UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
o¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
xý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20062007
OR
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report……………………………
For the transition period from ______ to _______
Commission File Number 1-11414
BANCO LATINOAMERICANO DE EXPORTACIONES, S.A.
(Exact name of Registrant as specified in its charter)
LATIN AMERICAN EXPORT BANK | REPUBLIC OF PANAMA |
(Translation of Registrant’s name into English) | REPUBLIC OF PANAMA
(Jurisdiction of incorporation or organization) |
Calle 50 y Aquilino de la Guardia
P.O. Box 0819-08730
Panama City, Republic of Panama
(507) 210-8500
(Address and telephone number of Registrant’s principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class Class E Common Stock
| Name of each exchange on which registered |
Class E Common Stock | New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
6,342,189 | | Shares of Class A Common Stock |
2,725,3872,660,847 | | Shares of Class B Common Stock |
27,261,495 27,367,113 | | Shares of Class E Common Stock |
36,329,07236,370,149 | | Total Shares of Common Stock |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
x¨ Yes ¨ý No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
¨ Yes xý No
Note -– Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
xý Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated file”filer” in Rule 12b-2 of the Exchange Act. (Check one):
¨ Large Accelerated Filer xý Accelerated Filer ¨ Non-accelerated Filer
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
ý U.S. GAAP ¨ IFRS ¨ Other
Indicate by check mark which financial statement item the Registrant has elected to follow.
¨ Item 17 xý Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes xý No
BANCO LATINOAMERICANO DE EXPORTACIONES, S.A.
TABLE OF CONTENTS
PART I
| | | | |
PART I | | |
| |
Item 1. | | Identity of Directors, Senior Management and Advisers | | 5 |
| |
Item 2. | | Offer Statistics and Expected Timetable | | 5 |
| |
Item 3. | | Key Information | | 5 |
A. | | Selected Financial Data | | 5 |
B. | | Capitalization and Indebtedness | | 6 |
C. | | Reasons for the Offer and Use of Proceeds | | 6 |
D. | | Risk Factors | 6 |
| 6 |
Item 4. | | Information on the Company | | 89
|
A. | | History and Development of the Company | | 89 |
B. | | Business Overview | | 9 |
C. | | Organizational Structure | | 2321 |
D. | | Property, PlantsPlant and Equipment | 21 |
| 24 |
Item 4A. Unresolved Staff Comments | 21 |
| |
Item 5. | | Operating and Financial Review and Prospects | | 2421
|
A. | | Operating Results | | 2422 |
B. | | Liquidity and Capital Resources | | 2933 |
C. | | Research and Development, Patents and Licenses, etc. | | 3438 |
D. | | Trend Information | | 3438 |
E. | | Off-Balance Sheet Arrangements | | 3539 |
F. | | Contractual Obligations and Commercial Commitments | 39 |
| 35 |
Item 6. | | Directors, Senior ManagementExecutive Officers and Employees | | 3640
|
A. | | Directors and Senior ManagementExecutive Officers | | 3640 |
B. | | Compensation | | 4044 |
C. | | Board Practices | | 4248 |
D. | | Employees | | 4652 |
E. | | Share Ownership | 52 |
| 46 |
Item 7. | | Major Shareholders and Related Party Transactions | | 4652
|
A. | | Major Shareholders | | 4652 |
B. | | Related Party Transactions | | 4754 |
C. | | Interests of Experts and Counsel | 54 |
| 47 |
Item 8. | | Financial Information | | 4754
|
A. | | Consolidated Statements and Other Financial Information | | 4754 |
B. | | Significant Changes | 55 |
| 48 |
Item 9. | | The Offer and Listing | | 4855
|
A. | | Offer and Listing Details | | 4855 |
B. | | Plan of Distribution | | 4855 |
C. | | Markets | | 4855 |
D. | | Selling Shareholders | | 4955 |
E. | | Dilution | | 49 |
F. | | Expenses of the Issue | | 4956 |
F. | Expenses of the Issue | 56 |
| |
Item 10. | | Additional Information | | 4956
|
A. | | Share Capital | | 4956 |
B. | | Memorandum and Articles of Association | | 4956 |
C. | | Material Contracts | | 4956 |
D. | | Exchange Controls | | 4956 |
E. | | Taxation | | 4956 |
F. | | Dividends and Paying Agents | | 5360 |
G. | | Statement by Experts | | 5360 |
H. | | Documents on Display | | 5360 |
I. | | Subsidiary Information | 60 |
| 53 |
Item 11. | | Quantitative and Qualitative Disclosure About Market Risk | | 5360
|
| |
Item 12. | | Description of Securities Other than Equity Securities | 63 |
| | |
56PART II
| |
| |
Item 13. | | Defaults, Dividend Arrearages and Delinquencies | | 5663
|
| |
Item 14. | | Material Modifications to the Rights of Security Holders and Use of Proceeds | | 5663
|
| |
Item 15. | | Controls and Procedures | | 5663
|
| |
Item 16. | | Reserved | | 5765
|
A. | | Item 16A. Audit and Compliance Committee Financial Expert | | 5765 |
B. | | Item 16B. Code of Ethics | | 5765 |
C. | | Item 16C. Principal Accountant Fees and Services | | 5765 |
D. | | Item 16D. Exemptions from the Listing Standards for Audit Committees | | 5866 |
E. | | Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 66 |
| 58 | |
PART III | |
| |
Item 17. | | Financial Statements | | 5967
|
| |
| | Financial Statements | | 5967
|
| |
Item 19. | | Exhibits | | 5967
|
In this Annual Report on Form 20-F (this “Annual Report”), references to the “Bank” or “Bladex” are to Banco Latinoamericano de Exportaciones, S.A., a specialized supranational bank incorporated under the laws of the Republic of Panama (“Panama”) and its subsidiaries. References to “dollars” or “$” are to United States dollars. The Bank accepts deposits and raises funds principally in United States dollars, grants loans mostly in United States dollars and publishes its consolidated financial statements in United States dollars. The numbers and percentages set out in this Annual Report have been rounded and, accordingly, may not total exactly.
Upon written or oral request, the Bank will provide without charge to each person to whom this Annual Report is delivered, a copy of any or all of the documents listed as exhibits to this Annual Report (other than exhibits to those documents, unless the exhibits are specifically incorporated by reference in the documents). Written requests for copies should be directed to the attention of Carlos Yap,Jaime Celorio, Chief Financial Officer, Bladex, as follows: (1) if by regular mail, to P.O. Box 0819-08730, Panama City, Republic of Panama, and (2) if by courier, to Calle 50 y Aquilino de la Guardia, Panama City, Republic of Panama. Telephone requests may be directed to Mr. YapCelorio at 011-507-210-8563. Written requests also may be faxed to Mr. YapCelorio at 011-507-269-6333 or sent via e-mail to cyap@blx.com.jcelorio@bladex.com. Information is also available on the Bank’s website at: www.blx.com.www.bladex.com.
Forward-Looking Statements
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements regarding:
| · | the anticipated growth of the Bank’s credit portfolio, including its trade finance portfolio; |
| · | the Bank’s ability to increase the number of corporate clients; |
| | the continuation of the Bank’s preferred creditor status; |
| | the effects of changing interest rates on the Bank’s financial condition; |
| | the implementation of the Bank’s strategies and initiatives, including its revenue diversification strategy; |
| | anticipated operating income in future periods; |
| | the implied volatility of the Bank’s Treasury revenues; |
| | the adequacy of the Bank’s allowance for and provisions for credit losses; |
| | he Bank’s ability to maintain its investment-grade credit ratings; |
| | the availability and cost of funding for the Bank’s lending operations; and |
| | the adequacy of the Bank’s sources of liquidity to cover large deposit withdrawals. |
In addition, the statements included under the headings “Strategy” and “Trends” are forward-looking statements. Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause actual results to differ materially from these forward-looking statements include the risks described in the section titled “Risk Factors.” Forward-looking statements include statements regarding:
| · | the anticipated growth of the Bank’s credit portfolio, including its trade finance portfolio; |
| · | the Bank’s ability to increase the number of corporate clients; |
| · | the continuation of the Bank’s preferred creditor status; |
| · | the effects of changing interest rates and of an improving macroeconomic environment in the Region on the Bank’s financial condition; |
| · | the execution of the Bank’s strategies and initiatives, including its revenue diversification strategy; |
| · | the anticipated operating income and return on equity in future periods; |
| · | the implied volatility of the Bank’s Treasury and Asset Management revenues; |
| · | the adequacy of the Bank’s allowance for and provisions for credit losses; |
| · | the Bank’s ability to maintain its investment-grade credit ratings; |
| · | the availability and mix of future sources of funding for the Bank’s lending operations; and |
| · | the adequacy of the Bank’s sources of liquidity to replace large deposit withdrawals. |
In addition, the statements included under the headings “Strategy” and “Trends” are forward-looking statements. All forward-looking statements in this Annual Report are made as of the date hereof, based on information available to the Bank as of the date hereof, and the Bank assumes no obligation to update any forward-looking statement.
PART I
Item 1.Item 1. | Identity of Directors, Senior Management and Advisers |
| Not required in this Annual Report.
|
Item 2. | Offer Statistics and Expected Timetable
|
| Not required in this Annual Report.
|
Item 3. | Key InformationNot required in this Annual Report.
|
Item 2.Offer Statistics and Expected Timetable
Not required in this Annual Report.
Item 3.Key Information
A. Selected Financial Data
The following table presents consolidated selected financial data for the Bank. The financial data presented below are at and for the years ended December 31, 2002, 2003, 2004, 2005, 2006 and 20062007 and are derived from the Bank’s consolidated financial statements for the years indicated, which were prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The 2003, 2004, 2005 and 2006 consolidated financial statements were audited by KPMG.the registered public accounting firm KPMG, and the consolidated financial statements for the year ended December 31, 2007 were audited by the registered public accounting firm Deloitte, Inc. The consolidated financial statements of the Bank at December 31, 20052006 and 20062007 and for each of the three years in the three-year period ended December 31, 20062007 (the “Consolidated Financial Statements”) are included in this Annual Report, together with the reportreports of KPMG.the registered public accounting firms KPMG and Deloitte Inc. The information below is qualified in its entirety by the detailed information included elsewhere herein and should be read in conjunction with Item 4, “Information on the Company,”Company”, Item 5, “Operating and Financial Review and Prospects” and the Consolidated Financial Statements and notes thereto included in this Annual Report.
Consolidated Selected Financial Information
| | At and for the Year Ended December 31, | | | At and for the Year Ended December 31, | |
| | 2002 | | 2003 | | 2004 | | 2005 | | 2006 | | | 2003 | | 2004 | | 2005 | | 2006 | | 2007 | |
| | (in $ thousands, except per share amounts and ratios) | | | (in $ thousand, except per share amounts and ratios) | |
Income Statement Data: | | | | | | | | | | | | | | | | | | | | | | | |
Net interest income 1 | | | $64,779 | | $53,987 | | $42,025 | | $45,253 | | $58,837 | | |
Commission income, net 1 | | | 8,886 | | 7,446 | | 5,928 | | 5,824 | | 6,285 | | |
Reversal of (Provision for) credit losses 2 | | | (278,756 | ) | | 58,905 | | 112,271 | | 38,374 | | 13,045 | | |
Net interest income | | | $ | 53,987 | | $ | 42,025 | | $ | 45,253 | | $ | 58,837 | | $ | 70,570 | |
Fees and commissions, net | | | | 7,446 | | 5,928 | | 5,824 | | 6,393 | | 5,555 | |
Reversal of provision for credit losses 1 | | | | 58,905 | | 112,271 | | 38,374 | | 13,045 | | 1,475 | |
Trading gains | | | | 0 | | 0 | | 0 | | 879 | | 23,866 | |
Net gain on sale on securities available for sale | | | | 22,211 | | 2,922 | | 206 | | 2,568 | | 9,119 | |
Total operating expenses | | | (19,259 | ) | | (22,561 | ) | | (21,352 | ) | | (24,691 | ) | | (28,929 | ) | | | (22,561 | ) | | (21,352 | ) | | (24,691 | ) | | (28,929 | ) | | (37,027 | ) |
Income (loss) from continuing operations | | | (266,492 | ) | | 111,496 | | 141,730 | | 77,518 | | 57,902 | | |
Income before cumulative effect of changes in accounting principles | | | | 111,496 | | 141,730 | | 77,518 | | 57,902 | | 72,177 | |
Cumulative effect of accounting changes | | | 0 | | 0 | | 0 | | 2,583 | | 0 | | | | 0 | | 0 | | 2,583 | | 0 | | 0 | |
Net income (loss) | | | (268,838 | ) | | 111,496 | | 141,730 | | 80,101 | | 57,902 | | |
Net income | | | | 111,496 | | 141,730 | | 80,101 | | 57,902 | | 72,177 | |
Balance Sheet Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Trading assets | | | 0 | | 0 | | 0 | | 0 | | 130,076 | | | | 0 | | 0 | | 0 | | 130,076 | | 52,597 | |
Investment securities | | | 160,714 | | 77,793 | | 192,856 | | 208,570 | | 471,351 | | | | 77,793 | | 192,856 | | 208,570 | | 471,351 | | 468,360 | |
Loans | | | 2,516,512 | | 2,275,031 | | 2,441,686 | | 2,610,019 | | 2,980,772 | | | | 2,275,031 | | 2,441,686 | | 2,610,019 | | 2,980,772 | | 3,731,838 | |
Allowance for loan losses | | | 429,720 | | 224,347 | | 106,352 | | 39,448 | | 51,266 | | | | 224,347 | | 106,352 | | 39,448 | | 51,266 | | 69,643 | |
Total assets | | | 2,925,401 | | 2,560,612 | | 2,732,940 | | 3,159,231 | | 3,978,338 | | | | 2,560,612 | | 2,732,940 | | 3,159,231 | | 3,978,337 | | 4,790,532 | |
Total deposits | | | 551,973 | | 702,955 | | 864,160 | | 1,046,618 | | 1,056,278 | | | | 702,955 | | 864,160 | | 1,046,618 | | 1,056,277 | | 1,462,371 | |
Trading liabilities | | | 0 | | 0 | | 0 | | 0 | | 54,832 | | | | 0 | | 0 | | 0 | | 54,832 | | 90,765 | |
Short-term borrowings and placements | | | 647,344 | | 687,214 | | 704,718 | | 760,699 | | 1,595,604 | | |
Medium and long-term borrowings and placements | | | 1,285,493 | | 485,516 | | 403,621 | | 533,860 | | 558,860 | | |
Short-term borrowings | | | | 687,214 | | 704,718 | | 760,699 | | 1,595,604 | | 1,504,710 | |
Borrowings and long-term debt | | | | 485,516 | | 403,621 | | 533,860 | | 558,860 | | 1,010,316 | |
Total liabilities | | | 2,584,002 | | 1,976,283 | | 2,076,810 | | 2,542,449 | | 3,394,442 | | | | 1,976,283 | | 2,076,810 | | 2,542,449 | | 3,394,442 | | 4,178,281 | |
Total stockholders’ equity | | | 328,923 | | 584,329 | | 656,130 | | 616,782 | | 583,896 | | | | 584,329 | | 656,130 | | 616,782 | | 583,895 | | 612,251 | |
Average number of shares outstanding | | | 17,343 | | 28,675 | | 39,232 | | 38,550 | | 37,065 | | | | 28,675 | | 39,232 | | 38,550 | | 37,065 | | 36,349 | |
Average number of diluted shares outstanding | | | | 28,675 | | 39,372 | | 38,860 | | 37,572 | | 36,414 | |
Per Common Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net income (loss) per share | | | (15.56 | ) | | 3.88 | | 3.61 | | 2.08 | | 1.56 | | |
Diluted earnings (loss) per share | | | (15.56 | ) | | 3.88 | | 3.60 | | 2.06 | | 1.54 | | |
Book value (period end) | | | 18.91 | | 14.84 | | 16.87 | | 16.19 | | 16.07 | | |
Cash dividends per share | | | 0.00 | | 0.00 | | 1.50 | | 2.60 | | 1.75 | | |
Basic earnings per share6 | | | | 3.88 | | 3.61 | | 2.01 | | 1.56 | | 1.99 | |
Diluted earnings per share6 | | | | 3.88 | | 3.60 | | 1.99 | | 1.54 | | 1.98 | |
Book value per share (period end) | | | | 14.84 | | 16.87 | | 16.19 | | 16.07 | | 16.83 | |
Regular cash dividends per share | | | | 0.00 | | 0.50 | | 0.60 | | 0.75 | | 0.88 | |
Special cash dividends per share | | | | 0.00 | | 1.00 | | 2.00 | | 1.00 | | 0.00 | |
Selected Financial Ratios: | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Ratios: | | | | | | | | | | | | | | | | | | | | | | | | |
Return on average assets | | | (6.47 | )% | | 4.24 | % | | 5.83 | % | | 3.00 | % | | 1.70 | % | | | 4.24 | % | | 5.83 | % | | 3.00 | % | | 1.70 | % | | 1.71 | % |
Return on average stockholders’ equity | | | (60.48 | )% | | 23.91 | % | | 22.75 | % | | 12.85 | % | | 9.96 | % | | | 23.91 | % | | 22.75 | % | | 12.85 | % | | 9.96 | % | | 11.91 | % |
Net interest margin 3 | | | 1.48 | % | | 1.87 | % | | 1.65 | % | | 1.70 | % | | 1.76 | % | |
Net interest spread 3 | | | 0.96 | % | | 1.23 | % | | 0.98 | % | | 0.67 | % | | 0.70 | % | |
Net interest margin 2 | | | | 1.87 | % | | 1.65 | % | | 1.70 | % | | 1.76 | % | | 1.71 | % |
Net interest spread 2 | | | | 1.23 | % | | 0.98 | % | | 0.67 | % | | 0.70 | % | | 0.80 | % |
Total operating expenses to total average assets | | | 0.46 | % | | 0.86 | % | | 0.88 | % | | 0.93 | % | | 0.85 | % | | | 0.86 | % | | 0.88 | % | | 0.93 | % | | 0.85 | % | | 0.88 | % |
Regular cash dividend payout ratio | | | | 0.00 | %3 | | 13.84 | % | | 29.84 | % | | 48.01 | % | | 44.32 | % |
Special cash dividend payout ratio | | | | 0.00 | %3 | | 27.68 | % | | 99.46 | % | | 64.01 | % | | 0.00 | % |
Asset Quality Ratios: | | | | | | | | | | | | | |
Impaired loans to total loans 4 | | | | 19.62 | % | | 10.50 | % | | 1.11 | % | | 0.00 | % | | 0.00 | % |
Charged-off loans to total loans | | | | 6.1 | % | | 0.5 | % | | 0.4 | % | | 0.00 | % | | 0.00 | % |
Allowance for loan losses to total loans, net of unearned income and deferred commission | | | | 9.89 | % | | 4.37 | % | | 1.51 | % | | 1.72 | % | | 1.87 | % |
Allowance for credit losses to non-accruing credits | | | | 53 | % | | 48 | % | | 217 | % | | n.a. | | n.a. | |
Capital Ratios: | | | | | | | | | | | | | |
Stockholders’ equity to total assets | | | | 22.82 | % | | 24.01 | % | | 19.52 | % | | 14.68 | % | | 12.78 | % |
Tier 1 capital to risk-weighted assets 5 | | | | 35.42 | % | | 42.90 | % | | 33.74 | % | | 24.45 | % | | 20.92 | % |
Total capital to risk-weighted assets 5 | | | | 36.67 | % | | 44.15 | % | | 34.99 | % | | 25.70 | % | | 22.17 | % |
1 Includes Reversal (provision) for loan losses to on and off-balance sheet credit risks. For information regarding reversal (provision) for credit losses, see Item 5, “Operating and Financial Review and Prospects/Operating Results”.
2 For information regarding calculation of the net interest margin and the net interest spread, see Item 5A, “Operating and Financial Review and Prospects/Operating Results/Net Interest Income and Margins”.
3During 2003, the Bank suspended its dividend payment. In 2004, the Bank re-established its dividend payment.
4 Repossessed assets or troubled debt restructurings as defined in Statement of Financial Accounting Standards No. 15 amounted to $23 million in 2005, and $202 million in 2004, and related mostly to Argentine credits.
5 Calculated using the U.S. Federal Reserve Board’s 1992 fully phased-in risk-weighted capital guidelines.
6 For 2005, exclude the cumulative effect of changes in accounting principles, which represented $0.07 per share.
| | At and for the Year Ended December 31,
| |
| | 2002
| | 2003
| | 2004
| | 2005
| | 2006
| |
| | (in $ thousands, except per share amounts and ratios) | |
Cash dividend payout ratio | | | 0.00 | % | | 0.00 | % | | 41.52 | % | | 125.13 | % | | 112.02 | % |
Asset Quality Ratios: | | | | | | | | | | | | | | | | |
Impaired loans to total loans, net of unearned income and deferred commission 4 | | | 27.62 | % | | 19.62 | % | | 10.50 | % | | 1.11 | % | | 0.00 | % |
Charged-off loans to total loans, net of unearned income and deferred commission | | | 0.8 | % | | 6.1 | % | | 0.5 | % | | 0.4 | % | | 0.00 | % |
Allowance for loan losses to total loans, net of unearned income and deferred commission | | | 17.17 | % | | 9.89 | % | | 4.37 | % | | 1.51 | % | | 1.72 | % |
Allowance for credit losses to non-accruing credits | | | 54 | % | | 53 | % | | 48 | % | | 217 | % | | n.a. | |
Capital Ratios: | | | | | | | | | | | | | | | | |
Stockholders’ equity to total assets | | | 11.24 | % | | 22.82 | % | | 24.01 | % | | 19.52 | % | | 14.68 | % |
Tier 1 capital to risk-weighted assets 5 | | | 15.26 | % | | 35.42 | % | | 42.90 | % | | 33.74 | % | | 24.45 | % |
Total capital to risk-weighted assets 5 | | | 16.51 | % | | 36.67 | % | | 44.15 | % | | 34.99 | % | | 25.70 | % |
1
| For 2002, commission expense related to borrowings and placements was reclassified from commission expense and other charges to interest expense to conform to the required presentation for 2003 pursuant to U.S. GAAP. |
2
| For information regarding reversal (provision) for credit losses, see “Business Overview” and “Results of Operations”. |
3
| For information regarding calculation of the net interest margin and the net interest spread, see “Results of Operations—Net Interest Income and Margins”. |
4 | Repossessed assets or troubled debt restructurings as defined in Statement of Financial Accounting Standards No. 15 amounted to $23 million in 2005, and $202 million in 2004, and related mostly to Argentine credits. |
5 | Calculated using the U.S. Federal Reserve Board’s 1992 fully phased in risk-weighted capital guidelines. |
B. | B. Capitalization and Indebtedness |
| Not required in this Annual Report. |
C. | Reasons for the Offer and Use of Proceeds
|
| Not required in this Annual Report. |
D.C. Reasons for the Offer and Use of Proceeds | Risk Factors
|
Not required in this Annual Report.
D. Risk Factors
Risks Relating to the Region
The Bank’s credit portfolio is concentrated in Latin America and the Caribbean. The Bank also faces borrower concentration. Adverse economic changes in those countries or in the condition of the Bank’s largest borrowers could affect adversely the Bank’s growth, asset quality, prospects, profitability and financial condition.
The Bank’s lendingcredit activities and, as a result, the credit portfolio isare concentrated in Central and South America and the Caribbean (the “Region”), which is a reflection of itsthe Bank’s mission and strategy. Historically, economies of countries in the Region have occasionally experienced significant volatility characterized, in some cases, by political uncertainty, slow growth or recession, declining investments, government and private sector debt defaults and restructurings, significant inflation and/or devaluation. Global economic changes, including oil prices, commodities prices, the U.S. dollar interest rates and exchange rate, and slower economic growth in developedindustrialized countries, could have a significant adverse effect on the economic condition of countries in the Region. In turn, adverse changes affecting the economies of countries in the Region could have a significant adverse impact on the quality of the Bank’s credit portfolio, including increased loan loss provisions, debt restructurings, and loan losses and, aslosses. As a result, this could also have an adverse impact on the Bank’s asset growth, asset quality, prospects, profitability and financial condition.
The Bank’s lendingcredit activities are concentrated in a relatively small number of countries, which could have an adverse impact on the Bank’s credit portfolio and, as a result, its financial condition, growth, prospects, cash flows and results of operations and financial condition if one or more of those countries encounters economic difficulties. At December 31, 2006,2007, approximately 64%67% of the Bank’s credit portfolio was outstanding to borrowers in the following four countries: Brazil ($1,6631,728 million, or 42%36%); Colombia ($329530 million, or 8%11%); MexicoPeru ($283484 million, or 7%10%); and PeruMexico ($280451 million, or 7%9%).
In addition, at December 31, 2006, 15%2007, 11% of the Bank’s total credits were to five borrowers in Brazil, and 9%13% of total credits were to threefour borrowers from: Ecuadorfrom Peru (5%), Colombia (3%), Peru (3%Mexico (2%), and the Dominican RepublicVenezuela (3%). A significant deterioration of the financial or economic condition of any of these countries or borrowers could have an adverse impact on the Bank’s credit portfolio, and, as a result, requirerequiring the Bank to create additional allowances for credit losses, or suffer further credit losses with the effect being accentuated because of this concentration.
Local country foreign exchange controls or currency devaluation may harm the Bank’s borrowers’ ability to pay U.S. dollar-denominated obligations.
The Bank makes mostly U.S. dollar-denominated loans and investments. As a result, the Bank faces the risk that local country foreign exchange controls will restrict the ability of the Bank’s borrowers, even if they are exporters, to acquire dollars to repay loans on a timely basis, and/or that significant currency devaluation will occur, which could increase the cost, in local currency terms, to the Bank’s borrowers of acquiring dollars to repay loans.
Increased risk perception in countries in the Region where the Bank has large credit exposure could have an adverse impact on the Bank’s credit ratings, funding activities and funding costs.
Increased risk perception in any country in the Region where the Bank has large exposures could trigger downgrades to the Bank’s credit ratings. A credit rating downgrade would likely increase the Bank’s funding costs, and reduce its deposit base and access to the debt capital markets. In that case, the Bank’s ability to obtain the necessary funding to carry on its trade financefinancing activities in Latin Americathe Region at meaningful levels could be severely hampered.
Risks Relating to the Bank’s Business
Bladex faces liquidity risk, and its failure to adequately manage this risk could result in a liquidity shortage, which could adversely affect its financial condition, results of operations and cash flows.
Bladex, like all financial institutions, faces liquidity risk, or the risk of not being able to maintain adequate cash flow to repay its deposits and borrowings, and fund its credit portfolio on a timely basis. Failure to adequately manage its liquidity risk could produce a cash shortage as a result of which the Bank would not be able to repay these obligations as they become due.
Approximately one third of the Bank’s funding represents short-term borrowings from international banks, the majority of which are European and North American institutions, which also compete with the Bank in its credit extension activity, and represent a source of business for the Bank, as well. If these international banks ceased to provide funding to the Bank, the Bank would have to seek funding from other sources, which may not be available, or if available, may be at higher interest cost.
Financial turnmoil in the international markets could negatively impact liquidity in the financial markets, reducing the Bank’s access to credit or increasing its cost of funding, which could lead to tighter lending standards. An example of this situation is the liquidity constraint experienced since the second half of 2007 in the international financial markets, driven by the subprime crisis in the United States. The persistence or worsening of these unfavorable market conditions could have a material adverse effect on the Bank's liquidity.
As a U.S. dollar-based economy, Panama does not have a central bank in the traditional sense, and there is no lender of last resort to the banking system in the country. Central banks in other Latin American and Caribbean countries would not be obligated to act as lenders of last resort if Bladex were to face a liquidity shortage. Accordingly, if the Bank faced a liquidity shortage, it would have to rely on commercial liquidity sources to resolve the liquidity shortage.
The Bank’s allowances for credit losses could be inadequate to cover credit losses related to its loans and contingencies.
The Bank determines the appropriate level of allowances for credit losses based inon a process that estimates the probable loss inherent in theits portfolio, which is the result of a statistical analysis supported by the Bank’s historical portfolio performance and the Bank’s management’s qualitative judgment. The latter includes assumptions and estimates made in the context of changing political and economic conditions in the Region. The Bank’s allowances could be inadequate to cover losses in its credit portfolio due to exposure concentration, which in turn, could have a material adverse effect on the Bank’s financial condition, and results of operations.operations and cash flows.
The Bank’s businesses are subject to market risk.
Market risk generally represents the risk that values of assets and liabilities or revenues will be adversely affected by changes in market conditions. Market risk is inherent in the financial instruments associated with many of the Bank’s operations and activities, including loans, deposits, investment and trading securities, short-term borrowings, long-term debt, derivatives and trading positions. Among many other market conditions that may shift from time to time thereby exposing the Bank to market risk, are fluctuations in interest and currency exchange rates, changes in the implied volatility of interest rates, changes in foreign exchange rates and changes in securities prices, due to changes in either market perception or actual credit quality of either the issuer or its country of origin. Accordingly, depending on the instruments or activities impacted, market risks can have wide ranging, complex adverse affects on the Bank’s financial condition, results of operations, cash flows and business. See Item 11, “Quantitative and Qualitative Disclosure About Market Risk”.
BladexThe Bank faces liquidityinterest rate risk which is caused by the mismatch in maturities of interest earning assets and its failure to adequately manageinterest bearing liabilities. If not properly managed, this risk could produce a liquidity shortage, which could affect adversely its financial condition and results of operations.mismatch can reduce net interest income as interest rates fluctuate.Bladex, like all financial institutions, faces liquidity risk, or the risk of not being able to maintain adequate cash flow to repay its deposits, borrowings, and placements required to fund its credit portfolio on a timely basis. Failure to adequately manage its liquidity risk could produce a cash shortage as a result of which the Bank would not be able to repay these obligations as they become due.
As a U.S. dollar based economy, Panama does not havebank, Bladex faces interest rate risk because interest-bearing liabilities generally reprice at a central bank indifferent pace than interest-earning assets. Failure to adequately manage eventual mismatches may reduce the traditional sense, and there is no lenderBank’s net interest income during periods of last resort to the banking system in the country. Central banks in other Latin American countries would not be obligated to act as lenders of last resort if Bladex were to face a liquidity shortage. Accordingly, if the Bank faced a liquidity shortage, it would have to rely on commercial liquidity sources to resolve it.fluctuating interest rates.
Operational problems or errors can have a material adverse impact on the Bank’s business, financial condition, and results of operations.operations and cash flows.
Bladex, like all financial institutions, is exposed to operational risks, including the risk of fraud by employees and outsiders, failure to obtain proper internal authorizations, failure to properly document transactions, equipment failures, and errors by employees. There can be no assurance that operationalOperational problems or errors will notmay occur, and that their occurrence will notmay have a material adverse impact on the Bank’s business, financial condition, and results of operations.operations and cash flows.
Bladex, has an Operational Risk department that evaluates the operational risk level of every key product or process that could have an impact on the financial statements. This department coordinates periodic training for all personnel and auto-evaluations with the participation of those personnel controlling each process. Each incident reported, with real or potential loss, is registered in an operational risk database, and on a quarterly basis, the Bank’s management is informed of the relevant incidents that occurred (if any) and the suggested mitigation plan.
The Bank’s credit portfolio may not continue to grow at the same or similar rate.
No assurance can be given that, in the future, the Bank’s credit portfolio, including the Bank’s foreign trade portfolio, will continue to grow at historical rates. A reversal in the growth rate of the Region’s economy and trade volumes could adversely affect the growth rate of the Bank’s credit portfolio.
Increased competition and banking industry consolidation could limit the Bank’s ability to grow and may adversely affect results of operations.
Most of the competition the Bank faces in the trade finance areabusiness comes from international banks, the majority of which are European and North American institutions. Many of these international banks have substantially greater resources than the Bank and enjoy access to less expensive funding than the Bank does. There can be no assurance that increased competition will not adversely affect adversely the Bank’s growth prospects and results of operations.
Although some of these international banks compete directly with the Bank, in many cases they also provide funding for the Bank and represent a source of business. If these international banks ceased providing funding to the Bank, the Bank would be required to seek funding from other sources, which may not be available, or if available, may be at higher interest costs.
Merger activity in the financial services industry has produced companies that are capable of offering a wide array of financial products and services at competitive prices. This significant consolidation of the banking business has also reduced the number of client banks in the Region for trade finance credit and services. Globalization of the capital markets and financial services industries exposes the Bank to further competition. The Bank's ability to grow its business and, therefore, its earnings, is affected by these competitive pressures.
Any delays or failure to implement business initiatives that the Bank may undertake could prevent the Bank from realizing the anticipated revenues and benefits of the initiatives.
Part of the Bank’s strategy is to diversify income sources through business initiatives, including targeting new clients and developing new products and services. These initiatives may not be fully implemented within the time frame the Bank expects, or at all. In addition, even if such initiatives are fully implemented, they may not generate revenues as expected. Any delays in implementing these business initiatives could prevent the Bank from realizing the anticipated benefits of the initiatives, which could adversely affect the Bank’s business, results of operations and growth prospects.
Item 4.Information on the Company
A.History and Development of the Company
The Bank, headquartered in Panama City, Panama, is a specialized supranational bank originally established by central banks of Latin American and Caribbean countries to promote trade finance in the Region. The Bank was established pursuant to a May 1975 proposal of the XX Assembly of Governors of central banks in the Region, which recommended the creation of a supranational organization to increase the Region’s foreign trade financing capacity. The Bank was constituted in 1978 as a corporation pursuant to the laws of the Republic of Panama as “Banco Latinoamericano de Exportaciones, S.A.” and commenced operations inon January 2, 1979. The Bank operates under the commercial name of “Bladex”.“Bladex.” Panama was selected as the location of the Bank’s headquarters because of the country’s importance as a Regional banking center, the benefits of a fully U.S. dollar-based economy, the absence of foreign exchange controls, its geographic location, and the quality of its communications facilities. Under special legislation enacted in 1978, the Bank was granted certain privileges by the government of Panama, including an exemption from payment of income taxes in Panama.
Bladex offers its services through the Bank’s head office and subsidiaries in Panama City, and its subsidiaries and offices in New York City, including its agency (the "New York Agency") and Bladex Asset Management, its International Administrative Office in Miami,Inc. (“Bladex Asset Management”), its subsidiaries in Brazil and the Cayman Islands, its international administrative office in Miami and its representative offices in Mexico City and Buenos Aires andas well as through a worldwide network of correspondent banks. Bladex’s head office is located at Calle 50 y Aquilino de la Guardia, Panama City, Panama, and its telephone number is 011-507-210-8500. See “Organizational Structure” and Note 1 to the Consolidated Financial Statements.Item 18, “Financial Statements”, note 1.
B.Business Overview
Overview
The Bank’s mission is to provide seamless support to Latin America’s foreign trade, while creating value for its stockholders. The Bank is principally engaged in providing trade financing to selected commercial banks and corporations in the Region.
Bladex intermediates in the financial and capital markets throughout the Region, through three business platforms:
The Commercial Division, which comprises the Bank’s corefinancial intermediation and fee generation activities, including the Bank’s trade finance products, includesuch as loans for pre - and post exportpost-export financing and import of goods, letters of credit, banker’s acceptances and guarantees. The majority of the Bank’s loans are extended in connection with specific identified foreign trade transactions. More recently, throughThrough its revenue diversification strategy, the BankBank’s Commercial Division has introduced a broader range of products, services and solutions associated with foreign trade, including co-financing arrangements, underwriting leasing,of syndicated credit facilities, structured trade andfinancing, asset-based financing in the form of factoring, vendor financing and US clearingleasing, as well as other fee-based business, like U.S.-clearing electronic services.
The Treasury Division, which is responsible for ensuring the Bank’s funding and liquidity, for the management of its interest rate, liquidity and currency risks, and for Bladex’s investments in fixed-income securities.
The Bank’s lending and investing activities are funded by interbank deposits, primarily from central banks and financial institutions in the Region, by borrowings from international commercial banks and, to a lesser extent, by sales of the Bank’s debt securities to financial institutions and investors in Japan, Europe, and North America and the Region. The Bank does not provide retail-bankingretail banking services to the general public, such as retail savings accounts or checking accounts, and does not take retail deposits.
During 2006, the Bank completed the process of conversion of its treasury area into a revenue center. The area is organized around three business platforms, from which Bladex intermediates in the capital markets throughout the Region. The Treasury, based in the Panama head office, is responsible for ensuring the Bank’s funding and liquidity, for the management of its interest rate and liquidity risks, and for Bladex’s investments in fixed-income securities. Asset Distribution, based in the New York Agency, was established to intermediate in the primary and secondary loan markets in Latin America. Bladex Asset Management Division, which is based in New York is engagedand commenced operations in April 2006, provides investment advisory services to funds and managed accounts, and conducts business through the Bladex Offshore Feeder Fund (“the Feeder”) and the Bladex Capital Growth Fund (“the Fund”) incorporated in the managementCayman Islands. The Asset Management Division incorporates the investment manager, Bladex Asset Management, and the Bank’s investment in any of a multi-strategy portfoliothe managed funds or accounts. The Asset Management Division’s objective is to achieve above average long-term rates of Latin Americanreturn, while also attempting to preserve capital, mitigate risk and produce returns, which, over the long-term, have low correlation to the returns of the major U.S. equity and investment grade fixed income securities, currencies, and credit derivatives.indices.
At December 31, 2006,2007, the Bank had 4749 officers across its offices responsible for marketing the Bank’s financial products and services to existing and potential customers.
Historically, trade finance generally has not been negatively affected by Latin American debt restructurings. This has been due, in part, to the perceived importance that governments and borrowers in the Region attach to maintaining their access to trade finance. In the case of Bladex, the Bank generally has enjoyed “preferred creditor” status in several countries in the Region, which has strengthened its position in respect of debt restructurings. The Bank, due in part to its preferred creditor status, generally has been allowed to negotiate directly with the governments of these countries concerning its loans, as opposed to negotiating indirectly as a member of a group of creditors in debt restructuring proceedings. In addition, the Bank’s preferred creditor status has generally exempted it from convertibility and transfer limitations of U.S. dollars for payment of external obligations. The Bank believes that its preferred creditor status is partially attributable to its relationship with its Class A stockholders consisting of central banks or governmental financial institutions from 23 countries in the Region.
Developments During 20062007 During 2006, Bladex achieved net income of $58 million, or $1.56 per share, compared with net income of $80 million, or $2.08 per share, for 2005. The net income reduction was driven by lower reversals of credit provisions and recoveries on assets, net of impairments, which for 2006 amounted to $19 million, compared to $51 million in 2005.
Bladex’s strategy of diversifying its activities and revenues, as well as broadening its services to new clients along new trade-related business lines translated into an increase of 36% in operating income (net income before net reversals of credit provisions and recoveries on assets, net of impairments), to $39 million, compared to $29 million in 2005, reflecting principally a 30% increase in net interest income, an 8% increase in fee income, and higher gains in Treasury activities. Net revenues from the impaired portfolio contributed only 6% of this operating income, compared to 20% in 2005. Excluding this effect, the real increase in operating income reached 60%. The increase in the Bank’s revenue, combined with careful expense control allowedDuring 2007, the Bank to improvecontinued the successful execution of its operating efficiency ratio from 46% in 2005 to 42% in 2006. As a result, the Bank’s operating return on average equity rose to 6.8%, compared to 4.6% in 2005, and 4.7% in 2004.revenue diversification strategy among its three business divisions.
SustainedThe Commercial Division achieved corporate client base growth and portfolio diversification, resulting in the Bank’s commercial activity resulted in over $8 billion in credit disbursements in 2006, and a 19%16% increase in its average credit portfolio over 2005. This growth was achieved under conditions of high liquidity2006, with approximately $8 billion in the financial markets and intense regional competition, and was especially noteworthy in the corporate segment.
credits granted. The growth of the Bank’s credit and other business activities was achieved while maintaining its credit quality, allowing Bladex to close 2006 without anyresulting in no past due or non-accrual loans. The Bank continued to develop and introduce new products in 2006. The Bank launched new activities in leasing, and completedloans at the transformationend of the year 2007.
The Treasury function intoDivision continued the expansion of its revenue-driven activities, increasing its securities available-for-sale portfolio by 35%. This portfolio is comprised of liquid, Latin American fixed income securities of high credit quality. In addition, the Treasury Division was able to effectively manage and strengthen the Bank’s liquidity position, in spite of the increased level of uncertainty in international markets since August of 2007, as a profit center, through active participationresult of the subprime crisis in the Region’s fixed income marketsUnited States. During 2007, the Bank closed its first-ever funding transactions denominated in local currencies of the Region, including a bond issuance in Peruvian Nuevo Soles and throughinter-bank borrowings and loans denominated in Mexican Pesos; the creationBank also signed a five-year international loan syndication for an amount of $150 million, and a newthree-year borrowing for an additional $75 million, and updated its $2.25 billion European Medium-Term Note (“EMTN”) program.
The Asset Management Division was successful in its proprietary asset management fund.activities and earned above-average returns. As a result, along with the Bank’s commitment to the industry’s best practices in risk management and operational control, the Bank obtained the approval of U.S. regulators to offer investment advisory services to qualified offshore investors.
In addition, the Bank completedquantitative terms, these activities resulted in a series of important internal projects25% increase in 2006, such as the deployment of a new technology platform,net income, which has allowed the Banktotaled $72 million, compared to optimize its responsiveness to clients, improve its operating efficiency,$58 million in 2006. See Item 5, “Operating and upgrade its information management systems.Financial Review and Prospects/Operating Results/Net Income” and Item 18, “Financial Statements”, note 22.
Strategy for 2008
Developments and Strategy for 2007In 2007,For 2008, Bladex continuesintends to focuscontinue focusing its efforts on diversifying its revenue sources across a stronger client franchise, geared towards a growing corporate segment, a wider product range, and expanded Treasury operations,its three business units, with the objective of achieving improved return on equity levels.levels, while preserving and optimizing the Bank’s stockholders’ equity.
The Bank has adjusted its business modelCommercial Division intends to further expand its participationcontinue developing a stronger client base, focused towards a growing corporate segment, and continuing the implementation of a wider product range, including factoring, vendor financing and leasing, which in the value chain of international trade flows. In this context, the Bank is developing and implementing new products to finance trade flows between the Region and the rest of the world, and to facilitate trade between countries within the Region, thus strengthening intra-regional commercial flows. As such, the commercial effort is primarily focused on offering services to a significant segment of the external trade business that is not adequately covered by local financial markets, or by multinational banks operatingturn should result in the Region.
To achieve this, in 2007 Bladex continues to reinforce its product portfolio. Introducing operational and financial leasing services allows Bladex to offer additional financing solutions to its clients. The Bank also continues to focus its efforts on leveragingincreasing the Bank’s competitive advantages in originating, structuring, underwriting,capacity and distributing trade finance transactions by focusing on maximizing profitability per client, and strengthening the Bank’s relationships with its clients.execution of fee income generation.
The Bank also continuesintends to continue to expand its Treasury Division activities, by increasing its available-for-sale and continue complementing its revenue sources. During 2007, the Bank plans to increase its available for sale and held to maturityheld-to-maturity fixed income portfolio throughout the Region, and to issue additional bonds in other Latin American markets.
The Asset Management Division intends to adjust the structure ofcontinue to expand its asset management fundoperations and expects to allow the participation ofoffer its services to third-party investors.
During the first quarter of 2007, the Bank decidedinvestors, in order to discontinue its digital identity project, as the market for the service in the Region was taking longer to mature than the Bank's management had anticipated. While the project expenses were relatively small, amounting to less than 3% of the Bank’s operating expenses for 2006, the Bank's management concluded that management time could be put to better use pursuing other businesses.generate additional fee income.
Lending Policies
The Bank extends credit directly to banks, corporations and state-owned export organizations within the Region. The Bank analyzes credit requests from eligible borrowers in light of credit risk criteria, including economic and market conditions. The Bank maintains a consistent lending policy and applies the same credit criteria to all types of potential borrowers in evaluating creditworthiness.
The Bank finances import and export transactions for all goods and products, with the exception of articles such as weapons, ammunition, military equipment, hallucinogenic drugs or narcotics not utilized for medical purposes. Imports and exports financed by the Bank are destined for buyers/sellers in countries both inside and outside the Region.
The Bank’s loans generally are unsecured. However, in certain instances, based upon its credit review of the borrower and the economic and political situation and trends in the borrower’s home country, the Bank has determined that the level of risk involved requires that a loan be secured by pledged deposits.
Country Credit Limits
Bladex has a methodology for capital allocation by country aligned with Basel II and its risk weights for assets. The Credit Policy and Risk Assessment Committee of the Board of Directors (“CPER”) approves a level of “allocated capital” for each country, instead of nominal exposure limits. These country capital limits are reviewed at least annually in the quarterly meetings of the aforementioned Committee.CPER. The system establishes the capital equivalent of each transaction, based on the internal numeric rating assigned to each country, (whichwhich is approved by this Committee, on the basis of recommendations made by the Country Risk Committee comprised by members of local management). CPER.
The amounts of capital allocated takestake into account the customer type (sovereign, state-owned or private, corporate or financial institutions), the type of transaction (trade or non trade)non-trade), and the average remaining tenorterm of the transaction (less than(from 1 to 180 days, 181 days to a year, between one and three years, or more than three years). Capital utilizations by the business units should nevernot exceed the Bank’s reported stockholders’ equity.
Borrower Lending Limits
Generally the Bank establishes lines of credit for each borrower according to the results of its risk analysis and potential business potential prospects; however, the Bank is not required to lend under these lines of credit. Once a line of credit has been established, credit generally is extended after receipt of a request from the borrower for financing, usually related to foreign trade. Loan pricing is determined in accordance with prevailing market conditions and the borrower’s creditworthiness.
For existing borrowers, the Bank’s management has authority to approve credit lines up to the legal lending limit prescribed by Panamanian law (see “Regulation—Item 4, “Information on the Company/Business Overview/Regulation—Panamanian Law”), provided that the credit lines comply fully with the country credit limits and conditions for the borrower’s country of domicile set by the Board.Bank’s Board of Directors (the “Board”). Approved borrower lending limits are reported to the CPER quarterly. Panamanian Banking Law prescribes certain concentration limits, which are applicable and strictly adhered to by the Bank, including a thirty percent (30%) limit as a percentage of capital and reserves for any one borrower and borrower group, in the case of financial institutions, and a twenty-five percent (25%) limit as a percentage of capital and reserves for any one borrower and borrower group, in the case of corporate and sovereign borrowers. As of December 31, 2006,2007, the legal lending limit prescribed by Panamanian law for any one borrowercorporations and sovereign borrowers amounted to approximately $175 million. The head of the Commercial Area or Treasury Area, or their designees, depending on the facility type, recommend proposed credit lines. Approval from the head of the Risk Management Area is required for all credit approvals, and approval from the Chief Executive Officer also is required for all new clients$153 million, and for exposures exceeding $30financial institutions and financial groups amounted to approximately $184 million. Certain credit lines require approval by the CPER. On a quarterly basis, the CPER reviews the impaired portfolio, if any, along with certain non-impaired credits.
Panamanian Banking Law prescribes certain concentration limits, which are strictly adhered to by the Bank, including a 30% limit, applicable to the Bank, as a percentage of capital and reserves for any one borrower and borrower group. At December 31, 2006,2007, the Bank was in full compliance with all regulatory limits. See “Regulation—Item 4, “Information on the Company/Business Overview/Regulation/Panamanian Law”.
Credit Portfolio
The Bank’s credit portfolio consists of the commercial division portfolio and the fair value of selected investment securities.treasury portfolio.
The Bank’s credit portfolio increased from $2,944 million at December 31, 2004, to $3,616 million at December 31, 2005 and to $4,006 million at December 31, 2006.2006 and $4,753 million at December 31, 2007.
Commercial Division Portfolio
The Commercial Division Portfoliocommercial portfolio includes the book value of loans, securities purchased under agreements to resell and contingencies and other assets (including confirmed and stand-by letters of credit reimbursement undertakings,and guarantees, credit commitments, reimbursement undertakings, equity investments and customers’ liabilities under acceptances).
The Bank’s commercial portfolio (excluding non-accruing credits)credits in 2005) increased from $2,463 million at December 31, 2004, to $3,365 million at December 31, 2005 and to $3,634 million at December 31, 2006.2006 and $4,281 million at December 31, 2007.
At December 31, 2006, 74%2007, 63% of the Bank’s commercial portfolio represented trade related credits. The corporate market segment represented 49% of the total commercial portfolio, of which 68% represented trade financing. The following table sets forth the distribution of the Bank’s commercial portfolio (excluding non-accruing credits), by product category at December 31 of each year:
| | At December 31, | | At December 31, | |
| | 2002 | | % | | 2003 | | % | | 2004 | | % | | 2005 | | % | | 2006 | | % | | 2003 | | % | | 2004 | | % | | 2005 | | % | | 2006 | | % | | 2007 | | % | |
| | (in $ millions, except percentages) | | (in $ million, except percentages) | |
Loans | | | $1,825 | | 75.8 | | | $1,830 | | 79.8 | | | $2,186 | | 88.7 | | | $2,581 | | 76.7 | | $ | $2,981 | | 82.0 | | $ | 1,830 | | 79.8 | | $ | 2,186 | | 88.7 | | $ | 2,581 | | 76.7 | | $ | 2,981 | | 82.0 | | $ | 3,732 | | 87.2 | |
Securities purchased under agreements to resell | | | 132 | | 5.5 | | 132 | | 5.8 | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | | 132 | | 5.8 | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | 0.0 | | 0.0 | |
Contingencies | | | 450 | | | 18.7 | | | 330 | | | 14.4 | | | 277 | | | 11.3 | | | 784 | | | 23.3 | | | 654 | | | 18.0 | |
Contingencies and other assets | | | | 330 | | | 14.4 | | | 277 | | | 11.3 | | | 784 | | | 23.3 | | | 654 | | | 18.0 | | | 550 | | | 12.8 | |
Total | | | $2,407 | | | 100.0 | | | $2,292 | | | 100.0 | | | $2,463 | | | 100.0 | | | $3,365 | | | 100.0 | | | $3,634 | | | 100.0 | | $ | 2,292 | | | 100.0 | | $ | 2,463 | | | 100.0 | | $ | 3,365 | | | 100.0 | | $ | 3,634 | | | 100.0 | | $ | 4,281 | | | 100.0 | |
Loan Portfolio
At December 31, 2006,2007, the Bank’s total loans amounted to $2,981$3,732 million, compared to $2,610$2,981 million at December 31, 2005.2006. See “ChangesItem 5, “Operating and Financial Review and Prospects/Operating Results/Changes in Financial Condition—Loans”Condition” and Note 6 to the Consolidated Financial Statements.Item 18, “Financial Statements”, note 6.
Loans by Country
The following table sets forth the distribution of the Bank’s loans by country at December 31 of each year:
| | At December 31, | | At December 31, | |
| | 2002 | | % | | 2003 | | % | | 2004 | | % | | 2005 | | % | | 2006 | | % | | 2003 | | % | | 2004 | | % | | 2005 | | % | | 2006 | | % | | 2007 | | % | |
| | (in $ millions, except percentages) | | (in $ million, except percentages) | |
Argentina | | | $694 | | 27.6 | | | $398 | | 17.5 | | | $207 | | 8.5 | | | $51 | | 2.0 | | | $203 | | 6.8 | | $ | 398 | | 17.5 | | $ | 207 | | 8.5 | | $ | 51 | | 2.0 | | $ | 203 | | 6.8 | | $ | 264 | | 7.1 | |
Bolivia | | | 13 | | 0.5 | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | 5 | | 0.2 | | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | 5 | | 0.2 | | 5 | | 0.1 | |
Brazil | | | 930 | | 37.0 | | 1,011 | | 44.4 | | 1,054 | | 43.2 | | 1,095 | | 42.0 | | 1,317 | | 44.2 | | | 1,011 | | 44.4 | | 1,054 | | 43.2 | | 1,095 | | 42.0 | | 1,317 | | 44.2 | | 1,379 | | 37.0 | |
Chile | | | 48 | | 1.9 | | 131 | | 5.8 | | 322 | | 13.2 | | 283 | | 10.8 | | 175 | | 5.9 | | | 131 | | 5.8 | | 322 | | 13.2 | | 283 | | 10.8 | | 175 | | 5.9 | | 10 | | 0.3 | |
Colombia | | | 80 | | 3.2 | | 96 | | 4.2 | | 148 | | 6.1 | | 249 | | 9.5 | | 163 | | 5.5 | | | 96 | | 4.2 | | 148 | | 6.1 | | 249 | | 9.5 | | 163 | | 5.5 | | 400 | | 10.7 | |
Costa Rica | | | 42 | | 1.7 | | 59 | | 2.6 | | 38 | | 1.5 | | 54 | | 2.1 | | 85 | | 2.9 | | | 59 | | 2.6 | | 38 | | 1.5 | | 54 | | 2.1 | | 85 | | 2.9 | | 77 | | 2.1 | |
Dominican Republic | | | 156 | | 6.2 | | 24 | | 1.1 | | 0 | | 0.0 | | 1 | | 0.0 | | 9 | | 0.5 | | | 24 | | 1.1 | | 0 | | 0.0 | | 1 | | 0.0 | | 9 | | 0.3 | | 29 | | 0.8 | |
Ecuador | | | 46 | | 1.8 | | 22 | | 1.0 | | 51 | | 2.1 | | 25 | | 1.0 | | 43 | | 1.4 | | | 22 | | 1.0 | | 51 | | 2.1 | | 25 | | 1.0 | | 43 | | 1.4 | | 61 | | 1.6 | |
El Salvador | | | 2 | | 0.1 | | 26 | | 1.1 | | 44 | | 1.8 | | 81 | | 3.1 | | 82 | | 2.8 | | | 26 | | 1.1 | | 44 | | 1.8 | | 81 | | 3.1 | | 82 | | 2.8 | | 47 | | 1.2 | |
Guatemala | | | 29 | | 1.1 | | 34 | | 1.5 | | 38 | | 1.6 | | 41 | | 1.6 | | 89 | | 3.0 | | | 34 | | 1.5 | | 38 | | 1.6 | | 41 | | 1.6 | | 89 | | 3.0 | | 96 | | 2.6 | |
Honduras | | | 0 | | 0.0 | | 0 | | 0.0 | | 6 | | 0.2 | | 26 | | 1.0 | | 36 | | 1.2 | | | 0 | | 0.0 | | 6 | | 0.2 | | 26 | | 1.0 | | 36 | | 1.2 | | 49 | | 1.3 | |
Jamaica | | | 11 | | 0.4 | | 14 | | 0.6 | | 26 | | 1.1 | | 24 | | 0.9 | | 49 | | 1.6 | | | 14 | | 0.6 | | 26 | | 1.1 | | 24 | | 0.9 | | 49 | | 1.6 | | 77 | | 2.1 | |
Mexico | | | 142 | | 5.6 | | 183 | | 8.0 | | 262 | | 10.7 | | 161 | | 6.1 | | 168 | | 5.6 | | | 183 | | 8.0 | | 262 | | 10.7 | | 161 | | 6.1 | | 168 | | 5.6 | | 410 | | 11.0 | |
Nicaragua | | | 7 | | 0.2 | | 9 | | 0.4 | | 5 | | 0.2 | | 2 | | 0.1 | | 10 | | 0.5 | | | 9 | | 0.4 | | 5 | | 0.2 | | 2 | | 0.1 | | 10 | | 0.3 | | 13 | | 0.3 | |
Panama | | | 19 | | 0.8 | | 44 | | 1.9 | | 89 | | 3.7 | | 156 | | 6.0 | | 180 | | 6.1 | | | 44 | | 1.9 | | 89 | | 3.7 | | 156 | | 6.0 | | 180 | | 6.1 | | 140 | | 3.7 | |
Paraguay | | | 2 | | 0.1 | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | |
Peru | | | 63 | | 2.5 | | 65 | | 2.8 | | 55 | | 2.2 | | 180 | | 7.0 | | 262 | | 8.8 | | | 65 | | 2.8 | | 55 | | 2.2 | | 180 | | 7.0 | | 262 | | 8.8 | | 454 | | 12.2 | |
Trinidad & Tobago | | | 84 | | 3.3 | | 100 | | 4.4 | | 92 | | 3.8 | | 177 | | 6.8 | | 104 | | 3.5 | | | 100 | | 4.4 | | 92 | | 3.8 | | 177 | | 6.8 | | 104 | | 3.5 | | 88 | | 2.3 | |
Uruguay | | | 0 | | 0.0 | | 0 | | 0.0 | | 0 | | 0.0 | | 4 | | 0.1 | | 0 | | 0.0 | | | 0 | | 0.0 | | 0 | | 0.0 | | 4 | | 0.1 | | 0 | | 0.0 | | 0 | | 0.0 | |
Venezuela | | | 149 | | | 6.0 | | | 61 | | | 2.7 | | | 5 | | | 0.2 | | | 0 | | | 0.0 | | | 1 | | | 0.0 | | | 61 | | | 2.7 | | | 5 | | | 0.2 | | | 0 | | | 0.0 | | | 1 | | | 0.0 | | | 135 | | | 3.6 | |
Total | | | $2,517 | | | 100.0 | | | $2,275 | | | 100.0 | | | $2,442 | | | 100.0 | | | $2,610 | | | 100.0 | | | $2,981 | | | 100.0 | | $ | 2,275 | | | 100.0 | | $ | 2,442 | | | 100.0 | | $ | 2,610 | | | 100.0 | | $ | 2,981 | | | 100.0 | | $ | 3,732 | | | 100.0 | |
Loans by Type of Borrower
The following table sets forth the amounts of the Bank’s loans by type of borrower at December 31 of each year:
| | At December 31, | | At December 31, | |
| | 2002 | | 2003 | | 2004 | | 2005 | | 2006 | | 2003 | | 2004 | | 2005 | | 2006 | | 2007 | |
| | (in $ millions) | | (in $ million) | |
Private sector commercial banks | | | $935 | | | $986 | | | $1,243 | | | $1,583 | | | $1,167 | | $ | 986 | | $ | 1,243 | | $ | 1,583 | | $ | 1,167 | | $ | 1,491 | |
State-owned commercial banks | | | 511 | | | 422 | | | 563 | | | 118 | | | 273 | | | 422 | | 563 | | 118 | | 273 | | 241 | |
Central banks | | | 71 | | | 0 | | | 13 | | | 0 | | | 0 | | | 0 | | 13 | | 0 | | 0 | | 0 | |
Sovereign debt | | | 90 | | | 50 | | | 58 | | | 49 | | | 123 | | | 50 | | 58 | | 49 | | 123 | | 113 | |
State-owned exporting organizations | | | 335 | | | 424 | | | 363 | | | 402 | | | 138 | | | 424 | | 363 | | 402 | | 138 | | 282 | |
Private corporations | | | 574 | | | 392 | | | 201 | | | 458 | | | 1,279 | | | 392 | | | 201 | | | 458 | | | 1,279 | | | 1,605 | |
Total | | | $2,517 | | | $2,275 | | | $2,442 | | | $2,610 | | | $2,981 | | $ | 2,275 | | $ | 2,442 | | $ | 2,610 | | $ | 2,981 | | $ | 3,732 | |
During 2007, the Bank increased its exposure to private corporations by $326 million, reflecting its strategy of developing a stronger client base, focused towards a growing corporate segment.
Maturities and Sensitivites of the Loan Portfolio
The following table sets forth the maturity profile of the loan portfolio at December 31, 2007, by type of rate and type of borrower:
| | At December 31, 2007 | |
| | (in $ million) | |
| | Due in one year or less | | Due after one year through five years | | Due after five years | | Total | |
FIXED RATE | | | | | | | | | | | | | |
Private sector commercial banks | | $ | 830 | | $ | 30 | | $ | 0 | | $ | 860 | |
State-owned commercial banks | | | 145 | | | 20 | | | 0 | | | 165 | |
Sovereign debt | | | 30 | | | 83 | | | 0 | | | 113 | |
State-owned exporting organizations | | | 148 | | | 0 | | | 0 | | | 148 | |
Private corporations | | | 538 | | | 29 | | | 2 | | | 569 | |
Sub-total | | $ | 1,692 | | $ | 162 | | $ | 2 | | $ | 1,856 | |
FLOATING RATE | | | | | | | | | | | | | |
Private sector commercial banks | | $ | 355 | | $ | 220 | | $ | 56 | | $ | 631 | |
State-owned commercial banks | | | 41 | | | 35 | | | 0 | | | 76 | |
State-owned exporting organizations | | | 131 | | | 3 | | | 0 | | | 134 | |
Private corporations | | | 307 | | | 710 | | | 19 | | | 1,036 | |
Sub-total | | $ | 833 | | $ | 968 | | $ | 75 | | $ | 1,876 | |
Total | | $ | 2,525 | | $ | 1,129 | | $ | 77 | | $ | 3,732 | |
Contingencies and other assets
The Bank applies toBank’s contingencies and other assets included in the samecommercial portfolio consist of selected financial instruments with off-balance sheet credit policies used in its lending process to its evaluation of these instruments. At December 31, 2006, total contingencies amounted to $654 million, representing 18% of the Bank’s total commercial portfolio.risk and customer liabilities under acceptances.
The Bank, on behalf of its institutional client base, advises and confirms letters of credit to facilitate foreign trade transactions. The Bank also issuesprovides stand-by letters of credit and guarantees, to provide coverage forincluding country risk guarantees, which cover the country risk arising from the risk of convertibility and transferability of local currency of countries in the Region into hard currency and to provide coverage for country risk arising from political risks, such as expropriation, nationalization, war and/or civil disturbances. At December 31, 2006, total guarantees representing country risk coverage amounted to $124 million. The Bank also enters intoprovides commitments to extend credit, commitments (defined aswhich are a combination of either non-binding or legal agreements to lend to a customer)customer.
The Bank applies the same credit policies used in orderits lending process to meetits evaluation of these instruments, and, once issued, the financial needscommitment is irrevocable and remains valid until its expiration. At December 31, 2007, total contingencies and other assets in the commercial portfolio amounted to $550 million, representing 13% of customers.the Bank’s total commercial portfolio. See Note 16 to the Consolidated Financial Statements.Item 18, “Financial Statements,” note 16.
Treasury Portfolio
The treasury portfolio includes investment securities and credit default swaps (an off-balance sheet credit derivative product), which totaled $468 million and $3 million, respectively, at December 31, 2007.
Investment Securities
The Bank’s investment securities consist mostly of debt securities held to maturity and securities available for sale. See Note 5 to the Consolidated Financial Statements.Item 18, “Financial Statements”, notes 2 (g) and 5.
In the normal course of business, the Bank utilizes interest rate swaps for hedging purposes in its assets (mainly its investment securities) and liabilities management activities, including investment securities.activities.
At December 31, 2006,2007, the Bank's investment securities portfolio totaled $471$468 million of which 79%and consisted of investments with issuers in the Region, of which 67% were banks and sovereign borrowers and 33% were corporations. For the year 2007, the Bank’s total securities portfolio had a weighted average interest rate of 6.02%5.99% per annum.
Trading Assets and LiabilitiesAsset Management Portfolio
The Bank’s trading activity started in April 2006 and is conducted through an asset management fund incorporated inportfolio includes trading assets and liabilities of the Cayman Islands.Asset Management Division, which is the investment manager of the Fund. At December 31, 2006,2007, the fair value of trading assets was $130$53 million and the fair value of trading liabilities was $55$91 million. See Notes 2(g)Item 18, “Financial Statements”, notes 1, 2 (f), 4, and 2020.
The Fund follows a multi-strategy/multi-product trading approach striving to take advantage of Latin American and Caribbean opportunities. The Fund takes long and short positions within the Consolidated Financial Statements.equity, fixed income and foreign exchange markets.
The Board of Directors of the Fund controls the exposure of the Fund to certain risks through a risk matrix, which contains guidelines and parameters that the Fund’s managers must follow. Specific risk management guidelines include constraints regarding capital usage, portfolio concentration, among other factors.
Total Outstandings by Country
The following table sets forth the aggregate amount of the Bank’s cross-border outstandings, consisting of cash and due from banks, interest-bearing deposits in other banks, investment securities, net of impairment loss on securities, securities purchased under agreements to resell, trading assets and loans, but not including contingencies and other assets (collectively “cross-border outstandings”) at December 31 of each year:
| | 2004 | | 2005 | | 2006 | |
| | Amount | | % of Total Outstandings | | Amount | | % of Total Outstandings | | Amount | | % of Total Outstandings | |
| | (in $ millions, except percentages) | |
Argentina | | | $208 | | | 7.4 | % | | $55 | | | 1.8 | % | | $229 | | | 5.9 | % |
Brazil | | | 1,065 | | | 38.2 | | | 1,193 | | | 39.1 | | | 1,494 | | | 38.2 | |
Chile | | | 362 | | | 13.0 | | | 315 | | | 10.5 | | | 210 | | | 5.4 | |
Colombia | | | 172 | | | 6.2 | | | 260 | | | 8.5 | | | 278 | | | 7.1 | |
Costa Rica | | | 38 | | | 1.3 | | | 54 | | | 1.8 | | | 85 | | | 2.2 | |
Ecuador | | | 51 | | | 1.8 | | | 25 | | | 0.8 | | | 43 | | | 1.1 | |
El Salvador | | | 59 | | | 2.1 | | | 101 | | | 3.3 | | | 87 | | | 2.2 | |
France | | | 15 | | | 0.5 | | | 1 | | | 0.0 | | | 50 | | | 1.3 | |
Germany | | | 0 | | | 0.0 | | | 40 | | | 1.3 | | | 0 | | | 0.0 | |
Guatemala | | | 38 | | | 1.4 | | | 41 | | | 1.4 | | | 89 | | | 2.3 | |
Jamaica | | | 26 | | | 0.9 | | | 24 | | | 0.8 | | | 51 | | | 1.3 | |
| | 2004 | | 2005 | | 2006 | | 2007 | | | | Amount | | % of Total Outstandings | | Amount | | % of Total Outstandings | | Amount | | % of Total Outstandings | | | | (in $ million, except percentages) | | Argentina | | $ | 55 | | | 1.8 | | $ | 229 | | | 5.9 | | $ | 283 | | | 6.0 | | Austria | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 45 | | | 1.0 | | Brazil | | | 1,193 | | | 39.1 | | | 1,494 | | | 38.2 | | | 1,544 | | | 32.7 | | Chile | | | 315 | | | 10.3 | | | 210 | | | 5.4 | | | 52 | | | 1.1 | | Colombia | | | 260 | | | 8.5 | | | 278 | | | 7.1 | | | 526 | | | 11.1 | | Costa Rica | | | 54 | | | 1.8 | | | 85 | | | 2.2 | | | 77 | | | 1.6 | | Ecuador | | | 25 | | | 0.8 | | | 43 | | | 1.1 | | | 61 | | | 1.3 | | El Salvador | | | 101 | | | 3.3 | | | 87 | | | 2.2 | | | 57 | | | 1.2 | | France | | | 1 | | | 0.0 | | | 50 | | | 1.3 | | | 45 | | | 1.0 | | Germany | | | 40 | | | 1.3 | | | 0 | | | 0.0 | | | 60 | | | 1.3 | | Guatemala | | | 41 | | | 1.4 | | | 89 | | | 2.3 | | | 96 | | | 2.0 | | Honduras | | | 26 | | | 0.8 | | | 36 | | | 0.9 | | | 49 | | | 1.0 | | Jamaica | | | 24 | | | 0.8 | | | 51 | | | 1.3 | | | 77 | | | 1.6 | | Mexico | | | 199 | | | 6.5 | | | 268 | | | 6.8 | | | 442 | | | 9.4 | | Panama | | | 161 | | | 5.3 | | | 200 | | | 5.1 | | | 212 | | | 4.5 | | Peru | | | 180 | | | 5.9 | | | 271 | | | 6.9 | | | 484 | | | 10.2 | | Spain | | | 48 | | | 1.6 | | | 73 | | | 1.9 | | | 48 | | | 1.0 | | Trinidad & Tobago. | | | 177 | | | 5.8 | | | 104 | | | 2.6 | | | 88 | | | 1.9 | | United States | | | 5 | | | 0.2 | | | 135 | | | 3.5 | | | 110 | | | 2.3 | | Venezuela. | | | 0 | | | 0.0 | | | 1 | | | 0.0 | | | 135 | | | 2.8 | | Other countries1 | | | 142 | | | 4.6 | | | 209 | | | 5.3 | | | 240 | | | 5.1 | | Total | | $ | 3,048 | | | 100.0 | | $ | 3,914 | | | 100.0 | | $ | 4,730 | | | 100.0 | |
| | 2005
| | 2006
| |
| | Amount
| | % of Total Outstandings
| | Amount
| | % of Total Outstandings
| | Amount
| | % of Total Outstandings
| |
| | (in $ millions, except percentages) | |
Japan | | | 45 | | | 1.6 | | | 35 | | | 1.1 | | | 33 | | | 0.9 | |
Mexico | | | 364 | | | 13.0 | | | 199 | | | 6.5 | | | 268 | | | 6.8 | |
Panama | | | 89 | | | 3.2 | | | 161 | | | 5.3 | | | 200 | | | 5.1 | |
Peru | | | 55 | | | 2.0 | | | 180 | | | 5.9 | | | 271 | | | 6.9 | |
Spain | | | 24 | | | 0.8 | | | 48 | | | 1.6 | | | 73 | | | 1.9 | |
Switzerland | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 40 | | | 1.0 | |
Trinidad & Tobago. | | | 92 | | | 3.3 | | | 177 | | | 5.8 | | | 104 | | | 2.6 | |
United States | | | 15 | | | 0.6 | | | 5 | | | 0.2 | | | 135 | | | 3.5 | |
Other1 | | | 71 | | | 2.6 | | | 132 | | | 4.3 | | | 174 | | | 4.4 | |
Total | | | $2,789 | | | 100.0 | % | | $3,048 | | | 100.0 | % | | $3,914 | | | 100.0 | % |
1 Other consists of cross-border outstandings to countries in which cross-border outstandings did not exceed 1% of total assets outstandings. | Other consists of cross-border outstandings to countries in which cross-border outstandings did not exceed 1% of total assets for any of the periods indicated above. |
In allocating country risk limits, the Bank takes into consideration several factors, including the Bank’s perception of country risk levels, business opportunities, and economic and political analysis, applying a portfolio management approach.
Cross-border outstandings in countries outside the Region correspond principally to cashthe Bank’s liquidity placements. See Item 5, “Operating and due from banks, interest-earning deposits with banksFinancial Review and securities held to maturity.Prospects/Liquidity and Capital Resources/Liquidity”.
The following table sets forth the amount of the Bank’s cross-border outstandings by type of institution at December 31 of each year:
| | 2004 | | 2005 | | 2006 | | 2005 | | 2006 | | 2007 | |
| | (in $ millions) | | (in $ million) | |
Private sector commercial banks | | | $1,429 | | | $1,784 | | | $1,595 | | $ | 1,784 | | $ | 1,595 | | $ | 1,943 | |
State-owned commercial banks | | | 563 | | | 184 | | | 324 | | | 184 | | | 324 | | | 306 | |
Central banks | | | 28 | | | 20 | | | 0 | | | 20 | | | 0 | | | 0 | |
Sovereign debt | | | 110 | | | 157 | | | 424 | | | 157 | | | 424 | | | 436 | |
State-owned exporting organizations | | | 488 | | | 434 | | | 219 | | | 434 | | | 219 | | | 364 | |
Private corporations | | | 171 | | | 470 | | | 1,352 | | | 470 | | | 1,352 | | $ | 1,680 | |
Total | | | $2,789 | | | $3,048 | | | $3,914 | | $ | 3,048 | | $ | 3,914 | | $ | 4,730 | |
Asset QualityRevenues Per CountryThe Bank believes that its asset quality is linked to the composition of its client base, the importance that governments and borrowers in the Region attach to maintaining continued access to trade financing, its preferred creditor status, and the Bank’s strict adherence to commercial criteria in its credit activities. The Bank has developed knowledge of, and a relationship with, most of its client base throughout its 28 years of operations in the Region, which allows it to continue to further enhance its risk management process.
The Bank’s management and the CPER periodically review a report of all loan delinquencies. The Bank’s collection policies include rapid internal notification of any delinquency and prompt initiation of collection efforts, usually involving senior management.
Impaired Assets and ContingenciesThe Bank’s impaired assets consist of impaired loans and impaired securities. Loans are identified as impaired and placed on non-accrual status when any principal or interest payment is over 90 days past due or if the Bank’s management determines that the ultimate collection of principal or interest is doubtful. In all cases, if a borrower has more than one outstanding loan under its line of credit with the Bank and any of its individual loans is placed on non-accrual status, the Bank places all outstanding loans to that borrower on non-accrual status. Similarly, if a single note of a loan is placed on non-accrual status, the remaining notes under that loan are placed on non-accrual status as well. Securities that experience a decline in value, which is deemed other than temporary, are classified as impaired. Contingencies are identified as impaired and placed on non-accrual status when any payment of fees or commissions relating thereto is over 90 days past due or if the Bank’s management determines that the item may become payable by the Bank and ultimate collection of principal or interest is doubtful. For more information see Notes 2, 5, 6 and 16 to the Consolidated Financial Statements.
The following table sets forth information regarding the Bank’s impaired assets and contingencies at December 31 of each year:
| | 2002 | | 2003 | | 2004 | | 2005 | | 2006 | |
| | (in $ millions, except percentages) | |
Impaired loans | | | $691 | | | $445 | | | $256 | | | $29 | | | $0 | |
Allocation from the allowance for loan losses | | | 365 | | | 191 | | | 82 | | | 11 | | | 0 | |
Impaired loans as a percentage of total loans, net of unearned income and deferred commission | | | 27.6 | % | | 19.6 | % | | 10.5 | % | | 1.1 | % | | 0.0 | % |
Impaired contingencies | | | $45 | | | $32 | | | $32 | | | $13 | | | $0 | |
Allocation from the reserve for losses on off balance-sheet credit risks | | | 14 | | | 20 | | | 21 | | | 9 | | | 0 | |
Impaired contingencies as a percentage of total contingencies | | | 9.2 | % | | 8.8 | % | | 10.5 | % | | 1.7 | % | | 0.0 | % |
Impaired securities (par value) | | | $107 | | | $10 | | | $5 | | | $0 | | | $0 | |
Estimated fair value adjustments on options and impaired securities1 | | | 73 | | | 5 | | | 4 | | | 0 | | | 0 | |
Estimated fair value of impaired securities | | | $35 | | | $5 | | | $1 | | | $0 | | | $0 | |
Impaired securities as a percentage of total securities2 | | | 21.6 | % | | 6.8 | % | | 0.5 | % | | 0.0 | % | | 0.0 | % |
Impaired assets and contingencies as a percentage of total credit portfolio3 | | | 23.4 | % | | 17.0 | % | | 9.8 | % | | 1.2 | % | | 0.0 | % |
1
| Includes impairment losses on securities, estimated unrealized gain (loss) on impaired securities, premiums and discounts. |
2
| Total securities consist of investment securities considered part of the Bank’s credit portfolio. |
3
| The total credit portfolio consists of loans net of unearned income, fair value of investment securities, securities purchased under agreements to resell and contingencies. |
Allowance for Credit LossesThe allowance for credit losses (which includes the allowance for loan losses and the reserve for losses on off-balance sheet credit risk) covers the credit risk on loans and contingencies. The allowance for credit losses includes an asset-specific component and a formula-based component in line with FAS 5. The asset-specific component relates to a provision for losses on credits considered impaired and measured on a case-by-case basis pursuant to FAS 114. For additional information regarding allowance for credit losses, see Notes 2 (k) and 7 to the Consolidated Financial Statements.
During the third quarter of 2005, Bladex implemented a new methodology for estimating generic allowances for credit losses. The new methodology is driven primarily by Bladex’s own historical probability of default and loss experience, as well as an internal country risk classification, rather than relying exclusively on third party data, as was formerly the case. This change in methodology was the result of the Bank’s decision to adopt best practices in the banking industry, and is in line with FAS 5, which calls for the use of internal historical performance data in the estimation of credit loss reserves. The Bank began compiling its eight-year historical database in 2004 and completed this effort during 2005.
The reserve balances for estimating generic allowances, for both on and off-balance sheet credit exposures, are calculated applying the following formula:
Reserves = S(E x PD x LGD)
where:
| a) | Exposure (E) = the total accounting balance (on and off-balance sheet) at the end of the period under review, segregated by country. |
| b) | Probabilities of Default (PD) = one-year probability of default applied to the portfolio in each country. Default rates are based on Bladex’s historical portfolio performance per country rating category during an eight-year period, complemented by probabilities of default data from international credit rating agencies for high risk cases, in view of the greater robustness of credit rating agencies data for such cases. |
| c) | Loss Given Default (LGD) = a factor of 45% is utilized, based on best practices in the banking industry. This factor applies to all countries, except those classified as higher risk, in which case management applies historical loss experience on a case-by-case basis. |
The following table sets forth information regarding the Bank’s allowance for credit losses with respect to total credits outstanding at December 31 of each year:
| | 2002 | | 2003 | | 2004 | | 2005 | | 2006 | |
| | (in $ millions, except percentages) | |
Components of the allowance for credit losses | | | | | | | | | | | |
Allowance for loan losses | | | | | | | | | | | |
Balance at beginning of the year | | | $177 | | | $430 | | | $224 | | | $106 | | | $39 | |
Provision (reversal) | | | 273 | | | (70 | ) | | (111 | ) | | (48 | ) | | 12 | |
Effect of change in methodology | | | 0 | | | 0 | | | 0 | | | (6 | ) | | 0 | |
Cumulative effect on prior years (2004) of a change in credit loss reserve methodology | | | 0 | | | 0 | | | 0 | | | (6 | ) | | 0 | |
Recoveries | | | 0 | | | 2 | | | 6 | | | 3 | | | 0 | |
Loans charged-off | | | (21 | ) | | (138 | ) | | (13 | ) | | (9 | ) | | 0 | |
Balance at the end of the year | | | $430 | | | $224 | | | $106 | | | $39 | | | $51 | |
Reserve for losses on off-balance sheet credit risk: | | | | | | | | | | | | | | | | |
Balance at beginning of the year | | | $17 | | | $23 | | | $34 | | | $33 | | | $52 | |
Provision (reversal) | | | 6 | | | 11 | | | (1 | ) | | (0 | ) | | (25 | ) |
Effect of change in methodology | | | 0 | | | 0 | | | 0 | | | 16 | | | 0 | |
Cumulative effect on prior years (2004) of a change in credit loss reserve methodology | | | 0 | | | 0 | | | 0 | | | 3 | | | 0 | |
Balance at end of the year | | | $23 | | | $34 | | | $33 | | | $52 | | | $27 | |
Total allowance for credit losses | | | $453 | | | $258 | | | $139 | | | $92 | | | $78 | |
Allowance for credit losses to total credit portfolio | | | 13.7 | % | | 9.1 | % | | 4.7 | % | | 2.5 | % | | 2.0 | % |
The effect of the change in credit loss methodology for 2005 decreased net income by $10 million, or $0.26 per share (resulting from a loan loss reserve provision reversal of $6 million, and an off-balance sheet reserve provision charge of $16 million). In addition, the adjustment to apply retroactively the new methodology (to December 31, 2004) increased net income for 2005 by $3 million (resulting from a loan loss reserve provision reversal of $6 million and an off-balance sheet reserve provision charge of $3 million). The pro-forma amounts shown on the income statement have been adjusted for the effect of retroactive application of the credit loss reserve, which could have been applied, had the new methodology been in effect.
The $12 million overall positive impact on 2005 net income as it relates to the allowance for loan losses results from the use by the Bank of its own historical portfolio performance to determine the probabilities of default, whereas the previous methodology utilized only probabilities of default data from international credit rating agencies, which are more severe than the Bank’s, given the more selective and specialized nature of the Bank’s portfolio (short-term trade finance). To a lesser extent, the result was also affected by the use of the current methodology of one-year probabilities of default, given the short-term nature of the Bank’s portfolio (average maturity of 264 days), whereas the previous methodology utilized the probabilities of default of the remaining tenor of each loan, which resulted in more severe factors when exposures were longer term.
With regard to the reserve for losses on off-balance sheet credit risk, the $19 million overall negative impact on 2005 net income reflected the use by the previous methodology of a somewhat lower probability of default for off-balance sheet items, whereas the current methodology applies the same factor to both on and off-balance sheet items. This is because the Bank’s data at this date is not sufficiently large to allow for segregated probabilities of default on a robust basis. In this regard, we note that the Bank determined, in the aftermath of the Argentine crisis, to reserve for both on and off-balance sheet items on an equal basis.
The following table sets forth information regarding the Bank’s allowance for credit losses allocated by country of exposure at December 31 of each year:
| | 2004 | | 2005 | | 2006 | |
| | Total | | % | | Total | | % | | Total | | % | |
| | (in $ millions, except percentages) | |
Argentina | | | $83.9 | | | 60.2 | % | | $21.0 | | | 23.0 | % | | $25.4 | | | 32.4 | % |
Brazil | | | 29.3 | | | 21.0 | | | 18.5 | | | 20.2 | | | 11.2 | | | 14.3 | |
Colombia | | | 1.3 | | | 0.9 | | | 0.5 | | | 0.5 | | | 1.7 | | | 2.2 | |
Dominican Republic | | | 3.9 | | | 2.8 | | | 1.2 | | | 1.3 | | | 2.6 | | | 3.3 | |
Ecuador | | | 14.4 | | | 10.5 | | | 46.1 | | | 50.4 | | | 30.0 | | | 38.3 | |
Jamaica | | | 1.0 | | | 0.7 | | | 0.2 | | | 0.5 | | | 2.4 | | | 3.1 | |
Mexico | | | 1.2 | | | 0.8 | | | 0.1 | | | 0.1 | | | 1.2 | | | 1.6 | |
Peru | | | 1.3 | | | 1.0 | | | 2.8 | | | 3.0 | | | 0.6 | | | 0.8 | |
Other1 | | | 3.2 | | | 2.3 | | | 1.2 | | | 1.3 | | | 3.2 | | | 4.1 | |
Total Allowance for Credit Losses | | | $139.5 | | | 100.0 | % | | $91.5 | | | 100.0 | % | | $78.5 | | | 100.0 | % |
1
| Other consists of allowance for credit losses allocated to countries in which allowance for credit losses outstandings did not exceed $1 million for any of the periods indicated above. |
The following table sets forth information regarding the Bank’s allowance for credit losses by type of borrower at December 31 of each year:
| | 2004 | | 2005 | | 2006 |
| | (in $ millions) |
Private sector commercial banks | | | $30.1 | | | $19.8 | | | $14.9 |
State-owned commercial banks | | | 60.0 | | | 18.0 | | | 5.3 |
Central banks | | | 10.0 | | | 36.1 | | | 20.5 |
Sovereign debt | | | 0.0 | | | 1.1 | | | 1.1 |
State-owned exporting organization | | | 6.6 | | | 3.1 | | | 1.5 |
Private corporations | | | 32.6 | | | 13.5 | | | 35.1 |
Total | | | $139.5 | | | $91.5 | | | $78.5 |
The following table sets forth the distribution of the Bank’s loans charged-off against the allowance for loan losses, by country at December 31 of each year:
| | 2002 | | % | | 2003 | | % | | 2004 | | % | | 2005 | | % | | 2006 | | % |
| | (in $ millions, except percentages) |
Argentina | | | $20 | | | 95.3 | | | $137 | | | 99.4 | | | $13 | | | 100.0 | | | $5 | | | 53.7 | | | $0 | | | 0.0 |
Brazil | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 4 | | | 46.3 | | | 0 | | | 0.0 |
Mexico | | | 1 | | | 4.7 | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 0 | | | 0.0 |
Paraguay | | | 0 | | | 0.0 | | | 1 | | | 0.6 | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 0 | | | 0.0 |
Total | | | $21 | | | 100.0 | | | $138 | | | 100.0 | | | $13 | | | 100.0 | | | $9 | | | 100.0 | | | $0 | | | 0.0 |
Reversals of Argentine Specific Provision for Credit LossesThe crisis in Argentina that began in December 2001, escalated into a full-scale political and economic crisis, which resulted in the default by the Argentine government on more than $50 billion of sovereign debt. Efforts by the Argentine government to contain the situation were followed by civil unrest and riots and a succession of government collapses and resignations. This economic crisis resulted in the imposition by the Argentine government of a number of measures, including a freeze on bank deposits, forced conversion of dollar-denominated bank deposits, a 70% currency devaluation, and the imposition of exchange controls. Because of the Argentine crisis, the Bank’s Argentine obligors faced repayment difficulties. At December 31, 2001, the Bank’s Argentine credit portfolio totaled $1 billion. The Bank classified as impaired nearly its entire Argentine exposure due to these collectibility concerns and increased its allowance for credit losses during 2001 and 2002 by $77 million and $279 million, respectively, bringing the total credit reserves assigned to its Argentine portfolio to $380 million at December 31, 2002.
In the years following the crisis, Argentina continued to experience significant problems and uncertainties, such as its defaults on debt with the World Bank and IMF, exchange controls, the need for important structural reforms (related to public security and the financial system), and political conflicts and domestic uncertainty. These factors forced the Bank to maintain strong provisioning coverage on its Argentine portfolio during these years.
Beginning in 2002, the Bank negotiated the restructuring of its Argentine portfolio and sold at a discount most of the positions that the Bank estimated had the lowest probability of collection. At the close of 2003, the Bank had restructured, sold or charged-off all of its non-performing exposures, with the exception of four clients for a total $34 million. During 2004 and 2005, the Bank was able to sell these four exposures. The restructuring process was made possible in part by the exception granted to Bladex by the Central Bank of Argentina regarding the foreign exchange controls imposed at the early stage of the crisis.
In 2003, economic conditions in Argentina started to improve gradually. After an 11% negative economic growth in 2002, the country achieved a 9% GDP growth in 2003, and in each of the following two years. The country benefited from post-crisis catch-up effects and a declining interest rate environment, combined with increasing prices of its most important commodities, wheat and soy, driven by a strong demand from Asian markets, which had a positive effect on the country’s balance of payments and current accounts. During 2005, the country benefited from the sovereign foreign debt restructuring process, involving a deep discount in value and reduced interest payments, which eased the pressure on its balance of payments and consequently, increased the availability of hard currency for Argentine corporations to repay their obligations.
The following table shows Argentina’s key economic indicators for the years indicated, reflecting an improved economic scenario from 2003 through 2006:
Key Economic Indicators - Argentina1 | |
| | 2000 | | 2001 | | 2002 | | 2003 | | 2004 | | 2005 | | 2006 | |
Real GDP Growth (%) | | | -0.8 | % | | -4.4 | % | | -10.9 | % | | 8.8 | % | | 9.0 | % | | 9.2 | % | | 8.5 | % |
Fiscal Balance (% GDP) | | | -2.4 | % | | -3.2 | % | | -1.5 | % | | 0.5 | % | | 3.1 | % | | 1.8 | % | | 1.8 | % |
Public-sector Debt (% GDP) | | | 45.1 | % | | 53.8 | % | | 145.9 | % | | 138.3 | % | | 127.3 | % | | 73.5 | % | | 64.6 | % 2 |
Inflation (%) | | | -0.7 | % | | -1.5 | % | | 41.0 | % | | 3.7 | % | | 6.1 | % | | 12.3 | % | | 9.8 | % |
Current Account ($ millions) | | | -8,989 | | | -3,336 | | | 8,710 | | | 8,051 | | | 3,158 | | | 5,625 | | | 8,054 | |
Current Account (% GDP) | | | -3.2 | % | | -1.2 | % | | 8.5 | % | | 6.2 | % | | 2.1 | % | | 3.1 | % | | 3.8 | % |
Forex Reserves ($ millions) | | | 25,147 | | | 14,553 | | | 10,489 | | | 14,153 | | | 19,646 | | | 28,077 | | | 32,037 | |
Debt Service ratio (%) | | | 70.8 | % | | 42.2 | % | | 59.8 | % | | 79.3 | % | | 66.9 | % | | 47.3 | % | | n.a. | |
1
| Source: Banco Central de la República Argentina. |
2
| This ratio corresponds to the third quarter of 2006.
|
These factors contributed to a gradual improvement and more stable economic situation, which in turn improved the financial flexibility of many of the Bank’s clients, allowing them to comply with their contracted payments or make prepayments. As a result, the Bank was able to decrease its impaired loan portfolio in Argentina by $191 million, $184 million, and $23 million, for the years 2004, 2005, and 2006, respectively, as well as to recover previously charged-off loans, resulting in reversals of loan loss provisions for $105 million, $48 million, and $10 million, respectively. These reversals resulted from loan collections and sales that exceeded their respective net book values.
The following table sets forth information regarding the Bank’s reversals (provisions) of allowance for loan losses during the years indicated:
| | For the year ended December 31, | |
| | 2004 | | 2005 | | 2006 | |
| | (in $ millions) | |
Argentine reversals related to sale of loans | | | $6.3 | | | $2.9 | | | $0.0 | |
Argentine reversals related to credit restructurings and collections, and changes in expected loss levels | | | 92.5 | | | 45.1 | | | 10.2 | |
Total Argentine Specific Reserves Reversals | | | $98.8 | | | $47.9 | | | $10.2 | |
Brazil Specific Reserves Reversals (Provisions) | | | (2.2 | ) | | 13.2 | | | 1.0 | |
Total Specific Reserves Reversals | | | $96.6 | | | $61.1 | | | $11.2 | |
Generic Reserves Reversals (Provisions) - due to changes in credit portfolio composition and risk levels | | | $8.4 | | | $(15.5 | ) | | $(23.0 | ) |
Generic Reserves Reversals - due to change in credit loss reserve methodology | | | 0.0 | | | 6.0 | | | 0.0 | |
Total Generic Reserves Reversals (Provisions) | | | $8.4 | | | $(9.6 | ) | | $(23.0 | ) |
Recoveries - Argentine credits | | | 6.4 | | | 0.5 | | | 0.0 | |
Recoveries - Other credits | | | 0.0 | | | 2.3 | | | 0.0 | |
Total Recoveries | | | $6.4 | | | $2.6 | | | $0.0 | |
Total Reversals (Provisions) of Allowance for Loan Losses | | | $111.4 | | | $54.2 | | | $(11.8 | ) |
The following table sets forth information regarding the Bank’s approximate net revenues per country at the dates indicated, with net revenues calculated as the sum of net interest income, fees and commissions, net, derivatives andactivities of hedging activities,derivative instruments, trading gains, net gain on sale of securities available for sale, gain (loss) on foreign currency exchange and other income net.(expense), net1.
| | For the year ended December 31, |
| | 2004 | | 20052 | | 2006 |
| | (in $ millions) |
Argentina | | | $14.6 | | | $5.7 | | | $4.2 |
Brazil | | | 17.9 | | | 23.4 | | | 31.4 |
Chile | | | 1.1 | | | 2.9 | | | 2.7 |
Colombia | | | 2.2 | | | 3.4 | | | 3.6 |
Costa Rica | | | 0.0 | | | 0.0 | | | 1.6 |
| | For the year ended December 31, | |
| | 2005 | | 2006 | | 2007 | |
| | (in $ million) | |
Argentina | | $ | 5.7 | | $ | 4.2 | | $ | 4.8 | |
Brazil | | | 23.4 | | | 31.4 | | | 33.2 | |
Chile | | | 2.9 | | | 2.7 | | | 1.4 | |
Colombia | | | 3.4 | | | 3.6 | | | 7.8 | |
Costa Rica | | | 0.0 | | | 1.6 | | | 0.9 | |
Dominican Republic | | | 1.0 | | | 1.0 | | | 0.9 | |
Ecuador | | | 2.5 | | | 2.9 | | | 3.2 | |
El Salvador | | | 1.2 | | | 1.5 | | | 0.9 | |
Guatemala | | | 0.0 | | | 1.3 | | | 1.5 | |
Jamaica | | | 1.2 | | | 1.5 | | | 1.5 | |
Mexico | | | 4.7 | | | 5.0 | | | 12.4 | |
Panama | | | 1.6 | | | 3.6 | | | 3.8 | |
Peru | | | 1.4 | | | 3.4 | | | 4.5 | |
Trinidad and Tobago | | | 0.0 | | | 1.8 | | | 2.4 | |
Venezuela | | | 0.7 | | | 1.0 | | | 3.3 | |
Other countries2 | | | 3.9 | | | 1.2 | | | 1.5 | |
Asset Management Division | | | 0.0 | | | 0.6 | | | 24.1 | |
Total | | $ | 53.6 | | $ | 68.2 | | $ | 108.2 | |
| | For the year ended December 31,
|
| | 2004
| | 20052
| | 2006
|
| | (in $ millions) |
Dominican Republic | | | 1.1 | | | 1.0 | | | 1.0 |
Ecuador | | | 2.8 | | | 2.5 | | | 2.9 |
El Salvador | | | 0.6 | | | 1.2 | | | 1.5 |
Guatemala | | | 0.0 | | | 0.0 | | | 1.3 |
Jamaica | | | 0.6 | | | 1.2 | | | 1.5 |
Mexico | | | 4.1 | | | 4.7 | | | 5.0 |
Panama | | | 0.6 | | | 1.6 | | | 3.6 |
Peru | | | 1.1 | | | 1.4 | | | 3.4 |
Trinidad and Tobago | | | 0.0 | | | 0.0 | | | 1.8 |
Venezuela | | | 1.2 | | | 0.7 | | | 1.0 |
Other1 | | | 2.9 | | | 3.9 | | | 1.83 |
Total | | | $50.8 | | | $53.6 | | | $68.2 |
1 | Net revenues per country exclude operating expenses, reversal (provision) for loan losses, reversal (provision) for losses on off-balance sheet credit risk, recoveries on assets, net of impairments and cumulative effect on prior years of changes in accounting principles. |
2 | Other consists of net revenues per country in which net revenues did not exceed $1 million for any of the periods indicated above.above |
2
| Starting in 2005, derivatives & hedging activities are included as part of net revenues, as the Treasury Area became one of the Bank’s revenue centers. |
| It includes $627 thousand corresponding to the Bank’s proprietary asset management fund. |
The $15 million increase in net revenues for 2006 compared to 2005, was mainly due to:15
| · | a $14 million, or 30%, increase in net interest income, mostly driven by: |
| | a 26% increase inNet revenues per country reflect the average accruing loan and investment portfolio; and |
| | an increase of 6 basis points in net interest margin, resulting from the impact of increasing interest rates on the Bank’s available capital, wider lending spreads, and lower cost of funds. |
| | These factors were partially offset by the impact of lower interest collections on the Bank’s richly priced non-accruing portfolio over the period. |
| · | a $1 million, or 12%, increase in non-interest income, mostly driven by: |
| · | an 8% increase in fee income; and |
| · | higher gains in Treasury activities. |
The $3 million increase in net revenues for 2005 compared to 2004, was primarily due to:
| · | the positive effect of higher interest rates on the Bank’s interest-earning assets; |
| · | the positive effect of an increase in the average credit portfolio from $2,705 million in 2004 to $3,081 million in 2005; and |
| · | revenues from gains on hedging activities. |
| · | These factors were offset by the impact of lower interest collections on the Bank’s decreasing and richly priced non-accruing portfolio, as well as lower net lending margins and lower gains on the sale of Argentine impaired securities. |
derived from the Bank’s commercial portfolio (loans and contingencies), treasury portfolio (investment securities and credit default swaps) and asset management portfolio (trading assets and liabilities), throughout the Region. See Item 4, “Information on the Company/Business Overview/Commercial Portfolio, Treasury Portfolio and Asset Management Portfolio” and Item 5, “Operating and Financial Review and Prospects/Operating Results/Net Income”.
Competition
The Bank operates in a highly competitive environment in most of its markets. Management recognizes that the Bank needs to continue to investmarkets, and adapt in order to remain competitive. The Bank faces strong competition principally from regional and international banks in making loans, and providing fee-generating services. The Bank competes in its lending and deposit taking activities with other banks and international financial institutions, many of which have greater financial resources and offer sophisticated banking services. Whenever economic conditions and risk perception improve in the largest countries of the Region, competition from commercial banks, the securities markets and other new participants tends to increase. Competition may have the effect of reducing the spreads of the Bank’s lending rates over its funding costs and constraining the Bank’s profitability.
The trade finance business is subject to change. Increased open account exports and new financing requirements from multinational corporations are changing the way banks intermediate foreign trade financing. The Bank cannot predict with certainty the changes that may occur and how these may affect the competitiveness of its businesses.
The Bank believes that competition also comes from investment banks and the local and international securities markets, which provide liquidity to the financial systems in certain countries in the Region, as well as non-bank specialized financial institutions. The Bank competes primarily on the basis of pricing and quality of service. Moreover, the Bank has developed customer loyalty because it has been a consistent source of trade-related financing. The Bank also believes that its operating efficiencies, commitment to the Region, preferred creditor status, market knowledge, and business focus constitute important competitive advantages in certain markets. See “RiskItem 3, “Key Information/Risk Factors”.
Regulation
General
The Superintendency of Banks of Panama (the “Superintendency of Banks”) regulates, supervises and examines Bladex. The New York Agency is regulated, supervised and examined by the New York Banking Department and the Federal Reserve Board and the Florida International Administrative Office is regulated, supervised and examined by the Florida Office of Financial Regulation and the Federal Reserve Board. Bladex Offshore Feeder Fund and Bladex Capital Growth Fund are regulated by government authorities in the Cayman Islands. The regulation of the Bank by relevant Panamanian authorities differs from the regulation generally imposed on banks, including foreign banks, in the United States by U.S. federal and state regulatory authorities.
As of October 5, 2004, theThe Superintendency of Banks entered into an arrangementhas signed and executed agreements or letters of understanding with twenty-four foreign supervisory authorities for the sharing of supervisory information with various U.S. regulators, includingunder the principles of reciprocity, appropriateness, national agreement, and confidentiality. Those twenty-four entities include the Federal Reserve Board,System, the Office of the Comptroller of Currency and the Board of Governors, the Federal Deposit Insurance Corporation (the “Statementand the Office of Cooperation”). TheThrift Supervision. In addition, the Statement of Cooperation between the United States and Panama promotes cooperation between U.S. and Panamanian banking regulators and demonstrates the commitment of the U.S. regulators and the Superintendency of Banks to the principles of comprehensive consolidated supervision.
On February 26, 1998, Panama adopted Decree-Law No. 9 (the “Banking Law”), which is a comprehensive revision and restatement of the banking legislation in Panama. The Banking Law took effect on June 12, 1998.
The Bank operates in Panama under a General Banking License issued by the National Banking Commission, predecessor of the Superintendency of Banks, and is subject to supervision and examination by the Superintendency of Banks.Banks, pursuant to Decree-Law No. 9 of February 26, 1998 (the “Banking Law”). Banks operating under a General Banking License (“General License Banks”) may engage in all aspects of the banking business in Panama, including acceptingtaking local and offshore deposits, as well as entering into banking transactions in Panama that may have an economic impact outside of Panama.making local and international loans.
General License Banks must have paid-in capital of not less than $10 million. Additionally, General License Banks must maintain minimum capital of 8% of their total risk-weighted assets. The capital adequacy standards used by the Superintendency of Banks are based on the Basel Capital Accord. The Superintendency of Banks is authorized to increase the minimum capital requirement percentage in Panama in the event that generally accepted international capitalization standards as set forth in the Basel Capital Accord become more stringent.
General License Banks are required to maintain 30% of their global deposits in liquid assets (which include short-term loans to other banks and other liquid assets) of the type prescribed by the Superintendency of Banks. Under the Banking Law, deposits from central banks and other similar depositories of the international reserves of sovereign states are immune from attachment or seizure proceedings.
Pursuant to the Banking Law, the Bankbanks cannot makegrant loans or issue guarantees or any other obligation (“Credit Facilities”) to any one person or a group of related persons in excess of twenty-five percent (25%) of the Bank’s total capital. However, the Banking Law established that in cases of loans and other credits granted by mixed-capital banks with headquarters in Panama whose principal business is the granting of loans to other banks, the limit will be thirty percent (30%) of its capital.the Bank´s capital funds. As confirmed by the Superintendency of Banks, the Bank currently applies the limit of thirty percent (30%) of the Bank’s total capital with respect to the Bank’s credit facilities in favor of financial institutions and the limit of twenty-five percent (25%) of the Bank’s total capital with respect to the Bank’s credit facilities in favor of corporations and sovereign borrowers.
Under the Banking Law, a bank may not grant loans or issue guarantees or any other obligation to “related parties” that exceed (1) 5% of its total capital, in the case of unsecured transactions, (2) 10% of its total capital, in the case of collateralized transactions (other than loans secured by deposits in the bank), and (3) 25%50% of the Capital Funds of the Bank,its total capital in the case of loans secured by deposits in the total amount of all operations of the Bank and that of the subsidiaries that consolidate with for loans and credit facilities granted to Related Parties and for indebtedness title investment issued by Related Parties.bank. For these purposes, a “related party” is (a) any one or more of the bank’s directors, (b) any stockholder of the bank who directly or indirectly owns 5% or more of the outstandingissued and issuedoutstanding capital stock of the bank, (c) any company of which one or more of the bank’s directors is a director or officer or where one or more of the bank’s directors is a guarantor of the loan or credit facility, (d) any company or entity in which the bank or any one of its directors or officers can exercise a controlling influence, (e) any company or entity in which the bank or any one of its directors or officers owns 20% or more of the outstanding and issued capital stock of suchthe company or entity and (f) managers, officers and employees of the bank, or their respective spouses (other than home mortgage loans or guaranteed personal loans under general programs approved by the bank for employees).
The Superintendency of Banks may authorize the total or partial exclusion of loans or credits from the computation of these limitations in cases of unsecured loans and other credits granted by mixed-capital banks with headquarters in Panama whose principal business is the granting of loans to other banks, which is the case of the Bank. This authorization is contingent on the following conditions: (i) the ownership of shares in the debtor bank -directly or indirectly- byindirectly-by the shared director or shared officer, may not exceed five-percentfive percent (5%) of the said bank's capital, or may not amount to any sum that would ensure his or her majority control over the decisions of thisthe bank; (ii) the ownership of shares in the creditor bank -directlybank-directly or indirectly- byindirectly-by the debtor bank represented in any manner by the shared director or shared officer, may not exceed five-percentfive percent (5%) of the shares outstanding of the creditor bank, or may not amount to any sum that would ensure his or her majority control over the decisions of thisthe bank; (iii) the shared director or shared officer must abstain from participating in the deliberations and in the voting sessions held by the creditor bank regarding the loan or credit request, under this article, and (iv) the loan or credit must strictly comply with customary standards of discretion set by the grantor bank's credit policy. The Superintendency of Banks shallwill determine the amount of the exclusion in the case of each loan or credit submitted for its consideration.
The Banking Law contains additional limitations and restrictions with respect to related party loans and credit facilities. For instance, under the Banking Law, all loans made to managers, officers, employees or stockholders who are owners of 5% or more of the lending Bank’s outstanding and issued capital stock shallwill be made on terms and conditions similar to those given by the bank to its clients in arm’s-length transactions and which reflect market conditions. Shares of a bank cannot be pledged or offered as security for loans or credit facilities issued by suchthe bank.
In addition to the foregoing requirements, there are certain other restrictions applicable to General License Banks, including (1) a requirement that a bank must notify the Superintendency of Banks before opening or closing a branch or office in Panama and obtain approval from the Superintendency of Banks before opening or closing a branch or subsidiary outside Panama, and (2) a requirement that a bank obtain approval from the Superintendency of Banks before it liquidates its operations, merges or consolidates with another bank or sells all or substantially all of its assets.assets, (3) a requirement that a bank must notify the Superintendency of Banks, within sixty (60) days prior to the beginning of each fiscal term, the name of the certified public accounting firm that it wishes to contract to carry out the duty of external auditing for the new fiscal term, and (4) a requirement that a bank obtains prior approval from the Superintendency of Banks of the risk rating entity it wishes to hire to perform the risk rating. The subsidiaries of Panamanian banks established in foreign jurisdictions must observe the legal and regulatory provisions applicable in Panama regarding the sufficiency of capital, as prescribed under the Banking Law.
The Banking Law provides that banks in Panama are subject to inspection by the Superintendency of Banks, which must take place at least once every two years. These supervisory powers of the Superintendency of Banks also extend to a bank’s subsidiaries and branches. The Superintendency of Banks last inspected the Bank during April and May 2006, and the results of this inspection were fully satisfactory.
The Superintendency of Banks is empowered to request from any bank or any company that belongs to the economic group of which a bank in Panama is a member, the documents and reports pertaining to its operations and activities. Banks are required to file with the Superintendency of Banks monthly, quarterly and annuallyannual information, including financial statements, an analysis of their credit facilities and any other information requested by the Superintendency of Banks. In addition, banks are required to make available for inspection any reports or documents that are necessary for the Superintendency of Banks to ensure compliance with Panamanian banking laws and regulations. Banks subject to supervision may be fined by the Superintendency of Banks for violations of Panamanian banking laws and regulations.
On February 22, 2008, the Panamanian cabinet voted to adopt Decree-Law No. 2 (the “New Banking Law”), which is a revision and restatement of the Banking Law. This new legislation will take effect on August 25, 2008. The New Banking Law regulates banks and the entire “banking group” to which each bank belongs. Banking groups are defined as the holding company and all direct and indirect subsidiaries of the holding company, including the bank in question. Banking groups must comply with audit standards and various limitations set forth in the New Banking Law, in addition to all compliance required of the bank in question.
Under the New Banking Law, a bank’s capital composition will include tertiary capital in addition to primary and secondary capital, and the sum of secondary and tertiary capital cannot exceed primary capital. Tertiary capital will be made up of short-term subordinated debt incurred for the management of market risk. Capital adequacy standards will require primary capital equal to no less than 4% of the bank’s assets and off-balance sheet operations that represent a contingency to the bank, as well as the previous requirement of maintaining a minimum capital of 8% of its total risk-weighted assets. Additionally, the Superintendency of Banks may take into account market risks, operational risks and country risks, among others, to evaluate capital adequacy standards.
The New Banking Law will limit loans, guarantees and other similar obligations granted to “related parties” by the bank as well as by the ultimate parent of the banking group. The new definition of related parties also includes parties related to the ultimate parent of the banking group.
The supervisory powers of the Superintendency of Banks will extend to the bank and the banking group, and any inspection carried out by the Superintendency of Banks may involve an inspection of the banking group. As a result, the bank, as well as the banking group, must make available for inspection any reports or documents that are necessary for the Superintendency of Banks to ensure compliance with Panamanian banking laws and regulations.
The Bank has not been significantly impacted by the incorporation of these changes regarding the New Banking Law.
Panamanian Anti MoneyAnti-Money Laundering laws and regulations. In Panama, all banks and all trust corporations must take necessary measures to prevent their operations and/or transactions from being used to commit the felony of money laundering, terrorism financing or any other illicit activity contemplated in the laws and regulations addressing this matter.
United States Law
Bladex operates a New York state-licensed agency in New York, New York and maintains a direct wholly-owned non-banking subsidiary in Delaware, Bladex Holdings Inc. (“Bladex Holdings”), that is not engaged in activities other than owning twoone wholly owned subsidiariessubsidiary incorporated under the laws of the State of Delaware: Clavex, LLC, incorporated on June 15, 2006, and Bladex Asset Management, Inc. incorporated on May 24, 2006. In february 2007, another wholly-owned subsidiary Clavex, LLC,which was incorporated on June 15, 2006, was dissolved. On October 30, 2006, the Bank established an International Administrative Office in Miami, Florida (the “Miami“Florida International Administrative Office”).
New York State Law. The New York Agency, established in 1989, is licensed by the Superintendent of Banks of the State of New York (the “Superintendent”) under the New York Banking Law. The New York Agency maintains an international banking facility that also is regulated by the Superintendent and the Federal Reserve Board. The New York Agency is examined by the New York State Banking Department and is subject to banking laws and regulations applicable to a foreign bank that operates a New York agency. New York agencies of foreign banks are regulated substantially the same as, and have similar powers to, New York state-chartered banks, except with respect to capital requirements and deposit-taking activities.
The Superintendent is empowered by law to require any branch or agency of a foreign bank to maintain in New York specified assets equal to a percentage of the branch or agency’s liabilities, as the Superintendent may designate. Under the current requirement, the New York Agency is required to maintain a pledge of 1%a minimum of $2 million with respect to its total third-party liabilities subjectand such pledge may be up to 1% of the agency’s third party liabilities, or upon meeting eligibility criteria, up to a minimummaximum amount of $2$100 million. At December 31, 2006,2007, the New York Agency maintained a pledge of $5.5 million, complying with the minimum required amount.
In addition, the Superintendent retains the authority to impose specific asset maintenance requirements upon individual agencies of foreign banks on a case-by-case basis. No special requirement has been prescribed for the New York Agency.
The New York Banking Law generally limits the amount of loans to any one person to 15 percent of the capital, surplus fund and undivided profits of a bank. For foreign bank agencies, the lending limits are based on the capital of the foreign bank and not that of the agency.
The Superintendent is authorized to take possession of the business and property of a New York agency of a foreign bank whenever an event occurs that would permit the Superintendent to take possession of the business and property of a state-chartered bank. These events include the violation of any law, unsafe business practices, an impairment of capital, and the suspension of payments of obligations. In liquidating or dealing with an agency’s business after taking possession of the agency, the New York Banking Law provides that the claims of creditors which arose out of transactions with the agency may be granted a priority with respect to the agency’s assets over other creditors of the foreign bank.
Florida State Law. The MiamiFlorida International Administrative Office, established in October 2006, is licensed and supervised by the Florida Office of Financial Regulation under the Florida Financial Institutions Codes. The Miamiactivities of the Florida International Administrative Office isare subject to certain activitiesthe restrictions described below as well as to Florida banking laws and regulations that are applicable generally to foreign banks that operate offices in Florida. The MiamiFlorida International Administrative Office is also subject to regulation by the Federal Reserve Board under the International Banking Act of 1978 (the “IBA”).
Pursuant to Florida law, the MiamiFlorida International Administrative Office is authorized to conduct certain “back office” functions on behalf of the Bank, including administration of the Bank’s personnel and operations, data processing and record keeping activities, and negotiating and servicing loans or extensions of credit and investments. Under the provisions of the IBA and the regulations of the Federal Reserve Board, the Florida International Administrative Office is also permitted to function as a representative office of the Bank. In this capacity it may solicit new business for the Bank and conduct research. It may also act in a liaison capacity between the Bank and its customers.
Federal Law. In addition to being subject to New York and Florida state laws and regulations, the New York Agency and the Florida International Administrative Office are subject to federal regulations, primarily under the IBA, and isare subject to examination and supervision by the Federal Reserve Board. The IBA generally extends federal banking supervision and regulation to the United StatesU.S. offices of foreign banks and to the foreign bank itself. Under the IBA, the United StatesU.S. branches and agencies of foreign banks, including the New York Agency, are subject to reserve requirements on certain deposits. At present, the New York Agency has no deposits subject to such requirements. The New York Agency also is subject to reporting and examination requirements imposed by the Federal Reserve Board similar to those imposed on domestic banks that are members of the Federal Reserve System. The Foreign Bank Supervision Enhancement Act of 1991 (the “FBSEA”) has amended the IBA to enhance the authority of the Federal Reserve Board to supervise the operations of foreign banks in the United States. In particular, the FBSEA has expanded the Federal Reserve Board’s authority to regulate the entry of foreign banks into the United States, supervise their ongoing operations, conduct and coordinate examinations of their U.S. offices with state banking authorities, and terminate their activities in the United States for violations of law or for unsafe or unsound banking practices.
In addition, under the FBSEA, state-licensed branches and agencies of foreign banks may not engage in any activity that is not permissible for a “federal branch” (i.e., a branch of a foreign bank licensed by the federal government through the Office of the Comptroller of the Currency of the Treasury Department (“OCC”), rather than by a state), unless the Federal Reserve Board has determined that such activity is consistent with sound banking practices.
The New York Agency does not engage in retail deposit-taking in the United States, and deposits with the New York Agency are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Under the FBSEA, the New York Agency may not obtain FDIC insurance and generally may not accept deposits of less than $100,000.
The IBA also restricts the ability of a foreign bank with a branch or agency in the United States to engage in nonbankingnon-banking activities in the United States, to the same extent as a United StatesU.S. bank holding company. Bladex is subject to certain provisions of the Federal Bank Holding Company Act of 1956 (the “BHCA”) because it maintains an agency in the United States. Generally, any nonbanking activity engaged in by Bladex directly or through a subsidiary in the United States is subject to certain limitations under the BHCA. Under the Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”), a foreign bank with a branch or agency in the United States may engage in a broader range of non-banking financial activities, provided it is qualified and has filed a declaration with the Federal Reserve Board to be a “financial holding company” (“FHC”). As of the date hereof, Bladex has not filed such a declaration with the Federal Reserve Board. At present, Bladex has one subsidiary in the United States, Bladex Holdings Inc. (“Bladex Holdings”), that is incorporated under Delaware law. That subsidiary is not engaged in any activity, other than owning twoone Delaware Companies,company, which areis Bladex Asset Management, Inc. and Clavex, LLC.
In addition, pursuant to the Financial Services Regulatory Relief Act of 2006, the Securities and Exchange Commission (“SEC”) and the Federal Reserve Board finalized Regulation R. Regulation R defines the scope of exceptions provided for in the GLB Act for securities activities which banks may conduct without registering with the SEC as securities brokers or moving such activities to a broker-dealer affiliate. The “push out” rules exceptions contained in Regulation R enable banks, subject to certain conditions, to continue to conduct securities transactions for customers as part of the bank’s trust and fiduciary, custodial, and deposit “sweep” functions, and to refer customers to securities broker-dealer pursuant to a networking arrangement with the broker-dealer. The New York Agency is subject to Regulation R with respect to its securities activities.
USA PATRIOT Act of 2001. The USA PATRIOT Act of 2001 (the “PATRIOT Act”) substantially broadened the scope of U.S. anti-money laundering laws and regulations by imposing significantly new compliance and due diligence obligations, creating new crimes and penalties and expanding the extraterritorial jurisdiction of the United States. Failure of a financial institution to comply with the PATRIOT Act’s requirements could have serious legal and reputational consequences for an institution. Both the New York Agency and the MiamiFlorida International Administrative Office are “financial institutions” within the meaning of the PATRIOT Act. The New York Agency has adopted comprehensive policies and procedures to address the requirements of the PATRIOT Act.
Cayman Islands Law
Bladex Offshore Feeder Fund and Bladex Capital Growth Fund are exempted companies incorporated in the Cayman Islands with limited liability, incorporated on February 21, 2006 under the Companies Law (2004 Revision) of the Cayman Islands. The registered office of these companies is at PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, KY1-1104, Cayman Islands.
The Companies Law (2004(2007 Revision) of the Cayman Islands (the "Companies Law") is derived, to a large extent, from the older Companies Acts of England, although there are significant differences between the Companies Law and the current Companies Act of England. Section 193 of the Companies Law requires that Bladex Offshore Feeder Fund and Bladex Capital Growth Fund shall not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of these companies carried on outside the Cayman Islands. This does not prevent Bladex Offshore Feeder Fund and Bladex Capital Growth Fund from effecting and concluding contracts in the Cayman Islands and exercising in the Cayman Islands all of its powers necessary for the carrying on of its business outside the Cayman Islands.
Cayman Islands Anti-Money Laundering laws and regulations. The Proceeds of Criminal Conduct Law (2005(2007 Revision) and the Terrorism Law, (2003 Revision)2003 of the Cayman Islands impose reporting obligations on residents of the Cayman Islands who know or suspect the involvement of another person in money laundering or terrorist activities.
C.Organizational Structure
For information regarding the Bank’s organizational structure see Note 1 to the Consolidated Financial Statements.
Item 18, “Financial Statements”, note 1.
D.Property, PlantsPlant and Equipment
The Bank owns its principal offices,main branch, with office space of 3,4576,161 square meters, located at Calle 50 yand Aquilino de Lala Guardia in Panama City. The Bank leases 11.2 square meters of computer equipment hosting located at Gavilan Street Balboa in Panama City and 21.2 square meters of office space and Internet access to be used in case of a contingency, located at 75E Street San Francisco in Panama City. In addition, the Bank leases office space for its representative offices in Mexico and Buenos Aires, Bladex Representação Ltda. in Brazil, its New York Agency, Bladex Asset Management in New York, and its International Administrative Office in Miami. See NotesItem 18, “Financial Statements”, notes 2 (n)(m) and 17 to the Consolidated Financial Statements.17.
Item 4A.Unresolved Staff Comments
None.
Item 5.Operating and Financial Review and Prospects
The following discussion should be read in conjunction with the Bank’s Consolidated Financial Statements and the Notesnotes thereto included elsewhere in this Annual Report.
Nature of Earnings
The Bank derives income from net interest income, fee income,fees and commissions, trading gains, and net gains on sale of securities available for sale and from trading gains.available-for-sale. Net interest income, or the difference between the interest income the Bank receives on its interest-earning assets and the interest it pays on interest-bearing liabilities, is generated principally by the Bank’s lending activities. The Bank generates fee incomefees and commissions mainly through the issuance, confirmation and negotiation of letters of credit and guarantees covering commercial and country risk, and through loan origination and sales.
A.Operating Results
The following table summarizes changes in components of the Bank’s net income and performance at and for the periods indicated.
| | At and For the Year Ended December 31, | | |
| | 2004 | | 2005 | | 2006 | | | At and For the Year Ended December 31, | |
| | (in $ thousands, except per share amounts and percentages) | | | 2005 | | 2006 | | 2007 | |
| | | | | | | | | (in $ thousand, except per share amounts and percentages) | |
Total interest income | | | $76,152 | | | $116,823 | | | $203,350 | | | $ | 116,823 | | $ | 203,350 | | $ | 264,869 | |
Total interest expense | | | 34,127 | | | 71,570 | | | 144,513 | | | | 71,570 | | | 144,513 | | | 194,299 | |
Net interest income | | | 42,025 | | | 45,253 | | | 58,837 | | | | 45,253 | | | 58,837 | | | 70,570 | |
Reversal of (provision for) loan losses | | | 111,400 | | | 54,155 | | | (11,846 | ) | |
Reversal (provision) for loan losses | | | | 54,155 | | | (11,846 | ) | | (11,994 | ) |
Net interest income after reversal of (provision for) loan losses | | | 153,425 | | | 99,408 | | | 46,991 | | | | 99,408 | | | 46,991 | | | 58,576 | |
Other income (expense): | | | | | | | | | | | | | | | | | | | | |
Reversal of (provision for) losses on off-balance sheet credit risk | | | 871 | | | (15,781 | ) | | 24,891 | | |
Commission income, net | | | 5,928 | | | 5,824 | | | 6,285 | | |
Derivatives and hedging activities | | | 47 | | | 2,338 | | | (225 | ) | |
Recoveries (impairment) on securities | | | 0 | | | 10,206 | | | 5,551 | | |
Reversal (provision) for losses on off-balance sheet credit risk | | | | (15,781 | ) | | 24,891 | | | 13,468 | |
Fees and commissions, net | | | | 5,824 | | | 6,285 | | | 5,555 | |
Activities of hedging derivatives instruments | | | | 2,338 | | | (225 | ) | | (989 | ) |
Recoveries of assets, net of impairments | | | | 10,206 | | | 5,551 | | | (500 | ) |
Trading gains | | | 0 | | | 0 | | | 879 | | | | 0 | | | 879 | | | 23,866 | |
Net gain on sale of securities available for sale | | | 2,922 | | | 206 | | | 2,568 | | | | 206 | | | 2,568 | | | 9,119 | |
Gain (loss) on foreign currency exchange | | | (194 | ) | | 3 | | | (253 | ) | | | 3 | | | (253 | ) | | 115 | |
Other income, net | | | 83 | | | 5 | | | 144 | | |
Other income (expense), net | | | | 5 | | | 144 | | | (6 | ) |
Net other income | | | 9,657 | | | 2,801 | | | 39,840 | | | | 2,801 | | | 39,840 | | | 50,628 | |
Total operating expenses | | | (21,352 | ) | | (24,691 | ) | | (28,929 | ) | | | (24,691 | ) | | (28,929 | ) | | (37,027 | ) |
Income before cumulative effect of changes in accounting principles | | | $141,730 | | | $77,518 | | | $57,902 | | | $ | 77,518 | | $ | 57,902 | | $ | 72,177 | |
Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 0 | | | 2,733 | | | 0 | | | | 2,733 | | | 0 | | | 0 | |
Cumulative effect on prior years (to December 31, 2004) of an early adoption of the fair-value-based method of accounting stock-based employee compensation | | | 0 | | | (150 | ) | | 0 | | | | (150 | ) | | 0 | | | 0 | |
Net income | | | $141,730 | | | $80,101 | | | $57,902 | | | $ | 80,101 | | $ | 57,902 | | $ | 72,177 | |
Net income per share | | | $3.61 | | | $2.08 | | | $1.56 | | |
Basic earnings per share | | | $ | 2.01 | | $ | 1.56 | | $ | 1.99 | |
Diluted earnings per share | | | $3.60 | | | $2.06 | | | $1.54 | | | $ | 1.99 | | $ | 1.54 | | | 1.98 | |
Return on average assets | | | 5.8 | % | | 3.0 | % | | 1.7 | % | | | 3.0 | % | | 1.7 | % | | 1.7 | % |
Return on average stockholders’ equity | | | 22.8 | % | | 12.9 | % | | 10.0 | % | | | 12.9 | % | | 10.0 | % | | 11.9 | % |
Net Income
For 2007, net income was $72 million, compared with $58 million for 2006, a $14 million, or 25%, increase, mainly attributable to a $12 million, or 20%, increase in net interest income (mostly from the Commercial Division), $23 million in higher trading gains from the Asset Management Division, and a $7 million increase from gain on sale of securities available-for-sale from the Treasury Division. These increases were partly offset mainly by an $8 million increase in operating expenses.
The Commercial Division’s net income, which includes net interest income from loans, fees and commissions and other income derived from financial services and off-balance sheet credits (such as letters of credit, guarantees and credit commitments), allocated operating expenses and reversals (provisions) for credit losses, amounted to $43 million in 2007, compared to $47 million in 2006. The $4 million decrease was mainly driven by lower reversals for credit losses which amounted to $1 million in 2007 compared to $13 million in 2006. This decrease was partly offset mainly by net interest income growth, due to higher average balances of the loan portfolio and higher weighted average lending spreads over cost of funds.
The Treasury Division’s net income, which includes net interest income on investment securities, gains and losses on the sale of securities, on activities of hedging derivative instruments and on foreign currency exchange transactions, allocated operating expenses and recoveries on assets, net of impairment, amounted to $10 million in 2007, compared to $11 million in 2006. The $1 million, or 7%, decrease is mainly attributable to recoveries on assets which amounted to $0 during 2007, compared to $6 million during 2006 (related to collections of Argentine securities which had been written-off and charged to earnings in prior years). This decrease was partly offset mainly by gains in the available-for-sale portfolio.
During 2006, Bladex achievedThe Asset Management Division’s net income, ofwhich includes net interest income on trading securities, trading gains and allocated operating expenses, totaled $19 million for the year 2007, compared to $21 thousand in 2006. The increase is attributable principally to higher trading gains from asset management activities, which amounted to $24 million in 2007 compared to $0.9 million in 2006.
For 2006, net income was $58 million, compared with net income ofto $80 million for 2005. The $22 million reduction in net income during 2006 mainly resulted from lower reversals of credit provisions and recoveries on assets, net of impairments, which, for 2006, amounted to $19 million, compared to $51 million in 2005. This reduction was partly offset mainly by higher net interest income derived from the Commercial Division’s loan portfolio growth and diversification.
The $62 millionFor further information on net income reduction during 2005 was driven by lower net reversals of both credit provisions and impairment losses, which amounted to $51 million, compared to $112 million in 2004, resulting from the $247 million reduction in the non-accruing credit portfolio in Argentina and Brazil. Excluding the impact of the reversals of credit provisions and impairment losses, and net revenues from the non-accruing portfolio, net income for 2005 grew by 42%.business segment, see Item 18, “Financial Statements”, note 22.
Net Interest Income and Margins
The following table sets forth information regarding net interest income, the Bank’s net interest margin (the net interest income divided by the average balance of interest-earning assets), and the net interest spread (the average yield earned on interest-earning assets, less the average yield paid on interest-bearing liabilities) for the periods indicated.
| | For the Year Ended December 31, | |
| | 2004 | | 2005 | | 2006 | |
| | (in $ millions, except percentages) | |
Interest income | | | | | | | |
Accruing assets | | | $57 | | | $108 | | | $201 | |
Non-accruing assets | | | 19 | | | 9 | | | 3 | |
Total interest income | | | 76 | | | 117 | | | 203 | |
Interest expense | | | (34 | ) | | (72 | ) | | (145 | ) |
Net interest income | | | $42 | | | $45 | | | $59 | |
Net interest margin | | | 1.65 | % | | 1.70 | % | | 1.76 | % |
Net interest spread | | | 0.98 | % | | 0.67 | % | | 0.70 | % |
| | For the Year Ended December 31, | |
| | 2005 | | 2006 | | 2007 | |
| | (in $ million, except percentages) | |
Net interest income | | | | | | | | | | |
Commercial Division | | | | | | | | | | |
Accruing portfolio | | $ | 33.2 | | $ | 49.0 | | $ | 64.1 | |
Non-accruing portfolio | | | 6.2 | | | 2.0 | | | 0.0 | |
Commercial Division | | $ | 39.4 | | $ | 50.9 | | $ | 64.1 | |
Treasury Division | | | 5.9 | | | 6.9 | | | 6.2 | |
Asset Management Division | | | 0.0 | | | 1.0 | | | 0.2 | |
Consolidated | | $ | 45.3 | | $ | 58.8 | | $ | 70.6 | |
Net interest margin | | | 1.70 | % | | 1.76 | % | | 1.71 | % |
Net interest spread | | | 0.67 | % | | 0.70 | % | | 0.80 | % |
The $14$12 million, or 30%20%, increase in net interest income in 2007 compared to 2006 was the result of higher average balances in the loan portfolio (24%) and increased weighted average lending spreads over the cost of funds. The increase in loan portfolio average balances and lending spreads is attributable to the Bank’s strategy to improve client and geographic portfolio diversification, by increasing its exposure to the corporate client segment in several countries in the Region. The 5 basis point decrease in net interest margin during 2007 compared to 2006 was mainly due to higher leveraging of the balance sheet and by non-recurring interest income on non-accrual loans received on a cash basis during 2006, was driven by a 26%both of which offset higher lending spreads during 2007.
The $14 million increase in net interest income and the 6 basis point increase in net interest margin in 2006 compared to 2005 were mainly due to an increase in the average accruing loan and investment portfolio, as a well as higher net interest margin (6 bps), the latter resulting from the impact of increasing interest rates on the Bank’s available capital, wider lending spreads reflecting changes in the Bank’s portfolio mix, and a lower cost of funds. These factors were partially offset by the lower interest collections on the Bank’s (richly) priced non-accruing portfolio over the period.
The $3 million increase in net interest income and the increase in net interest margin in 20052006, compared to 2004 were mainly due to the positive effect of higher market interest rates on the Bank’s interest earning assets. This factor offset the impact of lower interest collections on the Bank’s decreasing non-accruing portfolio, which resulted in the decline in net interest spread.2005.
Distribution of Assets, Liabilities and Stockholders’ Equity; Interest Rates and Differentials
The following table presents the distribution of consolidated average assets, liabilities and stockholders’ equity, as well as the total dollar amounts of interest income from average interest-earning assets and the resulting yields, and the dollar amounts of interest expense and average interest-bearing liabilities, and corresponding information regarding rates. All impaired loans are on a non-accruing status,basis, and interest on these loans is accounted for on a cash basis. Average balances have been computed on the basis of consolidated daily average balance sheets.
| | Year ended December 31, | |
| | 2004 | | 2005 | | 2006 | |
Description | | Average balance | | Interest | | Average yield/rate | | Average balance | | Interest | | Average yield/rate | | Average balance | | Interest | | Average yield/rate | |
| | (in $ millions, except percentages) | |
Interest-Earning Assets | | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits with banks | | | $213 | | | $3 | | | 1.28 | % | | $158 | | | $5 | | | 3.19 | % | | $180 | | | $9 | | | 4.90 | % |
Securities purchased under agreements to resell | | | 89 | | | 2 | | | 1.92 | | | 0 | | | 0 | | | n.a. | | | 0 | | | 0 | | | n.a. | |
Loans, net | | | 1,792 | | | 47 | | | 2.58 | | | 2,211 | | | 93 | | | 4.15 | | | 2,697 | | | 163 | | | 5.96 | |
| | Year ended December 31,
| |
| | 2004
| | 2005
| | 2006
| |
Description
| | Average balance
| | Interest
| | Average yield/rate
| | Average balance
| | Interest
| | Average yield/rate
| | Average balance
| | Interest
| | Average yield/rate
| |
| | (in $ millions, except percentages) | |
| | | | Year ended December 31, | |
| | | | 2005 | | 2006 | | 2007 | |
Description | | Description | | Average balance | | Interest | | Average yield/rate | | Average balance | | Interest | | Average yield/rate | | Average balance | | Interest | | Average yield/rate | |
| | | | (in $ million, except percentages) | |
Interest-Earning Assets | | Interest-Earning Assets | | | | | | | | | | | | | | | | | | | |
Interest-bearing deposits with banks | | Interest-bearing deposits with banks | $ | 158 | | $ | 5 | | 3.19 | % | $ | 180 | | $ | 9 | | 4.90 | % | $ | 327 | | $ | 17 | | 5.12 | % |
Loans, net | | Loans, net | | 2,211 | | 93 | | 4.15 | | 2,697 | | 163 | | 5.96 | | 3,366 | | 222 | | 6.49 | |
Impaired loans | | | 356 | | | 19 | | | 5.16 | | | 106 | | | 9 | | | 8.10 | | | 18 | | | 3 | | | 14.77 | | Impaired loans | | 106 | | 9 | | 8.10 | | 18 | | 3 | | 14.77 | | 0 | | 0 | | n.a. | |
Trading assets | | | 0 | | | 0 | | | n.a. | | | 0 | | | 0 | | | n.a. | | | 50 | | | 6 | | | 11.46 | | Trading assets | | 0 | | 0 | | n.a. | | 50 | | 6 | | 11.46 | | 84 | | 5 | | 6.27 | |
Investment securities | | | 92 | | | 6 | | 6.31 | | | 181 | | | 10 | | 5.43 | | | 390 | | | 23 | | 5.76 | | Investment securities | | 181 | | | 10 | | | 5.43 | | | 390 | | | 23 | | | 5.76 | | | 345 | | | 21 | | | 5.99 | |
Total interest-earning assets | | | $2,542 | | | $76 | | | 2.95 | % | | $2,656 | | | $117 | | | 4.34 | % | | $3,336 | | | $203 | | | 6.01 | % | Total interest-earning assets | $ | 2,656 | | $ | 117 | | | 4.34 | % | $ | 3,336 | | $ | 203 | | | 6.01 | % | $ | 4,122 | | $ | 265 | | | 6.34 | % |
Non-interest-earning assets | | | $61 | | | | | | | | | $81 | | | | | | | | | $90 | | | | | | | | Non-interest-earning assets | $ | 81 | | | | | | $ | 90 | | | | | | $ | 90 | | | | | |
Allowance for loan losses | | | (179 | ) | | | | | | | | (79 | ) | | | | | | | | (44 | ) | | | | | | | Allowance for loan losses | | (79 | ) | | | | | | (44 | ) | | | | | | (62 | ) | | | | | |
Other assets | | | 7 | | | | | | | 9 | | | | | | | 21 | | | | | | Other assets | | 9 | | | | | | | | | 21 | | | | | | | | | 59 | | | | | | | |
Total Assets | | | $2,432 | | | | | | | | $2,667 | | | | | | | | $3,403 | | | | | | | Total Assets | $ | 2,667 | | | | | | | | $ | 3,403 | | | | | | | | $ | 4,209 | | | | | | | |
Interest-Bearing Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest-Bearing Liabilities | | | | | | | | | | | | | | | | | | | |
Deposits | | | $772 | | | $12 | | | 1.52 | % | | $869 | | | $30 | | | 3.36 | % | | 1,106 | | | $57 | | | 5.05 | % | Deposits | $ | 869 | | $ | 30 | | 3.36 | % | | 1,106 | | $ | 57 | | 5.05 | % | $ | 1,321 | | $ | 70 | | 5.26 | % |
Trading liabilities | | Trading liabilities | | 0 | | 0 | | n.a. | | 35 | | 5 | | 13.17 | | 59 | | 4 | | 6.98 | |
Securities sold under repurchase agreements | | | 159 | | | 2 | | | 1.29 | | | 40 | | | 1 | | | 2.92 | | | 306 | | | 16 | | | 5.29 | | Securities sold under repurchase agreements | | 40 | | 1 | | 2.92 | | 306 | | 16 | | 5.29 | | 253 | | 14 | | 5.30 | |
Short-term borrowings and placements | | | 374 | | | 7 | | | 1.92 | | | 565 | | | 19 | | | 3.36 | | | 738 | | | 39 | | | 5.16 | | |
Medium- and long-term borrowings and placements | | | 401 | | | 13 | | | 3.14 | | | 451 | | | 22 | | | 4.72 | | | 500 | | | 28 | | | 5.57 | | |
Trading liabilities | | | 0 | | | 0 | | n.a. | | | 0 | | | 0 | | n.a. | | | 35 | | | 5 | | 13.17 | | |
Short-term borrowings | | Short-term borrowings | | 565 | | 19 | | 3.36 | | 738 | | 39 | | 5.16 | | 1,019 | | 57 | | 5.49 | |
Borrowings and long-term debts | | Borrowings and long-term debts | | 451 | | | 22 | | | 4.72 | | | 500 | | | 28 | | | 5.57 | | | 809 | | | 49 | | | 6.02 | |
Total interest-bearing liabilities | | | $1,707 | | | $34 | | | 1.97 | % | | $1,925 | | | $72 | | | 3.67 | % | | $2,684 | | | $145 | | | 5.31 | % | Total interest-bearing liabilities | $ | 1,925 | | $ | 72 | | | 3.67 | % | $ | 2,684 | | $ | 145 | | | 5.31 | % | $ | 3,462 | | $ | 194 | | | 5.54 | % |
Non-interest bearing liabilities and other liabilities | | | $102 | | | | | | | $118 | | | | | | | $137 | | | | | | Non-interest bearing liabilities and other liabilities | $ | 118 | | | | | | | | $ | 137 | | | | | | | | $ | 141 | | | | | | | |
Total Liabilities | | | $1,809 | | | | | | | | $2,044 | | | | | | | | $2,821 | | | | | | | Total Liabilities | $ | 2,044 | | | | | | | | $ | 2,821 | | | | | | | | $ | 3,603 | | | | | | | |
Stockholders’ equity | | | 623 | | | | | | | 623 | | | | | | | 581 | | | | | | Stockholders’ equity | | 623 | | | | | | | | | 581 | | | | | | | | | 606 | | | | | | | |
Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity | | | $2,432 | | | | | | | | $2,667 | | | | | | | | $3,403 | | | | | | | Total Liabilities, Redeemable Preferred Stock and Stockholders’ Equity | $ | 2,667 | | | | | | | | $ | 3,403 | | | | | | | | $ | 4,209 | | | | | | | |
Net Interest Spread | | | | | | | | | 0.98 | % | | | | | | | | 0.67 | % | | | | | | | | 0.70 | % | Net Interest Spread | | | | | | 0.67 | % | | | | | | 0.70 | % | | | | | | 0.80 | % |
Net Interest Income and Net Interest Margin | | | | | | $42 | | | 1.65 | % | | | | | $45 | | | 1.70 | % | | | | | $59 | | | 1.76 | % | Net Interest Income and Net Interest Margin | | | | $ | 45 | | | 1.70 | % | | | | $ | 59 | | | 1.76 | % | | | | $ | 71 | | | 1.71 | % |
Changes in Net Interest Income — Volume and Rate Analysis
Net interest income is affected by changes in volume and changes in interest rates. Volume changes are caused by differences in the level of interest-earning assets and interest-bearing liabilities. Rate changes result from differences in yields earned on interest-earning assets and rates paid on interest-bearing liabilities. The following table sets forth a summary of the Bank’s changes in net interest income of the Bank resulting from changes in average interest-earning asset and interest-bearing liability balances (volume) and changes in average interest rates for 2005 compared to 2004 and 2006 compared to 2005.2005 and for 2007 compared to 2006. Volume and rate variances have been calculated based on movements in average balances over the period and changes in interest rates on average interest-earning assets and average interest-bearing liabilities. Variances caused by changes in both volume and rates have been allocated equally to volume and rate.
| | 2005 vs. 2004 | | 2006 vs. 2005 | | | 2006 vs. 2005 | | 2007 vs. 2006 | |
| | Volume | | Rate | | Net Change | | Volume | | Rate | | Net Change | | | Volume | | Rate | | Net Change | | Volume | | Rate | | Net Change | |
| | (in $ thousands) | | | (in $ thousand) | |
Increase (Decrease) in interest income | | | | | | | | | | | | | | |
Increase (decrease) in interest income | | | | | | | | | | | | | | | |
Interest-bearing deposits with banks | | | ($1,238 | ) | | $3,593 | | | $2,356 | | | $914 | | | $2,939 | | | $3,853 | | | $ | 914 | | $ | 2,939 | | $ | 3,853 | | $ | 7,461 | | $ | 566 | | $ | 8,027 | |
Securities purchased under agreements to resell | | | (867 | ) | | (867 | ) | | (1,733 | ) | | 0 | | | 0 | | | 0 | | |
Loans, net | | | 14,312 | | | 31,656 | | | 45,968 | | | 24,916 | | | 45,141 | | | 70,058 | | | | 24,916 | | 45,141 | | 70,058 | | 42,262 | | 16,278 | | 58,540 | |
Impaired loans | | | (16,848 | ) | | 6,861 | | | (9,987 | ) | | (10,180 | ) | | 4,196 | | | (5,984 | ) | | | (10,180 | ) | | 4,196 | | (5,984 | ) | | (1,360 | ) | | (1,360 | ) | | (2,721 | ) |
Trading assets | | | 0 | | | 0 | | | 0 | | | 2,905 | | | 2,905 | | | 5,810 | | | | 2,905 | | 2,905 | | 5,810 | | 3,024 | | (3,518 | ) | | (495 | ) |
Investment securities | | | 5,313 | | | (1,245 | ) | | 4,068 | | | 11,836 | | | 955 | | | 12,791 | | | | 11,836 | | | 955 | | | 12,791 | | | (2,677 | ) | | 844 | | | (1,832 | ) |
Total increase (decrease) | | | $673 | | $39,998 | | $40,671 | | $30,391 | | $56,135 | | $86,527 | | | $ | 30,391 | | $ | 56,135 | | $ | 86,527 | | $ | 48,710 | | $ | 12,810 | | $ | 61,519 | |
Increase (Decrease) in interest expense | | | | | | | | | | | | | | | | | | | | |
Increase (decrease) in interest expense | | | | | | | | | | | | | | | |
Deposits | | | 2,392 | | | 15,228 | | | 17,620 | | | 10,090 | | | 16,961 | | | 27,051 | | | | 10,090 | | 16,961 | | 27,051 | | 11,275 | | 2,557 | | 13,832 | |
Trading liabilities | | | | 2,320 | | 2,320 | | 4,640 | | 2,505 | | (2,948 | ) | | (443 | ) |
Securities sold under repurchase agreements | | | (2,539 | ) | | 1,650 | | | (889 | ) | | 11,065 | | | 4,167 | | | 15,232 | | | | 11,065 | | 4,167 | | 15,232 | | (2,860 | ) | | 11 | | (2,848 | ) |
Short-term borrowings and placements | | | 5,112 | | | 6,796 | | | 11,908 | | | 7,460 | | | 11,901 | | | 19,361 | | |
Medium- and long-term borrowings and placements | | | 2,000 | | | 6,804 | | | 8,804 | | | 2,540 | | | 4,120 | | | 6,660 | | |
Trading liabilities | | | 0 | | | 0 | | | 0 | | | 2,320 | | | 2,320 | | | 4,640 | | |
Short-term borrowings | | | | 7,460 | | 11,901 | | 19,361 | | 15,205 | | 2,939 | | 18,144 | |
Borrowings and long term debt | | | | 2,540 | | | 4,120 | | | 6,660 | | | 18,147 | | | 2,954 | | | 21,101 | |
Total increase (decrease) | | | $6,965 | | | $30,479 | | | $37,443 | | | $33,474 | | | $39,469 | | | $72,943 | | | $ | 33,474 | | $ | 39,469 | | $ | 72,943 | | $ | 44,273 | | $ | 5,513 | | $ | 49,786 | |
Increase (Decrease) in net interest income | | | $(6,292 | ) | | $9,520 | | | $3,228 | | | $(3,082 | ) | | $16,666 | | | $13,584 | | |
Increase (decrease) in net interest income | | | $ | (3,082 | ) | $ | 16,666 | | $ | 13,584 | | $ | 4,437 | | $ | 7,297 | | $ | 11,734 | |
As depicted in the table above, the main factor contributing to the $12 million increase in net interest income during 2007 compared to 2006 was the increase in rates, which resulted in a $7 million increase in net interest income, reflecting higher average lending spreads over the cost of funds for the Bank’s loan portfolio and higher average inter-bank market rates in the Bank’s assets and liabilities. The $4 million increase in net interest income derived from higher volumes during 2007 is mainly attributable to an increase in the average loan portfolio and higher average liquidity balances (interest-bearing deposits with banks), partly offset by an increase in the Bank’s funding through higher average liability deposits and borrowings.
For 2006, the $13 million increase in net interest income compared to 2005 was mainly attributable to higher inter-bank market rates in the Bank’s assets and liabilities, partly offset by a reduction in the average balance of the Bank’s impaired portfolio.
Reversal of (Provision for)(Provision) for Loan Losses
During 2007, as the Bank reduced its impaired portfolio to zero at December 31, 2006, there were no reversals of specific provisions for loan losses related to the impaired and restructured portfolio. These impaired portfolio reversals totaled $11 million in 2006 and $61 million in 2005.
The Bank’s $12 million provision for loan losses during 2007 was mainly due to the net effect of:
·an $18 million generic provision charge, due to increased loan exposure; and
·a $6 million recovery on previously charged-off loans.
The Bank’s $12 million provision for loan losses during 2006 was mainly due to the net effect of:
·
a $23 million generic provision charge, due to increased loan exposure;
| · | a $23 million generic provision charge, due to increased loan exposure; |
| · | a $10 million reversal related to the collection of Argentine restructured loans during the year; and |
| · | a $1 million reversal related to the collection of a Brazilian restructured loan during the year. |
·a $1 million reversal related to the collection of a Brazilian restructured loan during the year.
The Bank’s $54 million reversal of provision for loan losses during 2005 was mainly due to the net effect of:
| · | a $3 million reversal related to the sale of an Argentine loan with a nominal value of $11 million; |
| · | a $45$48 million reversal related to the decrease in Argentine restructured loans, reflecting loan sales, payments and prepayments received during the year; |
| · | a $13 million reversal related to the decrease in Brazilian restructured loans, reflecting payments and prepayments received during the year; |
| · | a $3 million reversal due to recoveries from loans charged-off in previous years; |
·a $3 million recovery on previously charged-off loans; | · | a $16 million generic provision charge, due to increased loan exposure; and |
·a $16 million generic provision charge, due to increased loan exposure; and | · | a $6 million reversal due to the change in the credit loss reserve methodology during 2005. |
·a $6 million reversal due to the change in the credit loss reserve methodology during 2005.
For detailed information, see “Business Overview —Item 5, “Operating and Financial Review and Prospects/Operating Results/Asset Quality and Allowance for Credit Losses and Asset Quality”Losses”.
The Bank generates commission income primarily from originating letters of credit confirmation, guarantees, country risk coverage, and loans. The following table shows the components of the Bank’s commission income for the periods indicated.
| | For the Year Ended December 31, | |
| | 2004 | | 2005 | | 2006 | |
| | (in $ thousands) | |
Letters of credit | | | $3,894 | | | $3,396 | | | $4,121 | |
Guarantees | | | 1,540 | | | 2,011 | | | 1,419 | |
Loans and other | | | 603 | | | 464 | | | 773 | |
Commission Income | | | $6,037 | | | $5,872 | | | $6,313 | |
Commission Expense | | | (109 | ) | | (48 | ) | | (28 | ) |
Commission Income, Net | | | $5,928 | | | $5,824 | | | $6,285 | |
The increase of $461 thousand in commission income, net for 2006, compared to 2005, reflects mostly a 12% increase in the average volume of letters of credit.
The decline of $104 thousand in commission income for 2005 compared to 2004 resulted mainly from lower pricing in the letter of credit business.
Reversal (provision) for Losses on Off-Balance Sheet Credit Risk
The $13 million reversal of provision for losses on off-balance sheet credit risk in 2007 was mainly due to decreased letter of credit exposure in higher risk countries, as well as improved risk profiles in certain countries.
The $25 million reversal of provision for losses on off-balance sheet credit risk in 2006 was mainly due to a $15 million reduction in generic reserves driven by exposure reductions in certain countries and a $10 million reversal in specific reserves resulting from the maturity of Argentine impaired contingencies. The $16 million provision for losses on off-balance sheet credit risk in 2005 was mainly related to the effect of a change in the credit loss reserve methodology during 2005. For detailed information see “Business Overview — Allowance
Fees and Commissions, net
The Bank generates fee and commission income primarily from originating letters of credit confirmation, guarantees (including commercial and country risk coverage), loan origination and distribution, and service activities. The following table shows the components of the Bank’s fees and commissions, net, for Credit Lossesthe periods indicated.
| | For the Year Ended December 31, | |
| | 2005 | | 2006 | | 2007 | |
| | | | (in $ thousand) | | | |
Letters of credit | | $ | 3,396 | | $ | 4,121 | | $ | 2,842 | |
Guarantees | | | 2,012 | | | 1,419 | | | 1,088 | |
Loans | | | 297 | | | 556 | | | 836 | |
Other (1) | | | 119 | | | 297 | | | 789 | |
Fees and commissions, net | | $ | 5,824 | | $ | 6,393 | | $ | 5,555 | |
(1)Net of commission expense.
The decrease of $838 thousand in net fees and Asset Quality”.commissions for 2007 compared to 2006 is attributable to lower letter of credit and guarantee activity during the first part of the year, partially offset by increased loan fees and other service activities.
The increase of $569 thousand in net fees and commissions for 2006 compared to 2005 reflects mainly a 12% increase in the average volume of letters of credit.
DerivativesActivities of Hedging Derivative Instruments
During 2007 and
Hedging Activities 2006, the Bank recorded losses of $989 thousand and $225 thousand, respectively, related to hedging derivative instruments. During 2005, the Bank recorded income of $2 million mostlymainly related to the unwinding of interest rate swaps associated with the sale of securities availableavailable-for-sale. The 2007 losses relate mainly to the fair value at their inception of interest rate swaps contracted for sale. fair value hedge relationships that classify under the short-cut method. The difference in price at inception of these derivatives is attributable solely to differing prices within the bid-ask spread between the entry transaction and a hypothetical exit transaction. The Bank has the policy of recognizing this difference in prices in the results of operations at the inception of a hedge relationship. For additional information, see Item 11, “Quantitative and Qualitative Disclosure about Market Risk”.
Impairment LossRecoveries on SecuritiesAssets, Net of ImpairmentsFor detailed information see “Business Overview — Allowance for Credit Losses and Asset Quality”.
For information, see Item 18, “Financial Statements”, notes 2(g) and 5.
Trading gains
During 2007, the Bank achieved $24 million in trading gains compared to $879 thousand in 2006.
Net Gain on the Sale of Securities Available for Sale
From time to time, the Bank purchases debt instruments as part of its Treasury activity with the intention of selling them prior to maturity. These debt instruments are classified as securities available for saleavailable-for-sale and are included as part of the Bank’s credit portfolio.
For the year 2007, the Bank’s net gains on the sale of securities available-for-sale were $9 million. This net gain relates to the sale of securities for a nominal amount of $509 million.
During 2006, the Bank’s net gain on the sale of securities available for saleavailable-for-sale was $3 million, compared to $0.2 million in 2005. The 2006 gain was related to the sale of securities available for saleavailable-for-sale for a nominal amount of $105 million. During 2005 and 2004, the Bank had gains on the sale of securities available for sale for $206 thousand and $3 million respectively, mostly related to the sale of impaired Argentine securities.
Operating Expenses
The following table shows a breakdown of the components of the Bank’s total operating expenses for the periods indicated.
| | For the Year Ended December 31, |
| | 2004 | | 2005 | | 2006 |
| | (in $ thousands) |
Salaries and other employee expenses | | | $10,335 | | | $13,073 | | | $16,826 |
Depreciation | | | 1,298 | | | 869 | | | 1,406 |
Professional services | | | 2,572 | �� | | 3,281 | | | 2,671 |
Maintenance and repairs | | | 1,207 | | | 1,172 | | | 1,000 |
Other operating expenses | | | 5,941 | | | 6,295 | | | 7,026 |
Total Operating Expenses | | | $21,352 | | | $24,691 | | | $28,929 |
26
| | For the Year Ended December 31, | |
| | 2005 | | 2006 | | 2007 | |
| | (in $ thousand) | |
Salaries and other employee expenses | | $ | 13,073 | | $ | 16,826 | | $ | 22,049 | |
Depreciation and amortization | | | 869 | | | 1,406 | | | 2,555 | |
Professional services | | | 3,281 | | | 2,671 | | | 3,562 | |
Maintenance and repairs | | | 1,172 | | | 1,000 | | | 1,188 | |
Other operating expenses | | | 6,295 | | | 7,026 | | | 7,673 | |
Total Operating Expenses | | $ | 24,691 | | $ | 28,929 | | $ | 37,027 | |
The $8 million, or 28%, increase in operating expenses for 2007 compared to 2006 was mainly due to:
| · | a $5 million increase in salaries and other employee expenses mainly driven by a $3 million increase in performance-based variable compensation for the Bank's proprietary asset management team, and the remaining $2 million mainly related to higher senior management’s stock compensation plan, a one-time event accrual of employee vacation, and an increase in performance-based variable compensation provision for business lines other than proprietary asset management. |
| · | a $1 million increase in maintenance and depreciation expenses related to the Bank’s new technology platform; |
| · | a $1 million increase in professional services, mainly due to legal expenses related to the Bank’s business; and |
| · | a $1 million increase in expenses related to marketing and business travel. |
The $4 million, or 17%, increase in operating expenses for 2006 compared to 2005 was mostlymainly due to higher salary expenses associated with the development of the corporate segment and the implementation of new business initiatives, including proprietary asset management, leasing, and digital identity, as well as increased depreciation expenses related to the Bank’s new technology platform.
The $3 million, or 16%, increase in operating expenses for 2005 compared to 2004, was mostly due to increased expenses associated with the strengthening of the Bank’s sales team, the adoption of FAS 123R related stock-based compensation expense, and legal and consulting fees related to new product development and business initiatives.
Changes in Financial Condition
The following table summarizespresents components on the Bank’s balance sheet at December 31 of each year:
| | 2004 | | 2005 | | 2006 | |
| | (in $ thousands) | |
Assets | | | | | | | |
Cash and due from banks | | | $687 | | | $687 | | | $401 | |
Interest-bearing deposits with banks | | | 154,099 | | | 229,200 | | | 331,764 | |
Trading assets | | | 0 | | | 0 | | | 130,076 | |
Investment securities | | | 192,856 | | | 208,570 | | | 471,351 | |
Loans | | | 2,441,686 | | | 2,610,019 | | | 2,980,772 | |
Less: | | | | | | | | | | |
Allowance for loan losses | | | (106,352 | ) | | (39,448 | ) | | (51,266 | ) |
Unearned income and deferred loan fees | | | (7,013 | ) | | (5,577 | ) | | (4,425 | ) |
Loans, net | | | 2,328,321 | | | 2,564,994 | | | 2,925,081 | |
Customers’ liabilities under acceptances | | | 32,530 | | | 110,621 | | | 46,006 | |
Premises and equipment, net | | | 3,508 | | | 3,253 | | | 11,136 | |
Accrued interest receivable | | | 15,448 | | | 30,254 | | | 55,238 | |
Derivative financial instruments-assets | | | 0 | | | 357 | | | 541 | |
Other assets | | | 5,491 | | | 11,295 | | | 6,743 | |
Total Assets | | | $2,732,940 | | | $3,159,231 | | | $3,978,337 | |
Liabilities and Stockholders’ Equity | | | | | | | | | | |
Deposits | | | 864,160 | | | 1,046,618 | | | 1,056,277 | |
Securities sold under repurchase agreements | | | 82,368 | | | 128,599 | | | 438,356 | |
Short-term borrowings | | | 622,350 | | | 632,100 | | | 1,157,248 | |
Medium and long-term borrowings and placements | | | 403,621 | | | 533,860 | | | 558,860 | |
Trading liabilities | | | 0 | | | 0 | | | 54,832 | |
Acceptances outstanding | | | 32,530 | | | 110,621 | | | 46,006 | |
Accrued interest payable | | | 6,477 | | | 14,736 | | | 28,420 | |
Derivative financial instruments-liabilities | | | 0 | | | 297 | | | 2,634 | |
| | 2004 | | 2005 | | 2006 | | | 2005 | | 2006 | | 2007 | |
| | (in $ thousands) | | | (in $ thousand) | |
Assets | | | | | | | | | | | |
Cash and due from banks | | | $ | 687 | | $ | 401 | | $ | 596 | |
Interest-bearing deposits in banks | | | | 229,200 | | | 331,764 | | | 476,983 | |
Trading assets | | | | 0 | | | 130,076 | | | 52,597 | |
Investment securities | | | | 208,570 | | | 471,351 | | | 468,360 | |
Loans | | | | 2,610,019 | | | 2,980,772 | | | 3,731,838 | |
Less: | | | | | | | | | | | |
Allowance for loan losses | | | | (39,448 | ) | | (51,266 | ) | | (69,643 | ) |
Unearned income and deferred loan fees | | | | (5,577 | ) | | (4,425 | ) | | (5,961 | ) |
Loans, net | | | | 2,564,994 | | | 2,925,081 | | | 3,656,234 | |
Customers’ liabilities under acceptances | | | | 110,621 | | | 46,006 | | | 9,104 | |
Premises and equipment, net | | | | 3,253 | | | 11,136 | | | 10,176 | |
Accrued interest receivable | | | | 30,254 | | | 55,238 | | | 62,884 | |
Derivative instruments-used for hedging - receivable | | | | 357 | | | 541 | | | 122 | |
Other assets | | | | 11,295 | | | 6,743 | | | 53,476 | |
Total Assets | | | $ | 3,159,231 | | $ | 3,978,337 | | $ | 4,790,532 | |
Liabilities and Stockholders’ Equity | | | | | | | | | | | |
Deposits | | | | 1,046,618 | | | 1,056,277 | | | 1,462,371 | |
Trading liabilities | | | | 0 | | | 54,832 | | | 90,765 | |
Securities sold under repurchase agreements | | | | 128,599 | | | 438,356 | | | 283,210 | |
Short-term borrowings | | | | 632,100 | | | 1,157,248 | | | 1,221,500 | |
Borrowings and long-term debt | | | | 533,860 | | | 558,860 | | | 1,010,316 | |
Acceptances outstanding | | | | 110,621 | | | 46,006 | | | 9,104 | |
Accrued interest payable | | | | 14,736 | | | 28,420 | | | 39,198 | |
Derivative instruments used for hedging - payable | | | | 297 | | | 2,634 | | | 16,899 | |
Reserve for losses on off-balance sheet credit risk | | | 33,101 | | | 52,086 | | | 27,195 | | | | 52,086 | | | 27,195 | | | 13,727 | |
Redeemable preferred stock | | | 7,860 | | | 5,149 | | | 0 | | | | 5,149 | | | 0 | | | 0 | |
Other liabilities | | | 24,342 | | | 18,383 | | | 24,614 | | | | 18,383 | | | 24,614 | | | 31,191 | |
Total Liabilities | | | $2,076,810 | | | $2,542,449 | | | $3,394,442 | | | $ | 2,542,449 | | $ | 3,394,442 | | $ | 4,178,281 | |
Stockholders’ Equity | | | | | | | | | | | | | | | | | | | | |
Common stock, no par value | | | 279,978 | | | 279,979 | | | 279,980 | | | | 279,979 | | | 279,980 | | | 279,980 | |
Capital surplus | | | 133,785 | | | 134,340 | | | 134,945 | | | | 134,340 | | | 134,945 | | | 135,142 | |
Capital reserves | | | 95,210 | | | 95,210 | | | 95,210 | | | | 95,210 | | | 95,210 | | | 95,210 | |
Retained earnings | | | 233,701 | | | 212,916 | | | 205,200 | | | | 212,916 | | | 205,200 | | | 245,348 | |
Accumulated other comprehensive income (loss) | | | 6,082 | | | 619 | | | 3,328 | | | | 619 | | | 3,328 | | | (9,641 | ) |
Treasury stock | | | (92,627 | ) | | (106,282 | ) | | (134,768 | ) | | | (106,282 | ) | | (134,768 | ) | | (133,788 | ) |
Total Stockholders’ Equity | | | $656,130 | | | $616,782 | | | $583,895 | | | $ | 616,782 | | $ | 583,895 | | $ | 612,251 | |
Total Liabilities and Stockholders’ Equity | | | $2,732,940 | | | $3,159,231 | | | $3,978,337 | | | $ | 3,159,231 | | $ | 3,978,337 | | $ | 4,790,532 | |
The $812 million increase in total assets during 2007 was mainly due to a $751 million increase in the loan portfolio, resulting from the continued execution of the Bank’s strategy of diversifying its portfolio concentration specifically by increasing its loans within the corporate segment. At December 31, 2007, the average maturity of the loan portfolio was 429 days, and 68% of the portfolio was scheduled to mature within one year. 60% of the portfolio was trade related and 40% constituted non-trade loans mainly extended to banks, sovereign or exporting corporations. The corporate segment (which includes state-owned exporting organizations and private corporations) represented 51% of the loan portfolio in 2007 compared to 48% in 2006 and, of this corporate segment, 66% and 74% was trade related in 2007 and 2006, respectively.
The increase in assets during 2007 was mainly financed by a $406 million increase in deposits from central and commercial banks of the Region, and by a $451 million increase in medium- and long-term borrowings and debt, including a bond issuance in Peruvian Nuevo Soles, interbank borrowings in Mexican Pesos, a five-year international loan syndication for an amount of $150 million, and a three-year borrowing for an additional $75 million, among other borrowings.
The $819 million increase in assets during 2006, compared to 2005, was mainly due to a $371 million increase in loans during 2006which reflects the Bank’s new strategy to diversify its client base, involving principally an increase in its activity with corporations. The corporate portfolio increased $600 million to representand represented 45% of the total portfolio, as compared to one third of the portfolio in 2005. In addition, during 2006, the Bank increased its investment securities portfolio -which mainly consisted of debt securities available-for-sale and held-to-maturity with banks and sovereign borrowers-, and its trading assets, as the Bank initiated operations of its Asset Management Division, which acts as investment manager for the Fund engaged in the management of a multi-strategy portfolio of Latin American fixed income investment securities, foreign exchange and equity securities and derivatives.
The increase in assets during 2006 was mainly financed by a $525 million increase in short-term borrowings primarily from North American and European banks, and by a $310 million increase in securities sold under repurchase agreements related to the investment securities portfolio.
Asset Quality
The $168 million increaseBank believes that its asset quality is linked to the composition of its client base, the importance that governments and borrowers in the Region attach to maintaining continued access to trade financing, its preferred creditor status, and the Bank’s strict adherence to commercial criteria in its credit activities.
The Bank’s management and the CPER periodically review a report of all loan delinquencies. The Bank’s collection policies include rapid internal notification of any delinquency and prompt initiation of collection efforts, usually involving senior management.
Impaired Assets and Contingencies
The Bank’s impaired assets consist of impaired loans and impaired securities. For more information on impaired loans, see Item 18, “Financial Statements”, notes 2 (i) and 6. For more information on impaired securities, see Item 18, “Financial Statements”, notes 2 (g) and 5.
Contingencies are identified as impaired and placed on non-accrual status when any payment of fees or commissions relating thereto is over 90 days past due or if the Bank’s management determines that the item may become payable by the Bank and its ultimate collection of principal or commission is doubtful. For more information on contingencies, see Item 18, “Financial Statements”, note 16.
The following table sets forth information regarding the Bank’s impaired assets and contingencies at December 31 of each year:
| | 2003 | | 2004 | | 2005 | | 2006 | | 2007 | |
| | (in $ million, except percentages) | |
Impaired loans | | $ | 445 | | $ | 256 | | $ | 29 | | $ | 0 | | $ | 0 | |
Allocation from the allowance for loan losses | | | 191 | | | 82 | | | 11 | | | 0 | | | 0 | |
Impaired loans as a percentage of total loans, net of unearned income and deferred commission | | | 19.6 | % | | 10.5 | % | | 1.1 | % | | 0.0 | % | | 0.0 | % |
Impaired contingencies | | $ | 32 | | $ | 32 | | $ | 13 | | $ | 0 | | $ | 0 | |
Allocation from the reserve for losses on off balance-sheet credit risks | | | 20 | | | 21 | | | 9 | | | 0 | | | 0 | |
Impaired contingencies as a percentage of total contingencies | | | 8.8 | % | | 10.5 | % | | 1.7 | % | | 0.0 | % | | 0.0 | % |
Impaired securities (par value) | | $ | 10 | | $ | 5 | | $ | 0 | | $ | 0 | | $ | 0 | |
Estimated fair value adjustments on options and impaired securities1 | | | 5 | | | 4 | | | 0 | | | 0 | | | 0 | |
Estimated fair value of impaired securities | | $ | 5 | | $ | 1 | | $ | 0 | | $ | 0 | | $ | 0 | |
Impaired securities as a percentage of total securities2 | | | 6.8 | % | | 0.5 | % | | 0.0 | % | | 0.0 | % | | 0.0 | % |
Impaired assets and contingencies as a percentage of total credit portfolio3 | | | 17.0 | % | | 9.8 | % | | 1.2 | % | | 0.0 | % | | 0.0 | % |
______________________
1Includes impairment losses on securities, estimated unrealized gain (loss) on impaired securities, premiums and discounts.
2 Total securities consist of investment securities considered part of the Bank’s credit portfolio.
3 The total credit portfolio consists of loans net of unearned income, fair value of investment securities, securities purchased under agreements to resell and contingencies.
As of December 31, 2006 and 2007 the Bank did not have any impaired credits on its portfolio nor any credits with specific reserves.
Allowance for Credit Losses
The allowance for credit losses (which includes the allowance for loan losses and the reserve for losses on off-balance sheet credit risk) covers the credit risk on loans and contingencies. The allowance for credit losses includes an asset-specific component and a formula-based component in line with Statement of Financial Accounting Standard (“SFAS”) No. 5 “Accounting for Contingencies” (“SFAS No. 5”). The asset-specific component relates to a provision for losses on credits considered impaired and measured on a case-by-case basis pursuant to SFAS No. 114 “Accounting by Creditors for Impairment of a Loan”. For additional information regarding allowance for credit losses, see Item 18, “Financial Statements”, notes 2 (j) and 7.
During 2005, Bladex implemented a new methodology for estimating generic allowances for credit losses. The new methodology is driven primarily by Bladex’s own historical default and loss experience, as well as an internal country risk classification, rather than relying exclusively on third-party data, as was formerly the case. This change in methodology was the result of the Bank’s decision to adopt best practices in the banking industry, and is in line with SFAS No.5, which calls for the use of internal historical performance data in estimating credit loss reserves. The Bank began compiling its eight-year historical database in 2004 and completed this effort during 2005.
The reserve balances for estimating generic allowances, for both on and off-balance sheet credit exposures are calculated applying the following formula:
Reserves = S(E x PD x LGD)
where:
| a) | Exposure (E) = the total accounting balance (on and off-balance sheet) at the end of the period under review, segregated by country. |
| b) | Probabilities of Default (PD) = one-year probability of default applied to the portfolio in each country. Default rates are based on Bladex’s historical portfolio performance per rating category during a ten-year period, complemented by probabilities of default data from international credit rating agencies for high risk cases, in view of the greater robustness of credit rating agencies data for such cases. |
| c) | Loss Given Default (LGD) = a factor of 45% is utilized, based on best practices in the banking industry. This factor applies to all countries, except those classified as higher risk, in which case management applies historical loss experience on a case-by-case basis. |
The effect of this new methodology for 2005 was mainly attributablea decrease in net income by $10 million, or $0.26 per share (resulting from a loan loss reserve provision reversal of $6 million, and an off-balance sheet reserve provision charge of $16 million). In addition, the adjustment to apply retroactively the new methodology (to December 31, 2004) increased net income for 2005 by $3 million (resulting from a loan loss reserve provision reversal of $6 million and an off-balance sheet reserve provision charge of $3 million). See Item 18, “Financial Statements”, notes 2 (j) and 7.
The following table sets forth information regarding the Bank’s allowance for credit losses with respect to total credits outstanding at December 31 of each year:
| | 2003 | | 2004 | | 2005 | | 2006 | | 2007 | |
| | (in $ million, except percentages) | |
Components of the allowance for credit losses | | | | | | | | | | | | | | | | |
Allowance for loan losses | | | | | | | | | | | | | | | | |
Balance at beginning of the year | | $ | 430 | | $ | 224 | | $ | 106 | | $ | 39 | | $ | 51 | |
Provision (reversal) | | | (70 | ) | | (111 | ) | | (48 | ) | | 12 | | | 12 | |
Effect of change in methodology | | | 0 | | | 0 | | | (6 | ) | | 0 | | | 0 | |
Cumulative effect on prior years (2004) of a change in credit loss reserve methodology | | | 0 | | | 0 | | | (6 | ) | | 0 | | | 0 | |
Recoveries | | | 2 | | | 6 | | | 3 | | | 0 | | | 6 | |
Loans charged-off | | | (138 | ) | | (13 | ) | | (9 | ) | | 0 | | | 0 | |
Balance at the end of the year | | $ | 224 | | $ | 106 | | $ | 39 | | $ | 51 | | $ | 70 | |
Reserve for losses on off-balance sheet credit risk: | | | | | | | | | | | | | | | | |
Balance at beginning of the year | | $ | 23 | | $ | 34 | | $ | 33 | | $ | 52 | | $ | 27 | |
Provision (reversal) | | | 11 | | | (1 | ) | | (0 | ) | | (25 | ) | | (13 | ) |
Effect of change in methodology | | | 0 | | | 0 | | | 16 | | | 0 | | | 0 | |
Cumulative effect on prior years (2004) of a change in credit loss reserve methodology | | | 0 | | | 0 | | | 3 | | | 0 | | | 0 | |
Balance at end of the year | | $ | 34 | | $ | 33 | | $ | 52 | | $ | 27 | | $ | 14 | |
Total allowance for credit losses | | $ | 258 | | $ | 139 | | $ | 92 | | $ | 78 | | $ | 83 | |
Allowance for credit losses to total credit portfolio | | | 9.1 | % | | 4.7 | % | | 2.5 | % | | 2.0 | % | | 1.8 | % |
The following table sets forth information regarding the Bank’s allowance for credit losses allocated by country of exposure at December 31 of each year:
| | 2005 | | 2006 | | 2007 | |
| | Total | | % | | Total | | % | | Total | | % | |
| | (in $ million, except percentages) | |
Argentina | | $ | 21 | | | 23.0 | | $ | 25 | | | 32.4 | | $ | 32 | | | 38.4 | |
Brazil | | | 19 | | | 20.2 | | | 11 | | | 14.3 | | | 11 | | | 13.2 | |
Colombia | | | 1 | | | 0.5 | | | 2 | | | 2.2 | | | 2 | | | 2.7 | |
Dominican Republic | | | 1 | | | 1.3 | | | 3 | | | 3.3 | | | 0 | | | 0.3 | |
Ecuador | | | 46 | | | 50.4 | | | 30 | | | 38.3 | | | 17 | | | 20.2 | |
Jamaica | | | 0 | | | 0.3 | | | 2 | | | 3.1 | | | 4 | | | 5.0 | |
Mexico | | | 0 | | | 0.1 | | | 1 | | | 1.6 | | | 3 | | | 3.5 | |
Nicaragua | | | 0 | | | 0.1 | | | 0 | | | 0.6 | | | 1 | | | 1.7 | |
Peru | | | 3 | | | 3.0 | | | 1 | | | 0.8 | | | 2 | | | 2.9 | |
Venezuela | | | 0 | | | 0.3 | | | 0 | | | 0.1 | | | 7 | | | 8.3 | |
Other1 | | | 1 | | | 0.9 | | | 3 | | | 3.4 | | | 3 | | | 3.7 | |
Total Allowance for Credit Losses | | $ | 92 | | | 100.0 | | $ | 79 | | | 100.0 | | $ | 83 | | | 100.0 | |
____________________
1 Other consists of allowance for credit losses allocated to countries in which allowance for credit losses outstanding did not exceed $1 million as of December 31, 2007.
The following table sets forth information regarding the Bank’s allowance for credit losses by type of borrower at December 31 of each year:
| | | 2005 | | | 2006 | | | 2007 | |
| | | (in $ million) | |
Private sector commercial banks | | $ | 20 | | $ | 15 | | $ | 22 | |
State-owned commercial banks | | | 18 | | | 5 | | | 2 | |
Central banks | | | 36 | | | 21 | | | 9 | |
Sovereign debt | | | 1 | | | 1 | | | 1 | |
State-owned exporting organization | | | 3 | | | 2 | | | 10 | |
Private corporations | | | 14 | | | 35 | | | 39 | |
Total | | $ | 92 | | $ | 79 | | $ | 83 | |
The following table sets forth the distribution of the Bank’s loans charged-off against the allowance for loan losses by country at December 31 of each year:
| | 2003 | | % | | 2004 | | % | | 2005 | | % | | 2006 | | % | | 2007 | | % | |
| | (in $ million, except percentages) | |
Argentina | | $ | 137 | | | 99.4 | | $ | 13 | | | 100.0 | | $ | 5 | | | 53.7 | | $ | 0 | | | 0.0 | | $ | 0 | | | | 0.0 | |
Brazil | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 4 | | | 46.3 | | | 0 | | | 0.0 | | | 0 | | | | 0.0 | |
Paraguay | | | 1 | | | 0.6 | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 0 | | | 0.0 | | | 0 | | | | 0.0 | |
Total | | $ | 138 | | | 100.0 | | $ | 13 | | | 100.0 | | $ | 9 | | | 100.0 | | $ | 0 | | | 0.0 | | $ | 0 | | | | 0.0 | |
Reversals of Argentine Specific Provision for Credit Losses
At the end of 2001 and during 2002, the Bank classified as impaired most of its $1 billion Argentine credit exposure at the time, due to the increase incountry’s economic and financial crisis of 2001, which caused the Bank’s non-trade lending, which offsetArgentine obligors to face payment difficulties. Accordingly, the reductionBank increased its allowance for credit losses during 2001 and 2002 by $77 million and $279 million, respectively, bringing the total credit reserves assigned to its Argentine portfolio to $380 million at December 31, 2002. From 2002 to 2005, the Bank negotiated the restructuring of its Argentine portfolio and sold at a discount most of the positions that the Bank estimated had the lowest probability of collection. At the close of 2005, the Bank had restructured, sold or charged-off all of its non-performing exposures.
As a result, the Bank was able to decrease its impaired Argentine loan portfolio to $23 million at December 31, 2005 and to zero at December 31, 2006, resulting in reversals of loan loss provisions related to the portfolio for $48 million and $10 million for 2005 and 2006, respectively. These reversals resulted from loan collections and sales that exceeded their respective net book values.
The following table sets forth information regarding the Bank’s non-accruing portfolio.reversals (provisions) of allowance for loan losses during the years indicated:
| | For the year ended December 31, | |
| | 2005 | | 2006 | | 2007 | |
| | (in $ million) | |
Argentine reversals related to sale of loans | | $ | 2.9 | | $ | 0.0 | | $ | 0.0 | |
Argentine reversals related to credit restructurings and collections, and changes in expected loss levels | | | 45.1 | | | 10.2 | | | 0.0 | |
Total Argentine Specific Reserves Reversals | | $ | 47.9 | | $ | 10.2 | | $ | 0.0 | |
Brazil Specific Reserves Reversals (Provisions) | | | 13.2 | | | 1.0 | | | 0.0 | |
Total Specific Reserves Reversals | | $ | 61.1 | | $ | 11.2 | | $ | 0.0 | |
Generic Reserves Reversals (Provisions) - due to changes in credit portfolio composition and risk levels | | $ | (15.5 | ) | $ | (23.0 | ) | | (18.4 | ) |
Generic Reserves Reversals - due to change in credit loss reserve methodology | | | 6.0 | | | 0.0 | | | 0.0 | |
Total Generic Reserves Reversals (Provisions) | | $ | (9.6 | ) | $ | (23.0 | ) | $ | (18.4 | ) |
Recoveries - Argentine credits | | | 0.3 | | | 0.0 | | | 2.0 | |
Recoveries - Other credits | | | 2.3 | | | 0.0 | | | 4.4 | |
Total Recoveries | | $ | 2.6 | | $ | 0.0 | | $ | 6.4 | |
Total Reversals (Provisions) of Allowance for Loan Losses | | $ | 54.2 | | $ | (11.8 | ) | $ | (12.0 | ) |
Critical Accounting Policies
General
The Bank prepares its Consolidated Financial Statements in conformity with U.S. GAAP. As such, the Bank is required to use methods, make estimates, judgments and assumptions in applying its accounting policies that have a significant impact on the results it reports in its Consolidated Financial Statements. Some of the Bank’s accounting policies require management to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. The Bank’s management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from the estimates.
The Bank’s most critical accounting estimates include the assessment of allowance for credit losses, impairments on the value of securities that are “other than temporary” and the fair value of financial instruments. For information regarding the Bank’s most criticalsignificant accounting policies, see Notes 2, 5, 7Item 18, “Financial Statements”, note 2.
Allowance for Credit Losses
The classification of the Bank’s credit portfolio for allowances for credit losses under U.S. GAAP is determined through statistical modeling and 20estimates. Informed judgments must be made when identifying deteriorated loans, the probability of default, the expected loss, the value of collateral and current economic conditions. Even though the Bank’s management considers its allowances for credit losses to be adequate, the use of different estimates and assumptions could produce different allowances for credit losses, and amendments to the Consolidatedallowances may be required in the future due to changes in the value of collateral, the amount of cash to be received or other economic events. See Item 18, “Financial Statements”, note 2(j).
The estimates of the Bank’s portfolio’s inherent risks and overall recovery vary with changes in the economy, individual industries, and countries and individual borrowers’ or counterparties’ ability and willingness to repay their obligations. The degree to which any particular assumption affects the allowance for credit losses depends on the severity of the change and its relationship to the other assumptions. The methods and assumptions used by management in estimating the fair values of each type of financial instruments are described in Item 18, “FInancial Statements”, note 20.
Fair Value of Financial Statements.Instruments
In calculating the fair value of the Bank’s financial instruments, the Bank’s management uses market data available and its best judgment. However, there are limitations in any estimation technique. The estimated fair value amounts have been measured as of their respective year-ends. Fair value calculations are only provided for a limited portion of the Bank’s assets and liabilities. See Item 18, “Financial Statements”, note 20.
Notwithstanding the level of subjectivity inherent in determining fair value, the Bank’s management believes that its estimates of fair value are adequate. The use of different models or assumptions could lead to changes in the Bank’s reported results.
B.Liquidity and Capital Resources
Liquidity
Liquidity refers to the Bank’s ability to maintain adequate cash flows to fund operations and meet obligations and other commitments on a timely basis. The Bank maintains its liquid assets mainly in demand deposits, overnight funds and time deposits with well-known international banks.banks, as well as highly rated marketable securities. These liquid assets are adequate to cover 24-hour deposits from customers, which theoretically could be withdrawn on the same day. At December 31, 2006,2007, the Bank’s 24-hour deposits from customers (overnight deposits, demand deposit accounts and call deposits) amounted to $132$111 million, representing 12.5%8% of the Bank’s total deposits. The liquidity requirement resulting from these maturities is met by the Bank’s liquid assets, which at December 31, 2006,2007, were $327$418 million (representing 31%29% of total deposits), and by daily maturities of approximately $62$172 million to $114 million in the Bank’s loan portfolio.$205 million.
The main objectives ofAs established by the Bank’s liquidity policy, with respect to liquidity risk are: to achieve diversification of liabilities, to avoid concentrations (both in clients and maturities), to have adequatethe Bank’s liquid assets levels, and to avoid risky mismatches between assets and liabilities. The Bank establishedare held in the following limits: maximumform of inter-bank deposits taken from any client or economic group maturing in one day, and total maximum deposits maturing in any one day. The Bank also established a limit on the cumulative maturity gap and a liquidity ratio (a percentage of total interest-earning assets in highly liquid assets - cash and due from banks, unpledged deposits with banks and selected investments not used as collateral for repurchase agreements). Inter-bank deposits are placed with reputable international banks that have A1, P1, or F1 ratings byfrom two of the major rating agencies, and are located outside of the Region. These banks must have a correspondent relationship with the Bank and be approved by the Board on an annual basis. In addition, the Bank’s liquidity policy allows for investing in negotiable money market instruments, such asincluding Euro certificates of deposit, commercial paper, bankers’ acceptances and other liquid instruments with maturities of up to 180 days.three years. These instruments must be of investment grade quality (carrying two of the following ratings: A-1, P-1A or F-1 from Standard & Poor’s, Moody’s or Fitch, respectively)better and must have a liquid secondary market.
The primary objectives for the investment of the Bank’s liquidity funds are security and convertibility and the secondary objective is yield. The Bank reviewsperforms daily review and monitorscontrols on its liquidity position, onincluding the application of a daily basis.series of limits to restrict its overall liquidity risk. Specific limits have been established to control cumulative maturity “gaps” between assets and liabilities, for each maturity classification presented in the Bank’s internal liquidity reports, as well as to control concentrations of deposits taken from any client or economic group maturing in one day and total maximum deposits maturing in one day. The Bank has also established a minimum amount of liquidity to be maintained at the end of each day, as a percentage of total assets. As a precautionary measure, since the onset of the global liquidity crisis in August 2007, Bladex has consistently maintained a cash position substantially in excess of the minimum required.
In 2007, Bladex updated its Contingent Liquidity Plan, which provides for regular stress-testing of its liquidity position. The plan contemplates the regular monitoring of several quantified internal and external reference points (such as deposit level, quality of assets, Emerging Markets Bonds Index Plus (“EMBI+”), cost of funds and market interest rates), which, in moments of high volatility, would trigger implementation of a series of precautionary measures to reinforce the Bank's liquidity position.
The following table shows the Bank’s liquid assets, which consist of short-term funds deposited with other banks broken down by principal geographic area:area, at December 31 of each year:
| | At December 31, | | At December 31, | |
| | 2004 | | 2005 | | 2006 | | 2005 | | 2006 | | 2007 | |
| | (in $ millions) | | (in $ million) | |
Europe | | | $104 | | | $189 | | | $224 | | $ | 189 | | $ | 224 | | $ | 298 | |
United States | | | 1 | | | 1 | | | 49 | | | 1 | | | 49 | | | 39 | |
Other O.E.C.D. | | | 45 | | | 35 | | | 54 | | | 35 | | | 54 | | | 81 | |
Total | | | $151 | | | $225 | | | $327 | | $ | 225 | | $ | 327 | | $ | 418 | |
While the Bank’s liabilities generally mature over somewhat shorter periods than its assets, requiring the Bank to renew or create new liabilities at current interest rates, the associated liquidity risk is diminished by the short-term nature of the loan portfolio.portfolio, as the Bank is engaged primarily in the financing of foreign trade. At December 31, 2006,2007, the average original term to maturity of the Bank’s short-term loan portfolio was approximately 213217 days.
AtMedium term assets (maturing beyond one year) totaled $1.6 billion as of December 31, 2006,2007. Of that amount, $448 million was comprised of liquid bonds held primarily in the Bank’s cumulative maturity gap forsecurities available-for-sale portfolio. The remaining $1.2 billion in medium-term assets represented commercial loans. These medium-term loans are funded by medium-term borrowings (49%) and the subsequent twelve-month period was positive. This means that the Bank has sufficient asset maturities in the next twelve months to cover the maturity of its liabilities.Bank’s equity (51%).
Funding Sources
The Bank’s principal sources of funds are deposits, borrowed funds and floatingfloating- and fixed ratefixed-rate placements. While these sources are expected to continue to provide the majority of the funds needed by the Bank in the future, their mix,the exact composition of the Bank´s funding sources, as well as the possible use of other sources of funds, will depend upon future economic and market conditions. The following table shows the Bank’s funding distribution: distribution at December 31 of each year:
| | At December 31, | | | At December 31, | |
| | 2004 | | 2005 | | 2006 | | | 2005 | | 2006 | | 2007 | |
| | (in percentages) | | | | | (in percentages) | | | |
Inter-bank deposits | | | 41.6 | % | | 41.2 | % | | 31.1 | % | | | 41.2 | % | | 31.1 | % | | 35.0 | % |
Securities sold under repurchase agreements | | | 4.0 | % | | 5.1 | % | | 12.9 | % | | | 5.1 | % | | 12.9 | % | | 6.8 | % |
Short- and medium-term borrowings and placements | | | 49.4 | % | | 45.9 | % | | 50.6 | % | |
Borrowings and debts | | | | 45.9 | % | | 50.6 | % | | 53.4 | % |
Other liabilities. | | | 5.0 | % | | 7.9 | % | | 5.4 | % | | | 7.9 | % | | 5.4 | % | | 4.8 | % |
Total liabilities | | | 100.0 | % | | 100.0 | % | | 100.0 | % | | | 100.0 | % | | 100.0 | % | | 100.0 | % |
Deposits
The Bank obtains deposits principally from central and commercial banks in the Region. At December 31, 2006,2007, approximately 37%31% of the deposits held by the Bank were deposits made by central banks of countries in the Region. Many of these banks deposit a portion of their dollar reserves with the Bank. The average term remaining to maturity of deposits from central banks of countries in the Region at December 31, 2007 and 2006 was 36 days and 2005 was 44 days.days, respectively. The bulk of the Bank’s remainingother deposits is obtained primarily from commercial banks located in the Region. At December 31, 2006,2007, deposits from the Bank’sBank´s five largest depositors, of which three were central banks in the Region, represented 60%43% of the Bank’s total deposits.
The following table analyzesshows the Bank’s deposits by country at December 31 of each year:
| | 2004 | | 2005 | | 2006 | | 2005 | | 2006 | | 2007 | |
| | (in $ millions) | | (in $ million) | |
Argentina | | | $75 | | | $75 | | | $91 | | $ | 75 | | $ | 91 | | $ | 75 | |
Barbados | | | 2 | | | 10 | | | 5 | | | 10 | | | 5 | | | 28 | |
Brazil | | | 365 | | | 424 | | | 400 | | | 424 | | | 400 | | | 322 | |
Cayman Island | | | 0 | | | 0 | | | 27 | | | 0 | | | 27 | | | 33 | |
Chile | | | 5 | | | 0 | | | 0 | |
Colombia | | | 32 | | | 44 | | | 47 | | | 44 | | | 47 | | | 154 | |
Costa Rica | | | 46 | | | 2 | | | 7 | | | 2 | | | 7 | | | 10 | |
Dominican Republic | | | 28 | | | 22 | | | 27 | | | 22 | | | 27 | | | 21 | |
Ecuador | | | 75 | | | 182 | | | 99 | | | 182 | | | 99 | | | 70 | |
El Salvador | | | 27 | | | 32 | | | 27 | | | 32 | | | 27 | | | 26 | |
Finland | | | 0 | | | 0 | | | 10 | | | 0 | | | 10 | | | 10 | |
Guatemala | | | 0 | | | 0 | | | 1 | | | 0 | | | 1 | | | 0 | |
Germany | | | 45 | | | 0 | | | 0 | |
Haiti | | | 2 | | | 2 | | | 3 | | | 2 | | | 3 | | | 3 | |
Honduras | | | 20 | | | 10 | | | 14 | | | 10 | | | 14 | | | 27 | |
Italy | | | 9 | | | 0 | | | 0 | |
Jamaica | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | | | 2 | |
Mexico | | | 90 | | | 128 | | | 35 | | | 128 | | | 35 | | | 332 | |
The Netherlands | | | 0 | | | 17 | | | 18 | | | 17 | | | 18 | | | 21 | |
Nicaragua | | | 0 | | | 0 | | | 2 | | | 0 | | | 2 | | | 11 | |
Panama | | | 13 | | | 15 | | | 48 | | | 15 | | | 48 | | | 80 | |
Paraguay | | | 3 | | | 0 | | | 0 | |
Peru | | | 0 | | | 5 | | | 43 | | | 5 | | | 43 | | | 41 | |
Trinidad and Tobago | | | | 11 | | | 10 | | | 20 | |
United Kingdom | | | | 0 | | | 0 | | | 40 | |
United States | | | 0 | | | 0 | | | 19 | | | 0 | | | 19 | | | 20 | |
Trinidad and Tobago | | | 10 | | | 11 | | | 10 | |
Venezuela | | | 14 | | | 65 | | | 121 | | | 65 | | | 121 | | | 117 | |
Total | | | $864 | | | $1,047 | | | $1,056 | | $ | 1,047 | | $ | 1,056 | | $ | 1,462 | |
Short-Term Borrowings and Placements and Securities Sold Under Repurchase Agreements
The Bank’s short-term borrowings consist of borrowings from banks andthat have maturities of up to 365 days. These borrowings are made available to the Bank on an uncommitted basis for the financing of trade-related loans. Approximately 3935 European and North American banks provide these short-term borrowings from banks.to the Bank.
As of December 31, 2006,2007, short-term borrowings amounted to $1,596$1,222 million, an increase of $835$64 million from the amount as of December 31, 2005.2006. The increase in short-term borrowings funded the growth in the credit portfolio experienced during the year.was due to funding, liquidity and asset/liability management needs.
The average term remaining to maturity of short-term borrowings at December 31, 20062007 was approximately 102104 days. See Note 10 to the Consolidated Financial Statements.Item 18, “Financial Statements”, note 10.
The Bank also enters into repurchase agreements (“repos”) with international banks, utilizing its investment securities portfolio as collateral to secure cost-effective funding. As of December 31, 2006,2007, repos amounted to $438$283 million, a decrease of $155 million from the amount as of December 31, 2006, reflecting an increase of $309 million from December 31, 2005, reflecting the increase in the Bank’s investment securities portfolio during this period.borrowings as a funding strategy.
The following table presents information regarding the amounts outstanding, under, and interest rates on, the Bank’s short-term borrowings and placements and securities sold under repurchase agreements at the dates and during the periods indicated.
| | At and for the Year Ended December 31, | |
| | 2004 | | 2005 | | 2006 | |
| | (in $ millions, except percentages) | |
Short term borrowings and Securities sold under repurchase agreements | | | | | | | |
Advances from banks | | | $622 | | | $608 | | | $1,147 | |
Discounted acceptances | | | 0 | | | 24 | | | 10 | |
Securities sold under repurchase agreements | | | 82 | | | 129 | | | 438 | |
Total short term borrowings and securities sold under repurchase agreements | | | $705 | | | $761 | | | $1,596 | |
| | | | | | | | | | |
Maximum amount outstanding at any month-end | | | $705 | | | $761 | | | $1,634 | |
Amount outstanding at year-end | | | $705 | | | $761 | | | $1,596 | |
Average amount outstanding | | | $533 | | | $601 | | | $1,044 | |
Weighted average interest rate on average amount outstanding | | | 1.74 | % | | 3.39 | % | | 5.20 | % |
Weighted average interest rate on amount outstanding at year end | | | 2.83 | % | | 4.73 | % | | 5.51 | % |
| | At and for the Year Ended December 31, | |
| | 2005 | | 2006 | | 2007 | |
| | (in $ million, except percentages) | |
Short-term borrowings and securities sold under repurchase agreements | | | | | | | | | | |
Advances from banks | | $ | 608 | | $ | 1,147 | | $ | 1,222 | |
Discounted acceptances | | | 24 | | | 10 | | | 0 | |
Securities sold under repurchase agreements | | | 129 | | | 438 | | | 283 | |
Total short-term borrowings and securities sold under repurchase agreements | | $ | 761 | | $ | 1,596 | | $ | 1,505 | |
| | | | | | | | | | |
Maximum amount outstanding at any month-end | | $ | 761 | | $ | 1,634 | | $ | 1,505 | |
Amount outstanding at year-end | | $ | 761 | | $ | 1,596 | | $ | 1,505 | |
Average amount outstanding | | $ | 601 | | $ | 1,044 | | $ | 1,272 | |
Weighted average interest rate on average amount outstanding | | | 3.39 | % | | 5.20 | % | | 5.45 | % |
Weighted average interest rate on amount outstanding at year end | | | 4.73 | % | | 5.51 | % | | 5.34 | % |
Medium-Borrowings and Long-Term Borrowings and PlacementsDebt
The interest rates on medium and long-term borrowings are adjusted semi-annually based on short-term LIBOR rates plus a credit spread (which is based on several factors, including credit ratings, risk perception, and the maturity period)remaining term to maturity). The Bank uses these funds to finance its medium-term and long-term loan portfolio. TheAt December 31, 2007 the average term remaining to maturity of the Bank’s medium and long-term debt iswas two years.
The Bank’s Euro Medium Term Note Program, or, EMTN Program has a maximum aggregate limit of $2.3 billion. Notes issued under the EMTN Program are placed in the Euro or Regulation S(Regulation S), or 144A markets and are general obligations of the Bank. The EMTN Program may be used to issue notes with maturities ranging from 90 days up to a maximum of 30 years, at fixed or floating interest rates and in various currencies. The Bank has not actively used the EMTN Program in the past three years, as it has relied on cheaper interbank funding. As of December 31, 2006,2007, the total amount outstanding under this programthe EMTN Program with medium-term maturities was $25 million.
During the third quarter of 2007, the Bank established a program for bond issuances in Peru. The program has a maximum aggregate limit of the equivalent of $300 million. Bonds issued under the program are denominated in Peruvian Nuevo Soles (PEN), may be issued in several series with different maturities and interest rate structures, will be offered exclusively to institutional investors domiciled in the Republic of Peru, and will rank pari-passu with other debt obligations of the Bank. The funds raised from the program will be used to finance the Bank’s credit portfolio and to cover its general long-term financial needs. The first placement of bonds under the program consisted of bonds with a maturity of seven years and a fixed rate of interest, and was subsequently swapped into U.S. dollars through a cross-currency swap. As of December 31, 2007, the total amount outstanding under the program was PEN 123,000,000 (equivalent to $41.0 million).
As part of its interest rate and currency risk management, the Bank hasmay from time to time, enteredenter into foreign exchange forward and cross currencyforwards, cross-currency contracts and interest rate swaps to hedge the risk associated with a portion of the notes issued under its EMTN Program.various programs. See NoteItem 18, “Financial Statements”, note 11, to the Consolidated Financial Statements and Item 11, “Quantitative and Qualitative Disclosure About Market Risk”.
Cost and Maturity Profile of Borrowed Funds and FloatingFloating- and Fixed RateFixed-Rate Placements
The following table sets forth certain information regarding the weighted average cost and the remaining maturities of the Bank’s borrowed funds and floatingfloating- and fixed ratefixed-rate placements at December 31, 2006:2007:
| | Amount | | Weighted Average Cost | | Amount | | Weighted Average Cost | |
| | (in $ millions) | | | | | (in $ million) | | | |
Short-term borrowings at fixed interest rate | | | | | | | | | | | | |
Due in 0 to 30 days | | | $467 | | | 5.43 | % | | $ | 250 | | | 5.47 | % |
Due in 31 to 90 days | | | 465 | | | 5.50 | % | | | 403 | | | 5.45 | % |
Due in 91 to 180 days | | | 390 | | | 5.57 | % | | | 255 | | | 5.30 | % |
Due in 181 to 365 days | | | 274 | | | 5.57 | % | | | 298 | | | 5.01 | % |
Total | | | $1,596 | | | 5.51 | % | | $ | 1,207 | | | 5.31 | % |
Short-term borrowings at floating interest rate | | | | | | | | |
Due in 0 to 30 days | | | $ | 283 | | | 5.49 | % |
Due in 181 to 365 days | | | | 15 | | | 5.17 | % |
Total | | | $ | 298 | | | 5.48 | % |
Medium and long-term borrowings at fixed interest rate | | | | | | | | | | | | | | |
Due in 0 to 30 days | | | $1 | | | 8.42 | % 1 | | $ | 3 | | | 8.31 | % 1 |
Due in 31 to 90 days | | | 3 | | | 8.42 | % 1 | | | 5 | | | 8.31 | % 1 |
Due in 91 to 180 days | | | 4 | | | 8.42 | % 1 | | | 18 | | | 6.83 | % 1 |
Due in 181 to 365 days | | | 48 | | | 5.01 | % 1 | | | 78 | | | 5.74 | % 1 |
Due in 1 through 4 years | | | 49 | | | 8.42 | % 1 | |
Due in 1 through 6 years | | | | 132 | | | 6.85 | % 1 |
Total | | | $105 | | | 6.87 | % | | $ | 236 | | | 6.53 | % |
Medium and long-term borrowings at floating interest rate | | | | | | | | | | | | | | |
Due in0 to 30 days | | | $1 | | | 5.71 | % | |
Due in 31 to 90 days | | | 5 | | | 5.58 | % | |
Due in 91 to 180 days | | | 25 | | | 5.90 | % | | $ | 25 | | | 5.08 | % |
Due in 181 to 365 days | | | 74 | | | 5.70 | % | | | 270 | | | 5.57 | % |
Due in 1 through 4 years | | | 324 | | | 5.74 | % | |
Due in 1 through 6 years | | | | 414 | | | 5.41 | % |
Total | | | $429 | | | 5.74 | % | | $ | 709 | | | 5.46 | % |
Medium & long-term floating rate placements | | | | | | | | |
Due in 1 through 4 years | | | $25 | | | 6.10 | % | |
Medium and long-term at fixed-rate placements | | | | | | | | |
Due in 7 through 12 years | | | $ | 41 | | | 6.50 | % |
Total | | | $25 | | | 6.10 | % | | $ | 41 | | | 6.50 | % |
Medium and long-term floating-rate placements | | | | | | | | |
Due in 0 to 30 days | | | $ | 10 | | | 6.19 | % |
Due in 91 to 180 days | | | | 10 | | | 5.33 | % |
Due in 1 through 6 years | | | | 5 | | | 5.65 | % |
Total | | | $ | 25 | | | 5.74 | % |
1 Represent fixed-rate interest-bearing liabilities booked in local currency to fund fixed-rate interest-earning assets in the same local currency. | Represent fixed rate interest-bearing liabilities booked in local currency, to fund fixed rate interest-earning assets in the same local currency. |
Asset/Liability Management
The Bank seeks to manage its assets and liabilities to reduce the potential adverse impact on net interest income that could result from interest rate changes. The Bank controls interest rate risk through systematic monitoring of maturity mismatches. The Bank’s investment decision-making takes into account not only the rates of return and the respective underlying degreedegrees of risk, but also liquidity requirements, including minimum cash reserves, withdrawal and maturity of deposits and additional demand for funds. For any given period, a matched pricing structure exists when an equal amount of assets and liabilities are repriced. An excess of assets or liabilities over these matched items results in a “gap” or “mismatch”, as shown in the table under “Interest Rate Sensitivity” below. A negative gap denotes liability sensitivity and normally means that a decline in interest rates would have a positive effect on net interest income, while an increase in interest rates would have a negative effect on net interest income. Substantially all of the Bank’s assets and liabilities are denominated in dollars and, therefore, the Bank has no material foreign exchange risk.
Interest Rate Sensitivity
The following table presents the projected maturities and interest rate adjustment periods of the Bank’s assets, liabilities and stockholders’ equity based upon the contractual maturities and adjustment dates at December 31, 2006.2007. The Bank’s interest-earning assets and interest-bearing liabilities and the related interest rate sensitivity gap shown in the following table may not reflect positions in subsequent periods.
| | Total | | 0-30 Days | | 31-90 Days | | 91-180 Days | | 181-365 Days | | More than 365 Days | | Non-Interest Sensitive | | | Total | | 0-30 Days | | 31-90 Days | | 91-180 Days | | 181-365 Days | | More than 365 Days | | Non-Interest Sensitive | |
| | (in $ millions, except percentages) | | | (in $ million, except percentages) | |
Interest-earning assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash and due from banks | | | $29.3 | | | $0.0 | | | $0.0 | | | $0.0 | | | $0.0 | | | $0.0 | | | $29.3 | | | $ | 72 | | $ | 72 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
Interest-bearing deposits with banks | | | 302.9 | | | 297.4 | | | 5.5 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | | 405 | | 405 | | 0 | | 0 | | 0 | | 0 | | 0 | |
Investment securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Trading securities | | | 130.1 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 130.1 | | | 0.0 | | |
Available for Sale Securities | | | 346.2 | | | 115.3 | | | 13.1 | | | 130.9 | | | 13.0 | | | 73.8 | | | 0.0 | | |
Held to Maturity Securities | | | 125.2 | | | 35.1 | | | 10.0 | | | 80.1 | | | 0.0 | | | 0.0 | | | 0.0 | | |
Trading assets | | | | 53 | | 0 | | 0 | | 0 | | 0 | | 16 | | 36 | |
Securities available for sale | | | | 468 | | 148 | | 190 | | 84 | | 0 | | 47 | | 0 | |
Loans, net | | | 2,925.1 | | | 522.7 | | | 1,294.4 | | | 836.5 | | | 132.3 | | | 194.9 | | | (55.7 | ) | | | 3,656 | | | 992 | | | 1,310 | | | 985 | | | 210 | | | 234 | | | (76 | ) |
Total interest-earning assets | | | 3,858.7 | | | 970.5 | | | 1,323.0 | | | 1,047.5 | | | 145.3 | | | 398.8 | | | (26.4 | ) | | | 4,655 | | 1,617 | | 1,500 | | 1,069 | | 210 | | 298 | | (39 | ) |
Non-interest earning assets | | | 112.9 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 112.9 | | | | 133 | | 0 | | 0 | | 0 | | 0 | | 0 | | 133 | |
Other assets | | | 6.7 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 6.7 | | | | 2 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 2 | |
Total assets | | | $3,978.3 | | | $970.5 | | | $1,323.0 | | | $1,047.5 | | | $145.3 | | | $398.8 | | | $93.3 | | | $ | 4,791 | | $ | 1,617 | | $ | 1,500 | | $ | 1,069 | | $ | 210 | | $ | 298 | | $ | 97 | |
Interest-bearing liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deposits | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Demand | | | $132.1 | | | $132.1 | | | $0.0 | | | $0.0 | | | $0.0 | | | $0.0 | | | $0.0 | | | $ | 111 | | $ | 111 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
Time | | | 924.1 | | | 578.2 | | | 317.2 | | | 28.8 | | | 0.0 | | | 0.0 | | | 0.0 | | | | 1,351 | | 1,061 | | 207 | | 73 | | 10 | | 0 | | 0 | |
Securities sold under repurchase Agreements | | | 438.4 | | | 322.7 | | | 115.7 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | |
Short-term borrowings and placements | | | 1,157.2 | | | 144.4 | | | 349.2 | | | 390.1 | | | 273.5 | | | 0.0 | | | 0.0 | | |
Medium- and long-term borrowings and placements | | | 558.9 | | | 252.0 | | | 51.7 | | | 129.6 | | | 60.4 | | | 65.2 | | | 0.0 | | |
Trading Liabilities | | | 54.8 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 54.8 | | | 0.0 | | |
Trading liabilities | | | | 91 | | 1 | | 0 | | 0 | | 0 | | 32 | | 58 | |
Securities sold under repurchase agreements | | | | 283 | | 283 | | 0 | | 0 | | 0 | | 0 | | 0 | |
Short-term borrowings(1) | | | | 1,287 | | 250 | | 408 | | 280 | | 350 | | 0 | | 0 | |
Borrowings and long-term debt(1) | | | | 945 | | | 376 | | | 232 | | | 101 | | | 20 | | | 216 | | | 0 | |
Total interest-bearing liabilities | | | 3,265.6 | | | 1,429.4 | | | 833.8 | | | 548.5 | | | 333.9 | | | 120.0 | | | 0.0 | | | | 4,068 | | 2,083 | | 847 | | 453 | | 380 | | 248 | | 58 | |
Non-interest-bearing liabilities | | | 128.9 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 128.9 | | | | 110 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 110 | |
Total liabilities | | | 3,394.4 | | | 1,429.4 | | | 833.8 | | | 548.5 | | | 333.9 | | | 120.0 | | | 128.9 | | | | 4,178 | | 2,083 | | 847 | | 453 | | 380 | | 248 | | 168 | |
Stockholders’ equity | | | 583.9 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 0.0 | | | 583.9 | | | | 612 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 612 | |
Total liabilities and stockholders’ equity | | | $3,978.3 | | | $1,429.4 | | | $833.8 | | | $548.5 | | | $333.9 | | | $120.0 | | | $712.8 | | | | 4,791 | | | 2,083 | | | 847 | | | 453 | | | 380 | | | 248 | | | 780 | |
Interest rate sensitivity gap | | | | | | (458.9 | ) | | 489.2 | | | 499.0 | | | (188.5 | ) | | 278.8 | | | (619.5 | ) | | | | | (466 | ) | | 653 | | 616 | | (170 | ) | | 51 | | (684 | ) |
Cumulative interest rate sensitivity gap | | | | | | (458.9 | ) | | 30.5 | | | 529.3 | | | 340.7 | | | 619.5 | | | | | | | | | (466 | ) | | 187 | | 803 | | 633 | | 684 | | | |
Cumulative gap as a % of total interest-earning assets | | | | | | -12 | % | | 1 | % | | 14 | % | | 9 | % | | 16 | % | | | | | | | | -10 | % | | 4 | % | | 17 | % | | 14 | % | | 15 | % | | | |
(1) The sum of totals of Short-term borrowings and Borrowings and long-term debt are equal as the sum of these same accounts presented on Balance Sheet of financial statements.
The Bank’s interest rate risk is the exposure of earnings (current and potential) and capital to adverse changes in interest rates and is managed by attempting to match the term and repricing characteristics of the Bank’s interest rate sensitive assets and liabilities. The Bank’s interest rate risk arises from the Bank’s liability sensitive short-term position, which means that the Bank’s interest-bearing liabilities reprice more quickly than the Bank’s interest-earning assets. As a result, there is a potential adverse impact on the Bank’s net interest income that might result from interest rate increases. The Bank’s policy with respect to interest rate risk provides that the Bank establishes limits with regards to: (i) changes in net interest income due to a potential impact given certain movements in interest rates, (ii) changes in the amount of available equity funds of the Bank (given a one basis point movement in interest rates) and (iii) changes in Value-at-Risk (VaR)value-at-risk (“VaR”) of the Bank’s portfolio (the expected maximum loss due to interest rate fluctuations, based(based on statistical analysis of the historical volatility of the Bank’s portfolio). The Bank also has used interest rate swaps as part of its interest rate risk management. 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 fixedfixed- for floating ratefloating-rate interest payments or vice versa.
Stockholders’ Equity
The following table presents information concerning the Bank’s capital position at the dates indicated.
| | At December 31, | |
| | 2005 | | 2006 | | 2007 | |
| | (in $ thousand) | |
Common stock | | $ | 279,978 | | $ | 279,980 | | $ | 279,980 | |
Capital surplus | | | 134,340 | | | 134,945 | | | 135,142 | |
Capital reserves | | | 95,210 | | | 95,210 | | | 95,210 | |
Retained earnings | | | 212,916 | | | 205,200 | | | 245,348 | |
Accumulated other comprehensive income (loss) | | | 619 | | | 3,328 | | | (9,641 | ) |
Treasury stock | | | (106,282 | ) | | (134,768 | ) | | (133,788 | ) |
Total stockholders’ equity | | $ | 616,782 | | $ | 583,895 | | $ | 612,252 | |
The $28 million increase in stockholders’ equity during 2007 was mainly due to the following factors:
| | At December 31, | |
| | 2004 | | 2005 | | 2006 | |
| | (in $ thousands) | |
Common stock | | | $279,978 | | | $279,978 | | | $279,980 | |
Capital surplus | | | 133,785 | | | 134,340 | | | 134,945 | |
Capital reserves | | | 95,210 | | | 95,210 | | | 95,210 | |
Retained earnings | | | 233,701 | | | 212,916 | | | 205,200 | |
Accumulated other comprehensive income | | | 6,082 | | | 619 | | | 3,328 | |
Treasury stock | | | (92,627 | ) | | (106,282 | ) | | (134,768 | ) |
Total stockholders’ equity | | | $656,130 | | | $616,782 | | | $583,895 | |
| · | Increased retained earnings due to the Bank’s net income of $72 million, partially offset by a total of $32 million in dividends paid to common stockholders; offset by |
| · | Decreased accumulated other comprehensive income related to derivative hedging instruments, due to the lowering of interest rates by the Federal Reserve Board during the credit crisis. This loss was not offset by the investment securities portfolio, which is covered by interest rate swaps, due to an increase in credit spreads as a result of the liquidity shortage in the market. |
The net decrease in stockholders’ equity during 2006 was mainly due to the following factors:
| · | Dividends paid to common stockholders of $66 million ($27 million paid in quarterly dividends and $38 million paid in special dividends); and |
| · | The repurchase of $29 million Class E shares pursuant to the Bank’s stock repurchase program. |
| · | These factors were offset by net income forof $58 million and higher accumulated other comprehensive income related to the available for saleavailable-for-sale portfolio. |
The net decrease in stockholders’ equity during 2005 was mainly due to the following factors:
| · | Dividends paid to common stockholders of $101 million ($23 million paid in quarterly dividends and $78 million paid in special dividends); |
| · | Lower accumulated other comprehensive income related to the available for sale portfolio; and |
| · | The repurchase of $14 million Class E shares pursuant to the Bank’s stock repurchase program. |
| · | These factors were offset by net income for $80 million. |
At December 31, 2006, the Bank had completed the Bank’sits $50 million stock repurchase program at December 31, 2006, which was commenced in August 2004. See “Dividends”Item 10, “Additional Information/Dividends” and Item 16E, “Purchases of Equity Securities by the Issuer and Affiliated Purchasers”.
Capital reserves are established by the Bank from retained earnings and are a form of retained earnings according torequired by Panamanian banking regulations. Capital reserves are intended to strengthen the Bank’s capital position. Reductions of these reserves, for example to pay dividends, require approval of the Board of the Bank and Panamanian banking authorities. Panamanian banking regulations do not require the Bank to maintain any particular level of capital reserves.
At December 31, 2006,2007, the capital ratio of total stockholders’ equity to total assets was 14.7%12.8%. Although the Bank is not subject to the capital adequacy requirements of the United States Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), if the Federal Reserve Board’s fully phased-in risk-based capital guidelines applied to the Bank, the Bank's ratios would have exceeded all applicable capital adequacy requirements. At December 31, 2006,2007, the Bank’s Tier 1 and total capital ratios calculated according to these guidelines were 24.4%21% and 25.7%22%, respectively. The Banking Law (as defined under Item 4, “Information on the Company—Company/Business Overview—Overview/Regulation”) in Panama, which became effective on June 12, 1998, requires the Bank to maintain a minimum total capital to risk-weighted asset ratio of 8% (each, as defined in the Banking Law). At December 31, 2006,2007, the Bank’s total capital to risk-weighted asset ratio, calculated according to the guidelines of the Banking Law, was 16.0%14.12%. See “Regulation—Item 4, “Information on the Company/Business Overview/Regulation/Panamanian Law”.
C.Research and Development, Patents and Licenses, etc.
Not applicable.
D.Trend Information
The following are the most important trends, uncertainties and events that are reasonably likely to materially affect the Bank or that would cause the financial information disclosed herein not to be indicative of the Bank’s future operating results or financial condition:
| · | The effect of changes in global economic conditions, including oil and other commodities prices, the U.S. dollar exchange rate, interest rates, and slower economic growth in developed countries and trading partners, and the effect that these changes may have on the economic condition of countries in the Region.Region, including the Region´s foreign trade growth, and hence on the Bank’s capacity to grow its trade financing business. |
| · | The effect that an economic slowdown or political events in large Latin American countries may have on the Bank’s asset quality, results of operations and growth prospects. |
| · | Continued improvement in risk perception in the Bank’s markets, increased competition and U.S. dollar liquidity which could further pressureaffect spreads over LIBORthe cost of funds on the Bank’s accruingloan portfolio, whichand in turn, could reduce the Bank’s net interest spreads. |
| · | A downturn in the capital markets or a downturn in investor confidence.confidence which could affect the Bank’s access to funding or increase its costs of funding. |
In addition, see “RiskItem 3, “Key Information/Risk Factors” for a discussion of the risks the Bank faces, which could affect the Bank’s business, results of operations or financial condition.
E.Off-Balance Sheet Arrangements
In the ordinary course of business, in order to meet the financing needs of its customers, the Bank enters into arrangements that are not recognized on its balance sheet. At December 31, 2006,2007, the Bank’s off-balance sheet arrangements included stand-by letters of credit, guarantees (commercial risk and country risk), reimbursement undertakingscredit default swaps and credit commitments (including unused commitments and other commitments). See Note 16 to the Consolidated Financial Statements.Item 18, “Financial Statements”, note 16. These arrangements are kept off-balance sheet as long as the Bank does not incur an obligation from them or itself become entitled to an asset. A reserve for losses on off-balance sheet credit risk is recognized on the balance sheet, with the resulting loss recorded in the income statement.
For 2006,2007, fees and commission income from off-balance sheet arrangements amounted to $6 million. For additional information, see “Results of Operations - Commission Income”Item 5, “Operating and Financial Review and Prospects/Operating Results/Fees and Commissions, net”. For 2006,In 2007, the Bank iswas committed to invest $2$1.5 million, ($31.9 million in 2005)2006) in a private investment fund whose main objective is to generate capital appreciation in the long termlong-term through the purchase of sharesequity securities and convertible debt mainly from Mexican manufacturing corporations or foreign corporations looking to establish or expand their operations in Mexico.
No obligations have arisen from variable interest entities as defined in Financial Interpretation (“FIN”) 46R “Consolidation of Variable Interest Entities - Revised” (“FIN 46R.
The Bank has entered into agreements that contain indemnification provisions, such as46R”), including indemnification agreements with its executive officers and directors, and provides indemnity insurance pursuant to which directors and officers are indemnified or insured against liability or loss under certain circumstances, including liabilities or related losses arising under the Securities Act and the Exchange Act.
F.Contractual Obligations and Commercial Commitments
The following tables set forth information regarding the Bank’s contractual obligations and commercial commitments as of December 31, 2006.2007.
| | Payments Due by Period | |
Contractual Obligations | | Total | | Less than 1 year | | 1 - 3 years | | 3 - 5 years | | More than 5 years | |
| | (in $ million) | |
Deposits | | $ | 1,462 | | $ | 1,462 | | $ | 0 | | $ | 0 | | $ | 0 | |
Trading liabilities | | | 91 | | | 91 | | | 0 | | | 0 | | | 0 | |
Securities sold under repurchase agreement | | | 283 | | | 283 | | | 0 | | | 0 | | | 0 | |
Short-term borrowings | | | 1,222 | | | 1,222 | | | 0 | | | 0 | | | 0 | |
Borrowings and long-term debt 1 | | | 1,010 | | | 357 | | | 352 | | | 260 | | | 41 | |
Accrued Interest Payable | | | 39 | | | 33 | | | 5 | | | 1 | | | 0 | |
Service agreements | | | 3 | | | 1 | | | 1 | | | 1 | | | 0 | |
Leasehold obligations | | | 4 | | | 1 | | | 1 | | | 1 | | | 1 | |
Total contractual obligations | | $ | 4,114 | | $ | 3,450 | | $ | 359 | | $ | 263 | | $ | 42 | |
| | Payments Due by Period |
Contractual Obligations | | Total | | Less than 1 year | | 1 - 3 years | | 3 - 5 years | | More than 5 years |
| | (in $ millions) |
Medium and long-term debt obligations1 | | | $559 | | | $145 | | | $344 | | | $70 | | | $0 |
Service agreements | | | 5 | | | 1 | | | 1 | | | 1 | | | 2 |
Leasehold obligations | | | 4 | | | 1 | | | 1 | | | 2 | | | 0 |
Total contractual obligations | | | $568 | | | $147 | | | $346 | | | $73 | | | $2 |
| | Amount of Commitment Expiration by Period | |
Other Commercial Commitments | | Total | | Less than 1 year | | 1 - 3 years | | 3 - 5 years | | More than 5 years | |
| | (in $ million) | |
Letters of credit | | | 97 | | | 97 | | | 0 | | | 0 | | | 0 | |
Stand-by letters of credit | | | 152 | | | 152 | | | 0 | | | 0 | | | 0 | |
Guarantees | | | 159 | | | 111 | | | 48 | | | 0 | | | 0 | |
Credit default swaps | | | 3 | | | 0 | | | 3 | | | 0 | | | 0 | |
Other commercial commitments | | | 129 | | | 67 | | | 61 | | | 0 | | | 22 | |
Total Commercial Commitments | | $ | 541 | | $ | 427 | | $ | 112 | | $ | 0 | | $ | 2 | |
______________________
| | Amount of Commitment Expiration by Period | |
Other Commercial Commitments | | Total | | Less than 1 year | | 1 - 3 years | | 3 - 5 years | | More than 5 years | |
| | (in $ millions) | |
Letters of credit | | | $109 | | | $109 | | | $0 | | | $0 | | | $0 | |
Stand-by letters of credit | | | 158 | | | 156 | | | 2 | | | 0 | | | 0 | |
Guarantees | | | 154 | | | 40 | | | 81 | | | 33 | | | 0 | |
Reimbursements undertaking | | | 3 | | | 3 | | | 0 | | | 0 | | | 0 | |
Other commercial commitments | | | 200 | | | 97 | | | 102 | | | 0 | | | 2 | 2 |
Total Commercial Commitments | | | $624 | | | $405 | | | $184 | | | $33 | | | $2 | |
1 Certain debt obligations are subject to covenants that could accelerate the payment of these obligations.2 This amount is without maturity.
1
| Certain debt obligations are subject to covenants that could accelerate the payment of these obligations. |
2
| This amount is without maturity. |
Purchase Agreements
The Bank has signed service agreements with certain vendors that provide services that are necessary for the ongoing operations of its business and are mainly related to the maintenance of a new technology platform and telecommunications services. The terms of these agreements are up to eight years and some of them can be re-negotiated for annual or semi-annual price adjustments after the fifth year. Under the terms of these agreements, the Bank has committed to contractually specified minimum payments over the contractual periods. See Note 17 to the Consolidated Financial Statements.Item 18, “Financial Statements”, note 17.
Item 6.Directors, Executive Officers and EmployeesDirectors, Senior Management and Employees
A.Directors and Senior ManagementExecutive Officers
Directors
The following table sets forth certain information concerning the Directors of the Bank as of the date of this Annual Report.
Name | | Country of Citizenship | | Position Held with The Bank | | Year Term Expires | | Age | | Country of Citizenship | | Position Held with The Bank | | Year Term Expires | | Director Since | | Age | |
CLASS A | | | | | | | | | | | | | | | | | | | |
Guillermo Güémez García Deputy Governor Banco de Mexico, Mexico | | Mexico | | Director | | 2008 | | 66 | | | Mexico | | Director | | 2011 | | 1997 | | 67 | |
Santiago Perdomo Maldonado President Red Multibanca Colpatria, Colombia | | Colombia | | Director | | 2008 | | 49 | |
José Maria Rabelo Banco do Brasil, Brazil | | Brazil | | Director | | 2010 | | 52 | |
José Maria Rabelo Vice-President of International Wholesale Business Banco do Brasil, Brazil | | | | Brazil | | Director | | 2010 | | 2007 | | 52 | |
Roberto Feletti Vice-President Banco de la Nación Argentina | | | | Argentina | | Director | | 2011 | | 2008 | | 49 | |
CLASS E | | | | | | | | | | | | | | | | | | | | |
Mario Covo Chief Executive Officer Finaccess International, Inc., U.S.A. | | U.S.A | | Director | | 2008 | | 49 | | | U.S.A | | Director | | 2011 | | 1999 | | 50 | |
Will C. Wood Principal Kentwood Associates, U.S.A. | | U.S.A. | | Director | | 2009 | | 67 | | | U.S.A. | | Director | | 2009 | | | 1999 | | 68 | |
Herminio Blanco Soluciones Estratégicas Consultoría, Mexico | | Mexico | | Director | | 2010 | | 56 | |
William Hayes President Wellstone Global Finance, LLC, U.S.A. | | U.S.A. | | Director | | 2010 | | 64 | |
Herminio Blanco Chief Executive Officer Soluciones Estratégicas Consultoría, Mexico | | | | Mexico | | Director | | 2010 | | 2004 | | 57 | |
William D. Hayes President Wellstone Global Finance, LLC, U.S.A. | | | | U.S.A. | | Director | | 2010 | | 2004 | | 64 | |
Maria da Graça França Brazil | | Brazil | | Director | | 2010 | | 58 | | | Brazil | | Director | | 2010 | | 2004 | | 59 | |
ALL CLASSES OF COMMON STOCK | | | | | | | | | | | | | | | | | | | | |
Gonzalo Menéndez Duque Director Banco de Chile, Chile | | Chile | | Chairman of the Board of Directors | | 2009 | | 58 | | | Chile | | Chairman of the Board of Directors | | 2009 | | 1990 | | 59 | |
Jaime Rivera Chief Executive Officer Bladex, Panama | | Guatemala | | Director | | 2009 | | 54 | | | Guatemala | | Director | | 2009 | | 2004 | | 55 | |
Guillermo Güémez García has served as a Director of the Bank since 1997. Mr. Güémez has served as Deputy Governor of Banco de Mexico since 1995 and served as a Board Member of the National Insurance Commission and Casa de Moneda de Mexico since 1995. He has served as President of the Executive Committee in Grupo Azucarero Mexico and Vice Chairman of Grupo de Embotelladoras Unidas, S.A. de C. V., from 1993 to 1994. Mr. Güémez served as Co-Chairman of the North American Committee, and Board Member of Home Mart, S.A. de C.V. and Vice Chairman of the Board of Grupo Embotelladoras Unidas, S.A. de C.V. from 19931986 to 1994. Mr. Güémez served on the Mexican Business Coordinating Council for Naftathe North American Free Trade Agreement (“NAFTA”) in the capacity of Executive Director from 1991 to 1993. He was employed by Banco Nacional de Mexico (Banamex) in various capacities from 1974 to 1991, including Manager for Foreign Currency Funding and International Credits from 1974 to 1978;1978, Representative in London and set up Banco Nacional de Mexico’s branch in London from 1979 to 1981, Executive Vice President of International Treasury and Foreign Exchange, Exchange Controls and Ficorca from 1982 to 1986, and Executive Vice President for International Products andProducts. He also was the founder and President of Euromex Casa de Cambio and Euroamerican Capital Corporation from 1986 to 1990. He has held the positions of,also served as well as International Operations from 1984 for Banco Nacional de Mexico. Mr. Güémez wasa Board Member of the Institute of International Finance and Board Member and Chairman of the Executive Committee of the International Mexican Bank Ltd. Prior to that Mr. Güémezhe was employed by Bank of America in Mexico as Assistant Representative.
Santiago Perdomo Maldonado has served as a Director of the Bank since 2003. Mr. Perdomo has served as President of Banco Colpatria - Red Multibanca Colpatria, in Colombia, since May 1999. Mr. Perdomo has been employed by Banco Colpatria in various capacities since 1994, including: as Executive Vice President from November 1998 to April 1999, as President from September 1994 to October 1998, and as Executive Vice President of Corporación Colpatria from February 1994 to August 1994. Previously, he was Manager of Corredora Bursatil from March 1993 to January 1994. Mr. Perdomo has also served as Manager of Colpatria Sociedad Administradora from September 1991 to February 1993, and as Manager of Corporate Banking from July 1981 to August 1991.
José Maria Rabelo has served as a Director of the Bank since 2007. Mr. Rabelo has served as Vice President of International and Wholesale Business inof Banco do Brasil, since July 2005. Mr. RabeloHe has been employed by Banco do Brasil in various capacities since 1996, holding the positions of Director of Foreign Trade from 2004 to 2005, General Manager of the Operational Assets ReestructuringRestructuring Unit from 2003 to 2004, Executive Superintendent of the Credit Unit from 1999 to 2000, Executive Superintendent of the Sao Paulo Business Unit from 1998 to 1999, Executive Manager of the Credit Function Unit in 1997, Executive Manager of the Distribution Unit from 1996 to 1997, and Superintendent of the Rio Grande do Norte State Unit in 1996. Mr. Rabelo was Commercial Director of Aliança do Brasil Insurance Company from 2000 to 2002.
Mario Covo Roberto Felettihas served as aVice President of Banco de la Nación Argentina, Argentina since 2006, President of Nación Fideicomisos since March 2008, Member of the Administrative Council of Economic and Finance Center Foundation for Argentina’s Development since April 2007, Technical Representative for the Third Meeting of the Strategic Commission of Reflection on South American Integration Process held in September and October 2006 and March 2007. He also served as Secretary of Infrastructure and Planning of Government of the City of Buenos Aires from 2003 to 2006. Mr. Feletti served as President of Banco de la Ciudad de Buenos Aires, Argentina from 2001 to 2003 and Director from 1998 to 2000. He also served as Director of Red Link from 2002 to 2003 and Chairman of the Bank since 1999.Board from 2001 to 2002. Mr. Feletti was Coordinator of Economic Studies Area of the Institute of Studies on State and Participation of State Workers’Association, Argentina from 1991 to 1997. Mr. Feletti was employed by Banco Central de la Republica Argentina from 1981 to 1991 in various capacities in the Supervising Equipments of Banking and Financial Institutions division. Mr. Feletti was a fiscal audit assistant for General Tax Administration, Argentina from 1980 to 1981 and a cost analyst for La Vascongada in Argentina from 1978 to 1979.
Mario Covo is a founding partner of Finaccess International, Inc., and has been Managing Partner of Helios Advisors in New York and has served as the Chairman and Chief Executive Officer of that company since 1999. Mr. Covo2000. He also is also one of the founders of Columbus Advisors, and the Columbus Group, where he worked from 1995 to 1999. Mr. Covo was employed bypreviously at Merrill Lynch, aswhere he was Head of Emerging Markets-Capital Markets from 1989 to 1995. Previously,Prior to working at Merrill Lynch, he was employed by Bankers Trust Company of New York as Vice President in the Latin American Merchant Banking Group from 1985 to 1989, focusing on corporate finance and debt-for-equity swaps. Prior to that Mr. Covo was employed as an International Economist for Chase Econometrics from 1984 to 1985, focusing primarily on Venezuela and Colombia.
Will C. Wood has served as a Director of the Bank since 1999. Mr. Wood has served as the founding principal of Kentwood Associates of Menlo Park, California since 1993. Mr. WoodHe is a trustee of the Dodge & Cox mutual funds. He was employed by Wells Fargo in the International Banking Group and served as an Executive Vice President from 1986 to 1989. While at Wells Fargo, heMr. Wood also was a Director of the Bankers’ Association for Foreign Trade and PEFCO, a privately owned export finance company. Mr. WoodHe was employed by Crocker Bank and served as Executive Vice President in charge of the International Division and Manager of the Latin America Area from 1975 to 1986. HeMr. Wood previously worked for Citibank in La Paz, Bolivia, Lima, Peru and Rio de Janeiro and Sao Paulo, Brazil, and began his career with Citibank’s Overseas Division in 1964New York in New York.1964.
Herminio A. Blanco has served as a Director of the Bank since 2004. Mr. Blanco has served as Chief Executive Officer of Soluciones Estratégicas Consultoría,Estrategicas Consultoria, Mexico City, since 2002. He has served as a2002, business consultant to some of the leading corporations in the world, advisor to the Inter-American Development Bank, advisor to national governments on trade negotiations, a member of the International Advisory Committee of Mitsubishi Corporation and a member of the Trilateral Commission since 2000. Mr. Blanco served asHe was Secretary of Trade and Industry of Mexico, Chairman of the National Council for Deregulation of Mexico, Chairman of the Advisory Council for Trade Negotiations of Mexico, Chairman of the Board of Exportadora de Sal, S.A., Chairman of the Board of Fideicomiso de Fomento Minero and Vice Chairman of the Board of Banco Nacional de Comercio Exterior, in Mexico from 1994 to 2000. He served as UndersecretaryMr. Blanco was Under Secretary for International Trade and Negotiations of the Ministry of Trade and Industry of Mexico from 1993 to 1994 and from 1988 to 1990. Mr. Blanco served asFrom 1990 to 1993, he was Mexico’s Chief Negotiator of the North American Free Trade Agreement (NAFTA), from 1990 to 1993. He served asNAFTA. Mr. Blanco was one of the three members of the Council of Economic Advisors to the President of Mexico from 1985 to 1988. Mr. Blanco served asHe was Assistant Professor of Economics at Rice University, Houston, Texas from 1980 to 1985. He served asMr. Blanco was senior advisor to the Finance Minister of Mexico from 1978 to 1980.
William D. Hayes has served as a Director of the Bank since 2004. Mr. Hayes has served as President of Whaleco, Inc., New York, President of Wellstone Global Finance, LLC, San Francisco, California and Connecticut, and as Charter MemberManaging Director and charter member of the Board of Directors and the Investment Committee of WestLB-Tricon Forfaiting Fund Limited, Bermudas since 1999. Mr. HayesHe served as Managing Director-Emerging Markets and in various other capacities for West Merchant Bank Limited, London (formerly Standard Chartered Merchant Bank and Chartered WestLB),WestLB from 1987 to 1999. Mr. Hayes served as Senior Vice President-TradingPresident- Trading for Libra Bank Limited, New York Agency from 1986 to 1987. He served as1987, Principal of W.D. Hayes and Associates, California from 1984 to 1986. He served1986, and in various capacities for Wells Fargo Bank, N.A., San Francisco, California from 1969 to 1984.
Maria da Graça França has served as a Director of the Bank since 2004. Ms. França served in various capacities for Banco do Brasil from 1971 until her retirement in May 2007, including Director of Internal Control of Banco do Brasil in Brasilia, from 2006 to May 2007,2007. She also has been employed by Banco do Brasil in various other capacities since 1971, including Head of North America and General Manager of Banco do Brasil, New York Branchbranch from 2004 to 2005, Executive General Manager of the International Division in Brasilia, Brazil from 2002 to 2003, Regional Manager for the operations of the Bank in South America based in Argentina in 2002, General Manager of Banco do Brasil, Paris Branchbranch from 1999 to 2002, Deputy General Manager of Banco do Brasil, Miami Branchbranch from 1993 to 1999, General Manager of the Departmentdepartment responsible for Banco do BrasilBrasil’s foreign network from 1992 to 1993, Deputy General Manager in charge of thefor foreign exchange from 1989 to 1992, Assistant Manager within the Risk Management Area from 1988 to 1989, Assistant Manager at thefor foreign exchange internal controls from 1984 to 1987 and employee in the Foreign Exchange Department from 1971 to 1984.
Gonzalo Menéndez Duque has served as a Director of the Bank since 1990. Mr. Menéndez Duque is a senior director of the Luksic companies in Chile and serves as a director of the following Luksic group holding companies: Banco de Chile since 2001, Holdings Quiñenco since 1996, and Antofagasta PLC since 1985. In addition, he serves as President of the following Luksic group companies: Banchile Corredores de Bolsa, S.A. since 2007 and Inversiones Vita since 2000. Previously, Mr. Menéndez Duque served as a director and President of several companies related to Grupo Luksic since 1985, including:including the following: Banco de A. Edwards and related companies, Banco Santiago, Empresas Lucchetti, S.A., Banco O’Higgins, Antofagasta Group, and Banchile Administradora General de Fondos.
Jaime Rivera has served as a Directordirector of the Bank since 2004, when he was appointed Chief Executive Officer of the institution.Officer. He joined the Bank in 2002 as Chief Operating Officer. Previously, Mr. Rivera served in various capacities for Bank of America Corporation beginning in 1978, including Managing Director of the Latin America Financial Institutions Group in Miami and the Latin America Corporate Finance team in New York, as General Manager in Brazil, Argentina, Uruguay and Guatemala, as Marketing Manager in Chile, and as Manager of Latin America Information Systems in Venezuela. Mr. RiveraHe has held Board positions with the Council of the Americas, the Florida International Bankers’ Association, and the Latin American Agribusiness Development Corporation. Mr. Rivera is a member of the International Advisory Committee (IAC) to the Board of Directors of the New York Stock Exchange. He has an MBA degree from Cornell University, a Master of Science degree from Northwestern University and a Bachelor of Science degree from Northrop University.
Senior ManagementExecutive Officers
The following table and information sets forth the names of the executive officers of the Bank and their respective positions as of the date hereof and positions held by them with the Bank and other entities in prior years:
Name | | Position Held with The Bank | | Country of Citizenship | | Age |
| | | | | | |
Jaime Rivera | | Chief Executive Officer | | Guatemala | | 5455 |
Rubens V. Amaral Jr. | | Executive Vice President - Chief Commercial Officer | | Brazil | | 48 |
Ernesto A. Bruggia | | Chief Operations Officer | | Argentina | | 51 |
Miguel Moreno | | Senior Vice President, Controller | | Colombia | | 5449 |
Gregory D. Testerman | | Executive Vice President - Senior Managing Director, Treasury and& Capital Markets | | U.S.A. | | 4445 |
Carlos Yap S.Miguel Moreno | | SeniorExecutive Vice President, Chief FinancialOperating Officer | | PanamaColombia | | 51 |
Ana Maria de Arias | | Senior Vice President, Human Resources and Corporate Operations | | Panama | | 4355 |
Miguel A. Kerbes | | Senior Vice President, Chief Risk Officer | | Uruguay | | 4748 |
Bismark E. Rodriguez | | Senior Vice President, Controller | | Venezuela | | 40 |
Jaime Celorio | | Senior Vice President, Chief Financial Officer | | Mexico | | 36 |
Ana Maria de Arias | | Senior Vice President, Human Resources and Administration | | Panama | | 44 |
Manuel Mejía-Aoun | | Head of Asset Management Division (Bladex Asset Management) | | Panama | | 49 |
Jaime Rivera has served as a Directordirector of the Bank since 2004, when he was appointed Chief Executive Officer of the institution.Officer. He joined the Bank in 2002 as Chief Operating Officer. Previously, Mr. Rivera served in various capacities for Bank of America Corporation beginning in 1978, including Managing Director of the Latin America Financial Institutions Group in Miami and the Latin America Corporate Finance team in New York, as General Manager in Brazil, Argentina, Uruguay and Guatemala, as Marketing Manager in Chile, and as Manager of Latin America Information Systems in Venezuela. Mr. RiveraHe has held Board positions with the Council of the Americas, the Florida International Bankers’ Association, and the Latin American Agribusiness Development Corporation. Mr. Rivera is a member of the International Advisory Committee (IAC) to the Board of Directors of the New York Stock Exchange. He has an MBA degree from Cornell University, a Master of Science degree from Northwestern University and a Bachelor of Science degree from Northrop University.
Rubens V. Amaral Jr. became Executive Vice President, Chief Commercial Officer of the Bank in March 2004. He previously served as General Manager and Managing Director for North America of Banco do Brasil, New York Branch, since 2000. Mr. Amaral served in various capacities with Banco do Brasil since 1975, holding the positions of Managing Director of the International Division and alternate member of the board of directors in 1998, Executive General Manager of the International Division in Sao Paulo from 19941998 to 1998,2000, Deputy General Manager in the New York Branch in charge of the Trade Finance and Correspondent Banking Department from 1994 to 1998, Head of Staff of the International Division from 1993 to 1994 and Advisor, Head of Department and General Manager in the Trade Finance Area at the International Department Division - Head Office from 1989 to 1993. Mr. Amaral also served as a representative in banking supervision for the Central Bank of Brazil from 1982 to 1988.
Ernesto A. Bruggia became Chief Operations Officer of the Bank in July 2004. Mr. Bruggia served as Chief Executive Officer of Banco de la Provincia de Buenos Aires (“BPBA”) from 1999 to 2004 and as Chief Executive Officer of Grupo BAPRO (the holding company of BPBA) from 1998 to 2004. Mr. Bruggia served in various capacities with BPBA beginning in 1976, including Assistant General Manager from 1993 to 1999, Finance and International Relations Manager from 1992 to 1993, International Operations Manager from 1990 to 1992, Deputy Manager in charge of International Operations from 1989 to 1990, Deputy Manager in charge of the International Division in 1985, and Chief of International Audit in 1983. Mr. Bruggia began his career with BPBA in 1976 in its Stock Exchange Department.
Miguel Moreno has served as Senior Vice President and Controller of the Bank since September 2001. He was a Management Consulting Partner for Price Waterhouse, Bogotá, Colombia from 1988 to 2001, and served as Vice President of Information Technology and Operations for Banco de Crédito, Bogotá, Colombia from 1987 to 1988. Mr. Moreno served as Chief Executive Officer, TM Ingeniería, Bogotá, Colombia, from 1983 to 1987, and as Head of Industrial Engineering Department, Los Andes University, Colombia, from 1982 to 1984. Mr. Moreno was employed by SENA, as Chief of the Organization and Systems Office, Colombia from 1977 to 1981, and served as Advisor to the Minister for the Finance and Public Credit Ministry of Colombia from 1976 to 1977.
Gregory D. Testerman has served as Executive Vice President - Senior Managing Director, Treasury and Capital Markets of the Bank since 2007. Mr. Testerman previously served as Senior Vice President, Treasury of the Bank from 2005 to 2006. Mr. Testerman served in various capacities with Banco Santander Central Hispano, S.A. from 1986 to 2003, including General Manager, Miami Agency, from 1999 to 2003, General Manager, Tokyo Branch and Country Manager in Japan from 1995 to 1999, Vice President, Head of Financial Control, Benelux and Asia Pacific, from 1991 to 1995, Second Vice President, Special Credit Valuation Assignment, London Branch, in 1991, Second Vice President, Treasury Operations Manager, Belgium, from 1989 to 1991, and Second Vice President, Management Reporting, Belgium, from 1986 to 1989. Mr. Testerman began his career with The Chase Manhattan Bank, N.A. as Assistant Treasurer in Belgium in 1986 and as part of the Corporate Controllers Development Program in New York from 1984 to 1986.
Carlos Yap S.Miguel Moreno became Executive Vice President, Chief Operating Officer in July 2007 after the replacement of Mr. Ernesto Bruggia. He previously served as Senior Vice President and Controller of the Bank since September 2001. He was a Management Consulting Partner for Price Waterhouse, Bogotá, Colombia from 1988 to 2001, and served as Vice President of Information Technology and Operations for Banco de Crédito, Bogotá, Colombia from 1987 to 1988. Mr. Moreno served as Chief Executive Officer of TM Ingeniería, Bogotá, Colombia, from 1983 to 1987, and as Head of Industrial Engineering Department, Los Andes University, Colombia, from 1982 to 1984. Mr. Moreno was employed by SENA as Chief of the Organization and Systems Office, Colombia from 1977 to 1981, and served as Advisor to the Minister for the Finance and Public Credit Ministry of Colombia from 1976 to 1977.
Miguel A. Kerbes has served as Senior Vice President, Chief Risk Officer for the Bank since July 2002. Mr. Kerbes previously served as Vice President, Risk Management from 2000 to 2002. He served as the Risk Officer, Southern Cone Area for Banco Santander, with domicile in Chile, from 1995 to 2000, overseeing the Country Risk Managers for the area. From 1992 to 1995, he served with Bank of Boston, Chile as the Risk Director for credit and treasury risks and as Senior Risk Officer. From 1989 to 1992, Mr. Kerbes participated in the start-up of ING Bank in Chile, continuing as its Risk Officer, with domicile in Chile. He had previously served with ING Bank in Uruguay and participated in the start-up of ING Bank in Argentina from 1982 to 1992.
Bismark E. Rodríguez became the Bank’s Controller on July 2007 after being appointed by the Bank in replacement of Mr. Miguel Moreno. Previously Mr. Rodriguez served as the Bank’s Vice President of the Internal Audit Department since 2004. Mr. Rodriguez also served as Senior Manager at PricewaterhouseCoopers in various capacities and countries from 1991 to 2003. Mr. Rodriguez is a Certified Internal Auditor (CIA), a Certified Financial Services Auditor (CFSA), and a Certified Control Self-Assessment Specialist (CCSA), which are all designations granted by The Institute of Internal Auditors (IIA).
Jaime Celorio was appointed Senior Vice President, Chief Financial Officer of the Bank, since July 2002.after the retirement of Mr. Carlos Yap in February 2008. Mr. Celorio previously served as Vice President, Finance,Chief Financial Officer and Chief Administrative Officer for Merrill Lynch México, S.A. de C.V., Casa de Bolsa, Mexico from 2002 to 2007. Mr. Celorio served as Controller Associate of the BankEmerging Markets in New York from 19931998 to 2002. Prior2001, and served as a Controller Associate in Mexico from 1995 to this position, Mr. Yap worked1998, both for the BankGoldman Sachs Group. Mr. Celorio also served in various capacities in PricewaterhouseCoopers, Mexico, from 1991 to 1994, as a Senior Auditor in the departments of Institutional Planning, Treasury, Correspondent International BankingAudit Division, and Capital Markets from 1980 to 1993. Prior to his employment with the Bank, Mr. Yap worked for Banco Nacional de Panamaas Supervisor in its Credit Department from 1979 to 1980, Azucarera Nacional, S.A. and the Panama Canal Company from 1977 to 1979.Financial Advisory Services.
Ana MaríaMaria de Arias has served as Senior Vice President of Human Resources and Administration since July 2007. Ms. Arias previously served as Senior Vice President of Human Resources and Corporate Operations of the Bank since June 2004.from 2004 to 2007. Prior to her employment with the Bank, she served as Vice President of Human Resources of Banco General, S.A., Panama from 2000 to 2004 and as Assistant Vice President of Human Resources from 1999 to 2000. She served in various capacities with the Panama Canal Commission, Panama from 1990 to 1999.
Miguel A. KerbesManuel Mejía-Aoun, has served as Head of Asset Management Division (Bladex Asset Management) since November 2005. Mr. Mejía-Aoun has over 19 years of investment experience in emerging markets. Prior to joining the Senior Vice President andBank, he was Chief RiskExecutive Officer of Maxblue, Deutsche Bank’s first personal financial consultancy business, focusing on high net worth investors in Latin America. Prior to that, he headed the Bank since July 2002.Latin American Foreign Exchange and Local Money Markets Sales and Trading Group at Deutsche Bank. In 1995, Mr. Kerbes previouslyMejía-Aoun served as Vice President, Risk Management, of the Bank from 2000 to 2002. He served as the Assistant Credit Director for the Southern Cone Area of Banco Santander-Chile from 1995 to 2000. Mr. Kerbes also served as the Head of Credit DivisionChief Emerging Markets Strategist at Banco Boston, Chile, from 1992Merrill Lynch covering fixed income securities in Latin America, Eastern Europe, Africa and Asia. From 1987 to 1995, he established and was employed by ING Bank in various capacities from 1982 to 1992.headed the Emerging Markets Trading Group at Merrill Lynch.
B.Compensation
Cash and Stock-Based Compensation
Executive Officers Compensation
The aggregate amount of cash compensation paid by the Bank during the year ended December 31, 20062007 to the executive officers ofemployed in the BankBank’s Head Office as a group including the Bank's chief executive officer, for services in all capacities was $2,479,891.$2,587,413. During the fiscal year ended December 31, 2006,2007, the Bank accrued, and in February 200712, 2008 paid performance-based bonuses to the Bank’s executive officers including the Bank's chief executive officer, in the aggregate amount of $1,171,000.$1,585,000. At December 31, 2006,2007, the total amount set aside or accrued by the Bank to provide pension, retirement or similar benefits for executive officers was approximately $629,457.$651,389.
In addition, the aggregate amount of cash compensation paid by the Bank during the year ended December 31, 2007 to the executive and non-executive employees of Bladex Asset Management, as a group for services in all capacities was $730,579. During the fiscal year ended December 31, 2007, the Bank accrued, and on February 12, 2008 paid performance-based bonuses to this group of executives in the aggregate amount of $3,225,000.
The aggregate number of stock options awarded during the year ended December 31, 20062007 to executive officers and other non-executive officersemployees of the Bank as a group under the Bank’s indexed stock option plan (the “Indexed2006 Stock Option Plan”)Plan was 198,528,188,634, representing a total compensation cost of $928,005,$889,956, of which $212,933$281,022 was charged against income in 2006,2007, and $715,072$635,223 will be charged to income over a period of 3.13.12 years. The options granted have a vesting period of four years and are granted based on the level of achievement by the Bank’s executive officers measured against established corporate financial performance goals. The Indexed2006 Stock Option Plan was terminateddiscontinued by the Board in April 2006.on February of 2008. Options granted under this plan have an exercise price of $16.34 and will expire on February 13, 2014.
The Bank sponsors a defined contribution plan for its expatriate officers. The Bank’s contributions are determined as a percentage of the eligible officer’s annual salary, with each officer contributing an additional amount withheld from his salary and deposited in a savings account with the Bank, earning interest at market rates.rates until March 2007, when the Bank transferred all contributions to a trust administered by an independent third party. During the years 2006, 2005, and 2004,year 2007, the Bank charged to salaries expense $259,534, $165,188 and $178,626, respectively,$175,466 with respect to this plan. As of December 31, 2006 and 2005,2007, the accumulated liability payable under this contribution plan amounted to $743,373, and $483,839, respectively.$381,760.
2006 CEO2007 Chief Executive Officer Compensation
The 20062007 compensation of the Bank's chief executive officerChief Executive Officer included a base salary of $300,000, a performance-based cash bonus of $230,000,$286,000, a performance-based indexed stock option grant with a value of $249,000,$250,000, a retirement plan that included a contribution from the Bank of $30,003,$21,310 during 2007, and executive perquisites of $5,769.other benefits amounting to $8,570. During the fiscal year ended December 31, 2006,2007, the Bank accrued, and in February 20072008 paid a performance-based bonus to the Bank’s CEOChief Executive Officer in the aggregate amount of $286,000.$350,000. At December 31, 2006,2007, the total amount set aside or accrued by the Bank to provide pension, retirement or similar benefits for the CEOChief Executive Officer was approximately $220,555.$249,623. In addition, the CEOChief Executive Officer has a contractual severance payment in case of termination without cause of $300,000.
Board of Directors Compensation
As part ofIn July 2007, the Bank’sBoard adopted a new compensation plan, eachpolicy for non-employee directors. Each non-employee director of the Bank is eligible to receivereceives an annual amountcash retainer of up to $30,000$40,000 for his services as a director and the Chairman of the Board receives an additionalannual cash retainer in the amount of $85,000. This annual retainer covers seven Board and/or shareholders meetings. When the Board has met more than seven times, the Bank will pay each director an attendance fee of $1,500 for each meeting of theadditional Board and eachand/or stockholders meeting attended, and $1,000 for each Board Committee meeting attended.meeting. The Chairman of the Board is eligible to receive an additional 50% of the compensation that other directors are eligible to receive. The Chairman of each Committee of the Board is eligible to receive an additional amount of $500 for each such additional Board, stockholders or Committee meeting attended. The aggregate amount of cash compensation paid by the Bank during the year ended December 31, 20062007 to the directors of the Bank as a group for their services as directors was $713,000.$738,000.
The aggregate number of restricted stock awarded duringIn July 2007, the year ended December 31, 2006 to non-employee directors of the Bank as a group underBoard amended the Bank’s restricted stock plan (the “Board Restricted Stock Plan”) was 5,967 Class E shares and compensation expense charged against income in 2006 relating to such issuances was $94,875.. Under this plan,the amended terms of the Board Restricted Stock Plan, each non-employee director of the Bank is awarded annually a number of shares of classClass E common stock equal to the number that results from dividing $10,000$50,000 ($15,00075,000 in the case of the Chairman of the Board) by the market price of a classClass E share on the date the award is made.
The aggregate number of shares of restricted stock options awarded during the year ended December 31, 20062007 to non-employee directors of the Bank as a group under the IndexedBoard Restricted Stock Option Plan was 18,182 representing a22,240 Class E shares and the compensation cost of $84,990, of which $19,501 wasexpense charged against income in 2006, $65,4892007 relating to such issuances was $42,929 and $431,895 will be charged to income over a period of 3.14.55 years.
In addition, the aggregate number of options awarded during the year ended December 31, 2007 to non-employee directors under the Bank’s 2006 Stock Option Plan was 20,131, representing a total compensation cost of $94,976, of which $20,947 was charged against income in 2007, and $74,029 will be charged to income over a period of 3.12 years.
For a detailed description of the Board Restricted Stock Plan and other discontinued stock based compensation plans, see Note 14 to the Consolidated Financial Statements.Item 18, “Financial Statements”, note 14.
20062008 Stock OptionIncentive Plan
On DecemberFebruary 12, 2006,2008, the Board adoptedof Directors approved the 20062008 Stock Option Plan.Incentive Plan (the “2008 Plan”). The maximum aggregate number of shares, which may be issued under2008 Plan replaces the 2006 Stock Option Plan is two million Class E common shares. and the Board Restricted Stock Plan. The 2008 Plan covers non-executive directors, executive officers and other employees of the Bank and gives the Board greater flexibility to grant stock options, restricted stock units, restricted stock grants, dividend equivalent rights and stock appreciation rights, under terms and conditions to be determined from time to time by the Board and specified in the award agreements.
On February 12, 2008, the Bank awarded an annual basis,aggregate number of 39,239 restricted stock units and 172,106 stock options to executive officers of the Bank. An additional aggregate number of 13,743 restricted stock units and 60,297 stock options were granted to other non-executive employees of the Bank on February 12, 2008. The stock options granted have an exercise price of $15.43 and will expire on February 12, 2015. The restricted stock units have a four-year cliff vesting period.
No grants have been made to directors of the Bank under the 2008 Plan to this date.
On April 14, 2008, the Board of Directors modified stock option grants made under the 2004 Indexed Option Plan, the 2006 Stock Option Plan, allows directors to receive stock options for an equivalent amount of $10,000, and for the Chairman2008 Stock Incentive Plan, converting part of the Board, an equivalent amountgrants to $15,000. The Board, with the recommendation and advice of the Nomination and Compensation Committee, may authorize the grant of options to any one or more key employees of the Bank, as well as determine or impose conditions upon the grant or exercise ofrestricted stock options under the Plan.
The stock options expire seven years after the date of grant and, except as otherwise provided in the award agreement, shall be exercisable beginning on the fourth anniversary of the date of grant. However, in no event will the exercise price of a stock option be less than 100% the fair market value per share subject to the stock option on the date the stock option was granted.
At December 31, 2006 no grants had been made under this plan. On February 13, 2007, the Board granted 20,131 stock options to non-employee directors and 188,634 stock options to key employees, representing a compensation cost of $94,976 and $889,956, respectively. This cost will be charged to income over a period of four years.units.
Beneficial Ownership
As of December 31, 2006,2007, the Bank’s executive officers and directors, as a group, owned an aggregate of 34,30659,246 Class E shares, which was approximately 0.1%0.2% of all issued and outstanding Class E shares.
The following tables settable sets forth information regarding the number of shares, stock options, deferred equity units, and indexed stock options owned by the Bank’s executive officers and options and rights held as of December 31, 2006.2007, as well as the restricted stock units and stock options granted in February 2008 under the 2008 Plan.
Name and Position of Executive Officer | | Number of Shares Beneficially Owned as of Dec. 31, 2007 | | Number of Shares that may be Acquired within 60 days of Dec. 31, 2007 | | Stock Options (1) | | Deferred Equity Units (2) | | Indexed Stock Options (3) | | 2008 Stock Plan Restricted Stock Units (4) | | 2008 Stock Plan Options (4) | |
Jaime Rivera Chief Executive Officer | | | 1,400 | | | 0 | | | 52,989 | | | 770 | | | 155,709 | | | 9,721 | | | 42,636 | |
Rubens V. Amaral Jr. Executive Vice President Chief Commercial Officer | | | 0 | | | 0 | | | 26,494 | | | 0 | | | 102,638 | | | 8,101 | | | 35,530 | |
Gregory D. Testerman Executive Vice President Senior Managing Director, Treasury & Capital Markets | | | 0 | | | 0 | | | 21,195 | | | 0 | | | 20,998 | | | 9,397 | | | 41,215 | |
Miguel Moreno Executive Vice President, Chief Operating Officer | | | 2,000 | | | 0 | | | 10,597 | | | 597 | | | 35,757 | | | 5,184 | | | 22,739 | |
Miguel A. Kerbes Senior Vice President, Chief Risk Officer | | | 0 | | | 0 | | | 19,646 | | | 621 | | | 29,830 | | | 3,240 | | | 14,212 | |
Bismark E. Rodriguez L. Senior Vice President Controller | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,296 | | | 5,684 | |
Carlos Yap S. (5) Senior Vice President, Chief Financial Officer | | | 0 | | | 0 | | | 21,163 | | | 545 | | | 26,574 | | | 0 | | | 0 | |
Jaime Celorio Senior Vice President, Chief Financial Officer | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 437 | | | 1,918 | |
Ana Maria de Arias Senior Vice President, Human Resources and Administration | | | 590 | | | 0 | | | 10,597 | | | 0 | | | 21,176 | | | 1,863 | | | 8,172 | |
Total (6) | | | 3,990 | | | 0 | | | 162,681 | | | 2,533 | | | 392,682 | | | 39,239 | | | 172,106 | |
______________________
Name and Position of Executive Officer | | Number of Shares Beneficially Owned as of Dec. 31, 2006 | | Number of Shares that may be Acquired within 60 days of Dec. 31, 2006 | | Stock Options1 | | Deferred Equity Units2 | | Indexed Stock Options |
Jaime Rivera Chief Executive Officer | | | 1,400 | | | 0 | | | 52,989 | | | 770 | | | 155,709 |
Rubens V. Amaral Jr. Chief Commercial Officer | | | 0 | | | 0 | | | 26,494 | | | 0 | | | 102,638 |
Ernesto A. Bruggia Chief Operations Officer | | | 2,155 | | | 0 | | | 15,896 | | | 0 | | | 37,992 |
Miguel Moreno Senior Vice President, Controller | | | 2,000 | | | 0 | | | 10,597 | | | 597 | | | 35,757 |
Gregory Testerman Senior Managing Director, Treasury and Capital Markets | | | 0 | | | 0 | | | 21,195 | | | 0 | | | 20,998 |
Carlos Yap S Senior Vice President, Chief Financial Officer | | | 0 | | | 27,163 | | | 27,163 | | | 545 | | | 26,574 |
Ana Maria de Arias Senior Vice President, Human Resources and Corporate Operations | | | 590 | | | 0 | | | 10,597 | | | 0 | | | 21,176 |
Miguel A. Kerbes Senior Vice President, Chief Risk Officer | | | 0 | | | 3,750 | | | 19,646 | | | 621 | | | 29,380 |
Total | | | 6,145 | | | 30,913 | | | 184,577 | | | 2,533 | | | 430,674 |
1(1)
| Includes 153,664137,768 stock options granted to executive officers on February 13, 2007 under the 2006 Stock Option Plan and 30,91324,913 stock options granted under the Bank's 1995 and 1999 Stock Option Plans. In addition, an aggregate amount of 34,970 stock options were granted to other non-executive employees and 15,896 were granted to Mr. Ernesto Bruggia, who resigned as the Bank’s Chief Operations Officer in July 2007, under the 2006 Stock Option Plan. Vested options under the 1995 and 1999 Stock Option Plans and options expected to vest under the 2006 Stock Option Plan have no intrinsic value as of December 31, 2007 because the options’ exercise price was greater than the quoted market price of the Bank’s common stock at that date. |
(2) | Deferred equity units granted under the Bank's Deferred Compensation Plan (the “DC Plan”). In addition, as of the date hereof, there are 1,894 outstanding units that were granted to former executive officers of the Bank under the DC Plan. |
(3) | An aggregate amount of 23,549 stock options were granted to other non-executive employees and 37,992 stock options were granted to Mr. Ernesto Bruggia, under the Bank’s 2004 Indexed Stock Option Plan. Options expected to vest under this plan have no intrinsic value as of December 31, 2007 because the options’ strike price was greater than the quoted market price of the Bank’s common stock at that date. |
(4) | In addition, an aggregate amount of 60,297 stock options and 13,743 restricted stock units were granted to other employees of the Bank (other than the named executive officers) on February 12, 2008. |
(5) | Mr. Carlos Yap, who resigned as the Bank’s Chief Financial Officer on February 22, 2008, is eligible to exercise 15,163 stock options, granted under the Bank’s 1995 and 1999 Stock Option Plans. On February 13, 2007, an aggregate of 34,970Plans, by May 22, 2008. 6,000 stock options were granted to other non-executive officersMr. Yap under the 2006 Stock Option Plan.these same plans were forfeited on February 6, 2008. In addition, Mr. Yap is eligible to exercise 10,498 indexed stock options by June 1, 2008. 16,076 indexed stock options granted to Mr. Yap under this plan were forfeited on February 22, 2008. |
2(6)
| Deferred equity units grantedThe executive and non-executive employees of Bladex Asset Management, Inc. are not eligible to receive grants under the Bank’s Deferred Compensation Plan (DC Plan). In addition, as of the date hereof, there are 1,894 units outstanding under the DC Plan that were granted to former executive officers of the Bank.2008 Plan. |
The following table sets forth information regarding ownership of the Bank’s shares by members of its Board, including restricted shares, held under the Board Restricted Stock Planindexed stock options, and stock options, received under the Indexed Stock Option Plan,held as of December 31, 2006.2007.
Name of Director | | Number of Shares Beneficially Owned as of Dec. 31, 20061 | | Number of Shares that may be Acquired within 60 days of Dec. 31, 2006 | | Stock Options2 | | Restricted Shares 3 | | Indexed Stock Options | | Number of Shares Beneficially Owned as of Dec. 31, 2007 (1) | | Number of Shares that may be Acquired within 60 days of Dec. 31, 2007 | | Stock Options | | Restricted Shares (2) | | Indexed Stock Options | |
Maria da Graça França 4 | | | 0 | | 0 | | 0 | | 0 | | 0 | |
Guillermo Güémez García5 | | | 0 | | 0 | | 0 | | 0 | | 0 | |
Santiago Perdomo Maldonado | | | 2,850 | | 0 | | 2,119 | | 2,850 | | 5,960 | |
Guillermo Güémez García (3) | | | | 0 | | 0 | | 0 | | 0 | | 0 | |
Santiago Perdomo Maldonado (4) | | | | 5,191 | | 0 | | 2,119 | | 5,191 | | 5,960 | |
José Maria Rabelo (5) | | | | 0 | | 0 | | 0 | | 0 | | 0 | |
Will C. Wood | | | 4,850 | | 0 | | 2,119 | | 2,850 | | 5,960 | | | 7,191 | | 0 | | 2,119 | | 5,191 | | 5,960 | |
Mario Covo | | | 2,850 | | 0 | | 2,119 | | 2,850 | | 5,960 | | | 5,191 | | 0 | | 2,119 | | 5,191 | | 5,960 | |
Herminio Blanco | | | 1,845 | | 0 | | 2,119 | | 1,845 | | 5,960 | | | 4,186 | | 0 | | 2,119 | | 4,186 | | 5,960 | |
William Hayes | | | 9,645 | | 0 | | 2,119 | | 1,845 | | 5,960 | | | 12,986 | | 0 | | 2,119 | | 4,186 | | 5,960 | |
Alexandre Lodygensky Jr6 | | | 1,845 | | 0 | | 2,119 | | 1,845 | | 5,960 | |
Maria da Graça França | | | | 2,341 | | 0 | | 0 | | 2,341 | | 0 | |
Gonzalo Menéndez Duque | | | 4,276 | | | 0 | | | 3,179 | | | 4,276 | | | 8,942 | | | 7,788 | | | 0 | | | 3,179 | | | 7,788 | | | 8,942 | |
Total | | | 28,161 | | | 0 | | | 15,893 | | | 18,361 | | | 44,702 | | | 44,874 | | | 0 | | | 13,774 | | | 34,074 | | | 38,742 | |
______________________
1(1)
| Includes Class E shares held under the Board Restricted Stock Plan. |
2
| Stock options granted on February 13, 2007, under the 2006 Stock Option Plan. |
3(2)
| Under this plan, Directorsthe Board Restricted Stock Plan, directors receiving restricted shares will have all the rights of stockholders of the Bank, (including voting and dividend rights), except that all such shares will be subject to restrictions on transferability, which will lapse on the fifth anniversary of the award date. |
4 (3)
| 1,845 Class E shares corresponding to Ms. França’s entitlement under the Board Restricted Stock Plan have been issued to her employer, Banco do Brasil. In addition, an aggregate number of 5,960 indexed options to which Ms. França was entitled under the Indexed Stock Option Plan have been granted to Banco do Brasil and an aggregate number of 2,119 stock options to which Ms. França was entitled under the 2006 Stock Option Plan have been granted to Banco do Brasil. |
5 | 2,8505,191 Class E shares corresponding to Mr. Güémez’s entitlement under the Board Restricted Stock Plan have been issued to his employer, Banco de Mexico. In addition, an aggregate number of 2,119 stock options to which Mr. GuéGüémez was entitled under the 2006 Stock Option Plan have been granted to Banco de Mexico. |
6 (4)
| Mr. Lodygensky´s termSantiago Perdomo served as a Class E expired indirector until April 2007 and he did not stand for re-election.14, 2008. |
(5) | 2,341 Class E shares corresponding to Mr. Rabelo’s entitlement under the Board Restricted Stock Plan have been issued to his employer, Banco do Brasil. |
For additional information regarding stock options granted to executive officers and directors, see Note 14 to the Consolidated Financial Statements. Item 18, “Financial Statements”, note 14.
C.Board Practices
Corporate Governance
The Board has decided not to constitute a corporate governance committee. Given the importance that corporate governance has for the Bank, the Board decided to address all matters related to corporate governance at the Board level. Thelevel and the Audit and Compliance Committee is responsible for promoting continued improvement in the Bank’s corporate governance and to verify compliance with all applicable policies.
The Bank has included the information regarding its corporate governance practices necessary to comply with Section 303A of the New York Stock Exchange's Listed Company Manual/Corporate Governance Rules of the New York Stock Exchange (the “NYSE”) on its website (www.blx.com/Investors Center/ (www.bladex.com/InvestorsCenter/Corporate Governance). Additionally, the Bank’s website (under “Corporate Governance”) provides a summary of the significant differences between corporate governance practices commonly used by the Bank and other public companies in Panama and the NYSE Standards for U.S. domestic companies.
Stockholders,Shareholders, employees of the Bank, and other interested parties may communicate directly with the Board by corresponding to the address below. Relevant correspondence will be discussed at the next scheduled meeting of the Board, or as indicated by the urgency of the matter.
Attn: Board of Directors of Banco Latinoamericano de Exportaciones, S. A.S.A.
c/o Mr. Gonzalo Menéndez Duque
Director & Chairman of the Board of Directors
Privileged & ConfidentialCalle 50 and Aquilino de la Guardia
P.O. Box 0819-08730
Panama City, Republic of Panama
In addition, Bladex has selected EthicsPoint, an on-line reporting system, to provide stockholders, employees of the Bank, and other interested parties with an alternative channel to report anonymously actual or possible violations of the Bank’s Code of Ethics, as well as other work-related situations or irregular or suspicious transactions, accounting matters, internal audit or accounting controls. In order to file a report, a link is provided in the Bank’s website (www.blx.com/(www.bladex.com/Investors Center/Corporate Governance), under “Corporate Governance - Private Filing of Reports.Reports”.
Information as to “Dignatarios”Non-Executive Officers of the Board (“Dignatarios”)
The following table sets forth the names, countries of citizenship, and ages of the Bank’s non-executive officers (“dignatariosDignatarios”), and their current office or position with other institutions and their current office or position with the Bank.institutions. Dignatarios are elected annually by the members of the Board. Dignatarios attend meetings of the Board, participate in discussions and offer advice and counsel to the Board, but do not have the power to vote (unless they also are directors of the Bank).
Name | | Country of Citizenship | | Position held by Dignatario with the Bank | | Age |
Gonzalo Menéndez Duque 1 Director Banco de Chile, Chile | | Chile | | Chairman of the Board | | 58 |
Jaime Rivera | | Guatemala | | Chief Executive Officer | | 5459 |
Maria da Graça França | | Brazil | | Treasurer | | 5859 |
Ricardo Manuel Arango Partner Arias, Fábrega & Fábrega | | Panama | | Secretary | | 4647 |
______________________
1 Mr. Gonzalo Menéndez Duque was re-elected Chairman in April 2008 by the Board. | Mr. Gonzalo Menéndez Duque was re-elected Chairman in April 2007 by the Board. |
Committees of the Board of Directors
The Board conducts its business through meetings of the Board and through its Committees.committees. During the fiscal year ended December 31, 2006,2007, the Board held 13eleven meetings. Each director attended an average of 93%98% of the total number of Board meetings held during the fiscal year ended December 31, 2006.2007. Each director also attended the prior year’s annual meeting.
The following table sets forth the four Committeesfive committees established by the Board, the current number of members of each Committeecommittee and the total number of meetings held by each Committeecommittee during the fiscal year ended December 31, 2006:2007:
Committee | | Number of members | | Total number of meetings held | | Number of members | | Total number of meetings held | |
Audit and Compliance Committee | | | 4 | | | 10 | | | 4 | | | 10 | |
Credit Policy and Risk Assessment Committee | | | 5 | | | 5 | | | 5 | | | 5 | |
Assets and Liabilities Committee | | | 5 | | | 6 | | | 5 | | | 12 | |
Nomination and Compensation Committee | | | 4 | | | 5 | | | 4 | | | 5 | |
Business Committee1 | | | | 5 | | | 0 | |
______________________
1 Established in February of 2008.
The Bank has included the charters of its four Committeescommittees established by the Board on its website www.blx.com/at www.bladex.com/Investors Center/Corporate Governance.Governance/Committees of the Board of Directors-Charters.
Audit and Compliance Committee
The Audit and Compliance Committee is a standing committee of the Board. According to its Charter, the Audit and Compliance Committee must be comprised of at least three independent directors. TheAs of April 15, 2008 the current members of the Audit and Compliance Committee are Will C. Wood (Chairman of the Audit and Compliance Committee), Gonzalo Menéndez Duque, Santiago Perdomo Maldonado and Maria da Graça França.
The Board has determined that all members of the Audit and Compliance Committee are independent directors, as defined under the terms defined by applicable laws and regulations, including rules promulgated by the U.S. Securities and Exchange CommissionSEC under the Sarbanes-Oxley Act of 2002, Section 303A of the rules of the New York Stock Exchange,NYSE, and Agreement No. 04-2001 of the Superintendency of Banks of the Republic of Panama.Banks. In addition, at least one of the members of the Committeecommittee is a “financial expert,” as defined in the rules enacted by the U.S. Securities and Exchange CommissionSEC under the Sarbanes-Oxley Act of 2002.
The Audit and Compliance Committee meets at least six times a year, as required by the Superintendency of Banks of Panama, or more often if the circumstances so require. During the fiscal year ended December 31, 2006, the Audit and Compliance met ten times. The Audit and Compliance Committee pre-approved all audit and non-audit services.
The Audit and Compliance Committee reviewed and recommended to the Board that the audited consolidatedCommittee’s financial statements of the Bank for the year ended December 31, 2006 be included in the Bank’s Annual Report.expert is Gonzalo Menéndez Duque.
The purpose of the Audit and Compliance Committee is to provide assistance to the Board in fulfilling its oversight responsibilities regarding the processing of the Bank’s financial information, the integrity of the Bank’s financial statements, the Bank’s system of internal controls over financial reporting, the process of internal and external audit, the Bank’s corporate governance, compliance with legal and regulatory requirements and the Bank’s ethics code.Code of Ethics.
The Audit and Compliance Committee meets at least six times a year, as required by the Superintendency of Banks, or more often if the circumstances so require. During the fiscal year ended December 31, 2007, the Audit and Compliance Committee met ten times.
The Audit and Compliance Committee, in its capacity as a Committeecommittee of the Board, is directly responsible to make recommendations to the Board regarding the appointment of the Bank’s independent auditors. The Audit and Compliance Committee recommended to the Board to replace KPMG as its current external independent auditors, and also recommended the appointment of Deloitte as the Bank’s new external independent auditors for the fiscal year ending December 31, 2007. This committee is also responsible for theappointment, compensation, and oversight of the Bank’s independent auditors, including the resolution of disagreements regarding financial reporting between the Bank’s management and such independent auditors. The Bank’s independent auditors are required to report directly to the Audit and Compliance Committee.
The Audit and Compliance Committee pre-approves all audit and non-audit services. The Charter of the Audit and Compliance Committee requires an annual self-evaluation of the committee’s performance. The Audit and Compliance Committee’s performance. Charter may be found on the Bank’s website at www.bladex.com/Investors Center/Corporate Governance/Committees of the Board of Directors-Charters.
See Item 16A, “Audit and Compliance Committee Financial ExpertExpert” and PrincipalItem 16C, “Principal Accountant Fees and Services”.
Credit Policy and Risk Assessment Committee (“CPER”)
The CPER is a standing committee of the Board. No member of the CPER can be an employee of the Bank. The Board has determined that all members of the CPER are independent. The current members of the CPER are Guillermo Güémez García (Chairman of the Committee)(Chairman), Gonzalo Menéndez Duque, Will C. Wood, Herminio Blanco, and José Maria Rabelo.
The CPER is in charge of reviewing and recommending to the Board all credit policies and procedures related to the management of the Bank’s risks. It also reviews the quality and profile of the Bank’s credit facilities, and the risk levels that the Bank is willing to assume. The Committee’sCPER’s responsibilities also include, among others, the review of operational and legal risks, the presentation for Board approval of country limits and limits exceeding delegated authority, and the approval of exemptions to credit policies.
The CommitteeCPER performs its duties through the review of periodicalperiodic reports from the Bank’s Risk Management, and by way of its interaction with the Chief Risk Officer and other members of the Bank’s management team. The CommitteeCPER meets at least four times per year. During the fiscal period ended December 31, 2006,2007, the CommitteeCPER held five meetings.
The Credit Policy and Risk Assessment Committee’s Charter may be found on the Bank’s website at www.bladex.com/Investors Center/Corporate Governance/Committees of the Board of Directors-Charters.
Assets and Liabilities Committee
The Assets and Liabilities Committee is a standing committee of the Board. No member of the Assets and Liabilities Committee can be an employee of the Bank. The Board has determined that all members of the Assets and Liabilities Committee are independent directors. The current members of the Assets and Liabilities Committee are Mario Covo (Chairman of the Committee)(Chairman), Herminio Blanco, Guillermo Güémez García, William Hayes, and José Maria Rabelo, and William Hayes.
The Assets and Liabilities Committee is responsible for reviewing and recommending to the Board all policies and procedures related to the Bank’s management of assets and liabilities to meet profitability, liquidity, and market risk control objectives. As part of its responsibilities, the Committeecommittee reviews and recommends to the Board, among others, policies related to the Bank’s funding, interest rate and liquidity gaps, investment of liquidity, derivative positions, funding strategies, and market risk.
The Assets and Liabilities Committee carries out its duties by reviewing periodic reports that it receives from management, and by way of its interaction with the SeniorExecutive Vice President-Senior Managing Director, Treasury and& Capital Markets and other members of the Bank’s management team. The Committeecommittee meets at least four times per year. During the fiscal year ended December 31, 2006,2007, the Committeecommittee held sixtwelve meetings.
The Assets and Liabilities Committee’s Charter may be found on the Bank’s website at www.bladex.com/Investors Center/Corporate Governance/Committees of the Board of Directors-Charters.
Nomination and Compensation Committee
The Nomination and Compensation Committee is a standing committee of the Board. No member of the Nomination and Compensation Committee can be an employee of the Bank. The Board has determined that all members of the Nomination and Compensation Committee are independent, under the terms defined by applicable laws and regulations, including rules promulgated by the U.S. Securities and Exchange CommissionSEC under the Sarbanes-Oxley Act of 2002, Section 303A of the rules of the New York Stock Exchange,NYSE, and Agreement No.04-2001 of the Superintendency of BanksBanks. As of April 15, 2008, the Republic of Panama. The current members of the Nomination and Compensation Committee are Maria da Graça França (Chairman of the Committee)(Chairman), Mario Covo, Santiago Perdomo Maldonado,William Hayes, and William Hayes.Roberto Feletti.
The Nomination and Compensation Committee meets at least four times per year. During the fiscal year ended December 31, 2006,2007, the Committeecommittee held five meetings.
The Nomination and Compensation Committee’s primary responsibilities are to assist the Board by identifying candidates to become Board members, and recommending nominees for the annual meetings of stockholders; by making recommendations to the Board concerning candidates for Chief Executive Officer and other senior management,executive officers and counseling on succession planning for senior management;executive officers; by recommending compensation for Board members and Committeecommittee members, including cash and equity compensation; by recommending compensation for senior managementexecutive officers and employees of the Bank, including cash and equity compensation, and policies for senior management and employee benefit programs and plans; and by reviewing and recommending changes to the Bank’s Code of Ethics; and by advising senior managementexecutive officers on issues related to the Bank’s personnel.
The Nomination and Compensation Committee will consider qualified director candidates recommended by stockholders. All director candidates will be evaluated in the same manner regardless of how they are recommended, including recommendations by stockholders. For director nominees, the committee considers candidate qualifications and other factors, including, but not limited to, diversity in background and experience, industry knowledge, educational level and the needs of the Bank. Stockholders can mail any such recommendations and an explanation of the qualifications of such candidates to the Secretary of the Bank at Calle 50 and Aquilino de la Guardia, P.O. Box 0819-08730, Panama City, Republic of Panama.
The Charter of the Nomination and Compensation Committee requires an annual self-evaluation of the committee’s performance.
The Nomination and Compensation Committee’s performance.Charter may be found on the Bank’s website at www.bladex.com/Investors Center/Corporate Governance/Committees of the Board of Directors-Charters.
Mr. Rivera is the only executive officer that serves as a member of the Board. None of the Bank’s executive officers serves as a director or a member of the Nomination and Compensation Committee, or any other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of the Board or the Nomination and Compensation Committee. None of the members of the Nomination and Compensation Committee has ever been an employee of the Bank.
Business Committee
The Business Committee is a standing committee of the Board that was established in February 2008. The Board has determined that all members of the Business Committee are independent directors. The current members of the Business Committee are William Hayes (Chairman), Gonzalo Menéndez Duque, Mario Covo, Herminio Blanco and José Maria Rabelo.
The Business Committee is primarily responsible for reviewing commercial and treasury business development and providing strategic guidance.
The Business Committee carries out its duties by supporting the business divisions in the achievement of their business objectives, following up on business strategies articulated by the Board of Directors, evaluating new business ideas and their profitability and focusing on continued improvement in business efficiency through adequate management of capital and resources. The committee will meet at least four times per year.
The Business Committee’s Charter, once approved in its final form by the Board, will be found on the Bank’s website at www.bladex.com/Investors Center/Corporate Governance/Committees of the Board of Directors-Charters.
Advisory Council
The Advisory Council was created by the Board in April 2000 pursuant to the powers granted to the Board under the Bank’s Articles of Incorporation. The duties of Advisory Council members consist primarily of providing advice to the Board with respect to the business of the Bank in their areas of expertise. Each member of the Advisory Council receives $5,000 for each Advisory Council meeting attended. The aggregate amount of fees for services rendered by the Advisory Council during 20062007 amounted to $15,000. During the fiscal year ended December 31, 2006,2007, the Advisory Council met once. The Advisory Council meets when convened by the Board.
The following table sets forth the names, positions, countries of citizenship and ages of the members of the Advisory Council of the Bank.
Name | | Position | | Country of Citizenship | | Age | |
Roberto Teixeira da Costa | | | Board Member Sul America, S.A. | | | Brazil | | 72 | 73 | |
Carlos Martabit | | | General Manager, Finance Division Banco del Estado de Chile | | | Chile | | 53 | 54 | |
Alberto Motta, Jr | | | Vice President
Inversiones BahiaBahía Ltd. | | | Panama | | 60 | 61 | |
Enrique Cornejo | | | Executive PresidentSecretary
Banco de la Nación -Ministry of Housing, Construction and Sanitation, Peru
| | | Peru | | | 51 | |
Santiago Perdomo (1) | | | President Banco Colpatria - Red Multibanca Colpatria | | | Colombia | | | 50 | |
(1) As of April 15, 2008, Mr. Perdomo was included as part of the Advisory Council.
D.Employees
As of December 31, 2006,2007, the total number of permanent employees was 171,188, which were geographically distributed as follows: Head Office in Panama: 139;157; New York Agency: 8; Bladex Asset Management: 2;3; Representative Office in Argentina: 2;3; Representative Office in Brazil: 10; Representative Office in Mexico: 4; and an International Administrative Office in Miami: 6.3.
E.Share Ownership
See “BeneficialItem 6, “Directors, Senior Management and Employees/Compensation/Beneficial Ownership” and “Compensation”.
Item 7.Major Shareholders and Related Party Transactions
A.Major Shareholders
As of December 31, 2006,2007, the Bank was not directly or indirectly owned or controlled by another corporation or any foreign government, and no person was the registered owner of more than 11.1%10% of the total outstanding shares of voting capital stock of the Bank.
The following table sets forth information regarding the Bank’s stockholders that are the beneficial owners of 5% or more of any one class of the Bank’s voting stock at December 31, 2006:
| | At December 31, | |
| | Number of Shares | | % of Class | | % of Total | |
Class A | | | | | | | |
Banco de la Nación Argentina | | | 1,045,348.00 | | | 16.5 | | | 2.9 | |
Banco do Brasil 1 | | | 974,551.00 | | | 15.4 | | | 2.7 | |
Banco de Comercio Exterior de Colombia | | | 488,547.00 | | | 7.7 | | | 1.3 | |
Banco de la Nación (Perú)6 | | | 446,556.00 | | | 7.0 | | | 1.2 | |
Banco Central del Paraguay | | | 434,658.00 | | | 6.9 | | | 1.2 | |
Banco Central del Ecuador | | | 431,217.00 | | | 6.8 | | | 1.2 | |
Banco del Estado de Chile | | | 323,412.75 | | | 5.1 | | | 0.9 | |
Sub-total shares of Class A Common Stock | | | 4,144,289.75 | | | 65.4 | | | 11.4 | |
Total Shares of Class A Common Stock | | | 6,342,189.16 | | | 100.0 | % | | 17.5 | % |
| | | | | | | | | | |
Class B | | | Number of Shares | | | % of Class | | | % of Total | |
Banco de la Provincia de Buenos Aires | | | 884,460.98 | | | 32.5 | | | 2.4 | |
Banco de la Nación Argentina | | | 295,944.50 | | | 10.9 | | | 0.8 | |
The Korea Exchange Bank | | | 147,172.50 | | | 5.4 | | | 0.4 | |
Sub-total shares of Class B Common Stock | | | 1,327,577.98 | | | 48.8 | | | 3.6 | |
Total Shares of Class B Common Stock | | | 2,725,387.37 | | | 100.0 | % | | 7.5 | % |
| | | | | | | | | | |
Class E 2 | | | Number of Shares | | | % of Class | | | % of Total | |
Oppenheimer Funds Inc | | | 4,034,215.00 | | | 14.8 | | | 11.1 | |
Brandes Investment Partners, LP | | | 3,134,771.00 | | | 11.5 | | | 8.6 | |
Franklin Resources Inc | | | 2,625,200.00 | | | 9.6 | | | 7.2 | |
Mondrian Investment Partners Ltd | | | 2,617,700.00 | | | 9.6 | | | 7.2 | |
Arnhold & S. Bleichroeder Advisers, LLC | | | 2,550,510.00 | | | 9.4 | | | 7.0 | |
Porter Orlin LLC | | | 2,016,300 | | | 7.4 | | | 5.6 | |
Capital Research and Management Co | | | 1,475,000.00 | | | 5.4 | | | 4.1 | |
Sub-total shares of Class E Common Stock | | | 18,453,696.00 | | | 67.7 | | | 50.8 | |
Total Shares of Class E Common Stock | | | 27,261,495.00 | | | 100.0 | % | | 75.0 | % |
| | | | | | | | | | |
Total Shares of Common Stock | | | 36,329,071.53 | | | | | | 100.0 | % |
1 | Does not include an aggregate of 1,845 Class E shares corresponding to Mrs. França’s entitlement under the Board Restricted Stock Plan issued to her employer, Banco do Brasil and an aggregate of 5,960 indexed options to which Mrs. França was entitled under the Indexed Stock Option Plan granted to Banco do Brasil, and an aggregate number of 2,119 stock options to which Ms. França was entitled under the 2006 Stock Option Plan granted to Banco do Brasil |
2007:
2 | Source: Schedule 13G and 13F filings with the U.S. Securities and Exchange Commission dated December 31, 2006. |
| | At December 31, 2007 | |
| | Number of Shares | | % of Class | | % of Total | |
Class A | | | | | | | |
Banco de la Nación Argentina Bartolomé Mitre 326 1036 Buenos Aires, Argentina | | | 1,045,348.00 | | | 16.5 | | | 2.9 | |
Banco do Brasil1 SBS Cuadra 1-Bloco A CEP 70.0070-100 Brasilia, Brazil | | | 974,551.00 | | | 15.4 | | | 2.7 | |
Banco de Comercio Exterior de Colombia Edif. Centro de Comercio Internacional Calle 28 No. 13A-15 Bogotá, Colombia | | | 488,547.00 | | | 7.7 | | | 1.3 | |
Banco de la Nación (Perú) Ave. Republica de Panamá 3664 San Isidro, Lima, Perú | | | 446,556.00 | | | 7.0 | | | 1.2 | |
Banco Central del Paraguay Federación Rusa y Sargento Marecos Asunción, Paraguay | | | 434,658.00 | | | 6.9 | | | 1.2 | |
Banco Central del Ecuador Ave. Amazonas entre Juan Pablo Sanz y Atahualpa Quito, Ecuador | | | 431,217.00 | | | 6.8 | | | 1.2 | |
Banco del Estado de Chile Ave. Libertador Bernardo O’Higgins 1111 Santiago, Chile | | | 323,412.75 | | | 5.1 | | | 0.9 | |
Sub-total shares of Class A Common Stock | | | 4,144,289.75 | | | 65.4 | % | | 11.4 | % |
Total Shares of Class A Common Stock | | | 6,342,189.16 | | | 100.0 | % | | 17.4 | % |
| | | | | | | | | | |
Class B | | | Number of Shares | | | % of Class | | | % of Total | |
Banco de la Provincia de Buenos Aires. San Martin 137 C1004AAC Buenos Aires, Argentina | | | 884,460.98 | | | 33.2 | | | 2.4 | |
Banco de la Nación Argentina Bartolomé Mitre 326 1036 Buenos Aires, Argentina | | | 295,944.50 | | | 11.1 | | | 0.8 | |
The Korea Exchange Bank 181, Euljiro 2GA Jengu, Seoul, Korea | | | 147,172.50 | | | 5.5 | | | 0.4 | |
Sub-total shares of Class B Common Stock | | | 1,327,577.98 | | | 49.8 | % | | 3.6 | % |
Total Shares of Class B Common Stock | | | 2,660,846.63 | | | 100.0 | % | | 7.3 | % |
| | | | | | | | | | |
Class E 2 | | | Number of Shares | | | % of Class | | | % of Total | |
Oppenheimer Funds Inc 6803 South Tucson Way Centennial, Colorado 80112-3924 | | | 3,588,615.00 | | | 13.1 | | | 9.9 | |
Brandes Investment Partners, LP 11988 El Camino Real, Suite 500 San Diego, California 92130 | | | 3,403,361.00 | | | 12.4 | | | 9.4 | |
Arnhold and S. Bleichroeder Advisers, LLC 1345 Avenue of the Americas New York, New York 10105-4300 | | | 2,480,070.00 | | | 9.1 | | | 6.8 | |
Mondrian Investment Partners Ltd 5th Floor, 10 Gresham Street London, EC2V 7JD | | | 1,862,300.00 | | | 6.8 | | | 5.1 | |
Sub-total shares of Class E Common Stock | | | 11,334,346.00 | | | 41.4 | % | | 31.2 | % |
Total Shares of Class E Common Stock | | | 27,367,113.00 | | | 100.0 | % | | 75.2 | % |
| | | | | | | | | | |
Total Shares of Common Stock | | | 36,370,148.79 | | | | | | 100.0 | % |
1 Does not include an aggregate of 2,341 Class E shares corresponding to Mr. José Maria Rabelo’s entitlement under the Board Restricted Stock Plan issued to his employer, Banco do Brasil.
2 Source: Schedule 13F filings with the SEC dated December 31, 2007.
All common shares have the same rights and privileges regardless of their class, except that:
| · | The affirmative vote of three-quarters (3/4) of the issued and outstanding Class A shares is required (A)(1) to dissolve and liquidate the Bank, (B)(2) to amend certain material provisions of the Amended and Restated Articles of Incorporation, (C)(3) to merge or consolidate the Bank with another entity and (D)(4) to authorize the Bank to engage in activities other than those described as the purposes of the Bank in its Amended and Restated Articles of Incorporation; |
| · | The Class E shares and the preferred shares are freely transferable, while the Class A shares and Class B shares can only be transferred to qualified holders; |
| · | The Class B shares may be converted into Class E shares; |
| · | The holders of Class A shares and Class B shares benefit from pre-emptive rights, but the holders of Class E common shares do not; and |
| · | The All classes vote separately for their respective Directors. |
B.Related Party Transactions
Certain directors of the Bank are executive officers and/or directors of banks and/or other financial institutions located in Latin America, the Caribbean and elsewhere. Some of these banks and/or other financial institutions own shares of the Bank’s common stock and have entered into loan transactions with the Bank in the ordinary course of business. The terms and conditions of such loan transactions, including interest rates and collateral requirements, are substantially the same as the terms and conditions of comparable loan transactions entered into with other persons under similar market conditions. As a matter of policy, directors of the Bank do not participate in the approval process for credit facilities extended to institutions of which they are executive officers or directors nor do they participate with respect to decisions regarding country exposure limits in countries in which such institutions are domiciled.
At December 31, 2006,2007, the Bank did not have any outstanding credit exposurefacility with related parties as defined by the Panamanian Superintendency of Banks.
C.Interests of Experts and Counsel
Not required in this Annual Report.
Item 8.Financial Information
A.Consolidated Statements and Other Financial Information
The information included in Item 18 of this Annual Report is referred to and incorporated by reference into this Item 8.A.
Dividends
The Board’s policy is to declare and distribute quarterly cash dividends on the Bank’s common stock, and, from time to time has declared special dividends to its stockholders. Dividends are declared at the Board’s discretion.
The following table shows information about common dividends paid on the dates indicated.
Payment date
| | Record date
| | Dividend per share
|
January 17, 2006 | | January 6, 2006 | | $0.15 |
April 6, 2006 | | | March 24, 2006 | | | $1.191
|
July 17, 2006 | | | July 7, 2006 | | | $0.19 |
October 16, 2006 | | | October 6, 2006 | | | $0.19 |
January 18, 2007 | | | January 8, 2007 | | | $0.19 |
April 10, 2007 | | | March 30, 2007 | | | $0.22 |
1 Includes $1.00 special dividend.
On February 2006, the Board declared a 25% increase in the quarterly dividend, from $0.15 per share to $0.1875 per share. In addition, the Board declared a special cash dividend of $1.00 per common share, which was paid on April 6, 2006 to stockholders of record as of March 24, 2006.Payment date | | Record date | | Dividend per share | |
January 18, 2007 | | | January 8, 2007 | | $ | 0.19 | |
April 10, 2007 | | | March 30, 2007 | | $ | 0.22 | |
July 6, 2007 | | | June 26, 2007 | | $ | 0.22 | |
October 5, 2007 | | | September 25, 2007 | | $ | 0.22 | |
January 17, 2008 | | | January 7, 2008 | | $ | 0.22 | |
April 4, 2008 | | | March 25, 2008 | | $ | 0.22 | |
On February 2007, the Board declared an increase in the quarterly dividend from $0.1875 per share to $0.22 per share.
The following table shows information about preferred dividends paid on the dates indicated.
Payment date
| | Record date
| | Dividend per share
|
May 17, 2004 | | | April 30, 2004 | | | $0.40 |
November 15, 2004 | | | November 8, 2004 | | | $1.90 |
May 16, 2005 | | | April 29, 2005 | | | $2.15 |
November 15, 2005 | | | October 31, 2005 | | | $2.18 |
May 15, 2006 | | | April 28, 2006 | | | $2.22 |
Payment date | | Record date | | Dividend per share | |
May 17, 2004 | | | April 30, 2004 | | $ | 0.40 | |
November 15, 2004 | | | November 8, 2004 | | $ | 1.90 | |
May 16, 2005 | | | April 29, 2005 | | $ | 2.15 | |
November 15, 2005 | | | October 31, 2005 | | $ | 2.18 | |
May 15, 2006 | | | April 28, 2006 | | $ | 2.22 | |
B.Significant Changes
Not applicable
Item 9.The Offer and Listing
A.Offer and Listing Details
The Bank’s Class E shares are listed on the New York Stock ExchangeNYSE under the symbol BLX.“BLX”. The following table shows the high and low sales prices of the Class E shares on the New York Stock ExchangeNYSE for the periods indicated.
| | Price per Class E Share (in $) | | Price per Class E Share (in $) | |
| | High | | Low | | High | | Low | |
2002 | | | 29.70 | | | 2.00 | |
2003 | | | 19.95 | | | 4.01 | | | 19.95 | | | 4.01 | |
2004 | | | 20.00 | | | 14.00 | | | 20.00 | | | 14.00 | |
20056 | | | 25.50 | | | 15.34 | |
2005 | | | | 25.50 | | | 15.34 | |
2006 | | | 18.70 | | | 14.59 | | | 18.70 | | | 14.59 | |
2005: | | | | | | | |
First Quarter | | | 25.50 | | | 18.53 | |
Second Quarter | | | 20.95 | | | 15.34 | |
Third Quarter | | | 18.52 | | | 16.70 | |
Fourth Quarter | | | 18.95 | | | 16.40 | |
2007 | | | | 23.17 | | | 15.52 | |
| | | | | | | | |
2006: | | | | | | | | | | | | | |
First Quarter | | | 18.70 | | | 15.65 | | | 18.70 | | | 15.65 | |
Second Quarter | | | 17.44 | | | 14.59 | | | 17.44 | | | 14.59 | |
Third Quarter | | | 16.90 | | | 15.38 | | | 16.90 | | | 15.38 | |
Fourth Quarter | | | 17.05 | | | 15.10 | | | 17.05 | | | 15.10 | |
2007: | | | | | | | | | | | | | |
First Quarter | | | 17.12 | | | 15.52 | | | 17.12 | | | 15.52 | |
2006: | | | | | | | |
November | | | 16.81 | | | 15.58 | |
Second Quarter | | | | 21.60 | | | 16.50 | |
Third Quarter | | | | 23.17 | | | 16.53 | |
Fourth Quarter | | | | 21.29 | | | 15.81 | |
2008: | | | | | | | | |
First Quarter | | | | 16.53 | | | 13.33 | |
2007: | | | | | | | | |
December | | | 17.05 | | | 15.91 | | | 18.76 | | | 15.81 | |
2007: | | | | | | | |
January | | | 17.12 | | | 16.12 | |
2008: | | | | | | | | |
March | | | | 16.53 | | | 14.33 | |
February | | | 17.07 | | | 16.25 | | | 16.34 | | | 13.44 | |
March | | | 16.80 | | | 15.52 | | | 15.94 | | | 13.33 | |
April | | | 20.02 | | | 16.50 | | | 19.46 | | | 15.50 | |
May | | | 21.60 | | | 18.60 | | | 19.14 | | | 16.39 | |
B.Plan of Distribution
Not required in this Annual Report.
C.Markets
The Bank’s Class A shares and Class B shares were sold in private placements or sold in connection with the Bank’s 2003 rights offering, are not listed on any exchange and are not publicly traded. The Bank’s Class E shares, which constitute the only class of shares publicly traded (on the New York Stock Exchange)NYSE), represent approximately 75% of the total shares of the Bank’s common stock issued and outstanding at December 31, 2006.2007. The Bank’s Class B shares are convertible into Class E shares on a one to one basis.
D.Selling Shareholders
Not required in this Annual Report.
E.Dilution
Not required in this Annual Report.
F.Expenses of the Issue
Not required in this Annual Report.
Item 10.Additional Information
A.Share Capital
Not required in this Annual Report.
B.Memorandum and Articles of Association
The Amended and Restated Articles of Incorporation, filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 2002 filed with the CommissionSEC on February 24, 2003, isand Item 10.B of the Form 20-F for the fiscal year ended December 31, 2004 filed with the SEC on June 23, 2005 are referred to and incorporated by reference into this Item 10.B.
C. MaterialMaterial Contracts
The Bank has not entered into any material contract outside the ordinary course of business during the two-year period immediately preceding the date of this Annual Report. See Note 17 to the Consolidated Financial Statements.Item 18, “Financial Statements”, note 17.
D.Exchange Controls
Currently, there are no Panamanian restrictions on the export or import of capital, including foreign exchange controls, and no restrictions on the payment of dividends or interest, nor are there limitations on the rights of foreign stockholders to hold or vote stock.
E.Taxation
The following is a summary of certain U.S. federal and Panamanian tax matters that may be relevant with respect to the acquisition, ownership and disposition of Class E shares. Prospective purchasers of Class E shares should consult their own tax advisors as to the United States, Panamanian or other tax consequences of the acquisition, ownership and disposition of Class E shares.
This summary does not address the consequences of the acquisition, ownership or disposition of the Bank’s Class A or Class B shares.
United States Taxes
This summary describes the principal U.S. federal income tax consequences of the ownership and disposition of the Class E shares, but does not purport to be a comprehensive description of all of the tax considerations that may be relevant to holders of Class E shares. This summary applies only to current holders that hold Class E shares as capital assets and does not address classes of holders that are subject to special treatment under the United States Internal Revenue Code of 1986, as amended (the “Code”), such as dealers in securities or currencies, financial institutions, tax-exempt entities, regulated investment companies, insurance companies, securities traders that elect mark-to-market tax accounting, persons subject to the alternative minimum tax, certain U.S. expatriates, persons holding Class E shares as part of a hedging, constructive ownership or conversion transaction or a straddle, holders whose functional currency is not the U.S. dollar, or a holder that owns 10% or more (directly, indirectly or constructively) of the voting shares of the Bank.
This summary is based upon the Code, existing, temporary and proposed regulations promulgated there under, judicial decisions and administrative pronouncements, as all in effect on the date of this Annual Report and which are subject to change (possibly on a retroactive basis) and to differing interpretations. Purchasers or holders of Class E shares should consult their own tax advisors as to the U.S. federal, state and local, and foreign tax consequences of the ownership and disposition of Class E shares in their particular circumstances.
As used herein, a “U.S. Holder” refers to a beneficial holder of Class E shares that is, for U.S. federal income tax purposes, (1) an individual citizen or resident of the United States, (2) a corporation, or an entity treated as a corporation, organized or created in or under the laws of the U.S. or any political subdivision thereof, (3) an estate the income of which is subject to U.S. federal income taxation without regard to the source of its income, (4) a trust, if both (A) a court within the United States is able to exercise primary supervision over the administration of the trust and (B) one or more U.S. persons (as defined in the Code) have the authority to control all substantial decisions of the trust, or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust, and (5) any holder otherwise subject to U.S. federal income taxation on a net income basis with respect to Class E shares (including a non-resident alien individual or foreign corporation that holds, or is deemed to hold, any Class E share in connection with the conduct of a U.S. trade or business). If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of Class E shares, the U.S. federal income tax consequences to a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. A holder of Class E shares that is a partnership and the partners in such partnership should consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership and disposition of Class E shares.
Taxation of Distributions
Subject to the “Passive Foreign Investment Company Status” discussion below, to the extent paid out of current or accumulated earnings and profits of the Bank as determined under U.S. federal income tax principles (“earnings and profits”), distributions made with respect to Class E shares (other than certain pro rata distributions of capital stock of the Bank or rights to subscribe for shares of capital stock of the Bank) will be includable in income of a U.S. Holder as ordinary dividend income in accordance with the U.S. Holder’s regular method of accounting for U.S. federal income tax purposes whether paid in cash or Class E shares. To the extent that a distribution exceeds the Bank’s earnings and profits, such distribution will be treated, first, as a nontaxable return of capital to the extent of the U.S. Holder’s tax basis in the Class E shares and will reduce the U.S. Holder’s tax basis in such shares, and thereafter as a capital gain from the sale or disposition of Class E shares. See “UnitedItem 10, “Additional Information/Taxation/United States Taxes—TaxationTaxes-Taxation of Capital Gains”. The amount of the distribution will equal the gross amount of the distribution received by the U.S. Holder, including any Panamanian taxes withheld from such distribution.
Distributions made with respect to Class E shares out of earnings and profits generally will be treated as dividend income from sources outside the United States. U.S. Holders that are corporations will not be entitled to the “dividends received deduction” under Section 243 of the Code with respect to such dividends. Dividends may be eligible for the special 15% rate applicable to “qualified dividend income” received by an individual, provided, that (1) the Bank is not a “passive foreign investment company” in the year in which the dividend is paid nor in the immediately preceding year, (2) the class of stock with respect to which the dividend is paid is readily tradable on an established securities market in the U.S., and (3) the U.S. Holder held his shares for more than 60 days during the 121-day period beginning 60 days prior to the ex-dividend date and meets other holding period requirements. Subject to certain conditions and limitations, Panamanian tax withheld from dividends will be treated as a foreign income tax eligible for deduction from taxable income or as a credit against a U.S. Holder’s U.S. federal income tax liability. Distributions of dividend income made with respect to Class E shares generally will be treated as “passive” income or, in the case of certain U.S. Holders, “general category income,” for purposes of computing a U.S. Holder’s U.S. foreign tax credit.
Less than 25 percent of the Bank’s gross income is effectively connected with the conduct of a trade or business in the United States, and the Bank expects this to remain true. If this remains the case, a holder of Class E shares that is not a U.S. Holder (a “non-U.S. Holder”) generally will not be subject to U.S. federal income tax or withholding tax on distributions received on Class E shares that are treated as dividend income for U.S. federal income tax purposes. Special rules may apply in the case of non-U.S. Holders (1) that are engaged in a U.S. trade or business, (2) that are former citizens or long-term residents of the United States, “controlled foreign corporations,” corporations that accumulate earnings to avoid U.S. federal income tax, and certain foreign charitable organizations, each within the meaning of the Code, or (3) certain non-resident alien individuals who are present in the United States for 183 days or more during a taxable year. Such persons should consult their own tax advisors as to the U.S. federal income or other tax consequences of the ownership and disposition of Class E shares.
Taxation of Capital Gains
Subject to the “Passive foreignForeign Investment Company Status” discussion below, gain or loss realized by a U.S. Holder on the sale or other disposition of Class E shares will generally be subject to U.S. federal income tax as capital gain or loss in an amount equal to the difference between the U.S. Holder’s tax basis in the Class E shares and the amount realized on the disposition. Such gain will be treated as long-term capital gain if the Class E shares are held by the U.S. Holder for more than one year at the time of the sale or other disposition. Otherwise, the gain will be treated as a short-term capital gain. Gain realized by a U.S. Holder on the sale or other disposition of Class E shares generally will be treated as U.S. source income for U.S. foreign tax credit purposes, unless the gain is attributable to an office or fixed place of business maintained by the U.S. Holder outside the United States or is recognized by an individual whose tax home is outside the United States, and certain other conditions are met. For U.S. federal income tax purposes, capital losses are subject to limitations on deductibility. As a general rule, U.S. Holders that are corporations can use capital losses for a taxable year only to offset capital gains in that year. A corporation may be entitled to carry back unused capital losses to the three preceding tax years and to carry over losses to the five following tax years. In the case of non-corporate U.S. Holders, capital losses in a taxable year are deductible to the extent of any capital gains plus ordinary income of up to $3,000. Unused capital losses of non-corporate U.S. Holders may be carried over indefinitely.
A non-U.S. Holder of Class E shares will generally not be subject to U.S. federal income tax or withholding tax on gain realized on the sale or other disposition of Class E shares. However, special rules may apply in the case of non-U.S. Holders (1) that are engaged in a U.S. trade or business, (2) that are former citizens or long-term residents of the United States, “controlled foreign corporations,” corporations which accumulate earnings to avoid U.S. federal income tax, and certain foreign charitable organizations, each within the meaning of the Code, or (3) certain non-resident alien individuals who are present in the United States for 183 days or more during a taxable year. Such persons should consult their own tax advisors as to the United States or other tax consequences of the purchase, ownership and disposition of the Class E shares.
Passive Foreign Investment Company Status
Under the Code, certain rules apply to an entity classified as a “passive foreign investment company” (“PFIC”). A PFIC is defined as any foreign (i.e., non-U.S.) corporation if either (1) 75% or more of its gross income for the taxable year is passive income (generally including, among other types of income, dividends, interest and gains from the sale of stock and securities) or (2) 50% or more of its assets (by value) produce, or are held for the production of, passive income. The Code provides an exception for foreign institutions in the active conduct of a banking business, provided the institution is licensed to do business in the United States. Under proposed regulations, the exception is extended to a foreign corporation that is not licensed to do business as a bank in the United States so long as such foreign corporation is an “active foreign bank.” Based on its current and intended method of operations as described herein, the Bank believes that it is not a PFIC under current U.S. federal income tax law because it is eligible for the exception available to active foreign banks in the Code and the proposed regulations. The Bank intends to continue to operate in a manner that will entitle the Bank to rely upon that exception to avoid classification as a PFIC.
If the Bank were to become a PFIC for purposes of the Code, unless a U.S. Holder makes the election described below, a U.S. Holder generally will be subject to a special tax charge with respect to (a) any gain realized on the sale or other disposition of Class E shares and (b) any “excess distribution” by the Bank to the U.S. Holder (generally, any distributions including return of capital distributions, received by the U.S. Holder on the Class E shares in a taxable year that are greater than 125 percent of the average annual distributions received by the U.S. Holder in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding period). Under these rules (1) the gain or excess distribution would be allocated ratably over the U.S. Holder’s holding period for the Class E shares, (2) the amount allocated to the current taxable year would be treated as ordinary income, (3) the amount allocated to each prior year would be subject to tax at the highest rate in effect for that year; and (4) onan interest charge at the rate generally applicable to underpayments of tax would be imposed with respect to the resulting tax attributable to each such prior year. For purposes of the foregoing rules, a U.S. Holder of Class E shares that uses such stock as security for a loan will be treated as having disposed of such stock.
If the Bank were a PFIC, U.S. Holders of interests in a holder of Class E shares may be treated as indirect holders of their proportionate share of the Class E shares and may be taxed on their proportionate share of any excess distributions or gain attributable to the Class E shares. An indirect holder also must treat an appropriate portion of its gain on the sale or disposition of its interest in the actual holder as gain on the sale of Class E shares.
If the Bank were to become a PFIC, a U.S. Holder could make an election, provided the Bank complies with certain reporting requirements, to have the Bank treated, with respect to such U.S. Holder, as a “qualified electing fund” (hereinafter referred to as a “QEF election”), in which case, the electing U.S. Holder would be required to include annually in gross income the U.S. Holder’s proportionate share of the Bank’s ordinary earnings and net capital gains, whether or not such amounts are actually distributed. If the Bank were to become a PFIC, the Bank intends to so notify each U.S. Holder and to comply with all reporting requirements necessary for a U.S. Holder to make a QEF election and will provide to record U.S. Holders of Class E shares such information as may be required to make such QEF election.
If the Bank is a PFIC in any year, a U.S. Holder that beneficially owns Class E shares during such year must make an annual return on Internal Revenue Service Form 8621, which describes the income received (or deemed to be received if a QEF election is in effect) from the Bank. The Bank will, if applicable, provide all information necessary for a U.S. Holder of record to make an annual return on Form 8621.
A U.S. Holder that owns certain “marketable stock” in a PFIC may elect to mark-to-market such stock and, subject to certain exceptions, include in income any gain (increases in market value) or loss (decreases in market value to the extent of prior gains recognized) realized as ordinary income or loss to avoid the adverse consequences described above. U.S. Holders of Class E shares are urged to consult their own tax advisors as to the consequences of owning stock in a PFIC and whether such U.S. Holder would be eligible to make either of the aforementioned elections to mitigate the adverse effects of such consequences.
Information Reporting and Backup Withholding
Each U.S. payor making payments in respect of Class E shares will generally be required to provide the Internal Revenue Service (the “IRS”) with certain information, including the name, address and taxpayer identification number of the beneficial owner of Class E shares, and the aggregate amount of dividends paid to such beneficial owner during the calendar year. Under the backup withholding rules, a holder may be subject to backup withholding at a current rate of 28% with respect to proceeds received on the sale or exchange of Class E shares within the United States by non-corporate U.S. Holders and to dividends paid, unless such holder (1) is a corporation or comes within certain other exempt categories (including securities broker-dealers, other financial institutions, tax-exempt organizations, qualified pension and profit sharing trusts and individual retirement accounts), and, when required, demonstrates this fact or (2) provides a taxpayer identification number, certifies as to no loss of exemption and otherwise complies with the applicable requirements of the backup withholding rules. Non-U.S. Holders are generally exempt from information reporting and backup withholding, but may be required to provide a properly completed Form W-8BEN (or other similar form) or otherwise comply with applicable certification and identification procedures in order to prove their exemption. This backup withholding tax is not an additional tax and any amounts withheld from a payment to a holder of Class E shares will be refunded (or credited against such holder’s U.S. federal income tax liability, if any) provided that the required information is furnished to the IRS.
There is no income tax treaty between Panama and the United States.
Panamanian Taxes
The following is a summary of the principal Panamanian tax consequences arising in connection with the ownership and disposition of the Bank’s Class E shares. This summary is based upon the laws and regulations of Panama, as well as court precedents and interpretative rulings, in effect as of the date of this Annual Report, all of which are subject to prospective and retroactive change.
General Principle
The Bank is exempt from income tax in Panama under a special exemption granted to the Bank pursuant to Law 38 of July 25, 1978. In addition, under general rules of income tax in Panama, only income that is deemed to be Panama source income is subject to taxation in Panama. Accordingly, since the Bank’s income is derived primarily from sources outside of Panama and is not deemed to be Panama source income, even in the absence of such a special exemption, the Bank would have limited income tax liability in Panama.
Taxation of Distributions
Dividends whether cash or in kind, paid by the Bank in respect of its shares are also exempt from dividend tax or other withholding under the aforementioned special legislation. If such special legislation did not exist, Panama would impose a 10% withholding tax on dividends or distributions paid in respect of the Bank’s registered shares (20% in respect of the Bank’s bearer shares), to the extent such dividends are paid from income derived by the Bank from Panamanian sources.
Taxation of Capital Gains
Inasmuch as almost all of the Bank’s income derives from non-Panamanian sources,Class E shares are listed on the NYSE, any capital gains realized by an individual or a corporation, regardless of its nationality or residency, on the sale or other disposition outside of Panama, of Class E shares should notwould be subject to taxation in Panama. However, there are no rules of income allocation currently in effect in Panama with respect toexempted from capital gains and it cannot be determined with certainty when the tax authorities would consider that a significant amount of the Bank’s income derives from Panamanian sources, thus resultingtaxes or any other taxes in the taxation of capital gains realized on the sale or disposition of the Bank’s Class E shares.Panama.
F.Dividends and Paying Agents
Not required in this Annual Report.
G.Statement by Experts
Not required in this Annual Report.
H.Documents on Display
Upon written or oral request, the Bank will provide without charge to each person to whom this Annual Report is delivered, a copy of any or all of the documents listed as exhibits to this Annual Report (other than exhibits to those documents, unless the exhibits are specifically incorporated by reference in the documents). Written requests for copies should be directed to the attention of Carlos Yap,Mr. Jaime Celorio, Chief Financial Officer, Bladex, as follows: (i) if by regular mail, to P.O. Box 0819-08730, Panama City, Republic of Panama, and (ii) if by courier, to Calle 50 y Aquilino de la Guardia, Panama City, Republic of Panama. Telephone requests may be directed to Mr. YapCelorio at 011-507-210-8563. Written requests may also be faxed to Mr. YapCelorio at 011-507-269-6333 or sent via e-mail to cyap@blx.com.jcelorio@bladex.com. Information is also available on the Bank’s website at: www.blx.com.www.bladex.com.
I.Subsidiary Information
Not applicable
Item 11.Quantitative and Qualitative Disclosure About Market Risk
The Bank’s risk management policies, as approved by the Board from time to time, are designed to identify and control the Bank’s credit and market risks by establishing and monitoring appropriate limits on the Bank’s credit and market exposures. Certain members of the Board constitute the Assets and Liabilities Committee, which meetmeets on a regular basis and monitormonitors and controlcontrols the risks in each specific area. At the management level, the Bank has a Risk Management Department that measures and controls the credit and market exposure of the Bank.
The Bank’s businesses are subject to market risk. The components of market risk are interest rate risk inherent in the Bank’s balance sheet, price risk in the Bank’s principal investinginvestment portfolio and market value risk in the Bank’s trading portfolios. For quantitative information relating to the Bank’s interest rate risk and information relating to the Bank’s management of interest rate risk, see “LiquidityItem 5, “Operating and Financial Review and Prospects/Liquidity and Capital Resources” and Item 18, “Financial Statements”, and Notesnotes 2 (q) and 18 to the Consolidated Financial Statements.18.
For information regarding derivative financial instruments see NotesItem 18, “Financial Statements”, notes 2 (q) and 18 to the Consolidated Financial Statements.18. For information regarding investment securities, see “Business Overview—Item 4, “Information on the Company/Business Overview/Investment Securities”, and Note 5 to the Consolidated Financial Statements.Item 18, “Financial Statements”, note 5.
Information about Derivative Financial InstrumentsThe table below lists for each of the years 20062008 to 20112012 the notional amounts and weighted interest rates, as of December 31, 2006,2007, for derivative financial instruments and other financial instruments that are sensitive to changes in interest rates: the Bank’s investments,investment securities, loans, borrowings and placements, interest rate swaps, cross currency swaps, forward currency exchange agreements, and trading assets and liabilities.
Expected maturity dates | | Expected maturity dates |
| | Maturities | | | 2008 | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | There- after | | | Without Maturity | | | Total 2007 | | | Fair Value 2007 | |
| | 2007 | | 2008 | | 2009 | | 2010 | | 2011 | | There-after | | Total 2006 | | Fair Value 2006 | | | ($ Equivalent in thousand) | |
| | ($ Equivalent in thousands) | | |
Non - Trading | | | | | | | | | | | | | | | | |
Investments | | | | | | | | | | | | | | | | | | |
NON-TRADING | | | | | | | | | | | | | | | | | | | | |
ASSETS | | | | | | | | | | | | | | | | | | | | |
Investment Securities | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | 141,000 | | 15,000 | | 34,000 | | 35,000 | | 5,000 | | 190,338 | | 420,338 | | 464,298 | | | 15,000 | | 24,000 | | 40,000 | | 33,296 | | 30,000 | | 245,700 | | | | 387,996 | | 437,038 | |
Average fixed rate | | | 6.60 | % | | 4.38 | % | | 8.06 | % | | 7.55 | % | | 9.63 | % | | 9.99 | % | | 8.29 | % | | | | | 4.38 | % | 8.69 | % | | 7.63 | % | | 9.24 | % | | 9.79 | % | | 9.18 | % | | | | 8.86 | % | | | |
Variable rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | | | 5,000 | | | | 2,000 | | | | | | 7,000 | | 7,015 | | | 5,000 | | | | 11,000 | | | | 5,000 | | 10,000 | | | | 31,000 | | 31,322 | |
Average variable rate | | | | | 5.82 | % | | | | 7.17 | % | | | | | | 6.21 | % | | | | | 5.82 | % | | | 6.29 | % | | | | 5.72 | % | | 6.68 | % | | | | 6.25 | % | | | |
Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | 1,426,912 | | 602 | | 442 | | 302 | | 139 | | 4,000 | | 1,432,397 | | 1,402,631 | | | 1,661,392 | | 1,949 | | 34,245 | | 21,886 | | 20,806 | | 1,966 | | | | 1,742,244 | | 1,708,544 | |
Average fixed rate | | | 6.09 | % | | 6.10 | % | | 5.76 | % | | 5.43 | % | | 5.21 | % | | 7.37 | % | | 6.09 | % | | | | | 6.05 | % | 7.06 | % | | 7.42 | % | | 7.07 | % | | 6.29 | % | | 7.03 | % | | | | 6.09 | % | | | |
Mexican Peso | | | 14,039 | | 14,893 | | 16,678 | | 18,678 | | 1,654 | | | | 65,942 | | 69,940 | | | 30,334 | | 33,564 | | 37,143 | | 12,255 | | | | | | | | 113,296 | | 125,160 | |
Average fixed rate | | | 11.28 | % | | 11.38 | % | | 11.38 | % | | 11.38 | % | | 11.38 | % | | | | 11.36 | % | | | | | 10.15 | % | 10.17 | % | | 10.18 | % | | 9.32 | % | | | | | | | | 10.08 | % | | | |
Variable rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | 670,137 | | 364,238 | | 199,192 | | 100,045 | | 106,904 | | 25,935 | | 1,466,451 | | 1,452,599 | | | 813,945 | | 362,788 | | 195,486 | | 200,230 | | 205,084 | | 75,347 | | | | 1,852,880 | | 1,819,231 | |
Average variable rate | | | 6.49 | % | | 6.33 | % | | 6.98 | % | | 6.86 | % | | 6.45 | % | | 6.88 | % | | 6.54 | % | | | | | 6.16 | % | 6.44 | % | | 6.64 | % | | 6.31 | % | | 6.37 | % | | 6.97 | % | | | | 6.34 | % | | | |
Mexican Peso | | | 12,223 | | | | | | | | | | | | 12,223 | | 12,176 | | | 18,322 | | | | | | | | | | | | | | 18,322 | | 16,984 | |
Average variable rate | | | 9.58 | % | | | | | | | | | | | | 9.58 | % | | | | | 9.89 | % | | | | | | | | | | | | | 9.89 | % | | | |
Euro | | | 482 | | 892 | | 819 | | 1,157 | | 409 | | | | 3,759 | | 3,595 | | | 1,091 | | 1,354 | | 1,648 | | 820 | | 183 | | | | | | 5,096 | | 5,059 | |
Average variable rate | | | 4.53 | % | | 4.55 | % | | 4.57 | % | | 4.59 | % | | 4.57 | % | | | | 4.56 | % | | | | | 4.89 | % | 5.01 | % | | 4.91 | % | | 5.12 | % | | 5.58 | % | | | | | | 4.99 | % | | | |
Borrowings and Placements | | | | | | | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | | | | | | | |
Borrowings and Placements (1) | | Borrowings and Placements (1) | | | | | | | | | | | | | | | | | |
Fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | 1,635,604 | | | | | | | | | | | | 1,635,604 | | 1,635,317 | | | 1,267,300 | | 35,000 | | 30,203 | | | | | | | | | | 1,332,503 | | 1,333,315 | |
Average fixed rate | | | 5.48 | % | | | | | | | | | | | | 5.48 | % | | | | | 5.31 | % | 5.03 | % | | 4.52 | % | | | | | | | | | | 5.28 | % | | | |
Mexican Peso | | | 15,962 | | 15,962 | | 15,962 | | 15,962 | | 1,330 | | | | 65,178 | | 68,455 | | | 32,783 | | 32,783 | | 32,782 | | 11,227 | | | | | | | | 109,575 | | 122,157 | |
Average fixed rate | | | 8.42 | % | | 8.42 | % | | 8.42 | % | | 8.42 | % | | 8.42 | % | | | | 8.42 | % | | | | | 8.31 | % | 8.31 | % | | 8.31 | % | | 8.23 | % | | | | | | | | 8.30 | % | | | |
Peruvian Soles | | | | | | | | | | | | | 41,048 | | | | 41,048 | | 40,442 | |
Average fixed rate | | | | | | | | | | | | | 6.50 | % | | | | 6.50 | % | | | |
Variable rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | 105,180 | | 291,500 | | 52,000 | | 5,000 | | | | | | 453,680 | | 455,015 | | | 594,710 | | 103,000 | | 184,190 | | | | 150,000 | | | | | | 1,031,900 | | 1,032,209 | |
Average variable rate | | | 5.74 | % | | 5.76 | % | | 5.80 | % | | 5.98 | % | | | | | | 5.76 | % | | | | | 5.52 | % | 5.41 | % | | 5.47 | % | | | | 5.32 | % | | | | | | 5.47 | % | | | |
DERIVATIVES INSTRUMENTS | | DERIVATIVES INSTRUMENTS | | | | | | | | | | | | | | | | | |
Interest Rate Swaps | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars variable to fixed | | | | | | | 19,000 | | 35,000 | | 5,000 | | 190,338 | | 249,338 | | (1,655 | ) | | | | 24,000 | | 40,000 | | 33,296 | | 50,000 | | 245,700 | | | | 392,996 | | (14,415 | ) |
Average pay rate | | | | | | | 8.61 | % | | 7.55 | % | | 9.63 | % | | 9.99 | % | | 9.54 | % | | | | | | | 8.69 | % | | 7.63 | % | | 9.24 | % | | 8.25 | % | | 9.18 | % | | | | 8.88 | % | | | |
Average receive rate | | | | | | | 8.88 | % | | 7.81 | % | | 9.92 | % | | 10.11 | % | | 9.69 | % | | | | | | | 8.62 | % | | 7.58 | % | | 9.5 | % | | 8.64 | % | | 9.24 | % | | | | 8.98 | % | | | |
Cross Currency Swaps | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Receive US Dollars | | | 462 | | 853 | | 785 | | 1,108 | | 392 | | | | 3,601 | | | | | 1,016 | | 1,109 | | 1,432 | | 716 | | 162 | | | | | | 4,435 | | (622 | ) |
US Dollars variable rate | | | 6.63 | % | | 6.64 | % | | 6.65 | % | | 6.66 | % | | 6.65 | % | | | | 6.65 | % | | | | |
US Dollars fixed rate | | | 6.43 | % | 6.45 | % | | 6.45 | % | | 6.45 | % | | 6.47 | % | | | | | | | 6.45 | % | | | |
Pay US Dollars | | | | | | | | | | | | | 41,020 | | | | 41,020 | | (857 | ) |
US Dollars fixed rate | | | | | | | | | | | | | 5.35 | % | | | | 5.35 | % | | | |
Pay EUR | | | 462 | | 854 | | 785 | | 1,108 | | 392 | | | | 3,601 | | (164 | ) | | 1,016 | | 1,109 | | 1,432 | | 716 | | 162 | | | | | | 4,435 | | | |
EUR variable rate | | | 4.53 | % | | 4.55 | % | | 4.57 | % | | 4.59 | % | | 4.57 | % | | | | 4.56 | % | | | | |
Forward Currency Exchange Agreements | | | | | | | | | | | | | | | | | | | |
Receive US Dollars/Pay Mexican Pesos | | | 14,391 | | 466 | | 1,686 | | 2,924 | | 299 | | | | 19,766 | | (340 | ) | |
Average exchange rate | | | 11.03 | | 11.90 | | 11.90 | | 11.90 | | 11.90 | | | | 11.27 | | | | |
Pay US Dollars/Receive Mexican Pesos | | | 1,593 | | 5 | | | | | | | | | | 1,598 | | 66 | | |
EUR fixed rate | | | 5.46 | % | 5.49 | % | | 5.48 | % | | 5.51 | % | | 5.58 | % | | | | | | 5.49 | % | | | |
Received Peruvian Soles | | | | | | | | | | | | | 41,020 | | | | 41,020 | | | |
Peruvian Soles fixed rate | | Peruvian Soles fixed rate | | | | | | | | | | 6.50 | % | | | | 6.50 | % | | | |
| | MaturitiesExpected maturity dates
| |
| | 2007
| | 2008 | | 2009 | | | 2010 | | | 2011 | | | There-after2012
| | | There- after | | | Without Maturity | | | Total 20062007
| | | Fair Value 20062007
| |
| | ($ Equivalent in thousands) | |
Forward Currency Exchange Agreements | | | | | | | | | | | | | | | | | | | | |
Receive US Dollars/Pay Mexican Pesos | | | 19,196 | | 2,235 | | 4,749 | | 982 | | | | | | | | 27,162 | | (885 | ) |
Average exchange rate | | | 11.31 | | 11.90 | | | | | | | | | | 11.31 | | | | | 11.08 | | 11.79 | | 11.83 | | 11.94 | | | | | | | | 11.30 | | | |
Trading | | | | | | | | | | | | | | | | | | | |
Pay US Dollars/Receive Mexican Pesos | | | 853 | | 27 | | | | | | | | | | | | 880 | | 2 | |
Average exchange rate | | | 11.03 | | 11.23 | | | | | | | | | | | | 11.04 | | | |
TRADING | | | | | | | | | | | | | | | | | | | | |
Trading Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Investments in securities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Debt securities: | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | | | | | 5,000 | | | | | | 60,750 | | 65,750 | | 69.589 | | | | | | | | | | | | | 15,000 | | | | 15,000 | | 16,097 | |
Average fixed rate | | | | | | | 7.50 | % | | | | | | 8.56 | % | | 8.48 | % | | | | | | | | | | | | | | | 5.54 | % | | | | 5.54 | % | | | |
Mexican Peso | | | | | | | | | | | | | 18,520 | | 18,520 | | 21,184 | | |
Average fixed rate | | | | | | | | | | | | | 9.18 | % | | 9.18 | % | | | | |
Uruguayan Peso | | | | | | | | | | | | | 5,829 | | 5,829 | | 6,433 | | |
Average fixed rate | | | | | | | | | | | | | 5.00 | % | | 5.00 | % | | | | |
Brasilian Real | | | | | | | | | | | | | 11,139 | | 11,139 | | 12,671 | | |
Average fixed rate | | | | | | | | | | | | | 12.50 | % | | 12.50 | % | | | | |
Variable rate | | | | | | | | | | | | | | | | | | | |
Equities: | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | | | | | | | | | | | 15,103 | | 15,103 | | 6,080 | | | | | | | | | | | | | | | 36,315 | | 36,315 | | 36,315 | |
Average variable rate | | | | | | | | | | | | | 0.00 | % | | 0.00 | % | | | | |
Argentine Peso | | | | | 13,262 | | | | | | | | | | 13,262 | | 13,774 | | |
Average variable rate | | | | | 11.99 | % | | | | | | | | | | 11.99 | % | | | | |
Credit default swaps | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | | | | | | | | | 5,000 | | | | 5,000 | | 79 | | | 10,000 | | | | | | | | | | | | | | 10,000 | | 20 | |
Average rate | | | | | | | | | | | 1.40 | % | | | | 1.40 | % | | | | |
Average fixed rate | | | 0.8 | % | | | | | | | | | | | | | 0.8 | % | | | |
US Dollars | | | (10,000 | ) | | | | | | | | | | | | | (10,000 | ) | | 10 | |
Average fixed rate | | | 1.4 | % | | | | | | | | | | | | | 1.4 | % | | | |
Interest rate swaps | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Brasilian Real | | | | | 2,038 | | | | | | | | 4,685 | | 6,723 | | 104 | | |
Average rate | | | | | 13.63 | % | | | | | | | | 12.63 | % | | 12.93 | % | | | | |
Mexican Peso | | | | | | | | | | | | | 2,315 | | 2,315 | | 161 | | |
Average rate | | | | | | | | | | | | | 8.84 | % | | 8.84 | % | | | | |
Brasilian Real fixed to floating | | | | | | | | | | | 50,837 | | | | | | 50,837 | | 155 | |
Average paying rate | | | | | | | | | | | 12.8 | % | | | | | | 12.8 | % | | | |
Average receiving rate | | | | | | | | | | | 11.1 | % | | | | | | 11.1 | % | | | |
Trading Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Securities sold short | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | | | | | | | | | | | 52,000 | | 52,000 | | 54,039 | | | | | | | | | | | | | 31,860 | | | | 31,860 | | 31,734 | |
Average fixed rate | | | | | | | | | | | | | 6.00 | % | | 6.00 | % | | | | | | | | | | | | | | | 8.48 | % | | | | 8.48 | % | | | |
Equities: | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | | | | | | | | | | | | | 57,863 | | 57,863 | | 57,863 | |
Forward currency exchange agreements | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Receive US Dollars/Pay Argentine Pesos | | | 5,243 | | | | | | | | | | | | 5,243 | | (147 | ) | |
Receive US Dollars/Pay Brazilian Reales | | | (171,173 | ) | | | | | | | | | | | | | (171,173 | ) | | 788 | |
Average exchange rate | | | 3.21 | | | | | | | | | | | | 3.21 | | | | | 1.794 | | | | | | | | | | | | | | 1.794 | | | |
Receive US Dollars/Pay Brasilian Reales | | | 36,398 | | | | | | | | | | | | 36,398 | | (522 | ) | |
Pay US Dollars/Receive Brazilian Reales | | | 171,173 | | | | | | | | | | | | | | 171,173 | | | |
Average exchange rate | | | 2.22 | | | | | | | | | | | | 2.22 | | | | | 1.793 | | | | | | | | | | | | | | 1.793 | | | |
Pay US Dollars/Receive Brasilian Reales | | | (36,398 | ) | | | | | | | | | | | | (36,398 | ) | | | | |
Receive US Dollars/Pay Mexican Pesos | | | (20,000 | ) | | | | | | | | | | | | | (20,000 | ) | | - | |
Average exchange rate | | | 2.19 | | | | | | | | | | | | 2.19 | | | | | 10.93 | | | | | | | | | | | | | | 10.93 | | | |
Pay US Dollars/Receive Mexican Pesos | | | 15,269 | | | | | | | | | | | | 15,269 | | (212 | ) | | 20,000 | | | | | | | | | | | | | | 20,000 | | - | |
Average exchange rate | | | 10.99 | | | | | | | | | | | | 10.99 | | | | | 10.93 | | | | | | | | | | | | | | 10.93 | | | |
Receive US Dollars/Pay Mexican Pesos | | | (15,269 | ) | | | | | | | | | | | | (15,269 | ) | | | | |
Receive US Dollars/Pay Colombian Pesos | | | (89,849 | ) | | | | | | | | | | | | | (89,849 | ) | | 326 | |
Average exchange rate | | | 11.15 | | | | | | | | | | | | 11.15 | | | | | 2,042 | | | | | | | | | | | | | | 2,042 | | | |
Pay US Dollars/Receive Colombian Pesos | | | 20,784 | | | | | | | | | | | | 20,784 | | 8 | | | 89,849 | | | | | | | | | | | | | | 89,849 | | | |
Average exchange rate | | | 2,327 | | | | | | | | | | | | 2,327 | | | | | 2,034 | | | | | | | | | | | | | | 2,034 | | | |
Receive US Dollars/Pay Colombian Pesos | | | (15,770 | ) | | | | | | | | | | | | (15,770 | ) | | | | |
Receive US Dollars/Pay Chilean Pesos | | | (10,000 | ) | | | | | | | | | | | | | (10,000 | ) | | 41 | |
Average exchange rate | | | 2,349 | | | | | | | | | | | | 2,349 | | | | | 500 | | | | | | | | | | | | | | 500 | | | |
Pay US Dollars/Receive Peruvian Nuevos Soles | | | 10,064 | | | | | | | | | | | | 10,064 | | 79 | | |
Pay US Dollars/Receive Chilean Pesos | | | 10,000 | | | | | | | | | | | | | | 10,000 | | | |
Average exchange rate | | | 3.22 | | | | | | | | | | | | 3.22 | | | | | 500 | | | | | | | | | | | | | | 500 | | | |
Credit default swaps | | | | | | | | | | | | | | | | | | | | |
US Dollars | | | | | | | 3,000 | | | | | | | | | | 3,000 | | 13 | |
Average fixed rate | | | | | | | 0.50 | % | | | | | | | | | | 0.50 | % | | | |
(1) Borrowings and placements include securities sold under repurchase agreements, and short and long-term borrowings and debt.
Although certain assets and liabilities may have similar maturities or periods of re-pricing, they may be impacted in varying degrees to changes in market interest rates. The maturity of certain types of assets and liabilities may fluctuate in advance of changes in market rates, while the maturity of other types of assets and liabilities may lag behind changes in market rates. In the event of a change in interest rates, prepayment and early withdrawal levels could deviate significantly from the maturities assumed in calculating the table above.
For information regarding the fair value disclosure of financial instruments, see Note 20 to the Consolidated Financial Statements.
Item 18, “Financial Statements”, note 20.
Foreign Exchange Risk Management and Sensitivity
The Bank accepts deposits and raises funds principally in United StatesU.S. dollars, and makes loans mostly in United StatesU.S. dollars. Currency exchange risk arises when the Bank accepts deposits or raises funds in one currency and lends or invests the proceeds in another. Whenever possible, foreign currency-denominated assets are funded with liability instruments denominated in the same currency. In those cases where assets were funded in different currencies, forward foreign exchange or cross currency swapscross-currency swap contracts were used to fully hedge the risk resulting from this cross currency funding. During 2006,2007, the Bank did not heldhold significant open foreign exchange positions, except for trading purposes. The Fund invests in securities denominated in foreign currency as well as in forward foreign currency exchange contracts, for trading purposes. At December 31, 2006,2007, the Bank had an equivalent of $65$288 million of non-dollar financial liabilities, which matched funded asset transactions in the same currency.
Item 12.Description of Securities Other than Equity Securities
Not required in this Annual Report.applicable.
PART II
Item 13.Defaults, Dividend Arrearages and Delinquencies
None.
Item 14.Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
Item 15.Controls and Procedures
Evaluation ofa) Disclosure Controls and Procedures
The Bank maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports it files under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Such controls include those designed to ensure that information for disclosure is accumulated and communicated to the members of the Board and management, including the Chief Executive Officer (the “CEO”), as appropriate to allow timely decisions regarding required disclosure.
The CEO and the Chief Financial Officer (the "CFO"), with the participation of management, evaluated the effectiveness of the Bank’s disclosure controls and procedures as of December 31, 2006.2007. Based on such evaluation, the CEO and the CFO have concluded that, as of the end of such period, the Bank's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Bank in the reports that it files or submits under the Exchange Act.effective.
Changes inb) Management’s Annual Report on Internal ControlsControl Over Financial Reporting
During fiscal year ended December 31, 2006, the Bank implemented a new information system platform, which supports widely the operations that are carry out by the BankManagement is responsible for establishing and assists in the generation ofmaintaining adequate internal control over financial reporting as well assuch term is defined in Exchange Act Rule 13a-15(f) or 15d-15(f). With the processparticipation and supervision of compliance reporting. Internal controlsthe Bank´s CEO and CFO, its management has assessed the effectiveness of its internal control over financial reporting as of December 31, 2007.
The assessment includes the documentation and procedures were revised, documented and put in place to ensure that are aligned with the process implemented throughout the new information system and are in compliance with the provisionunderstanding of Sarbanes-Oxley Act in its Section 404 (SOX 404).
The new information system went live in June 2006; since then, the Bank has been monitoring its performance and no additional changes have occurred other than the above referred in the Bank’s internal control over financial reporting. Management evaluated the design effectiveness and tested the operational effectiveness of internal controls over financial reporting (asto form its conclusion.
Management’s evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Bank´s internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Bank´s transactions and dispositions of its assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Bank´s receipts and expenditures are being made only in accordance with authorizations of the Bank´s management and the Board; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Bank’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on the COSO criteria and the Bank´s management’s evaluation, the Bank’s management has concluded that its internal control over financial reporting was effective as of December 31, 2007.
c) Attestation Report of the Registered Public Accounting Firm
The Company's independent registered public accounting firm, Deloitte Inc, has issued an attestation report on the effectiveness of the Bank's internal control over financial reporting, which is included in Item 18, “Financial Statements”, for reference.
d) Changes in Internal Controls
Item 16.Reserved Reserved
A. Item 16A.Audit and Compliance Committee Financial Expert
The Bank’s Board of Directors has determined that at least one member of the committeeAudit and Compliance Committee is a “financial expert,” as defined in the rules enacted by the U.S. Securities and Exchange CommissionSEC under the Sarbanes-Oxley Act of 2002. The Audit and Compliance Committee’s financial expert is Mr. Gonzalo Menéndez Duque.
B. Item 16B.Code of Ethics
The Bank has adopted a code of ethics that applies to the Bank’s principal executive officers and principal financial and accounting officers. The Bank includes the information regarding its corporate governance practices necessary to comply with Section 303A of the New York Stock Exchange'sNYSE's Listed Company Manual/Corporate Governance Rules, including itsRules. A current copy of this code of ethics on its website (www.blx.com/Investor Center/Corporate Governance).is file as Exhibit 14.1 to this Form 20-F. Shareholders may request a hard copy of Bladex’s code of ethics, free of charge, from the following contact:
Mr. Jaime Celorio
Chief Financial Officer
Banco Latinoamericano de Exportaciones, S.A. (Bladex)
Tel.: (507) 210-8563
Fax: (507) 269-6333
e-mail: jcelorio@bladex.com
C. Item 16C.Principal Accountant Fees and Services
At the Bank’s Annual Shareholders’ Meeting held on April 18, 2007, in Panama City, Panama, stockholders appointed Deloitte Inc. as the Bank’s new independent auditors for the fiscal year ending December 31, 2007. The change was approved and recommended to stockholders by the Audit and Compliance Committee of the Bank’s Board of Directors. The recommendation was based on cost efficiency reasons.
Deloitte Inc. is a registered Public Accounting Firm. Duringpublic accounting firm. In the yearsyear ended December 31, 2006, and 2005, and throughprior to the date hereof,appointment on April 18, 2007, the Bank did not engage Deloitte Inc. on any matters. The Bank has been advised by Deloitte Inc. that neither that firm nor any of its affiliates has any relationship with the Bank or its subsidiaries, other than the relationship that typically exists between independent auditors and their clients.
The reports of Deloitte Inc., the Bank’s independent auditor from April 19, 2007 through December 31, 2007, on the Bank’s consolidated financial statements for the year ended December 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle.
The reports of KPMG, the Bank’s independent auditor through April 18, 2007, on the Bank’s consolidated financial statements for the yearsyear ended December 31, 2006 and 2005 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle. In connection with the audit of the two fiscal years ended December 31, 2006 and 2005, and during the subsequent interim period through the date of this report, there were no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused them to make reference to the subject matter of the disagreements in connection with their opinion on the Bank’s consolidated financial statements. In addition, there have been no reportable events, as defined in Item 304 (a)(1)(v) of Regulation S-K.
The following table sets forth the aggregate fees billed for each of the fiscal years ended December 31, 2005 and 2006 for professional services rendered by the Bank’s former independent auditors, KPMG:KPMG, and for the professional services rendered by the Bank’s current independent auditors, Deloitte Inc.:
| | | Year 2006 | | Year 2007 | |
| | | KPMG | | Deloitte Inc. | |
| | 2005 | | 2006 | | | | | |
Audit Fees | | | $336,674 | | | $471,693 | | $ | 471,693 | | $ | 426,495 | |
Tax Fees | | | 32,500 | | | 37,500 | | | 37,500 | | | 0 | |
All Other Fees | | | 6,207 | | | 22,485 | | | 22,485 | | $ | 39,509 | |
Total | | | $375,381 | | | $531,678 | | $ | 531,678 | | $ | 466,004 | |
The following is a description of the type of services included within the categories listed above:
| · | Audit Feesfees include aggregate fees billed for professional services rendered by Deloitte Inc. in 2007 and KPMG in 2006, for the audit of the Bank’s annual financial statements or services that are normally provided by KPMG in connection with statutory and regulatory filings.filings or engagements for those fiscal years. During 2007 and 2006, no audit-related fees (which relate to the assurance and services related to the performance of the audit or review of the Bank’s financial statements) were paid by the Bank. |
| · | Tax Feesfees include aggregate fees billed for professional services rendered by Deloitte Inc. in 2007 and KPMG to the Bankin 2006 for tax compliance, tax advice and tax planning. For the year 2007, the Bank hired PricewaterhouseCoopers to prepare and sign as a preparer the Bank’s U.S. Federal, New York State and New York City, and Florida, and corporate income/franchise tax returns, as well as calculate quarterly estimated tax payments and prepare required estimated tax payment forms. |
| · | All Other Feesother fees include aggregate fees billed for products and services provided by Deloitte Inc. in 2007 and KPMG in 2006 to the Bank, other than the services reported in the twothree preceding paragraphs. |
Audit and Compliance Committee Pre-Approval Policies and Procedures
The Audit and Compliance Committee pre-approves all audit and non-audit services to be provided to the Bank by the Bank’s independent auditors.
D.Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
E. Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On August 5, 2004, the Bank announcedestablished a $50 million three-year open market stock repurchase program under which Bladex, mayit could, from time to time, repurchase its Class E shares of common stock on the open market at the then prevailing market price. Repurchases under the program arewere made in accordance with applicable law and subject to all required regulatory approvals. The repurchases arewere made using Bladex’s cash resources, and the program may becould have been suspended or discounted at any time without prior notice.
AtOn July 17, 2006, the Bank completed the $50 million repurchase program with 3,042,618 shares repurchased. The following table shows information aboutregarding shares repurchased by the Bank in the open market:market.
Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs |
September 2004 (9.10.04 - 9.22.04) | | | 231,200 | | | $16.41 | | | 231,200 | | | 2,814,811 |
October 2004 (10.5.04 - 10.20.04) | | | 230,700 | | | $16.18 | | | 230,700 | | | 2,625,136 |
March 2005 (03.17.05) | | | 10,000 | | | $21.93 | | | 10,000 | | | 1,926,724 |
May 2005 (05.13.05 - 05.26.05) | | | 297,500 | | | $17.08 | | | 297,500 | | | 2,175,838 |
August 2005 (08.11.05 - 08.31.05) | | | 121,500 | | | $17.06 | | | 121,500 | | | 2,057,247 |
September 2005 (09.1.05 - 09.30.05) | | | 376,000 | | | $17.09 | | | 376,000 | | | 1,677,895 |
November 2005 (11.18.05 - 11.18.05) | | | 900 | | | $17.07 | | | 900 | | | 1,678,808 |
February 2006 (02.23.06 - 02.23.06) | | | 3,200 | | | $17.80 | | | 3,200 | | | 1,606,478 |
March 2006 (03.7.06 - 03.31.06) | | | 278,700 | | | $17.10 | | | 278,700 | | | 1,393,462 |
April 2006 (04.3.06 - 03.13.06) | | | 102,700 | | | $17.28 | | | 102,700 | | | 1,276,706 |
May 2006 (05.11.06 - 05.31.06) | | | 188,500 | | | $16.63 | | | 188,500 | | | 1,137,953 |
June 2006 (06.1.06 - 06.30.06) | | | 992,200 | | | $15.70 | | | 992,200 | | | 213,097 |
July 2006 (07.3.06 - 07.17.06) | | | 209,518 | | | $15.97 | | | 209,518 | | | |
Total | | | 3,042,618 | | | $16.43 | | | 3,042,618 | | | |
Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs | |
September 2004 (9.10.04 – 9.22.04) | | | 231,200 | | $ | 16.41 | | | 231,200 | | | 2,814,811 | |
October 2004 (10.5.04 – 10.20.04) | | | 230,700 | | $ | 16.18 | | | 230,700 | | | 2,625,136 | |
March 2005 (03.17.05) | | | 10,000 | | $ | 21.93 | | | 10,000 | | | 1,926,724 | |
May 2005 (05.13.05 – 05.26.05) | | | 297,500 | | $ | 17.08 | | | 297,500 | | | 2,175,838 | |
August 2005 (08.11.05 – 08.31.05) | | | 121,500 | | $ | 17.06 | | | 121,500 | | | 2,057,247 | |
September 2005 (09.1.05 – 09.30.05) | | | 376,000 | | $ | 17.09 | | | 376,000 | | | 1,677,895 | |
November 2005 (11.18.05 – 11.18.05) | | | 900 | | $ | 17.07 | | | 900 | | | 1,678,808 | |
February 2006 (02.23.06 – 02.23.06) | | | 3,200 | | $ | 17.80 | | | 3,200 | | | 1,606,478 | |
March 2006 (03.7.06 – 03.31.06) | | | 278,700 | | $ | 17.10 | | | 278,700 | | | 1,393,462 | |
April 2006 (04.3.06 – 04.13.06) | | | 102,700 | | $ | 17.28 | | | 102,700 | | | 1,276,706 | |
May 2006 (05.11.06 – 05.31.06) | | | 188,500 | | $ | 16.63 | | | 188,500 | | | 1,137,953 | |
June 2006 (06.1.06 – 06.30.06) | | | 992,200 | | $ | 15.70 | | | 992,200 | | | 213,097 | |
July 2006 (07.3.06 – 07.17.06) | | | 209,518 | | $ | 15.97 | | | 209,518 | | | 0 | |
Total | | | 3,042,618 | | $ | 16.43 | | | 3,042,618 | | | | |
PART III
Item 17.Financial Statements
The Bank is providing the financial statements and related information specified in Item 18.
Item 18.Financial Statements
List of Consolidated Financial StatementsIndependent Auditors’ Report | | F-1 | Reports of Independent Registered Public Accounting Firms | | F-3 | Consolidated Balance Sheets at December 31, 2007 and 2006 | | F-8 | Consolidated Statements of Income for the Years Ended December 31, 2007, 2006 and 2005 | | F-2F-9 | Consolidated Statements of Operations for each of the Years in the Three-Year Period Ended December 31, 2006 | | F-3 | Consolidated Statements of Changes in Stockholders’ Equity for each of the Years in the Three-Year Period Ended December 31, 2007, 2006 and 2005 | | F-4F-10 | Consolidated Statements of Comprehensive Income for each of the Years in the Three-Year Period Ended December 31, 2007, 2006 and 2005 | | F-5F-11 | Consolidated Statements of Cash Flows for each of the Years in the Three-Year Period Ended December 31, 2007, 2006 and 2005 | | F-6F-12 | | | F-7F-13 |
| | | | | Amended and Restated Articles of Incorporation* | Exhibit 1.2. | | By-Laws* | Exhibit 4.1. | | Mandate Letter* | Exhibit 12.1. | | Rule 13a-14(a) Certification of Principal Executive Officer | Exhibit 12.2. | | Rule 13a-14(a) Certification of Principal Financial Officer | | | Rule 13a-14(b) Certification of Principal Executive Officer | | | Rule 13a-14(b) Certification of Principal Financial Officer | Exhibit 14.1. | | Code of Ethics |
* Filed as an exhibit to the Form 20-F for the fiscal year ended December 31, 2002 filed with the CommissionSEC on February 24, 2003.
SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. BANCO LATINOAMERICANO DE EXPORTACIONES, S.A. | | /s/ JAIME RIVERA | | Jaime Rivera | Chief Executive Officer | | June 19, 2008 |
BANCO LATINOAMERICANOBanco Latinoamericano
DE EXPORTACIONES,de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Consolidated Financial StatementsWith Report of Independent Registered Public
Accounting Firm
Consolidated financial statements Years ended December 31, 20062007 and 20052006
(With Independent Registered Public AccountingDeloitte-Panamá
Firm’s Report Thereon)
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand subsidiaries
Independent Auditors’ Report and Consolidated Financial Statements 2007 and 2006
Table of Contents
ContentsPages | | | Page | Report of Independent Registered Public Accounting Firm | | F-1 | Consolidated Balance Sheets | | F-2 | Consolidated Statements of Income | Firms | F-3 | Consolidated Statements of Changes in Stockholders´ Equity | | F-4 | Consolidated Statements of Comprehensive Income | | F-5 | Consolidated Statements of Cash Flows | | F-6 | Notes to Consolidated Financial Statements | | F-7 |
| | | | Consolidated balance sheet | F-8 | | | Consolidated statement of income | F-9 | | | Consolidated statement of changes in stockholders’ equity | F-10 | | | Consolidated statements of comprehensive income | F-11 | | | KPMG
Apartado postal 816-1089
| Teléfono:
Fax:
Internet F-12 | | (507) 208-0700
(507) 263-9852
www.kpmg.pa
| Notes to consolidated financial statements | F-13 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Banco Latinoamericano de Exportaciones, S.A.:
We have audited the accompanying consolidated balance sheets of Banco Latinoamericano de Exportaciones, S. A. and subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2006. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Banco Latinoamericano de Exportaciones, S. A. and subsidiaries as of December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.
As further disclosed in Note 2 and 7 to the consolidated financial statements, the Bank changed its method of accounting for share-based compensation plans and its methodology for estimating generic allowances for credit losses in 2005.
February 28, 2007
Panama, Republic of Panama
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
| | AND SUBSIDIARIES
| | | | Consolidated Balance Sheets
| | | | December 31, 2006 and 2005 | | | | (in US$ thousand, except per share amounts) | |
| | Note | | 2006 | | 2005 | | Assets | | | | | | | | Cash and due from banks | | | 3,20 | | | 401 | | | 687 | | Interest-bearing deposits with banks (including pledged deposits | | | | | | | | | | | of $33,470 and $5,000 for 2006 and 2005, respectively) | | | 3,20 | | | 331,764 | | | 229,200 | | Trading assets | | | 4,20 | | | 130,076 | | | 0 | | Securities available for sale | | | 5,20 | | | 346,194 | | | 182,050 | | Securities held to maturity (market value of $125,118 in 2006 and | | | | | | | | | | | $26,325 in 2005) | | | 5,20 | | | 125,157 | | | 26,520 | | Loans | | | 6,20 | | | 2,980,772 | | | 2,610,019 | | Less: | | | | | | | | | | | Allowance for loan losses | | | 7,20 | | | 51,266 | | | 39,448 | | Unearned income and deferred loan fees | | | | | | 4,425 | | | 5,577 | | Loans, net | | | | | | 2,925,081 | | | 2,564,994 | | | | | | | | | | | | | Customers' liabilities under acceptances | | | 20 | | | 46,006 | | | 110,621 | | Premises and equipment (net of accumulated depreciation | | | | | | | | | | | of $8,043 in 2006 and $9,137 in 2005) | | | | | | 11,136 | | | 3,253 | | Accrued interest receivable | | | 20 | | | 55,238 | | | 30,254 | | Derivative instruments used for hedging - receivable | | | 18,20 | | | 541 | | | 357 | | Other assets | | | 8,17 | | | 6,743 | | | 11,295 | | Total assets | | | | | | 3,978,337 | | | 3,159,231 | | | | | | | | | | | | | Liabilities and Stockholders' Equity | | | | | | | | | | | Deposits: | | | 9,20 | | | | | | | | Noninterest-bearing - Demand | | | | | | 1,620 | | | 1,315 | | Interest-bearing - Demand | | | | | | 130,510 | | | 27,070 | | Interest-bearing - Time | | | | | | 924,147 | | | 1,018,233 | | Total deposits | | | | | | 1,056,277 | | | 1,046,618 | | | | | | | | | | | | | Securities sold under repurchase agreements | | | 5,20 | | | 438,356 | | | 128,599 | | Short-term borrowings | | | 10,20 | | | 1,157,248 | | | 632,100 | | Medium and long-term debt and borrowings | | | 11,20 | | | 558,860 | | | 533,860 | | Trading liabilities | | | 4,20 | | | 54,832 | | | 0 | | Acceptances outstanding | | | 20 | | | 46,006 | | | 110,621 | | Accrued interest payable | | | 20 | | | 28,420 | | | 14,736 | | Derivative instruments used for hedging - payable | | | 18,20 | | | 2,634 | | | 297 | | Reserve for losses on off-balance sheet credit risk | | | 7 | | | 27,195 | | | 52,086 | | Redeemable preferred stock ($10 par value) | | | 12,20 | | | 0 | | | 5,149 | | Other liabilities | | | | | | 24,614 | | | 18,383 | | Total liabilities | | | | | | 3,394,442 | | | 2,542,449 | | | | | | | | | | | | | Stockholders' equity: | | | 13,14,15,19 | | | | | | | | Class "A" common stock, no par value, assigned value of $6.67 | | | | | | | | | | | (Authorized 40,000,000; outstanding 6,342,189) | | | | | | 44,407 | | | 44,407 | | Class "B" common stock, no par value, assigned value of $6.67 | | | | | | | | | | | (Authorized 40,000,000; outstanding 2,725,390 in 2006 | | | | | | | | | | | and 3,214,344 in 2005) | | | | | | 21,959 | | | 25,219 | | Class "E" common stock, no par value, assigned value of $6.67 | | | | | | | | | | | (Authorized 100,000,000; outstanding 27,261,495 in 2006 | | | | | | | | | | | and 28,540,242 in 2005) | | | | | | 213,614 | | | 210,353 | | Additional paid-in capital in excess of assigned value | | | | | | 134,945 | | | 134,340 | | Capital reserves | | | | | | 95,210 | | | 95,210 | | Retained earnings | | | | | | 205,200 | | | 212,916 | | Accumulated other comprehensive income | | | 5,19 | | | 3,328 | | | 619 | | Treasury stock | | | 13 | | | (134,768 | ) | | (106,282 | ) | Total stockholders' equity | | | | | | 583,895 | | | 616,782 | | | | | | | | | | | | | Commitments and contingent liabilities | | | 16,17,18,21 | | | | | | | | | | | | | | | | | | | Total liabilities and stockholders' equity | | | | | | 3,978,337 | | | 3,159,231 | |
See accompanying notes to consolidated financial statements.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
| | AND SUBSIDIARIES
| | | | Consolidated Statements of Income
| | | | For Each of the Years in the Three - Year Period Ended December 31, 2006 | | | | (in US$ thousand, except per share amounts) | |
| | Note | | 2006 | | 2005 | | 2004 | | Interest income: | | | | | | | | | | Deposits with banks | | | | | $ | 8,973 | | | 5,121 | | | 2,765 | | Trading assets | | | | | | 5,810 | | | 0 | | | 0 | | Investment securities: | | | | | | | | | | | | | | Available for sale | | | | | | 16,780 | | | 7,755 | | | 3,688 | | Held to maturity | | | | | | 5,985 | | | 2,219 | | | 2,218 | | Loans | | | | | | 165,802 | | | 101,728 | | | 67,481 | | Total interest income | | | | | | 203,350 | | | 116,823 | | | 76,152 | | Interest expense: | | | | | | | | | | | | | | Deposits | | | | | | 56,611 | | | 29,559 | | | 11,939 | | Trading liabilities | | | | | | 4,639 | | | 0 | | | 0 | | Short-term borrowings | | | | | | 55,000 | | | 20,408 | | | 9,388 | | Medium and long-term debt and borrowings | | | | | | 28,263 | | | 21,603 | | | 12,800 | | Total interest expense | | | | | | 144,513 | | | 71,570 | | | 34,127 | | Net interest income | | | | | | 58,837 | | | 45,253 | | | 42,025 | | | | | | | | | | | | | | | | Reversal of (provision for) loan losses | | | 7 | | | (11,846 | ) | | 54,155 | | | 111,400 | | Net interest income, after reversal of (provision | | | | | | | | | | | | | | for) loan losses | | | | | | 46,991 | | | 99,408 | | | 153,425 | | | | | | | | | | | | | | | | Other income (expense): | | | | | | | | | | | | | | Reversal (provision) for losses on off-balance sheet credit risk | | | 7 | | | 24,891 | | | (15,781 | ) | | 871 | | Fees and commissions, net | | | | | | 6,285 | | | 5,824 | | | 5,928 | | Derivatives and hedging activities | | | | | | (225 | ) | | 2,338 | | | 47 | | Recoveries on assets, net of impairments | | | 5 | | | 5,551 | | | 10,206 | | | 0 | | Trading gains | | | | | | 879 | | | 0 | | | 0 | | Net gain on sale of securities available for sale | | | 5 | | | 2,568 | | | 206 | | | 2,922 | | Gain (loss) on foreign currency exchange | | | | | | (253 | ) | | 3 | | | (194 | ) | Other income, net | | | | | | 144 | | | 5 | | | 83 | | Net other income | | | | | | 39,840 | | | 2,801 | | | 9,657 | | | | | | | | | | | | | | | | Operating expenses: | | | | | | | | | | | | | | Salaries and other employee expenses | | | | | | 16,826 | | | 13,073 | | | 10,335 | | Depreciation of premises and equipment | | | | | | 1,406 | | | 869 | | | 1,298 | | Professional services | | | | | | 2,671 | | | 3,281 | | | 2,571 | | Maintenance and repairs | | | | | | 1,000 | | | 1,172 | | | 1,207 | | Other operating expenses | | | | | | 7,026 | | | 6,296 | | | 5,941 | | Total operating expenses | | | | | | 28,929 | | | 24,691 | | | 21,352 | | | | | | | | | | | | | | | | Income before cumulative effect of changes in | | | | | | | | | | | | | | accounting principles | | | | | | 57,902 | | | 77,518 | | | 141,730 | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 7,15 | | | 0 | | | 2,733 | | | 0 | | Cumulative effect on prior year (to December 31, 2004) of an early adoption of the fair-value-based method of accounting stock-based employee compensation plan | | | 14,15 | | | 0 | | | (150 | ) | | 0 | | Net income | | | | | $ | 57,902 | | | 80,101 | | | 141,730 | | | | | | | | | | | | | | | | Basic earnings per share: | | | 7,14,15 | | | | | | | | | | | Income before cumulative effect of changes in | | | | | | | | | | | | | | accounting principles | | | | | $ | 1.56 | | | 2.01 | | | 3.61 | | Cumulative effect of changes in accounting principles | | | | | | 0.00 | | | 0.07 | | | 0.00 | | Net income per share - basic | | | | | $ | 1.56 | | | 2.08 | | | 3.61 | | | | | | | | | | | | | | | | Diluted earnings per share: | | | 7,14,15 | | | | | | | | | | | Income before cumulative effect of changes in | | | | | | | | | | | | | | accounting principles | | | | | $ | 1.54 | | | 1.99 | | | 3.60 | | Cumulative effect of changes in accounting principles | | | | | | 0.00 | | | 0.07 | | | 0.00 | | Net income per share - diluted | | | | | $ | 1.54 | | | 2.06 | | | 3.60 | | | | | | | | | | | | | | | | Pro forma amounts, assuming the changes in | | | | | | | | | | | | | | accounting principles are applied retroactively: | | | 7,14,15 | | | | | | | | | | | Income before effect of changes in accounting principles | | | | | $ | 57,902 | | | 77,518 | | | 141,730 | | Cumulative effect on prior years of a change in the credit loss reserve methodology | | | | | | 0 | | | 0 | | | (8,244 | ) | Effect on prior year of an early adoption of the fair-value based method of accounting stock-based employee compensation plan | | | | | | 0 | | | 0 | | | (150 | ) | Net income available to common stockholders for both basic and diluted earning per share | | | | | $ | 57,902 | | | 77,518 | | | 133,336 | | | | | | | | | | | | | | | | Basic earnings per share | | | | | $ | 1.56 | | | 2.01 | | | 3.40 | | | | | | | | | | | | | | | | Diluted earnings per share | | | | | $ | 1.54 | | | 1.99 | | | 3.39 | | | | | | | | | | | | | | | | Average basic shares | | | | | | 37,065 | | | 38,550 | | | 39,232 | | | | | | | | | | | | | | | | Average diluted shares | | | | | | 37,572 | | | 38,860 | | | 39,371 | |
See accompanying notes to consolidated financial statements. BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
| | AND SUBSIDIARIES
| | | | Consolidated Statements of Changes in Stockholders´ Equity
| | | | For Each of the Years in the Three - Year Period Ended December 31, 2006
| | | | | |
| | | | | | | | | | Accumulated | | | | | | | | | | Additional | | | | | | other | | | | Total | | | | Common | | paid-in | | Capital | | Retained | | comprehensive | | Treasury | | stockholders’ | | | | stock | | capital | | reserves | | earnings | | income | | stock | | equity | | | | | | | | | | | | | | | | | | Balances at January 1, 2004 | | | 279,978 | | | 133,786 | | | 95,210 | | | 150,789 | | | 9,876 | | | (85,310 | ) | | 584,329 | | Net income | | | 0 | | | 0 | | | 0 | | | 141,730 | | | 0 | | | 0 | | | 141,730 | | Other comprehensive income | | | 0 | | | 0 | | | 0 | | | 0 | | | (3,794 | ) | | 0 | | | (3,794 | ) | Issuance of restricted stocks | | | 0 | | | 0 | | | 0 | | | (116 | ) | | 0 | | | 211 | | | 95 | | Repurchase of Class "E" common stocks | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (7,528 | ) | | (7,528 | ) | Dividends declared | | | 0 | | | 0 | | | 0 | | | (58,702 | ) | | 0 | | | 0 | | | (58,702 | ) | Balances at December 31, 2004 | | | 279,978 | | | 133,786 | | | 95,210 | | | 233,701 | | | 6,082 | | | (92,627 | ) | | 656,130 | | Net income | | | 0 | | | 0 | | | 0 | | | 80,101 | | | 0 | | | 0 | | | 80,101 | | Other comprehensive income | | | 0 | | | 0 | | | 0 | | | 0 | | | (5,463 | ) | | 0 | | | (5,463 | ) | Compensation cost - indexed stock options plan | | | 0 | | | 555 | | | 0 | | | 0 | | | 0 | | | 0 | | | 555 | | Issuance of restricted stocks | | | 0 | | | 0 | | | 0 | | | (57 | ) | | 0 | | | 152 | | | 95 | | Exercised stock options | | | 0 | | | 0 | | | 0 | | | (4 | ) | | 0 | | | 8 | | | 4 | | Repurchase of Class "E" common stocks | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (13,815 | ) | | (13,815 | ) | Difference in fractional shares in conversion | | | | | | | | | | | | | | | | | | | | | | | of common stocks | | | 1 | | | (1 | ) | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Dividends declared | | | 0 | | | 0 | | | 0 | | | (100,825 | ) | | 0 | | | 0 | | | (100,825 | ) | Balances at December 31, 2005 | | | 279,979 | | | 134,340 | | | 95,210 | | | 212,916 | | | 619 | | | (106,282 | ) | | 616,782 | | Net income | | | 0 | | | 0 | | | 0 | | | 57,902 | | | 0 | | | 0 | | | 57,902 | | Comprehensive income | | | 0 | | | 0 | | | 0 | | | 0 | | | 2,709 | | | 0 | | | 2,709 | | Compensation cost - indexed stock options plan | | | 0 | | | 606 | | | 0 | | | 0 | | | 0 | | | 0 | | | 606 | | Issuance of restricted stocks | | | 0 | | | 0 | | | 0 | | | (49 | ) | | 0 | | | 144 | | | 95 | | Exercised stock options | | | 0 | | | 0 | | | 0 | | | (14 | ) | | 0 | | | 27 | | | 13 | | Repurchase of Class "E" common stocks | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | (28,657 | ) | | (28,657 | ) | Difference in fractional shares in conversion | | | | | | | | | | | | | | | | | | | | | | | of common stocks | | | 1 | | | (1 | ) | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | Dividends declared | | | 0 | | | 0 | | | 0 | | | (65,555 | ) | | 0 | | | 0 | | | (65,555 | ) | Balances at December 31, 2006 | | | 279,980 | | | 134,945 | | | 95,210 | | | 205,200 | | | 3,328 | | | (134,768 | ) | | 583,895 | |
See accompanying notes to consolidated financial statements.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
| | AND SUBSIDIARIES
| | | | Consolidated Statements of Comprehensive Income
| | | | For Each of the Years in the Three - Year Period Ended December 31, 2006 | | | | (in US$ thousand) | |
| | Note | | 2006 | | 2005 | | 2004 | | | | | | | | | | | | Income before cumulative effect of changes in | | | | | | | | | | | | | | accounting principles | | | | | | 57,902 | | | 77,518 | | | 141,730 | | Cumulative effect on prior years (to December 31, 2004) | | | | | | | | | | | | | | of a change in the credit loss reserve methodology | | | 7 | | | 0 | | | 2,733 | | | 0 | | Cumulative effect on prior year (to December 31, 2004) | | | | | | | | | | | | | | of an early adoption of the fair value-based method of | | | | | | | | | | | | | | accounting stock-based employee compensation plan | | | 14,15 | | | 0 | | | (150 | ) | | 0 | | Net income | | | | | | 57,902 | | | 80,101 | | | 141,730 | | | | | | | | | | | | | | | | Other comprehensive income (loss): | | | | | | | | | | | | | | Unrealized gains (losses) on securities: | | | | | | | | | | | | | | Unrealized gains (losses) arising from the year | | | 5,19 | | | 5,349 | | | (5,257 | ) | | (1,256 | ) | Less: Reclassification adjustments for gains | | | | | | | | | | | | | | included in net income | | | 19 | | | (2,568 | ) | | (206 | ) | | (2,922 | ) | Net change in unrealized gains (losses) on securities | | | | | | | | | | | | | | available for sale | | | | | | 2,781 | | | (5,463 | ) | | (4,178 | ) | Unrealized gains on derivatives arising | | | | | | | | | | | | | | from the year | | | 19 | | | (72 | ) | | 0 | | | 384 | | Other comprehensive income (loss) | | | | | | 2,709 | | | (5,463 | ) | | (3,794 | ) | Comprehensive income | | | | | | 60,611 | | | 74,638 | | | 137,936 | |
See accompanying notes to consolidated financial statements.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
| | AND SUBSIDIARIES
| | | | Consolidated Statements of Cash Flows
| | | | For Each of the Years in the Three - Year Period Ended December 31, 2006 | | | | (in US$ thousand) | |
| | 2006 | | 2005 | | 2004 | | Cash flows from operating activities: | | | | | | | | Income before cumulative effect of changes in accounting principles | | | 57,902 | | | 77,518 | | | 141,730 | | Cumulative effect on prior years (to December 31, 2004) of a change | | | | | | | | | | | in the credit loss reserve methodology | | | 0 | | | 2,733 | | | 0 | | Cumulative effect on prior year (to December 31, 2004) of an early | | | | | | | | | | | adoption of the fair-value based method of accounting stock-based | | | | | | | | | | | employee compensation plan | | | 0 | | | (150 | ) | | 0 | | Net income | | | 57,902 | | | 80,101 | | | 141,730 | | Adjustments to reconcile net income to net cash (used in) provided by | | | | | | | | | | | operating activities: | | | | | | | | | | | Derivatives and hedging activities | | | 312 | | | (85 | ) | | (48 | ) | Depreciation of premises and equipment | | | 1,406 | | | 869 | | | 1,298 | | Reversal of (provision for) loan losses | | | 11,846 | | | (54,155 | ) | | (111,400 | ) | Provision (reversal) for losses on off-balance sheet credit risk | | | (24,891 | ) | | 15,781 | | | (871 | ) | Impairment loss on assets | | | 0 | | | 469 | | | 0 | | Net gain on sale of securities available for sale | | | (2,568 | ) | | (206 | ) | | (2,922 | ) | Compensation cost - indexed stock options plan | | | 606 | | | 555 | | | 0 | | Issuance of restricted stock | | | 95 | | | 95 | | | 95 | | Deferred compensation awards | | | 13 | | | 3 | | | 0 | | Amortization of premiums and discounts on investments | | | 4,748 | | | 2,343 | | | 1,175 | | Net decrease (increase) in operating assets: | | | | | | | | | | | Trading assets | | | (130,076 | ) | | 0 | | | 0 | | Accrued interest receivable | | | (24,984 | ) | | (14,806 | ) | | (4,517 | ) | Derivative financial instruments | | | 0 | | | 25 | | | (10,333 | ) | Other assets | | | 4,552 | | | (5,804 | ) | | 723 | | Net increase (decrease) in operating liabilities: | | | | | | | | | | | Accrued interest payable | | | 13,684 | | | 8,259 | | | 385 | | Trading liabilities | | | 54,832 | | | 0 | | | 0 | | Other liabilities | | | 2,108 | | | (5,958 | ) | | 10,511 | | Net cash (used in) provided by operating activities | | | (30,415 | ) | | 27,486 | | | 25,826 | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | Net increase in pledged interest bearing deposits | | | (28,470 | ) | | (800 | ) | | (2,000 | ) | Net increase in loans | | | (384,433 | ) | | (179,315 | ) | | (173,687 | ) | Proceeds from the sale of loans | | | 12,500 | | | 0 | | | 0 | | Net acquisition of premises and equipment | | | (9,289 | ) | | (614 | ) | | (688 | ) | Proceeds from the redemption of securities available for sale | | | 20,000 | | | 26,000 | | | 19,274 | | Proceeds from the maturity of securities held to maturity | | | 9,000 | | | 0 | | | 0 | | Proceeds from the sale of securities available for sale | | | 129,731 | | | 276,524 | | | 7,657 | | Purchases of investment securities | | | (419,143 | ) | | (326,307 | ) | | (144,425 | ) | Net cash used in investing activities | | | (670,104 | ) | | (204,512 | ) | | (293,869 | ) | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | Net increase in due to depositors | | | 9,659 | | | 182,458 | | | 161,205 | | Net increase in short-term borrowings | | | | | | | | | | | and securities sold under repurchase agreements | | | 834,905 | | | 55,981 | | | 17,503 | | Proceeds from medium and long-term debt and borrowings | | | 133,680 | | | 309,962 | | | 256,728 | | Repayments of medium and long-term debt and borrowings | | | (108,680 | ) | | (179,723 | ) | | (338,623 | ) | Dividends paid | | | (63,364 | ) | | (100,825 | ) | | (52,867 | ) | Redemption of redeemable preferred stocks | | | (3,216 | ) | | (2,711 | ) | | (2,425 | ) | Repurchase of common stocks | | | (28,657 | ) | | (13,815 | ) | | (7,528 | ) | Net cash provided by financing activities | | | 774,327 | | | 251,327 | | | 33,993 | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 73,808 | | | 74,301 | | | (234,050 | ) | Cash and cash equivalents at beginning of the year | | | 224,887 | | | 150,586 | | | 384,636 | | Cash and cash equivalents at end of the year | | | 298,695 | | | 224,887 | | | 150,586 | | | | | | | | | | | | | Supplemental disclosures of cash flow information: | | | | | | | | | | | Cash paid during the year for interest | | | 130,829 | | | 63,298 | | | 33,742 | |
See accompanying notes to consolidated financial statements.
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand subsidiaries
Consolidated balance sheets | December 31, 2007 and 2006 | (in US$ thousand, except per share amounts) |
| | Notes | | 2007 | | 2006 | | Assets | | | | | | | | | | | Cash and due from banks | | | 3,20 | | | 596 | | | 401 | | Interest-bearing deposits in banks (including pledged deposits of $59,308 in 2007 and $33,470 in 2006) | | | 3,20 | | | 476,983 | | | 331,764 | | Trading assets | | | 4,20 | | | 52,597 | | | 130,076 | | Securities available for sale | | | 5,20 | | | 468,360 | | | 346,194 | | Securities held to maturity (market value of $125,118 in 2006) | | | 5,20 | | | - | | | 125,157 | | Loans | | | 6,20 | | | 3,731,838 | | | 2,980,772 | | Less: | | | | | | | | | | | Allowance for loan losses | | | 7,20 | | | 69,643 | | | 51,266 | | Unearned income and deferred fees | | | | | | 5,961 | | | 4,425 | | Loans, net | | | | | | 3,656,234 | | | 2,925,081 | | | | | | | | | | | | | Customers' liabilities under acceptances | | | 20 | | | 9,104 | | | 46,006 | | Premises and equipment (net of accumulated depreciation and amortization of $9,704 in 2007 and $8,043 in 2006) | | | | | | 10,176 | | | 11,136 | | Accrued interest receivable | | | 20 | | | 62,884 | | | 55,238 | | Derivative instruments used for hedging - receivable | | | 18,20 | | | 122 | | | 541 | | Brokerage receivable | | | 20 | | | 44,289 | | | - | | Other assets | | | 8 | | | 9,187 | | | 6,743 | | Total assets | | | | | | 4,790,532 | | | 3,978,337 | | | | | | | | | | | | | Liabilities and stockholders' equity | | | | | | | | | | | | | | | | | | | | | | Deposits: | | | 9,20 | | | | | | | | Noninterest-bearing - Demand | | | | | | 890 | | | 1,620 | | Interest-bearing - Demand | | | | | | 110,606 | | | 130,510 | | Time | | | | | | 1,350,875 | | | 924,147 | | Total deposits | | | | | | 1,462,371 | | | 1,056,277 | | | | | | | | | | | | | Trading liabilities | | | 4,20 | | | 90,765 | | | 54,832 | | Securities sold under repurchase agreements | | | 5,20 | | | 283,210 | | | 438,356 | | Short-term borrowings | | | 10,20 | | | 1,221,500 | | | 1,157,248 | | Borrowings and long-term debt | | | 11,20 | | | 1,010,316 | | | 558,860 | | Acceptances outstanding | | | 20 | | | 9,104 | | | 46,006 | | Accrued interest payable | | | 20 | | | 39,198 | | | 28,420 | | Derivative instruments used for hedging - payable | | | 18,20 | | | 16,899 | | | 2,634 | | Reserve for losses on off-balance sheet credit risk | | | 7 | | | 13,727 | | | 27,195 | | Other liabilities | | | 12 | | | 31,191 | | | 24,614 | | Total liabilities | | | | | | 4,178,281 | | | 3,394,442 | | | | | | | | | | | | | Stockholders' equity: | | | 13,14,15,19 | | | | | | | | Class "A" common stock, no par value, assigned value of $6.67 (Authorized 40,000,000; outstanding 6,342,189) | | | | | | 44,407 | | | 44,407 | | Class "B" common stock, no par value, assigned value of $6.67 (Authorized 40,000,000; outstanding 2,660,847 in 2007 and 2,725,390 in 2006) | | | | | | 21,528 | | | 21,959 | | Class "E" common stock, no par value, assigned value of $6.67 (Authorized 100,000,000; outstanding 27,367,113 in 2007 and 27,261,495 in 2006) | | | | | | 214,045 | | | 213,614 | | Additional paid-in capital in excess of assigned value to common stock | | | | | | 135,142 | | | 134,945 | | Capital reserves | | | | | | 95,210 | | | 95,210 | | Retained earnings | | | | | | 245,348 | | | 205,200 | | Accumulated other comprehensive income (loss) | | | 5,19 | | | (9,641 | ) | | 3,328 | | Treasury stock | | | 13 | | | (133,788 | ) | | (134,768 | ) | Total stockholders' equity | | | | | | 612,251 | | | 583,895 | | | | | | | | | | | | | Commitments and contingent liabilities | | | 8,16,17,18,21 | | | | | | | | | | | | | | | | | | | Total liabilities and stockholders' equity | | | | | | 4,790,532 | | | 3,978,337 | |
The accompanying notes are part of these consolidated financial statements.
Banco Latinoamericano de Exportaciones, S. A. and subsidiaries
Consolidated statements of income | Years ended december 31, 2007, 2006 and 2005 | (in US$ thousand, except per share amounts) |
| | Notes | | 2007 | | 2006 | | 2005 | | Interest income: | | | | | | | | | | | | | | Deposits with banks | | | | | | 17,001 | | | 8,973 | | | 5,121 | | Trading assets | | | | | | 5,315 | | | 5,810 | | | - | | Investment securities: | | | | | | | | | | | | | | Available for sale | | | | | | 19,595 | | | 16,780 | | | 7,755 | | Held to maturity | | | | | | 1,337 | | | 5,985 | | | 2,219 | | Loans | | | | | | 221,621 | | | 165,802 | | | 101,728 | | Total interest income | | | | | | 264,869 | | | 203,350 | | | 116,823 | | Interest expense: | | | | | | | | | | | | | | Deposits | | | | | | 70,443 | | | 56,611 | | | 29,559 | | Trading liabilities | �� | | | | | 4,197 | | | 4,639 | | | - | | Short-term borrowings | | | | | | 70,244 | | | 55,000 | | | 20,408 | | Borrowings and long-term debt | | | | | | 49,415 | | | 28,263 | | | 21,603 | | Total interest expense | | | | | | 194,299 | | | 144,513 | | | 71,570 | | Net interest income | | | | | | 70,570 | | | 58,837 | | | 45,253 | | | | | | | | | | | | | | | | Reversal (provision) for loan losses | | | 7 | | | (11,994 | ) | | (11,846 | ) | | 54,155 | | Net interest income, after reversal of provision for loan losses | | | | | | 58,576 | | | 46,991 | | | 99,408 | | | | | | | | | | | | | | | | Other income (expense): | | | | | | | | | | | | | | Reversal (provision) for losses on off-balance sheet credit risk | | | 7 | | | 13,468 | | | 24,891 | | | (15,781 | ) | Fees and commissions, net | | | | | | 5,555 | | | 6,393 | | | 5,824 | | Activities of hedging derivative instruments | | | 18 | | | (989 | ) | | (225 | ) | | 2,338 | | Recoveries on assets, net of impairments | | | 5,8 | | | (500 | ) | | 5,551 | | | 10,206 | | Trading gains | | | | | | 23,866 | | | 879 | | | - | | Net gain on sale of securities available for sale | | | 5 | | | 9,119 | | | 2,568 | | | 206 | | Gain (loss) on foreign currency exchange | | | | | | 115 | | | (253 | ) | | 3 | | Other income (expense), net | | | | | | (6 | ) | | 36 | | | 5 | | Net other income | | | | | | 50,628 | | | 39,840 | | | 2,801 | | | | | | | | | | | | | | | | Operating expenses: | | | | | | | | | | | | | | Salaries and other employee expenses | | | | | | 22,049 | | | 16,826 | | | 13,073 | | Depreciation and amortization of premises and equipment | | | | | | 2,555 | | | 1,406 | | | 869 | | Professional services | | | | | | 3,562 | | | 2,671 | | | 3,281 | | Maintenance and repairs | | | | | | 1,188 | | | 1,000 | | | 1,172 | | Other operating expenses | | | | | | 7,673 | | | 7,026 | | | 6,296 | | Total operating expenses | | | | | | 37,027 | | | 28,929 | | | 24,691 | | | | | | | | | | | | | | | | Income before cumulative effect of changes in accounting principles | | | | | | 72,177 | | | 57,902 | | | 77,518 | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 7,15 | | | - | | | - | | | 2,733 | | Cumulative effect on prior year (to December 31, 2004) of an early adoption of the fair-value-based method of accounting stock-based employee compensation plan | | | 14,15 | | | - | | | - | | | (150 | ) | Net income | | | | | | 72,177 | | | 57,902 | | | 80,101 | | | | | | | | | | | | | | | | Basic earnings per share: | | | 7,14,15 | | | | | | | | | | | Income before cumulative effect of changes in accounting principles | | | | | | 1.99 | | | 1.56 | | | 2.01 | | Cumulative effect of changes in accounting principles | | | | | | 0.00 | | | 0.00 | | | 0.07 | | Net income per share | | | | | | 1.99 | | | 1.56 | | | 2.08 | | | | | | | | | | | | | | | | Diluted earnings per share: | | | 7,14,15 | | | | | | | | | | | Income before cumulative effect of changes in accounting principles | | | | | | 1.98 | | | 1.54 | | | 1.99 | | Cumulative effect of changes in accounting principles | | | | | | 0.00 | | | 0.00 | | | 0.07 | | Net income per share | | | | | | 1.98 | | | 1.54 | | | 2.06 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic earnings per share | | | | | | 1.99 | | | 1.56 | | | 2.01 | | | | | | | | | | | | | | | | Diluted earnings per share | | | | | | 1.98 | | | 1.54 | | | 1.99 | | | | | | | | | | | | | | | | Average basic shares | | | | | | 36,349 | | | 37,065 | | | 38,550 | | | | | | | | | | | | | | | | Average diluted shares | | | | | | 36,414 | | | 37,572 | | | 38,860 | |
The accompanying notes are part of these consolidated financial statements.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Consolidated statements of changes in stockholders' equity | Years ended december 31, 2007, 2006 and 2005 | (in US$ thousand) |
| | | | | | | | | | Accumulated | | | | | | | | | | Additional | | | | | | other | | | | Total | | | | Common | | paid-in | | Capital | | Retained | | comprehensive | | Treasury | | stockholders’ | | | | stock | | capital | | reserves | | earnings | | income (loss) | | stock | | equity | | | | | | | | | | | | | | | | | | Balances at January 1, 2005 | | | 279,978 | | | 133,786 | | | 95,210 | | | 233,701 | | | 6,082 | | | (92,627 | ) | | 656,130 | | Net income | | | - | | | - | | | - | | | 80,101 | | | - | | | - | | | 80,101 | | Other comprehensive income | | | - | | | - | | | - | | | - | | | (5,463 | ) | | - | | | (5,463 | ) | Compensation cost - indexed stock options plan | | | - | | | 555 | | | - | | | - | | | - | | | - | | | 555 | | Issuance of restricted stocks | | | - | | | - | | | - | | | (57 | ) | | - | | | 152 | | | 95 | | Exercised stock options pursuant to compensation plan | | | - | | | - | | | - | | | (4 | ) | | - | | | 8 | | | 4 | | Repurchase of Class "E" common stock | | | - | | | - | | | - | | | - | | | - | | | (13,815 | ) | | (13,815 | ) | Difference in fractional shares in conversion of common stocks | | | 1 | | | (1 | ) | | - | | | - | | | - | | | - | | | - | | Dividends declared | | | - | | | - | | | - | | | (100,825 | ) | | - | | | - | | | (100,825 | ) | Balances at December 31, 2005 | | | 279,979 | | | 134,340 | | | 95,210 | | | 212,916 | | | 619 | | | (106,282 | ) | | 616,782 | | Net income | | | - | | | - | | | - | | | 57,902 | | | - | | | - | | | 57,902 | | Comprehensive income | | | - | | | - | | | - | | | - | | | 2,709 | | | - | | | 2,709 | | Compensation cost - indexed stock options plan | | | - | | | 606 | | | - | | | - | | | - | | | - | | | 606 | | Issuance of restricted stocks | | | - | | | - | | | - | | | (49 | ) | | - | | | 144 | | | 95 | | Exercised stock options pursuant to | | | | | | | | | | | | | | | | | | | | | | | compensation plan | | | - | | | - | | | - | | | (14 | ) | | - | | | 27 | | | 13 | | Repurchase of Class "E" common stock | | | - | | | - | | | - | | | - | | | - | | | (28,657 | ) | | (28,657 | ) | Difference in fractional shares in conversion of common stocks | | | 1 | | | (1 | ) | | - | | | - | | | - | | | - | | | - | | Dividends declared | | | - | | | - | | | - | | | (65,555 | ) | | - | | | - | | | (65,555 | ) | Balances at December 31, 2006 | | | 279,980 | | | 134,945 | | | 95,210 | | | 205,200 | | | 3,328 | | | (134,768 | ) | | 583,895 | | Net income | | | - | | | - | | | - | | | 72,177 | | | - | | | - | | | 72,177 | | Comprehensive income | | | - | | | - | | | - | | | - | | | (12,969 | ) | | - | | | (12,969 | ) | Compensation cost - stock options plan | | | - | | | 1,130 | | | - | | | - | | | - | | | - | | | 1,130 | | Issuance of restricted stocks | | | - | | | (644 | ) | | - | | | - | | | - | | | 531 | | | (113 | ) | Exercised stock options pursuant to compensation plan | | | - | | | (289 | ) | | - | | | - | | | - | | | 449 | | | 160 | | Dividends declared | | | - | | | - | | | - | | | (32,029 | ) | | - | | | - | | | (32,029 | ) | Balances at December 31, 2007 | | | 279,980 | | | 135,142 | | | 95,210 | | | 245,348 | | | (9,641 | ) | | (133,788 | ) | | 612,251 | |
The accompanying notes are part of these consolidated financial statements.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Consolidated statements of comprehensive income | Years ended december 31, 2007, 2006 and 2005 | (in US$ thousand) |
| | Notes | | 2007 | | 2006 | | 2005 | | | | | | | | | | | | Net income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income before cumulative effect of changes in accounting principles | | | | | | 72,177 | | | 57,902 | | | 77,518 | | | | | | | | | | | | | | | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 7 | | | - | | | - | | | 2,733 | | | | | | | | | | | | | | | | Cumulative effect on prior year (to December 31, 2004) of an early adoption of the fair value-based method of accounting stock-based employee compensation plan | | | 14,15 | | | - | | | - | | | (150 | ) | Net income | | | | | | 72,177 | | | 57,902 | | | 80,101 | | | | | | | | | | | | | | | | Other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized gains (losses) on securities available for sale: | | | | | | | | | | | | | | Unrealized gains (losses) arising from the year | | | 19 | | | (1,912 | ) | | 5,349 | | | (5,257 | ) | Less: Reclassification adjustments for gains included in net income | | | 5,19 | | | (9,119 | ) | | (2,568 | ) | | (206 | ) | Net change in unrealized gains (losses) on securities available for sale | | | | | | (11,031 | ) | | 2,781 | | | (5,463 | ) | | | | | | | | | | | | | | | Unrealized losses on derivative financial instruments: | | | | | | | | | | | | | | Unrealized losses arising from the year | | | 19 | | | (2,081 | ) | | (72 | ) | | - | | Less: Reclassification adjustments for net losses included in net income | | | 19 | | | 143 | | | - | | | - | | | | | | | | | | | | | | | | Net change in unrealized losses on derivative financial instruments | | | | | | (1,938 | ) | | (72 | ) | | - | | | | | | | | | | | | | | | | Other comprehensive income (loss) | | | | | | (12,969 | ) | | 2,709 | | | (5,463 | ) | | | | | | | | | | | | | | | Comprehensive income | | | | | | 59,208 | | | 60,611 | | | 74,638 | |
The accompanying notes are part of these consolidated financial statements.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Consolidated Statements of Cash Flows | Years Ended December 31, 2007, 2006 and 2005 | (in US$ thousand) |
| | 2007 | | 2006 | | 2005 | | Cash flows from operating activities: | | | | | | | | | | | Income before cumulative effect of changes in accounting principles | | | 72,177 | | | 57,902 | | | 77,518 | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | - | | | - | | | 2,733 | | Cumulative effect on prior year (to December 31, 2004) of an early adoption of the fair-value based method of accounting stock-based employee compensation plan | | | - | | | - | | | (150 | ) | Net income | | | 72,177 | | | 57,902 | | | 80,101 | | Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | | | | | | Activities of hedging derivative instruments | | | 1,258 | | | 312 | | | (85 | ) | Depreciation and amortization of premises and equipment | | | 2,555 | | | 1,406 | | | 869 | | Provision (reversal) for loan losses | | | 11,994 | | | 11,846 | | | (54,155 | ) | Provision (reversal) for losses on off-balance sheet credit risk | | | (13,468 | ) | | (24,891 | ) | | 15,781 | | Impairment loss on assets | | | 500 | | | - | | | 469 | | Net gain on sale of securities available for sale | | | (9,119 | ) | | (2,568 | ) | | (206 | ) | Compensation cost - stock options plans | | | 1,130 | | | 606 | | | 555 | | Issuance of restricted stock | | | (113 | ) | | 95 | | | 95 | | Deferred compensation awards | | | - | | | 13 | | | 3 | | Amortization of premiums and discounts on investments | | | 6,268 | | | 4,748 | | | 2,343 | | Net decrease (increase) in operating assets: | | | | | | | | | | | Trading assets | | | 77,479 | | | (130,076 | ) | | - | | Accrued interest receivable | | | (7,646 | ) | | (24,984 | ) | | (14,806 | ) | Derivative financial instruments | | | - | | | - | | | 25 | | Brokerage receivable | | | (44,289 | ) | | - | | | - | | Other assets | | | (2,944 | ) | | 4,552 | | | (5,804 | ) | Net increase (decrease) in operating liabilities: | | | | | | | | | | | Trading liabilities | | | 35,933 | | | 54,832 | | | - | | Accrued interest payable | | | 10,778 | | | 13,684 | | | 8,259 | | Other liabilities | | | 4,261 | | | 2,108 | | | (5,958 | ) | Net cash provided by (used in) operating activities | | | 146,754 | | | (30,415 | ) | | 27,486 | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | Net increase in pledged interest bearing deposits | | | (25,838 | ) | | (28,470 | ) | | (800 | ) | Net increase in loans | | | (864,971 | ) | | (384,433 | ) | | (179,315 | ) | Proceeds from the sale of loans | | | 121,824 | | | 12,500 | | | - | | Net acquisition of premises and equipment | | | (1,595 | ) | | (9,289 | ) | | (614 | ) | Proceeds from the redemption of securities available for sale | | | 19,074 | | | 20,000 | | | 26,000 | | Proceeds from the maturity of securities held to maturity | | | 125,000 | | | 9,000 | | | - | | Proceeds from the sale of securities available for sale | | | 578,697 | | | 129,731 | | | 276,524 | | Purchases of investment securities | | | (716,472 | ) | | (419,143 | ) | | (326,307 | ) | Net cash used in investing activities | | | (764,281 | ) | | (670,104 | ) | | (204,512 | ) | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | Net increase in due to depositors | | | 406,094 | | | 9,659 | | | 182,458 | | Net (decrease) increase in short-term borrowings and securities sold under repurchase agreements | | | (90,894 | ) | | 834,905 | | | 55,981 | | Proceeds from borrowings and long-term debt | | | 613,126 | | | 133,680 | | | 309,962 | | Repayments of borrowings and long-term debt | | | (161,670 | ) | | (108,680 | ) | | (179,723 | ) | Dividends paid | | | (29,713 | ) | | (63,364 | ) | | (100,825 | ) | Redemption of redeemable preferred stock | | | - | | | (3,216 | ) | | (2,711 | ) | Exercised stock options | | | 160 | | | - | | | - | | Repurchase of common stock | | | - | | | (28,657 | ) | | (13,815 | ) | Net cash provided by financing activities | | | 737,103 | | | 774,327 | | | 251,327 | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 119,576 | | | 73,808 | | | 74,301 | | Cash and cash equivalents at beginning of the year | | | 298,695 | | | 224,887 | | | 150,586 | | Cash and cash equivalents at end of the year | | | 418,271 | | | 298,695 | | | 224,887 | | | | | | | | | | | | | Supplemental disclosures of cash flow information: | | | | | | | | | | | Cash paid during the year for interest | | | 183,521 | | | 130,829 | | | 63,298 | |
The accompanying notes are part of these consolidated financial statements.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements
December 31, 2006 and 2005
| Banco Latinoamericano de Exportaciones, S. A. (“Bladex Head Office” and together with its subsidiaries “Bladex” or the “Bank”), headquartered in Panama City, Republic of Panama, is a specialized supranational bank established to finance trade in Latin America and the Caribbean (the “Region”). The Bank was established pursuant to a May, 1975 proposal presented to the XX 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, constitutedincorporated in 1978 as a corporation pursuant to the laws of the Republic of Panama, and officially initiated operations on January 2, 1979. |
The Bank operates under a general banking license issued by the National Banking Commission of Panama, predecessor of the SuperintendenceSuperintendency of Banks of Panama (“the SBP”(the “SBP”), and is subject to its supervision and inspection. 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. Its wholly owned subsidiaries: Clavex LLC, incorporated on June 15, 2006, under the laws of the State of Delaware, provides digital identification solutions to improve international commerce and electronic banking in the Region; and subsidiaries are:
| · | Bladex Asset Management, Inc., incorporated on May 24, 2006, under the laws of the State of Delaware, USA, serves as investment manager for Bladex Offshore Feeder Fund (the “Feeder”) and Bladex Capital Growth Fund (the “Fund”). |
| · | Clavex LLC, incorporated on June 15, 2006, under the laws of the State of Delaware, USA, ceased operations in February 2007. |
The Feeder is a wholly owned subsidiary, incorporated on February 21, 2006 under the laws of Cayman Islands, and in turn is the sole owner of the Fund, which was also incorporated under the laws of Cayman Islands on February 21, 2006. Both companies are investment funds that started operations in April 2006 and share the same investment objectives. The Feeder invests substantially all of its assets in the Fund. The objective of the Fund is to achieve capital appreciation by investing in Latin American debt securities, indexed funds, currencies, and trading derivative instruments.
Bladex Representacao Ltda., incorporated under the laws of Brazil on January 7, 2000, acts as the Bank’s representative office in Brazil. Bladex Representacao Ltda. is 99.999% owned by Bladex Head Office and 0.001% owned by Bladex Holdings Inc.
Clavex, S.A., is a wholly owned subsidiary, incorporated on May 18, 2006, under the laws of the Republic of Panama, to mainly provide digital identification solutions to improve international commerce and electronic banking in the Region.specialized training.
| The Bank has an agency in New York City, USA (the "New York Agency"), which began operations on March 27, 1989. The New York Agency is principally engaged in financing transactions related to international trade, mostly the confirmation and financing of letters of credit for customers of the Region. The Bank also has representative offices in Buenos Aires, Argentina, and in Mexico City, D.F., Mexico. On March 27, 2006, the Federal Reserve Bank of the USA approved Bladex´s request to establish an office in Miami, Florida. On October 30, 2006, the Bank received the authorization by the Financial Services Commission - Office of Financial Regulation of the State of Florida, to transact business in Florida as an International Administrative Office. | Bladex Head Office has an agency in New York City, USA (the "New York Agency"), which began operations on March 27, 1989. The New York Agency is principally engaged in financing transactions related to international trade, mostly the confirmation and financing of letters of credit for customers of the Region. The New York Agency is also licensed by the State of New York Banking Department, USA, to operate an International Banking Facility (“IBF”). The Bank also has representative offices in Buenos Aires, Argentina, and in Mexico City, D.F., Mexico, and an international administrative office in Miami, Florida, USA.
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements In addition, Banco Latinoamericano de Exportaciones Limited, a wholly owned subsidiary incorporated under the laws of the Cayman Islands (B.W.I.) ceased its banking operations on November 30, 2004 and was dissolved in 2005. All financial assets and liabilities were transferred to Bladex Head Office and recorded at their carrying amount.amount on the date of the transfer.
(2)2. Summary of Significant Accounting Policiessignificant accounting policies
| (a)a)
| Basis of Presentationpresentation |
The
These consolidated financial statements have been prepared under accounting principles generally accepted accounting principles in the United States of America (“U.S. GAAP”). All amounts presented in the consolidated financial statements and notes are expressed in U.S. dollars.dollars of the United Stated of America (“US$”), which is the Bank’s functional currency. The accompanying consolidated financial statements have been translated from Spanish version to English version for users outside of the Republic of Panama.
| (b)b) | PrinciplePrinciples of Consolidationconsolidation
|
The consolidated financial statements include the accounts of Bladex Head Office, its agencies and subsidiaries. All intercompany balances and transactions have been eliminated for consolidation purposes.
| c) | The consolidated financial statements include the accountsUse of Bladex Head Office, its agencies and subsidiaries. All inter-company balances and transactions have been eliminated for consolidation purposes.estimates |
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant changes relate to the determination of the allowances for credit losses, impairment losses on assets, impairment of securities available for sale and held to maturity, and the fair value of financial instruments. Actual results could differ from those estimates. Management believes these estimates are adequate.
| | Certain amounts in prior years have been reclassified to conform to the current year’s presentation. |
d)
| (d) | Use of EstimatesCash equivalents
|
| | The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates that are particularly susceptible to significant change relate to the determination of the allowances for credit losses and impairment losses on assets. Actual results could differ from those estimates. Management believes these estimates are adequate. |
Cash equivalents consist of due from banks and interest-bearing deposits within banks with original maturities of three months or less, except deposits pledged.
| (f) | e) | Repurchase and Resale Agreementsagreements |
Repurchase and resale agreements representsrepresent collateralized financing transactions used to increase liquidity and are carried at the amounts at which the securities will be subsequently reacquired or resold, including accrued interest, as specified in the respective agreements. The Bank’s policy is to take possession of securities purchased under agreements to resell and to relinquish possession of the securities sold under agreements to repurchase. The market value of securities to be repurchased and resold is permanently monitored, and additional collateral is provided where appropriate, to protect against credit exposure.
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements
| (g)f) | Trading Assetsassets and Liabilitiesliabilities |
Trading assets include mainly debt instruments and shares in indexed funds that have been bought and held principally for the purpose of selling them in the near term. Trading liabilities include debt instruments that the Bank has sold to other parties but does not own (“short” positions). The Bank is obliged to purchase securities at a future date to cover short positions. Included in trading assets and trading liabilities are the reported receivables (unrealized gains) and payables (unrealized losses) related to derivatives.derivative instruments. These amounts include the derivative assets and liabilities net of cash received andor paid, respectively, under legally enforceable master netting agreements. Trading assets and trading liabilities are carried at fair value, which is determined based upon quoted prices when available, or if quoted market prices are not available, on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security. Unrealized and realized gains and losses on trading positionsassets and liabilities are recorded in earnings as trading gains (losses).
Transactions traded not yet settled at the consolidated balance sheet date are recorded as brokerage receivables and payables.
| (h) | g) | Investment Securitiessecurities |
Securities are classified at the date of purchase based on the ability and intent to sell or hold them as investments. These securities consist of debt securities such as: negotiable commercial paper, bonds and floating rate notes.
| 1) | Securities Available for Sale |
xSecurities available for sale
These securities consist of debt instruments that the Bank buys with the intention of selling them prior to maturity and are subject to the same approval criteria as the rest of the credit portfolio. These securities are carried at fair value, based on quoted market prices when available, or if quoted market prices are not available, on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security. Unrealized gains and losses are reported as net increase or decreases to accumulated other comprehensive income (loss) in equity until they are realized.
Securities held to maturity | 2) | Securities Held to Maturity |
| | Securities classified as held to maturity represent securities that the Bank has the ability and the intent to hold until maturity. These securities are carried at amortized cost and are subject to the same approval criteria as the rest of the credit portfolio. |
| | Interest on securities is recognized based on the interest method. Amortization of premiums and accretion of discounts, are included in interest income as an adjustment to the yield. Realized gains and losses from the sales of securities available for sale, which are included in realized gain (loss) from investment securities, are determined using the specific identification method. Impairment is evaluated considering numerous factors, and their relative significance varies case by case. Factors considered include the length of time and extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability to retain the security in order to allow for an anticipated recovery in market value. If, based on the analysis, it is determined that the impairment is other-than-temporary, the security is written down to its fair value, and a loss is recognized through earnings as impairment loss on assets. Accrual of income is suspended on fixed maturities that are in default, or on which it is likely that future interest payments will not be received as scheduled. |
Interest on securities is recognized based on the interest method. Amortization of premiums and accretion of discounts are included in interest income as an adjustment to the yield. Realized gains and losses from the sales of securities which are included in realized gain (loss) from investment securities, are determined using the specific identification method.
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements Impairment of investments is evaluated considering numerous factors, and their relative significance varies case by case. Factors considered include the length of time and extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer and the intent and ability of the Bank to retain the security in order to allow for an anticipated recovery in market value. If, based on the analysis, it is determined that the impairment is other-than-temporary, the security is written down to its fair value, and a loss is recognized through earnings as impairment loss on assets. Accrual of income is suspended on fixed maturities that are in default, or on which it is likely that future interest payments will not be received as scheduled.
An investment in a private investment fund and other equity
Other investments, that mainly consist of unlisted stock, are reportedrecorded at cost and are included in other assets. The Bank determined that it is not practicable to estimateobtain the fairmarket value of these investments, as these shares are not traded in a secondary market. Impairment of these investments is assessed annually.evaluated periodically and declines that are determined to be other than temporary are charged to earnings as impairment on assets.
| | Loans are reported at their principal amounts outstanding net of unearned income, deferred loan fees and allowance for loan losses. Interest income is recognized using the interest method. The amortization of net unearned income and deferred loan fees are recognized as an adjustment to the related loan yield over the term of the loan by a method that approximates the interest method. |
| | Loans are identified as impaired and placed on a cash basis (non-accrual) when interest or principal is past due for 90 days or more, or before if the Bank's management determines that the ultimate collection of principal or interest is doubtful. Factors considered by the Bank’s management in determining impairment include collection status, collateral value, the probability of collecting scheduled principal and interest payment when due, and economic conditions in the borrowing country. Any interest receivable is reversed and charged-off against earnings. Interest on non-accruing loans is only recorded as earned when collected. Non-accruing loans are returned to an accrual status when (1) all contractual principal and interest amounts are reasonably assured of repayment (2) there is a sustained period of repayment performance in accordance with the contractual terms of at least six months, which is the minimum required by the SBP; and (3) if in the Bank’s management’s opinion the loan is fully collectible. When current events or available information confirms that specific impaired loans or portions thereof are uncollectible, such impaired loans are charged-off against the allowance for loan losses. | Loans are reported at their principal amounts outstanding net of unearned income, deferred fees and allowance for loan losses. Interest income is recognized using the interest method. The amortization of net unearned income and deferred fees are recognized as an adjustment to the related loan yield using the interest method.
| | A loan is classified as a troubled debt restructuring if a significant concession in amount, maturity or interest rate is granted to the borrower due to the deterioration in its financial condition. Marketable securities received in exchange for loan claimsPurchased loans are recorded at acquisition cost. The difference between the principal and the acquisition cost of loans, the premiums and discounts, is amortized over the life of the loan as an adjustment to the yield. All other costs related to acquisition of loans are expensed when incurred.
Loans are identified as impaired and placed on a cash (non-accrual) basis when interest or principal is past due for 90 days or more, or before if the Bank's management determines that the ultimate collection of principal or interest is doubtful. Factors considered by the Bank’s management in determining impairment include collection status, collateral value, the probability of collecting scheduled principal and interest payments when due, and economic conditions in the borrower’s country of residence. Any interest receivable is reversed and charged-off against earnings. Interest on non-accruing loans is only recorded as earned when collected. Non-accruing loans are returned to an accrual status when (1) all contractual principal and interest amounts are current (2) there is a sustained period of repayment performance in accordance with the contractual terms of at least six months; and (3) if in the Bank management’s opinion the loan is fully collectible. When current events or available information confirm that specific impaired loans or portions thereof are uncollectible, such impaired loans are charged-off against the allowance for loan losses.
A loan is classified as a troubled debt restructuring if a significant concession in amount, maturity or interest rate is granted to the borrower due to the deterioration in its financial condition. Marketable securities received in exchange for loan under debt restructurings are initially recorded at fair value, with any gain or loss recorded as recovery or charge to the allowance, and are subsequently accounted for as securities available for sale. |
| | Transfers of financial assets, primarily loans, are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Bank; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Upon completion of a transfer of assets that satisfies the conditions described above to be accounted for as a sale, the Bank recognizes the assets as sold and records in earnings any gain or loss on the sale. The Bank may retain interest in loans sold in the form of servicing rights. Service rights are only recognized when the benefits of the service exceeds the costs associated with the responsibility of that service. |
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements
Transfers of financial assets, primarily loans, are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Bank; (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Upon completion of a transfer of assets that satisfies the conditions described above to be accounted for as a sale, the Bank recognizes the assets as sold and records in earnings any gain or loss on the sale. The Bank may retain interest in loans sold in the form of servicing rights. Service rights are only recognized when the benefits of the service exceeds the costs associated with the responsibility of that service.
| (k)j) | Allowance for Credit Lossescredit losses |
The allowance for credit losses is provided for losses derived from the credit extension process, inherent in the loan portfolio and off-balance sheet financial instruments, using the reserve method of providing for credit losses. Additions to the allowance for credit losses are made by charges to earnings. Credit losses are deducted from the allowance, and subsequent recoveries are added. The allowance is also decreased by reversals of the allowance back to earnings. The allowance attributable to loans is reported as a deduction of loans and the allowance for off-balance sheet credit risk, such as: letters of credit and guarantees, is reported as a liability.
The allowance for possible credit losses includes an asset-specific component and a formula-based component. The asset-specific component relates to provision for losses on credits considered impaired and measured on a case-by-case basis. An allowance is established when the discounted cash flows (or collateral value of observable market price) of the credit is lower than the carrying value of that credit. The formula-based component covers the Bank’s performing credit portfolio and is established based in a process that estimates the probable loss inherent in the portfolio, based on statistical analysis and management’s qualitative judgment. The statistical calculation is a product of internal risk classifications, probabilities of default and loss given default. The probability of default is supported by Bladex´sBladex’s historical portfolio performance complemented by probabilities of default provided by external sources for higher risk cases, in view of the greater robustness of this external data for such cases. The loss given default utilized is based on Bladex´sBladex’s historical losses experience and best practices.
| (l) | k) | Fair Valuevalue of Guarantees Including Indirect Indebtednessguarantees including indirect indebtedness of Othersothers |
The Bank recognizes a liability for the fair value of all the obligations undertaken such as stand-by letters of credit and guarantees. Fair value is calculated based on the present value of the premium to be received based on FIN 45 or a specific allowance for off-balance sheet allowance based on FAS 5,credit contingencies, whichever is greater.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
| (m)l) | Fees and Commissionscommissions |
Loan origination fees, net of direct loan origination costs, are deferred, and the net amount is recognized as revenue over the contractual term of the loans as an adjustment to the yield. These fees, net of direct loan origination costs,fees are not recognized as revenue during periods in which interest income on loans is suspended because of concerns about the realization of loan principal or interest. Underwriting fees are recognized as revenue when the Bank has rendered all services to the issuer and is entitled to collect the fee from the issuer.issuer, when there are no contingencies related to the fee. Underwriting fees are recognized net of syndicate expenses. In addition, the Bank recognizes credit arrangement and syndication fees as revenue after satisfying certain retention, timing and yield criteria. Fees received in connection with a modification of terms of a troubled debt restructuring are applied as a reduction of the recorded investment in the loan. All related costs, including direct loan origination costs, are charged to expense as incurred. Fees earned on letters of credit, guarantees and other commitments are amortized using the straight-line method over the life of such instruments.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
| (n) | m) | Premises and Equipmentequipment |
Premises and equipment, including the electronic data processing equipment, are carried at cost less accumulated depreciation and amortization, except land, which is carried at cost. Depreciation isand amortization are charged to operations using the straight-line method, and is provided over the estimated useful life of the related asset. The estimated original useful life for building is 40 years and for furniture and equipment is 3 to 5 years.
| | The Bank capitalizes the cost of internal-use software that has a useful life in excess of one year in accordance with SOP 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. These costs consist of payments made to third parties related to the use of licenses and installation of both, software and hardware, and other related costs.The Bank defers the cost of internal-use software that has a useful life in excess of one year in accordance with SOP 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”. These costs consist of payments made to third parties related to the use of licenses and installation of both, software and hardware. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. Capitalized internal use software costs will be amortized using the straight-line method over their estimated useful lives, generally consisting of 3 to 5 years. |
| (o)n) | Capital Reservesreserves |
According to Panamanian banking regulations, capital
Capital reserves are established by the Bank as a carve-outsegregation of retained earnings and are, as such, a form of retained earnings. ReductionsEven though their constitution is not required by the SBP, reductions of these capital reserves require the approval of the Bank’s Board of Directors and the SBP.
| (p)o) | Cash and Stock Based Compensation Planstock-based compensation plan |
In year 2005, the Bank chose to make an early adoption of theadopt Statement of Financial Accounting Standards (“SFAS”) No.123(R), “Share-Based Payment”, which established the use of the fair-value-based method of accounting for stock-based employee compensation. As prescribed in this standard, thecompensation to key employees and directors. The Bank elected to use the “modified prospective application” for new and previously granted awards that are not fully vested on the effective date. Compensation cost is based on the fair value of the awards granted and is recognized over the requisite service period of the award. The fair value of each option is estimated at the grant date using the Black-Scholes option-pricing model. The Bank has the policy of re-issuing shares from treasury shares. As a result of the early adoption of this rule, a compensation cost of $555 thousand was recorded during 2005. The adjustment of $150 thousandshares, when options are exercised. Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to apply retroactively the new method was included in income of 2005. The pro forma amounts shown on the income statement were adjusted for the effect of retroactive application of compensation cost, which would have been applied, had the new method been in effect. Before the application of FAS 123(R), the Bank applied the intrinsic method as provided in Accounting Principles Board Opinion No.25 (APB 25), “Accounting for Stock Issued to Employees” and related interpretations and accordingly, no compensation cost was recognized for stock options in prior years.consolidated financial statements
| (q) | p) | Redeemable Preferred Stockpreferred stock |
The Bank accounts for as liabilities all financial instruments that embody an obligation to the issuer including the Bank’s redeemable preferred stocks.Bank. The accrual of interest payable is charged to interest expense.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
| (r)q)
| Derivative Financial Instrumentsfinancial instruments and Hedge Accountinghedge accounting |
| |
The Bank makes use of derivative financial instruments for its management of interest rate and foreign exchange risks, which represent the majority of the Bank’s derivatives, and foreign exchange risks, which represent the majority of the Bank’s derivatives, as well as for trading purposes. The accounting for changes in value of a derivative depends on whether the contract is for trading purposes or has been designated and qualifies for hedge accounting. |
Derivatives held for trading purposes include interest rate swaps, forward foreign exchange contracts and credit default swaps, as part of the Fund’s trading activity, and those used for risk management purposes that do not qualify for hedge accounting. The fair value of trading derivatives is reported as trading assets and trading liabilities, as applicable. Changes in realized and unrealized gains and losses and interest flows from these trading instruments are included in trading gains (losses).
Derivatives for hedging purposes primarily include interest rate swaps and forward foreign exchange contracts. Derivative contracts designated and qualifying as fair value hedge are reported as other assets and other liabilities and hedge accounting is applied. In order to qualify for hedge accounting, a derivative must be considered highly effective at reducing the risk associated with the exposure being hedged. Each derivative must be designated as a hedge, with documentation of the risk management objective and strategy, including identification of the hedging instrument, the hedged item and the risk exposure, as well as how effectiveness will be assessed prospectively and retrospectively. The extent to which a hedging instrument is effective at achieving offsetting changes in fair value or cash flows must be assessed at least quarterly. Any ineffectiveness must be reported in current-period earnings. The Bank discontinues hedge accounting prospectively in the following situations:
| 1. | It is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item. |
| 2. | The derivative expires or is sold, terminated or exercised. |
| 3. | The Bank otherwise determines that designation of the derivative as a hedging instrument is no longer appropriate. |
The Bank carries all derivatives in the consolidated balance sheet at fair value. For qualifying fair value hedges, all changes in the fair value of the derivative and the fair value of the item for the risk being hedged are recognized in earnings. If the hedge relationship is terminated, then the fair value adjustment to the hedge item continues to be reported as part of the basis of the item and is amortized to earnings as a yield adjustment. For qualifying cash flow hedges, the effective portion of the change in the fair value of the derivative is recorded in other comprehensive income and recognized in the income statement when the hedged cash flows affect earnings. Ineffective portion is recognized in the income statement as activities of hedging derivative instruments. If the cash flow hedge relationship is terminated, then the change in fair value of the derivative recordedrelated amounts in other comprehensive income is recognizedare reclassified into earnings when thehedged cash flows that were hedged occur.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
| (s)r) | Foreign Currency Transactionscurrency transactions |
Assets and liabilities denominated in foreign currencies are re-measured into U.S. dollar equivalents using period-end spot foreign exchange rates. The effects of re-measuring assets and liabilities into the U.S. dollar as the functional currency are included in earnings.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES | | Assets and liabilities denominated in foreign currencies are translated into U.S. dollar equivalents using period-end spot foreign exchange rates. The effects of re-measuring assets and liabilities into the U.S. dollar as the functional currency are included in earnings. |
Notes to Consolidated Financial Statements
Bladex Head Office, as well as the Feeder, the Fund and Clavex, S.A., are exempt
| · | Bladex Head Office is exempted from the payment of income taxes in Panama in accordance to its Constitutive Law that granted special benefits, including the total exemption of income tax payment. |
| · | The Feeder and the Fund are not subject to income taxes in accordance to Laws of the Caiman Islands. |
| · | Clavex, S.A. is subject to income taxes in Panama on profits from local operations. |
| · | Bladex Representacao Ltd. is subject to income taxes in Brazil. |
| · | The New York Agency and Bladex’s subsidiaries incorporated in the USA are subject to USA federal and local taxation based on the portion of income that is effectively connected with its operations in that country. |
Such amounts of income taxes. Bladex Representacao Ltd. is subject to income taxes in Brazil. The New York Agency and Bladex´s subsidiaries incorporated in the USA are subject to United States of America federal and local taxation based on the portion of income that is effectively connected with its operations in that country. Such amounts have been immaterial to date.
| (u)t) | Earnings Per Shareper share |
Basic earnings per share (EPS) is computed by dividing income available to common stockholders (the numerator) by the weighted average number of common shares outstanding (the denominator) during the year. Diluted EPSearning per share measures performance incorporating the effect that potential common shares, such as stock options outstanding during the same period, would have on EPS.earning per share. The computation is similar to the computation of EPS,earning per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the diluted potential common shares had been issued.
| (v)u) | RecentRecently Issued Accounting PronouncementsStandards |
FASB StatementSFAS No. 157: Fair Value Measurement
FASBSFAS No. 157 defines fair value, establishes a framework for measuring fair value inunder U.S. GAAP, and enhances disclosures about fair value measurements. This StatementStandard applies when other accounting pronouncements require fair value measurements; it does not require new fair value measurements. This StatementStandard is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those years. Earlier application is encouraged, providedThe Bank does not anticipate any significant effect on its consolidated financial position, operations and cash flows with the entity has not yet issued financial statements, including financial statements for any interim period for that fiscal year.adoption of SFAS No.157.
FASB StatementSFAS No. 158: Employers´ Accounting159: The Fair Value Option for Defined Benefit PensionFinancial Assets and Other Postretirement Plans - an amendmentFinancial Liabilities.
SFAS No. 159 will allow the Bank to report at fair value many of FASB Statements No. 87, 88, 106its financial instruments and 132(R) FASB 158 requires an employercertain other items that are not currently required to recognize in its statement of financial position the overfunded or underfunded statusbe reported at fair value. The valuation of a defined benefit postretirement plan measured as the difference between thefinancial instrument at fair value of plan assets and the benefit obligation. Employers must also recognize as a component of other comprehensive income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period. The Statementis irrevocable once adopted. All changes in fair value are reported in earnings. This standard is effective for public entities with a calendar year end of December 31, 2006. This Statement did not have anyears beginning after November 15, 2007. The Bank is currently evaluating the potential impact on the Banks´its consolidated financial statements.statements of adopting this standard.
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements
(3)3.
| Cash and Cash Equivalentscash equivalents |
| Cash and cash equivalents are as follows: |
| | December 31, | | December 31, | | (In US$ thousand) | | 2006 | | 2005 | | | | | 2007 | | 2006 | | (In thousand of US$) | | | | | | | | | | | | | | | | | | | Cash and due from banks | | | 401 | | | 687 | | | 596 | | | 401 | | Interest bearing deposits with banks | | | 331,764 | | | 229,200 | | Interest bearing deposits in banks | | | | 476,983 | | | 331,764 | | Total | | | 332,165 | | | 229,887 | | | 477,579 | | | 332,165 | | Less: | | | | | | | | | | | | | | Pledged deposits | | | 33,470 | | | 5,000 | | | 59,308 | | | 33,470 | | | | | 298,695 | | | 224,887 | | | 418,271 | | | 298,695 | |
At December 31, 2007 and 2006 pledged deposits within banks include $53.8 million and $28 million, respectively, of collateral advanced on securities sold short for trading purposes.liabilities. On December 31, 20062007 and 2005,2006, the Agency of New York had pledged certificates of deposit with a carrying value of $5.5 million, and $5.0 million, respectively, with the State of New York Banking Department, as required by law since March 1994.
(4)4.
| Trading Assetsassets and Liabilitiesliabilities |
The Bank’s trading activity started in April 2006 and is carried through the Fund incorporated in Cayman Islands. At December 31, 2006, the fair value of trading assets and liabilities is as follows:
(In US$ thousand)
| | Fair Value
| Trading assets:
| | | Government securities | | | 81,077 | Corporate securities | | | 48,655 | Derivative instruments | | | 344 | Total | | | 130,076 | | | | | Trading liabilities:
| | | | Government securities sold short | | | 54,039 | Derivative instruments | | | 793 | Total | | | 54,832 |
| | December 31, | | | | 2007 | | 2006 | | (In thousand of US$) | | | | | | | | | | | | | | | | Trading assets: | | | | | | | | Government bonds | | | 10,891 | | | 81,077 | | Corporate bonds | | | 5,206 | | | 48,655 | | Shares in indexed funds | | | 36,315 | | | - | | Derivative instruments | | | 185 | | | 344 | | Total | | | 52,597 | | | 130,076 | | | | | | | | | | Trading liabilities: | | | | | | | | Government bonds sold short | | | 31,734 | | | 54,039 | | Shares in indexed funds sold short | | | 57,863 | | | - | | Derivative instruments | | | 1,168 | | | 793 | | Total | | | 90,765 | | | 54,832 | |
Trading assets secure all short sale transactions.
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements
(5)5. | Investment Securitiessecurities |
| a) | Securities Available for Sale |
| | The amortized cost, related unrealized gross gain (loss) and fair value of securities available for sale, are as follows: | Securities available for sale
| | December 31, 2006 | (In US$ thousand) | | Amortized Cost | | Unrealized Gross Gain | | Unrealized Gross Loss | | Fair Value | Corporate debt: | | | | | | | | | Brazil | | | 16,985 | | | 69 | | | 129 | | | 16,925 | Chile | | | 16,086 | | | 0 | | | 144 | | | 15,942 | Panama | | | 20,026 | | | 0 | | | 254 | | | 19,772 | | | | 53,097 | | | 69 | | | 527 | | | 52,639 | Government debt: | | | | | | | | | | | | | Argentina | | | 9,421 | | | 69 | | | 6 | | | 9,484 | Brazil | | | 112,370 | | | 3,315 | | | 61 | | | 115,624 | Colombia | | | 97,335 | | | 776 | | | 16 | | | 98,095 | Chile | | | 16,091 | | | 0 | | | 444 | | | 15,647 | El Salvador | | | 4,981 | | | 19 | | | 0 | | | 5,000 | Mexico | | | 48,350 | | | 1,516 | | | 161 | | | 49,705 | | | | 288,548 | | | 5,695 | | | 688 | | | 293,555 | Total | | | 341,645 | | | 5,764 | | | 1,215 | | | 346,194 |
The amortized cost, related unrealized gross gain (loss) and fair value of securities available for sale, are as follows:
| | December 31, 2005 | | December 31, 2007 | | (In US$ thousand) | | Amortized Cost | | Unrealized Gross Gain | | Unrealized Gross Loss | | Fair Value | | (In thousand of US$) | | | Amortized Cost | | Unrealized Gross Gain | | Unrealized Gross Loss | | Fair Value | | | | | | Corporate debt: | | | | | | | | | | | | | | | | | | | | | | Brazil | | | 16,967 | | | 44 | | | 247 | | | 16,764 | | | 67,971 | | | 78 | | | 660 | | | 67,389 | | Chile | | | 16,575 | | | 0 | | | 191 | | | 16,384 | | | 42,849 | | | - | | | 549 | | | 42,300 | | Panama | | | 5,014 | | | 72 | | | 0 | | | 5,086 | | | 20,019 | | | 669 | | | - | | | 20,688 | | | | | 38,556 | | | 116 | | | 438 | | | 38,234 | | | 130,839 | | | 747 | | | 1,209 | | | 130,377 | | Government debt: | | | | | | | | | | | | | | | | | | | | | | | | | | Argentina | | | 4,336 | | | 0 | | | 142 | | | 4,194 | | | 19,546 | | | 22 | | | 28 | | | 19,540 | | Brazil | | | 80,285 | | | 538 | | | 15 | | | 80,808 | | | 59,464 | | | 1,897 | | | 18 | | | 61,343 | | Colombia | | | 11,238 | | | 63 | | | 0 | | | 11,301 | | | 123,084 | | | 2,797 | | | 206 | | | 125,675 | | Chile | | | 16,566 | | | 0 | | | 523 | | | 16,043 | | Dominican Republic | | | | 13,093 | | | - | | | 182 | | | 12,911 | | El Salvador | | | 20,000 | | | 0 | | | 0 | | | 20,000 | | | 10,984 | | | - | | | 84 | | | 10,900 | | Mexico | | | 11,710 | | | 0 | | | 240 | | | 11,470 | | | 27,045 | | | - | | | 89 | | | 26,956 | | Panama | | | | 50,008 | | | 1,462 | | | 112 | | | 51,358 | | Peru | | | | 29,291 | | | 24 | | | 15 | | | 29,300 | | | | | 144,135 | | | 601 | | | 920 | | | 143,816 | | | 332,515 | | | 6,202 | | | 734 | | | 337,983 | | Total | | | 182,691 | | | 717 | | | 1,358 | | | 182,050 | | | 463,354 | | | 6,949 | | | 1,943 | | | 468,360 | |
| | December 31, 2006 | | (In thousand of US$) | | Amortized Cost | | Unrealized Gross Gain | | Unrealized Gross Loss | | Fair Value | | Corporate debt: | | | | | | | | | | | | | | Brazil | | | 16,985 | | | 69 | | | 129 | | | 16,925 | | Chile | | | 16,086 | | | - | | | 144 | | | 15,942 | | Panama | | | 20,026 | | | - | | | 254 | | | 19,772 | | | | | 53,097 | | | 69 | | | 527 | | | 52,639 | | Government debt: | | | | | | | | | | | | | | Argentina | | | 9,421 | | | 69 | | | 6 | | | 9,484 | | Brazil | | | 112,370 | | | 3,315 | | | 61 | | | 115,624 | | Colombia | | | 97,335 | | | 776 | | | 16 | | | 98,095 | | Chile | | | 16,091 | | | - | | | 444 | | | 15,647 | | El Salvador | | | 4,981 | | | 19 | | | - | | | 5,000 | | Mexico | | | 48,350 | | | 1,516 | | | 161 | | | 49,705 | | | | | 288,548 | | | 5,695 | | | 688 | | | 293,555 | | Total | | | 341,645 | | | 5,764 | | | 1,215 | | | 346,194 | |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements At December 31, 20062007 and 2005,2006, securities available for sale with a carrying value of $322.7$323 million and $119.3 million, respectively,each year, were pledged to secure borrowings for securities sold under repurchase agreements.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following table discloses whether thesethose securities that have had unrealized losses for less than 12 months or for 12 months or longer:
| | December 31, 2006 | (In US$ thousand) | | Less than 12 Months | | 12 Months or Greater | | Total | | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | | | | | | | | | | | | | Corporate debt | | | 19,772 | | | 254 | | | 30,791 | | | 273 | | | 50,563 | | | 527 | Government debt | | | 6,187 | | | 16 | | | 36,004 | | | 672 | | | 42,191 | | | 688 | | | | 25,959 | | | 270 | | | 66,795 | | | 945 | | | 92,754 | | | 1,215 |
| | December 31, 2005 | | December 31, 2007 | | (In US$ thousand) | | Less than 12 Months | | 12 Months or Greater | | Total | | (In thousand of US$) | | | Less than 12 months | | 12 months or longer | | Total | | | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate debt | | | 31,096 | | 438 | | 0 | | 0 | | 31,096 | | 438 | | | 68,244 | | 1,107 | | 30,495 | | 102 | | 98,739 | | 1,209 | | Government debt | | | 26,242 | | | 397 | | | 16,043 | | | 523 | | | 42,285 | | | 920 | | | 113,093 | | | 706 | | | 15,962 | | | 28 | | | 129,055 | | | 734 | | | | | 57,338 | | | 835 | | | 16,043 | | | 523 | | | 73,381 | | | 1,358 | | | 181,337 | | | 1,813 | | | 46,457 | | | 130 | | | 227,794 | | | 1,943 | |
The gross | | December 31, 2006 | | (In thousand of US$) | | Less than 12 months | | 12 months or longer | | Total | | | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | Fair Value | | Unrealized Gross Losses | | | | | | | | | | | | | | | | | | | | | | Corporate debt | | | 19,772 | | | 254 | | | 30,791 | | | 273 | | | 50,563 | | | 527 | | Government debt | | | 6,187 | | | 16 | | | 36,004 | | | 672 | | | 42,191 | | | 688 | | | | | 25,959 | | | 270 | | | 66,795 | | | 945 | | | 92,754 | | | 1,215 | |
Gross unrealized losses are duerelated mainly to an overall increasesincrease in market interest rates and/orand market credit spreads and not due to underlying credit concerns ofabout the issuers. At December 31, 2006 and 2005,2007, the Bank believes that none of the securities in its investment portfolio are other-than-temporarily impaired.
During 2006 and 2005, the Bank collected Argentine impaired securities for $5.6 million and $10.7 million, respectively, which had been written-off and charged to earnings in prior years. These recoveries were recorded in earnings as recoveries on assets. During the year 2005, an impaired security with a net carrying value of $0.5 million was written-off and charged to earnings as a decrease to recoveries on assets.
The following table presents the realized gains and losses on securities available for sale:
| | December 31, | (In US$ thousand) | | 2006 | | 2005 | | 2004 | | | Gains | | Losses | | Gains | | Losses | | Gains | | Losses | | | | | | | | | | | | | | | | | 2,568 | | | 0 | | | 253 | | | 47 | | | 2,922 | | | 0 |
(In thousand of US$) | | Year ended December 31, | | | | 2007 | | 2006 | | 2005 | | Gains | | | 9,550 | | | 2,568 | | | 253 | | Losses | | | (431 | ) | | - | | | (47 | ) | Net | | | 9,119 | | | 2,568 | | | 206 | |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
The amortized cost and fair value of securities available for sale distributed by contractual maturity at December 31, 2006,2007, are shown in the following table:
| | Amortized | | Fair | | | Cost | | Value | | | | | | Due within 1 year | | | 16,005 | | | 16,054 | After 1 but within 5 years | | | 94,960 | | | 93,898 | After 5 years | | | 230,680 | | | 236,242 | | | | 341,645 | | | 346,194 |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES (In thousand of US$) | | Amortized Cost | | Fair Value | | | | | | | | | | Due within 1 year | | | 19,998 | | | 19,953 | | After 1 year but within 5 years | | | 153,382 | | | 153,628 | | After 5 years but within 10 years | | | 289,974 | | | 294,779 | | | | | 463,354 | | | 468,360 | |
NotesSecurities held to Consolidated Financial Statementsmaturity
| b) | Securities Held to Maturity |
The amortized cost, related unrealized gross gain (loss) and quoted marketfair value of securities held to maturity are as follows:
(In US$ thousand) | | December 31, 2006 | | | Amortized Cost | | Unrealized Gross Gain | | Unrealized Gross Loss | | Fair Value | | | | | | | | | | Corporate debt: | | | | | | | | | Switzerland | | | 40,044 | | | 0 | | | 10 | | | 40,034 | United States of America | | | 60,048 | | | 0 | | | 27 | | | 60,021 | Sub-total | | | 100,092 | | | 0 | | | 37 | | | 100,055 | Government debt: | | | | | | | | | | | | | Mexico | | | 25,065 | | | 0 | | | 2 | | | 25,063 | Total | | | 125,157 | | | 0 | | | 39 | | | 125,118 |
(In US$ thousand) | | December 31, 2005 | | | Amortized Cost | | Unrealized Gross Gain | | Unrealized Gross Loss | | Fair Value | | | | | | | | | | Government debt - Mexico | | | 26,520 | | | 0 | | | 195 | | | 26,325 |
| | December 31, 2006 | | (In thousand of US$) | | Amortized Cost | | Unrealized Gross Gain | | Unrealized Gross Loss | | Fair Value | | | | | | | | | | | | | | | | Corporate debt: | | | | | | | | | | | | | | Switzerland | | | 40,044 | | | - | | | 10 | | | 40,034 | | United States of America | | | 60,048 | | | - | | | 27 | | | 60,021 | | | | | 100,092 | | | - | | | 37 | | | 100,055 | | Government debt: | | | | | | | | | | | | | | Mexico | | | 25,065 | | | - | | | 2 | | | 25,063 | | Total | | | 125,157 | | | - | | | 39 | | | 125,118 | |
At December 31, 2006, and 2005, the contractual maturity of the securities held to maturity was within one year and none of the securities in this portfolio iswas considered other-than-temporarily impaired in view that thosesince such securities dodid not maintain significant gross unrealized losses for more than twelvethen 12 months. At December 31, 2006, and 2005, securities held to maturity with a carrying value of $125.2 million and $26.5 million, respectively, were pledged to secure repurchase agreements. All held to maturity investments matured during the first semester of 2007.
The following table set forth details of the Bank’s loan portfolio:
(In thousand of US$) | | | December 31, | | | | December 31, | | 2007 | | 2006 | | (In US$ thousand) | | 2006 | | 2005 | | | | | | | | | | | | | | Corporate | | | 1,417,777 | | | 840,061 | | | 1,886,580 | | | 1,417,777 | | Banks: | | | | | | | | | | | | | | Commercial | | | 1,130,490 | | | 1,582,846 | | State owned | | | 273,090 | | | 117,842 | | Private | | | | 1,485,313 | | | 1,130,490 | | State-owned | | | | 241,322 | | | 273,090 | | Other | | | 159,415 | | | 69,270 | | | 118,623 | | | 159,415 | | | | | | | | | | | Total | | | 2,980,772 | | | 2,610,019 | | | 3,731,838 | | | 2,980,772 | |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
The remaining contractual loan maturities are summarized as follows:
| | December 31, | (In US$ thousand) | | 2006 | | 2005 | Current | | | | | Up to 1 month | | | 297,920 | | | 397,745 | From 1 month to 3 months | | | 719,966 | | | 601,557 | From 3 months to 6 months | | | 649,147 | | | 592,223 | From 6 months to 1 year | | | 456,528 | | | 521,367 | From 1 year to 2 years | | | 375,954 | | | 309,539 | From 2 years to 5 years | | | 412,565 | | | 158,766 | More than 5 years | | | 68,692 | | | 0 | | | | 2,980,772 | | | 2,581,197 | | | | | | | | Restructured and impaired | | | 0 | | | 28,822 | | | | 2,980,772 | | | 2,610,019 |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES(In thousand of US$) | | December 31, | | | | 2007 | | 2006 | | Maturities: | | | | | | | | Up to 1 month | | | 667,612 | | | 297,920 | | From 1 month to 3 months | | | 667,393 | | | 719,966 | | From 3 months to 6 months | | | 572,597 | | | 649,147 | | From 6 months to 1 year | | | 617,482 | | | 456,528 | | From 1 year to 2 years | | | 399,655 | | | 375,954 | | From 2 years to 5 years | | | 729,786 | | | 412,565 | | More than 5 years | | | 77,313 | | | 68,692 | | | | | 3,731,838 | | | 2,980,772 | |
Notes to Consolidated Financial Statements
The following table provides a breakdown of loans by country risk:
(In thousand of US$) | | | December 31, | | | | December 31, | | 2007 | | 2006 | | (In US$ thousand) | | 2006 | | 2005 | | Country | | | | | | Country: | | | | | | | | | Argentina | | | 203,015 | | | 51,215 | | | 263,814 | | | 203,015 | | Bolivia | | | 5,000 | | | 0 | | | 5,000 | | | 5,000 | | Brazil | | | 1,316,650 | | | 1,095,055 | | | 1,379,394 | | | 1,316,650 | | Chile | | | 175,147 | | | 282,500 | | | 10,000 | | | 175,147 | | Colombia | | | 163,132 | | | 249,025 | | | 400,458 | | | 163,132 | | Costa Rica | | | 85,028 | | | 53,962 | | | 76,506 | | | 85,028 | | Dominican Republic | | | 8,805 | | | 997 | | | 28,770 | | | 8,805 | | Ecuador | | | 42,926 | | | 25,407 | | | 60,529 | | | 42,926 | | El Salvador | | | 82,250 | | | 80,753 | | | 46,563 | | | 82,250 | | Guatemala | | | 88,573 | | | 41,303 | | | 95,902 | | | 88,573 | | Honduras | | | 36,466 | | | 25,654 | | | 48,631 | | | 36,466 | | Jamaica | | | 48,904 | | | 24,018 | | | 77,401 | | | 48,904 | | Mexico | | | 167,808 | | | 160,737 | | | 410,164 | | | 167,808 | | Nicaragua | | | 10,121 | | | 1,977 | | | 12,616 | | | 10,121 | | Panama | | | 180,511 | | | 156,061 | | | 139,720 | | | 180,511 | | Peru | | | 261,617 | | | 180,156 | | | 454,226 | | | 261,617 | | Trinidad and Tobago | | | 103,513 | | | 177,498 | | | 87,565 | | | 103,513 | | Uruguay | | | 0 | | | 3,701 | | Venezuela | | | 1,306 | | | 0 | | | 134,579 | | | 1,306 | | | | | 2,980,772 | | | 2,610,019 | | | 3,731,838 | | | 2,980,772 | |
The fixed and floating interest ratesrate distribution of the loan portfolio is as follows:
(In thousand of US$) | | | December 31, | | | | December 31, | | 2007 | | 2006 | | (In US$ thousand) | | 2006 | | 2005 | | | | | | | | | | | | | | Fixed interest rates | | | 1,498,338 | | | 1,561,893 | | | 1,855,540 | | | 1,498,338 | | Floating interest rates | | | 1,482,434 | | | 1,048,126 | | | 1,876,298 | | | 1,482,434 | | | | | 2,980,772 | | | 2,610,019 | | | 3,731,838 | | | 2,980,772 | |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
At December 31, 2007 and 2006, y 2005,84% and 89%, respectively, of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.
The following is a summary of information on non-accruing loans, and interest amounts on non-accruing loans:
| | December 31, | (In US$ thousand) | | 2006 | | 2005 | | 2004 | | | | | | | | Loans on non-accrual status | | | 0 | | | 28,822 | | | 255,552 | Interest which would had been recorded if the loans had not been on a non-accrual status | | | 0 | | | 7,004 | | | 18,716 | Interest income collected on non-accruing loans | | | 2,721 | | | 7,670 | | | 18,692 | Foregone interest revenue | | | 0 | | | 0 | | | 24 |
(In thousand of US$) | | December 31, | | | | 2007 | | 2006 | | 2005 | | | | | | | | | | | | | Loans on non-accrual status | | | - | | | - | | | 28,822 | | Interest which would had been recorded if the loans had not been on a non-accrual status | | | - | | | - | | | 7,004 | | Interest income collected on non-accruing loans | | | - | | | 2,721 | | | 7,670 | | Foregone interest revenue | | | - | | | - | | | - | |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following is a summary of information pertaining to impaired loans: (In US$ thousand) | | December 31, | | (In thousand of US$) | | | December 31, | | | | 2006 | | 2005 | | 2004 | | 2007 | | 2006 | | 2005 | | | | | | | | | | | | | | | | | | | Impaired loans with specific allowance for credit losses | | | 0 | | | 28,822 | | | 255,552 | | | - | | | - | | | 28,822 | | | | | | | | | | | | | | | | | | | | | | Specific allowance for impaired loans (under SFAS 114) | | | 0 | | | 11,184 | | | 81,725 | | | - | | | - | | | 11,184 | | | | | | | | | | | | | | | | | | | | | | Average balance of impaired loans during the year | | | 18,168 | | | 105,964 | | | 356,278 | | | - | | | 18,168 | | | 105,964 | | | | | | | | | | | | | | | | | | | | | | Interest income collected on impaired loans | | | 2,721 | | | 7,670 | | | 18,692 | | | - | | | 2,721 | | | 7,670 | |
At December 31, 20062007 and 2005,2006, the Bank has credit activity transactions in the normal course of business with 18% and 22%, respectively, of its Class “A” and “B” stockholders (See(see Note 13). All transactions are made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and are subject to all of the Bank’s Corporate Governancecorporate governance and control procedures. At December 31, 2007 and 2006, approximately 22% and 2005, approximately 27% and 40%, respectively, of the outstanding loan portfolio is placed with the Bank’s Class “A” and “B” stockholders and their related parties. At December 31, 2006,2007, the Bank was not directly or indirectly owned or controlled by another corporation or any foreign government, and no Class “A” or “B” shareholder was the registered owner of more than 3.5% of the total outstanding shares of the voting capital stock of the Bank.
During the year 2006,2007, the Bank sold a loanloans with a book value of $12.5$121.8 million, with a net gain of $6$271 thousand. The Bank did not retain any servicing rights on this sale.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
(7)7.
| Allowance for Credit Lossescredit losses |
The allowance for credit losses is available to absorb estimated probable credit losses existing in the credit portfolio at the date of the consolidated balance sheets. During the third quarter of 2005, Bladex implemented a new methodology for estimating generic allowances for credit losses. The new methodology incorporates statistical data on Bladex´sBladex’s historical loss performance into calculate the calculation of expected loss and loss given default ratios, replacing the use of general probability of default information from rating agencies used in the former model. The Bank believes that this new methodology providerepresents a morechange in determining an adequate level of allowance for credit losses. The effect of the change in methodology for periods ending before December 31, 2004, are2005 is included ininto the results of the year ended December 31, 2005 earnings and representsrepresented a net reversal of provisions for $2.7 million (reversal of $5.9 million in provision for loan losses and increase of $3.2 million in provision for off-balance sheet risk). The net effect of the change for the year ended December 31, 2005 was a decrease of $10 million in net income ($0.26 cents per share). The pro forma amounts shown on the income statement have been adjusted for the effect of retroactive application of credit loss reserve, which would have been applied, had the new methodology been in effect.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Bank classifies the allowance for credit losses into two components:
| a) | Allowance for Loan Losses:loan losses: |
(In US$ thousand) | | December 31, | | | (In thousand of US$) | | | December 31, | | | | 2006 | | 2005 | | 2004 | | | 2007 | | 2006 | | 2005 | | | | | | | | | | | | | | | | | | | | Balance at beginning of the year | | | 39,448 | | | 106,352 | | | 224,347 | | | | 51,266 | | | 39,448 | | | 106,352 | | | | | | | | | | | | | | | | | | | | | | | Provision for (reversal of) loan losses: | | | | | | | | | | | | Provision (reversal) for loan losses: | | | | | | | | | | | | Current year allocation | | | 11,846 | | | (48,180 | ) | | (111,400 | ) | | | 11,994 | | | 11,846 | | | (48,180 | ) | Effect of a change in the credit loss reserve methodology - 2005 | | | 0 | | | (5,975 | ) | | 0 | | | | - | | | - | | | (5,975 | ) | | | | 11,846 | | | (54,155 | ) | | (111,400 | ) | | | 11,994 | | | 11,846 | | | (54,155 | ) | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 0 | | | (5,937 | ) | | 0 | | | | - | | | - | | | (5,937 | ) | Loan recoveries | | | 3 | | | 2,612 | | | 6,396 | | | | 6,434 | | | 3 | | | 2,612 | | Loans written-off against the allowance for loan losses | | | (31 | ) | | (9,424 | ) | | (12,991 | ) | | | (51 | ) | | (31 | ) | | (9,424 | ) | Balance at end of the year | | | 51,266 | | | 39,448 | | | 106,352 | | | | 69,643 | | | 51,266 | | | 39,448 | |
| b) | ReserveReversal of provision for Losses on Off-Balance Sheet Credit Risk: |
(In US$ thousand) | | December 31, | | | | 2006 | | 2005 | | 2004 | | | | | | | | | | Balance at beginning of the year | | | 52,086 | | | 33,101 | | | 33,972 | | | | | | | | | | | | | (Reversal of) provision for losses on off-balance sheet credit risk: | | | | | | | | | | | Current year allocation | | | (24,891 | ) | | (210 | ) | | (871 | ) | Effect of a change in the credit loss reserve methodology - 2005 | | | 0 | | | 15,991 | | | 0 | | | | | (24,891 | ) | | 15,781 | | | (871 | ) | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 0 | | | 3,204 | | | 0 | | Balance at end of the year | | | 27,195 | | | 52,086 | | | 33,101 | |
| The reserve forcredit losses on off-balance sheet credit risk reflectsare mostly related to reserves assigned and recovery of the Bank’s management estimate of probable losses on off-balance sheet credit risk items, such as: confirmed letters of credit, stand-by letters of credit, guarantees and credit commitments. (See Note 16). |
Reversal of provision for credit losses are mostly related to reserves assigned to the bank’s Argentine non - accruingArgentine non-accruing portfolio, which was collected during the last three years.
|
b)Reserve for losses on off-balance sheet credit risk: (In thousand of US$) | | December 31, | | | | 2007 | | 2006 | | 2005 | | | | | | | | | | | | | Balance at beginning of the year | | | 27,195 | | | 52,086 | | | 33,101 | | | | | | | | | | | | | Provision (reversal) for losses on off-balance sheet credit risk: | | | | | | | | | | | Current year allocation | | | (13,468 | ) | | (24,891 | ) | | (210 | ) | Effect of a change in the credit loss reserve methodology - 2005 | | | - | | | - | | | 15,991 | | | | | (13,468 | ) | | (24,891 | ) | | 15,781 | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | - | | | - | | | 3,204 | | Balance at end of the year | | | 13,727 | | | 27,195 | | | 52,086 | |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
The reserve for losses on off-balance sheet credit risk reflects the Bank’s management estimate of probable losses on off-balance sheet credit risk items such as: confirmed letters of credit, stand-by letters of credit, guarantees and credit commitments (see Note 16).
At December 31, 20062007 and 2005,2006, other assets include an equity investment in a private investment fund and an equity investment in a company specialized in digital solutions. At December 31, 2006 and 2005, these investments totaled $3.6for $2.4 million and $2.7$3.1 million, respectively. Its main objective is to generate capital gains in the long term through the purchase of shares and convertible debt, mainly from Mexican manufacturing corporations or foreign corporations looking for establishing or expanding its operations in Mexico. During 2007, the Bank invested $0.4 million in the fund, and received a total of $1.1 million of capital distribution that generated a net loss of $106 thousand. During 2006 the Bank invested $0.9 million.
At December 31, 2006 and 2005,2007 the Bank did not estimateis committed to invest $1.5 million in this fund.
At December 31, 2007 and 2006, the fair value of these investments andBank has not identified any events or changes in their financial condition that may have had a significant adverse effect on the carrying value of these investments.this investment. The Bank does not consider these investmentsthis investment to be other-than-temporarilyother-than-temporary impaired. BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
NotesAt December 31, 2006, other assets also included an equity investment of $500 thousand in a company specialized in digital solutions. During the first semester of 2007, this investment was written off and charged to Consolidated Financial Statementsearnings as its impairment was considered other than temporary.
| The maturity profile and other information of the Bank’s deposits is as follows: |
(In US$ thousand) | | December 31, | | (In thousand of US$) | | | December 31, | | | | 2006 | | 2005 | | 2007 | | 2006 | | | | | | | | | | | | Demand | | | 132,130 | | | 28,385 | | | 111,496 | | | 132,130 | | Up to 1 month | | | 578,220 | | | 575,362 | | | 1,060,706 | | | 578,220 | | From 1 month to 3 months | | | 317,153 | | | 361,071 | | | 206,889 | | | 317,153 | | From 3 months to 6 months | | | 28,774 | | | 81,800 | | | 73,280 | | | 28,774 | | From 6 months to 1 year | | | | 10,000 | | | - | | | | | 1,056,277 | | | 1,046,618 | | | 1,462,371 | | | 1,056,277 | | | | | | | | | | Aggregate amounts of time deposits of $100,000 or more | | | 924,147 | | | 1,018,038 | | Aggregate amounts of deposits in offices outside of Panama | | | 422,359 | | | 350,026 | | Interest expense | | | 19,963 | | | 8,853 | |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
The following table presents additional information about deposits:
(In thousand of US$) | | December 31, | | | | 2007 | | 2006 | | | | | | | | Aggregate amounts of time deposits of $100,000 or more | | | 1,350,875 | | | 924,147 | | Aggregate amounts of deposits in offices outside Panama | | | 290,501 | | | 422,359 | | Interest expense paid to deposits in offices outside Panama | | | 22,636 | | | 19,963 | |
(10)10. | Short-Term BorrowingsShort-term borrowings
|
The breakdown of short-term borrowings due to banks and other investorscreditors is as follows: (In thousand of US$) | | December 31, | | | | 2007 | | 2006 | | At fixed interest rates: | | | | | | Advances from corporations | | | 25,000 | | | - | | Advances from banks | | | 1,181,500 | | | 1,147,248 | | Discounted acceptances | | | - | | | 10,000 | | | | | 1,206,500 | | | 1,157,248 | | At floating interest rates: | | | | | | | | Advances from banks | | | 15,000 | | | - | | | | | | | | | | Total short-term borrowings | | | 1,221,500 | | | 1,157,248 | | | | | | | | | | Average outstanding balance during the year | | | 1,272,986 | | | 497,830 | | | | | | | | | | Maximum balance at any month-end | | | 1,221,500 | | | 1,208,348 | | | | | | | | | | Weighted average interest rate at end of the year | | | 5.31 | % | | 5.56 | % | | | | | | | | | Weighted average interest rate during the year | | | 5.48 | % | | 5.50 | % |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
(In US$ thousand) | | December 31, | | | | 2006 | | 2005 | | Short-term borrowings: | | | | | | Advances from banks | | | 1,147,248 | | | 608,100 | | Discounted acceptances | | | 10,000 | | | 24,000 | | Total short-term borrowings | | | 1,157,248 | | | 632,100 | | | | | | | | | | Weighted average interest rate at the end of the year | | | 5.56 | % | | 4.79 | % |
Notes to consolidated financial statements
(11)11. | MediumBorrowings and Long-Term Debt and Borrowingslong-term debt
|
Borrowings consist of medium-termlong-term and syndicated loans obtained from international banks. Debt instruments consist of Euro medium-term notes.Euro-Notes and other issuances in Latin America. The breakdown of mediumborrowings and long-term debt and borrowings (original maturity of more than one year) is as follows:
(In US$ thousand) | | December 31, | | | | 2006 | | 2005 | | Borrowings: | | | | | | At fixed interest rates with due dates from January 2007 to January 2011 | | | 105,180 | | | 40,000 | | At floating interest rates with due dates from January 2007 to December 2009 | | | 428,680 | | | 449,860 | | Total borrowings | | | 533,860 | | | 489,860 | | Debt Instruments: | | | | | | | | At floating interest rates with due dates from January 2008 to October 2010 | | | 25,000 | | | 44,000 | | Total debt instruments | | | 25,000 | | | 44,000 | | | | | | | | | | Total medium and long-term debt and borrowings outstanding | | | 558,860 | | | 533,860 | | | | | | | | | | Average outstanding during the year | | | 497,830 | | | 444,393 | | | | | | | | | | Maximum outstanding at any month-end | | | 558,860 | | | 587,998 | | | | | | | | | | Weighted average interest rate at the end of the year | | | 5.82 | % | | 4.64 | % | Weighted average interest rate during the year | | | 5.50 | % | | 4.72 | % |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES(In thousand of US$) | | December 31, | | | | 2007 | | 2006 | | Borrowings: | | | | | | At fixed interest rates with due dates from June 2008 to July 2011 | | | 235,578 | | | 105,180 | | At floating interest rates with due dates from January 2008 to March 2012 | | | 708,690 | | | 428,680 | | Total borrowings | | | 944,268 | | | 533,860 | | Debt: | | | | | | | | At fixed interest rates with due dates in November 2014 | | | 41,048 | | | - | | At floating interest rates with due dates from January 2008 until October 2010 | | | 25,000 | | | 25,000 | | Total debt | | | 66,048 | | | 25,000 | | | | | | | | | | Total borrowings and long-term debt outstanding | | | 1,010,316 | | | 558,860 | | | | | | | | | | Average outstanding balance during the year | | | 808,890 | | | 497,830 | | | | | | | | | | Maximum outstanding balance at any month-end | | | 1,059,224 | | | 558,860 | | | | | | | | | | Weighted average interest rate at the end of the year | | | 5.75 | % | | 5.82 | % | Weighted average interest rate during the year | | | 5.94 | % | | 5.50 | % |
Notes to Consolidated Financial Statements
The Bank's funding activities include an Euro-Medium-Term Notea Euro-Note program, which may be used to issue notes for up to $2.3 billion, with maturities from 90 days up to a maximum of 30 years, at fixed or floating interest rates, or at discount, and in various currencies.
During 2007 the Bank issued long-term debt for a total of 123 million Peruvian Soles with maturity in November 2014. This issuance is hedged with cross-currency swaps at fixed interest rate.
The notes are generally sold in bearer or registered form through one or more authorized financial institutions.
Some borrowing agreements include various events of default and covenants pertainingrelated to minimum capital adequacy ratios, incurrence of additional liens, and asset sales, as well as other customary covenants, representations and warranties. At December 31, 2006,2007, the Bank was in compliance with all covenants.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
The future maturities of medium and long-term debt and borrowings outstanding at December 31, 2006,2007, are as follows:
(In US$ thousand) | | | | (In thousand of US$) | | | | | Due in: | | Outstanding | | Outstanding | | | | | | | | 2007 | | | 145,180 | | 2008 | | | 291,500 | | | 357,300 | | 2009 | | | 52,000 | | | 138,000 | | 2010 | | | 5,000 | | | 214,393 | | 2011 | | | 65,180 | | | 109,575 | | 2012 | | | | 150,000 | | 2013 | | | | - | | 2014 | | | | 41,048 | | | | | 558,860 | | | 1,010,316 | |
(12)12.
| Redeemable Preferred StockOther liabilities
|
Redeemed Preferred Stock:
On May 15, 2006, the Bank redeemed all non-voting preferred shares outstanding. In case of a liquidation of the Bank, the preferred stockholders were entitled to receive a liquidation preference of $10 per share, plus accrued and unpaid dividends. The Bank redeemed preferred stock at its par value at the equivalent ofby 20% of totalthe aggregate par value of the preferred stock outstanding as of March 15, 2002, and on March 15 of each of the subsequent years up to 2006. At December 31, 20062007 and 2005,2006, the Bank had $1.3 million and $1.9 million, respectively, representing 126,448 and $2.0 million representing 193,623 and 202,633 preferred shares, respectively, redeemed but not claimed by preferred shareholders, which are recorded in other liabilities. Preferred stockholders had the right to receive an interest on their preferred stock equivalent to the same percentage as the common stockholders (excluding from the calculation any common stock issued as stock dividend).
| The Bank’s common stock is divided into three categories: |
| 1) | Class “A”; shares may only be issued to Latin American Central Banks or banks in which the state or other government agency is the majority shareholder. |
| 2) | Class “B”; shares may only be issued to banks or financial institutions. |
| 3) | Class “E”; shares may be issued to any person whether a natural person or a legal entity. |
The holders of Class “B” shares have the right to convert or exchange their Class “B” shares, at any time, and without restriction, for Class “E” shares, at a rate of one to one. On August 3, 2004, the Board of Directors authorized a three-year stock repurchase program under which Bladex may, from time to time, repurchase up to an aggregate of $50 million of its Class “E”E shares of common stock, in the open market at the then prevailing market price. OnIn July 2006, this stock repurchase program was completed at an average price of $16.43 per share.
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements The following table provides detailed information on the Bank’s common stock activity per class for each of the years in the three-year period ended December 31, 2006:2007:
(Shares units) | | Class “A” | | Class “B” | | Class “E” | | Total | | | (Share units) | | | Class “A” | | Class “B” | | Class “E” | | Total | | | | | | | | | | | | | | | | | | | | | Authorized | | | 40,000,000 | | | 40,000,000 | | | 100,000,000 | | | 180,000,000 | | | | 40,000,000 | | | 40,000,000 | | | 100,000,000 | | | 180,000,000 | | Outstanding at December 31, 2003 | | | 6,342,189 | | | 3,466,702 | | | 29,543,847 | | | 39,352,738 | | | Conversions | | | 0 | | | (195,433 | ) | | 195,432 | | | (1 | ) | | Restricted stock granted | | | 0 | | | 0 | | | 6,242 | | | 6,242 | | | Repurchased stock | | | 0 | | | 0 | | | (461,900 | ) | | (461,900 | ) | | | | | | | | | | | | | | | | | Outstanding at December 31, 2004 | | | 6,342,189 | | | 3,271,269 | | | 29,283,621 | | | 38,897,079 | | | | 6,342,189 | | | 3,271,269 | | | 29,283,621 | | | 38,897,079 | | Conversions | | | 0 | | | (56,925 | ) | | 56,925 | | | 0 | | | | - | | | (56,925 | ) | | 56,925 | | | - | | Restricted stock granted | | | 0 | | | 0 | | | 5,320 | | | 5,320 | | | Restricted stock issued | | | | - | | | - | | | 5,320 | | | 5,320 | | Repurchased stock | | | 0 | | | 0 | | | (805,900 | ) | | (805,900 | ) | | | - | | | - | | | (805,900 | ) | | (805,900 | ) | Exercised stock options | | | 0 | | | 0 | | | 276 | | | 276 | | | Exercised stock options - compensation plan | | | | - | | | - | | | 276 | | | 276 | | Outstanding at December 31, 2005 | | | 6,342,189 | | | 3,214,344 | | | 28,540,242 | | | 38,096,775 | | | | 6,342,189 | | | 3,214,344 | | | 28,540,242 | | | 38,096,775 | | Conversions | | | 0 | | | (488,954 | ) | | 488,954 | | | 0 | | | | - | | | (488,954 | ) | | 488,954 | | | - | | Restricted stock granted | | | 0 | | | 0 | | | 5,967 | | | 5,967 | | | Restricted stock issued | | | | - | | | - | | | 5,967 | | | 5,967 | | Repurchased stock | | | 0 | | | 0 | | | (1,774,818 | ) | | (1,774,818 | ) | | | - | | | - | | | (1,774,818 | ) | | (1,774,818 | ) | Exercised stock options | | | 0 | | | 0 | | | 1,150 | | | 1,150 | | | Exercised stock options - compensation plan | | | | - | | | - | | | 1,150 | | | 1,150 | | Outstanding at December 31, 2006 | | | 6,342,189 | | | 2,725,390 | | | 27,261,495 | | | 36,329,074 | | | | 6,342,189 | | | 2,725,390 | | | 27,261,495 | | | 36,329,074 | | Conversions | | | | - | | | (64,540 | ) | | 64,540 | | | - | | Accumulated difference in fraccional shares in coversion of common stocks | | | | | | | (3 | ) | | | | | (3 | ) | Restricted stock issued | | | | - | | | - | | | 22,240 | | | 22,240 | | Exercised stock options - compensation plan | | | | - | | | - | | | 18,838 | | | 18,838 | | Outstanding at December 31, 2007 | | | | 6,342,189 | | | 2,660,847 | | | 27,367,113 | | | 36,370,149 | |
The following table presents information regarding shares repurchased but not retired by the Bank and accordingly classified as treasury stock:
(In US$ thousand, except share data) | | Class “A” | | Class “B” | | Class “E” | | Total | | | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Outstanding at December 31, 2003 | | | 318,140 | | | 10,708 | | | 568,010 | | | 15,655 | | | 1,740,958 | | | 58,948 | | | 2,627,108 | | | 85,311 | | Repurchased during 2004 | | | 0 | | | 0 | | | 0 | | | 0 | | | 461,900 | | | 7,527 | | | 461,900 | | | 7,527 | | Restricted stocks granted | | | 0 | | | 0 | | | 0 | | | 0 | | | (6,242 | ) | | (211 | ) | | (6,242 | ) | | (211 | ) | Outstanding at December 31, 2004 | | | 318,140 | | | 10,708 | | | 568,010 | | | 15,655 | | | 2,196,616 | | | 66,264 | | | 3,082,766 | | | 92,627 | | Repurchased during 2005 | | | 0 | | | 0 | | | 0 | | | 0 | | | 805,900 | | | 13,815 | | | 805,900 | | | 13,815 | | Restricted stocks granted | | | 0 | | | 0 | | | 0 | | | 0 | | | (5,320 | ) | | (152 | ) | | (5,320 | ) | | (152 | ) | Exercised stock options | | | 0 | | | 0 | | | 0 | | | 0 | | | (276 | ) | | (8 | ) | | (276 | ) | | (8 | ) | Outstanding at December 31, 2005 | | | 318,140 | | | 10,708 | | | 568,010 | | | 15,655 | | | 2,996,920 | | | 79,919 | | | 3,883,070 | | | 106,282 | | Repurchased during 2006 | | | 0 | | | 0 | | | 0 | | | 0 | | | 1,774,818 | | | 28,657 | | | 1,774,818 | | | 28,657 | | Restricted stocks granted | | | 0 | | | 0 | | | 0 | | | 0 | | | (5,967 | ) | | (144 | ) | | (5,967 | ) | | (144 | ) | Exercised stock options | | | 0 | | | 0 | | | 0 | | | 0 | | | (1,150 | ) | | (27 | ) | | (1,150 | ) | | (27 | ) | Outstanding at December 31, 2006 | | | 318,140 | | | 10,708 | | | 568,010 | | | 15,655 | | | 4,764,621 | | | 108,405 | | | 5,650,771 | | | 134,768 | |
(In thousand, except for share data) | | Class “A” | | Class “B” | | Class “E” | | Total | | | | | | | | | | | | | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2004 | | | 318,140 | | | 10,708 | | | 568,010 | | | 15,655 | | | 2,196,616 | | | 66,264 | | | 3,082,766 | | | 92,627 | | Repurchased during 2005 | | | - | | | - | | | - | | | - | | | 805,900 | | | 13,815 | | | 805,900 | | | 13,815 | | Restricted stock issued | | | - | | | - | | | - | | | - | | | (5,320 | ) | | (152 | ) | | (5,320 | ) | | (152 | ) | Exercised stock options - compensation plan | | | - | | | - | | | - | | | - | | | (276 | ) | | (8 | ) | | (276 | ) | | (8 | ) | Outstanding at December 31, 2005 | | | 318,140 | | | 10,708 | | | 568,010 | | | 15,655 | | | 2,996,920 | | | 79,919 | | | 3,883,070 | | | 106,282 | | Repurchased during 2006 | | | - | | | - | | | - | | | - | | | 1,774,818 | | | 28,657 | | | 1,774,818 | | | 28,657 | | Restricted stock issued | | | - | | | - | | | - | | | - | | | (5,967 | ) | | (144 | ) | | (5,967 | ) | | (144 | ) | Exercised stock options - compensation plan | | | - | | | - | | | - | | | - | | | (1,150 | ) | | (27 | ) | | (1,150 | ) | | (27 | ) | Outstanding at December 31, 2006 | | | 318,140 | | | 10,708 | | | 568,010 | | | 15,655 | | | 4,764,621 | | | 108,405 | | | 5,650,771 | | | 134,768 | | Restricted stock issued | | | - | | | - | | | - | | | - | | | (22,240 | ) | | (531 | ) | | (22,240 | ) | | (531 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercised stock options - compensation plan | | | - | | | - | | | - | | | - | | | (18,838 | ) | | (449 | ) | | (18,838 | ) | | (449 | ) | Outstanding at December 31, 2007 | | | 318,140 | | | 10,708 | | | 568,010 | | | 15,655 | | | 4,723,543 | | | 107,425 | | | 5,609,693 | | | 133,788 | |
(14)14. | Cash and Stock Based Compensation Plansstock-based compensation plans |
| The Bank established equity compensation plans under which it administers restricted stock and stock option plans to attract, retain and motivate Directors, and key employees and compensate them for their contributions to the growth and profitsprofitability of the Bank. |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
| a)
| Restricted Stock - Directors
| Notes to consolidated financial statements
During 2005 the Bank adopted SFAS No. 123(R) “Share-Based Payment”. As a result of the early adoption of this rule, compensation cost of $555 thousand was recorded in 2005. The adjustment of $150 thousand to retroactively apply the new method was charged to income of 2005.
Restricted Stock - Directors
During 2003, the Board of Directors approved a restricted stock award programplan for Directors of the Bank. Restricted stockBank that was amended during 2007. These Class “E” stocks may be sourced from treasury stock, or authorized un-issuedunissued shares. On a yearly basis,Until 2006, the Bank’s Board ofplan allowed Directors may grantto receive Class “E” shares for each Director on an annual basis worth $10 thousand, and to the Chairman of the Board worth $15 thousand. Following the amendment of this award plan, starting in 2007, annually the Board may grant Class “E” shares for each Director worth $50 thousand, and to the Chairman of the Board worth $75 thousand, all based on Bladex´sBladex’s closing price in the New York Stock Exchange (“NYSE”) at the last trading date precedingof the grant. The restricted stocks have a cliff vesting period of five years after five years.the grant date. During 2007, 2006, 2005 and 2004,2005, the Bank issued under this plan 22,240, 5,967, 5,320 and 6,242,5,320 Class “E” common shares, respectively,respectively. Costs of restricted stock issued under this plan for $475 thousand in 2007, and related compensation$95 thousand in 2006 and 2005, are amortized during the cliff vesting period. Related costs charged against income was $95totaled $118 thousand, $65 thousand and $46 thousand in 2007, 2006 and 2005, respectively. At December 31, 2007 remaining compensation cost for each year.$587 thousand will be amortized over 3.06 years.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIESStock Option Plan 2006 - Directors and Key Employees
Notes to Consolidated Financial Statements
| b) | Stock Option Plan 2006 - Directors and Key Employees
|
On December 12, 2006, the Bank’s Board of Directors adopted the 2006 Stock Option Plan. The maximum aggregate number of shares which may be issued under the 2006 Stock Option Plan is two million Class “E”E common shares. However, if there are any modifications to the number of shares representing the outstanding common stock of the Bank, as a result of a stock split,dividend, combination of stock or change in the corporate structure, the number of shares that may be issued under the 2006 Stock Option Plan will be revised. Under the 2006 Stock Option Plan, the Bank’s Board of Directors, with the recommendation and advice of the Nomination and Compensation Committee, may authorize the grant of options to any one or more key employees or directors of the Bank, as well as determine or impose conditions upon the grant or exercise of Options under the Plan. The Options expire seven years after the grant date of grant and, except otherwise provided in the award agreement, shall be exercisable beginning on the fourth anniversary of the date of grant. However,
During 2007, the Board of Directors granted $95 thousand in no eventstock options to members of the Board of Directors and $890 thousand in stock options to key employees of the Bank. At December 31, 2007, related cost charged against income was $302 thousand. Remaining compensation cost for $709 thousand will be amortized over 3.12 years. The fair value of each option granted is estimated at the exercise price of an Option be less than 100%grant date using the fair market value per share subject to the OptionBlack-Scholes option-pricing model, based on the date the Option was granted.following factors:
As of December 31, 2006, no stock options have been granted under this plan. | | December 31, 2007 | | | | | | Weighted average fair value option | | $ | 4.72 | | Weighted average expected terms, in years | | | 5.50 | | Expected volatility | | | 36 | % | Risk-free rate | | | 4.81 | % | Expected dividend | | | 3.54 | % |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
| c)
| Indexed Stock Option Plan 2003 - Directors and Key Employees
| Notes to consolidated financial statements
A summary of the status of the share options granted to Directors and key employees is presented below:
| | 2007 | | | | Options | | Weighted Average Option Price Exercisable | | Outstanding, beginning of year | | | - | | | - | | Granted | | | 208,765 | | $ | 16.34 | | Forfeited | | | - | | | - | | Outstanding, end of year | | | 208,765 | | $ | 16.34 | |
Indexed Stock Option Plan
During 2003, the Board of Directors approved an indexed stock option plan for Directors and key employees of the Bank, which was subsequently terminated in April 2006. On an annual basis, the plan allowed Directors to receive options to purchase Class “E” shares from treasury shares already held, for an equivalent amount of $10 thousand, and for the Chairman of the Board, an equivalent amount of $15 thousand. The number of options granted for key employees was determined by the Board of Directors based on the target of each eligible position and the value of the option at grant date. The indexed stock options expire in seven years with a cliff-vesting period of four years. The exercise price is adjusted based on the change in a customized Latin America general market index. As of December 31, 2006,2007, the Bank had an unrecognized compensation cost of $1.5 million$689 thousand related to non-vested options granted under the indexed stock option plan, which will be recognized over a period of 3.081.70 years. Related costs charged against income amounted to $828 thousand in 2007, $635 thousand in 2006, and $385 thousand in 2005. The fair value of each option granted is estimated at the grant date using the Black-Scholes option-pricing model, based on the following factors:
| | December 31, | | | | | 2006 | | 2005 | | 2004 | | | 2007 | | 2006 | | 2005 | | | | | | | | | | | | | | | | | Weighted average fair value option | | | $4.5 | | | $5.3 | | | $6.6 | | | $ | 6.02 | | $ | 4.5 | | $ | 5.3 | | Weighted average expected term, in years | | | 6.1 | | | 6.2 | | | 5.4 | | | | 4.11 | | | 6.1 | | | 6.2 | | Expected volatility | | | 51.4 | % | | 51.4 | % | | 51.4 | % | | | 51.4 | % | | 51.4 | % | | 51.4 | % | Risk-free rate | | | 3 | % | | 3 | % | | 3 | % | | | 3 | % | | 3 | % | | 3 | % | Expected dividends | | | 6.7 | % | | 6.7 | % | | 6.7 | % | | Expected dividend | | | | 6.7 | % | | 6.7 | % | | 6.7 | % |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A summary of the status of the share options granted under the indexed stock option plans is presented below:
| | December 31, | | | | 2006 | | 2005 | | 2004 | | 2007 | | 2006 | | 2005 | | | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding, beginning of year | | | 307,013 | | | $12.42 | | | 184,836 | | | $18.53 | | | 0 | | | $0 | | | 523,723 | | $ | 14.53 | | 307,013 | | $ | 12.42 | | 184,836 | | $ | 18.53 | | Granted | | | 216,710 | | | $16.00 | | | 152,084 | | | $17.30 | | | 186,886 | | | $12.19 | | | - | | $ | - | | 216,710 | | $ | 16.00 | | 152,084 | | $ | 17.30 | | Forfeited | | | 0 | | | $0 | | | (29,907 | ) | | $17.30 | | | (2,050 | ) | | $12.19 | | | - | | $ | - | | - | | $ | - | | (29,907 | ) | $ | 17.30 | | Exercised | | | | (18,838 | ) | $ | 8.50 | | | - | | $ | - | | | - | | $ | - | | Outstanding, end of year | | | 523,723 | | | $13.90 | | | 307,013 | | | $17.30 | | | 184,836 | | | $12.19 | | | 504,885 | | $ | 14.47 | | | 523,723 | | $ | 13.90 | | | 307,013 | | $ | 17.30 | | Weighted average fair value of options granted during the year | | | | | | | | | | | | | | | | | | | | | | | $ | - | | | | | $ | 4.48 | | | | | $ | 5.18 | |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
| | December 31, 2006 | Range of Exercise Prices | | Number Outstanding | | Weighted Average Exercise Price | | Weighted Average Contractual Life Remaining (In years) | | | | | | | | $10.00 - 20.00 | | | 523,723 | | | $13.90 | | | 5.19 |
Notes to consolidated financial statements
| d)
| Stock Option Plan - Directors and Employees
|
| | December 31, 2007 | | Range of Exercise Prices | | Number Outstanding | | Weighted Average Exercise Price | | Weighted Average Contractual Life Remaining (in years) | | | | | | | | | | $10.00 - 20.00 | | | 504,885 | | $ | 14.47 | | | 4.11 | |
Stock Option Plan - Discontinued
During 2000, the Board of Directors approved a stock option plan for Directors and employees of the Bank. The exercise price of each option must equal 100% of the market value of the stock at the grant date and becomes 100% exercisable one year after the grant date and expires on the fifth year after the grant date. In addition, during 1995 and 1999, the Board of Directors approved two stock option plans for employees. Under these stock option plans, stock options were granted at a purchase price equal to the average market value of the common stock at the grant date. One third of the options may be exercised on each successive year after the grant date and expire on the tenth anniversary after the grant date. On July 19, 2003, the Board of Directors approved discontinuing these plans therefore;therefore, no additional stock options have been granted.
A summary of the status of the stock options granted to Directors and employees is presented below:
| | December 31, | | | | 2006 | | 2005 | | 2004 | | | | Shares | | Wtd. Avg. Exercise Price | | Shares | | Wtd. Avg. Exercise Price | | Shares | | Wtd. Avg. Exercise Price | | 2007 | | 2006 | | 2005 | | | | | | | | | | | | | | | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Shares | | Weighted Average Exercise Price | | Outstanding, beginning of year | | | 56,093 | | | | | | 102,012 | | | | | | 228,625 | | | | | | 49,613 | | $ | 34.84 | | 56,093 | | $ | 34.34 | | 102,012 | | $ | 36.12 | | Forfeited | | | (4,200 | ) | | $34.47 | | | (37,483 | ) | | $35.35 | | | 0 | | | 0 | | | (2,850 | ) | $ | 30.95 | | (4,200 | ) | $ | 34.47 | | (37,483 | ) | $ | 35.35 | | Expired | | | (2,280 | ) | | $32.88 | | | (8,436 | ) | | $37.88 | | | (126,613 | ) | | $37.46 | | | (8,600 | ) | $ | 51.19 | | | (2,280 | ) | $ | 32.88 | | | (8,436 | ) | $ | 37.88 | | Outstanding, end of year | | | 49,613 | | | $34.84 | | | 56,093 | | | $34.34 | | | 102,012 | | | $36.12 | | | 38,163 | | $ | 31.46 | | | 49,613 | | $ | 34.84 | | | 56,093 | | $ | 34.34 | | Exercisable at year end | | | 49,613 | | | $34.84 | | | 56,093 | | | $34.34 | | | 93,989 | | | $36.40 | | | 38,163 | | $ | 31.46 | | | 49,613 | | $ | 34.84 | | | 56,093 | | $ | 34.34 | |
| | December 31, 2007 | | | | Outstanding Options | | Exercisable Options | | Range of Exercise Prices | | Number Outstanding | | Weighted Average Exercise Price | | Weighted Average Contractual Life Remaining | | Number Outstanding | | Weighted Average Exercise Price | | | | | | | | | | | | | | $20.00 - 30.00 | | | 14,143 | | $ | 23.12 | | | 2 years | | | 14,143 | | $ | 23.12 | | $30.01 - 40.00 | | | 15,370 | | $ | 32.88 | | | 4 years | | | 15,370 | | $ | 32.88 | | $40.01 - 50.00 | | | 8,650 | | $ | 42.56 | | | 1 year | | | 8,650 | | $ | 42.56 | | Total | | | 38,163 | | $ | 31.46 | | | | | | 38,163 | | $ | 31.46 | |
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements | | December 31, 2006 | | | Options Outstanding | | Options Exercisable | Range of Exercise Prices | | Number Outstanding | | Weighted Average Exercise Price | | Weighted Average Contractual Life Remaining | | Number Exercisable | | Weighted Average Exercise Price | $20.00 - 30.00 | | | 15,643 | | | $23.10 | | | 4 years | | | 15,643 | | | $23.10 | $30.01 - 40.00 | | | 15,770 | | | $32.88 | | | 5 years | | | 15,770 | | | $32.88 | $40.01 - 50.00 | | | 9,600 | | | $42.56 | | | 2 years | | | 9,600 | | | $42.56 | Greater than $50.00 | | | 8,600 | | | $51.19 | | | 1 year | | | 8,600 | | | $51.19 | Total | | | 49,613 | | | $34.84 | | | | | | 49,613 | | | $34.84 |
Expatriate officers plan:Officer Plan: The Bank sponsors a defined contribution plan for its expatriate top executives. The Bank’s contributions are determined as a percentage of the eligible officers’ annual salary,salaries, with each officer contributing an additional amount withheld from his salary andsalary. Contributions from officers were deposited in a saving account with the Bank at market interest rates.rates until March 2007, when the Bank transferred the balance of contributions from both, the Bank and the officers, to a trust that is managed by a fund manager. Officers are entitled to the contributions from the Bank once they have worked with the Bank for at least three years. During the years 2007, 2006 2005 and 2004,2005, the Bank charged to salaries expense, $175 thousand, $261 thousand $165 thousand, and $179$165 thousand, respectively. As of December 31, 2007, 2006 2005 and 2004,2005, the accumulated liability payable amounted to $382 thousand, $745 thousand $484 thousand and $356$484 thousand, respectively.
Deferred equity unit planEquity Unit Plan (the “DEU Plan”): In 1999, the Board of Directors approved the adoption of the DEU Plan, which was subsequently terminated in July 2003. This plan expired in February 2006 and employees exercised their rights in cash or shares.
Deferred compensation planCompensation Plan (the “DC Plan”): In 1999, the Board of Directors approved the adoption of the DC Plan, which was subsequently terminated in July 2003. The DC Plan has two separate features. Under the first component, the Bank maycould grant to each eligible employee a number of DEU equal to an amount equivalent to a percentage, not to exceed 3%, of the employee’s compensation, divided by the market value of a Class “E” share. Eligible employees willwould vest the DEU after three years of service. Distributions arewere made in respect of DEU on the later of (i) the date the vested DEU arewere credited to an employee’s account and (ii) ten years after the employee iswas first credited with DEU under the DC Plan. Participating employees receive dividends, and receive additional deferred equity units in lieu of a dividend with respect to their unvested deferred equity units. The second component allowsallowed employees who are not citizens or residents of the United States of America to defer a percentage of their compensation, and receive discretionary matching cash contribution. In no event shallcould the value of (i) the discretionary matching cash contribution made on behalf of an employee and (ii) the grant of deferred equity units made to such employees exceed 6% of the employee’s annual base compensation. BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A summary of the status of the DC Plan is presented bellow:
| | December, 31 | | | | 2006 | | 2005 | | 2004 | | | | | | | | | | Outstanding at the beginning of the year | | | 27,953 | | | 28,351 | | | 28,890 | | Granted | | | 0 | | | 0 | | | 0 | | Forfeited | | | 0 | | | 0 | | | (82 | ) | Exercised | | | (4,174 | ) | | (398 | ) | | (457 | ) | Outstanding at end of the year | | | 23,779 | | | 27,953 | | | 28,351 | |
| | 2007 | | 2006 | | 2005 | | | | | | | | | | Outstanding, beginning of year | | | 23,779 | | | 27,953 | | | 28,351 | | Exercised | | | (1,597 | ) | | (4,174 | ) | | (398 | ) | Outstanding, end of year | | | 22,182 | | | 23,779 | | | 27,953 | |
As of December 31, 2007, 2006, 2005 and 2004,2005, expenses recorded were $20 thousand, $48 thousand, and $67 thousand, and $32 thousand, respectively.
BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements
(15)15.
| Earnings Per Share |
| The following is a reconciliation of the income and share data used in the basic and diluted earnings per share (“EPS”) computations for the dates indicated: |
(In thousand of US$, except per share amounts) | | | Year ended December 31, | | | | December 31, | | | 2007 | | 2006 | | 2005 | | (In US$ thousand, except per share amounts) | | 2006 | | 2005 | | 2004 | | | Income before cumulative effect of changes in accounting principles: | | | $57,902 | | | 77,518 | | | 141,730 | | | | 72,177 | | | 57,902 | | | 77,518 | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 0 | | | 2,733 | | | 0 | | | | - | | | - | | | 2,733 | | Cumulative effect on prior year (to December 31, 2004) of an early adoption of the fair-value-based method of accounting stock-based employee compensation | | | 0 | | | (150 | ) | | 0 | | | | - | | | - | | | (150 | ) | Net income available to common stockholders for both, basic and diluted EPS | | | $57,902 | | | 80,101 | | | 141,730 | | | | 72,177 | | | 57,902 | | | 80,101 | | Weighted average common shares outstanding applicable to basic EPS | | | 37,065 | | | 38,550 | | | 39,232 | | | | | | | | | | | | | | | Weighted average common shares outstanding - applicable to basic EPS | | | | 36,349 | | | 37,065 | | | 38,550 | | Basic earnings per share: | | | | | | | | | | | | | | | | | | | | | Income before cumulative effect of changes in accounting principles | | | $1.56 | | | 2.01 | | | 3.61 | | | | 1.99 | | | 1.56 | | | 2.01 | | Cumulative effect on prior years of accounting changes | | | 0.00 | | | 0.07 | | | 0 | | | | 0.00 | | | 0.00 | | | 0.07 | | Net income per share | | | 1.56 | | | 2.08 | | | 3.61 | | | | 1.99 | | | 1.56 | | | 2.08 | | | | | | | | | | | | | | Weighted average common shares outstanding | | | | | | | | | | | | | | | | | | | | | applicable to diluted EPS | | | 37,065 | | | 38,550 | | | 39,232 | | | | 36,349 | | | 37,065 | | | 38,550 | | Effect of dilutive securities (1): | | | | | | | | | | | | | | | | | | | | | Indexed stock option plans | | | 507 | | | 310 | | | 139 | | | | 65 | | | 507 | | | 310 | | Adjusted weighted average common shares outstanding Applicable to diluted EPS | | | 37,572 | | | 38,860 | | | 39,371 | | | | 36,414 | | | 37,572 | | | 38,860 | | | | | | | | | | | | | | Diluted earnings per share: | | | | | | | | | | | | | | | | | | | | | Income before cumulative effect of changes in accounting principles | | | $1.54 | | | 1.99 | | | 3.60 | | | | 1.98 | | | 1.54 | | | 1.99 | | Cumulative effect on prior years of accounting changes | | | 0.00 | | | 0.07 | | | 0.00 | | | | 0.00 | | | 0.00 | | | 0.07 | | Net income per share | | | 1.54 | | | 2.06 | | | 3.60 | | | | 1.98 | | | 1.54 | | | 2.06 | | Pro forma amounts, assuming the changes in accounting principles are applied retroactively: | | | | | | | | | | | | Income before the effect of changes in accounting principles: | | | $57,902 | | | 77,518 | | | 141,730 | | | Effect on prior years of a change in the credit loss reserve methodology | | | 0 | | | 0 | | | (8,244 | ) | | Effect on prior year of early adoption of the fair-value-based method of accounting stock-based employee compensation | | | 0 | | | 0 | | | (150 | ) | | Net income available to common stockholders for both, basic and diluted EPS | | | $57,902 | | | 77,518 | | | 133,336 | | | | | | | | | | | | | | | | | | | | | | | | Basic earning per share | | | $1.56 | | | 2.01 | | | 3.40 | | | | 1.99 | | | 1.56 | | | 2.01 | | | | | | | | | | | | | | | | | | | | | | | Diluted earning per share | | | $1.54 | | | 1.99 | | | 3.39 | | | | 1.98 | | | 1.54 | | | 1.99 | |
(1) At December 31, 2007, 2006, 2005, and 2004, weighted average options for 38,467, 53,177 98,806 and 145,460,98,806, respectively, were excluded from the computation of diluted EPSearning per share because the option’s exercise price was greater than the average quoted market price of the Bank’s common stock. BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements
(16)16.
| Financial Instrumentsinstruments with Off-Balance Sheet Credit Riskoff-balance sheet credit risk |
| In the normal course of business, to meet the financing needs of its customers, the Bank is party to financial instruments with off-balance sheet credit risk. These financial instruments involve, to varying degrees, elements of credit and market risk in excess of the amount recognized in the consolidated balance sheets. Credit risk represents the possibility of loss resulting from the failure of a customer to perform in accordance with the terms of a contract. |
The Bank’s outstanding financial instruments with off-balance sheet credit risk were as follows:
(In US$ thousand) | | December 31, | | (In thousand of US$) | | | December 31, | | | | | 2007 | | 2006 | | | | 2006 | | 2005 | | | | | | Confirmed letters of credit | | | 109,102 | | | 155,547 | | | 97,211 | | | 109,102 | | Stand-by letters of credit and guarantees: | | | | | | | | | | | | | | Country risk | | | 123,924 | | | 149,921 | | | 113,924 | | | 123,924 | | Commercial risk | | | 168,295 | | | 239,112 | | | 197,528 | | | 168,295 | | Other | | | 20,000 | | | 0 | | | - | | | 20,000 | | Credit derivatives | | | | 3,000 | | | - | | | | | | 314,452 | | | 312,219 | | | | | | | | | | | Credit commitments | | | 200,191 | | | 138,228 | | | 129,378 | | | 200,191 | | Reimbursement undertaking | | | 2,687 | | | 904 | | | - | | | 2,687 | | | | | 624,199 | | | 683,712 | | | 541,041 | | | 624,199 | |
As of December 31, 2006,2007, the maturity profile of the Bank’s outstanding financial instruments with off-balance sheet credit risk is as follows:
(In thousand of US$ thousand)) | | | | Maturities | | Amount | | | | | | Within 1 year | | | 405,047427,146 | | From 1 to 2 years | | | 120,53070,502 | | From 2 to 5 years | | | 96,61941,807 | | After 5 years | | | 2,0031,586 | | | | | 624,199541,041 | |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
| As of December 31, 20062007 and 20052006 the breakdown of the Bank’s off-balance sheet exposure by country risk is as follows: |
(In US$ thousand) | | December 31, | | | 2006 | | 2005 | Country | | | | | Argentina | | | 1,055 | | | 2,316 | Brazil | | | 213,956 | | | 264,160 | Chile | | | 461 | | | 132 | Colombia | | | 67,830 | | | 500 | Costa Rica | | | 11,553 | | | 31,797 | Dominican Republic | | | 112,234 | | | 126,559 | Ecuador | | | 80,570 | | | 82,355 | El Salvador | | | 1,175 | | | 1,367 | Guatemala | | | 5,980 | | | 4,084 | Jamaica | | | 0 | | | 22,715 | Mexico | | | 37,526 | | | 2,957 | Panama | | | 40,152 | | | 15,350 | Peru | | | 18,743 | | | 49,779 | Uruguay | | | 0 | | | 3,024 | United States | | | 0 | | | 16,677 | Venezuela | | | 32,782 | | | 59,460 | Other | | | 182 | | | 480 | | | | 624,199 | | | 683,712 |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES(In thousand of US$) | | | | | | 2007 | | 2006 | | Country: | | | | | | | | Argentina | | | 4,057 | | | 1,055 | | Brazil | | | 220,281 | | | 213,956 | | Chile | | | 590 | | | 461 | | Colombia | | | 4,225 | | | 67,830 | | Costa Rica | | | 71,871 | | | 11,553 | | Dominican Republic | | | 60,601 | | | 112,234 | | Ecuador | | | 81,379 | | | 80,570 | | El Salvador | | | 1,675 | | | 1,175 | | Guatemala | | | 6,293 | | | 5,980 | | Honduras | | | 400 | | | - | | Jamaica | | | 15,615 | | | - | | Mexico | | | 11,750 | | | 37,526 | | Panama | | | 10,565 | | | 40,152 | | Peru | | | 10 | | | 18,743 | | Trinidad and Tobago | | | 5,000 | | | - | | United States | | | 18,616 | | | - | | Venezuela | | | 27,963 | | | 32,782 | | Other | | | 150 | | | 182 | | | | | 541,041 | | | 624,199 | |
Notes to Consolidated Financial Statements
Letters of Creditcredit and Guaranteesguarantees The Bank, on behalf of its institutional client base, advises and confirms letters of credit to facilitate foreign trade transactions. When confirming letters of credit, the Bank adds its own unqualified assurance that the issuing bank will pay and that if the issuing bank does not honor drafts drawn on the credit, the Bank will. The Bank provides stand-by letters of credit and guarantees, including country risk guarantees, which are issued on behalf of institutional customers in connection with financing between its customers and third parties. The Bank applies the same credit policies used in its lending process, and once issued the commitment is irrevocable and remains valid until its expiration. Credit risk arises from the Bank's obligation to make payment in the event of a customer’s contractual default to a third party. Risks associated with stand-by letters of credit and guarantees are included in the evaluation of the Bank´sBank’s overall credit risk. The Bank issues stand-by letters and guarantees to provide coverage for country risk arising from the risk of convertibility and transferability of local currency of countries in the Region into hard currency, and to provide coverage for country risk arising from political risks, such as expropriation, nationalization, war and/or civil disturbances.
Credit Commitmentscommitments Commitments to extend credit are a combination of either non-binding or legal agreements to lend to a customer. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee to the Bank. As some commitments expire without being drawn down, the total commitment amounts do not necessarily represent future cash requirements.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Other GuaranteesNotes to consolidated financial statements
On September 6, 2006 Bladex Head Office issued two guarantees for contingent payments in favor of IdenTrust Inc., for up to $10 million each, to cover any direct loss to IdenTrust that might result from claims received from Clavex LLC´s customers as a consequence of Bladex and/or Clavex LLC break of trust. The guarantees have a maturity of one year, and are automatically renewed while Bladex and/or Clavex LLC have the distribution rights of IdenTrust products.
(17)17. | Leasehold and Other Commitmentsother commitments |
Leasehold commitments
At December 31, 2006,2007, a summary of leasehold commitmentscommitment is as follows:
| | Future Rental | | (In thousand of US$) | | Expiration Year | | Commitments | | (In US$ thousand) | | | | 2007 | | | 700 | | Year | | | Future Rental Commitments | | | | | | | 2008 | | | 718 | | | 654 | | 2009 | | | 725 | | | 660 | | 2010 | | | 735 | | | 667 | | 2011 | | | 771 | | | 618 | | 2012 | | | | 417 | | Thereafter | | | | 1,122 | | | | | 3,649 | | | 4,138 | |
Occupancy expense for years ended December 31, 2007, 2006 2005 and 2004,2005, amounted to $593 thousand, $637 thousand, and $447 thousand, and $311 thousand, respectively. BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Other Commitmentscommitments Private Investment Fund and Other Equity Investments
At December 31, 2006 the Bank is committed to invest $1.9 million ($2.8 million in 2005) in a private investment fund whose main objective is generate capital appreciation in the long term through the purchase of shares and convertible debt, mainly from Mexican manufacturing corporations or foreign corporations looking for establishing or expanding its operations in Mexico.
Purchase Agreements The Bank has signed service agreements with certain vendors that provide services that are necessary for the ongoing operations of its business and mainly related to the maintenance of a new technology platform and telecommunications services. The terms of these agreements are up to 8 years and some of them can be re-negotiatedrenegotiated for annual or semi-annualsemiannual price adjustments, after the fifth year.
Under the terms of these agreements, the Bank has committed to contractually specified minimumminimums payments over the contractual periods.periods as follows:
The contractual minimum payments are:
(In US$ thousand) Due in: | | Contractual payments | | 2007 | | | 699 | | (In thousand of US$) | | | | | Due in: | | | Amount | | | | | | | 2008 | | | 699 | | | 577 | | 2009 | | | 644 | | | 530 | | 2010 | | | 654 | | | 519 | | 2011 | | | 666 | | | 311 | | 2012 and all years thereafter | | | 2,068 | | 2012 | | | | 323 | | Thereafter | | | | 336 | | | | | 5,430 | | | 2,596 | |
To the extent that the Bank does not purchasefulfill the contractual minimum amount of services, the Bank must pay the shortfall to the vendors. The Bank believes that it will meet the contractual minimums payments through the normal course of business.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
(18)18. | Derivative Financial Instrumentsfinancial instruments |
At December 31, 2007 and 2006, quantitative information on derivative financial instruments held for hedging purposes is as follows: | | | 2006 | | | 2005 | (In thousands of US$) | | | | | | Fair Value | | | | | | Fair Value | Fair value hedges: | | | Nominal Amount | | | Asset | | | Liability | | | Nominal Amount | | | Asset | | | Liability | Interest rate swaps | | | 249,338 | | | 541 | | | 2,196 | | | 114,728 | | | 357 | | | 297 | Forward foreign exchange | | | 13,146 | | | 0 | | | 201 | | | 0 | | | 0 | | | 0 | Cross currency interest rate swaps | | | 3,600 | | | 0 | | | 164 | | | 0 | | | 0 | | | 0 | Cash flow hedges: | | | | | | | | | | | | | | | | | | | Forward foreign exchange | | | 5,022 | | | 0 | | | 73 | | | 0 | | | 0 | | | 0 | Total | | | 271,106 | | | 541 | | | 2,634 | | | 114,728 | | | 357 | | | 297 | Net gain (loss) of the ineffective portion in hedging activities | | | (225 | | | | | | | | | 84 | | | | | | |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES | | 2007 | | 2006 | | (In thousand of US$) | | Nominal | | Fair Value | | Nominal | | Fair Value | | | | Amount | | Asset | | Liability | | Amount | | Asset | | Liability | | Fair value hedges: | | | | | | | | | | | | | | | | | | | | Interest rate swaps | | | 372,996 | | | 122 | | | 13,408 | | | 249,338 | | | 541 | | | 2,196 | | Forward foreign exchange | | | - | | | - | | | - | | | 13,146 | | | - | | | 201 | | Cross-currency interest rate swaps | | | 45,455 | | | - | | | 1,479 | | | 3,600 | | | - | | | 164 | | Cash flow hedges: | | | | | | | | | | | | | | | | | | | | Interest rate swaps | | | 20,000 | | | - | | | 1,129 | | | - | | | - | | | - | | Forward foreign exchange | | | 26,282 | | | - | | | 883 | | | 5,022 | | | - | | | 73 | | | | | | | | | | | | | | | | | | | | | | Total | | | 464,733 | | | 122 | | | 16,899 | | | 271,106 | | | 541 | | | 2,634 | | | | | | | | | | | | | | | | | | | | | | Net loss on the ineffective portion of hedging activities | | | (989 | ) | | | | | | | | (225 | ) | | | | | | |
Notes to Consolidated Financial Statements
For control purposes, derivativesderivative instruments are recorded at their nominal amount ("notional amount") on thein memorandum accounts. Interest rate swaps are made either in a single currency or cross-currencycross currency for a prescribed period to exchange a series of interest rate flows, which involve fixed for floating interest payment or vice-versa.payments. The Bank also engages in some foreign exchange trades to serve customers’ transaction needs.needs and to manage the foreign currency risk. All such positions are hedged with an offsetting contract for the same currency. The Bank manages and controls the risks on these foreign exchange trades by establishing counter party credit limits by client,customer and by adopting policies that do not allow for open positions in the credit and investment portfolio. Derivative and foreign exchange instruments negotiated by the Bank are executed mainly over-the-counter (OTC). These contracts are executed between two counter parties that negotiate specific agreement terms, including notional amount, exercise price and maturity. During 2005, the Bank settled, prior to maturity, certain hedge relationships accounted for as fair value hedges and recorded $2.1 million in other income under derivative and hedging activities. These interest rate swaps were considered highly effective at reducing the interest rate risk associated with available for sale securities.
The Bank estimates that approximately $127 thousand of gains reported in other comprehensive income (loss) at December 31, 2007, related to forward foreign exchange contracts were expected to be reclassified into interest expense as an adjustment to yield adjustment of hedged liabilities during the twelve-month period ending December 31, 2008.
The Bank estimates that approximately $183 thousand of losses reported in other comprehensive income (loss) at December 31, 2007 related to forward foreign exchange contracts were expected to be reclassified into interest income as an adjustment to yield of hedged loans during the twelve-month period ending December 31, 2008.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
Types of Derivative and Foreign Exchange Instruments Interest rate swaps are contracts in which a series of interest rate flows in a single currency are exchanged over a prescribed period. The Bank has designated a portion of these derivative instruments as fair value hedges. Cross currency swaps are contracts that generally involve the exchange of both interest and principal amounts in two different currencies. The Bank has designated a portion of these derivative instruments as fair value hedges. Forward foreign exchange contracts representsrepresent an agreement to purchase or salesell foreign currency on a future date at agreed upon term. The Bank has designated a portion of these derivative instruments as fair value and cash flow hedges.
(19)19.
| Accumulated Other Comprehensive Income (Loss)other comprehensive income (loss) |
| As of December 31, 2007, 2006 2005 and 20042005 the breakdown of accumulated other comprehensive income (loss) related to investment securities available for sale and derivatives wasis as follows: |
(In US$ thousand) | | Investment Securities | | Derivatives Financial Instruments | | Total | | | Balance as of December 31, 2003 | | | 10,260 | | | (384 | ) | | 9,876 | | | Unrealized gains (losses) arising from the year | | | (1,256 | ) | | 384 | | | (872 | ) | | Reclassification adjustment for gains included in net income (1) | | | (2,922 | ) | | 0 | | | (2,922 | ) | | (In thousand of US$) | | | Investment Securities | | Derivative Financial Instruments | | Total | | | | | | | | | | | Balance as of December 31, 2004 | | | 6,082 | | | 0 | | | 6,082 | | | | 6,082 | | | - | | | 6,082 | | Unrealized losses arising from the year | | | (5,257 | ) | | 0 | | | (5,257 | ) | | Net unrealized losses arising from the year | | | | (5,257 | ) | | - | | | (5,257 | ) | Reclassification adjustment for gains included in net income (1) | | | (206 | ) | | 0 | | | (206 | ) | | | (206 | ) | | - | | | (206 | ) | Balance as of December 31, 2005 | | | 619 | | | 0 | | | 619 | | | | 619 | | | - | | | 619 | | Unrealized gains (losses) arising from the year | | | 5,349 | | | (72 | ) | | 5,277 | | | Net unrealized gains (losses) arising from the year | | | | 5,349 | | | (72 | ) | | 5,277 | | Reclassification adjustment for gains included in net income (1) | | | (2,568 | ) | | 0 | | | (2,568 | ) | | | (2,568 | ) | | - | | | (2,568 | ) | Balance as of December 31, 2006 | | | 3,400 | | | (72 | ) | | 3,328 | | | | 3,400 | | | (72 | ) | | 3,328 | | Net unrealized gains (losses) arising from the year | | | | (1,912 | ) | | (2,081 | ) | | (3,993 | ) | Reclassification adjustment for gains included in net income (1) | | | | (9,119 | ) | | 143 | | | (8,976 | ) | Balance as of December 31, 2007 | | | | (7,631 | ) | | (2,010 | ) | | (9,641 | ) | | | | | | | | | | | | |
| (1) | (1) Reclassification adjustments include amounts recognized in net income during the current year that had been part of other comprehensive income in this and previous years. |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements20.
(20) | Fair Value Disclosurevalue of Financial Instrumentsfinancial instruments |
| Bank’s management uses its best judgment in estimating the fair value of the Bank’s financial instruments; however, there are limitations in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily an indicative of the amounts the Bank could have realized in a sale transaction on the dates indicated. The estimated fair value amounts have been measured as of their respective year-ends, and have not been re-expressed or updated subsequent to the dates of these consolidated financial statements. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than the amounts reported at each year-end. |
| The following disclosures represent the Bank’s bestinformation should not be interpreted as an estimate of the fair value of on-and-off-balance financial instruments.the Bank. Fair value calculations are only provided for a limited portion of the Bank’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparison of fair value information of the Bank and other companies may not be meaningful for comparative analysis. The following methods and assumptions were used by management in estimating the fair values of each type of financial instruments: |
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
(a) Notes to consolidated financial statements
Financial instruments with carrying value equal to fair value
The carrying value of certain financial assets, including cash and due from banks, interest-bearing deposits within banks, accrued interest receivable, customers’ liabilities under acceptances and certain financial liabilities including, customer’s demand and time deposits, short-term borrowings and securities sold under repurchase agreements,agreement, accrued interest payable, and acceptances outstanding, as a result of their short-term nature, isare considered to be equal to fair value.
(b) Trading assets, trading liabilities and investment securities
The fair value of investment securities has been based upon current market quotations, where available. If quoted market prices are not available, fair value has been estimated based upon quoted price of similar instruments, or where these are not available, on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security.
(c) LoansLoans
The fair value of the performing loan portfolio has been determined principally based upon a discounted analysis of anticipated cash flows adjusted for expected credit losses. The loans have been grouped to the extent possible, into homogeneous pools, segregated by maturity and the weighted average maturity of the loans within each pool. Depending upon the type of loan involved, maturity assumptions have been based on either contractual or expected maturity. Credit risk has been factored into the present value analysis of cash flows associated with each loan type, by allocating allowances for loan losses. The allocated portion of the allowance, adjusted by a present value factor based upon the timing of expected losses, has been deducted from the gross cash flows prior to calculating the present value. The fair value of the non-performing loans has been determined net of the related allowance for loan losses.
| (d)
| Medium and long-term debt and borrowings
| Borrowings and long-term debt
The fair value of medium and long-term debt and borrowings is estimated using discounted cash flow analysis based on the current incremental borrowing rates for similar types of borrowing arrangements.
| (e)
| Derivative financial instruments |
The fair value of derivatives financial instruments
All derivative instruments are recognized in the consolidated balance sheet at fair value. Fair value is based uponon dealer quotes, pricing models, discounted cash flow analysis or quoted market prices when available. In cases where these prices are not available, fair value is estimated using valuation models that consider prices for instruments with similar assets or similar liabilities and other valuation techniques.characteristics. BANCO LATINOAMERICANO DE EXPORTACIONES,Banco Latinoamericano de Exportaciones, S. A.
AND SUBSIDIARIESand Subsidiaries
Notes to Consolidated Financial Statementsconsolidated financial statements
| (f) | Commitments to extend credit, stand-by letters of credit, and financial guarantees written
|
The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counter parties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligations with the counterparts at the reporting date. Fair values have been determined based on applicable requirements and do not necessarily represent the amount that would be realized upon liquidation. The following table provides information on the carrying value and fair value of the Bank’s financial instruments:
(In US$ thousand) | | December 31, | | | | | December 31, | | (In thousand of US$) | | | 2007 | | 2006 | | | | 2006 | | 2005 | | Carrying | | Fair | | Carrying | | Fair | | | | Carrying Value | | Fair Value | | Carrying Value | | Fair Value | | Value | | Value | | Value | | Value | | Financial assets: | | | | | | | | | | | | | | | | | | | | | | Instruments with carrying value equal to fair value | | | 433,409 | | | 433,365 | | | 370,762 | | | 370,762 | | | 593,856 | | | 593,856 | | | 433,409 | | | 433,409 | | Trading assets | | | 130,076 | | | 130,076 | | | 0 | | | 0 | | | 52,597 | | | 52,597 | | | 130,076 | | | 130,076 | | Securities available for sale | | | 346,194 | | | 346,194 | | | 182,050 | | | 182,050 | | | 468,360 | | | 468,360 | | | 346,194 | | | 346,194 | | Securities held to maturity | | | 125,157 | | | 125,118 | | | 26,520 | | | 26,325 | | | - | | | - | | | 125,157 | | | 125,118 | | Loans, net of allowance | | | 2,925,081 | | | 2,940,941 | | | 2,564,994 | | | 2,590,429 | | | 3,656,234 | | | 3,674,978 | | | 2,925,081 | | | 2,940,941 | | Derivatives financial instruments - assets | | | 541 | | | 541 | | | 357 | | | 357 | | Derivative financial instruments - assets | | | | 122 | | | 122 | | | 541 | | | 541 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | Instruments with carrying value equal to fair value | | | 2,726,307 | | | 2,726,294 | | | 1,937,823 | | | 1,937,823 | | | 3,015,383 | | | 3,015,383 | | | 2,726,307 | | | 2,726,307 | | Medium and long-term borrowings and placements | | | 558,860 | | | 563,183 | | | 533,860 | | | 527,657 | | Borrowings and long-term debt | | | | 1,010,316 | | | 1,023,413 | | | 558,860 | | | 563,183 | | Trading liabilities | | | 54,832 | | | 54,832 | | | 0 | | | 0 | | | 90,765 | | | 90,765 | | | 54,832 | | | 54,832 | | Derivatives financial instruments - liabilities | | | 2,634 | | | 2,634 | | | 297 | | | 297 | | Commitments to extend credit, stand-by letters of credits and guarantees (nominal amount $624,199 in 2006 and $683,712 in 2005) | | | 1,165 | | | 1,165 | | | 1,532 | | | 1,532 | | Derivative financial instruments - liabilities | | | | 16,899 | | | 16,899 | | | 2,634 | | | 2,634 | |
| Bladex is not engaged in any litigation that is material to the Bank’s business and,or, to the best of the knowledge of the Bank’s management, whichthat is likely to have a materialan adverse effect on its business, financial condition or results of operations. |
(22)22. | Business Segment Informationsegment information |
The Bank’s activities are operated and managed by two divisions,three segments, Commercial, Treasury and Treasury.Asset Management. The segment information reflects this operational and management structure, in a manner consistent with the requirements outlined on FASin SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”. The segment results are determined based on the Bank’s management accounting process, which assigns consolidated balance sheets, revenue and expense items to each reportable division on a systematic basis.
The In 2007 the Bank segregated the Asset Management activities from the Treasury Segment. Business segment information reported in the financial statements for the years ended December 31, 2006 and 2005 has been restated to segregate the new Asset Management Segment.
Commercial Division incorporates all of the Bank´sBank’s financial intermediation and fee generation activities. Operating income from the Commercial DivisionSegment includes net interest income from loans, fee income and allocated operating expenses.
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
Treasury Division incorporates deposits within banks and all of the Bank’s investment securities available for sale and proprietary asset management activities.held to maturity. Operating income from the Treasury Division includes:Segment includes net interest income from deposits and securities derivativesavailable for sale and held to maturity, derivative and hedging activities, gain and losses on trading and investmentsale of securities available for sale, gain and losses on foreign exchange, and allocated operating expenses.
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
AND SUBSIDIARIESAsset Management incorporates all of the Fund’s deposits and trading assets. Operating income from the Asset Management Segment includes net interest income from deposits with brokers, trading assets, derivative instruments for trading, gains and losses on trading, and allocated operating expenses.
Notes to Consolidated Financial Statements
The following table provides certain information regarding the Bank´sBank’s continuing operations by segment: Business Segment Analysis (1)
(In US$ millions) | | 2006 | | 2005 | | 2004 | | | (In millions of US$) | | | 2007 | | 2006 | | 2005 | | COMMERCIAL | | | | | | | | | | | | | | | | | | Interest income | | | | 221.6 | | | 165.8 | | | 101.7 | | Interest expense | | | | (157.5 | ) | | (114.9 | ) | | (62.3 | ) | Net interest income | | | 50.9 | | | 39.4 | | | 37.5 | | | | 64.1 | | | 50.9 | | | 39.4 | | Net other income (2) | | | 6.4 | | | 5.8 | | | 5.9 | | | | 5.3 | | | 6.4 | | | 5.8 | | Operating expenses | | | (23.7 | ) | | (21.7 | ) | | (18.5 | ) | | | (27.2 | ) | | (23.7 | ) | | (21.7 | ) | Net operating income (3) | | | 33.6 | | | 23.5 | | | 24.9 | | | | 42.3 | | | 33.6 | | | 23.5 | | Reversal of provision for loans and off-balance sheet credit losses, net | | | 13.0 | | | 38.4 | | | 112.3 | | | Reversals for loans and off-balance sheet credit losses | | | | 1.5 | | | 13.0 | | | 38.4 | | Impairment on assets | | | | (0.5 | ) | | 0.0 | | | 0.0 | | Net income, before cumulative effect of accounting change | | | 46.6 | | | 61.9 | | | 137.2 | | | | 43.2 | | | 46.6 | | | 61.9 | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 0.0 | | | 2.7 | | | 0.0 | | | | 0.0 | | | 0.0 | | | 2.7 | | Cumulative effect on prior years (to December 31, 2004) of an early adoption of the fair value-based method of accounting stock-based employee compensation plan | | | 0.0 | | | (0.2 | ) | | 0.0 | | | | 0.0 | | | 0.0 | | | (0.2 | ) | Net income | | | 46.6 | | | 64.5 | | | 137.2 | | | | 43.2 | | | 46.6 | | | 64.5 | | | | | | | | | | | | | | | | | | | | | | | Commercial Assets and Contingencies (end of period balances): | | | | | | | | | | | | | | | | | | | | | Interest-earning assets (4) | | | 2,976.3 | | | 2,604.4 | | | 2,434.7 | | | | 3,725.9 | | | 2,976.3 | | | 2,604.4 | | Other assets and contingencies (5) | | | 653.7 | | | 796.9 | | | 309.5 | | | | 549.5 | | | 653.7 | | | 796.9 | | Total Interest-Earning Assets, Other Assets and Contingencies | | | 3,630.0 | | | 3,401.4 | | | 2,744.2 | | | | 4,275.4 | | | 3,630.0 | | | 3,401.4 | | TREASURY | | | | | | | | | | | | | | | | | | | | | Interest income | | | | 33.7 | | | 28.8 | | | 15.1 | | Interest expense | | | | (27.5 | ) | | (21.9 | ) | | (9.2 | ) | Net interest income | | | 7.9 | | | 5.9 | | | 4.5 | | | | 6.2 | | | 6.9 | | | 5.9 | | Net other income (2) | | | 3.0 | | | 2.5 | | | 2.8 | | | | 8.5 | | | 2.1 | | | 2.5 | | Operating expenses | | | (5.2 | ) | | (3.0 | ) | | (2.9 | ) | | | (4.3 | ) | | (3.5 | ) | | (2.7 | ) | Net operating income (3) | | | 5.7 | | | 5.4 | | | 4.5 | | | | 10.3 | | | 5.6 | | | 5.8 | | Recoveries on assets | | | 5.6 | | | 10.2 | | | 0.0 | | | | 0.0 | | | 5.6 | | | 10.2 | | Net income | | | 11.3 | | | 15.6 | | | 4.5 | | | | 10.3 | | | 11.1 | | | 16.0 | | | | | | | | | | | | | | | | | | | | | | | Treasury Assets and Contingencies (end of period of balances): | | | | | | | | | | | | Treasury assets and contingencies (end of period of balances): | | | | | | | | | | | | Interest-earning assets (6) | | | 933.6 | | | 438.5 | | | 347.6 | | | | 819.6 | | | 775.2 | | | 438.5 | | Total Interest-Earning Assets, Other Assets and Contingencies | | | 933.6 | | | 438.5 | | | 347.6 | | | TOTAL | | | | | | | | | | | | Total Interest-earning assets, other assets and contingencies | | | | 819.6 | | | 775.2 | | | 438.5 | | ASSET MANAGEMENT | | | | | | | | | | | | Interest income | | | | 9.6 | | | 8.7 | | | 0.0 | | Interest expense | | | | (9.4 | ) | | (7.7 | ) | | (0.0 | ) | Net interest income | | | 58.8 | | | 45.3 | | | 42.0 | | | | 0.2 | | | 1.0 | | | 0.0 | | Net other income (2) | | | 9.4 | | | 8.4 | | | 8.8 | | | | 23.9 | | | 0.9 | | | 0.0 | | Operating expenses | | | (28.9 | ) | | (24.7 | ) | | (21.4 | ) | | | (5.5 | ) | | (1.9 | ) | | (0.3 | ) | Net operating income (3) | | | 39.3 | | | 28.9 | | | 29.5 | | | | 18.6 | | | 0.0 | | | (0.3 | ) | Reversal of provision for loans and off-balance sheet credit losses, net | | | 13.0 | | | 38.4 | | | 112.3 | | | Recoveries on assets | | | 5.6 | | | 10.2 | | | 0.0 | | | Net income, before cumulative effect of accounting change | | | 57.9 | | | 77.5 | | | 141.7 | | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 0.0 | | | 2.7 | | | 0.0 | | | Cumulative effect on prior years (to December 31, 2004) of an early adoption of the fair value-based method of accounting stock-based employee compensation plan | | | 0.0 | | | (0.2 | ) | | 0.0 | | | Net income | | | 57.9 | | | 80.1 | | | 141.7 | | | | 18.6 | | | 0.0 | | | (0.3 | ) | Total Assets and Contingencies (end of period balances): | | | | | | | | | | | | Interest-earning assets (4 & 6) | | | 3,909.9 | | | 3,042.9 | | | 2,782.3 | | | Other assets and contingencies (5) | | | 653.7 | | | 796.9 | | | 309.5 | | | Total Interest-Earning Assets, Other Assets and Contingencies | | | 4,563.6 | | | 3,839.8 | | | 3,091.9 | | | | | | | | | | | | | | | Fund’s Assets and Contingencies (end of period of balances): | | | | | | | | | | | | Interest-earning assets (6) | | | | 178.9 | | | 158.4 | | | 0 | | Total interest-earning assets, other assets and contingencies | | | | 178.9 | | | 158.4 | | | 0 | | | | | | | | | | | | | |
(Continues)
Banco Latinoamericano de Exportaciones, S. A. and Subsidiaries
Notes to consolidated financial statements
(In US$ million) | | 2007 | | 2006 | | 2005 | | | | | | | | | | TOTAL | | | | | | | | | | | Interest income | | | 264.9 | | | 203.3 | | | 116.8 | | Interest expense | | | (194.3 | ) | | (144.5 | ) | | (71.5 | ) | Net interest income | | | 70.6 | | | 58.8 | | | 45.3 | | Net other income (2) | | | 37.7 | | | 9.4 | | | 8.4 | | Operating expenses | | | (37.0 | ) | | (28.9 | ) | | (24.7 | ) | Net operating income (3) | | | 71.2 | | | 39.3 | | | 28.9 | | Reversals for loans and off-balance sheet credit losses | | | 1.5 | | | 13.0 | | | 38.4 | | Recoveries (impairment) on assets | | | (0.5 | ) | | 5.6 | | | 10.2 | | Net income, before cumulative effect of accounting change | | | 72.2 | | | 57.9 | | | 77.5 | | Cumulative effect on prior years (to December 31, 2004) of a change in the credit loss reserve methodology | | | 0.0 | | | 0.0 | | | 2.7 | | | | | | | | | | | | | Cumulative effect on prior years (to December 31, 2004) of an early adoption of the fair value-based method of accounting stock-based employee compensation plan | | | 0.0 | | | 0.0 | | | (0.2 | ) | Net income | | | 72.2 | | | 57.9 | | | 80.1 | | Total Assets and Contingencies (end of period balances): | | | | | | | | | | | Interest-earning assets (4 & 6) | | | 4,724.4 | | | 3,909.9 | | | 3,042.9 | | Other assets and contingencies (5) | | | 552.5 | | | 653.7 | | | 796.9 | | Total Interest-Earning Assets, Other Assets and Contingencies | | | 5,276.9 | | | 4,563.6 | | | 3,839.8 | |
| (1) | The numbers set out in these tables have been rounded and accordingly may not total exactly. |
| (2) | Net other income excludes reversals (provisions) for loans and off-balance sheet credit losses, and recoveries on assets. |
| (3) | Net operating income refers to net income excluding reversals (provisions) for loans and off-balance sheet credit losses, recoveries on assets, and cumulative effect on prior years of changes in accounting principles. |
| (4) | Includes loans, net of unearned income and deferred loan fees. |
| | Includes customers’ liabilities under acceptances, letters of credit and guarantees covering commercial and country risk, and credit commitments and equity investments recorded as other assets. |
| (6) | Includes cash and due from banks, interest-bearing deposits within banks, securities available for sale and held to maturity and trading securities. |
BANCO LATINOAMERICANO DE EXPORTACIONES, S. A.
| AND SUBSIDIARIES
| | Notes to Consolidated Financial Statements
|
(23) | Summary of Unaudited Quarterly Financial Information
|
| | 2006 | | (In US$ thousand, except per share data) | | Fourth | | Third | | Second | | First | | | | | | | | | | | | Interest income | | $ | 63,016 | | | 54,268 | | | 47,957 | | | 38,109 | | Interest expense | | | (46,278 | ) | | (38,687 | ) | | (33,021 | ) | | (26,527 | ) | Net interest income | | | 16,738 | | | 15,581 | | | 14,936 | | | 11,582 | | Provision for loan losses | | | (1,526 | ) | | (4,575 | ) | | (1,973 | ) | | (3,772 | ) | Net interest income after provision for loan losses | | | 15,212 | | | 11,006 | | | 12,963 | | | 7,810 | | | | | | | | | | | | | | | | Reversal of provision for losses on off-balance sheet credit risk | | | 2,948 | | | 7,158 | | | 3,602 | | | 11,183 | | Commission income, net | | | 1,672 | | | 1,749 | | | 1,293 | | | 1,571 | | Derivatives and hedging activities | | | 115 | | | (64 | ) | | (106 | ) | | (170 | ) | Recoveries on assets | | | 5,551 | | | 0 | | | 0 | | | 0 | | Trading gain (loss) | | | 4,849 | | | (1,594 | ) | | (2,376 | ) | | 0 | | Net gain on sale of securities available for sale | | | 0 | | | 0 | | | 0 | | | 2,568 | | Gain (loss) on foreign currency exchange | | | (67 | ) | | (57 | ) | | (143 | ) | | 14 | | Other income, net | | | 51 | | | 71 | | | 21 | | | 0 | | Operating expenses | | | (9,261 | ) | | (7,020 | ) | | (6,321 | ) | | (6,327 | ) | Net income | | $ | 21,070 | | | 11,249 | | | 8,933 | | | 16,649 | | | | | | | | | | | | | | | | Earnings per share | | $ | 0.58 | | | 0.51 | | | 0.24 | | | 0.44 | | Diluted earnings per share | | $ | 0.57 | | | 0.51 | | | 0.23 | | | 0.43 | | Average number of common shares outstanding (thousands) | | | 36,329 | | | 36,334 | | | 37,556 | | | 38,065 | | | | | | | | | | | | | | | | | | | 2005 | | | | | | | | | | | | | | | | (In US$ thousands, except per share data) | | | Fourth | | | Third | | | Second | | | First | | | | | | | | | | | | | | | | Interest income | | $ | 35,127 | | | 29,959 | | | 25,061 | | | 26,676 | | Interest expense | | | (22,629 | ) | | (18,291 | ) | | (15,122 | ) | | (15,528 | ) | Net interest income | | | 12,498 | | | 11,668 | | | 9,939 | | | 11,148 | | Reversal of (provision for) loan losses: | | | | | | | | | | | | | | Reversal of (provision for) - 2005 | | | (715 | ) | | 23,213 | | | 5,863 | | | 19,819 | | Reversal of (provision for) - effect of a change in the credit loss reserve methodology - 2005 | | | 16,518 | | | 707 | | | 1,266 | | | (12,516 | ) | | | | 15,803 | | | 23,920 | | | 7,129 | | | 7,303 | | | | | | | | | | | | | | | | Net interest income after provision (reversal) for loan losses | | | 28,301 | | | 35,588 | | | 17,068 | | | 18,451 | | Reversal of (provision for) losses on off-balance sheet credit risk: | | | | | | | | | | | | | | Reversal of (provision for) - 2005 | | | 1,571 | | | (1,051 | ) | | (3,286 | ) | | 2,977 | | Reversal of (provision for) - effect of a change in the credit | | | | | | | | | | | | | | loss reserve methodology - 2005 | | | (9,855 | ) | | (10,330 | ) | | 4,284 | | | (91 | ) | | | | (8,284 | ) | | (11,381 | ) | | 998 | | | 2,886 | | | | | | | | | | | | | | | | Commission income, net | | | 1,667 | | | 1,546 | | | 1,024 | | | 1,587 | | Derivatives and hedging activities | | | 2,336 | | | 2 | | | 0 | | | 0 | | Recoveries on assets, net of impairments | | | 0 | | | 137 | | | 0 | | | 10,069 | | Gain (loss) on sale of securities available for sale | | | (39 | ) | | 0 | | | 93 | | | 152 | | Gain (loss) on foreign currency exchange | | | (29 | ) | | 12 | | | 20 | | | 0 | | Other income, net | | | 2 | | | 1 | | | 1 | | | 1 | | Operating expenses | | | (7,408 | ) | | (6,034 | ) | | (5,616 | ) | | (5,633 | ) | Net income before cumulative effect of changes in accounting principles | | | 16,546 | | | 19,871 | | | 13,588 | | | 27,513 | | Cumulative effect on prior periods (to Dec. 31, 2004) of a change in the credit loss reserve methodology | | | 0 | | | 0 | | | 0 | | | 2,733 | | Effect on prior period (to Dec. 31, 2004) of an early adoption of the fair-value based method of accounting stock-based employee compensation | | | (150 | ) | | 0 | | | 0 | | | 0 | | Net income | | $ | 16,396 | | | 19,871 | | | 13,588 | | | 30,246 | | | | | | | | | | | | | | | | Net income per share before the cumulative effect of changes in accounting principles | | $ | 0.43 | | | 0.52 | | | 0.55 | | | 0.71 | | Cumulative effect of changes in accounting principles | | | 0.00 | | | 0.00 | | | 0.00 | | | 0.07 | | Earnings per share | | $ | 0.43 | | | 0.52 | | | 0.55 | | | 0.78 | | | | | | | | | | | | | | | | Diluted earnings per share before cumulative effect of a change in the credit loss reserve methodology | | $ | 0.43 | | | 0.51 | | | 0.55 | | | 0.70 | | Cumulative effect of changes in accounting principles | | | 0.00 | | | 0.00 | | | 0.00 | | | 0.07 | | Diluted earnings per share | | $ | 0.43 | | | 0.51 | | | 0.55 | | | 0.77 | | Average number of common shares outstanding (thousands) | | | 38,097 | | | 38,481 | | | 38,738 | | | 38,895 | |
SIGNATURESEXHIBIT INDEX
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.Exhibit
BANCO LATINOAMERICANO DE EXPORTACIONES, S.A.Exhibit 12.1. | | | Rule 13a-14(a) Certification of Principal Executive Officer | Exhibit 12.2. | | | Rule 13a-14(a) Certification of Principal Financial Officer | Exhibit 13.1. | | | Rule 13a-14(b) Certification of Principal Executive Officer | /s/ JAIME RIVERAExhibit 13.2. | | | Rule 13a-14(b) Certification of Principal Financial Officer |
Jaime Rivera Exhibit 14.1. | | | | Chief Executive Officer | | | | | | | | June 18, 2007 | | | Code of Ethics |
EXHIBIT INDEX
Exhibit
Exhibit 12.1.Rule 13a-14(a) Certification of Principal Executive Officer
Exhibit 12.2.Rule 13a-14(a) Certification of Principal Financial Officer
Exhibit 13.1.Rule 13a-14(b) Certification of Principal Executive Officer
Exhibit 13.2. Rule 13a-14(b) Certification of Principal Financial Officer
|
|