Report of Foreign Issuer (6-k)

Date : 05/16/2019 @ 10:04AM
Source : Edgar (US Regulatory)
Stock : Banco Latinoamericano de Comercio Exterior SA (BLX)
Quote : 21.32  0.19 (0.90%) @ 1:00AM
After Hours
Last Trade
Last $ 21.32 ◊ 0.00 (0.00%)

Report of Foreign Issuer (6-k)

 

 

 

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, 2019

 

Commission File Number 1-11414

 

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

(Exact name of Registrant as specified in its Charter)

 

FOREIGN TRADE BANK OF LATIN AMERICA, INC.

(Translation of Registrant’s name into English)

 

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

P.O. Box 0819-08730

Panama City, Republic of Panama

(Address of Registrant’s Principal Executive Offices)

 

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

 

Form 20-F x Form 40-F ¨

 

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

 

Yes ¨ No x

 

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

 

Yes ¨ No x

 

 

 

 

 

 

SIGNATURES

 

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

 

Date: May 15, 2019

 

  FOREIGN TRADE BANK OF LATIN AMERICA, INC.
  (Registrant)
     
  By: /s/ Ana Graciela de Méndez
     
  Name: Ana Graciela de Méndez
  Title: CFO

 

 

 

 

Banco Latinoamericano

de Comercio Exterior, S.A.

and Subsidiaries

 

Unaudited condensed consolidated interim statement of financial position as of March 31, 2019 and December 31, 2018, and related unaudited condensed consolidated interim statements of profit or loss, unaudited condensed consolidated interim statements of other comprehensive income, unaudited condensed consolidated interim statements of changes in equity and unaudited condensed consolidated interim statements of cash flows for the three months ended March 31, 2019, 2018 and 2017.

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S.A.

and Subsidiaries

 

Unaudited condensed consolidated interim financial statements

 

Contents Pages
   
Unaudited condensed consolidated interim statements of financial position 3
   
Unaudited condensed consolidated interim statements of profit or loss 4
   
Unaudited condensed consolidated interim statements of other comprehensive income 5
   
Unaudited condensed consolidated interim statements of changes in equity 6
   
Unaudited condensed consolidated interim statements of cash flows 7
   
Notes to the unaudited condensed consolidated interim financial statements 8-65

 

  2  

 

 

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

 

Unaudited condensed consolidated interim statement of financial position

March 31, 2019 and December 31, 2018

(In thousands of US dollars)

 

    Notes     March 31,
2019
(Unaudited)
    December 31,
2018
(Audited)
 
Assets                        
                         
Cash and cash equivalents     4       803,549       1,745,652  
                         
Securities and other financial assets, net     5,18       106,549       123,598  
                         
Loans             5,479,172       5,778,424  
Interest receivable             47,826       41,144  
Allowance for loans losses             (102,346 )     (100,785 )
Unearned interest and deferred fees             (14,938 )     (16,525 )
Loans, net     6       5,409,714       5,702,258  
                         
Customers' liabilities under acceptances             97,805       9,696  
Derivative financial instruments - assets     9,18       2,102       2,688  
                         
Equipment and leasehold improvements, net     10       23,158       6,686  
Intangibles, net             1,469       1,633  
Other assets             5,996       16,974  
Total assets             6,450,342       7,609,185  
                         
Liabilities and Equity                        
Liabilities:                        
Demand deposits             21,937       211,381  
Time deposits             2,725,637       2,759,441  
      11       2,747,574       2,970,822  
Interest payable             10,399       12,154  
Total deposits             2,757,973       2,982,976  
                         
Securities sold under repurchase agreements     12       28,232       39,767  
Borrowings and debt, net     13       2,513,208       3,518,446  
Interest payable             12,296       13,763  
                         
Customers' liabilities under acceptances             97,805       9,696  
Derivative financial instruments - liabilities     9,18       29,262       34,043  
Allowance for  loan commitments and financial guarantees contracts losses     7       2,702       3,289  
Other liabilities             11,930       13,615  
Total liabilities             5,453,408       6,615,595  
                         
Equity:                        
Common stock             279,980       279,980  
Treasury stock             (60,947 )     (61,076 )
Additional paid-in capital in excess of value assigned to common stock             120,318       119,987  
Capital reserves     21       95,210       95,210  
Regulatory reserves     21       136,019       136,019  
Retained earnings             427,064       423,050  
Other comprehensive income     15       (710 )     420  
Total equity             996,934       993,590  
Total liabilities and equity             6,450,342       7,609,185  

 

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

 

  3  

 

 

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

 

Unaudited condensed consolidated interim statements of profit or loss

For the three months ended March 31, 2019, 2018 and 2017

(In thousands of US dollars, except per share data and number of shares)

 

    Notes     2019     2018     2017  
                         
Interest income:                                
Deposits             5,357       2,939       2,001  
Securities             942       608       703  
Loans             67,255       53,890       56,427  
Total interest income     18       73,554       57,437       59,131  
Interest expense:                                
Deposits             (17,693 )     (14,004 )     (6,207 )
Borrowings and debt             (27,841 )     (16,843 )     (18,492 )
Total interest expense     18       (45,534 )     (30,847 )     (24,699 )
                                 
Net interest income             28,020       26,590       34,432  
                                 
Other income (expense):                                
Fees and commissions, net             2,350       3,059       3,269  
Loss on financial instruments, net             756       979       271  
Other income, net             945       115       354  
Total other income, net             4,052       4,153       3,894  
                                 
Total revenues             32,071       30,743       38,326  
                                 
Impairment loss on financial instruments     6,7       (942 )     (1,931 )     (3,662 )
                                 
Operating expenses:                                
Salaries and other employee expenses             (6,311 )     (10,094 )     (6,696 )
Depreciation of equipment and leasehold improvements     10       (691 )     (323 )     (431 )
Amortization of intangible assets             (164 )     (338 )     (201 )
Other expenses             (2,718 )     (3,559 )     (3,878 )
Total operating expenses             (9,884 )     (14,314 )     (11,206 )
Profit for the period             21,245       14,498       23,458  
                                 
Per share data:                                
Basic earnings per share     14       0.54       0.37       0.60  
Diluted earnings per share     14       0.54       0.37       0.60  
Weighted average basic shares     14       39,542       39,466       39,188  
Weighted average diluted shares     14       39,559       39,492       39,296  

 

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

 

  4  

 

 

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

 

Unaudited condensed consolidated interim statements of comprehensive income

For the three months ended March 31, 2019, 2018 and 2017

(In thousands of US dollars)

 

    Notes     2019     2018     2017  
                         
Profit for the period             21,245       14,498       23,458  
Other comprehensive income (loss):                                
Items that will not be reclassified subsequently to profit and loss:                                
Change in fair value on equity instrument at FVOCI, net of hedging     15       257       (623 )     -  
                                 
Items that are or may be reclassified subsequently to profit and loss:                                
Change in fair value of debt instruments at FVOCI, net of hedging     15       (1,781 )     1,291       937  
Reclassification of gains (losses) on debt instruments to the profit or loss     15       470       1,160       (2,485 )
Exchange difference in conversion of foreign currency operation     15       (76 )     (175 )     -  
                                 
Other comprehensive income (loss)     15       (1,130 )     1,653       (1,548 )
                                 
Total comprehensive income for the period             20,115       16,151       21,910  

 

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

 

  5  

 

 

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

 

Unaudited condensed consolidated interim statements of changes in equity

For the three months ended March 31, 2019, 2018 and 2017

(In thousands of US dollars)

 

    Common stock     Treasury stock     Additional paid-
in capital in
excess of value
assigned to
common stock
    Capital reserves     Regulatory
reserves
    Retained
earnings
    Other
comprehensive
income
    Total equity  
Balances at January 1, 2017     279,980       (69,176 )     120,594       95,210       62,459       525,048       (2,801 )     1,011,314  
Profit for the period     -       -       -       -       -       23,458       -       23,458  
Other comprehensive income     -       -       -       -       -       -       (1,548 )     (1,548 )
Compensation cost - stock options and stock units plans     -       1,005       (1,005 )     -       -       -       -       -  
Exercised options and stock units vested     -       -       419       -       -       -       -       419  
Repurchase of "Class B" and "Class E" common stock     -       471       (127 )     -       -       -       -       344  
Regulatory credit reserve     -       -       -       -       (10,967 )     10,967       -       -  
Dymanic provision     -       -       -       -       983       (983 )     -       -
Dividends declared     -       -       -       -       -       (15,078 )     -       (15,078 )
Balances at March 31, 2017     279,980       (67,700 )     119,881       95,210       52,474       543,413       (4,349 )     1,018,910  
                                                                 
Balances at January 1, 2018     279,980       (63,248 )     119,941       95,210       129,254       479,712       1,963       1,042,812  
Profit for the period     -       -       -       -       -       14,498       -       14,498  
Other comprehensive income (loss)     -       -       -       -       -       -       1,653       1,653  
Compensation cost - stock options and stock units plans     -       -       124       -       -       -       -       124  
Exercised options and stock units vested     -       2,577       254       -       -       -       -       2,831  
Regulatory credit reserve     -       -       -       -       (1,750 )     1,750       -       -  
Dividends declared     -       -       -       -       -       (15,182 )     -       (15,182 )
Balances at March 31, 2018     279,980       (60,671 )     120,319       95,210       127,504       480,778       3,616       1,046,736  
                                                                 
Balances at January 1, 2019     279,980       (61,076 )     119,987       95,210       136,019       423,050       420       993,590  
Effect for change in accounting policy     -       -       -       -       -       (2,006 )     -       (2,006 )
Profit for the period     -       -       -       -       -       21,245       -       21,245  
Other comprehensive income     -       -       -       -       -       -       (1,130 )     (1,130 )
Compensation cost - stock options and stock units plans     -       -       460       -       -       -       -       460  
Exercised options and stock units vested     -       129       (129 )     -       -       -       -       -  
Dividends declared     -       -       -       -       -       (15,225 )     -       (15,225 )
Balances at March 31, 2019     279,980       (60,947 )     120,318       95,210       136,019       427,064       (710 )     996,934  

 

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

 

  6  

 

 

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

 

Unaudited condensed consolidated interim statements of cash flows

For the three months ended March 31, 2019, 2018 and 2017

(In thousands of US dollars)

 

    2019     2018     2017  
                   
Cash flows from operating activities                        
Profit for the period     21,245       14,498       23,458  
Adjustments to reconcile profit for the year to net cash provided by (used in) operating activities:                        
Net changes in hedging position     394       2,714       29,247  
Depreciation of equipment and leasehold improvements     691       323       431  
Amortization of intangible assets     164       338       201  
Loss for disposal of equipment and leasehold improvements     -       -       4  
Impairment loss on financial instruments     942       1,931       4,116  
(Gain) loss, net on sale of financial assets at fair value through OCI     (109 )     -       114  
Amortization of premium and discount related to securities at amortized cost     92       249       143  
Compensation cost - share-based payment     460       124       419  
Interest income     (73,554 )     (57,437 )     (59,131 )
Interest expense     45,534       30,847       24,699  
Net decrease (increase) in operating assets:                        
Pledged deposits     6,551       36,685       7,270  
Loans     297,671       281,276       281,123  
Other assets     10,737       1,221       9,854  
Net increase (decrease) in operating liabilities:                        
Due to depositors     (223,247 )     (114,629 )     378,404  
Financial liabilities at fair value through profit or loss     -       -       (24 )
Other liabilities     (1,526 )     86       (17,073 )
Cash flows provided by (used in) operating activities     86,044       198,226       683,255  
                         
Interest received     67,663       53,584       58,870  
Interest paid     (48,756 )     (29,658 )     (20,492 )
Net cash provided by operating activities     104,952       222,152       721,633  
                         
Cash flows from investing activities:                        
Acquisition of equipment and leasehold improvements     (25 )     (21 )     (198 )
Acquisition of intangible assets     -       (27 )     -  
Proceeds from right-of-use assets     (17,125 )     -       -  
Proceeds from the sale of securities at fair value through OCI     4,200       679       6,459  
Proceeds from maturities of securities at amortized cost     12,700       600       10,941  
Purchases of securities at amortized cost     (200 )     -       -  
Net cash (used in) provided by investing activities     (450 )     1,231       17,202  
                         
Cash flows from financing activities:                        
Increase (decrease) in securities sold under repurchase agreements     (11,535 )     49,316       -  
Net decrease in short-term borrowings and debt     (868,016 )     (296,944 )     (708,518 )
Proceeds from long-term borrowings and debt     470,158       95,000       255,547  
Repayments of long-term borrowings and debt     (633,752 )     (133,238 )     (59,742 )
Proceeds from lease liabilities     20,734       -       -  
Payments of lease liabilities     (254 )     -       -  
Effect for change in accounting policy     (2,006 )     -       -  
Dividends paid     (15,383 )     (15,183 )     (15,077 )
Exercised stock options     -       2,577       344  
Net cash used in financing activities     (1,040,053 )     (298,472 )     (527,446 )
                         
Increase (decrease) net in cash and cash equivalents     (935,552 )     (75,089 )     211,389  
Cash and cash equivalents at beginning of the period     1,706,192       618,807       1,007,726  
Cash and cash equivalents at end of the period     770,640       543,718       1,219,115  

 

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

 

  7  

 

 

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

Notes to the consolidated financial statements

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

 

1. Corporate information

 

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

 

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

 

In the Republic of Panama, banks are regulated by the SBP through Executive Decree No. 52 of April 30, 2008, which adopts the unique text of Law Decree No. 9 of February 26, 1998, modified by 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. has ownership in Bladex Representaçao Ltda.

 

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

 

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

 

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

 

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

 

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

 

  8  

 

 

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

Notes to the consolidated financial statements

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

 

1. Corporate information (continued)

 

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

 

These unaudited condensed consolidated interim financial statements were authorized for issue by the Board of Directors on April 16, 2019.

 

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

 

2.1 Statement of compliance

 

These unaudited condensed consolidated interim financial statements of Banco Latinoamericano de Comercio Exterior, S. A. and its subsidiaries have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) issued by the International Accounting Standards Board ("IASB"). As all the disclosures required by IFRS for annual period consolidated financial statements are not included herein, these unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2018, contained in the Bank’s annual audited consolidated financial statements. The unaudited condensed consolidated interim statements of profit or loss, other comprehensive income, changes in equity and cash flows for the periods presented are not necessarily indicative of results expected for any future period.

 

3. Summary of accounting policies

 

3.1 New accounting policies

 

Accounting policy applicable from January 1, 2019:

 

Leases under IFRS 16

 

At inception of a contract, the Bank assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Bank assesses whether:

 

- The contract involves the use of an identified asset –this may be specified explicitly or implicitly; and should be physically distinct or represent substantially all of the capacity of a physically distinct asset.

 

- The Bank has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and

 

- The Bank has the right to direct the use of the asset. The Bank has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Bank has the right to direct the use of the asset if either:

 

- The Bank has the right to operate the asset; or
- The Bank designed the asset in a way that predetermines how and for what purpose it will be used.

 

This policy is applied to contracts entered into, or changed, on or after January 1, 2019.

 

At inception or on reassessment of a contract that contains lease component, the bank allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and buildings in which it is a lessee, the Bank has elected not to separate non-lease components and to account for the lease components as a single lease component.

 

  9  

 

 

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

Notes to the consolidated financial statements

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

 

3. Summary of accounting policies (continued)

 

3.1 New accounting policies (continued)

 

Accounting policy applicable until December 31, 2018:

 

Leases under NIC 17

 

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

 

Banks as a lessee

 

Leases where the lessor does not transfer to the Bank substantially all the risks and benefits incidental to ownership of the leased items are classified as operating leases. Operating lease payments are recognized as an expense in profit or loss on a straight-line basis through the lease term. Rental payable is recognized as an expense as incurred.

 

Bank as a sub-lessor

 

Leases where the Bank does not transfer substantially all of the risk and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating operating leases are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Rental income is recognized as revenue as earned. In the event that the contract is cancelable, they are recognized as income over the term of the lease.

 

Changes in accounting policies

 

Except for the changes below, the Bank has consistently applied the accounting policies to all periods presented in these consolidated financial statements.

 

The Bank applied IFRS 16 with a date of initial application of 1 January 2019. As a result, the Bank has changed its accounting policy for lease contracts as detailed below.

 

The Bank applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings at 1 January 2019. The details of the changes in accounting policies are disclosed below.

 

Definition of a lease

 

Previously, the Bank determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Bank assesses whether a contract is or contains a lease based on the definition of a lease based on the definition of a lease, as explained in Note 3.1.

 

On transition to IFRS 16, the Bank elected to apply the practical expedient to grandfather the assessment of which transactions are leases. It applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019.

 

As a lessee

 

As a lessee, the Bank previously classified leases as operating or finance leases based on its assessment of whether the leases transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Bank. Under IFRS 16, the Bank recognizes right-of-use assets and lease liabilities for most leases. These leases are on the consolidated statement of financial position.

 

  10  

 

 

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

Notes to the consolidated financial statements

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

 

3. Summary of accounting policies (continued)

 

3.1 New accounting policies (continued)

 

Leases classified as operating leases under IAS 17

 

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Bank´s internal funding cost rate as at 1 January 2019.

 

The right-of-use assets are measured at their book value as if IFRS 16 had been applied since the commencement date, discounted using total lease payments at present value, using the Bank's internal funding cost rate, the weighted average term of the contract, adjusted for any prepayment, incremental cost, dismantling cost and depreciation that would have been recognized from the beginning of the contract until the date of implementation of the standard.

 

The Bank used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

 

- Applied for lease contracts with similar characteristics, the internal funding cost rate of the Bank, according to the average term of stay.
- Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
- Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

 

Impacts on financial statements

 

On transition to IFRS 16, the Bank recognized and additional $17.1 million of right-of-use assets and $20.7 million of lease liabilities, recognizing the difference in retained earnings. When measuring the lease liabilities, the Bank discounted the lease payments using its internal funding cost rate at 1 January 2019. The weighted average rate applied is 4.81%.

 

    January 1,  
    2019  
Operating lease commitment disclosed as at December 31, 2018     16,790  
Discounted using the internal funding cost rate as at January 1, 2019     20,735  

 

  11  

 

 

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

Notes to the consolidated financial statements

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

 

4. Cash and cash equivalents

 

    March 31,     December 31,  
    2019     2018  
Cash and due from banks     8,459       9,644  
Interest-bearing deposits in banks     795,090       1,736,008  
Total     803,549       1,745,652  
                 
Less:                
Pledged deposits     32,909       39,460  
Total cash and cash equivalents     770,640       1,706,192  

 

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

 

    March 31, 2019     December 31, 2018  
    Amount     Interest rate
range
    Amount     Interest rate
range
 
Interest-bearing deposits in banks:                                
Demand deposits (1)     795,090       2.40% to 5.88%       1,686,008       2.43% to 6.5%  
Time deposits (2)     -               50,000       -  
Total     795,090               1,736,008          
                                 
Pledged deposits (3)     32,909       2.41 %     39,460       2.40 %

 

The following table provides a breakdown of pledged deposits by country risk:

 

    March 31,     December 31,  
    2019     2018  
Country:                
United States of America (3)     13,438       15,009  
United Kingdom     11,917       15,217  
Spain     7,520       8,740  
Netherlands     34       494  
Total     32,909       39,460  

 

(1) Interest-bearing demand deposits based on the daily rates determined by banks. The rate 5.88% corresponds to a deposit placed in BRL - Brazil. In addition, a rate of 5.79% corresponds to a deposit placed in MXN – Mexico.

 

(2) Time deposits “overnight” calculated on an average interest rate.

 

(3) Includes deposits pledged of $3.5 million at March 31, 2019 and December 31, 2018, respectively, with the New York State Banking Department under March 1994 legislation and deposits pledged to guarantee derivative financial instrument transactions.

 

  12  

 

 

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

Notes to the consolidated financial statements

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

 

5. Securities and other financial assets, net

 

All securities and other financial assets as of March 31, 2019 and December 31, 2018 are presented as follows:

 

          At fair value        
At March 31, 2019         With changes in other comprehensive income     With     Total securities and  
Carring amount   Amortized cost     Recyclable to profit
and loss
    Non-recyclable to
 profit and loss
    changes in
profit or loss
    other financial
assets, net
 
Principal     72,443       17,931       6,521       8,743       105,638  
Interest receivable     802       232       -       -       1,034  
Reserves     (123 )     -       -       -       (123 )
      73,122       18,163       6,521       8,743       106,549  

 

          At fair value        
At December 31, 2018         With changes in other comprehensive income     With     Total securities and  
Carring amount   Amortized cost     Recyclable to profit
and loss
    Non-recyclable to
profit and loss
    changes in
profit or loss
    other financial
assets, net
 
Principal     85,326       21,798       6,273       8,750       122,147  
Interest receivable     1,140       451       -       -       1,591  
Reserves     (140 )     -       -       -       (140 )
      86,326       22,249       6,273       8,750       123,598  

 

Securities at amortized cost

 

The amortized cost of these securities by country risk and type of debt, excluding the amounts of interest receivable and allowance for expected credit losses are as follows:

 

    March 31,
2019
    December 31,
2018
 
Corporate debt                
Brazil     1,492       1,491  
Mexico     7,221       7,264  
Panama     11,151       11,151  
      19,864       19,906  
                 
Sovereign debt                
Colombia     15,498       28,183  
Mexico     19,770       19,859  
Panama     17,311       17,378  
      52,579       65,420  
      72,443       85,326  

 

As of March 31, 2019, and December 31, 2018, t he allowance for expected credit losses relating to securities at amortized cost amounted to $123 thousand and $140 thousand, respectively.

 

As of March 31, 2019, and December 31, 2018, securities at amortized cost were pledged to secure repurchase transactions accounted for as secured financings with a carrying value of $23.6 million and 35.1 million, respectively.

 

  13  

 

 

 

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

Notes to the consolidated financial statements

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

 

5. Securities and other financial assets, net (continued)

 

Securities at amortized cost (continued)

 

Securities at amortized cost by contractual maturity are shown in the following tables:

 

    March 31,
2019
    December 31,
2018
 
Due within 1 year     25,551       28,551  
After 1 year but within 5 years     46,892       56,775  
      72,443       85,326  

 

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

 

Rating   March 31,
 2019
    December 31,
2018
 
2     -       5,181  
3     32,042       44,858  
4     38,909       33,796  
5     1,492       1,491  
Total     72,443       85,326  

 

Securities at fair value through other comprehensive income (FVOCI)

 

The fair value of financial instruments at FVOCI by country risk and type of debt are as follows:

 

    March 31,
2019
    December 31,
2018
 
Corporate debt                
Panama     1,832       6,157  
      1,832       6,157  
Sovereign debt                
Brazil     2,960       2,887  
Chile     5,086       5,011  
Trinidad and Tobago     8,053       7,743  
      16,099       15,641  
      17,931       21,798  

 

  14  

 

 

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

Notes to the consolidated financial statements

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

 

5. Securities and other financial assets

 

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

 

As of March 31, 2019, and December 31, 2018, the allowance for expected credit losses relating to securities at fair value through other comprehensive income amounted to $165 thousand and $172 thousand, respectively.

 

As of March 31, 2019, and December 31, 2018, securities at fair value through other comprehensive income were pledged to secure repurchase transactions accounted for as secured financings with a carrying value of $4.6 million, for both periods.

 

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

 

    Three months ended March 31st  
    2019     2018     2017  
Realized gain on sale of securities     109       -       161  
Realized loss on sale of securities     -       -       (47 )
Net gain on sale of securities at FVOCI     109       -       114  

 

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

 

Rating   March 31,
2019
    December 31,
2018
 
1     5,086       5,010  
4     9,885       13,901  
5     2,960       2,887  
Total     17,931       21,798  

 

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

 

    March 31, 2019     December 31, 2018  
    Amortized
cost
    Fair value     Amortized
cost
    Fair value  
                         
Due within 1 year     8,268       8,053       8,386       7,743  
After 1 year but within 5 years     8,074       8,047       8,084       7,898  
After 5 years but within 10 years     1,778       1,831       5,926       6,157  
      18,120       17,931       22,396       21,798  

 

Equity instrument at FVOCI

 

The fair value of the equity instrument irrevocably measured at fair value through OCI :

 

    March 31,
2019
    December 31,
2018
 
Equity Instrument at FVOCI     6,521       6,273  

 

  15  

 

 

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

Notes to the consolidated financial statements

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

 

6. Loans

 

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

 

    March 31,
2019
    December 31,
2018
 
Corporations:                
Private     1,878,029       1,893,696  
State-owned     515,694       801,938  
Financial institutions:                
Private     2,460,972       2,458,690  
State-owned     624,477       624,100  
Total     5,479,172       5,778,424  

 

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

 

    March 31,
2019
    December 31,
2018
 
Financial institutions     3,085,449       3,082,790  
Industrial     938,348       986,262  
Oil and petroleum derived products     360,139       634,615  
Agricultural     378,531       446,960  
Services     426,953       393,925  
Mining     30,000       20,000  
Sovereign     59,026       59,026  
Other     200,726       154,846  
Total     5,479,172       5,778,424  

 

  16  

 

 

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

Notes to the consolidated financial statements

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

 

6. Loans (continued)

 

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

 

March 31, 2019  
    Corporations       Financial institutions        
Rating   Private     State-owned     Private     State-owned     Total  
1-4     1,048,811       236,844       946,150       54,000       2,285,805  
5-6     682,640       278,850       1,383,122       510,999       2,855,611  
7     81,877       -       131,700       59,478       273,055  
8     -       -       -       -       -  
9     64,701       -       -       -       64,701  
10     -       -       -       -       -  
Total     1,878,029       515,694       2,460,972       624,477       5,479,172  

 

December 31, 2018  
    Corporations     Financial institutions        
Rating   Private     State-owned     Private     State-owned     Total  
1-4     975,588       388,773       797,439       54,000       2,215,800  
5-6     795,399       391,438       1,476,861       464,800       3,128,498  
7     58,008       21,727       184,390       105,300       369,425  
8     -       -       -       -       -  
9     64,701       -       -       -       64,701  
10     -       -       -       -       -  
Total     1,893,696       801,938       2,458,690       624,100       5,778,424  

 

  17  

 

 

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

Notes to the consolidated financial statements

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

 

 

6. Loans (continued)

 

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

 

    March 31,
2019
    December 31,
 2018
 
Country:                
Brazil     1,034,612       1,156,223  
Mexico     827,206       867,441  
Colombia     684,344       625,932  
Argentina     562,860       604,112  
Panama     483,541       485,546  
Dominican Republic     391,581       301,067  
Guatemala     289,316       328,830  
Costa Rica     266,847       370,087  
Chile     216,256       176,976  
Ecuador     177,476       188,445  
Paraguay     150,010       158,685  
Trinidad and Tobago     116,210       144,874  
Peru     81,967       78,191  
El Salvador     53,545       70,048  
Honduras     42,034       89,205  
Singapore     39,700       38,500  
Germany     35,500       17,500  
Luxembourg     14,644       17,664  
Belgium     11,523       13,278  
Jamaica     -       21,727  
Bolivia     -       14,187  
Uruguay     -       9,906  
Total     5,479,172       5,778,424  

 

  18  

 

 

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

Notes to the consolidated financial statements

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

 

6. Loans (continued)

 

The remaining loan maturities are summarized as follows:

 

    March 31,
2019
    December 31,
2018
 
Current:                
Up to 1 month     684,715       820,184  
From 1 month to 3 months     1,103,836       966,210  
From 3 months to 6 months     872,993       1,281,615  
From 6 months to 1 year     1,187,539       769,280  
From 1 year to 2 years     512,057       719,564  
From 2 years to 5 years     999,836       1,110,489  
More than 5 years     53,495       46,381  
      5,414,471       5,713,723  
                 
Impaired     64,701       64,701  
Total     5,479,172       5,778,424  

 

As of March 31, 2019, the range of interest rates on loans fluctuates from 1.20% to 11.76%, respectively (as of December 31, 2018 the range of interest rates fluctuates from 1.20% to 12.25%).

 

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

 

    March 31,
2019
    December 31,
2018
 
             
Fixed interest rates     2,507,462       2,706,834  
Floating interest rates     2,971,710       3,071,590  
Total     5,479,172       5,778,424  

 

As of March 31, 2019, and December 31, 2018, 82% of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

 

  19  

 

 

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

Notes to the consolidated financial statements

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

 

6. Loans (continued)

 

The following table presents an aging analysis of the loan portfolio by credit classification in stages 1, 2 and 3:

 

    March 31, 2019        
    Stage 1     Stage 2     Stage 3     Total  
Gross carrying amount                                
Current     4,978,948       435,523       54,616       5,469,087  
Past due                                
90-120 days     -       -       2,410       2,410  
151-180 days     -       -       1,428       1,428  
More than 180 days     -       -       6,247       6,247  
Total past due     -       -       10,085       10,085  
Total     4,978,948       435,523       64,701       5,479,172  

 

    December 31, 2018        
    Stage 1     Stage 2     Stage 3     Total  
Gross carrying amount                                
Current     5,340,751       372,972       57,025       5,770,748  
Past due                                
90-120 days     -       -       2,410       2,410  
151-180 days     -       -       2,857       2,857  
More than 180 days     -       -       2,409       2,409  
Total past due     -       -       7,676       7,676  
Total     5,340,751       372,972       64,701       5,778,424  

 

As of March 31, 2019 and December 31, 2018, the Bank had credit transactions in the normal course of business with 15% and 17%, respectively, of its Class “A” and “B” stockholders. All transactions were made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and were subject to all of the Bank’s Corporate Governance and control procedures. As of March 31 , 2019 and December 31, 2018, approximately 8% and 9%, respectively, of the outstanding loan portfolio was placed with the Bank’s Class “A” and “B” stockholders and their related parties. As of March 31, 2019, 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.

 

  20  

 

 

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

Notes to the consolidated financial statements

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

 

6. Loans (continued)

 

Recognition and derecognition of financial assets

 

During the periods ended March 31 , 2019, 2018 and 2017, the Bank sold loans measured at amortized cost. These sales were made based on compliance with the Bank's strategy to optimize credit risk of its loan portfolio.

 

The carrying amounts and gains arising from the derecognition of these financial instruments are presented in the following table. These gains are presented within the line “Gain (loss) on financial instruments, net” in the consolidated statement of profit or loss.

 

    Assignments and
participations
    Gains
(losses)
 
             
Carrying amount as of March 31, 2019     5,000       -  
Carrying amount as of March 31, 2018     41,667       (625 )
Carrying amount as of March 31, 2017     64,400       86  

 

  21  

 

 

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

Notes to the consolidated financial statements

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

 

6. Loans (continued)

 

The allowance for expected credit losses relating to loans at amortized cost are as follows:

 

    Stage 1 (1)     Stage 2 (2)     Stage 3 (3)     Total  
Allowance for expected credit losses as of December 31, 2018     34,957       16,389       49,439       100,785  
Transfer to lifetime expected credit losses     (1,916 )     1,916       -       -  
Transfer to credit-impaired financial instruments     -       -       -       -  
Transfer to 12-month expected credit losses     -       -       -       -  
Net effect of changes in allowance for expected credit losses     (86 )     5,145       4,301       9,360  
Financial instruments that have been derecognized during the period     (13,262 )     (2,307 )     -       (15,569 )
New financial assets originated or purchased     7,763       -       -       7,763  
Write-offs     -       -       -       -  
Recoveries     -       -       7       7  
Allowance for expected credit losses as of March 31, 2019     27,456       21,143       53,747       102,346  

 

    Stage 1 (1)     Stage 2 (2)     Stage 3 (3)     Total  
Allowance for expected credit losses as of December 31, 2017     19,821       33,477       27,996       81,294  
Transfer to lifetime expected credit losses     (514 )     514       -       -  
Transfer to credit-impaired financial instruments     (111 )     (7,864 )     7,975       -  
Transfer to 12-month expected credit losses     4,471       (4,471 )     -       -  
Net effect of changes in reserve for expected credit losses     (4,665 )     5,823       55,153       56,311  
Financial instruments that have been derecognized during the year     (16,400 )     (11,090 )     -       (27,490 )
New financial assets originated or purchased     32,355       -       -       32,355  
Write-offs     -       -       (41,686 )     (41,686 )
Recoveries     -       -       1       1  
Allowance for expected credit losses as of December 31, 2018     34,957       16,389       49,439       100,785  

 

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

 

  22  

 

 

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

Notes to the consolidated financial statements

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

 

7. Loan commitments and financial guarantee contracts

 

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

 

The Bank’s outstanding loan commitments and financial guarantee contracts are as follows:

 

    March 31,     December 31,  
    2019     2018  
Documentary letters of credit     176,443       218,988  
Stand-by letters of credit and guarantees - commercial risk     154,494       179,756  
Credit commitments     98,000       103,143  
Total loans commitments and financial guarantee contracts     428,937       501,887  

 

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

 

    March 31,     December 31,  
Maturities   2019     2018  
Up to 1 year     348,080       434,544  
From 1 to 2 years     857       200  
From 2 to 5 years     80,000       67,143  
Total     428,937       501,887  

 

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

 

    March 31,     December 31,  
Rating   2019     2018  
1-4     128,594       94,724  
5-6     154,054       158,864  
7     146,289       248,299  
Total     428,937       501,887  

 

  23  

 

 

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

Notes to the consolidated financial statements

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

 

7. Loan commitments and financial guarantee contracts (continued)

 

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

 

    March 31,     December 31,  
    2019     2018  
Country:                
Ecuador     145,345       247,225  
Mexico     57,887       22,731  
Colombia     55,646       52,000  
Costa Rica     51,625       38,598  
Brazil     50,000       50,000  
Panama     26,205       29,175  
Dominican Republic     16,500       16,500  
Guatemala     15,397       15,293  
Argentina     7,076       6,980  
Canada     1,079       422  
Peru     598       2,846  
El Salvador     554       824  
Honduras     390       250  
Uruguay     378       750  
Bolivia     257       293  
Germany     -       18,000  
Total     428,937       501,887  

 

Letters of credit, stand-by letters of credit and guarantees

 

The Bank, on behalf of its client’s base, issues, confirms and advises letters of credit to facilitate foreign trade transactions. When issuing, confirming and advising letters of credit, the Bank adds its own unqualified assurance that the bank will pay upon presentation of complying documents as per the terms and conditions established in the letter of credit. The Bank also issues, confirms and advises stand-by letters of credit and guarantees, which are issued on behalf of institutional clients in connection with financing between its clients and third parties.  The Bank applies the same credit policies used in its lending process, and once the commitment is issued, it becomes irrevocable and remains valid until its expiration upon the presentation of complying documents on or before the expiry date.

 

Credit commitments

 

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

 

  24  

 

 

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

Notes to the consolidated financial statements

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

 

7. Loan commitments and financial guarantee contracts (continued)

 

The allowance for expected credit losses relating to loan commitments and financial guarantee contracts is as follows:

 

    Stage 1 (1)     Stage 2 (2)     Stage 3 (3)     Total  
Allowance for expected credit losses as of December 31, 2018     3,089       200       -       3,289  
Transfer to lifetime expected credit losses     -       -       -       -  
Transfer to credit-impaired financial instruments     -       -       -       -  
Transfer to 12-month expected credit losses     -       -       -       -  
Net effect of changes in reserve for expected credit loss     (373 )     107       -       (266 )
Financial instruments that have been derecognized during the period     (1,794 )     (8 )     -       (1,802 )
New instruments originated or purchased     1,481       -       -       1,481  
Allowance for expected credit losses as of March 31, 2019     2,403       299       -       2,702  

 

    Stage 1 (1)     Stage 2 (2)     Stage 3 (3)     Total  
Allowance for expected credit losses as of December 31, 2017     1,358       5,487       -       6,845  
Transfer to lifetime expected credit losses     (31 )     31       -       -  
Transfer to credit-impaired financial instruments     -       -       -       -  
Transfer to 12-month expected credit losses     -       -       -       -  
Net effect of changes in reserve for expected credit loss     13       169       -       182  
Financial instruments that have been derecognized during the year     (1,179 )     (5,487 )     -       (6,666 )
New instruments originated or purchased     2,928       -       -       2,928  
Allowance for expected credit losses as of December 31, 2018     3,089       200       -       3,289  

 

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

 

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

 

  25  

 

 

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

Notes to the consolidated financial statements

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

 

8. Impairment loss on financial instruments, net

 

The following table sets forth the details for the loss on financial instrument recognized in the consolidated statements of profit or loss:

 

    For the three months ended March 31st  
    2019     2018     2017  
Gain in derivative financial instruments and changes in foreign currency, net     270       1,666       131  
Gain (loss) in financial instruments at fair value through profit or loss     377       (62 )     (60 )
Gain realized in financial instruments at fair value with changes in other comprehensive income     109       -       114  
(Loss) gain on sale of loans     -       (625 )     86  
      756       979       271  

 

9. Derivative financial instruments

 

Quantitative information on derivative financial instruments is as follows:

 

    March 31, 2019  
          Carrying amount of the
hedging instrument
       
    Nominal
Amount
    Asset     Liability    

Changes in fair
value used for

calculating hedge
ineffectiveness

 
Fair value hedges:                                
Interest rate swaps     432,833       37       (1,898 )     4,165  
Cross-currency swaps     226,160       881       (16,773 )     (1,032 )
Cash flow hedges:                                
Interest rate swaps     295,000       100       (477 )     2,386  
Cross-currency swaps     23,025       -       (1,207 )     177  
Foreign exchange forwards     194,684       1,084       (8,829 )     (1,509 )
Net investment hedges:                                
Foreign exchange forwards     6,438       -       (78 )     8  
Total     1,178,140       2,102       (29,262 )     4,195  

 

  26  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

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

Changes in fair
value used for

calculating
hedge
ineffectiveness

 
Fair value hedges:                                
Interest rate swaps     433,500       108       (6,134 )     (1,666 )
Cross-currency swaps     226,757       1,134       (15,994 )     11,676  
Cash flow hedges:                                
Interest rate swaps     460,000       513       (3,276 )     (2,462 )
Cross-currency swaps     23,025       -       (1,384 )     (2,263 )
Foreign exchange forwards     176,311       933       (7,177 )     (14,854 )
Net investment hedges:                                
Foreign exchange forwards     6,183       -       (78 )     (128 )
Total     1,325,776       2,688       (34,043 )     (9,697 )

 

The hedging instruments detailed in the tables above are presented in the consolidated statement of financial position as derivative financial instruments - assets or derivative financial instruments - liabilities.

 

  27  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

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

 

    March 31, 2019  
    Gain (loss)
recognized in
OCI (effective
portion)
    Classification of gain
(loss)
  Gain (loss)
reclassified from
OCI to  
profit or loss
    Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
                       
Derivatives – cash flow hedges                            
Interest rate swaps     810     Gain (loss) on interest rate swaps     -       -  
Cross-currency swaps     (144 )   Gain (loss) on foreign currency exchange     -       -  
            Interest income – loans     740       -  
Foreign exchange forwards     2,656     Interest income – securities at FVOCI     -       -  
            Interest expenses – deposits     704       -  
            Interest expense – borrowings and debt     -       -  
            Gain (loss) on foreign currency exchange     145       -  
Total     3,322           1,589       -  
                             
Derivatives – net investment hedge                            
Foreign exchange forwards     (6 )                    
Total     (6 )                    

 

  28  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

    March 31, 2018  
    Gain (loss)
recognized in
OCI (effective
portion)
    Classification of gain
(loss)
 

Gain (loss)
reclassified from
OCI to

profit or loss

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

 

  29  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

    March 31, 2017  
    Gain (loss)
recognized in
OCI (effective
portion)
    Classification of gain
(loss)
 

Gain (loss)
reclassified from
OCI to

profit or loss

    Gain (loss)
recognized on
derivatives
(ineffective
portion)
 
                       
Derivatives – cash flow hedge                            
Interest rate swaps     (384 )   Gain (loss) on interest rate swaps     -       233  
Cross-currency swaps     (1,419 )   Gain (loss) on foreign currency exchange     -       24  
            Interest income – loans     1,871       -  
Foreign exchange forwards     (9,838 )   Interest income – securities at FVOCI     -       -  
            Interest income – loans     -       -  
            Interest expense – borrowings and debt     -       -  
            Interest expenses – deposits     (800 )     -  
            Gain (loss) on foreign currency exchange     (27,169 )     -  
Total     (11,641 )         (26,098 )     257  
                             
Derivatives – net investment hedge                        
Foreign exchange forwards     -                      
Total     -                      

 

  30  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

For the agreements qualifying as fair value hedge, the Bank recognized the gain or loss on the derivative financial instruments and the gain or loss of the hedged asset or liability in profit or loss as follows:

 

    March 31, 2019  
    Classification in consolidated
statement of profit or loss
  Gain (loss) on
derivatives
    Gain (loss) on
hedged item
    Net gain (loss)  
Derivatives – fair value hedge                            
Interest rate swaps   Interest income – securities FVOCI     (9 )     94       85  
    Interest income – loans     13       850       863  
    Interest expenses – borrowings and debt     119       (3,049 )     (2,930 )
    Derivative financial instruments     (3,853 )     3,711       (142 )
Cross-currency swaps   Interest income – loans     (127 )     310       183  
    Interest expenses – borrowings and debt     (227 )     (182 )     (409 )
    Derivative financial instruments     (16,348 )     14,598       (1,750 )
Total         (20,432 )     16,332       (4,100 )

 

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

 

  31  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

    March 31, 2017  
    Classification in consolidated
statement of profit or loss
  Gain (loss) on
derivatives
    Gain (loss) on
hedged item
    Net gain (loss)  
Derivatives – fair value hedge                            
Interest rate swaps   Interest income – securities FVOCI     (47 )     169       122  
    Interest income – loans     10       141       151  
    Interest expenses – borrowings and debt     (261 )     (7,058 )     (7,319 )
    Derivative financial instruments     (648 )     765       117  
Cross-currency swaps   Interest income – loans     (102 )     119       17  
    Interest expenses – borrowings and debt     268       (1,837 )     (1,569 )
    Derivative financial instruments     13,101       (13,021 )     80  
Total         12,321       (20,722 )     (8,401 )

 

Derivatives financial position and performance

 

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

 

    March 31, 2019
Fair value hedges   Carrying
amount
    Accumulated
fair value
adjustments
    Line item in the consolidated statement of
financial position
Interest rate risk                    
Loans     65,601       (392 )   Loans
Issuances     351,257       (2,770 )   Borrowings and debt, net
                     
Foreign exchange rate risk and interest rate risk:                    
Securities at FVOCI     12,523       (148 )   Securities and other financial instruments, net
Loans     10,197       (914 )   Loans
Issuances     (198,869 )     15,511     Borrowings and debt, net

 

  32  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

Derivatives financial position and performance (continued)

 

    December 31, 2018
Fair value hedges   Carrying
amount
    Accumulated
fair value
adjustments
    Line item in the consolidated statement of
financial position
Interest rate risk                    
Loans     66,091       97     Loans
Issuances     349,428       5,266     Borrowings and debt, net
                     
Foreign exchange rate risk and interest rate risk:                    
Securities at FVOCI     12,221       (527 )   Securities and other financial instruments, net
Loans     10,581       (1,097 )   Loans
Issuances     199,356       15,024     Borrowings and debt, net
                     

 

The following tables detail the maturity profile of the timing of the nominal amounts of the hedging instruments, by type of risk covered:

 

    March 31, 2019  
Risk type   Foreign
exchange risk
    Interest rate
risk
   

Foreign exchange
and interest

rate risks

    Total  
Up to 1 month     94,635       -       -       94,635  
31 to 60 days     50,890       -       -       50,890  
61 to 90 days     13,818       17,000       73,193       104,011  
91 to 180 days     107,838       79,500       -       187,338  
181 to 365 days     2,090       130,000       -       132,090  
1 to 2 years     5,162       418,333       23,025       446,520  
2 to 5 years     3,446       83,000       76,210       162,656  
More than 5 years     -       -       -       -  
Total     277,879       727,833       172,428       1,178,140  

 

  33  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

Derivatives financial position and performance (continued)

 

    December 31, 2018  
Risk type   Foreign
exchange risk
    Interest rate
risk
   

Foreign exchange
and interest

rate risks

    Total  
Up to 1 month     27,458       -       -       27,458  
31 to 60 days     16,977       115,000       -       131,977  
61 to 90 days     6,908       50,000       -       56,908  
91 to 180 days     100,489       17,000       73,193       190,682  
181 to 365 days     98,813       159,500       -       258,313  
1 to 2 years     5,161       463,000       23,025       491,186  
2 to 5 years     3,704       89,000       7,779       100,483  
More than 5 years     -       -       68,768       68,768  
Total     259,510       893,500       172,765       1,325,775  

 

Assessment of the sources of ineffectiveness

 

As part of its hedging operations and according to the type of hedge, the Bank is exposed to the following ineffectiveness factors:

 

· Cash flow hedges: Type of hedge used to mitigate the risk of changes in foreign exchange currency rates, as well of changes in interest rate risk that could include volatility in the projected cash flows. The sources of ineffectiveness arise mainly because of the differences in discount rates (OIS - Overnight Index Swap).

 

· Fair value hedges: Type of hedge used to mitigate both interest rate risk and foreign currency risk. The sources of ineffectiveness come mainly from forward rates, discount rates and cross currency basis (cost of the operation).

 

  34  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

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

 

The Bank manages and controls the risks on these foreign exchange trades by establishing counterparty credit limits by customer and by adopting policies that do not allow for open positions in the loan and investment portfolio. The Bank also uses foreign exchange forward contracts to hedge the foreign exchange risk associated with the Bank’s equity investment in a non-U.S. dollar functional currency foreign entity. Derivative and foreign exchange forward 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 4.94 years .

 

The Bank recognized the lifetime associated cost of the foreign exchange forward contracts into interest income, in profit or loss, as an adjustment to the yield on hedged items creating an accumulated reserve in OCI, reclassified to profit or loss at their maturity. The Bank estimates that approximately $107 thousand are expected to be reclassified into profit or loss during the twelve-month year ending March 31 , 2020.

 

The Bank recognized the lifetime associated cost of the foreign exchange forward contracts into interest expense, in profit or loss, as an adjustment to the yield on hedge items creating an accumulated reserve in OCI, reclassified to profit or loss at their maturity. The Bank estimates that approximately $3,768 million are expected to be reclassified into profit or loss during the twelve-month year ending March 31 , 2020.

 

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 another 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 another portion as cash flow hedges. Foreign exchange forward contracts represent an agreement to purchase or sell foreign currency at a future date at agreed-upon terms. The Bank has designated these derivative instruments as cash flow hedges and net investment hedges.

 

Offsetting of financial assets and liabilities

 

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

 

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

 

  35  

 

   

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

Offsetting of financial assets and liabilities (continued)

 

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

 

a) Derivative financial instruments – assets

 

March 31, 2019
    Gross     Gross amounts
 offset in the
consolidated
statement of
    Net amount of
assets
 presented  in
the
consolidated
statement of
    Gross amounts not offset in the
consolidated statement of
financial position
       
Description   amounts of
 assets
    financial
 position
    financial
position
    Financial
instruments
    Cash collateral
received
    Net Amount  
Derivative financial instruments used for hedging  at fair value     2,102       -       2,102       -       (1,206 )     896  
Total     2,102       -       2,102       -       (1,206 )     896  

 

December 31, 2018
    Gross     Gross amounts
 offset in the
consolidated
statement of
    Net amount of
assets
 presented  in
the
consolidated
statement of
    Gross amounts not offset in the
consolidated statement of
financial position
       
Description   amounts of
 assets
    financial
 position
    financial
position
    Financial
instruments
    Cash collateral
received
    Net Amount  
Derivative financial instruments used for hedging  at fair value     2,688       -       2,688       -       (1,496 )     1,192  
Total     2,688       -       2,688       -       (1,496 )     1,192  

 

  36  

 

 

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

Notes to the consolidated financial statements

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

 

9. Derivative financial instruments (continued)

 

Offsetting of financial assets and liabilities (continued)

 

b) Financial liabilities and derivative financial instruments – liabilities

 

March 31, 2019
          Gross amounts
offset in the
consolidated
    Net amount of
liabilities
presented
in the
consolidated
    Gross amounts not offset in
the consolidated statement of
financial position
       
Description   Gross
amounts of
liabilities
    statement of
financial
position
    statement of
financial
position
    Financial
instruments
    Cash
collateral
pledged
    Net
Amount
 
Derivative financial instruments used for hedging at fair value     29,262       -       29,262       -       (29,409 )     (147 )
Total     29,262       -       29,262       -       (29,409 )     (147 )

 

December 31, 2018
          Gross amounts
offset in the
consolidated
    Net amount of
liabilities
presented
in the
consolidated
    Gross amounts not offset in
the consolidated statement of
financial position
       
Description   Gross
amounts of
liabilities
    statement of
financial
position
    statement of
financial
position
    Financial
instruments
    Cash
collateral
pledged
    Net
Amount
 
Derivative financial instruments used for hedging at fair value     34,043       -       34,043       -       (35,960 )     (1,917 )
Total     34,043       -       34,043       -       (35,960 )     (1,917 )

 

  37  

 

 

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

Notes to the consolidated financial statements

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

 

10. Equipment and leasehold improvements

 

Equipment and leasehold improvement comprise owned and lease assets that do not meet the definition of investment property:

 

    March 31,
2019
    December 31,
2019
 
             
Equipment and leasehold improvements, net     6,396       6,686  
Right-of-use assets     16,762       -  
      23,158       6,686  

 

Following is the movement on the leases for which the Bank is a lessee:

 

    Building  
Balance at January 1, 2019     17,125  
Depreciation by right-of-use property     (363 )
Balance al December 31, 2019     16,762  

 

The Bank leases buildings for its offices, the lease of offices space typically run for a period of 15 years, and the representative offices for 3 to 5 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

 

The Bank sub-leases some of its properties under operating leases.

 

  38  

 

 

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

Notes to the consolidated financial statements

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

 

11. Deposits

 

The maturity profile of the Bank’s deposits, excluding interest payable, is as follows:

 

    March 31,     December 31,  
    2019     2018  
Demand     21,937       211,381  
Up to 1 month     1,085,708       1,192,252  
From 1 month to 3 months     715,156       412,638  
From 3 months to 6 months     462,633       533,135  
From 6 months to 1 year     304,798       462,156  
From 1 year to 2 years     69,853       70,047  
From 2 years to 5 years     87,489       89,213  
      2,747,574       2,970,822  

 

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

 

    March 31,     December 31,  
    2019     2018  
Aggregate amounts of $100,000 or more     2,747,173       2,970,438  
Aggregate amounts of deposits in the New York Agency     253,206       265,349  

 

    For the three months ended March 31,  
    2019     2018     2017  
Interest expense on deposits made in the New York Agency     1,732       1,153       710  

 

12. Securities sold under repurchase agreements

 

As of March 31, 2019, and December 31, 2018, the Bank has financing transactions under repurchase agreements for $28.2 million and $39.8 million, respectively.

 

During the period ended March 31, 2019 and 2018, $287 thousand and $32 thousand was recorded corresponding to interest expenses generated by financing agreements under repurchase agreements. These expenses are included as interest expense – borrowings and debt line in the consolidated statement of profit or loss. As of March 31, 2017, the Bank did not incur in any interest expense generated by financing agreements under repurchase agreements.

 

  39  

 

 

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

Notes to the consolidated financial statements

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

 

13. Borrowings and debt

 

Borrowings and debt are detailed as follows:

 

    March 31, 2019  
    Short-Term     Long-term        
Carring amount   Borrowings     Debt     Lease Liabilities     Borrowings     Debt     Lease Liabilities     Total  
Principal     1,072,884       82,257       1,061       724,320       616,265       19,419       2,516,206  
Prepaid commissions     -       -       -       (2,354 )     (644 )     -       (2,998 )
      1,072,884       82,257       1,061       721,966       615,621       19,419       2,513,208  

 

    December 31, 2018  
    Short-Term     Long-term        
Carring amount   Borrowings     Debt     Lease Liabilities     Borrowings     Debt     Lease Liabilities     Total  
Principal     1,975,174       45,930       -       886,384       614,505       -       3,521,993  
Prepaid commissions     -       -       -       (2,790 )     (757 )     -       (3,547 )
      1,975,174       45,930       -       883,594       613,748       -       3,518,446  

 

Short-term borrowings and debt

 

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

 

    March 31,     December 31,  
    2019     2018  
Short-term borrowings:                
At fixed interest rates     272,225       695,500  
At floating interest rates     800,659       1,279,674  
Total borrowings     1,072,884       1,975,174  
Short-term debt:                
At fixed interest rates     12,700       2,700  
At floating interest rates     69,557       43,230  
Total debt     82,257       45,930  
Total short-term borrowings and debt     1,155,141       2,021,104  
                 
Average outstanding balance during the period     1,348,417       1,095,530  
Maximum balance at any month-end     1,437,837       2,021,104  
Range of fixed interest rates on borrowings and debt in U.S. dollars      2.76% to 3.30 %     2.74% to 3.30 %
Range of floating interest rates on borrowings in U.S. dollars      2.78% to 3.30 %     2.72% to 3.41 %
Range of fixed interest rates on borrowings in Mexican pesos     -       -  
Range of floating interest rate on borrowings in Mexican pesos      8.81% to 9.34 %     8.49% to 9.39 %
Weighted average interest rate at end of the period     3.77 %     3.18 %
Weighted average interest rate during the period     3.50 %     3.00 %

 

  40  

 

 

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

Notes to the consolidated financial statements

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

 

13. Borrowings and debt (continued)

 

Short-term borrowings and debt (continued)

 

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

 

    March 31,     December 31,  
    2019     2018  
Currency                
US dollar     1,022,725       1,926,000  
Mexican peso     132,416       95,104  
Total     1,155,141       2,021,104  

 

Long-term borrowings and debt

 

Borrowings consist of long-term and syndicated loans obtained from international banks. Debt instruments consist of public and private issuances under the Bank's Euro Medium Term Notes Program (“EMTN”) as well as public issuances in the Mexican and Japanese markets. The breakdown of borrowings and long-term debt (original maturity of more than one year), along with contractual interest rates, plus prepaid commissions as of March 31, 2019 and December 31, 2018, respectively, are as follows:

 

Long-term borrowings:   March 31,
2019
    December 31,
2018
 
At fixed interest rates with due dates from January 2019 to February 2022     61,162       63,367  
At floating interest rates with due dates from August 2019 to August 2023     663,158       823,017  
Total long-term borrowings     724,320       886,384  
                 
Long-term debt:                
At fixed interest rates with due dates from June 2019 to March 2024     503,982       503,229  
At floating interest rates with due dates from April 2019 to June 2023     112,283       111,276  
Total long-term debt     616,265       614,505  
Total long-term borrowings and debt     1,340,585       1,500,889  
Less: Prepaid commissions     (2,998 )     (3,547 )
Total long-term borrowings and debt, net     1,337,587       1,497,342  
                 
Net average outstanding balance during the period     1,390,695       1,244,619  
Maximum outstanding balance at any month – end     1,390,093       1,500,889  
Range of fixed interest rates on borrowings and debt in U.S. dollars     2.25% to 3.25 %     2.25% to 3.25 %
Range of floating interest rates on borrowings and debt in U.S. dollars     3.15% to 4.20 %     3.26% to 4.46 %
Range of fixed interest rates on borrowings in Mexican pesos     5.45% to 9.09 %     5.25% to 9.09 %
Range of floating interest rates on borrowings and debt in Mexican pesos     9.11% to 9.83 %     9.19% to 9.71 %
Range of fixed interest rates on debt in Japanese yens     0.46 %     0.46 %
Range of fixed interest rates on debt in Euros     3.75 %     3.75 %
Range of fixed interest rates on debt in Australian dollars     3.33 %     3.33 %
Weighted average interest rate at the end of the period     4.35 %     4.35 %
Weighted average interest rate during the period     4.46 %     4.09 %

 

  41  

 

 

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

Notes to the consolidated financial statements

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

 

 

13. Borrowings and debt (continued)

 

Long-term borrowings and debt (continued)

 

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

 

    March 31,
2019
    December 31,
2018
 
Currency                
US dollar     1,088,990       1,203,101  
Mexican peso     98,603       143,661  
Japanese yen     72,152       72,670  
Euro     59,538       60,315  
Australian dollar     21,302       21,142  
Total     1,340,585       1,500,889  

 

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

 

Some borrowing agreements include various events of default and covenants related to minimum capital adequacy ratios, incurrence of additional liens, and asset sales, as well as other customary covenants, representations and warranties. As of March 31, 2019, the Bank was in compliance with all those covenants.

 

The future payments of long-term borrowings and debt outstanding as of March 31, 2019, are as follows:

 

Payments   Outstanding  
       
2019     200,856  
2020     475,394  
2021     479,774  
2022     62,523  
2023     62,500  
2024     59,538  
      1,340,585  

 

  42  

 

 

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

Notes to the consolidated financial statements

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

 

13. Borrowings and debt (continued)

 

Long-term borrowings and debt (continued)

 

Reconciliation of movements of borrowings and debt arising from financing activities of consolidated statements of cash flows :

 

Borrowings and debt, net as at January 1, 2018     2,211,567  
Net increase (decrease) in short-term borrowings and debt     950,259  
Proceeds from long-term borrowings and debt     609,017  
Repayments of long-term borrowings and debt     (256,173 )
Change in foreign currency     1,903  
Adjustment of fair value for hedge accounting relationship     753  
Other adjustments     1,120  
Borrowings and debt, net as at December 31, 2018     3,518,446  
Net increase (decrease) in short-term borrowings and debt     (868,016 )
Proceeds from long-term borrowings and debt     470,158  
Repayments of long-term borrowings and debt     (633,752 )
Proceeds from lease liabilities     20,734  
Payment of lease liabilities     (254 )
Change in foreign currency     3,075  
Adjustment of fair value for hedge accounting relationship     2,153  
Other adjustments     662  
Borrowings and debt, net as at March 31, 2019     2,513,208  

 

  43  

 

 

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

Notes to the consolidated financial statements

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

 

13. Borrowings and debt (continued)

 

Long-term borrowings and debt (continued)

 

Lease liabilities

 

Maturity analysis contractual undiscounted cash flows of the lease liability is detailed below:

 

    March 31,
 2019
 
Due within 1 year     2,000  
After 1 year but within 5 years     8,516  
After 5 years but within 10 years     17,060  
Total undiscounted lease liabilities     27,576  
         
Short-term     1,061  
Long-term     19,419  
Lease liabilities included in the statement of financial position at March 31     20,480  

 

Amounts recognized in profit or loss

 

    March 31,
 2019
 
Interest on lease liabilities     (362 )
Income from sub-leasing right-of-use assets     75  

 

Amounts recognized in the statement of cash flows

 

    March 31,
2019
 
Cash outflow for leases     496  

 

  44  

 

 

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

Notes to the consolidated financial statements

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

 

14. Earnings per share

 

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

 

    March 31,     March 31,     March 31,  
    2019     2018     2017  
(Thousands of U.S. dollars)                        
Profit for the period     21,245       14,498       23,458  
                         
(U.S. dollars)                        
Basic earnings per share     0.54       0.37       0.60  
Diluted earnings per share     0.54       0.37       0.60  
                         
(Thousands of shares)                        
Weighted average of common shares outstanding - applicable to basic EPS     39,542       39,466       39,188  
                         
Effect of diluted securities:                        
Stock options and restricted stock units plan     17       26       108  
                         
Adjusted weighted average of common shares outstanding applicable to diluted EPS     39,559       39,492       39,296  

 

  45  

 

 

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

Notes to the consolidated financial statements

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

 

15. Other comprehensive income

 

The breakdown of other comprehensive income (loss) relating to financial instruments at FVOCI, derivative financial instruments, and foreign currency translation is as follows:

 

    Financial
instruments
at FVOCI
    Derivative
financial
instruments
    Foreign
currency
translation
adjustment
    Total  
Balance as of January 1, 2017     (853 )     (1,948 )     -       (2,801 )
Change in fair value of debt instruments, net of hedging     120       817       -       937  
Change in fair value of equity instruments at FVOCI, net of hedging     -       -       -       -  
Reclassification of gains (losses) on financial instruments included in profit or loss (1)     105       (2,590 )     -       2,485  
Other comprehensive income (loss) for the period     225       (1,773 )     -       1,548  
Balance as of March 31, 2017     (628 )     (3,721 )     -       (4,349 )
                                 
Balance as of January 1, 2018     (385 )     858       1,490       1,963  
Change in fair value of debt instruments, net of hedging     26       1,265       -       1,291  
Change in fair value of equity instruments at FVOCI, net of hedging     (555 )     (68 )     -       (623 )
Reclassification of gains (losses) on financial instruments included in profit or loss (1)     2       1,158       -       1,160  
Exchange difference in conversion of foreign operating currency     -       -       (175 )     (175 )
Other comprehensive income (loss) for the period     (527 )     2,355       (175 )     1,653  
Balance as of March 31, 2018     (912 )     3,213       1,315       3,616  
                                 
Balance as of January 1, 2019     (2,800 )     3,011       209       420  
Change in fair value of debt instruments, net of hedging     526       (2,307 )     -       (1,781 )
Change in fair value of equity instruments at FVOCI, net of hedging     251       6       -       257  
Reclassification of gains (losses) on financial instruments included in profit or loss (1)     (171 )     641       -       470  
Exchange difference in conversion of foreign operating currency     -       -       (76 )     (76 )
Other comprehensive income (loss) for the period     606       (1,660 )     (76 )     (1,130 )
Balance as of March 31, 2019     (2,194 )     1,351       133       (710 )

 

(1) Reclassification adjustments include amounts recognized in profit or loss of the year that had been part of other comprehensive income in this and previous years.

 

  46  

 

 

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

Notes to the consolidated financial statements

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

 

15. Other comprehensive income (continued)

 

The following table presents amounts reclassified from other comprehensive income to profit or loss:

 

March 31, 2019
Details about other comprehensive
income components
  Amount reclassified
from other
comprehensive income
    Affected line item in the consolidated statement of
profit or loss
Realized gains (losses) on securities at FVOCI:     -     Interest income – securities at FVOCI
      67     Net gain on sale of securities at FVOCI
      104     Derivative financial instruments and impairment loss on financial instruments at FVOCI
      171      
             
Gains (losses) on derivative financial instruments:            
Foreign exchange forwards     (740 )   Interest income – loans
      (704 )   Interest expense – borrowings and deposits
      803     Net gain (loss) on foreign currency exchange
Interest rate swaps     -     Net gain (loss) on interest rate swaps
Cross-currency swaps     -     Net gain (loss) on cross-currency swaps
      (641 )    

 

March 31, 2018
Details about other comprehensive
income components
  Amount reclassified
from other
comprehensive income
    Affected line item in the consolidated statement of
profit or loss
Realized gains (losses) on securities at FVOCI:     -     Interest income – securities at FVOCI
      -     Net gain on sale of securities at FVOCI
      (2 )   Derivative financial instruments and impairment loss on financial instruments at FVOCI
      (2 )    
             
Gains (losses) on derivative financial instruments:            
Foreign exchange forwards     (418 )   Interest income – loans
      (1,110 )   Interest expense – borrowings and deposits
      379     Net gain (loss) on foreign currency exchange
Interest rate swaps     (9 )   Net gain (loss) on interest rate swaps
Cross-currency swaps     -     Net gain (loss) on cross-currency swaps
      (1,158 )    

 

  47  

 

 

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

Notes to the consolidated financial statements

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

 

15. Other comprehensive income (continued)

 

March 31, 2017
Details about other comprehensive
income components
 

Amount reclassified

from other
comprehensive income

    Affected line item in the consolidated statement of
profit or loss
Realized gains (losses) on securities at FVOCI:     -     Interest income – securities at FVOCI
      (36 )   Net gain on sale of securities at FVOCI
      (69 )   Derivative financial instruments and impairment loss on financial instruments at FVOCI
      (105 )    
             
Gains (losses) on derivative financial instruments:            
Foreign exchange forwards     (1,871 )   Interest income – loans
      781     Interest expense – borrowings and deposits
      3,515     Net gain (loss) on foreign currency exchange
Interest rate swaps     163     Net gain (loss) on interest rate swaps
Cross-currency swaps     2     Net gain (loss) on cross-currency swaps
      2,590      

 

  48  

 

 

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

Notes to the consolidated financial statements

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

 

16. Fees and commission income

 

Fees and commission income from contracts with customers broken down by main types of services according to the scope of IFRS 15, are detailed below:

 

    March 31, 2019  
    Syndicated
 loans
    Documentary
letters of credit
    Stand-by letters
of credit and
guarantees
    Credit
commitments
    Other     Total  
                                     
Openning and confirmation     -       1,414       510       208       -       2,132  
Negotiation and acceptance     -       163       -       -       -       163  
Amendment     -       6       11       -       -       17  
Structuring     -       -       -       -       -       -  
Other     -       (2 )     -       -       40       38  
      -       1,580       522       208       40       2,350  

 

    March 31, 2018  
    Syndicated
loans
    Documentary
letters of credit
    Stand-by letter of
credit and
guarantees
    Credit
commitments
    Others     Total  
                                     
Openning and confirmation     -       1,839       1,026       66       -       2,931  
Negotiation and acceptance     -       37       -       -       -       37  
Amendment     -       25       6       -       -       31  
Structuring     25       -       -       -       -       25  
Others     -       -       -       -       35       35  
      25       1,901       1,032       66       35       3,059  

 

Fees and commission income from contracts with customers recognized under IAS 18 as of March 31, 2017 are detailed below:

 

    March 31,
2017
 
Commission income – Loans & commitments, net     38  
Commission income - Letters of credit     3,063  
Commission income - Structuring     168  
Total     3,269  

  

  49  

 

 

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

Notes to the consolidated financial statements

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

 

16. Fees and commission income (continued)

 

The following table provides information on the ordinary income that is expected to be recognized on the contracts in force as of March 31, 2019 and December 31, 2018:

 

    Up to 1 year     1 to 2 years     More than 2
years
    Total  
                                 
Ordinary income expected to be recognized on the contracts as of March 31, 2019     1,622       377       673       2,672  

 

    Up to 1 year     1 to 2 years     More than 2
years
    Total  
                                 
Ordinary income expected to be recognized on the contracts as of December 31, 2018     1,655       377       761       2,793  

 

17. Business segment information

 

The Bank’s activities are managed and executed in two business segments: Commercial and Treasury. The business segment results are determined based on the Bank’s managerial accounting process as defined by IFRS 8 – Operating Segments, which assigns assets, liabilities, revenue and expense items to each business segment on a systematic basis. The maximum decision-making operating authority of the Bank is represented by the Chief Executive Officer and the Executive Committee, which review the internal management reports for each division at least every six months. Segment profit, as included in the internal management reports is used to measure performance as management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate within the same industry.

 

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

 

The Commercial Business Segment encompasses the Bank’s core business of financial intermediation and fee generation activities catering to corporations, financial institutions and investors in Latin America.  These activities include the origination of bilateral short-term and medium-term loans, structured and syndicated credits, loan commitments, and financial guarantee contracts such as issued and confirmed letters of credit, stand-by letters of credit, guarantees covering commercial risk, and other assets consisting of customers’ liabilities under acceptances.

 

Profits from the Commercial Business Segment include (i) net interest income from loans; (ii) fees and commissions from the issuance, confirmation and negotiation of letters of credit, guarantees and loan commitments, and through loan structuring and syndication activities; (iii) gain on sale of loans generated through loan intermediation activities, such as sales in the secondary market and distribution in the primary market; (iv) impairment loss on financial instruments; and (v) direct and allocated operating expenses.

 

The Treasury Business Segment focuses on managing the Bank’s investment portfolio, and the overall structure of its assets and liabilities to achieve more efficient funding and liquidity positions for the Bank, mitigating the traditional financial risks associated with the balance sheet, such as interest rate, liquidity, price and currency risks. Interest-earning assets managed by the Treasury Business Segment include liquidity positions in cash and cash equivalents, and financial instruments related to the investment management activities, consisting of securities at FVOCI and securities at amortized cost. The Treasury Business Segment also manages the Bank’s interest-bearing liabilities, which constitute its funding sources, mainly deposits, short- and long-term borrowings and debt.

 

Profits from the Treasury Business Segment include net interest income derived from the above mentioned treasury assets and liabilities, and related net other income (net results from derivative financial instruments and foreign currency exchange, gain (loss) per financial instruments at FVTPL, gain (loss) on sale of securities at FVOCI, and other income), recovery or impairment loss on financial instruments, and direct and allocated operating expenses.

 

  50  

 

 

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

Notes to the consolidated financial statements

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

 

17. Business segment information (continued)

 

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

 

    March 31, 2019  
    Commercial     Treasury     Total  
Interest income     67,255       6,299       73,554  
Interest expense     (194 )     (45,340 )     (45,534 )
Inter-segment net interest income     (39,274 )     39,274       -  
Net interest income     27,788       233       28,020  
Other income (expense), net     2,598       1,453       4,051  
Total income     30,385       1,685       32,071  
                         
Impairment loss on financial assets     (968 )     26       (942 )
Impairment loss on non-financial assets     -       -       -  
Operating expenses     (7,310 )     (2,574 )     (9,884 )
Segment profit (loss)     22,107       (862 )     21,245  
                         
Segment assets     5,522,790       896,984       6,419,774  
Segment liabilities     100,508       5,340,991       5,441,499  

 

    March 31, 2018  
    Commercial     Treasury     Total  
Interest income     53,890       3,547       57,437  
Interest expense     -       (30,847 )     (30,847 )