Report of Foreign Issuer (6-k)

Date : 08/01/2019 @ 8:35PM
Source : Edgar (US Regulatory)
Stock : Banco Latinoamericano de Comercio Exterior SA (BLX)
Quote : 22.12  -0.07 (-0.32%) @ 1:00AM
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Last Trade
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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 August, 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: August 1, 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 as of June 30, 2019

and for the six months ended June 30, 2019 and 2018.

 

 

 

 

Banco Latinoamericano de Comercio Exterior, S.A.

and Subsidiaries

 

Contents    
     
Unaudited condensed consolidated interim statement of financial position   1
     
Unaudited condensed consolidated interim statement of profit or loss   2
     
Unaudited condensed consolidated interim statement of other comprehensive income   3
     
Unaudited condensed consolidated interim statement of changes in equity   4
     
Unaudited condensed consolidated interim statement of cash flows   5
     
Notes to the unaudited condensed consolidated interim financial statements   6-67

 

 

 

 

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

 

Unaudited condensed consolidated interim statement of financial position

June 30, 2019 and December 31, 2018

(In thousands of US dollars)

 

 

    Notes     June 30,
2019
(Unaudited)
    December 31,
2018
(Audited)
 
Assets                        
                         
Cash and cash equivalents     4,19       869,500       1,745,652  
                         
Securities and other financial assets, net     5,19       104,080       123,598  
                         
Loans             5,570,574       5,778,424  
Interest receivable             44,982       41,144  
Allowance for loans losses             (103,283 )     (100,785 )
Unearned interest and deferred fees             (15,062 )     (16,525 )
Loans, net     6,19       5,497,211       5,702,258  
                         
Customers' liabilities under acceptances     19       71,091       9,696  
Derivative financial instruments - assets     9,19       1,397       2,688  
                         
Equipment and leasehold improvements, net     10       22,513       6,686  
Intangibles, net             1,417       1,633  
Other assets     11       8,345       16,974  
Total assets             6,575,554       7,609,185  
                         
Liabilities and Equity                        
Liabilities:                        
Demand deposits             69,655       211,381  
Time deposits             2,944,833       2,759,441  
      12,19       3,014,488       2,970,822  
Interest payable             8,078       12,154  
Total deposits             3,022,566       2,982,976  
                         
Securities sold under repurchase agreements     13,19       28,231       39,767  
Borrowings and debt, net     14,19       2,405,151       3,518,446  
Interest payable             9,948       13,763  
                         
Customers' liabilities under acceptances     19       71,091       9,696  
Derivative financial instruments - liabilities     9,19       20,801       34,043  
Allowance for  loan commitments and financial guarantees contracts losses     7,19       2,554       3,289  
Other liabilities             12,697       13,615  
Total liabilities             5,573,039       6,615,595  
                         
Equity:                        
Common stock             279,980       279,980  
Treasury stock             (59,669 )     (61,076 )
Additional paid-in capital in excess of value assigned to common stock             119,477       119,987  
Capital reserves     22       95,210       95,210  
Regulatory reserves     22       136,019       136,019  
Retained earnings             434,111       423,050  
Other comprehensive income     16       (2,613 )     420  
Total equity             1,002,515       993,590  
Total liabilities and equity             6,575,554       7,609,185  

 

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

 

  1  

 

 

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

 

Unaudited condensed consolidated interim statements of profit or loss

For the three and six months ended June 30, 2019 and 2018

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

 

 

          For the three months
ended June 30
    For the six months
ended June 30
 
    Notes     2019     2018     2019     2018  
                               
Interest income:                                        
Deposits             4,181       3,225       9,538       6,164  
Securities             789       664       1,731       1,272  
Loans             65,560       58,030       132,815       111,920  
Total interest income     18       70,530       61,919       144,084       119,356  
Interest expense:                                        
Deposits             (18,896 )     (16,388 )     (36,589 )     (30,392 )
Borrowings and debt             (23,703 )     (17,642 )     (51,544 )     (34,485 )
Total interest expense     18       (42,599 )     (34,030 )     (88,133 )     (64,877 )
                                         
Net interest income             27,931       27,889       55,951       54,479  
                                         
Other income (expense):                                        
Fees and commissions, net     17,18       5,128       5,032       7,478       8,091  
Gain (loss) on financial instruments, net     8,18       63       (796 )     819       183  
Other income, net             512       530       1,457       645  
Total other income, net     18       5,703       4,766       9,754       8,919  
                                         
Total revenues             33,634       32,655       65,705       63,398  
                                         
Impairment loss on financial instruments     5,6,7       (811 )     (1,771 )     (1,753 )     (3,702 )
Impairment loss on non-financial assets     18       -       (2,888 )     -       (2,888 )
                                         
Operating expenses:                                        
Salaries and other employee expenses             (5,829 )     (6,083 )     (12,140 )     (16,177 )
Depreciation of equipment and leasehold improvements     10       (705 )     (319 )     (1,396 )     (642 )
Amortization of intangible assets             (191 )     (337 )     (355 )     (675 )
Other expenses             (3,826 )     (4,631 )     (6,544 )     (8,190 )
Total operating expenses     18       (10,551 )     (11,370 )     (20,435 )     (25,684 )
Profit for the period             22,272       16,626       43,517       31,124  
                                         
Per share data:                                        
Basic earnings per share     15       0.56       0.42       1.10       0.79  
Diluted earnings per share     15       0.56       0.42       1.10       0.79  
Weighted average basic shares     15       39,553       39,626       39,548       39,547  
Weighted average diluted shares     15       39,553       39,651       39,548       39,572  

 

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

 

  2  

 

 

Banco Latinoamericano de Comercio Exterior, S. A. y Subsidiarias

 

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

For the three and six months ended June 30, 2019 and 2018

(In thousands of US dollars)

 

 

            For the three months
ended June 30
    For the six months
ended June 30
 
            2019     2018     2019     2018  
                                 
Profit for the period             22,272       16,626       43,517       31,124  
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     16       (864 )     (2,519 )     (608 )     (2,519 )
                                         
Items that are or may be reclassified subsequently to profit and loss:                                        
Change in fair value of financial instruments, net of hedging     16       (743 )     83       (2,664 )     83  
Reclassification of gains (losses) on financial instruments to the profit or loss     16       (274 )     2,694       338       2,694  
Exchange difference in conversion of foreign currency operation     16       (23 )     (137 )     (99 )     (137 )
                                         
Other comprehensive income (loss)     16       (1,904 )     121       (3,033 )     121  
                                         
Total comprehensive income for the period             20,368       16,747       40,484       31,245  

 

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 changes in stockholders's equity

For the six months ended June 30, 2019 and 2018

(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, 2018     279,980       (63,248 )     119,941       95,210       129,254       479,712       1,963       1,042,812  
Profit for the period     -       -       -       -       -       31,124       -       31,124  
Other comprehensive income (loss)     -       -       -       -       -       -       121       121  
Issuance of restricted stock     -       1,259       (1,259 )     -       -       -       -       -  
Compensation cost - stock options and stock units plans     -       -       123       -       -       -       -       123  
Exercised options and stock units vested     -       3,355       254       -       -       -       -       3,609  
Repurchase of "Class B" and "Class E" common stock     -       (1 )     -       -       -       -       -       (1 )
Regulatory  reserve     -       -       -       -       (5,297 )     5,297       -       -  
Dividends declared     -       -       -       -       -       (30,409 )     -       (30,409 )
Balances at June 30, 2018     279,980       (58,635 )     119,059       95,210       123,957       485,724       2,084       1,047,379  
                                                                 
Balances at January 1, 2019, previously reported     279,980       (61,076 )     119,987       95,210       136,019       423,050       420       993,590  
Effect for change in accounting policy     -       -       -       -       -       (2,007 )     -       (2,007 )
Balances at January 1, 2019, adjusted     279,980       (61,076 )     119,987       95,210       136,019       421,043       420       991,583  
Profit for the period     -       -       -       -       -       43,517       -       43,517  
Other comprehensive income     -       -       -       -       -       -       (3,033 )     (3,033 )
Issuance of restricted stock     -       380       (1,259 )     -       -       -       -       (879 )
Compensation cost - stock options and stock units plans     -       -       897       -       -       -       -       897  
Exercised options and stock units vested     -       1,027       (148 )     -       -       -       -       879  
Dividends declared     -       -       -       -       -       (30,449 )     -       (30,449 )
Balances at June 30, 2019     279,980       (59,669 )     119,477       95,210       136,019       434,110       (2,613 )     1,002,515  

 

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 cash flows

For the six months ended June 30, 2019 and 2018

(In thousands of US dollars)

 

 

    2019     2018  
             
Cash flows from operating activities                
Profit for the period     43,517       31,124  
Adjustments to reconcile profit for the year to net cash provided by (used in) operating activities:                
Net changes in hedging position     (481 )     (1,786 )
Depreciation of equipment and leasehold improvements     1,396       642  
Amortization of intangible assets     355       675  
Loss for disposal of equipment and leasehold improvements     -       291  
Loss for derecognition of intangible assets     -       6,686  
Impairment loss on financial instruments     1,753       3,662  
(Gain) loss, net on sale of financial assets at fair value through OCI     (163 )     342  
Amortization of premium and discount related to securities at amortized cost     453       203  
Gain on sale of property and equipment     -       (18 )
Impairment loss on other assets     -       1,740  
Compensation cost - share-based payment     897       123  
Interest income     (144,084 )     (119,356 )
Interest expense     88,133       64,877  
Net decrease (increase) in operating assets:                
Pledged deposits     12,566       18,922  
Loans     207,850       (51,257 )
Other assets     8,630       (6,649 )
Net increase (decrease) in operating liabilities:                
Due to depositors     43,666       60,158  
Other liabilities     (612 )     1,936  
Cash flows provided by (used in) operating activities     263,876       12,315  
Interest received     140,831       111,849  
Interest paid     (96,024 )     (64,740 )
Net cash provided by operating activities     308,683       59,424  
                 
Cash flows from investing activities:                
Acquisition of equipment and leasehold improvements     (65 )     (492 )
Acquisition of intangible assets     (125 )     (6,725 )
Proceeds from the sale of securities at fair value through OCI     6,000       3,684  
Proceeds from maturities of securities at amortized cost     15,979       1,131  
Purchases of securities at amortized cost     (3,479 )     (10,529 )
Net cash provided by  (used in) investing activities     18,310       (12,931 )
                 
Cash flows from financing activities:                
 (Decrease) increase in securities sold under repurchase agreements     (11,536 )     -  
Net decrease in short-term borrowings and debt     (897,407 )     (23,065 )
Proceeds from long-term borrowings and debt     83,636       160,174  
Repayments of long-term borrowings and debt     (334,885 )     (126,172 )
Payments of lease liabilities     (512 )     -  
Dividends paid     (30,754 )     (30,641 )
Exercised stock options     879       3,609  
Repurchase of common stock     -       (1 )
Net cash used in financing activities     (1,190,579 )     (16,096 )
                 
Increase (decrease) net in cash and cash equivalents     (863,586 )     30,397  
Cash and cash equivalents at beginning of the period     1,706,192       618,807  
Cash and cash equivalents at end of the period     842,606       649,204  

 

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

 

  5  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

1. Corporate information

 

Banco Latinoamericano de Comercio Exterior, S. A. (“Bladex Head Office” and together with its subsidiaries “Bladex” or the “Bank”), headquartered in Panama City, Republic of Panama, is a specialized multinational bank established to support the financing of 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 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”).

 

  6  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

1. Corporate information (continued)

 

The Bank has representative offices in Buenos Aires, Argentina; in Mexico City, 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 July 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.

 

2.2 Reclassification

 

Certain amounts in the consolidated financial statements of the prior year was reclassified in order to align them with the presentation of the actual period.  These reclassifications did not change total assets, liabilities, equity, nor the profit for the period.

 

3. Change in accounting policies

 

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the consolidated financial statements of the Bank at and for the year ended December 31, 2018.

 

Changes in accounting policies are also expected to be reflected in the consolidated financial statements of the Bank at and for the year ended December 31, 2019.

 

3.1 Leases

 

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.

 

- 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.

 

  7  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

3. Change in accounting policies (continued)

 

3.1 Leases (continued)

 

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.

 

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:

 

A. 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.

 

B. 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.

 

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.

 

  8  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

3. Change in accounting policies (continued)

 

3.1 Leases (continued)

 

C. As a lessor

 

The Bank do not require to make any adjustments on transition of IFRS 16 for its leases like a lessor, except when figure as an intermediate lessor. The Bank accounted its leases in accordance with IFRS 16 on the date of initial application.

 

Under IFRS 16, the Bank should the evaluate the classification of the sublease by reference to the right-of-use assets, and not by reference to the underlying asset. At transition, the Bank revalued the classification of a sublease contract previously classified as an operating lease under IAS 17. The Bank concluded that the sublease is an operating lease under IFRS 16.

 

The Bank applied IFRS 15 to revenue from contracts with customers to assign the consideration in the contract to each lease component and that is not a lease.

 

D. Impacts on consolidated 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 commitments disclosed as of December 31, 2018     16,790  
Extensions and termination options that are reasonably true of being exercised     10,786  
      27,576  
         
Discounted lease liabilities using the internal funding cost rate as of January 1, 2019     20,735  

 

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 risks 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.

 

  9  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

4. Cash and cash equivalents

 

    June 30,     December 31,  
    2019     2018  
Cash and due from banks     8,246       9,644  
Interest-bearing deposits in banks     861,254       1,736,008  
Total     869,500       1,745,652  
                 
Less:                
Pledged deposits     26,894       39,460  
Total cash and cash equivalents     842,606       1,706,192  

 

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

 

    June 30, 2019     December 31, 2018  
    Amount     Interest rate
range
    Amount     Interest rate
range
 
Interest-bearing deposits in banks:                                
Demand deposits (1)     861,254       1.00% a 5.88%       1,686,008       2.43% to 6.5%  
Time deposits (2)     -               50,000       -  
Total     861,254               1,736,008          
                                 
Pledged deposits (3)     26,894       2.38 %     39,460       2.40 %

 

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

 

    June 30,     December 31,  
    2019     2018  
Country:                
United States of America (3)     13,843       15,009  
United Kingdom     11,937       15,217  
Spain     560       8,740  
Netherlands     174       494  
France     380       -  
Total     26,894       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 June 30, 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.

 

  10  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

5. Securities and other financial assets, net

 

All securities and other financial assets as of June 30, 2019 and December 31, 2018 are presented as follows:

 

          At fair value        
At June 30, 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     72,195       16,231       5,785       8,739       102,950  
Interest receivable     878       375       -       -       1,253  
Reserves     (123 )     -       -       -       (123 )
      72,950       16,606       5,785       8,739       104,080  

 

          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:

 

    June 30,     December 31,  
    2019     2018  
Corporate debt                
Brazil     1,494       1,491  
Mexico     7,177       7,264  
Panama     11,151       11,151  
      19,822       19,906  
                 
Sovereign debt                
Colombia     15,444       28,183  
Mexico     19,682       19,859  
Panama     17,247       17,378  
      52,373       65,420  
      72,195       85,326  

 

As of June 30, 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 June 30, 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.

 

  11  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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:

 

    June 30,
2019
    December 31,
2018
 
             
Due within 1 year     25,954       28,551  
After 1 year but within 5 years     46,241       56,775  
      72,195       85,326  

 

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

 

Rating     June 30,
2019
    December 31,
2018
 
2       -       5,181  
3       31,930       44,858  
4       38,770       33,796  
5       1,495       1,491  
Total       72,195       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, excluding interest receivable, are as follows:

 

    June 30,     December 31,  
    2019     2018  
Corporate debt                
Panama     -       6,157  
      -       6,157  
Sovereign debt                
Brazil     3,051       2,887  
Chile     5,121       5,011  
Trinidad and Tobago     8,059       7,743  
      16,231       15,641  
      16,231       21,798  

 

As of June 30, 2019, and December 31, 2018, the allowance for expected credit losses relating to securities at fair value through other comprehensive income amounted to $200 thousand and $172 thousand, respectively.

 

As of June 30, 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.

 

  12  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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

 

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

 

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

 

    Three months ended June 30  
    2019     2018  
Realized gain on sale of securities     54       -  
Realized loss on sale of securities     -       -  
Net gain on sale of securities at FVOCI     54       -  

 

    Six months ended June 30  
    2019     2018  
Realized gain on sale of securities     163       -  
Realized loss on sale of securities     -       -  
Net gain on sale of securities at FVOCI     163       -  

 

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

 

      June 30,     December 31,  
Rating     2019     2018  
1       5,121       5,010  
4       -       13,901  
5       11,110       2,887  
Total       16,231       21,798  

 

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

 

    June 30, 2019     December 31, 2018  
    Amortized           Amortized        
    Cost     Fair value     cost     Fair value  
                         
Due within 1 year     8,149       8,059       8,386       7,743  
After 1 year but within 5 years     8,065       8,172       8,084       7,898  
After 5 years but within 10 years     -       -       5,926       6,157  
      16,214       16,231       22,396       21,798  

 

  13  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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

 

Equity instrument at FVOCI, non-recyclable in profit & loss

 

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

 

    June 30,
2019
    December 31,
2018
 
             
Equity instrument     5,785       6,273  

 

Financial Instrument at fair value through profit and loss

 

The following table presents the fair value of the debt instrument at fair value with changes in profit or loss:

 

    June 30,
2019
    December 31,
2018
 
             
Financial instrument     8,739       8,750  

 

  14  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

6. Loans

 

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

 

    June 30,     December 31,  
    2019     2018  
Corporations:                    
Private     1,677,087       1,893,696  
State-owned     694,264       801,938  
Financial institutions:                
Private     2,588,603       2,458,690  
State-owned     610,620       624,100  
Total     5,570,574       5,778,424  

 

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

 

    June 30,     December 31,  
    2019     2018  
Financial institutions     3,199,223       3,082,790  
Industrial     929,642       986,262  
Oil and petroleum derived products     539,632       634,615  
Agricultural     226,301       446,960  
Services     369,632       393,925  
Mining     37,361       20,000  
Sovereign     53,123       59,026  
Other     215,660       154,846  
Total     5,570,574       5,778,424  

 

  15  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

6. Loans (continued)

 

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

 

June 30, 2019  
      Corporations     Financial institutions        
Rating     Private     State-owned     Private     State-owned     Total  
1-4       1,006,311       263,173       1,010,734       103,325       2,383,543  
5-6       397,588       205,311       1,291,840       409,278       2,304,017  
7       208,487       225,780       286,029       98,017       818,313  
8       -       -       -       -       -  
9       -       -       -       -       -  
10       64,701       -       -       -       64,701  
Total       1,677,087       694,264       2,588,603       610,620       5,570,574  

 

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  

 

  16  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

6. Loans (continued)

 

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

 

    June 30,     December 31,  
    2019     2018  
Country:                
Brazil     939,864       1,156,223  
Mexico     845,058       867,441  
Colombia     634,407       625,932  
Chile     477,461       176,976  
Argentina     382,601       604,112  
Dominican Republic     358,294       301,067  
Panama     348,426       485,546  
Guatemala     325,687       328,830  
Costa Rica     289,727       370,087  
Ecuador     229,198       188,445  
Trinidad and Tobago     192,028       144,874  
Paraguay     134,616       158,685  
Peru     120,021       78,191  
Honduras     85,008       89,205  
Jamaica     55,579       21,727  
El Salvador     55,292       70,048  
Germany     35,500       17,500  
Singapore     28,700       38,500  
Hong Kong     12,500       -  
Luxembourg     10,726       17,664  
Belgium     8,000       13,278  
Uruguay     1,881       9,906  
Bolivia     -       14,187  
Total     5,570,574       5,778,424  

 

  17  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

6. Loans (continued)

 

The remaining loan maturities are summarized as follows:

 

    June 30,     December 31,  
    2019     2018  
Current:                
Up to 1 month     887,230       820,184  
From 1 month to 3 months     935,618       966,210  
From 3 months to 6 months     948,871       1,281,615  
From 6 months to 1 year     1,226,020       769,280  
From 1 year to 2 years     456,569       719,564  
From 2 years to 5 years     992,807       1,110,489  
More than 5 years     58,758       46,381  
      5,505,873       5,713,723  
                 
Impaired     64,701       64,701  
Total     5,570,574       5,778,424  

 

As of June 30, 2019, the range of interest rates on loans fluctuates from 1.20% to 11.73%, 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:

 

    June 30,     December 31,  
    2019     2018  
             
Fixed interest rates     2,713,039       2,706,834  
Floating interest rates     2,857,535       3,071,590  
Total     5,570,574       5,778,424  

 

As of June 30, 2019, and December 31, 2018, 78% of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

 

  18  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

6. Loans (continued)

 

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

 

    June 30, 2019        
    Stage 1     Stage 2     Stage 3     Total  
Gross carrying amount                                
Current     5,201,350       304,523       54,616       5,560,489  
Past due                                
90-120 days     -       -       -       -  
151-180 days     -       -       -       -  
More than 180 days     -       -       10,085       10,085  
Total past due     -       -       10,085       10,085  
Total     5,201,350       304,523       64,701       5,570,574  

 

    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 June 30, 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 June 30 , 2019 and December 31, 2018, approximately 12% 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 June 30, 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.

 

Recognition and derecognition of financial assets

 

During the periods ended June 30 , 2019 and 2018, 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 June 30, 2019       5,000       -  
Carrying amount as of June 30, 2018       71,667       (625 )

 

  19  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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     (805 )     805       -       -  
Transfer to credit-impaired financial instruments     -       (2,743 )     2,743       -  
Transfer to 12-month expected credit losses     -       -       -       -  
Net effect of changes in allowance for expected credit losses     (948 )     2,856       7,585       9,493  
Financial instruments that have been derecognized during the period     (20,778 )     (5,285 )     -       (26,063 )
New financial assets originated or purchased     19,049       -       -       19,049  
Write-offs     -       -       -       -  
Recoveries     -       -       19       19  

Allowance for expected credit losses as of June 30, 2019

    31,475       12,022       59,786       103,283  

 

    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).

 

  20  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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:

 

    June 30,     December 31,  
    2019     2018  
Documentary letters of credit     203,410       218,988  
Stand-by letters of credit and guarantees - commercial risk     258,423       179,756  
Credit commitments     105,500       103,143  
Total loans commitments and financial guarantee contracts     567,333       501,887  

 

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

 

    June 30,     December 31,  
Maturities   2019     2018  
Up to 1 year     474,133       434,544  
From 1 to 2 years     13,200       200  
From 2 to 5 years     80,000       67,143  
Total     567,333       501,887  

 

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

 

      June 30,     December 31,  
Rating     2019     2018  
1-4       203,110       94,724  
5-6       203,637       158,864  
7       160,586       248,299  
Total       567,333       501,887  

 

 

  21  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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:

 

    June 30,     December 31,  
    2019     2018  
Country:                
Ecuador     159,634       247,225  
Costa Rica     63,533       38,598  
Colombia     59,544       52,000  
Dominican Republic     57,991       16,500  
Brazil     50,000       50,000  
France     47,906       -  
Mexico     43,088       22,731  
Panama     22,671       29,175  
Uruguay     21,007       750  
Peru     15,804       2,846  
Guatemala     13,578       15,293  
Switzerland     10,000       -  
Canada     1,079       422  
El Salvador     562       824  
Bolivia     546       293  
Honduras     390       250  
Germany     -       18,000  
Argentina     -       6,980  
Total     567,333       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.

 

  22  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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     59       194       -       253  
Financial instruments that have been derecognized during the period     (2,463 )     (9 )     -       (2,472 )
New instruments originated or purchased     1,484       -       -       1,484  

Allowance for expected credit losses as of June 30, 2019

    2,169       385       -       2,554  

 

    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.

 

  23  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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:

 

    Three months ended June 30  
    2019     2018  
Gain in derivative financial instruments and changes in foreign currency, net     13       (516 )
Gain (loss) in financial instruments at fair value through profit or loss     (4 )     (280 )
Gain realized in financial instruments at fair value with changes in other comprehensive income     54       -  
(Loss) gain on sale of loans     -       -  
      63       (796 )

 

    Six months ended June 30  
    2019     2018  
Gain in derivative financial instruments and changes in foreign currency, net     283       1,150  
Gain (loss) in financial instruments at fair value through profit or loss     373       (342 )
Gain realized in financial instruments at fair value with changes in other comprehensive income     163       -  
(Loss) gain on sale of loans     -       (625 )
      819       183  

 

  24  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

9. Derivative financial instruments

 

Quantitative information on derivative financial instruments is as follows:

 

    June 30, 2019  
    Nominal     Carrying amount of the
hedging instrument
    Changes in fair
value used for
calculating
hedge
 
    Amount     Asset     Liability     ineffectiveness  
Fair value hedges:                        
Interest rate swaps     447,167       153       (2,854 )     3,325  
Cross-currency swaps     147,991       628       (6,841 )     8,527  
Cash flow hedges:                                
Interest rate swaps     278,000       -       (1,559 )     1,204  
Cross-currency swaps     23,025       -       (1,553 )     (169 )
Foreign exchange forwards     175,769       616       (7,978 )     (994 )
Net investment hedges:                                
Foreign exchange forwards     5,752       -       (16 )     (62 )
Total     1,077,704       1,397       (20,801 )     11,831  

 

    December 31, 2018  
    Nominal     Carrying amount of the
hedging instrument
    Changes in fair
value used for
calculating
hedge
 
    Amount     Asset     Liability     ineffectiveness  
Fair value hedges:                        
Interest rate swaps     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.

 

  25  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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:

 

    Three months ended June 30, 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     1,138     Gain (loss) on interest rate swaps     -       -  
Cross-currency swaps     311     Gain on financial instruments, net     -       -  
            Interest income – loans     (498 )     -  
Foreign exchange forwards     608     Interest expenses – deposits     (525 )     -  
            Gain on financial instruments, net     (309 )     -  
Total     2,057           (1,332 )     -  
                             
Derivatives – net investment hedge                            
Foreign exchange forwards     128                      
Total     128                      

 

  26  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

9. Derivative financial instruments (continued)

 

    Six months ended June 30, 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     1,948     Gain (loss) on interest rate swaps     -       -  
Cross-currency swaps     166     Gain on financial instruments, net     -       -  
            Interest income – loans     (527 )     -  
Foreign exchange forwards     1,744     Interest expenses – deposits     (1,045 )     -  
            Gain on financial instruments, net     (170 )     -  
Total     3,858           (1,402 )     -  
                             
Derivatives – net investment hedge                            
Foreign exchange forwards     123                      
Total     123                      

 

  27  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

9. Derivative financial instruments (continued)

 

    Three months ended June 30, 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     (468 )   Gain (loss) on interest rate swaps     -       -  
Cross-currency swaps     856     Gain on financial instruments, net     -       -  
            Interest income – loans     746       -  
Foreign exchange forwards     9,923     Interest expenses – deposits     1,117       -  
            Gain on financial instruments, net     642       -  
Total     10,311           2,505       -  
                             
Derivatives – net investment hedge                            
Foreign exchange forwards     (928 )                    
Total     (928 )                    

 

  28  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

9. Derivative financial instruments (continued)

 

    Six months ended June 30, 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     (2,011 )   Gain (loss) on interest rate swaps     -       -  
Cross-currency swaps     1,040     Gain on financial instruments, net     -       4  
            Interest income – loans     1,164       -  
Foreign exchange forwards     7,298     Interest expenses – deposits     2,227       -  
            Gain on financial instruments, net     (2,732 )     -  
Total     (6,327 )         659       4  
                             
Derivatives – net investment hedge                            
Foreign exchange forwards     (919 )                    
Total     (919 )                    

 

  29  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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:

 

    June 30, 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     23       208       231  
    Interest income – loans     (9 )     1,703       1,694  
    Interest expenses – borrowings and debt     (1,937 )     (6,154 )     (8,091 )
    Gain on financial instruments, net     (435 )     283       (152 )
Cross-currency swaps   Interest income – loans     (251 )     608       357  
    Interest expenses – borrowings and debt     (959 )     (3,264 )     (4,223 )
    Gain on financial instruments, net     (5,003 )     4,203       (800 )
Total         (8,571 )     (2,413 )     (10,984 )

 

    June 30, 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 )     194       173  
    Interest income – loans     (14 )     160       146  
    Interest expenses – borrowings and debt     (555 )     (6,099 )     (6,654 )
    Gain on financial instruments, net     (3,425 )     3,262       (163 )
Cross-currency swaps   Interest income – loans     (488 )     936       448  
    Interest expenses – borrowings and debt     98       (4,535 )     (4,437 )
    Gain on financial instruments, net     (1,172 )     2,312       1,140  
Total         (5,577 )     (3,770 )     (9,347 )

 

  30  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

9. Derivative financial instruments (continued)

 

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:

 

    June 30, 2019
Fair value hedges   Carrying
amount
    Accumulated
fair value
adjustments
    Line item in the consolidated statement of
financial position
Interest rate risk                    
Securities at FVOCI     12,653       57     Securities and other financial instruments, net
Loans     65,251       585     Loans
Issuances     368,784       (1,216 )   Borrowings and debt, net
                     
Foreign exchange rate risk and interest rate risk:                    
Loans     9,768       72     Loans
Issuances     130,547       5,051     Borrowings and debt, net

 

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

 

  31  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

9. Derivative financial instruments (continued)

 

Derivatives financial position and performance (continued)

 

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

 

    June 30, 2019  
Risk type   Foreign
exchange risk
    Interest rate
risk
    Foreign exchange
and interest
rate risks
    Total  
Up to 1 month   -     -     -     -  
31 to 60 days     8,927       4,500       -       13,427  
61 to 90 days     31,461       75,000       -       106,461  
91 to 180 days     23,784       80,000       -       103,784  
181 to 365 days     13,375       463,000       -       476,375  
1 to 2 years     7,252       69,667       23,025       99,944  
2 to 5 years     96,722       33,000       147,991       277,713  
More than 5 years     -       -       -       -  
Total     181,521       725,167       171,016       1,077,704  

 

    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     27,177       17,000       146,505       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     -       89,000       11,484       100,484  
More than 5 years     -       -       68,768       68,768  
Total     182,494       893,500       249,782       1,325,776  

 

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).

 

  32  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

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 4.7 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 $432 thousand are expected to be reclassified into profit or loss during the twelve-month year ending June 30 , 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 $3.8 million are expected to be reclassified into profit or loss during the twelve-month year ending June 30 , 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.

 

  33  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

9. Derivative financial instruments (continued)

 

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.

 

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

 

a) Derivative financial instruments – assets

 

June 30, 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     1,397       -       1,397       -       (1,096 )     301  
Total     1,397       -       1,397       -       (1,096 )     301  

 

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  

 

  34  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

9. Derivative financial instruments (continued)

 

Offsetting of financial assets and liabilities (continued)

 

b) Financial liabilities and derivative financial instruments – liabilities

 

June 30, 2019
     Gross     Gross amounts
offset in the
consolidated
statement of
    Net amount of
liabilities
presented in
the
consolidated
    Gross amounts not offset in
the consolidated statement of
financial position
       
Description   amounts of
assets
    financial
position
    statement of
financial
    Financial
instruments
    Cash
collateral
pledged
    Net
Amount
 
Derivative financial instruments used for hedging at fair value     20,801       -       20,801       -       (23,394 )     (2,593 )
Total     20,801       -       20,801       -       (23,394 )     (2,593 )

 

December 31, 2018
     Gross     Gross amounts
offset in the
consolidated
statement of
    Net amount of
liabilities
presented in
the
consolidated
statement of
    Gross amounts not offset in
the consolidated statement of
financial position
       
Description   amounts of
liabilities
    financial
position
    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 )

 

  35  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

10. Equipment and leasehold improvements

 

Leases

 

In accordance with the accounting policy described in note 3.1, the Bank has applied IFRS 16, under the modified retrospective method. The following is the detail of the equipment and improvements to the leased property that comprise properties and leased assets that do not meet the definition of investment property:

 

    June 30,
2019
    December 31,
2019
 
             
Equipment and leasehold improvements, net     6,104       6,686  
Right-of-use assets     16,409       -  
      23,153       6,686  

 

Following is the movement of right-of-use assets on the leases for which the Bank is a lessee:

 

    Building  
Balance at January 1, 2019     17,125  
Increase due to revaluation of assets by right of use     8  
Depreciation by right-of-use property     (724 )
Balance al June 30, 2019     16,409  

 

The Bank leases buildings for its offices. The lease of offices spaces 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.

 

11. Other assets

 

Following is a summary of other assets

 

    June 30,     December 31,  
    2019     2018  
Accounts receivable (1)     2,983       13,333  
Interest receivable - deposits     35       281  
IT projects under development     665       357  
Other     4,662       3,003  
      8,345       16,974  

 

(1) As of December 31, 2018, the sale of financial assets was executed for $12.4 million and related payment was received in January 2019.

 

  36  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

12. Deposits

 

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

 

    June 30,     December 31,  
    2019     2018  
Demand     69,655       211,381  
Up to 1 month     1,280,921       1,192,252  
From 1 month to 3 months     672,304       412,638  
From 3 months to 6 months     757,686       533,135  
From 6 months to 1 year     143,191       462,156  
From 1 year to 2 years     2,029       70,047  
From 2 years to 5 years     88,702       89,213  
      3,014,488       2,970,822  

 

13. Securities sold under repurchase agreements

 

As of June 30, 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 June 30, 2019 and 2018, $509 thousand and $291 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 profit or loss.

 

14. Borrowings and debt

 

Borrowings and debt are detailed as follows:

 

    June 30, 2019  
    Short-Term     Long-term  
Carring amount   Borrowings     Debt     Lease Liabilities     Borrowings     Debt     Lease Liabilities     Total  
Principals     1,046,005       80,340       1,095       722,136       538,984       19,127       2,407,687  
Prepaid commissions     -       -       -       (2,067 )     (469 )     -       (2,536 )
    1,046,005       80,340       1,095       720,069       538,515       19,127       2,405,151  

 

    December 31, 2018  
    Short-Term     Long-term  
Carring amount   Borrowings     Debt     Lease Liabilities     Borrowings     Debt     Lease Liabilities     Total  
Principals     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  

 

  37  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

14. Borrowings and debt (continued)

 

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:

 

    June 30,     December 31,  
    2019     2018  
Short-term borrowings:                
At fixed interest rates     325,000       695,500  
At floating interest rates     721,005       1,279,674  
Total borrowings     1,046,005       1,975,174  
Short-term debt:                
At fixed interest rates     10,000       2,700  
At floating interest rates     70,340       43,230  
Total debt     80,340       45,930  
Total short-term borrowings and debt     1,126,345       2,021,104  
                 
Average outstanding balance during the period     1,172,622       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      2.65% to 3.30%       2.74% to 3.30%  
Range of floating interest rates on borrowings in U.S. dollars      2.74% to 3.11%       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      8.80% to 9.31%       8.49% to 9.39%  
Weighted average interest rate at end of the period     3.86%     3.18%
Weighted average interest rate during the period     3.65%     3.00%

 

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

 

    June 30,     December 31,  
    2019     2018  
Currency                
US dollar     982,800       1,926,000  
Mexican peso     143,545       95,104  
Total     1,126,345       2,021,104  

 

  38  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

14. Borrowings and debt (continued)

 

Long-term borrowings and debt

 

Borrowings consist of long-term and syndicated loans obtained from international banks. Debt instruments consist of public and private issuances under the Bank's Euro Medium Term Notes Program (“EMTN”) as well as public issuances in the Mexican 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 June 30, 2019 and December 31, 2018, respectively, are as follows:

 

Long-term borrowings:   June 30,
2019
    December 31,
2018
 
At fixed interest rates with due dates from October 2020 to February 2022     59,023       63,367  
At floating interest rates with due dates from November 2019 to August 2023     663,113       823,017  
Total long-term borrowings     722,136       886,384  
                 
Long-term debt:                
At fixed interest rates with due dates from May 2020 to March 2024     503,984       503,229  
At floating interest rates with due dates from March 2022 to June 2023     35,000       111,276  
Total long-term debt     538,984       614,505  
Total long-term borrowings and debt     1,261,120       1,500,889  
Less: Prepaid commissions     (2,536 )     (3,547 )
Total long-term borrowings and debt, net     1,258,584       1,497,342  
                 
Net average outstanding balance during the period     1,326,965       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     2.85% to 3.25%       2.25% to 3.25%  
Range of floating interest rates on borrowings and debt in U.S. dollars     3.07% to 4.07%       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     9.68% to 9.69%       9.19% to 9.71%  
Range of fixed interest rates on debt in Japanese yens     0.46% to 0.52%       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     4.21%     4.35%
Weighted average interest rate during the period     4.37%     4.09%

 

  39  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

14. 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 (excluded a lease liabilities)

 

    June 30,
2019
    December 31,
2018
 
Currency                      
US dollar     1,091,576       1,203,101  
Mexican peso     19,010       143,661  
Japanese yen     68,574       72,670  
Euro     60,898       60,315  
Australian dollar     21,062       21,142  
Total     1,261,120       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 June 30, 2019, the Bank was in compliance with all those covenants.

 

The future payments of long-term borrowings and debt outstanding as of June 30, 2019, are as follows:

 

Payments     Outstanding  
         
2019       33,943  
2020       477,636  
2021       495,019  
2022       131,125  
2023       62,500  
2024       60,897  
        1,261,120  

 

  40  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

14. 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, 2017     2,211,567  
Net increase (decrease) in short-term borrowings and debt     (23,065 )
Proceeds from long-term borrowings and debt     160,174  
Repayments of long-term borrowings and debt     (126,172 )
Change in foreign currency     (6,519 )
Adjustment of fair value for hedge accounting relationship     3,278  
Other adjustments     (1,121 )
Borrowings and debt, net as at June 30, 2018     2,218,142  

 

Borrowings and debt, net as at December 31, 2018     3,518,446  
Net increase (decrease) in short-term borrowings and debt     (897,407 )
Proceeds from long-term borrowings and debt     83,636  
Repayments of long-term borrowings and debt     (334,885 )
Payment of lease liabilities     (512 )
Proceeds from lease liabilities     20,734  
Change in foreign currency     8,719  
Adjustment of fair value for hedge accounting relationship     5,182  
Other adjustments     1,238  
Borrowings and debt, net as at June 30, 2019     2,405,151  

 

  41  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

14. 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:

 

    June 30,
2019
 
Due within 1 year     2,022  
After 1 year but within 5 years     8,510  
After 5 years but within 10 years     16,546  
Total undiscounted lease liabilities     27,078  
         
Short-term     1,096  
Long-term     19,127  
Lease liabilities included in the statement of financial   position at June 30     20,222  

 

Amounts recognized in the statement of cash flows

 

    June 30,
2019
 
Cash outflow for leases     996  

 

Amounts recognized in profit or loss

 

    Three months ended  
    June 30, 2019  
Interest on lease liabilities     (239 )
Income from sub-leasing right-of-use assets     75  

 

    Six months ended  
    June 30, 2019  
Interest on lease liabilities     (482 )
Income from sub-leasing right-of-use assets     150  

 

  42  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

15. 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:

 

    Three months ended June 30  
    2019     2018  
(Thousands of U.S. dollars)            
Profit for the period     22,272       16,626  
                 
(U.S. dollars)                
Basic earnings per share     0.56       0.42  
Diluted earnings per share     0.56       0.42  
                 
(Thousands of shares)                
Weighted average of common shares outstanding applicable to basic EPS     39,553       39,626  
                 
Effect of diluted securities:                
Stock options and restricted stock units plan     -       25  
                 
Adjusted weighted average of common shares outstanding applicable to diluted EPS     39,553       39,651

 

    Six months ended June 30  
    2019     2018  
(Thousands of U.S. dollars)            
Profit for the period     43,517       31,124  
                 
(U.S. dollars)                
Basic earnings per share     1.10       0.79  
Diluted earnings per share     1.10       0.79  
                 
(Thousands of shares)                
Weighted average of common shares outstanding applicable to basic EPS     39,548       39,547  
                 
Effect of diluted securities:                
Stock options and restricted stock units plan     -       25  
                 
Adjusted weighted average of common shares outstanding applicable to diluted EPS     39,548       39,572  

 

  43  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

16. 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, 2018     (385 )     858       1,490       1,963  
Change in fair value of financial instruments, net of hedging     (168 )     251       -       83  
Change in fair value of equity instruments at FVOCI, net of hedging     (3,379 )     860       -       (2,519 )
Reclassification of gains (losses) on financial instruments to the profit or loss (1)     (38 )     2,732       -       2,694  
Exchange difference in conversion of foreign currency operation     -       -       (137 )     (137 )
Other comprehensive income (loss) for the period     (3,585 )     3,843       (137 )     121  
Balance as of June 30, 2018     (3,970 )     4,701       1,353       2,084  
                                 
Balance as of January 1, 2019     (1,264 )     1,477       207       420  
Change in fair value of financial instruments, net of hedging     271       (2,935 )     -       (2,664 )
Change in fair value of equity instruments at FVOCI, net of hedging     (608 )     -       -       (608 )
Reclassification of gains (losses) on financial instruments to the profit or loss (1)     168       170       -       338  
Exchange difference in conversion of foreign currency operation     -       -       (99 )     (99 )
Other comprehensive income (loss) for the period     (169 )     (2,765 )     (99 )     (3,033 )
Balance as of June 30, 2019     (1,433 )     (1,288 )     108       (2,613 )

 

(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.

 

  44  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

16. Other comprehensive income (continued)

 

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

 

Three months ended June 30, 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:     72     Gain on financial instruments, net
             
Gains (losses) on derivative financial instruments:            
Foreign exchange forwards     (498 )   Interest income – loans
      (525 )   Interest expense – borrowings and deposits
      (309 )   Gain on financial instruments, net
Interest rate swaps     -     Gain on financial instruments, net
Cross-currency swaps     -     Gain on financial instruments, net
      (1,332 )    

 

Six months ended June 30, 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:     168     Gain on financial instruments, net
             
Gains (losses) on derivative financial instruments:            
Foreign exchange forwards     (527 )   Interest income – loans
      (1,045 )   Interest expense – borrowings and deposits
      170     Gain on financial instruments, net
Interest rate swaps     -     Gain on financial instruments, net
Cross-currency swaps     -     Gain on financial instruments, net
      (1,402 )    

 

  45  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

16. Other comprehensive income (continued)

 

Three months ended June 30, 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:     41     Gain on financial instruments, net
             
Gains (losses) on derivative financial instruments:            
Foreign exchange forwards     (746 )   Interest income – loans
      (1,116 )   Interest expense – borrowings and deposits
      288     Gain on financial instruments, net
Interest rate swaps     -     Gain on financial instruments, net
Cross-currency swaps     -     Gain on financial instruments, net
      (1,574 )    

 

Six months ended June 30, 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:     38     Gain on financial instruments, net
             
Gains (losses) on derivative financial instruments:            
Foreign exchange forwards     (1,164 )   Interest income – loans
      (2,227 )   Interest expense – borrowings and deposits
      667     Gain on financial instruments, net
Interest rate swaps     (8 )   Gain on financial instruments, net
Cross-currency swaps     -     Gain on financial instruments, net
      (2,732 )    

 

  46  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

17. 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:

 

    Three months ended June 30, 2019  
    Syndicated
loans
    Documentary
letters of
credit
    Stand-by
letters of
credit and
guarantees
    Credit
commitments
    Other     Total  
                                     
Openning and confirmation     -       1,796       625       200       -       2,621  
Negotiation and acceptance     -       61       -       -       -       61  
Amendment     -       14       3       -       -       17  
Structuring     2,437       -       -       -       -       2,437  
Other     -       (6 )     -       -       (2 )     (8 )
      2,437       1,865       628       200       (2 )     5,128  

 

    Six months ended June 30, 2019  
    Syndicated
loans
    Documentary
letters of
credit
    Stand-by letter
of credit and
guarantees
    Credit
commitments
    Others     Total  
                                     
Openning and confirmation     -       3,209       1,136       407       -       4,752  
Negotiation and acceptance     -       224       -       -       -       224  
Amendment     -       19       14       -       -       33  
Structuring     2,437       -       -       -       -       2,437  
Others     -       (6 )     -       -       38       32  
      2,437       3,446       1,150       407       38       7,478  

 

 

  47  

 

 

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

Notes to the unaudited condensed consolidated interim financial statements

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

 

 

17. Fees and commission income (continued)

 

    Three months ended June 30, 2018  
    Syndicated
loans
    Documentary
letters of
credit
    Stand-by
letters of
credit and
guarantees
    Credit
commitments
    Other     Total  
                                     
Openning and confirmation     -       1,880       959       136       -       2,975  
Negotiation and acceptance     -       28       -       -       -       28  
Amendment     -       16       6       -       -       22  
Structuring     2,011       -       -       -       -       2,011  
Other     -       -       -       -       (4 )     (4 )
      2,011       1,924       965       136       (4 )   &n