Edgar Filing: FOREIGN TRADE BANK OF LATIN AMERICA, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the month of October, 2013

BANCO LATINOAMERICANO DE COMERCIO EXTERIOR, S.A.

(Exact name of Registrant as specified in its Charter)

FOREIGN TRADE BANK OF LATIN AMERICA, INC.

(Translation of Registrant’s name into English)

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

P.O. Box 0819-08730

Panama City, Republic of Panama

(Address of Registrant’s Principal Executive Offices)

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

Form 20-F x Form 40-F ¨

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

Yes ¨ No x

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

SIGNATURES

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

October 25, 2013.

	FOREIGN TRADE BANK OF LATIN AMERICA, INC.

	By:	/s/ Pedro Toll

	Name:	Pedro Toll
	Title:	General Manager

Banco Latinoamericano

de Comercio Exterior, S. A.

and Subsidiaries

Consolidated Balance Sheets as of September 30, 2013 (Unaudited) and December 31, 2012, and Related Consolidated Statements of Income, Comprehensive Income, Stockholders’ Equity and Redeemable Noncontrolling Interest and Cash Flows (Unaudited) for the Three and Nine Months Ended September 30, 2013 and 2012

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Consolidated Financial Statements

Contents	Pages

Consolidated balance sheets – September 30, 2013 (Unaudited) and December 31, 2012	1

Consolidated statements of income (Unaudited) - For the three and nine months ended September 30, 2013 and 2012	2

Consolidated statements of comprehensive income (Unaudited) - For the nine months ended September 30, 2013 and 2012	3

Consolidated statements of changes in stockholders’ equity and redeemable noncontrolling interest (Unaudited) - For the nine months ended September 30, 2013 and 2012	4

Consolidated statements of cash flows (Unaudited) - For the nine months ended September 30, 2013 and 2012	5

Notes to consolidated financial statements (Unaudited)	6–62

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

Consolidated balance sheets

September 30, 2013 and December 31, 2012

(in US$ thousand, except share amounts)

	Notes		September 30, 2013 (Unaudited)			December 31, 2012 (Audited)
Assets
Cash and due from banks		4,19		2,276			6,718
Interest-bearing deposits in banks (including pledged deposits of $13,860 in 2013 and $14,519 in 2012)		4,19		888,430			700,312
Trading assets (including pledged securities to creditors of $1,262 in 2012)		5,18,19		-			5,265
Securities available-for-sale (including pledged securities to creditors of $192,815 in 2013 and $152,340 in 2012)		6,19		329,549			183,017
Securities held-to-maturity (fair value of $31,879 in 2013 and $34,149 in 2012) (including pledged securities to creditors of $9,165 in 2013 and $19,453 in 2012)		6,19		31,924			34,113
Investment funds		7,19		125,005			105,888
Loans		8		6,190,565			5,715,556
Less:
Allowance for loan losses		9		72,058			72,976
Unearned income and deferred fees				6,060			7,100
Loans, net		19		6,112,447			5,635,480

Customers' liabilities under acceptances		19		49,034			1,157
Accrued interest receivable		19		38,368			37,819
Equipment and leasehold improvements (net of accumulated depreciation and amortization of $13,222 in 2013 and $11,688 in 2012)				10,949			12,808
Derivative financial instruments used for hedging - receivable		16,18,19		14,193			19,239
Other assets				11,289			14,580
Total assets				7,613,464			6,756,396

Liabilities and stockholders' equity
Deposits:		10,19
Noninterest-bearing - Demand				3,354			580
Interest-bearing - Demand				43,801			131,295
Time				2,767,554			2,185,385
Total deposits				2,814,709			2,317,260

Trading liabilities		5,18,19		8			32,304
Securities sold under repurchase agreement		4,5,6,11,18,19		187,725			158,374
Short-term borrowings and debt		12,19		2,465,907			1,449,023
Acceptances outstanding		19		49,034			1,157
Accrued interest payable		19		19,491			17,943
Long-term borrowings and debt		13,19		1,138,165			1,905,540
Derivative financial instruments used for hedging - payable		16,18,19		10,620			11,747
Reserve for losses on off-balance sheet credit risk		9		7,253			4,841
Other liabilities				14,810			28,348
Total liabilities				6,707,722			5,926,537

Commitments and contingencies		15,19,20

Redeemable noncontrolling interest				52,591			3,384

Stockholders' equity:		14,21
Class A common stock, no par value, assigned value of $6.67 (Authorized 40,000,000; outstanding 6,342,189)				44,407			44,407
Class B common stock, no par value, assigned value of $6.67 (Authorized 40,000,000; outstanding 2,522,492 in 2013 and 2,531,926 in 2012)				20,683			20,683
Class E common stock, no par value, assigned value of $6.67 (Authorized 100,000,000; outstanding 29,614,193 in 2013 and 29,271,067 in 2012)				214,890			214,890
Additional paid-in capital in excess of assigned value of common stock				119,342			121,419
Capital reserves				95,210			95,210
Retained earnings				459,841			422,048
Accumulated other comprehensive loss		6,17		(17,133	)		(730	)
Treasury stock				(84,089	)		(91,452	)
Total stockholders' equity				853,151			826,475
Total liabilities and stockholders' equity				7,613,464			6,756,396

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

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

Consolidated statements of income (Unaudited)

(in US$ thousand, except per share amounts)

		Three months ended						Nine months ended
		September 30,						September 30,
	Notes	2013			2012			2013			2012
Interest income:	16,17
Deposits with banks			378			413			1,090			1,509
Trading assets			-			-			-			69
Investment securities:
Available-for-sale			2,073			949			5,545			4,701
Held-to-maturity			198			181			643			529
Investment funds			1,719			78			2,266			727
Loans			51,635			46,033			145,827			135,325
Total interest income			56,003			47,654			155,371			142,860
Interest expense:	16,17
Deposits			3,289			3,340			9,651			9,376
Investment funds			762			30			1,360			66
Short-term borrowings and debt			7,784			3,841			19,165			14,916
Long-term borrowings and debt			7,575			15,360			33,171			37,773
Total interest expense			19,410			22,571			63,347			62,131
Net interest income			36,593			25,083			92,024			80,729

Reversal of provision (provision) for loan losses	9		(3,901	)		(581	)		921			11

Net interest income, after reversal of provision (provision) for loan losses			32,692			24,502			92,945			80,740

Other income (expense):
Reversal of provision (provision) for losses on off-balance sheet credit risk	9		5,136			3,609			(2,412	)		2,510
Fees and commissions, net			3,754			2,095			8,988			6,738
Derivative financial instruments and hedging	16		(559	)		(1,859	)		299			541
Net gain (loss) from investment funds trading			(8,075	)		(2,638	)		(1,728	)		3,898
Net gain from trading securities			69			2,276			3,280			11,475
Net gain on sale of securities available-for-sale	6		-			-			961			6,030
Net loss on foreign currency exchange			(654	)		(2,358	)		(3,810	)		(10,846	)
Gain on sale of premises and equipment			-			-			-			5,626
Other income, net			407			916			1,497			2,130
Net other income			78			2,041			7,075			28,102

Operating expenses:
Salaries and other employee expenses			8,109			8,189			24,306			23,092
Depreciation and amortization of equipment and leasehold improvements			687			673			2,077			1,631
Professional services			813			883			2,408			2,649
Maintenance and repairs			408			565			1,121			1,438
Expenses from investment funds			(114	)		193			2,030			2,209
Other operating expenses			2,991			2,937			8,723			8,571
Total operating expenses			12,894			13,440			40,665			39,590

Net income from continuing operations			19,876			13,103			59,355			69,252

Net loss from discontinued operations	3		-			(130	)		(4	)		(591	)

Net income			19,876			12,973			59,351			68,661

Net income (loss) attributable to the redeemable noncontrolling interest			(2,950	)		(37	)		(1,492	)		207

Net income attributable to Bladex stockholders			22,826			13,010			60,843			68,454

Amounts attributable to Bladex stockholders:

Net income from continuing operations			22,826			13,140			60,847			69,045
Net loss from discontinued operations			-			(130	)		(4	)		(591	)
			22,826			13,010			60,843			68,454

Earning per share from continuing operations:
Basic	14		0.59			0.35			1.59			1.83

Diluted	14		0.59			0.34			1.58			1.83

Loss per share from discontinued operations:
Basic	14		-			(0.00	)		(0.00	)		(0.02	)

Diluted	14		-			(0.00	)		(0.00	)		(0.02	)

Earning per share:
Basic	14		0.59			0.34			1.59			1.81

Diluted	14		0.59			0.34			1.58			1.81

Weighted average basic shares	14		38,459			38,031			38,364			37,716

Weighted average diluted shares	14		38,672			38,246			38,460			37,813

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

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

Consolidated statements of comprehensive income (Unaudited)

For the nine months ended September 30, 2013 and 2012

(in US$ thousand)

	Notes	2013			2012

Net income			59,351			68,661

Other comprehensive income (loss):

Unrealized gains (losses) on securities available-for-sale:
Unrealized gains (losses) arising from the period	17		(12,583	)		8,427
Less: reclassification adjustments for net gains included in net income	17		(1,311	)		(5,775	)
Net change in unrealized gains (losses) on securities available for sale			(13,894	)		2,652

Unrealized gains (losses) on derivative financial instruments:
Unrealized gains (losses) arising from the period	17		(3,650	)		(552	)
Less: reclassification adjustments for net losses included in net income	17		1,409			237
Net change in unrealized gains (losses) on derivative financial instruments			(2,241	)		(315	)

Foreign currency translation adjustment, net of hedges:
Current period change			(197	)		(595	)
Reclassification adjustments for net losses included in net income			24			-
Net change in foreign currency translation adjustment			(173	)		(595	)

Other comprehensive income (loss)			(16,308	)		1,742

Comprehensive income			43,043			70,403

Comprehensive income (loss) attributable to the redeemable noncontrolling interest			(1,397	)		35

Comprehensive income attributable to Bladex stockholders			44,440			70,368

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

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

Consolidated statements of changes in stockholders' equity and redeemable noncontrolling interest (Unaudited)

For the nine months ended September 30, 2013 and 2012

(in US$ thousand)

	Stockholders' equity
			Additional
			paid-in capital
			in excess of								Accumulated
			assigned value								other						Total			Redeemable
	Common		of common			Capital		Retained			comprehensive			Treasury			stockholders'			noncontrolling
	stock		stock			reserves		earnings			income (loss)			stock			equity			interest

Balances at January 1, 2012		279,980		130,177			95,210		372,644			(3,112	)		(115,617	)		759,282			5,547
Net income		-		-			-		68,454			-			-			68,454			207
Redeemable noncontrolling interest - subscriptions		-		-			-		-			-			-			-			1,739
Redeemable noncontrolling interest - redemptions		-		-			-		-			-			-			-			(4,020	)
Other comprehensive income (loss)		-		-			-		-			1,914			-			1,914			(172	)
Compensation cost - stock options and stock units plans		-		1,590			-		-			-			-			1,590			-
Issuance of restricted shares		-		(680	)		-		-			-			680			-			-
Exercised options and stock units vested		-		(10,258	)		-		-			-			23,394			13,136			-
Dividends declared		-		-			-		(30,280	)		-			-			(30,280	)		-
Balances at September 30, 2012		279,980		120,829			95,210		410,818			(1,198	)		(91,543	)		814,096			3,301

Balances at January 1, 2013		279,980		121,419			95,210		422,048			(730	)		(91,452	)		826,475			3,384
Effect of deconsolidating a variable interest entity ("VIE")		-		-			-		-			-			-			-			(565	)
Net income (loss)		-		-			-		60,843			-			-			60,843			(1,492	)
Redeemable noncontrolling interest - subscriptions		-		-			-		-			-			-			-			53,000
Redeemable noncontrolling interest - redemptions		-		-			-		-			-			-			-			(1,831	)
Other comprehensive income (loss)		-		-			-		-			(16,403	)		-			(16,403	)		95
Compensation cost - stock options and stock units plans		-		2,359			-		-			-			-			2,359			-
Issuance of restricted shares		-		(629	)		-		-			-			629			-			-
Exercised options and stock units vested		-		(3,807	)		-		-			-			6,761			2,954			-
Repurchase of "Class E" common stock		-		- -			- -		- -			- -			(27	)		(27	)		-
Dividends declared		-		-			-		(23,050	)		-			-			(23,050	)		-
Balances at September 30, 2013		279,980		119,342			95,210		459,841			(17,133	)		(84,089	)		853,151			52,591

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

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

Consolidated statements of cash flows (Unaudited)

For the nine months ended September 30, 2013 and 2012

(in US$ thousand)

	2013			2012
Cash flows from operating activities:
Net income		59,351			68,661
Adjustments to reconcile net income to net cash provided by operating activities:
Activities of derivative financial instruments and hedging		5,401			(48,420	)
Depreciation and amortization of equipment and leasehold improvements		2,077			1,631
Reversal of provision for loan losses		(921	)		(11	)
Provision (reversal of provision) for losses on off-balance sheet credit risk		2,412			(2,510	)
Net gain on sale of securities available-for-sale		(961	)		(6,030	)
Gain on sale of premises and equipment		-			(5,626	)
Compensation cost - compensation plans		2,359			1,590
Amortization of premium and discounts on investments		3,532			2,481
Net decrease (increase) in operating assets:
Trading assets		281			13,337
Investment funds		(13,157	)		6,710
Accrued interest receivable		(549	)		1,738
Other assets		(44,628	)		3,097
Net increase (decrease) in operating liabilities:
Trading liabilities		(32,296	)		24,943
Accrued interest payable		1,548			13,427
Other liabilities		45,794			(1,318	)
Net change from discontinued operating activities		87			(196	)
Net cash provided by operating activities		30,330			73,504

Cash flows from investing activities:
Effect on cash of desconsolidating a VIE		(2,135	)		-
Net increase in pledged deposits		659			6,285
Net decrease in deposits with original maturities greater than three months		-			30,000
Net increase in loans		(535,203	)		(538,794	)
Proceeds from the sale of loans		59,157			2,180
Acquisition of equipment and leasehold improvements		(289	)		(9,481	)
Proceeds from the sale of premises and equipment		-			8,023
Proceeds from the redemption of securities available-for-sale		34,277			138
Proceeds from the sale of securities available-for-sale		47,475			254,773
Proceeds from maturities of securities held-to-maturity		13,410			5,550
Purchases of investments available-for-sale		(247,985	)		(20,442	)
Purchases of investments held-to-maturity		(11,460	)		(6,160	)
Net change from discontinued investing activities		63			-
Net cash used in investing activities		(642,031	)		(267,928	)

Cash flows from financing activities:
Net increase in due to depositors		497,223			30,661
Net increase (decrease) in short-term borrowings and debt and securities sold under repurchase agreements		1,046,235			(611,146	)
Proceeds from long-term borrowings and debt		233,000			817,827
Repayments of long-term borrowings and debt		(1,000,375	)		(293,925	)
Dividends paid		(34,251	)		(28,301	)
Subscriptions of redeemable noncontrolling interest		53,000			1,739
Redemptions of redeemable noncontrolling interest		(1,831	)		(4,020	)
Exercised stock options		2,954			13,136
Repurchase of common stock		(27	)		-
Net change from discontinued financing activities		27			-
Net cash provided by (used in) financing activities		795,955			(74,029	)

Effect of exchange rate fluctuations on cash and cash equivalents		81			(41	)

Net Increase (decrease) in cash and cash equivalents		184,335			(268,494	)
Cash and cash equivalents at beginning of the period		692,511			789,490
Cash and cash equivalents at end of the period		876,846			520,996

Supplemental disclosures of cash flow information:
Cash paid during the period for interest		61,799			48,704

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Organization

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

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

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

Bladex Head Office’s subsidiaries are the following:

Bladex Holdings Inc. is a wholly owned subsidiary, incorporated under the laws of the State of Delaware, United States of America (USA), on May 30, 2000. Bladex Holdings Inc. exercised control over Bladex Asset Management Inc., incorporated on May 24, 2006, under the laws of the State of Delaware, USA, used to provide investment management services to Bladex Offshore Feeder Fund and Bladex Capital Growth Fund (see Note 7). On September 8, 2009, Bladex Asset Management Inc. was registered as a foreign entity in the Republic of Panama, to establish a branch in Panama, which was mainly engaged in providing administrative and operating services to Bladex Asset Management Inc. in USA. Bladex Asset Management Inc. was dissolved, in the Republic of Panama on July 5, 2013 and, in the USA on September 18, 2013, and their net assets were transferred to the Head Office.

Bladex Offshore Feeder Fund was incorporated on February 21, 2006 under the laws of the Cayman Islands, and invested substantially all its assets in Bladex Capital Growth Fund, which was also incorporated under the laws of the Cayman Islands.

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Bladex Investimentos Ltda. was incorporated under the laws of Brazil on May 3, 2011. Bladex Head Office owns 99% of Bladex Investimentos Ltda. and Bladex Holdings Inc. owns the remaining 1%. This company has invested substantially all its assets in an investment fund incorporated in Brazil ("the Brazilian Fund") and registered with the Brazilian Securities Commission ("CVM", for its acronym in Portuguese). The Brazilian Fund is a non-consolidating variable interest entity (see Note 7).

The objective of the Brazilian Fund is to achieve capital gains by dealing in the interest, currency, securities, commodities and debt markets, and by trading instruments available in the spot and derivative markets.

BLX Brazil Ltd., was incorporated under the laws of the Cayman Islands on October 5, 2010. Bladex Head Office owned 99.80% of BLX Brazil Ltd. In turn, BLX Brazil Ltd. owned 99.9999% of Bladex Asset Management Brazil – Gestora de Recursos Ltda. and Bladex Asset Management Inc. owned the remaining 0.0001%. Bladex Asset Management Brazil – Gestora de Recursos Ltda. was incorporated under the laws of Brazil on January 6, 2011, and provided investment advisory services to Bladex Latam Fundo de Investimento Multimercado. BLX Brazil Ltd. and Bladex Asset Management Brazil – Gestora de Recursos, Ltda. were sold as part of the sale of the asset management unit (see Note 7).

Bladex Head Office has a participation of 55.87% in Alpha4X Feeder Fund (formerly Bladex Offshore Feeder Fund) a fund constituted under the laws of the Cayman Islands, that invests substantially all its assets in Alpha4X Capital Growth Fund (formerly Bladex Capital Growth Fund), which is also incorporated under the laws of the Cayman Islands (see Note 7). Alpha4X Feeder Fund is a variable interest entity (“VIE”), and has been consolidated in these consolidated financial statements. Both funds, Alpha4X Feeder Fund and Alpha4X Capital Growth Fund are registered with the Cayman Island Monetary Authority (“CIMA”), under the Mutual Funds Law of the Cayman Islands. The objective of these Funds is to achieve capital appreciation by investing in Latin American debt securities, stock indexes, currencies, and trading derivative instruments.

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

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

Bladex Head Office owned 50% of the equity shares of BCG PA LLC, a company incorporated under the laws of the State of Delaware, USA. This company owned “Class C” shares of Bladex Capital Growth Fund, which were sold as part of the sale of the asset management unit (see Note 7). The Class C shares entitled this company to receive a performance allocation on third-party investments in Bladex Offshore Feeder Fund and in Bladex Capital Growth Fund. This company was dissolved on August 14, 2013 and its net assets were transferred to its investors.

-7-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Summary of significant accounting policies

Basis of presentation

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

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

These unaudited consolidated financial statements should be read together with the consolidated financial statements and related notes for the fiscal year ended December 31, 2012. Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. GAAP, but not required for interim reporting purposes, has been condensed or omitted.

As noted above, the notes to the consolidated financial statements are unaudited.

Principles of consolidation

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

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

Variable interest entities

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

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

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

Equity method

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

Specialized accounting for investment companies

Alpha4X Feeder Fund (“Feeder”) and Alpha4X Capital Growth Fund (“Master”) are organized under a “Feeder-Master” structure. Under this structure, the Feeder invests all its assets in the Master which in turn invests in various assets on behalf of its investor. Specialized accounting for investment companies requires the Feeder to reflect its investment in the Master in a single line item equal to its proportionate share of the net assets of the Master, regardless of the level of Feeder’s interest in the Master. The Feeder records the Master’s results by accounting for its participation in the net interest income and expenses of the Master, as well as its participation in the realized and unrealized gains or losses of the Master (see Note 7).

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

Use of estimates

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Cash equivalents

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

Repurchase agreements

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

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

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

Trading assets and liabilities

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

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

Investment securities

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

Securities available-for-sale

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

Securities held-to-maturity

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

Impairment of securities

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

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

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

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

Investment Funds

The investment funds line includes the net value of the Feeder and the net value of Bladex investment in the Brazilian Fund. The Feeder records its investment in the Master at fair value, which is the Feeder’s proportionate interest in the net assets of the Master. The Master invests in trading assets and liabilities that are carried at fair value. The Master reports trading gains and losses from negotiation of these instruments as realized and unrealized gains and losses on investments (see Note 7).

Other investments

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

Loans

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

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

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

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

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

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

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

Rating	Classification	Description
1 to 6	Normal	Clients with payment ability to satisfy their financial commitments.

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

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

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

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

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

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

Transfer of financial assets

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

Allowance for credit losses

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

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

Reserves = ∑(E x PD x LGD); where:

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Exposure (E) = the total accounting balance (on and off-balance sheet) at the end of the period under review.

Probabilities of Default (PD) = one-year probability of default applied to the portfolio. Default rates are based on Bladex’s historical portfolio performance per rating category, complemented by Standard & Poor’s (“S&P”) probabilities of default for categories 6, 7 and 8, in view of the greater robustness of S&P data for such cases.

Loss Given Default (LGD) = a factor is utilized, based on historical information, same as based on best practices in the banking industry. Management applies judgment and historical loss experience.

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

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

Fees and commissions

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

Equipment and leasehold improvements

Equipment and leasehold improvements, including the electronic data processing equipment, are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are charged to operations using the straight-line method, over the estimated useful life of the related asset. The estimated original useful life for furniture and equipment is 3 to 5 years and for improvements is 3 to 15 years.

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Borrowings and debt

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

Capital reserves

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

Stock-based compensation and stock options plans

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

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

Derivative financial instruments and hedge accounting

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

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

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

The Bank discontinues hedge accounting prospectively in the following situations:

It is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item.

The derivative expires or is sold, terminated or exercised.

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

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

Foreign currency translation

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

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Income taxes

Bladex Head Office is exempted from payment of income taxes in Panama in accordance with the contract signed between the Republic of Panama and Bladex.

The Feeder and the Master are not subject to income taxes in accordance with the laws of the Cayman Islands. These companies received an undertaking exempting them from taxation of all future profits until March 7, 2026.

Bladex Representacao Ltda. And Bladex Investimentos Ltda., are subject to income taxes in Brazil.

The New York Agency and Bladex’s subsidiaries incorporated in USA are subject to federal and local taxation in USA based on the portion of income that is effectively connected with its operations in that country.

Such amounts of income taxes have been immaterial to date.

Redeemable noncontrolling interest

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

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

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

Earnings per share

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

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Recently issued accounting standards

At the consolidated balance sheet date, new accounting standards, modifications, interpretations, and updates to standards (“ASU”), applicable to the Bank, have been issued and are not in effect. These standards establish the following:

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

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

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

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

ASU 2013-07 – Presentation of Financial Statements (Topic 205)

The amendments in this update require an entity to prepare its financial statements using the liquidation basis of accounting when the liquidation is imminent. In addition, the guidance provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting.

The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The Bank does not anticipate any material impact on its financial statement upon adoption of this update.

ASU 2013-08 – Financial Services – Investment Companies (Topic 946)

The amendments in this update affect the scope, measurement, and disclosure requirements for investment companies under U.S. GAAP. The amendments in this update change the assessment of whether an entity is an investment company by developing a new two-tiered approach for that assessment, which requires an entity to possess certain fundamental characteristics while allowing judgment in assessing other typical characteristics. The new approach requires an entity to assess all of the characteristics of an investment company and consider its purpose and design to determine whether it is an investment company. These amendments also clarify the characteristics of an investment company and provide additional implementation guidance for that assessment.

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

This update is effective for annual and interim periods beginning after December 15, 2013. Early application is prohibited. The Bank does not anticipate any material impact on its financial statement upon adoption of this update.

ASU 2013-11 – Income Taxes (Topic 740)

The objective of the amendments in this update is to eliminate the diversity in practice on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of it, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as when those instances are not available, entities should present them as a liability and should not combined them with deferred tax assets.

These amendments are effective for fiscal years, and interim periods beginning after December 15, 2013. Early adoption is permitted. The Bank does not anticipate any material impact on its financial statement upon adoption of this update.

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Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Sale of the asset management unit and discontinued operations

On April 2, 2013, the Bank reached a definitive agreement to sale its asset management unit (the “Management Unit”) to Alpha4X Asset Management, LLC and related companies (“Alpha4X”). Alpha 4X Asset Management, LLC is a company majority-owned by former executives of the Management Unit (see Note 7).

The sale resulted in a gain of $455 thousand, which is reported in net loss from discontinued operations in the consolidated statements of income. The Bank applied discontinued operations accounting to the operations of the Management Unit in accordance with ASC Topic 205-20 – Presentation of Financial Statements – Discontinued Operations. Amounts reported in the consolidated financial statements of income and cash flows for the three and nine months ended September 30, 2012 have been reclassified to conform to the presentation of discontinued operations in the nine months ended September 30, 2013.

The reclassification of amounts in the consolidated statements of cash flows for the three and nine months ended September 30, 2012 did not affect the totals of operating, investing and financing activities.

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

	Three months ended September 30,					Nine months ended September 30,
(In thousands of US$)	2013		2012			2013			2012

Other income:
Fees and commissions ⁽¹⁾		-		651			610			2,101
Other income		-		2			468			20
		-		653			1,078			2,121
Operating expenses:
Salaries and other employee expenses		-		377			373			1,182
Depreciation and amortization		-		5			8			17
Professional services		-		162			462			590
Maintenance and repairs		-		1			1			4
Other operating expenses		-		238			238			919
Total operating expenses		-		783			1,082			2,712
Net loss from discontinued operations		-		(130	)		(4	)		(591	)

⁽¹⁾Includes management fees from investment funds for $567 thousand, and $2,020 thousand in the nine months ended September 30, 2013 and 2012, respectively.

-21-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Cash and cash equivalents

Cash and cash equivalents are as follows:

	September 30,		December 31,
(In thousands of US$)	2013		2012

Cash and due from banks		2,276		6,718
Interest-bearing deposits in banks		888,430		700,312
Total		890,706		707,030
Less:
Pledged deposits		13,860		14,519
		876,846		692,511

On September 30, 2013 and December 31, 2012, the New York Agency had a pledged deposit with a carrying value of $3.0 million with the New York State Banking Department, as required by law since March 1994. As of September 30, 2013 and December 31, 2012, the Bank had pledged deposits with a carrying value of $10.9 million and $11.5 million, respectively, to secure derivative financial instruments transactions and repurchase agreements.

Trading assets and liabilities

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

	September 30,		December 31,
(In thousands of US$)	2013		2012

Trading assets:
Sovereign bonds		-		5,146
Cross-currency swaps		-		49
Forward foreign exchange		-		50
Future contracts		-		20
Total		-		5,265

Trading liabilities:
Interest rate swaps		-		100
Cross-currency interest rate swaps		8		32,182
Forward foreign exchange		-		22
Total		8		32,304

Sovereign bonds outstanding as of December 31, 2012, generated gains of $0.1 million, which were recorded in earnings. As of December 31, 2012, bonds with a carrying value of $1.3 million, secured derivative financial instruments transactions.

-22-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

During the three and nine months ended September 30, 2013 and 2012, the Bank recognized the following gains and losses related to trading derivative financial instruments:

	Three months ended September 30,					Nine months ended September 30,
(In thousands of US$)	2013		2012			2013			2012

Interest rate swaps		-		(213	)		61			(318	)
Cross-currency swaps		-		-			67			-
Cross-currency interest rate swaps		2		2,629			3,244			11,413
Forward foreign exchange		67		(75	)		(25	)		406
Future contracts		-		(236	)		191			158
Total		69		2,105			3,538			11,659

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

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

As of September 30, 2013 and December 31, 2012, trading derivative liabilities include or have included interest rate swap and cross-currency interest rate swap contracts that were previously designated as fair value and cash flow hedges. Adjustments to the carrying value of the hedged underlying transactions are amortized in the interest expense line over the remaining term of these transactions. Changes in the fair value of these derivative instruments after discontinuation of hedge accounting are recorded in Net gain (loss) from trading securities.

As of September 30, 2013 and December 31, 2012, information on the nominal amounts of derivative financial instruments held for trading purposes is as follows:

	September 30, 2013						December 31, 2012
(In thousands of US$)	Nominal		Fair Value				Nominal		Fair Value
	Amount		Asset		Liability		Amount		Asset		Liability

Interest rate swaps		-		-		-		35,291		-		100
Cross-currency interest rate swaps		699		-		8		155,081		49		32,182
Forward foreign exchange		-		-		-		7,152		50		22
Future contracts		-		-		-		6,896		20		-
Total		699		-		8		204,420		119		32,304

-23-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Investment securities

Securities available-for-sale

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

	September 30, 2013
(In thousands of US$)	Amortized Cost		Unrealized Gross Gain		Unrealized Gross Loss		Fair Value
Corporate debt:
Brazil		52,644		74		1,252		51,466
Colombia		43,788		120		1,995		41,913
Chile		16,817		-		1,093		15,724
Honduras		6,585		19		122		6,482
Panama		9,149		22		162		9,009
Peru		24,522		-		1,200		23,322
Venezuela		25,768		-		1,983		23,785
		179,273		235		7,807		171,701

Sovereign debt:
Brazil		32,903		1,156		664		33,395
Colombia		26,313		-		945		25,368
Chile		9,953		-		656		9,297
Mexico		56,271		1,215		2,662		54,824
Panama		29,850		1,188		589		30,449
Trinidad and Tobago		4,707		-		192		4,515
		159,997		3,559		5,708		157,848

Total		339,270		3,794		13,515		329,549

	December 31, 2012
(In thousands of US$)	Amortized Cost		Unrealized Gross Gain		Unrealized Gross Loss		Fair Value
Corporate debt:
Brazil		13,581		158		-		13,739
Colombia		986		60		-		1,046
Chile		1,967		87		-		2,054
Peru		530		17		-		547
		17,064		322		-		17,386

Sovereign debt:
Brazil		28,783		1,965		-		30,748
Colombia		15,489		-		199		15,290
Chile		1,061		1		-		1,062
Honduras		15,986		224		-		16,210
Mexico		20,553		1,779		-		22,332
Panama		37,845		1,828		-		39,673
Venezuela		39,548		801		33		40,316
		159,265		6,598		232		165,631

Total		176,329		6,920		232		183,017

As of September 30, 2013 and December 31, 2012, securities available-for-sale with a carrying value of $192.8 million and $152.3 million, respectively, were pledged to secure repurchase transactions accounted for as secured financings.

-24-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

	September 30, 2013
(In thousands of US$)	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses

Corporate debt		152,830		7,807		-		-		152,830		7,807
Sovereign debt		78,025		5,572		15,022		136		93,047		5,708
		230,855		13,379		15,022		136		245,877		13,515

	December 31, 2012
(In thousands of US$)	Less than 12 months				12 months or longer				Total
	Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses		Fair Value		Unrealized Gross Losses

Sovereign debt		10,188		79		10,009		153		20,197		232
		10,188		79		10,009		153		20,197		232

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

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

	Three months ended September 30,				Nine months ended September 30,
(In thousands of US$)	2013		2012		2013			2012

Gains		-		-		962			6,141
Losses		-		-		(1	)		(111	)
Net		-		-		961			6,030

The amortized cost and fair value of securities available-for-sale by contractual maturity as of September 30, 2013, are shown in the following table:

(In thousands of US$)	Amortized Cost		Fair Value

Due within 1 year		22,479		23,050
After 1 year but within 5 years		173,298		173,464
After 5 years but within 10 years		143,493		133,035
		339,270		329,549

-25-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Securities held-to-maturity

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

	Septemer 30, 2013
(In thousands of US$)	Amortized Cost		Unrealized Gross Gain		Unrealized Gross Loss		Fair Value
Corporate debt:
Honduras		4,160		-		10		4,150
Panama		14,756		-		46		14,710
		18,916		-		56		18,860

Sovereign debt:
Colombia		13,008		11		-		13,019

Total		31,924		11		56		31,879

	December 31, 2012
(In thousands of US$)	Amortized Cost		Unrealized Gross Gain		Unrealized Gross Loss		Fair Value
Corporate debt:
Panama		12,660		-		-		12,660

Sovereign debt:
Colombia		13,011		4		3		13,012
Honduras		6,442		9		19		6,432
Panama		2,000		45		-		2,045
		21,453		58		22		21,489

Total		34,113		58		22		34,149

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

The amortized cost and fair value of securities held-to-maturity by contractual maturity as of September 30, 2013, are shown in the following table:

(In thousands of US$)	Amortized Cost		Fair Value

Due within 1 year		16,860		16,850
After 1 year but within 5 years		15,064		15,029
		31,924		31,879

As of September 30, 2013 and December 31, 2012, securities held-to-maturity with a carrying value of $9.2 million and $19.4 million, respectively, were pledged to secure repurchase transactions accounted for as secured financings.

-26-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Investment funds

Until March 31, 2013, the Bank had an interest in two investment funds: Bladex Offshore Feeder Fund (98.74%) and Bladex Latam Fundo de Investimento Multimercado (92.38%). Prior to the sale of the Management Unit, the Bank consolidated these funds following applicable consolidation guidance.

The Bank determined that Bladex Offshore Feeder Fund was evaluated under the requirements of ASC 810-10 - Consolidation prior to the implementation of Statement of Financial Accounting Standards (“SFAS”) 167 (FIN 46 (R) (ASU 2009-17 - Consolidation of Variable Interest Entities), because this fund met the deferral criteria in ASU 2010-10 "Amendments for Certain Investment Funds”. Prior consolidation guidance required that a VIE be consolidated by the party that will absorb a majority of the entity’s expected losses or residual returns, or both.

Bladex Latam Fundo de Investimento Multimercado, a VIE, was consolidated line by line following the consolidation accounting policy of VIEs described in Note 2 (c).

As described in Note 3, on April 2, 2013, the Bank reached a definitive agreement to sell the Management Unit. The sale agreement included, among others, the transfer of the Bank's participation in BLX Brazil Ltd. and Bladex Asset Management Brazil – Gestora de Recursos Ltda., the termination of the investment advisory contracts between Bladex Asset Management Inc. and Bladex Offshore Feeder Fund and Bladex Capital Growth Fund, and the change of name of Bladex Offshore Feeder Fund to Alpha4X Offshore Feeder Fund, of Bladex Capital Growth Fund to Alpha4X Capital Growth Fund, and of Bladex Latam Fundo de Investimento Multimercado to Alpha4X Latam Fundo de Investimento Multimercado.

With the sale of the Management Unit, the Bank deconsolidated Bladex Latam Fundo de Investimento Multimercado because it ceased to be the primary beneficiary of that VIE. The deconsolidation of this fund affected the balance of the redeemable noncontrolling interest. Since the date of sale of the Management Unit, the Bank's investment in Alpha4X Latam Fundo de Investimento Multimercado is adjusted to record the Bank's participation in the profits and losses of that fund in the Net gain (loss) from investment funds trading line.

The Bank continues consolidating its investment in Alpha4X Feeder Fund, following the previous consolidation guide for VIEs applied to former Bladex Offshore Feeder Fund. At September 30, 2013, the Bank has a participation of 55.87% in that fund. As disclosed in Note 2 (e), when consolidating the Feeder, the Bank retains the specialized accounting for investment companies applied by the Feeder in the Master.

The following table summarizes the balances of investments in invesment funds:

(In thousands of US$)	September 30,		December 31,
	2013		2012

Bladex Offshore Feeder Fund		-		105,888
Alpha4X Feeder Fund		119,171		-
Alpha4X Latam Fundo de Investimento Multimercado		5,834		-
		125,005		105,888

-27-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Loans

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

(In thousands of US$)	September 30,		December 31,
	2013		2012
Corporations:
Private		2,484,029		2,202,613
State-owned		803,893		538,638
Banking and financial institutions:
Private		1,686,727		1,775,938
State-owned		638,289		416,085
Middle-market companies:
Private		577,260		681,912
Sovereign		367		100,370
Total		6,190,565		5,715,556

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

(In thousands of US$)	September 30,		December 31,
	2013		2012

Banking and financial institutions		2,325,016		2,192,023
Industrial		1,039,647		1,108,223
Oil and petroleum derived products		1,042,578		894,368
Agricultural		1,021,793		853,377
Services		246,485		210,925
Mining		10,000		22,122
Sovereign		367		100,370
Others		504,679		334,148
Total		6,190,565		5,715,556

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

(In thousands of US$)	September 30, 2013
Rating ⁽¹⁾	Corporations				Banking and financial institutions				Middle-market companies		Sovereign		Total
	Private		State-owned		Private		State-owned		Private
1-6		2,484,029		803,893		1,686,727		638,289		577,260		367		6,190,565
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
10		-		-		-		-		-		-		-
Total		2,484,029		803,893		1,686,727		638,289		577,260		367		6,190,565

-28-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

(In thousands of US$)	December 31, 2012
Rating ⁽¹⁾	Corporations				Banking and financial institutions				Middle-market companies		Sovereign		Total
	Private		State-owned		Private		State-owned		Private
1-6		2,202,613		538,638		1,775,938		416,085		681,912		100,370		5,715,556
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
10		-		-		-		-		-		-		-
Total		2,202,613		538,638		1,775,938		416,085		681,912		100,370		5,715,556

⁽¹⁾

Current ratings as of September 30, 2013 and December 31, 2012, respectively.

The remaining loan maturities are summarized as follows:

(In thousands of US$)	September 30,		December 31,
	2013		2012
Current:
Up to 1 month		1,055,570		1,155,222
From 1 month to 3 months		1,321,295		1,475,201
From 3 months to 6 months		1,328,648		962,377
From 6 months to 1 year		1,002,549		752,822
From 1 year to 2 years		864,395		662,511
From 2 years to 5 years		618,108		692,884
More than 5 years		-		14,539
		6,190,565		5,715,556

Delinquent		-		-
Total		6,190,565		5,715,556

As of September 30, 2013 and December 31, 2012, there were no impaired loans.

-29-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

(In thousands of US$)	September 30,		December 31,
	2013		2012
Country:
Argentina		341,422		222,159
Belgium		34,524		30,692
Brazil		1,739,324		1,773,401
Chile		281,675		309,712
Colombia		542,056		450,037
Costa Rica		443,413		196,857
Dominican Republic		237,396		110,688
Ecuador		130,502		173,782
El Salvador		83,136		66,013
France		1,740		59,501
Guatemala		298,885		273,051
Honduras		46,208		70,701
Jamaica		39,899		9,772
Mexico		700,287		495,954
Netherlands		64,632		77,336
Nicaragua		3,827		10,169
Panama		214,862		277,144
Paraguay		71,074		27,060
Peru		555,280		841,032
Spain		-		9,695
Trinidad and Tobago		200,000		119,347
United States of America		5,300		2,925
Uruguay		155,123		108,528
		6,190,565		5,715,556

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

(In thousands of US$)	September 30,		December 31,
	2013		2012

Fixed interest rates		3,378,519		3,282,876
Floating interest rates		2,812,046		2,432,680
		6,190,565		5,715,556

As of September 30, 2013 and December 31, 2012, 89% and 92%, respectively, of the loan portfolio at fixed interest rates has remaining maturities of less than 180 days.

At September 30, 2013 and December 31, 2012, the Bank did not have loans in non-accrual status.

-30-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

Following is an analysis of loans in non-accrual status with impaired balance as of September 30, 2013 and December 31, 2012:

(In thousands of US$)

September 30, 2013

Three months ended
September 30, 2013

Nine months ended
September 30, 2013

Recorded
investment

Unpaid
principal
balance

Related
allowance

Average
principal
loan balance

Interest
income
recognized

With an allowance recorded Private corporations

Total

(In thousands of US$)	December 31, 2012								Three months ended September 30, 2012		Nine months ended September 30, 2012
	Recorded investment		Unpaid principal balance		Related allowance		Average principal loan balance		Interest income recognized		Interest income recognized
With an allowance recorded Private corporations		-		-		-		-		541		1,598
Total		-		-		-		-		541		1,598

As of September 30, 2013 and December 31, 2012, there were no impaired loans without related allowance.

As of September 30, 2013 and December 31, 2012, the Bank did not have any troubled debt restructurings.

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

(In thousands of US$)	September 30, 2013
	91-120 days		121-150 days		151-180 days		Greater than 180 days		Total Past Due		Delinquent		Current		Total Loans
Corporations		-		-		-		-		-		-		3,287,922		3,287,922
Banking and financial institutions		-		-		-		-		-		-		2,325,016		2,325,016
Middle-market companies		-		-		-		-		-		-		577,260		577,260
Sovereign		-		-		-		-		-		-		367		367
Total		-		-		-		-		-		-		6,190,565		6,190,565

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

-31-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

As of September 30, 2013 and December 31, 2012, the Bank has credit transactions in the normal course of business with 21% and 29%, respectively, of its Class “A” and “B” stockholders. All transactions are made based on arm’s-length terms and subject to prevailing commercial criteria and market rates and are subject to all of the Bank’s Corporate Governance and control procedures. As of September 30, 2013 and December 31, 2012, approximately 13% and 18%, respectively, of the outstanding loan portfolio is placed with the Bank’s Class “A” and “B” stockholders and their related parties. As of September 30, 2013, the Bank was not directly or indirectly owned or controlled by another corporation or any foreign government, and no Class “A” or “B” shareholder was the registered owner of more than 3.5% of the total outstanding shares of the voting capital stock of the Bank.

During the nine months ended September 30, 2013 and 2012, the Bank sold loans with a book value of $59.2 million and $72.2 million, respectively.

Allowance for credit losses

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

Allowance for loan losses:

Following tables disclose the activity in the allowance for loan losses during the three and nine month periods ended September 30, 2013 and 2012:

(In thousands of US$)	Three months ended September 30, 2013
	Corporations			Banking and financial institutions		Middle- market companies			Sovereign			Total
Balance at beginning of the period		34,286			25,327		8,540			3			68,156
Provision (reversal of provision) for loan losses		(3,774	)		9,504		(1,827	)		(2	)		3,901
Loan recoveries and other		-			1		-			-			1
Loans written-off		-			-		-			-			-
Balance at end of the period		30,512			34,832		6,713			1			72,058

Components:
Generic allowance		30,512			34,832		6,713			1			72,058
Specific allowance		-			-		-			-			-
Total allowance for loan losses		30,512			34,832		6,713			1			72,058

(In thousands of US$)	Three months ended September 30, 2012
	Corporations			Banking and financial institutions			Middle- market companies		Sovereign		Total
Balance at beginning of the period		47,841			25,953			8,259		97		82,150
Provision (reversal of provision) for loan losses		(803	)		(226	)		1,089		521		581
Loan recoveries and other		-			-			245		-		245
Loans written-off		-			-			-		-		-
Balance at end of the period		47,038			25,727			9,593		618		82,976

Components:
Generic allowance		37,438			25,727			9,593		618		73,376
Specific allowance		9,600			-			-		-		9,600
Total allowance for loan losses		47,038			25,727			9,593		618		82,976

-32-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

(In thousands of US$)	Nine months ended September 30, 2013
	Corporations			Banking and financial institutions		Middle- market companies			Sovereign			Total
Balance at beginning of the period		32,488			28,836		10,887			765			72,976
Provision (reversal of provision) for loan losses		(1,976	)		5,993		(4,174	)		(764	)		(921	)
Loan recoveries and other		-			3		-			-			3
Loans written-off		-			-		-			-			-
Balance at end of the period		30,512			34,832		6,713			1			72,058

Components:
Generic allowance		30,512			34,832		6,713			1			72,058
Specific allowance		-			-		-			-			-
Total allowance for loan losses		30,512			34,832		6,713			1			72,058

(In thousands of US$)	Nine months ended September 30, 2012
	Corporations			Banking and financial institutions			Middle- market companies		Sovereign		Total
Balance at beginning of the period		48,865			30,523			8,952		207		88,547
Provision (reversal of provision) for loan losses		3,995			(4,813	)		396		411		(11	)
Loan recoveries and other		-			17			245		-		262
Loans written-off		(5,822	)		-			-		-		(5,822	)
Balance at end of the period		47,038			25,727			9,593		618		82,976

Components:
Generic allowance		9,600			-			-		-		9,600
Specific allowance		37,438			25,727			9,593		618		73,376
Total allowance for loan losses		47,038			25,727			9,593		618		82,976

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

-33-

Banco Latinoamericano de Comercio Exterior, S. A.

and Subsidiaries

Notes to consolidated financial statements (Unaudited)

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

(In thousands of US$)	September 30, 2013
	Corporations		Banking and financial institutions		Middle-market companies		Sovereign		Total
Allowance for loan losses
Generic allowance		30,512		34,832		6,713		1		72,058
Specific allowance		-		-		-		-		-
Total of allowance for loan losses		30,512		34,832		6,713		1		72,058

Loans
Loans with generic allowance		3,287,922		2,325,016		577,260		367		6,190,565
Loans with specific allowance		-		-		-		-		-
Total loans		3,287,922		2,325,016		577,260		367		6,190,565

(In thousands of US$)	December 31, 2012
	Corporations		Banking and financial institutions		Middle-market companies		Sovereign		Total
Allowance for loan losses
Generic allowance		32,488		28,836		10,887		765		72,976
Specific allowance		-		-		-		-		-
Total of allowance for loan losses		32,488		28,836		10,887		765		72,976

Loans
Loans with generic allowance		2,741,251		2,192,023		681,912		100,370		5,715,556
Loans with specific allowance		-		-		-		-		-
Total loans		2,741,251		2,192,023		681,912		100,370		5,715,556

Reserve for losses on off-balance sheet credit risk:

(In thousands of US$)	Three months ended September 30,
	2013			2012
Balance at beginning of the period		12,389			9,986
Reversal of provision for losses on off-balance sheet credit risk		(5,136	)		(3,609	)
Balance at end of the period		7,253			6,377

(In thousands of US$)	Nine months ended September 30,
	2013		2012
Balance at beginning of the period		4,841		8,887
Provision (reversal of provision) for losses on off-balance sheet credit risk		2,412		(2,510	)
Balance at end of the period		7,253		6,377

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

-34-

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

Notes to consolidated financial statements (Unaudited)

10.

Deposits

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

	September 30,		December 31,
(In thousands of US$)	2013		2012

Demand		47,155		131,875
Up to 1 month		1,631,125		1,194,102
From 1 month to 3 months		774,386		540,619
From 3 months to 6 months		286,043		281,120
From 6 months to 1 year		70,000		152,000
From 1 year to 2 years		6,000		7,000
From 2 years to 5 years		-		10,544
		2,814,709		2,317,260

The following table presents additional information about deposits:

	September 30,		December 31,
(In thousands of US$)	2013		2012

Aggregate amounts of time deposits of $100,000 or more		2,767,554		2,185,277
Aggregate amounts of deposits in offices outside Panama		225,326		229,170
Interest expense paid to deposits in offices outside Panama		967		1,332

11.

Securities sold under repurchase agreements

The Bank’s financing transactions under repurchase agreements amounted to $187.7 million and $158.4 million as of September 30, 2013 and December 31, 2012, respectively.

During the nine months ended September 30, 2013 and 2012, interest expense related to financing transactions under repurchase agreements totaled $1.0 million and $1.5 million, respectively. These expenses are included in the interest expense – short-term borrowings and debt line in the consolidated statements of income.

-35-

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

Notes to consolidated financial statements (Unaudited)

12.

Short-term borrowings and debt

The breakdown of short-term borrowings and debt, together with contractual interest rates, is as follows:

	September 30,			December 31,
(In thousands of US$)	2013			2012

Borrowings:
At fixed interest rates		1,081,435			1,181,133
At floating interest rates		970,123			267,890
Total borrowings		2,051,558			1,449,023

Debt:
At fixed interest rates		304,349			-
At floating interest rates		110,000			-
Total debt		414,349			-
Total short-term borrowings and debt		2,465,907			1,449,023

Average outstanding balance during the period		1,876,512			967,629
Maximum balance at any month-end		2,632,541			1,449,023
Range of fixed interest rates on borrowings and debt in U.S. dollars		0.58% to 1.69	%		0.75% to 1.92	%
Range of floating interest rates on borrowings and debt in U.S. dollars		0.71% to 1.37	%		1.06% to 1.99	%
Fixed interest rate on borrowings in Euros		-			0.70	%
Fixed interest rate on borrowings in Mexican pesos		4.63% to 4.64	%		-
Floating interest rate on borrowings in Mexican pesos		4.26	%		5.14% to 5.25	%
Fixed interest rate on debt in Japanese yens		0.75	%		-
Fixed interest rate on debt in Swiss francs		0.80	%		-
Weighted average interest rate at end of the period		1.12	%		1.48	%
Weighted average interest rate during the period		1.26	%		1.79	%

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

(In thousands of US$)	September 30, 2013		December 31, 2012

Currency
U.S. dollar		2,333,500		1,365,500
Euro		-		39,633
Mexican peso		38,843		43,890
Japanese yen		5,088		-
Swiss franc		88,476		-
Total		2,465,907		1,449,023

-36-

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

Notes to consolidated financial statements (Unaudited)

13.

Long-term borrowings and debt

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

	September 30,			December 31,
(In thousands of US$)	2013			2012
Borrowings:
At fixed interest rates with due dates in June 2015		25,000			1,435
At floating interest rates with due dates from October 2013 to August 2016		491,195			1,296,785
Total borrowings		516,195			1,298,220
Debt:
At fixed interest rates with due dates from November 2014 to April 2017		444,645			453,373
At floating interest rates with due dates from March 2015 to July 2016		177,325			153,947
Total debt		621,970			607,320

Total long-term borrowings and debt outstanding		1,138,165			1,905,540

Average outstanding balance during the period		1,372,386			1,893,580

Maximum outstanding balance at any month-end		1,893,149			2,152,584

Fixed interest rates on d borrowings and debt in U.S. dollars		1.50% to 3.75	%		3.75	%

Range of floating interest rates on borrowings and debt in U.S. dollars		0.53% to 1.80	%		0.68% to 2.40	%

Range of fixed interest rates on borrowings and debt in Mexican pesos		-			7.60% to 9.90	%

Range of floating interest rates on borrowings and debt in Mexican pesos		4.96% to 5.54	%		5.50% to 6.34	%

Fixed interest rate on debt in Peruvian nuevos soles		6.50	%		6.50	%

Weighted average interest rate at the end of the period		3.11	%		2.92	%

Weighted average interest rate during the period		3.09	%		2.74	%

-37-

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

Notes to consolidated financial statements (Unaudited)

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

(In thousands of US$)	September 30, 2013		December 31, 2012

Currency
U.S. dollar		871,910		1,518,592
Mexican peso		222,090		338,760
Peruvian nuevo sol		44,165		48,188
Total		1,138,165		1,905,540

The Bank's funding activities include: (i) Euro Medium Term Note Program (“EMTN”), which may be used to issue notes for up to $2.3 billion, with maturities from 7 days up to a maximum of 30 years, at fixed or floating interest rates, or at discount, and in various currencies. The notes are generally issued in bearer or registered form through one or more authorized financial institutions; (ii) Short-and Long-Term Notes “Certificados Bursatiles” Program (the “Mexico Program”) in the Mexican local market, registered with the Mexican National Registry of Securities maintained by the National Banking and Securities Commission in Mexico (“CNBV”, for its acronym in Spanish), for an authorized aggregate principal amount of 10 billion Mexican pesos with maturities from one day to 30 years; (iii) a Program in Peru to issue corporate bonds under a private offer in Peruvian nuevos soles (“PEN”), offered exclusively to institutional investors domiciled in the Republic of Peru, for an maximum aggregate limit of the equivalent of $300 million, with different maturities and interest rate structures.

Some borrowing agreements include various events of default and covenants related to minimum capital adequacy ratios, incurrence of additional liens, and asset sales, as well as other customary covenants, representations and warranties. As of September 30, 2013, the Bank was in compliance with all covenants.

The future remaining maturities of long-term borrowings and debt outstanding as of September 30, 2013, are as follows:

(In thousands of US$)

Due in:	Outstanding

2013		25,369
2014		331,992
2015		177,325
2016		203,000
2017		400,479
		1,138,165

-38-

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

Notes to consolidated financial statements (Unaudited)

14.

Earnings per share

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

(In thousands of US$, except per share amounts)

	Three months ended					Nine months ended
	September 30					September 30
	2013		2012			2013			2012
Net income from continuing operations attributable to Bladex stockholders for both basic and diluted EPS		22,826		13,140			60,847			69,045
Net loss from discontinued operations		-		(130	)		(4	)		(591	)
Net income attributable to Bladex stockholders for both basic and diluted EPS		22,826		13,010			60,843			68,454

Basic earnings per share from continuing operations		0.59		0.35			1.59			1.83
Diluted earnings per share from continuing operations		0.59		0.34			1.58			1.83
Basic loss per share from discontinued operations		-		(0.00	)		(0.00	)		(0.02	)
Diluted loss per share from discontinued operations		-		(0.00	)		(0.00	)		(0.02	)

Basic earnings per share		0.59		0.34			1.59			1.81
Diluted earnings per share		0.59		0.34			1.58			1.81
Weighted average common shares outstanding - applicable to basic		38,459		38,031			38,364			37,716
Effect of dilutive securities ⁽¹⁾:
Stock options and restricted stock units plans		213		215			96			97
Adjusted weighted average common shares outstanding applicable to diluted EPS		38,672		38,246			38,460			37,813

⁽¹⁾

As of September 30, 2013 and 2012, the computation of earnings per share did not exclude any weighted-average options.

15.

Financial instruments with off-balance sheet credit risk

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

The Bank’s outstanding financial instruments with off-balance sheet credit risk were as follows:

	September 30,		December 31,
(In thousands of US$)	2013		2012

Confirmed letters of credit		164,812		106,415
Stand-by letters of credit and guarantees - Commercial risk		80,126		25,167
Credit commitments		98,500		103,294
		343,438		234,876

-39-

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

Notes to consolidated financial statements (Unaudited)

As of September 30, 2013, the remaining maturity profile of the Bank’s outstanding financial instruments with off-balance sheet credit risk is as follows:

(In thousands of US$)
Maturities	Amount

Within 1 year		224,266
From 1 to 2 years		95,655
From 2 to 5 years		22,895
After 5 years		622
		343,438

As of September 30, 2013 and December 31, 2012 the breakdown of the Bank’s off-balance sheet exposure by country risk is as follows:

(In thousands of US$)	September 30,		December 31,
Country:	2013		2012
Argentina		25,817		-
Bolivia		-		820
Brazil		17,500		23,630
Chile		6,084		6,084
Colombia		59,430		9,098
Costa Rica		1,174		1,000
Dominican Republic		108		1,535
Ecuador		81,748		79,760
El Salvador		2,062		625
Germany		36		-
Guatemala		42,484		180
Honduras		412		562
Mexico		18,516		27,289
Netherlands		17,833		-
Panama		33,720		58,219
Paraguay		57		-
Peru		23,409		2,843
Switzerland		1,000		-
United Kingdom		70		-
Uruguay		10,946		-
Venezuela		1,032		23,231
		343,438		234,876

Letters of credit and guarantees

The Bank, on behalf of its client base, advises and confirms letters of credit to facilitate foreign trade transactions. When confirming letters of credit, the Bank adds its own unqualified assurance that the issuing bank will pay and that if the issuing bank does not honor drafts drawn on the credit, the Bank will. The Bank provides stand-by letters of credit and guarantees, which are issued on behalf of institutional customers in connection with financing between its customers and third parties. The Bank applies the same credit policies used in its lending process, and once issued the commitment is irrevocable and remains valid until its expiration. Credit risk arises from the Bank's obligation to make payment in the event of a customer’s contractual default to a third party. Risks associated with stand-by letters of credit and guarantees are included in the evaluation of the Bank’s overall credit risk.

-40-

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

Notes to consolidated financial statements (Unaudited)

Credit commitments

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

16.

Derivative financial instruments for hedging purposes

As of September 30, 2013 and December 31, 2012, quantitative information on derivative financial instruments held for hedging purposes is as follows:

	September 30, 2013						December 31, 2012
(In thousands of US$)	Nominal		Fair Value ⁽¹⁾				Nominal		Fair Value ⁽¹⁾
	Amount		Asset		Liability		Amount		Asset		Liability
Fair value hedges:
Interest rate swaps		544,472		4,533		3,782		480,000		8,319		6,600
Cross-currency interest rate swaps		255,426		2,677		5,337		236,866		3,525		4,665
Cash flow hedges:
Interest rate swaps		343,000		-		965		-		-		-
Cross-currency interest rate swaps		126,308		5,038		-		42,001		7,333		23
Forward foreign exchange		111,711		1,945		202		75,733		62		411
Net investment hedges:
Forward foreign exchange		5,473		-		334		6,196		-		48
Total		1,386,390		14,193		10,620		840,796		19,239		11,747

Net gain on the ineffective portion of hedging activities ⁽²⁾		299						440

⁽¹⁾

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

⁽²⁾

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

-41-

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

Notes to consolidated financial statements (Unaudited)

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

Three months ended September 30, 2013
(In thousands of US$)					Gain (loss) reclassified
					from accumulated			Gain (loss)
	Gain (loss) recognized in OCI (effective portion)			Classification of gain (loss)	OCI to the statements of income (effective portion)			recognized on derivatives (ineffective portion)

Derivatives – cash flow hedge
Interest rate swaps		(173	)
Cross-currency interest rate swaps		2,826		Gain (loss) on foreign currency exchange		-			-
				Interest income – loans		(8	)		-

Forward foreign exchange		1,588		Interest income – loans		(736	)		-
				Interest expense - borrowings		-			-
				Gain (loss) on foreign currency exchange		1,412			-
Total		4,241				668			-

Derivatives – net investment hedge
Forward foreign exchange		(105	)	Gain (loss) on foreign currency exchange		-			-
Total		(105	)			-			-

Three months ended September 30, 2012
(In thousands of US$)	Gain (loss) recognized in OCI (effective portion)			Classification of gain (loss)	Gain (loss) reclassified from accumulated OCI to the statements of income (effective portion)			Gain (loss) recognized on derivatives (ineffective portion)

Derivatives – cash flow hedge
Interest rate swaps	-
Cross-currency interest rate swaps		996		Gain (loss) on foreign currency exchange		1,167			-

				Interest income – loans		(349	)		-

Forward foreign exchange		(2,060	)	Interest expense - borrowings		259			-
				Gain (loss) on foreign currency exchange		(578	)		-
Total		(1,064	)			499			-

Derivatives – net investment hedge
Forward foreign exchange		(30	)	Gain (loss) on foreign currency exchange		-			-
Total		(30	)			-			-

-42-

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

Notes to consolidated financial statements (Unaudited)

Nine months ended September 30, 2013
(In thousands of US$)					Gain (loss) reclassified
					from accumulated			Gain (loss)
	Gain (loss)				OCI to the			recognized on
	recognized in OCI				statements of income			derivatives
	(effective portion)			Classification of gain (loss)	(effective portion)			(ineffective portion)
Derivatives – cash flow hedge
Interest rate swaps		(921	)
Cross-currency interest rate swaps		(2,374	)	Gain (loss) on foreign currency exchange		-			-
				Interest income – loans		(8	)		-

				Interest income – loans		(766	)		-
Forward foreign exchange		1,648		Interest expense – borrowings		31			-
				Gain (loss) on foreign currency exchange		(80	)		-
Total		(1,647	)			(823	)		-

Derivatives – net investment hedge
Forward foreign exchange		246		Gain (loss) on foreign currency exchange		-			-
Total		246				-			-

Nine months ended September 30, 2012
(In thousands of US$)					Gain (loss) reclassified
					from accumulated			Gain (loss)
	Gain (loss)				OCI to the			recognized on
	recognized in OCI				statements of income			derivatives
	(effective portion)			Classification of gain (loss)	(effective portion)			(ineffective portion)
Derivatives – cash flow hedge
Interest rate swaps		217
Cross-currency interest rate swaps		2,412		Gain (loss) on foreign currency exchange		1,637			-

				Interest income – loans		(375	)		-
Forward foreign exchange		(3,181	)	Interest expense – borrowings		771			-
				Gain (loss) on foreign currency exchange		(2,273	)		-

Total		(552	)			(240	)		-

Derivatives – net investment hedge
Forward foreign exchange		165		Gain (loss) on foreign currency exchange		-			-
Total		165				-			-

-43-

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

Notes to consolidated financial statements (Unaudited)

The Bank recognized in earnings the gain (loss) on derivative financial instruments and the gain (loss) of the hedged asset or liability related to qualifying fair value hedges, as follows:

Three months ended September 30, 2013
(In thousands of US$)	Classification in statements of income	Gain (loss) on derivatives			Gain (loss) on hedged item			Net gain (loss)
Derivatives - fair value hedge

Interest rate swaps	Interest income – securities available-for-sale		(885	)		1,479			594
	Interest income – loans		(18	)		143			125
	Interest expense – borrowings and debt		802			(4,054	)		(3,252	)
	Derivative financial instruments and hedging (ineffectiveness)		1,964			(1,527	)		437


Cross-currency interest rate swaps	Interest income – loans		(249	)		559			310
	Interest expense – borrowings and debt		1,704			(3,094	)		(1,390	)
	Derivative financial instruments and hedging (ineffectiveness)		(3,556	)		2,559			(997	)
	Gain (loss) on foreign currency exchange		(654	)		606			(48	)
			(892	)		(3,329	)		(4,221	)

Three months ended September 30, 2012
(In thousands of US$)	Classification in statements of income	Gain (loss) on derivatives			Gain (loss) on hedged item			Net gain (loss)
Derivatives - fair value hedge
Interest rate swaps	Interest income – securities available-for-sale		(714	)		1,279			565
	Interest expense – borrowings and debt		506			(143	)		363
	Derivative financial instruments and hedging (ineffectiveness)		(72	)		-			(72	)


Cross-currency interest rate swaps	Interest income – loans		(68	)		167			99
	Interest expense – borrowings and debt		2,193			(2,763	)		(570	)
	Derivative financial instruments and hedging (ineffectiveness)		(1,788	)		-			(1,788	)
	Gain (loss) on foreign currency exchange		7,686			(7,612	)		74
			7,743			(9,072	)		(1,329	)

-44-

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

Notes to consolidated financial statements (Unaudited)

Nine months ended September 30, 2013
(In thousands of US$)	Classification in statements of income	Gain (loss) on derivatives			Gain (loss) on hedged item			Net gain (loss)
Derivatives - fair value hedge
Interest rate swaps	Interest income – securities available-for-sale		(2,415	)		3,684			1,269
	Interest income – loans		(23	)		217			194
	Interest expense – borrowings and debt		2,314			(12,151	)		(9,837	)
	Derivative financial instruments and hedging (ineffectiveness)		(4,467	)		4,615			148


Cross-currency interest rate swaps	Interest income – loans		(505	)		1,107			602
	Interest expense – borrowings and debt		5,435			(9,617	)		(4,182	)
	Derivative financial instruments and hedging (ineffectiveness)		(6,057	)		6,207			150
	Gain (loss) on foreign currency exchange		(430	)		458			28
			(6,148	)		(5,480	)		(11,628	)

Nine months ended September 30, 2012
(In thousands of US$)	Classification in statements of income	Gain (loss) on derivatives			Gain (loss) on hedged item			Net gain (loss)
Derivatives - fair value hedge
Interest rate swaps	Interest income – securities available-for-sale		(2,259	)		3,675			1,416
	Interest expense – borrowings and debt		951			(4,056	)		(3,105	)
	Derivative financial instruments and hedging (ineffectiveness)		104			-			104


Cross-currency interest rate swaps	Interest income – loans		(142	)		349			207
	Interest expense – borrowings and debt		6,117			(10,504	)		(4,387	)
	Derivative financial instruments and hedging (ineffectiveness)		436			-			436
	Gain (loss) on foreign currency exchange		8,291			(8,449	)		(158	)
			13,498			(18,985	)		(5,487	)

For control purposes, derivative instruments are recorded at their nominal amount (“notional amount”) in memorandum accounts. Interest rate swaps are made either in a single currency or cross currency for a prescribed period to exchange a series of interest rate flows, which involve fixed for floating interest payments, and viceversa. The Bank also engages in certain foreign exchange trades to serve customers’ transaction needs and to manage the foreign currency risk. All such positions are hedged with an offsetting contract for the same currency. The Bank manages and controls the risks on these foreign exchange trades by establishing counterparty credit limits by customer and by adopting policies that do not allow for open positions in the credit and investment portfolio. The Bank also uses foreign currency exchange contracts to hedge the foreign exchange risk associated with the Bank’s equity investment in a non-U.S. dollar functional currency foreign subsidiary. Derivative and foreign exchange instruments negotiated by the Bank are executed mainly over-the-counter (OTC). These contracts are executed between two counterparties that negotiate specific agreement terms, including notional amount, exercise price and maturity.

-45-

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

Notes to consolidated financial statements (Unaudited)

The maximum length of time over which the Bank has hedged its exposure to the variability in future cash flows on forecasted transactions is 7.74 years.

The Bank estimates that approximately $710 thousand of losses reported in OCI as of September 30, 2013 related to forward foreign exchange contracts are expected to be reclassified into interest income as an adjustment to yield of hedged loans during the rest of 2013.

Types of Derivatives and Foreign Exchange Instruments

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

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

-46-

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

Notes to consolidated financial statements (Unaudited)

17.

Accumulated other comprehensive income (loss)

As of September 30, 2013 and 2012 the breakdown of accumulated other comprehensive income (loss) related to investment securities available-for-sale and derivative financial instruments, and foreign currency translation is as follows:

(In thousands of US$)	Securities available- for-sale			Derivative financial instruments			Foreign currency translation adjustment, net of hedges			Total
Balance as of January 1, 2013		933			(368	)		(1,295	)		(730	)
Net unrealized gains (loss) arising from the period		(492	)		233			-			(259	)
Reclassification adjustment for (gains) loss included in net income ⁽¹⁾		(117	)		165			-			48
Foreign currency translation adjustment, net		-			-			(1	)		(1	)
Other comprehensive income (loss) from the period		(609	)		398			(1	)		(212	)
Balance as of March 31, 2013		324			30			(1,296	)		(942	)
Net unrealized gains (loss) arising from the period		(12,856	)		(2,996	)		-			(15,852	)
Reclassification adjustment for (gains) loss included in net income ⁽¹⁾		(677	)		252			24			(401	)
Foreign currency translation adjustment, net		-			-			(207	)		(207	)
Other comprehensive loss from the period		(13,533	)		(2,744	)		(183	)		(16,460	)
Balance as of June 30, 2013		(13,209	)		(2,714	)		(1,479	)		(17,402	)
Net unrealized gains (loss) arising from the period		765			(887	)		-			(122	)
Reclassification adjustment for (gains) loss included in net income ⁽¹⁾		(517	)		992			-			475
Foreign currency translation adjustment, net		-			-			(84	)		(84	)
Other comprehensive income (loss) from the period		248			105			(84	)		269
Balance as of September 30, 2013		(12,961	)		(2,609	)		(1,563	)		(17,133	)

Balance as of January 1, 2012		(1,728	)		(640	)		(744	)		(3,112	)
Net unrealized gains arising from the period		7,710			140			-			7,850
Reclassification adjustment for gains included in net income ⁽¹⁾		(3,841	)		(926	)		-			(4,767	)
Foreign currency translation adjustment, net		-			-			(92	)		(92	)
Other comprehensive income (loss) from the period		3,869			(786	)		(92	)		2,991
Balance as of March 31, 2012		2,141			(1,426	)		(836	)		(121	)
Net unrealized gains (loss) arising from the period		(611	)		372			-			(239	)
Reclassification adjustment for (gains) loss included in net income ⁽¹⁾		(1,934	)		1,665			-			(269	)
Foreign currency translation adjustment, net		-			-			5			5
Other comprehensive income (loss) from the period		(2,545	)		2,037			5			(503	)
Balance as of June 30, 2012		(404	)		611			(831	)		(624	)
Net unrealized gains (loss) arising from the period		1,328			(1,064	)		-			264
Reclassification adjustment for gains included in net income ⁽¹⁾		-			(502	)		-			(502	)
Foreign currency translation adjustment, net		-			-			(336	)		(336	)
Other comprehensive income (loss) from the period		1,328			(1,566	)		(336	)		(574	)
Balance as of September 30, 2012		924			(955	)		(1,167	)		(1,198	)

⁽¹⁾

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

-47-

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

Notes to consolidated financial statements (Unaudited)

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

Three months ended September 30, 2013
(In thousands of US$)
Details about accumulated other comprehensive income components	Amount reclassified form accumulated other comprehensive income			Affected line item in the statement where net income is presented

Realized gains (losses) on securities available-for-sale:
		-		Interest income – securities available-for-sale
		-		Net gain on sale of securities available-for-sale
		517		Derivative financial instruments and hedging
		517
Gain (loss) on derivative financial instruments:
Forward foreign exchange		(745	)	Interest income - loans
		-		Interest expense - borrowings
		(247	)	Net gain (loss) on foreign currency exchange
		(992	)
Loss on foreign currency translation adjustment		-		Net gain (loss) from discontinued operations

Three months ended September 30, 2012
(In thousands of US$)
Details about accumulated other comprehensive income components	Amount reclassified form accumulated other comprehensive income			Affected line item in the statement where net income is presented
Realized gains (losses) on securities available-for-sale:
		-		Interest income – securities available-for-sale
		-		Net gain on sale of securities available-for-sale
		-		Net gain (loss) on foreign currency exchange
		-
Gain (loss) on derivative financial instruments:
Forward foreign exchange		(348	)	Interest income - loans
		260		Interest expense - borrowings
		590		Net gain (loss) on foreign currency exchange
		502

Loss on foreign currency translation adjustment		-		Net gain (loss) from discontinued operations

-48-

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

Notes to consolidated financial statements (Unaudited)

Nine months ended September 30, 2013
(In thousands of US$)
Details about accumulated other comprehensive income components	Amount reclassified form accumulated other comprehensive income			Affected line item in the statement where net income is presented
Realized gains (losses) on securities available-for-sale:
		1		Interest income – securities available-for-sale
		793		Net gain on sale of securities available-for-sale
		517		Net gain (loss) on foreign currency exchange
		1,311
Gain (loss) on derivative financial instruments:
Forward foreign exchange		(774	)	Interest income - loans
		31		Interest expense - borrowings
		(666	)	Net gain (loss) on foreign currency exchange
		(1,409	)
Loss on foreign currency translation adjustment		(24	)	Net gain (loss) from discontinued operations

Nine months ended September 30, 2012
(In thousands of US$)
Details about accumulated other comprehensive income components	Amount reclassified form accumulated other comprehensive income			Affected line item in the statement where net income is presented
Realized gains (losses) on securities available-for-sale:
		-		Interest income – securities available-for-sale
		5,775		Net gain on sale of securities available-for-sale
		-		Net gain (loss) on foreign currency exchange
		5,775
Gain (loss) on derivative financial instruments:
Forward foreign exchange		(473	)	Interest income - loans
		772		Interest expense - borrowings
		(536	)	Net gain (loss) on foreign currency exchange
		(237	)

Loss on foreign currency translation adjustment		-		Net gain (loss) from discontinued operations

-49-

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

Notes to consolidated financial statements (Unaudited)

18.

Offsetting of financial assets and liabilities

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

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

Derivative financial instruments - assets

September 30, 2013

(In thousands of US$)

Gross amounts not offset in the
balance sheet

Description

Gross amounts
of assets

Gross amounts
offset in the
balance sheet

Net amount of assets
presented in the
balance sheet

Financial
instruments

Cash
collateral
received

Net
amount

Derivative financial instruments

14,193

(1,050

)

13,143

December 31, 2012
(In thousands of US$)
								Gross amounts not offset in the
								balance sheet
Description	Gross amounts of assets		Gross amounts offset in the balance sheet			Net amount of assets presented in the balance sheet		Financial instruments	Cash collateral received			Net amount

Derivative financial instruments		19,385		(27	)		19,358	-		(2,950	)		16,408

-50-

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

Notes to consolidated financial statements (Unaudited)

The following table presents the reconciliation of assets that have been offset or are subject to master netting agreements to individual line items in the balance sheet as of September 30, 2013 and December 31, 2012:

(In thousands of US$)	September 30, 2013						December 31, 2012
Description	Gross amounts of assets		Gross amounts offset in the balance sheet		Net amount of assets presented in the balance sheet		Gross amounts of assets		Gross amounts offset in the balance sheet			Net amount of assets presented in the balance sheet
Derivative financial instruments:
Trading assets		-		-		-		146		(27	)		119
Derivative financial instruments used for hedging - receivable		14,193		-		14,193		19,239		-			19,239
Total derivative financial instruments		14,193		-		14,193		19,385		(27	)		19,358

Financial liabilities and derivative financial instruments - liabilities

September 30, 2013

(In thousands of US$)							Gross amounts not offset in the balance sheet
Description	Gross amounts of liabilities		Gross amounts offset in the balance sheet		Net amount of liabilities presented in the balance sheet		Financial instruments			Cash collateral pledged			Net amount
Securities sold under repurchase agreements		187,725		-		187,725		(182,119	)		(5,606	)		-
Derivative financial instrument		10,628		-		10,628		-			(4,730	)		5,878
Total		198,353		-		198,353		(182,119	)		(10,336	)		5,878

December 31, 2012

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

-51-

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

Notes to consolidated financial statements (Unaudited)

The following table presents the reconciliation of liabilities that have been offset or are subject to master netting agreements to individual line items in the balance sheet as of September 30, 2013 and December 31, 2012:

(In thousands of US$)	September 30, 2013						December 31, 2012
Description	Gross amounts of liabilities		Gross amounts offset in the balance sheet		Net amount of liabilities presented in the balance sheet		Gross amounts of liabilities		Gross amounts offset in the balance sheet			Net amount of liabilities presented in the balance sheet
Securities sold under repurchase agreements		187,725		-		187,725		158,374		-			158,374
Derivative financial instruments:
Trading liabilities		8		-		8		32,331		(27	)		32,304
Derivative financial instruments used for hedging - payable		10,620		-		10,620		11,747		-			11,747
Total derivative financial instruments		10,628		-		10,628		44,078		(27	)		44,051

19.

Fair value of financial instruments

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

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

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

-52-

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

Notes to consolidated financial statements (Unaudited)

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

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

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

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

Trading assets and liabilities and securities available-for-sale

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

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

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

Investment funds

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

-53-

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

Notes to consolidated financial statements (Unaudited)

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

Derivative financial instruments

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

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

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

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

Transfer of financial assets

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

-54-

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

Notes to consolidated financial statements (Unaudited)

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

			September 30, 2013
(In thousands of US$)	Quoted market prices in an active market (Level 1)		Internally developed models with significant observable market information (Level 2)		Internally developed models with significant unobservable market information (Level 3)		Total carrying value in the consolidated balance sheets
Assets
Trading assets
Sovereign bonds		-		-		-		-
Cross-currency swaps		-		-		-		-
Future contracts		-		-		-		-
Total trading assets		-		-		-		-
Securities available-for-sale
Corporate debt		171,701		-		-		171,701
Sovereign debt		157,848		-		-		157,848
Total securities available-for-sale		329,549		-		-		329,549
Investment funds		-		125,005		-		125,005
Derivative financial instruments used for hedging - receivable
Interest rate swaps		-		4,533		-		4,533
Cross-currency interest rate swaps		-		7,715		-		7,715
Forward foreign exchange		-		1,945		-		1,945
Total derivative financial instruments used for hedging - receivable		-		14,193		-		14,193
Total assets at fair value		329,549		139,198		-		468,747

Liabilities
Trading liabilities
Interest rate swaps		-		-		-		-
Cross-currency interest rate swaps		-		8		-		8
Total trading liabilities		-		8		-		8
Derivative financial instruments used for hedging – payable
Interest rate swaps		-		4,747		-		4,747
Cross-currency interest rate swaps		-		5,337		-		5,337
Forward foreign exchange		-		536		-		536
Total derivative financial instruments used for hedging - payable		-		10,620		-		10,620
Total liabilities at fair value		-		10,628		-		10,628

Securities available-for-sale with fair value of $6,482 thousand as of September 30, 2013 were transferred during 2013 from level 2 to level 1 of the fair value hierarchy, because quoted prices of those securities are now available in an active market.

-55-

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

Notes to consolidated financial statements (Unaudited)

			December 31, 2012
(In thousands of US$)	Quoted market prices in an active market (Level 1)		Internally developed models with significant observable market information (Level 2)		Internally developed models with significant unobservable market information (Level 3)		Total carrying value in the consolidated balance sheets
Assets
Trading assets
Sovereign bonds		5,146		-		-		5,146
Cross-currency swaps		49		-		-		49
Forward foreign exchange		-		50		-		50
Future contracts		20		-		-		20
Total trading assets		5,215		50		-		5,265
Securities available-for-sale
Corporate debt		17,386		-		-		17,386
Sovereign debt		165,355		276		-		165,631
Total securities available-for-sale		182,741		276		-		183,017
Investment fund		-		105,888		-		105,888
Derivative financial instruments used for hedging - receivable
Interest rate swaps		-		8,319		-		8,319
Cross-currency interest rate swaps		-		10,858		-		10,858
Forward foreign exchange		-		62		-		62
Total derivative financial instruments used for hedging - receivable		-		19,239		-		19,239
Total assets at fair value		187,956		125,453		-		313,409

Liabilities
Trading liabilities
Interest rate swaps		-		100		-		100
Cross-currency interest rate swaps		-		32,182		-		32,182
Forward foreign exchange		-		22		-		22
Total trading liabilities		-		32,304		-		32,304
Derivative financial instruments used for hedging – payable
Interest rate swaps		-		6,600		-		6,600
Cross-currency interest rate swaps		-		4,688		-		4,688
Forward foreign exchange		-		459		-		459
Total derivative financial instruments used for hedging - payable		-		11,747		-		11,747
Total liabilities at fair value		-		44,051		-		44,051

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

-56-

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

Notes to consolidated financial statements (Unaudited)

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

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

Financial instruments with carrying value that approximates fair value

The carrying value of certain financial assets, including cash and due from banks, interest-bearing deposits in banks, customers’ liabilities under acceptances, accrued interest receivable and certain financial liabilities including customer’s demand and time deposits, securities sold under repurchase agreements, accrued interest payable, and acceptances outstanding, as a result of their short-term nature, are considered to approximate fair value. These instruments are classified in Level 2.

Securities held-to-maturity

The fair value has been based upon current market quotations, where available. If quoted market prices are not available, fair value has been estimated based upon quoted price of similar instruments, or where these are not available, on discounted expected cash flows using market rates commensurate with the credit quality and maturity of the security. These securities are classified in Levels 1 and 2.

Loans

The fair value of the loan portfolio, including impaired loans, is estimated by discounting future cash flows using the current rates at which loans would be made to borrowers with similar credit ratings and for the same remaining maturities, considering the contractual terms in effect as of December 31 of the relevant period. These assets are classified in Level 2.

Short and long-term borrowings and debt

The fair value of short and long-term borrowings and debt is estimated using discounted cash flow analysis based on the current incremental borrowing rates for similar types of borrowing arrangements, taking into account the changes in the Bank’s credit margin. These liabilities are classified in Level 2.

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

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of guarantees and letters of credit is based on fees currently charged for similar agreements which consider the counterparty risks; which fair value is calculated based on the present value of the premium to be received or a specific allowance for off-balance sheet credit contingencies, whichever is greater. These commitments are classified in level 3 since the second quarter of 2013. Fair value of these instruments is provided for disclosure purposes only.

-57-

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

Notes to consolidated financial statements (Unaudited)

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

(In thousands of US$)							September 30, 2013
	Carrying Value		Fair Value		Quoted market prices in an active market (Level 1)		Internally developed models with significant observable market information (Level 2)		Internally developed models with significant unobservable market information (Level 3)
Financial assets:
Instruments with carrying value that approximates fair value		978,108		978,108		-		978,108		-
Securities held-to-maturity		31,924		31,879		17,169		14,710		-
Loans, net ⁽¹⁾		6,112,447		6,325,782		-		6,325,782		-

Financial liabilities:
Instruments with carrying value that approximates fair value		3,070,959		3,071,204		-		3,071,204		-
Short-term borrowings and debt		2,465,907		2,471,407		-		2,471,407		-
Long-term borrowings and debt		1,138,165		1,159,227		-		1,159,227		-
Commitments to extend credit, standby letters of credit, and financial guarantees written		9,389		8,959		-		-		8,959

⁽¹⁾

The carrying value of loans is net of the Allowance for loan losses of $72.1 million and unearned income and deferred fees of $6.1 million for September 30, 2013.

(In thousands of US$)	December 31, 2012
	Carrying Value		Fair Value		Quoted market prices in an active market (Level 1)		Internally developed models with significant observable market information (Level 2)		Internally developed models with significant unobservable market information (Level 3)

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

⁽¹⁾

The carrying value of loans is net of the Allowance for loan losses of $73.0 million and unearned income and deferred fees of $7.1 million for December 31, 2012.

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

Notes to consolidated financial statements (Unaudited)

20.

Litigation

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

21.

Capital adequacy

The Banking Law in the Republic of Panama requires banks with general banking license to maintain a total capital adequacy index that shall not be lower than 8% of total assets and off-balance sheet irrevocable contingency transactions, weighted according to their risk; and primary capital equivalent that shall not be less than 4% of its assets and off-balance sheet irrevocable contingency transactions, weighted according to their risk. As of September 30, 2013, the Bank’s capital adequacy ratio is 14.41% which is in compliance with the capital adequacy ratios required by the Banking Law in the Republic of Panama.

22.

Business segment information

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

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

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

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

-59-

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

Notes to consolidated financial statements (Unaudited)

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

Treasury incorporates deposits in banks and all of the Bank’s trading assets, securities available-for-sale and held-to-maturity, and the balance of the investment funds. Operating income from the Treasury Segment includes net interest income from deposits with banks, trading securities and securities available-for-sale and held-to-maturity, net interest margin related to investment funds, derivative and hedging activities, net gain (loss) from investment funds trading, net gain from trading securities, net gain on sale of securities available-for-sale, net loss on foreign currency exchange, and allocated income and operating expenses. The Treasury segment information for 2012 includes the results of the investment funds, in order to conform to the presentation of this segment in 2013.

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

Business Segment Analysis ⁽¹⁾

	Three months ended						Nine months ended
	September 30,						September 30,
(In thousands of US$)	2013			2012			2013			2012
COMMERCIAL
Interest income		51,636			46,034			145,827			135,474
Interest expense		(20,197	)		(18,580	)		(58,585	)		(54,171	)
Net interest income		31,439			27,454			87,242			81,302
Net other income ⁽²⁾		4,098			2,829			10,156			8,253
Operating expenses		(10,423	)		(9,595	)		(30,655	)		(26,917	)
Net operating income ⁽³⁾		25,114			20,688			66,743			62,639
Reversal of provision (provision) for loan and off-balance sheet credit losses		1,235			3,028			(1,491	)		2,521
Net income attributable to Bladex stockholders		26,349			23,716			65,252			65,160

Commercial assets and contingencies (end of period balances):
Interest-earning assets ^{(4 y 6)}								6,184,506			5,483,931
Other assets and contingencies ⁽⁵⁾								393,190			317,985
Total interest-earning assets, other assets and contingencies								6,577,696			5,801,916
TREASURY
Interest income		4,367			1,620			9,544			7,386
Interest expense		787			(3,991	)		(4,762	)		(7,960	)
Net interest income		5,154			(2,371	)		4,782			(574	)
Net other income (expense)⁽²⁾		(9,156	)		(4,397	)		(669	)		11,713
Operating expenses		(2,471	)		(3,845	)		(10,010	)		(12,673	)
Net operating income ⁽³⁾		(6,473	)		(10,613	)		(5,897	)		(1,534	)
Net income (loss)		(6,473	)		(10,613	)		(5,897	)		(1,534	)
Net income attributable to the redeemable noncontrolling interest		(2,950	)		(37	)		(1,492	)		207
Net income (loss) attributable to Bladex stockholders		(3,523	)		(10,576	)		(4,405	)		(1,741	)
Treasury assets and contingencies (end of period balances):
Interest-earning assets ⁽⁶⁾								1,377,183			865,559
Redeemable noncontrolling interest								(52,592	)		(3,301	)
Total interest-earning assets and third participation								1,324,591			862,258
TOTAL
Interest income		56,003			47,654			155,371			142,860
Interest expense		(19,410	)		(22,571	)		(63,347	)		(62,131	)
Net interest income		36,593			25,083			92,024			80,729
Net other income ⁽²⁾		(5,058	)		(1,568	)		9,487			19,966
Operating expenses		(12,894	)		(13,440	)		(40,665	)		(39,590	)
Net operating income ⁽³⁾		18,641			10,075			60,846			61,105
Reversal of provision (provision) for loans and off-balance sheet credit losses		1,235			3,028			(1,491	)		2,521
Net income – business segment		19,876			13,103			59,355			63,626
Net income (loss) attributable to the redeemable noncontrolling interest		(2,950	)		(37	)		(1,492	)		207
Net income attributable to Bladex stockholders – business segment		22,826			13,140			60,847			63,419
Other income unallocated - gain on sale of premises and equipment		-			-			-			5,626
Discontinued operations (Note 3)		-			(130	)		(4	)		(591	)
Net income attributable to Bladex stockholders		22,826			13,010			60,843			68,454
Total assets and contingencies (end of period balances):
Interest-earning assets ^{(4 y 6)}								7,561,689			6,349,490
Other assets and contingencies ⁽⁵⁾								393,190			317,985
Redeemable noncontrolling interest								(52,592	)		(3,301	)
Total interest-earning assets, other assets and contingencies								7,902,287			6,664,174

⁽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, recoveries on assets, and gain on sale of premises and equipment.

-60-

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

Notes to consolidated financial statements (Unaudited)

	Three months ended						Nine months ended
	September 30,						September 30,
(In thousands of US$)	2013			2012			2013			2012

Reconciliation of Net other income:
Net other income – business segment		(5,058	)		(1,568	)		9,487			19,966
Reversal of provision (provision) for losses on off-balance sheet credit risk		5,136			3,609			(2,412	)		2,510
Gain on sale of premises and equipment		-			-			-			5,626
Net other income – consolidated financial statements		78			2,041			7,075			28,102

⁽³⁾

Net operating income refers to net income excluding reversals (provisions) for loans and off-balance sheet credit losses and recoveries on assets.

⁽⁴⁾

Includes selected deposits placed, and loans, net of unearned income and deferred loan fees.

⁽⁵⁾

Includes customers’ liabilities under acceptances, letters of credit and guarantees covering commercial and country risk, and credit commitments.

⁽⁶⁾Includes cash and due from banks, interest-bearing deposits with banks, securities available-for-sale and held-to-maturity, trading securities and the balance of investment funds.

Reconciliation of Total assets:	September 30, 2013			September 30, 2012
Interest-earning assets – business segment		7,561,689			6,349,489
Allowance for loan losses		(72,058	)		(82,976	)
Customers’ liabilities under acceptances		49,034			597
Accrued interest receivable		38,368			36,430
Equipment and leasehold improvements, net		10,949			12,108
Derivative financial instruments used for hedging - receivable		14,193			20,565
Other assets		11,289			15,839
Total assets – consolidated financial statements		7,613,464			6,352,052

Geographic information is as follows:

	Three months ended September 30, 2013
(In thousands of US$)	Panama			Brazil		United States of America			Cayman Islands			Total

Interest income		49,214			-		5,070			1,719			56,003
Interest expense		(18,361	)		-		(287	)		(762	)		(19,410	)
Net interest income		30,853			-		4,783			957			36,593

	Nine months ended September 30, 2013
(In thousands of US$)	Panama			Brazil		United States of America			Cayman Islands			Total

Interest income		138,601			33		14,504			2,233			155,371
Interest expense		(61,020	)		-		(967	)		(1,360	)		(63,347	)
Net interest income		77,581			33		13,537			873			92,024

Long-lived assets:
Equipment and leasehold improvements, net		10,692			-		257			-			10,949

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

Notes to consolidated financial statements (Unaudited)

	Three months ended September 30, 2012
(In thousands of US$)						United
						States of			Cayman
	Panama			Brazil		America			Islands			Total

Interest income		42,718			23		4,857			56			47,654
Interest expense		(22,186	)		-		(355	)		(30	)		(22,571	)
Net interest income		20,532			23		4,502			26			25,083

	Nine months ended September 30, 2012
(In thousands of US$)						United
						States of			Cayman
	Panama			Brazil		America			Islands			Total

Interest income		129,070			117		13,063			610			142,860
Interest expense		(61,089	)		-		(976	)		(66	)		(62,131	)
Net interest income		67,981			117		12,087			544			80,729

Long-lived assets:
Equipment and leasehold improvements, net		11,665			8		435			-			12,108

December 31, 2012

(In thousands of US$)

United

States of

Cayman

Panama

Brazil

America

Islands

Total

Long-lived assets:

Equipment and leasehold improvements, net

12,397

403

12,808

-62-