value of a derivative depends on whether the contract is for trading purposes or has been designated and qualifies for hedge accounting.

 

Derivatives held for trading purposes include interest rate swap, cross-currency swap, forward foreign exchange and future contracts used for risk management purposes that do not qualify for hedge accounting. The fair value of trading derivatives is reported as trading assets or trading liabilities, as applicable. Changes in realized and unrealized gains and losses and interest from these trading instruments are included in net gain (loss) from trading securities.

 

Derivatives for hedging purposes primarily include forward foreign exchange contracts and interest rate swap contracts in US dollars and cross-currency swaps. Derivative contracts designated and qualifying for hedge accounting are reported in the consolidated balance sheet as derivative financial instruments used for hedging - receivable and payable, as applicable, and hedge accounting is applied. In order to qualify for hedge accounting, a derivative must be considered highly effective at reducing the risk associated with the exposure being hedged. Each derivative must be designated as a hedge, with documentation of the risk management objective and strategy, including identification of the hedging instrument, the hedged item and the risk exposure, as well as how effectiveness will be assessed prospectively and retrospectively. The extent to which a hedging instrument is effective at achieving offsetting changes in fair value or cash flows must be assessed at least quarterly. Any ineffectiveness must be reported in current-period earnings.

 

The Bank discontinues hedge accounting prospectively in the following situations:

 

1.It is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item.
2.The derivative expires or is sold, terminated or exercised.

 

-16-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

3.The Bank otherwise determines that designation of the derivative as a hedging instrument is no longer appropriate.

 

The Bank carries all derivative financial instruments in the consolidated balance sheet at fair value. For qualifying fair value hedges, all changes in the fair value of the derivative and the fair value of the item for the risk being hedged are recognized in earnings. If the hedge relationship is terminated, then the fair value adjustment to the hedged item continues to be reported as part of the basis of the item and is amortized to earnings as a yield adjustment. The Bank applies the shortcut method of hedge accounting that does not recognize ineffectiveness in hedges of interest rate swap that meet the requirements of ASC Topic 815-20-25-104. For qualifying cash flow hedges and net investment hedges, the effective portion of the change in the fair value of the derivative is recorded in OCI and recognized in the consolidated statement of income when the hedged cash flows affect earnings. The ineffective portion is recognized in the consolidated statement of income as activities of derivative financial instruments and hedging. If the cash flow hedge relationship is terminated, related amounts in OCI are reclassified into earnings when hedged cash flows occur.

 

v)Foreign currency translation

 

Assets and liabilities of foreign subsidiaries whose local currency is considered their functional currency, are translated into the reporting currency, US dollars, using period-end spot foreign exchange rates. The Bank uses monthly-averaged exchange rates to translate revenues and expenses from local functional currency into US dollars. The effects of those translations adjustments are reported as a component of the Other comprehensive income (loss) in the stockholders’ equity.

 

Transactions whose terms are denominated in a currency other than the functional currency, including transactions denominated in local currency of the foreign entity with the US dollar as their functional currency, are recorded at the exchange rate prevailing at the date of the transaction. Assets and liabilities in foreign currency are translated into US dollars using period-end spot foreign exchange rates. The effects of translation of monetary assets and liabilities into US dollars are included in current year’s earnings in the Gain (loss) on foreign currency exchange item.

 

w)Income taxes

 

·Bladex Head Office is exempted from payment of income taxes in Panama in accordance with the contract signed between the Republic of Panama and Bladex.
·The Feeder, the Fund, and BLX Brazil Ltd. are not subject to income taxes in accordance with the laws of the Cayman Islands. These companies received an undertaking exempting them from taxation of all future profits until March 7, 2026 for the Feeder and the Fund, and until November 23, 2030 for BLX Brazil Ltd.
·Bladex Representacao Ltda., Bladex Investimentos Ltda., and Bladex Asset Management Brazil – Gestora de Recursos Ltda. are subject to income taxes in Brazil.
·The New York Agency and Bladex’s subsidiaries incorporated in USA are subject to federal and local taxation in USA based on the portion of income that is effectively connected with its operations in that country.

 

Such amounts of income taxes have been immaterial to date.

 

-17-
 

   

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

x)Redeemable noncontrolling interest

 

ASC Topic 810 - Consolidation requires that a noncontrolling interest, previously referred to as a minority interest, in a consolidated subsidiary be reported as a separate component of equity and the amount of consolidated net income specifically attributable to the noncontrolling interest be presented separately, below net income in the consolidated statement of income.

 

Furthermore, in accordance with ASC 480-10-S99, equity securities that are redeemable at the option of the holder and not solely within the control of the issuer must be classified outside of equity. The terms of third party investments in the consolidated funds contain a redemption clause which allows the holders the option to redeem their investment at fair value.  Accordingly, the Bank presents the noncontrolling interest between liabilities and stockholders’ equity in the consolidated balance sheets.

 

Net assets of the Feeder and the Brazilian Fund are measured and presented at fair value, given the nature of their net assets (i.e. represented mainly by cash and investments in securities).  Therefore, when calculating the value of the redeemable noncontrolling interest under ASC Topic 810, such amount is already recorded at its fair value and no further adjustments under ASC 480-10-S99 are necessary. 

 

y)Earnings per share

 

Basic earnings per share is computed by dividing the net income attributable to Bladex (the numerator) by the weighted average number of common shares outstanding (the denominator) during the year. Diluted earnings per share measure performance incorporating the effect that potential common shares, such as stock options and restricted stock units outstanding during the same period, would have on net earnings per share. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except for the denominator, which is increased to include the number of additional common shares that would have been issued if the beneficiaries of stock purchase options and other stock plans could exercise their options. The number of potential common shares that would be issued is determined using the treasury stock method.

 

z)Recently issued accounting standards

 

During 2012 and 2011, new accounting standards, modifications, interpretations, and updates to standards (“ASU”), applicable to the Bank, have been issued and are not in effect. These standards establish the following:

 

ASU 2013-05 – Foreign Currency Matters (Topic 830)

The objective of the amendments in this Update is to resolve the diversity in practice about the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary. When a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary, the parent is required to release any related cumulative translation adjustment into net income.

 

-18-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

The amendments in this update clarify that the sale of an investment in a foreign entity includes both (1) events that result in the loss of a controlling financial interest in a foreign entity, and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date (sometimes also referred to as a step acquisition). Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events.

 

This update is effective for annual and interim periods beginning after December 15, 2013. The amendments should be applied prospectively to derecognition events occurring after the effective date. Early adoption is permitted. The Bank does not anticipate any material impact on its financial statement upon adoption of this update.

 

3.Discontinued operations

 

Since the fourth quarter of 2012, the Bank applies discontinued operations accounting to the operations of the Asset Management unit in accordance with ASC Topic 205-20 – Presentation of Financial Statements – Discontinued Operations. Amounts reported in the consolidated financial statements of income and cash flows for the three months ended March 31, 2012 have been reclassified to conform to the presentation of discontinued operations in the three months ended March, 31, 2013. The reclassification of amounts in the consolidated statements of cash flows for the first quarter 2012 did not affect the totals of operating, investing and financing activities. The book value of assets of the Asset Management unit is not significant; so have not been reported as assets held-for-sale in the consolidated balance sheet.

 

The following table summarizes the operating results of the discontinued operations:

 

   Three months ended
March 31,
 
(In thousands of US$)  2013   2012 
Other income:          
Fees and commissions (1)   610    703 
Other income   13    13 
    623    716 
Operating expenses:          
Salaries and other employee expenses   (304)   (402)
Depreciation and amortization   (5)   (6)
Professional services   (159)   (291)
Maintenance and repairs   (1)   (1)
Other operating expenses   (181)   (320)
Total operating expenses   (650)   (1,020)
Net loss from discontinued operations   (27)   (304)

 

(1)Includes management fees from the investment fund for $567 thousand, and $684 thousand in the three months ended March 31, 2013 and 2012, respectively.

 

-19-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

4.Cash and cash equivalents

 

Cash and cash equivalents are as follows:

 

   March 31,   December 31, 
(In thousands of US$)  2013   2012 
Cash and due from banks   3,410    6,718 
Interest-bearing deposits in banks   577,630    700,312 
Total   581,040    707,030 
Less:          
Pledged deposits   6,542    14,519 
    574,498    692,511 

 

On March 31, 2013 and December 31, 2012, the New York Agency had a pledged deposit with a carrying value of $3.0 million with the New York State Banking Department, as required by law since March 1994. As of March 31, 2013 and December 31, 2012, the Bank had pledged deposits with a carrying value of $3.5 million and $11.5 million, respectively, to secure derivative financial instruments transactions and repurchase agreements.

 

5.Trading assets and liabilities

 

The fair value of trading assets and liabilities is as follows:

 

   March 31,   December 31, 
(In thousands of US$)  2013   2012 
Trading assets:          
Sovereign bonds   5,046    5,146 
Cross-currency swaps   30    49 
Forward foreign exchange   -    50 
Future contracts   8    20 
Total   5,084    5,265 
Trading liabilities:          
Interest rate swaps   79    100 
Cross-currency interest rate swaps   7,792    32,182 
Forward foreign exchange   -    22 
Total   7,871    32,304 

 

Sovereign bonds outstanding as of March 31, 2013 and December 31, 2012, generated gains of $0.1 million, which have been recorded in earnings.

 

As of March 31, 2013 and December 31, 2012, bonds with a carrying value of $1.6 million and $1.3 million, respectively, secured repurchase agreements accounted for as secured borrowings and derivative financial instruments transactions.

 

-20-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

During the three months ended March 31, 2013 and 2012, the Bank recognized the following gains and losses related to trading derivative financial instruments:

 

   Three months ended
March 31,
 
(In thousands of US$)  2013   2012 
Interest rate swaps   (3)   (150)
Cross-currency swaps   67    - 
Cross-currency interest rate swaps   4,794    8,351 
Forward foreign exchange   (15)   (56)
Future contracts   191    429 
Total   5,034    8,574 

 

These amounts are reported in the Net gain from trading securities and Net gain from the investment fund trading lines in the consolidated statements of income.

 

In addition to the trading derivative financial instruments, the Bank has hedging derivative financial instruments that are disclosed in Note 16.

 

As of March 31, 2013 and December 31, 2012, trading derivative liabilities include interest rate swap and cross-currency interest rate swap contracts that were previously designated as fair value hedges which hedge accounting was discontinued during 2012. Adjustments to the carrying value of the hedged underlying transactions are amortized in the interest expense line over the remaining term of these transactions. Changes in the fair value of these derivative instruments after discontinuation of fair value hedge accounting are recorded in Net gain from trading securities.

 

As of March 31, 2013 and December 31, 2012, information on the nominal amounts of derivative financial instruments held for trading purposes is as follows:

 

   March 31, 2013   December 31, 2012 
(In thousands of US$)  Nominal   Fair Value   Nominal   Fair Value 
   Amount   Asset   Liability   Amount   Asset   Liability 
Interest rate swaps   32,248    -    79    35,291    -    100 
Cross-currency swap   1,011    30    -    -    -    - 
Cross-currency interest rate swaps   49,213    -    7,792    155,081    49    32,182 
Forward foreign exchange   -    -    -    7,152    50    22 
Future contracts   1,881    8    -    6,896    20    - 
Total   84,353    38    7,871    204,420    119    32,304 

 

-21-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

6.Investment securities

 

Securities available-for-sale

 

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

 

   March 31, 2013 

(In thousands of US$)

 

 

Amortized

Cost

  

Unrealized

Gross Gain

  

Unrealized

Gross Loss

  

Fair

Value

 
Corporate debt:                    
Brazil   35,251    228    108    35,371 
Colombia   23,057    79    142    22,994 
Chile   9,610    51    62    9,599 
Panama   2,059    -    8    2,051 
Peru   14,502    69    107    14,464 
    84,479    427    427    84,479 
Sovereign debt:                    
Brazil   34,479    1,754    116    36,117 
Colombia   25,740    16    330    25,426 
Chile   4,595    -    53    4,542 
Honduras   14,979    171    24    15,126 
Mexico   35,014    1,683    63    36,634 
Panama   47,142    1,625    110    48,657 
Trinidad and Tobago   4,791    -    105    4,686 
Venezuela   42,673    884    14    43,543 
    209,413    6,133    815    214,731 
Total   293,892    6,560    1,242    299,210 

 

   December 31, 2012 

(In thousands of US$)

 

 

Amortized

Cost

   Unrealized
Gross Gain 
   Unrealized
Gross Loss
  

Fair

Value 

 
Corporate debt:                    
Brazil   13,581    158    -    13,739 
Colombia   986    60    -    1,046 
Chile   1,967    87    -    2,054 
Peru   530    17    -    547 
    17,064    322    -    17,386 
                     
Sovereign debt:                    
Brazil   28,783    1,965    -    30,748 
Colombia   15,489    -    199    15,290 
Chile   1,061    1    -    1,062 
Honduras   15,986    224    -    16,210 
Mexico   20,553    1,779    -    22,332 
Panama   37,845    1,828    -    39,673 
Venezuela   39,548    801    33    40,316 
    159,265    6,598    232    165,631 
Total   176,329    6,920    232    183,017 

 

As of March 31, 2013 and December 31, 2012, securities available-for-sale with a carrying value of $235.4 million and $152.3 million, respectively, were pledged to secure repurchase transactions accounted for as secured financings.

 

-22-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

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

 

   March 31, 2013 
(In thousands of US$)  Less than 12 months   12 months or longer   Total 
  

 

Fair

Value

  

Unrealized

Gross
Losses

  

 

Fair

Value

  

Unrealized

Gross
Losses

  

 

Fair

Value

  

Unrealized

Gross
Losses

 
                         
Corporate debt   48,767    427    -    -    48,767    427 
Sovereign debt   64,206    676    10,009    139    74,215    815 
    112,973    1,103    10,009    139    122,982    1,242 

 

 

   December 31, 2012 
(In thousands of US$)  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   10,188    79    10,009    153    20,197    232 
    10,188    79    10,009    153    20,197    232 

 

Gross unrealized losses are related mainly to changes in market interest rates and other market factors, and not due to underlying credit concerns by the Bank about the issuers.

 

The following table presents the realized gains and losses on sale of securities available-for-sale:

 

   Three months ended
March 31,
 
(In thousands of US$)  2013   2012 
Gains   116    4,417 
Losses   (1)   (111)
Net   115    4,306 

 

The amortized cost and fair value of securities available-for-sale by contractual maturity as of March 31, 2013, are shown in the following table:

 

(In thousands of US$) 

Amortized

Cost

  

Fair

Value

 
Due within 1 year   34,163    32,250 
After 1 year but within 5 years   177,590    183,585 
After 5 years but within 10 years   82,139    81,375 
    293,892    299,210 

 

-23-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Securities held-to-maturity

 

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

 

   March 31, 2013 

(In thousands of US$)

 

 

Amortized

Cost

   Unrealized
Gross Gain
   Unrealized
Gross Loss
  

Fair

Value

 
Corporate debt:                    
Panama   15,726    -    56    15,670 
Sovereign debt:                    
Colombia   13,010    4    2    13,012 
Honduras   8,501    1    12    8,490 
Panama   2,000    45    -    2,045 
    23,511    50    14    23,547 
Total   39,237    50    70    39,217 

 

   December 31, 2012 

(In thousands of US$)

 

 

Amortized

Cost

   Unrealized
Gross Gain
   Unrealized
Gross Loss
  

Fair

Value

 
Corporate debt:                    
Panama   12,660    -    -    12,660 
Sovereign debt:                    
Colombia   13,011    4    3    13,012 
Honduras   6,442    9    19    6,432 
Panama   2,000    45    -    2,045 
    21,453    58    22    21,489 
Total   34,113    58    22    34,149 

 

Securities that show gross unrealized losses have had losses for less than 12 months. These losses are related mainly to changes in market interest rates and other market factors and not due to underlying credit concerns by the Bank about the issuers therefore, such losses are considered temporary.

 

The amortized cost and fair value of securities held-to-maturity by contractual maturity as of March 31, 2013, are shown in the following table:

 

(In thousands of US$) 

Amortized

Cost

  

Fair

Value

 
Due within 1 year   19,917    19,963 
After 1 year but within 5 years   19,320    19,254 
    39,237    39,217 

 

As of March 31, 2013 and December 31, 2012, securities held-to-maturity with a carrying value of $13.0 million and $19.4 million, respectively, were pledged to secure repurchase transactions accounted for as secured financings.

 

-24-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

7.Investment fund

 

The balance in the investment fund for $105.5 million as of March 31, 2013 and $105.9 million as of December 31, 2012 represents the participation of the Feeder in the net asset value (NAV) of the Fund.

 

The Fund’s net assets are mainly composed by cash, investments in equity and debt instruments, and derivative financial instruments that are quoted and traded in active markets. For financial instruments for which quoted prices are not available, the Fund uses independent valuations from pricing providers that use valuation models considering market information.

 

As of March 31, 2013, the Feeder owns 98.55% of the Fund with a total of 78,696.9 shares issued, divided in 839.0 “Class A” shares, 207.6 “Class A1” shares and 77,650.3 “Class B” shares.

 

As of December 31, 2012, the Feeder owns 97.95% of the Fund with a total of 79,335.7 shares issued, divided in 839.0 “Class A” shares, 846.4 “Class A1” shares and 77,650.3 “Class B” shares.

 

The Fund has issued “Class A”, “Class A1”, “Class B”, “Class C”, “Class D”, “Class E” and “Class E1” shares and administrative shares. “Class A”, “Class A1” and “Class B” shares are participating shares in the net gains (losses) of the Fund, and only differ in relation to certain administrative fees. “Class C” and “Class D” shares do not participate in the net gains (losses) of the Fund; they are only entitled to the performance allocation from “Class A”, “Class A1” and “Class B” shares. The “Class E” and “Class E1” shares are not subject to either administrative fees or performance allocation. The Bank owns the Feeder’s and the Fund’s administrative shares.

 

“Class A”, “Class A1” and “Class E” shares can be redeemed monthly by investors with 30 days’ notice. $100 million of the “Class B” shares can be redeemed starting in 2013.

 

8.Loans

 

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

 

(In thousands of US$)  March 31,   December 31, 
   2013   2012 
Corporations:          
Private   2,345,891    2,202,613 
State-owned   846,222    538,638 
Banking and financial institutions:          
Private   1,482,830    1,775,938 
State-owned   461,361    416,085 
Middle-market companies:          
Private   688,163    681,912 
Sovereign   24,308    100,370 
Total   5,848,775    5,715,556 

 

-25-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

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

 

(In thousands of US$)  March 31,   December 31, 
   2013   2012 
Banking and financial institutions   1,944,191    2,192,023 
Industrial   1,137,051    1,108,223 
Oil and petroleum derived products   1,313,005    894,368 
Agricultural   897,522    853,377 
Services   182,454    210,925 
Mining   10,253    22,122 
Sovereign   24,308    100,370 
Others   399,991    334,148 
Total   5,848,775    5,715,556 

 

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

 

(In thousands of US$)  March 31, 2013 
Rating (1)  Corporations  

Banking and financial

institutions

   Middle-market
companies
    Sovereign   Total 
   Private   State-owned   Private   State-owned   Private       
1-6   2,345,891    846,222    1,482,830    461,361    688,163    24,308    5,848,775 
7   -    -    -    -    -    -    - 
8   -    -    -    -    -    -    - 
9   -    -    -    -    -    -    - 
10   -    -    -    -    -    -    - 
Total   2,345,891    846,222    1,482,830    461,361    688,163    24,308    5,848,775 

 

(In thousands of US$)  December 31, 2012 
Rating (1)  Corporations  

Banking and financial

institutions

   Middle-market
companies
   Sovereign   Total 
   Private   State-owned   Private   State-owned   Private       
1-6   2,202,613    538,638    1,775,938    416,085    681,912    100,370    5,715,556 
7   -    -    -    -    -    -    - 
8   -    -    -    -    -    -    - 
9   -    -    -    -    -    -    - 
10   -    -    -    -    -    -    - 
Total   2,202,613    538,638    1,775,938    416,085    681,912    100,370    5,715,556 

 

(1)Current ratings as of March 31, 2013 and December 31, 2012, respectively.

 

-26-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

The remaining loan maturities are summarized as follows:

 

(In thousands of US$)  March 31,   December 31, 
   2013   2012 
Current:          
Up to 1 month   1,260,034    1,155,222 
From 1 month to 3 months   1,350,340    1,475,201 
From 3 months to 6 months   992,278    962,377 
From 6 months to 1 year   1,016,405    752,822 
From 1 year to 2 years   515,984    662,511 
From 2 years to 5 years   699,402    692,884 
More than 5 years   13,475    14,539 
    5,847,918    5,715,556 
Delinquent   857    - 
Total   5,848,775    5,715,556 

 

As of March 31, 2013 and December 31, 2012, there were no impaired loans.

 

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

 

(In thousands of US$)  March 31,   December 31, 
   2013   2012 
Country:          
Argentina   195,421    222,159 
Belgium   -    30,692 
Brazil   1,723,750    1,773,401 
Chile   234,031    309,712 
Colombia   470,761    450,037 
Costa Rica   328,474    196,857 
Dominican Republic   177,904    110,688 
Ecuador   208,330    173,782 
El Salvador   54,810    66,013 
France   -    59,501 
Guatemala   243,653    273,051 
Honduras   63,318    70,701 
Jamaica   36,747    9,772 
Mexico   625,166    495,954 
Netherlands   71,258    77,336 
Nicaragua   13,429    10,169 
Panama   183,734    277,144 
Paraguay   39,833    27,060 
Peru   800,022    841,032 
Spain   9,695    9,695 
Trinidad and Tobago   204,912    119,347 
United States   -    2,925 
Uruguay   163,528    108,528 
    5,848,775    5,715,556 

 

-27-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

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

 

(In thousands of US$)  March 31,   December 31, 
   2013   2012 
         
Fixed interest rates   3,464,816    3,282,876 
Floating interest rates   2,383,959    2,432,680 
    5,848,775    5,715,556 

 

As of March 31, 2013 and December 31, 2012, 89% and 92%, respectively, of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

 

The following is a summary of information in non-accruing loans, and interest amounts on non-accruing loans:

 

(In thousands of US$)  March 31,   December 31, 
   2013   2012 
Loans in non-accrual status          
Private corporations   -    - 
Private middle-market companies   -    - 
Total loans in non-accrual status   -    - 

 

   Three months ended March 31, 
   2013   2012 
Interest which would have been recorded if the loans had not been in a non-accrual status   -    535 
Interest income collected on non-accruing loans   -    517 

 

An analysis of non-accruing loans with impaired balances as of March 31, 2013 and December 31, 2012 is detailed as follows:

 

(In thousands of US$)  March 31, 2013   Three months ended
March 31, 2013
 
  
Recorded
investment
   Unpaid 
principal 
balance
  
Related 
allowance
   Average 
principal loan
balance 
   Interest
income
recognized
 
With an allowance recorded Private corporations   -    -    -    -    - 
Total   -    -    -    -    - 

 

(In thousands of US$)  December 31, 2012   Three months ended 
March 31, 2012
 
   Recorded
investment
   Unpaid 
principal 
balance
   Related 
allowance
   Average 
principal loan
balance
   Interest 
income
recognized
 
With an allowance recorded Private corporations   -    -    -    24,000    517 
Total   -    -    -    24,000    517 

 

As of March 31, 2013 and December 31, 2012, there were no impaired loans without related allowance.

 

-28-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

As of March 31, 2013 and December 31, 2012, the Bank did not have any troubled debt restructurings.

 

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

 

(In thousands of US$)  March 31, 2013 
  
91-120
days
  
121-150
days
  
151-180
days
   Greater
than 180
days
  
Total
Past Due
   Delinquent   Current  


Total

Loans

 
Corporations   -    -    -    -    -    -    3,192,113    3,192,113 
Banking and financial institutions   -    -    -    -    -    -    1,944,191    1,944,191 
Middle-market companies   -    -    -    -    -    -    688,163    688,163 
Sovereign   -    -    -    -    -    -    24,308    24,308 
Total   -    -    -    -    -    -    5,848,775    5,848,775 

 

(In thousands of US$)  December 31, 2012 
   91-120
days
   121-150
days
   151-180
days
   Greater
than 180
days
   Total
Past Due
   Delinquent   Current   Total
Loans
 
Corporations   -    -    -    -    -    -    2,741,251    2,741,251 
Banking and financial institutions   -    -    -    -    -    -    2,192,023    2,192,023 
Middle-market companies   -    -    -    -    -    -    681,912    681,912 
Sovereign   -    -    -    -    -    -    100,370    100,370 
Total   -    -    -    -    -    -    5,715,556    5,715,556 

 

As of March 31, 2013 and December 31, 2012, the Bank has credit transactions in the normal course of business with 29% of its Class “A” and “B” stockholders. All transactions are made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and are subject to all of the Bank’s Corporate Governance and control procedures. As of March 31, 2013 and December 31, 2012, approximately 16% and 18%, respectively, of the outstanding loan portfolio is placed with the Bank’s Class “A” and “B” stockholders and their related parties. As of March 31, 2013, 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.

 

During the three months ended March 31, 2013 and 2012, the Bank sold loans with a book value of $15 million and $2.2 million, respectively.

 

-29-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

9.Allowance for credit losses

 

The Bank classifies the allowance for credit losses into two components:

 

 

a)Allowance for loan losses:

 

Following tables disclose the activity in the allowance for loan losses during the three-month periods ended March 31, 2013 and 2012:

 

(In thousands of US$)  Three months ended March 31, 2013 
   Corporations   Banking and
financial
institutions
   Middle-
market

companies
   Sovereign   Total 
Balance at beginning of the year   32,488    28,836    10,887    765    72,976 
Provision (reversal of provision) for loan losses   2,259    (4,055)   235    (610)   (2,171)
Loan recoveries and other   -    3    -    -    3 
Loans written-off against the allowance for loan losses   -    -    -    -    - 
Balance at end of the year   34,747    24,784    11,122    155    70,808 
                          
Components:                         
Generic allowance   34,747    24,784    11,122    155    70,808 
Specific allowance   -    -    -    -    - 
Total allowance for loan losses   34,747    24,784    11,122    155    70,808 

 

(In thousands of US$)  Three months ended March 31, 2012 
   Corporations   Banking and
financial
institutions
   Middle-
market

companies
   Sovereign   Total 
Balance at beginning of the year   48,865    30,523    8,952    207    88,547 
Provision (reversal of provision) for loan losses   2,531    (5,904)   (98)   (37)   (3,508)
Loan recoveries and other   -    (9)   -    -    (9)
Loans written-off against the allowance for loan losses   (5,820)   -    -    -    (5,820)
Balance at end of the year   45,576    24,610    8,854    170    79,210 
                          
Components:                         
Generic allowance   35,976    24,610    8,854    170    69,610 
Specific allowance   9,600    -    -    -    9,600 
Total allowance for loan losses   45,576    24,610    8,854    170    79,210 

 

Provision (reversal of provision) of generic allowance for credit losses are mostly related to changes in volume and composition of the credit portfolio. The decrease in the generic allowance for loan losses in 2013 was primarily due to an increased exposure in countries, customers and type of transactions with better ratings and a decreased exposure in those with lower ratings.

 

-30-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Following is a summary of loan balances and reserves for loan losses:

  

(In thousands of US$)  March 31, 2013 
   Corporations   Banking and
financial institutions
  
Middle-market
companies
   Sovereign   Total 
Allowance for loan losses                         
Generic allowance   34,747    24,784    11,122    155    70,808 
Specific allowance   -    -    -    -    - 
Total of allowance for loan losses   34,747    24,784    11,122    155    70,808 
Loans                         
Loans with generic allowance   3,192,113    1,944,191    688,163    24,308    5,848,775 
Loans with specific allowance   -    -    -    -    - 
Total loans   3,192,113    1,944,191    688,163    24,308    5,848,775 

 

(In thousands of US$)  December 31, 2012 
   Corporations   Banking and
financial institutions
  
Middle-market
companies
   Sovereign   Total 
Allowance for loan losses                         
Generic allowance   32,488    28,836    10,887    765    72,976 
Specific allowance   -    -    -    -    - 
Total of allowance for loan losses   32,488    28,836    10,887    765    72,976 
Loans                         
Loans with generic allowance   2,741,251    2,192,023    681,912    100,370    5,715,556 
Loans with specific allowance   -    -    -    -    - 
Total loans   2,741,251    2,192,023    681,912    100,370    5,715,556 

 

b)Reserve for losses on off-balance sheet credit risk:

 

(In thousands of US$)  Three months ended March 31, 
   2013   2012 
Balance at beginning of the year   4,841    8,887 
Provision (reversal of provision) for losses on off-balance sheet credit risk   2,437    (903)
Balance at end of the year   7,278    7,984 

 

The reserve for losses on off-balance sheet credit risk reflects the Bank’s Management estimate of probable losses on off-balance sheet credit risk items such as: confirmed letters of credit, stand-by letters of credit, guarantees and credit commitments (see Note 15). The 2013’s increase in the reserve for losses on off-balance sheet credit risk was primarily due to changes in volume, composition, and risk profile of the portfolio.

 

-31-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

10.Deposits

 

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

 

   March 31,   December 31, 
(In thousands of US$)  2013   2012 
Demand   159,878    131,875 
Up to 1 month   1,541,987    1,194,102 
From 1 month to 3 months   470,123    540,619 
From 3 months to 6 months   137,009    281,120 
From 6 months to 1 year   265,000    152,000 
From 1 year to 2 years   13,000    7,000 
From 2 years to 5 years   4,544    10,544 
    2,591,541    2,317,260 

 

The following table presents additional information about deposits:

 

   March 31,   December 31, 
(In thousands of US$)  2013   2012 
         
Aggregate amounts of time deposits of $100,000 or more   2,431,663    2,185,277 
Aggregate amounts of deposits in offices outside Panama   229,403    229,170 
Interest expense paid to deposits in offices outside Panama   347    1,332 

 

11.Securities sold under repurchase agreements

 

The Bank’s financing transactions under repurchase agreements amounted to $240.8 million and $158.4 million as of March 31, 2013 and December 31, 2012, respectively.

 

During the three months ended March 31, 2013 and 2012, interest expense related to financing transactions under repurchase agreements totaled $0.3 million and $0.8 million, respectively. These expenses are included in the interest expense – borrowings line in the consolidated statements of income.

 

-32-
 

  

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

12.Short-term borrowings

 

The breakdown of short-term borrowings due to financial institutions, together with contractual interest rates, is as follows:

   March 31,   December 31, 
(In thousands of US$)  2013   2012 
Advances from financial institutions:          
At fixed interest rates   1,272,000    1,181,133 
At floating interest rates   264,497    267,890 
Total short-term borrowings   1,536,497    1,449,023 
           
Average outstanding balance during the year   1,353,289    967,629 
           
Maximum balance at any month-end   1,536,497    1,449,023 
           
Range of fixed interest rates on borrowings in U.S. dollars   0.68% to 1.84%    0.75% to 1.92% 
           
Range of floating interest rates on borrowings in U.S. dollars   1.03% to 1.31%    1.06% to 1.99% 
           
Fixed interest rate on borrowings in Euros   -    0.70%
           
Floating interest rate on borrowings in Mexican pesos   5.20%   5.14% to 5.25% 
           
Weighted average interest rate at end of the year   1.38%   1.48%
           
Weighted average interest rate during the year   1.48%   1.79%

 

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

 

(In thousands of US$)  March 31,
2013
   December 31,
2012
 
Currency          
U.S. dollar   1,496,000    1,365,500 
Euro   -    39,633 
Mexican peso   40,497    43,890 
Total   1,536,497    1,449,023 

 

-33-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

13.Borrowings and long-term debt

 

Borrowings consist of long-term and syndicated loans obtained from international banks. Debt instruments consist of Euro-Notes and issuances in Latin America. The breakdown of borrowings and long-term debt (original maturity of more than one year), together with contractual interest rates, is as follows:

 

   March 31,   December 31, 
(In thousands of US$)  2013   2012 
Borrowings:          
At fixed interest rates with due dates from April 2013 to September 2013   732    1,435 
At floating interest rates with due dates from April 2013 to November 2014   1,002,987    1,296,785 
Total borrowings   1,003,719    1,298,220 
Debt:          
At fixed interest rates with due dates from November 2014 to April 2017   452,104    453,373 
At floating interest rates with due dates in March 2015   161,988    153,947 
Total debt   614,092    607,320 
           
Total borrowings and long-term debt outstanding   1,617,811    1,905,540 
           
Average outstanding balance during the year   1,829,983    1,893,580 
           
Maximum outstanding balance at any month-end   1,893,149    2,152,584 
           
Fixed interest rates on debt in U.S. dollars   3.75%   3.75%
           
Range of floating interest rates on borrowings and debt in U.S. dollars   0.60% to 2.40%    0.68% to 2.40% 
           
Range of fixed interest rates on borrowings in Mexican pesos   7.60% to 9.90%    7.60% to 9.90% 
           
Range of floating interest rates on borrowings and debt in Mexican pesos   4.98% to 5.83%    5.50% to 6.34% 
           
Fixed interest rate on debt in Peruvian nuevos soles   6.50%   6.50%
           
Weighted average interest rate at the end of the period   2.93%   2.16%
           
Weighted average interest rate during the period   2.88%   2.74%

 

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

 

(In thousands of US$)  March 31,
2013
   December 31,
2012
 
Currency          
U.S. dollar   1,293,698    1,518,592 
Mexican peso   276,623    338,760 
Peruvian nuevo sol   47,490    48,188 
Total   1,617,811    1,905,540 

 

-34-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

The Bank's funding activities include: (i) Euro Medium Term Note Program (“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 initials in Spanish), for an authorized aggregate principal amount of 10 billion Mexican pesos with maturities from one day to 30 years; (iii) a Program in Peru to issue corporate bonds under a private offer in Peruvian nuevos soles (“PEN”), offered exclusively to institutional investors domiciled in the Republic of Peru, for an maximum aggregate limit of the equivalent of $300 million, with different maturities and interest rate structures.

 

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, 2013, the Bank was in compliance with all covenants.

 

The future remaining maturities of long-term debt and borrowings outstanding as of March 31, 2013, are as follows:

 

(In thousands of US$)    
Due in:  Outstanding 
     
2013   111,467 
2014   939,742 
2015   161,988 
2016   - 
2017   404,614 
    1,617,811 
-35-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

14.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:

 

(In thousands of US$, except per share amounts)  Three months ended March 31, 
   2013   2012 
Net income from continuing operations attributable to Bladex stockholders for both basic and diluted EPS   16,321    35,525 
Net loss from discontinued operations   (27)   (304)
Net income attributable to Bladex stockholders for both basic and diluted EPS   16,294    32,221 
           
Basic earnings per share from continuing operations   0.43    0.87 
Diluted earnings per share from continuing operations   0.43    0.87 
           
Basic income (loss) per share from discontinued operations   (0.00)   (0.01)
Diluted income (loss) per share from discontinued operations   (0.00)   (0.01)
           
Basic earnings per share   0.43    0.86 
Diluted earnings per share   0.43    0.86 
           
Weighted average common shares outstanding - applicable to basic EPS   38,218    37,281 
Effect of dilutive securities (1):          
Stock options and restricted stock units plans   95    285 
Adjusted weighted average common shares outstanding applicable to diluted EPS   38,313    37,566 

 

(1)As of March 31, 2013 and 2012, the computation of earnings per share did not exclude any weighted-average options.

 

15.Financial instruments with off-balance sheet credit risk

 

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

 

   March 31,   December 31, 
(In thousands of US$)  2013   2012 
Confirmed letters of credit   66,806    106,415 
Stand-by letters of credit and guarantees - Commercial risk   44,569    25,167 
Credit commitments   268,085    103,294 
    379,460    234,876 

 

-36-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

As of March 31, 2013, the remaining maturity profile of the Bank’s outstanding financial instruments with off-balance sheet credit risk is as follows:

 

(In thousands of US$)    
Maturities  Amount 
Within 1 year   347,753 
From 1 to 2 years   1,000 
From 2 to 5 years   30,069 
After 5 years   638 
    379,460 

 

As of March 31, 2013 and December 31, 2012 the breakdown of the Bank’s off-balance sheet exposure by country risk is as follows:

 

(In thousands of US$)  March 31,   December 31, 
Country:  2013   2012 
Bolivia   1,220    820 
Brazil   23,000    23,630 
Chile   157,839    6,084 
Colombia   29,508    9,098 
Costa Rica   1,000    1,000 
Dominican Republic   1,540    1,535 
Ecuador   55,548    79,760 
El Salvador   475    625 
Guatemala   177    180 
Honduras   585    562 
Mexico   15,640    27,289 
Panama   71,929    58,219 
Peru   9,902    2,843 
Venezuela   11,097    23,231 
    379,460    234,876 

 

Letters of credit and guarantees

The Bank, on behalf of its client 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 credit, the Bank will. The Bank provides stand-by letters of credit and guarantees, which are issued on behalf of institutional customers in connection with financing between its customers 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 customer’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 customers. 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.

 

-37-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

16.Derivative financial instruments for hedging purposes

 

As of March 31, 2013 and December 31, 2012, quantitative information on derivative financial instruments held for hedging purposes is as follows:

 

   March 31, 2013   December 31, 2012 
   Nominal   Fair Value (1)   Nominal   Fair Value (1) 
(In thousands of US$)  Amount   Asset   Liability   Amount   Asset   Liability 
Fair value hedges:                              
Interest rate swaps   480,000    8,264    5,305    480,000    8,319    6,600 
Cross-currency interest rate swaps   237,435    10,704    626    236,866    3,525    4,665 
Cash flow hedges:                              
Cross-currency interest rate swaps   41,911    7,157    67    42,001    7,333    23 
Forward foreign exchange   55,107    10    1,717    75,733    62    411 
Net investment hedges:                              
Forward foreign exchange   13,199    105    -    6,196    -    48 
Total   827,652    26,240    7,715    840,796    19,239    11,747 
                               
Net gain (loss) on the ineffective portion of hedging activities (2)   (516)            440 

 

(1) The fair value of assets and liabilities is reported within the derivative financial instruments used for hedging - receivable and payable lines in the consolidated balance sheets, respectively.

(2) Gains and losses resulting from ineffectiveness and credit risk in hedging activities are reported within the derivative financial instruments and hedging line in the consolidated statements of income.

 

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

 

Three months ended March 31, 2013
(In thousands of US$)  Gain (loss)
recognized in OCI
(effective portion)
   Classification of gain (loss)  Gain (loss) reclassified
from accumulated 
OCI to the 
statements of income 
(effective portion)
   Gain (loss)
recognized on
derivatives
(ineffective portion)
 
Derivatives – cash
flow hedge
                  
Cross-currency interest rate swaps   (439)  Gain (loss) on foreign currency exchange   -    - 
                   
Forward foreign exchange   (1,657)  Interest income – loans   (21)   - 
        Interest expense - borrowings   31    - 
        Gain (loss) on foreign currency exchange   (288)   - 
Total   (2,096)      (278)   - 
                   
Derivatives – net investment hedge                  
Forward foreign exchange   (112)  Gain (loss) on foreign currency exchange   -    - 
Total   (112)      -    - 

 

-38-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Three months ended March 31, 2012
(In thousands of US$)  Gain (loss)
recognized in OCI
(effective portion)
   Classification of gain (loss)  Gain (loss) reclassified
from accumulated
OCI to the
statements of income
(effective portion)
   Gain (loss)
recognized on
derivatives
(ineffective portion)
 
Derivatives – cash flow hedge                  
Interest rate swaps   217              
                   
Cross-currency interest rate swaps   979   Gain (loss) on foreign currency exchange   398    - 
                   
Forward foreign exchange   (1,056)  Interest income – loans   (71)   - 
        Interest expense - borrowings   256    -
        Gain (loss) on foreign currency exchange   343    - 
Total   140       926    - 
                   
Derivatives – net investment hedge                  
Forward foreign exchange   (206)  Gain (loss) on foreign currency exchange   -    - 
Total   (206)      -    - 

 

The Bank recognized in earnings 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:

 

Three months ended March 31, 2013
(In thousands of US$)  Classification in statements of
income
  Gain (loss) on
derivatives
   Gain (loss) on
hedged item
   Net gain
(loss)
 
Derivatives -  fair value hedge                  
Interest rate swaps  Interest income – available-for-sale   (753)   1,082    329 
   Interest income – loans   (1)   14    13 
   Interest expense – borrowings and debt   684    (4,047)   (3,363)
                   
   Derivative financial instruments and hedging (ineffectiveness)   (741)   716    (25)
                   
Cross-currency interest rate swaps  Interest  income – loans   (98)   211    113 
   Interest expense – borrowings and debt   1,929    (3,356)   (1,427)
                   
   Derivative financial instruments and hedging (ineffectiveness)   6,431    (6,922)   (491)
   Gain (loss) on foreign currency exchange   (429)   458    29 
       7,022    (11,844)   (4,822)

 

-39-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Three months ended March 31, 2012
(In thousands of US$)  Classification in statements of
income
  Gain (loss) on
derivatives
   Gain (loss) on
hedged item
   Net gain
(loss)
 
Derivatives -  fair value hedge                  
Interest rate swaps  Interest income – available-for-sale   (824)   1,235    411 
                   
   Derivative financial instruments and hedging (ineffectiveness)   440    -    440 
   Interest  income – loans   (9)   14    5 
   Interest expense – borrowings and debt   1,566    (2,992)   (1,426)
   Gain (loss) on foreign currency exchange   15,997    (16,287)   (290)
       17,170    (18,030)   (860)

 

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. The Bank also engages in certain foreign exchange trades to serve customers’ transaction needs and to manage the 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 1.64 years.

 

The Bank estimates that approximately $52 thousand of losses reported in OCI as of March 31, 2013 related to forward foreign exchange contracts are expected to be reclassified into interest income as an adjustment to yield of hedged loans during the rest of 2013.

 

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. Forward foreign exchange 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.

 

-40-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

In addition to hedging derivative financial instruments, the Bank has derivative financial instruments held for trading purposes that have been disclosed in Note 5.

 

17.Accumulated other comprehensive income (loss)

 

As of March 31, 2013 and 2012 the breakdown of accumulated other comprehensive income (loss) related to investment securities available-for-sale and derivative financial instruments, and foreign currency translation is as follows:

 

(In thousands of US$)  Securities
available-
for-sale
   Derivative
financial
instruments
   Foreign currency
translation
adjustment,
net of hedges
   Total 
Balance as of January 1, 2013   933    (368)   (1,295)   (730)
Net unrealized gains (loss) arising from the period   (492)   233    -    (259)
Reclassification adjustment for gains (loss) included in net income (1)   (117)   165    -    48 
Foreign currency translation adjustment, net   -    -    (1)   (1)
Other comprehensive income (loss) from the period   (609)   398    (1)   (212)
Balance as of March 31, 2013   324    30    (1,296)   (942)
                     
Balance as of January 1, 2012   (1,728)   (640)   (744)   (3,112)
Net unrealized gains arising from the period   7,710    140    -    7,850 
Reclassification adjustment for (loss) included in net income (1)   (3,841)   (926)   -    (4,767)
Foreign currency translation adjustment, net   -    -    (92)   (92)
Other comprehensive income (loss) from the period   3,869    (786)   (92)   2,991 
Balance as of March 31, 2012   2,141    (1,426)   (836)   (121)

 

(1) Reclassification adjustments include amounts recognized in net income during the current period that had been part of other comprehensive income (loss) in this and previous periods.

 

The following table presents amounts reclassified from other comprehensive income to the net income of the period:

 

Three months ended March 31, 2013
(In thousands of US$)       
Details about accumulated other
comprehensive income components
  Amount reclassified
form accumulated other
comprehensive income
   Affected line item in the statement 
where net income is presented
Unrealized gains (losses) on securities available-for-sale:        
    1   Interest income – securities available-for-sale
    116   Net gain on sale of securities available-for-sale
    117    
Gain (loss) on derivative financial instruments:        
Forward foreign exchange   (21)  Interest income - loans
    31   Interest expense - borrowings
    (175)  Net gain (loss) on foreign currency exchange
    (165)   

 

-41-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Three months ended March 31, 2012
(In thousands of US$)       
Details about accumulated other
comprehensive income components
  Amount reclassified
form accumulated other
comprehensive income
   Affected line item in the statement 
where net income is presented
Unrealized gains (losses) on securities available-for-sale:        
    3,841   Net gain on sale of securities available-for-sale
         
Gain (loss) on derivative financial instruments:        
Forward foreign exchange   (71)  Interest income - loans
    256   Interest expense - borrowings
    741   Net gain (loss) on foreign currency exchange
    926    

 

18.Offsetting of financial assets and liabilities

 

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

 

a)Derivative financial instruments - assets

 

March 31, 2013
(In thousands of US$)              Gross amounts not offset in the
balance sheet
    
Description  Gross amounts
of assets
   Gross amounts
offset in the
balance sheet
   Net amount of assets
presented in the
 balance sheet
   Financial
instruments
  Cash
collateral
received
   Net
amount
 
                        
Derivative financial instruments   26,294    (16)   26,278  -   (2,950)   23,328 

  

December 31, 2012
(In thousands of US$)              Gross amounts not offset in the
balance sheet
    
Description  Gross amounts
of assets
   Gross amounts
offset in the
balance sheet
   Net amount of assets
presented in the
balance sheet
   Financial
instruments
  Cash
collateral
received
   Net
amount
 
                        
Derivative financial instruments   19,385    (27)   19,358  -   (2,950)   16,408 

 

 

-42-
 

  

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

 

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 balance sheet as of March 31, 2013 and December 31, 2012:

 

(In thousands of US$)  March 31, 2013   December 31, 2012 
Description  Gross
amounts of
assets
   Gross
amounts
offset in the
balance sheet
   Net amount
of assets
presented in
the balance
sheet
   Gross
amounts
of assets
   Gross
amounts
offset in the
balance sheet
   Net amount of
assets
presented in
the balance
sheet
 
Derivative financial instruments:                              
Trading assets   54    (16)   38    146    (27)   119 
Derivative financial instruments used for hedging - receivable   26,240    -    26,240    19,239    -    19,239 
Total derivative financial instruments   26,294    (16)   26,278    19,385    (27)   19,358 

 

b)Financial liabilities and derivative financial instruments - liabilities

 

March 31, 2013
(In thousands of US$)              Gross amounts not offset in the
balance sheet
     
Description  Gross amounts
of liabilities
   Gross amounts
offset in the
balance sheet
   Net amount of
liabilities
presented in the
balance sheet
   Financial
instruments
   Cash
collateral
pledged
   Net
amount
 
                         
Securities sold under repurchase agreements   240,827    -    240,827    (239,297)   (1,530)   - 
 
Derivative financial instruments
   15,602    (16)   15,586    -    (2,010)   13,576 
Total   256,429    (16)   256,413    (239,297)   (3,540)   13,576 

 

December 31, 2012
(In thousands of US$)              Gross amounts not offset in the
balance sheet
     
Description  Gross amounts
of liabilities
   Gross amounts
offset in the
balance sheet
   Net amount of
liabilities
presented in the
balance sheet
   Financial
instruments
   Cash
collateral
pledged
   Net
amount
 
                         
Securities sold under repurchase agreements   158,374    -    158,374    (157,705)   (669)   - 
Derivative financial instruments   44,078    (27)   44,051    -    (10,849)   33,202 
Total   202,452    (27)   202,425    (157,705)   (11,518)   33,202 

 

-43-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

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 balance sheet as of March 31, 2013 and December 31, 2012:

 

(In thousands of US$)  March 31, 2013   December 31, 2012 
Description  Gross
amounts of
liabilities
   Gross
amounts
offset in the
balance sheet
   Net amount of
liabilities
presented in the
balance sheet
   Gross
amounts of
liabilities
   Gross
amounts
offset in the
balance sheet
   Net amount of
liabilities
presented in the
balance sheet
 
                         
Securities sold under repurchase agreements   240,827    -    240,827    158,374    -    158,374 
Derivative financial instruments:                              
Trading liabilities   7,887    (16)   7,871    32,331    (27)   32,304 
Derivative financial instruments used for hedging - payable   7,715    -    7,715    11,747    -    11,747 
Total derivative financial instruments   15,602    (16)   15,586    44,078    (27)   44,051 

 

19.Fair value of financial instruments

 

The Bank determines the fair value of its financial instruments using the fair value hierarchy established in ASC Topic 820 - Fair Value Measurements and Disclosure, which requires the Bank to maximize the use of observable inputs (those that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market information obtained from sources independent of the reporting entity) and to minimize the use of unobservable inputs (those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances) when measuring fair value. Fair value is used on a recurring basis to measure assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurring basis to evaluate assets and liabilities for impairment or for disclosure purposes. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Bank uses some valuation techniques and assumptions when estimating fair value. The Bank applied the following fair value hierarchy:

 

Level 1 – Assets or liabilities for which an identical instrument is traded in an active market, such as publicly-traded instruments or futures contracts.

 

Level 2 – Assets or liabilities valued based on observable market data for similar instruments, quoted prices in markets that are not active; or other observable inputs that can be corroborated by observable market data for substantially the full term of the asset or liability.

-44-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Level 3 – Assets or liabilities for which significant valuation assumptions are not readily observable in the market; instruments measured based on the best available information, which might include some internally-developed data, and considers risk premiums that a market participant would require.

 

When determining the fair value measurements for assets and liabilities that are required or permitted to be recorded at fair value, the Bank considers the principal or most advantageous market in which it would transact and considers the assumptions that market participants would use when pricing the asset or liability. When possible, the Bank uses active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Bank uses observable market information for similar assets and liabilities. However, certain assets and liabilities are not actively traded in observable markets and the Bank must use alternative valuation techniques to determine the fair value measurement. The frequency of transactions, the size of the bid-ask spread and the size of the investment are factors considered in determining the liquidity of markets and the relevance of observed prices in those markets.

 

When there has been a significant decrease in the volume or level of activity for a financial asset or liability, the Bank uses the present value technique which considers market information to determine a representative fair value in usual market conditions.

 

A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring basis, including the general classification of such assets and liabilities under the fair value hierarchy is presented below:

 

Trading assets and liabilities and securities available-for-sale

 

Trading assets and liabilities are carried at fair value, which is based upon quoted prices when available, or if quoted market prices are not available, on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security.

 

Securities available for sale are carried at fair value, based on quoted market prices when available, or if quoted market prices are not available, based on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security.

 

When quoted prices are available in an active market, available-for-sale securities and trading assets and liabilities are classified in level 1 of the fair value hierarchy. If quoted market prices are not available or they are available in markets that are not active, then fair values are estimated based upon quoted prices of similar instruments, or where these are not available, by using internal valuation techniques, principally discounted cash flows models. Such securities are classified within level 2 of the fair value hierarchy.

 

Investment fund

The Fund invests in trading assets and liabilities that are carried at fair value, which is based upon quoted market prices when available. For financial instruments for which quoted prices are not available, the Fund uses independent valuations from pricing providers that use their own proprietary valuation models that take into consideration discounted expected cash flows, using market rates commensurate with the credit quality and maturity of the security. These prices are compared to independent valuations from counterparties.

 

-45-
 

  

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

  

The Fund is not traded in an active market and, therefore, representative market quotes are not readily available. Its fair value is adjusted on a monthly basis based on its financial results, its operating performance, its liquidity and the fair value of its long and short investment portfolio that are quoted and traded in active markets. Such investment is classified within level 2 of the fair value hierarchy.

 

Derivative financial instruments

The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. Exchange-traded derivatives that are valued using quoted prices are classified within level 1 of the fair value hierarchy.

 

For those derivative contracts without quoted market prices, fair value is based on internal valuation techniques using inputs that are readily observable and that can be validated by information available in the market. The principal technique used to value these instruments is the discounted cash flows model and the key inputs considered in this technique include interest rate yield curves and foreign exchange rates. These derivatives are classified within level 2 of the fair value hierarchy.

 

The fair value adjustments applied by the Bank to its derivative carrying values include credit valuation adjustments (“CVA”), which are applied to over-the-counter derivative instruments, in which the base valuation generally discounts expected cash flows using the London Interbank Offered Rate (“LIBOR”) interest rate curves. Because not all counterparties have the same credit risk as that implied by the relevant LIBOR curve, a CVA is necessary to incorporate the market view of both, counterparty credit risk and the Bank’s own credit risk, in the valuation.

 

Own-credit and counterparty CVA is determined using a fair value curve consistent with the Bank’s or counterparty credit rating. The CVA is designed to incorporate a market view of the credit risk inherent in the derivative portfolio. However, most of the Bank’s derivative instruments are negotiated bilateral contracts and are not commonly transferred to third parties. Derivative instruments are normally settled contractually, or if terminated early, are terminated at a value negotiated bilaterally between the counterparties. Therefore, the CVA (both counterparty and own-credit) may not be realized upon a settlement or termination in the normal course of business. In addition, all or a portion of the CVA may be reversed or otherwise adjusted in future periods in the event of changes in the credit risk of the Bank or its counterparties or due to the anticipated termination of the transactions.

 

Transfer of financial assets

Gains or losses on sale of loans depend in part on the carrying amount of the financial assets involved in the transfer, and its fair value at the date of transfer. The fair value of instruments is determined based upon quoted market prices when available, or are based on the present value of future expected cash flows using information related to credit losses, prepayment speeds, forward yield curves, and discounted rates commensurate with the risk involved.

 

-46-
 

  

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Financial instruments measured at fair value on a recurring basis by caption on the consolidated balance sheets using the fair value hierarchy are described below:

  

   March 31, 2013 
(In thousands of US$) 

 

Quoted market
prices in an active
market

(Level 1)

  

Internally developed

models with significant

observable market

information

(Level 2)

  

Internally developed

models with

significant unobservable

market information

(Level 3)

  

 

Total carrying

value in the

consolidated

balance sheets

 
Assets                    
Trading assets                    
Sovereign bonds   5,046    -    -    5,046 
Cross-currency  swaps   30    -    -    30 
Future contracts   8    -    -    8 
Total trading assets   5,084    -    -    5,084 
Securities available-for-sale                    
Corporate debt   84,479    -    -    84,479 
Sovereign debt   214,731    -    -    214,731 
Total securities available-for-sale   299,210    -    -    299,210 
Investment fund   -    105,544    -    105,544 
Derivative financial instruments used for hedging – receivable                    
Interest rate swaps   -    8,264    -    8,264 
Cross-currency interest rate swaps   -    17,861    -    17,861 
Forward foreign exchange   -    115    -    115 
Total derivative financial instruments used for hedging – receivable   -    26,240    -    26,240 
Total assets at fair value   304,294    131,784    -    436,078 
                     
Liabilities                    
Trading liabilities                    
Interest rate swaps   -    79    -    79 
Cross-currency interest rate swaps   -    7,792    -    7,792 
Total trading liabilities   -    7,871    -    7,871 
Derivative financial instruments used for hedging – payable                    
Interest rate swaps   -    5,305    -    5,305 
Cross-currency interest rate swaps   -    693    -    693 
Forward foreign exchange   -    1,717    -    1,717 
Total derivative financial instruments used for hedging - payable   -    7,715    -    7,715 
Total liabilities at fair value   -    15,586    -    15,586 

 

-47-
 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

   December 31, 2012 
(In thousands of US$) 

 

Quoted market

prices in an active

market

(Level 1)

  

Internally developed

models with significant

observable market

information

(Level 2)

  

Internally developed

models with

significant unobservable

market information

(Level 3)

  

 

Total carrying

value in the

consolidated

balance sheets

 
Assets                    
Trading assets                    
Sovereign bonds   5,146    -    -    5,146 
Cross-currency swaps   49    -    -    49 
Forward foreign exchange   -    50    -    50 
Future contracts   20    -    -    20 
Total trading assets   5,215    50    -    5,265 
Securities available-for-sale                    
Corporate debt   17,386    -    -    17,386 
Sovereign debt   165,355    276    -    165,631 
Total securities available-for-sale   182,741    276    -    183,017 
Investment fund   -    105,888    -    105,888 
Derivative financial instruments used for hedging - receivable                    
Interest rate swaps   -    8,319    -    8,319 
Cross-currency interest rate swaps   -    10,858    -    10,858 
Forward foreign exchange   -    62    -    62 
Total derivative financial instruments used for hedging - receivable   -    19,239    -    19,239 
Total assets at fair value   187,956    125,453    -    313,409 
                     
Liabilities                    
Trading liabilities                    
Interest rate swaps   -    100    -    100 
Cross-currency interest rate swaps   

-

    32,182    

-

    32,182 
Forward foreign exchange   -    22    -    22 
Total trading liabilities   -    32,304    -    32,304 
Derivative financial instruments used for hedging – payable                    
Interest rate swaps   -    6,600    -    6,600 
Cross-currency interest rate swaps   -    4,688    -    4,688 
Forward foreign exchange   -    459    -    459 
Total derivative financial instruments used for hedging - payable   -    11,747    -    11,747 
Total liabilities at fair value   -    44,051    -    44,051 

 

ASC Topic 825 - Financial Instruments requires disclosure of fair value of financial instruments including those assets and liabilities for which the Bank did not elect the fair value option. Bank’s management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are limitations in any estimation technique. The estimated fair value amounts have been measured as of their respective period-end. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each period-end.

 

-48-
 

 

 

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

The following information should not be interpreted as an estimate of the fair value of the Bank. Fair value calculations are only provided for a limited portion of the Bank’s financial assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparison of fair value information of the Bank and other companies may not be meaningful for comparative analysis.

 

The following methods and assumptions were used by the Bank’s management in estimating the fair values of financial instruments whose fair value are not measured on a recurring basis:

 

Financial instruments with carrying value that approximates fair value

 

The carrying value of certain financial assets, including cash and due from banks, interest-bearing deposits in banks, customers’ liabilities under acceptances, accrued interest receivable and certain financial liabilities including customer’s demand and time deposits, securities sold under repurchase agreements, accrued interest payable, and acceptances outstanding, as a result of their short-term nature, are considered to approximate fair value.

 

Securities held-to-maturity

 

The fair value has been based upon current market quotations, where available. If quoted market prices are not available, fair value has been estimated based upon quoted price of similar instruments, or where these are not available, on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security.

 

Loans

 

The fair value of the loan portfolio, including impaired loans, is estimated by discounting future cash flows using the current rates at which loans would be made to borrowers with similar credit ratings and for the same remaining maturities, considering the contractual terms in effect as of December 31 of the relevant period.

 

Borrowings and short and long-term debt

 

The fair value of short-term and long-term debt and borrowings is estimated using discounted cash flow analysis based on the current incremental borrowing rates for similar types of borrowing arrangements, taking into account the changes in the Bank’s credit margin.

 

Commitments to extend credit, stand-by letters of credit, and financial guarantees written

 

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements which consider the counterparty risks; which fair value is calculated based on the present value of the premium to be received or a specific allowance for off-balance sheet credit contingencies, whichever is greater.

  

-49-
 

  

Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

The following table provides information on the carrying value and estimated fair value of the Bank’s financial instruments that are not measured on a recurring basis:

  

(In thousands of US$)  March 31, 2013 
   Carrying
Value
   Fair 
Value
   Quoted market
prices in an
active market
(Level 1)
   Internally developed
models with
significant
 observable market
information

(Level 2)
   Internally developed
models with significant
unobservable market
information
(Level 3)
 
Financial assets:                         
Instruments with carrying value that approximates fair value   619,883    619,883    -    619,833          - 
                          
Securities held-to-maturity   39,237    39,228    21,502    17,726    - 
Loans, net of allowance (1)   5,772,395    5,919,497    -    5,919,497    - 
                          
Financial liabilities:                         
Instruments with carrying value that approximates fair value   2,858,951    2,859,167    -    2,859,167    - 
                          
Short-term borrowings   1,536,497    1,540,031    -    1,540,031    - 
Borrowings and long-term debt   1,617,811    1,645,324    -    1,645,324    - 
Commitments to extend credit, standby letters of credit, and financial guarantees written   7,502    7,285    -    7,285    - 

 

(1) The carrying value of loans is net of the Allowance for loan losses of $70.8 million for March 31, 2013.

 

(In thousands of US$)  December 31, 2012 
   Carrying
Value
   Fair 
Value
   Quoted market
prices in an
active market
(Level 1)
   Internally developed
models with
significant
 observable market
information

(Level 2)
   Internally developed
models with significant
unobservable market
information
(Level 3)
 
                     
Financial assets:                         
Instruments with carrying value that approximates fair value   746,006    746,006    -    746,006          - 
                          
Securities held-to-maturity   34,113    34,149    19,444    14,705    - 
Loans, net of allowance (1)   5,635,480    5,784,172    -    5,784,172    - 
                         
Financial liabilities:                         
Instruments with carrying value that approximates fair value   2,494,734    2,494,824    -    2,494,824    - 
                          
Short-term borrowings   1,449,023    1,453,159    -    1,453,159    - 
Borrowings and long-term debt   1,905,540    1,922,544    -    1,922,544    - 
Commitments to extend credit, standby letters of credit, and financial guarantees written   5,781    4,841    -    4,841    - 

  

(1) The carrying value of loans is net of the Allowance for loan losses of $73.0 million for December 31, 2012.

 

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

20.Litigation

 

Bladex is not engaged in any litigation that is material to the Bank’s business or, to the best of the knowledge of the Bank’s management that is likely to have an adverse effect on its business, financial condition or results of operations.

 

21.Capital adequacy

 

The Banking Law in the Republic of Panama requires banks with general banking license to maintain a total capital adequacy index that shall not be lower than 8% of total assets and off-balance sheet irrevocable contingency transactions, weighted according to their risk; and primary capital equivalent that shall not be less than 4% of its assets and off-balance sheet irrevocable contingency transactions, weighted according to their risk. As of March 31, 2013, the Bank’s capital adequacy ratio is 15.4% which is in compliance with the capital adequacy ratios required by the Banking Law in the Republic of Panama.

  

22.Business segment information

 

The Bank’s activities are operated and managed in two segments, Commercial and Treasury. The Asset Management unit was discontinued since the fourth quarter of 2012. The segment information reflects this operational and management structure, in a manner consistent with the requirements outlined in ASC Topic 280 - Segment Reporting. The segment results are determined based on the Bank’s managerial accounting process, which assigns consolidated balance sheets, revenue and expense items to each reportable division on a systematic basis.

 

In 2011, the Bank made the following changes in the measurement methods used to determine segment profit or loss. Current interest expense allocation methodology reflects allocated funding on a matched-funded basis, net of risk adjusted capital by business segment. Current operating expense allocation methodology allocates overhead expenses based on resource consumption by business segment. Prior methodology allocated interest expenses and overhead operating expenses based on the segments average portfolio.

 

The Bank incorporates net operating income(3) by business segment in order to disclose the revenue and expense items related to its normal course of business, segregating from the net income, the impact of reversals of reserves for loan losses and off-balance sheet credit risk, and recoveries on assets. In addition, the Bank’s net interest income represents the main driver of net operating income; therefore, the Bank presents its interest-earning assets by business segment, to give an indication of the size of business generating net interest income. Interest-earning assets also generate gains and losses on sales, such as for securities available-for-sale and trading assets and liabilities, which are included in net other income, in the Treasury segment. The Bank also discloses its other assets and contingencies by business segment, to give an indication of the size of business that generates net fees and commissions, also included in net other income, in the Commercial Segment.

 

The Bank believes that the presentation of net operating income provides important supplementary information to investors regarding financial and business trends relating to the Bank’s financial condition and results of operations. These measures exclude the impact of reversals (provisions) for loan losses and reversals (provisions) for losses on off-balance sheet credit risk (together referred to as “reversal (provision) for credit losses”) which Bank’s management considers distort trend analysis.

 

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

Net operating income disclosed by the Bank should not be considered a substitute for, or superior to, financial measures calculated differently from similar measures used by other companies. These measures, therefore, may not be comparable to similar measurements used by other companies.

 

Commercial incorporates all of the Bank’s financial intermediation and fees generated by the commercial portfolio. The commercial portfolio includes book value of loans, selected deposits placed, acceptances and contingencies. Operating income from the Commercial Segment includes net interest income from loans, fee income and allocated operating expenses.

 

Treasury incorporates deposits in banks and all of the Bank’s trading assets, securities available-for-sale and held-to-maturity, and the balance of the Investment Fund and the assets of the Brazilian Fund. Operating income from the Treasury Segment includes net interest income from deposits with banks, trading securities and securities available-for-sale and held-to-maturity, net interest margin related to the Feeder’s participation in the net interest margin of the Fund, derivative and hedging activities, net gain from investment fund trading, net gain from trading securities, net gain on sale of securities available-for-sale, net loss on foreign currency exchange, and allocated income and operating expenses. Operating income from this segment also includes the net interest margin from the Brazilian Fund, as well as net gain from trading securities, fee income, and allocated operating expenses from the Brazilian Fund. The Treasury segment information for 2012 includes the results of the Investment Fund and the Brazilian Fund for those years, in order to conform to the presentation of this segment in 2013.

 

The following table provides certain information regarding the Bank’s continuing operations by segment:

  

Business Segment Analysis (1)

 

   March 31, 
(In thousands of US$)  2013   2012 
COMERCIAL          
Interest income   46,529    44,478 
Interest expense   (19,144)   (17,662)
Net interest income   27,385    26,816 
Net other income (2)   2,836    2,972 
Operating expenses   (9,850)   (8,498)
Net operating income (3)   20,371    21,290 
Reversal of provision (provision) for loan and off-balance sheet credit losses   (266)   4,411 
Net income attributable to Bladex stockholders   20,105    25,701 
           
Commercial assets and contingencies (end of period balances):          
Interest-earning assets (4 y 6)   5,843,203    5,086,665 
Other assets and contingencies (5)    383,058    351,576 
Total interest-earning assets, other assets and contingencies   6,226,261    5,438,241 
TREASURY          
Interest income   1,876    3,901 
Interest expense   (3,241)   (1,087)
Net interest income   (1,365)   2,814 
Net other income (2)   1,195    8,296 
Operating expenses   (3,602)   (4,148)
Net operating income (3)   (3,772)   6,962 
Net income (loss)   (3,772)   6,962 
           
Net income attributable to the redeemable noncontrolling interest   12    140 
Net income (loss) attributable to Bladex stockholders   (3,784)   6,822 
           
Treasury assets and contingencies (end of period balances):          
Interest-earning assets (6)    1,030,115    945,841 
Third party participation   (1,896)   (6,422)
Total interest-earning assets and third participation   1,028,219    939,419 

 

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

   March 31, 
(In thousands of US$)  2013   2012 
TOTAL          
Interest income   48,404    48,379 
Interest expense   (22,385)   (18,749)
Net interest income   26,019    29,630 
Net other income (2)   4,032    11,268 
Operating expenses   (13,452)   (12,644)
Net operating income (3)   16,599    28,254 
Reversal of provision (provision) for loans and off-balance sheet credit losses   (266)   4,411 
Net income – business segment   16,333    32,665 
Net income (loss) attributable to the redeemable noncontrolling interest   12    140 
Net income attributable to Bladex stockholders – business segment   16,321    32,525 
Discontinued operations (Note 3)   (27)   (304)
Net income attributable to Bladex stockholders   16,294    32,221 
           
Total assets and contingencies (end of period balances):          
Interest-earning assets (4 y 6)   6,873,318    6,032,506 
Other assets and contingencies (5)   383,058    351,576 
Third party participation   (1,896)   (6,422)
Total interest-earning assets, other assets and contingencies   7,254,480    6,377,660 

 

(1)The numbers set out in these tables have been rounded and accordingly may not total exactly.
(2)Net other income excludes reversals (provisions) for loans and off-balance sheet credit losses.

Reconciliation of Net other income:          
Net other income – business segment   4,032    11,268 
(Provision) reversal  of provision for losses on off-balance sheet credit risk   (2,437)   903 
Net other income  – consolidated financial statements   1,595    12,171 

 

(1)Net operating income refers to net income excluding reversals (provisions) for loans and off-balance sheet credit losses and recoveries on assets.
(2)Includes selected deposits placed, and loans, net of unearned income and deferred loan fees.
(3)Includes customers’ liabilities under acceptances, letters of credit and guarantees covering commercial and country risk, and credit commitments.
(4)Includes cash and due from banks, interest-bearing deposits with banks, securities available for sale and held to maturity, trading securities and the balance of the Investment Fund.

 

  

March 31,

2013

  

March 31,

2012

 
Reconciliation of Total assets:          
Interest-earning assets – business segment   6,873,318    6,032,506 
Allowance for loan losses   (70,808)   (79,210)
Customers’ liabilities under acceptances   2,728    2,040 
Accrued interest receivable   36,115    38,988 
Premises and equipment   12,194    6,225 
Derivative financial instruments used for hedging - receivable   26,240    9,895 
Other assets   14,055    19,872 
Total assets  – consolidated financial statements   6,893,842    6,030,316 

 

Geographic information is as follows:

 

   March 31, 2013 
(In thousands of US$)  Panama   Brazil   United
States of
America
   Cayman
Islands
   Total 
                     
Interest income   44,243    33    4,096    32    48,404 
Interest expense   (22,008)   -    (347)   (30)   (22,385)
Net interest income   22,235    33    3,749    2    26,019 
                          
Long-lived assets:                         
Premises and equipment, net   11,816    7    371    -    12,194 

 

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Banco Latinoamericano de Comercio Exterior, S. A.
and Subsidiaries
 
Notes to consolidated financial statements (Unaudited)

 

   March 31, 2012 
(In thousands of US$)  Panama   Brazil   United
States of
America
   Cayman
Islands
   Total 
                     
Interest income   43,891    67    3,885    536    48,379 
Interest expense   (18,424)   -    (311)   (14)   (18,749)
Net interest income   25,467    67    3,574    522    29,630 
                          
Long-lived assets:                         
Premises and equipment, net   5,711    10    504    -    6,225 

 

   December 31, 2012 
(In thousands of US$)  Panama   Brazil   United
States of
America
   Cayman
Islands
   Total 
                     
Long-lived assets:                         
Premises and equipment, net   12,397    8    403    -    12,808 

 

3.Subsequent events

 

On April 2, 2013, Bladex announced the finalization of its definitive agreement for the sale of its Asset Management Unit. The Asset Management Unit is being sold to Alpha4X Asset Management, LLC (“Alpha4X”), a newly-formed company that is majority-owned by former members of the Asset Management Unit. Bladex will continue to invest in the fund under Alpha4X’s management in its role as anchor investor for a period of up to three years.

 

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