banco de costa rica and subsidiaries consolidated ... · banco de costa rica and subsidiaries notes...
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Banco de Costa Rica and subsidiaries
Consolidated Financial Statements (Unaudited)
March 31, 2014
(With corresponding figures for 2013)
Table of contents Consolidated Financial Statement Consolidated Balance Sheet Consolidated Statement of Income Consolidated Statement of changes in equity Consolidated Statement of cash flows Notes to the consolidated financial statements
(1) Sumary of operations and significant accountint policies ............................. ………….-6-
(a) Operations……………………………………………… .... ………………………..-6-
(b) Accounting polices for consolidated financial statement preparation… .. ……….…-9-
(c) Investments in other companies………………………………………… .. ………...-9-
(d) Foreign currency………………………………………………………… ………...-10-
(e) Basis of consolidated financial stetement preparation . ........................................... -11-
(f) Financial intruments…………… ............................................................................. -11-
(g) Cash and cash equivalents .. ................................................................................... -14-
(h) Investments in financial instruments… ................................................................... -14-
(i) Loan portfolio… ...................................................................................................... -15-
(j) Allowance for loan losses… .................................................................................... -16-
(k) Securities sold under repurchase agreements……………… .................................. -22-
(l) Accounting for accrued intrest recivable… ............................................................. -22-
(m) Other recivable… ..................................................................................................... -22-
(n) Foreclosed assets… ................................................................................................. .-22-
(o) Offsetting… ............................................................................................................. -23-
(p) Property and equipment…. ...................................................................................... -23-
(q) Defferred charges… ................................................................................................. -25-
(r) Intangible assets….. ................................................................................................ -25-
(s) Impairment of assets…. ........................................................................................... -26-
(t) Accounts payable and other payables…. ................................................................. -27-
(u) Provisions… ............................................................................................................. -27-
(v) Legal reserve…. ...................................................................................................... -29-
(w) Revaluation surplus…. ............................................................................................. -30-
(x) Use of estimates… ................................................................................................... -30-
(y) Recognition of main revenue and expenses…. ........................................................ -30-
(z) Income tax…. ........................................................................................................... -31-
(aa) BICSA financial leases… ........................................................................................ -32-
(bb) The Bank pension, retirement and outgoing personnel… ....................................... -32-
(cc) Statutory allocations… ............................................................................................. -32-
(dd) Development Financing Funds…. ........................................................................... -33-
(ee) Develepment Credit Funds…. ................................................................................. -33-
(ff) BICSA trust. ............................................................................................................ .-34-
(gg) Economic period… .................................................................................................. -34-
(2) Collateralized or restricted assets… ............................................................................. -35-
(3) Balances and transactions with…. ................................................................................ -35-
(4) Cash and cash equivalents… ........................................................................................ -36-
(5) Investments in financial intruments…. ......................................................................... -37-
(6) Loan portfolio… .......................................................................................................... .-38-
a) Loan portfolio by sector…. ...................................................................................... -38-
b) Current loans…. ....................................................................................................... -39-
c) Loan porfolio by arrears… ....................................................................................... -40-
d) Past due loans…. ...................................................................................................... -40-
e) Acrrued interest receivable on loan porfolio ....................................................... …-41-
f) Alowance for loan impairment…. ........................................................................... -42-
g) Syndicated loans… .................................................................................................. -43-
(7) Foreclosed assets, net… ............................................................................................... -56- (8) Investments in other companies…. .............................................................................. -56- (9) Poperty and Equipment…………………………… ................................................ …-59- (10) Intangible assets…………….. ...................................................................................... -62- (11) Demand obligations with public………….. ................................................................. -63- (12) Demand and term obligations with public and entities…. ........................................... -64- (13) Other obligations with the public….. ........................................................................... -65- (14) Obligations with entities………. .................................................................................. -66-
(a) Maturities of loans payable…. ................................................................................. -68-
(15) Income tax…. ............................................................................................................... -69-
(16) Provisions…… ............................................................................................................. -74-
(17) Other laundry accounts payable…. .............................................................................. -78-
(18) Equity…........................................................................................................................ -79-
(19) Commitments and contigencies… ................................................................................ -81-
(20) Trust .............................................................................................................................. -86-
(21) Other denit memoranda accounts…. ............................................................................ -87-
(22) Currents and term brokerage operations and portfolio amagement operations.. ......... -88-
(23) Investments fund management agreements…….. ........................................................ -91-
(24) Pension fund managment agreements…………… ...................................................... -93-
(25) Financial income on investments in financial intruments…. ....................................... -95-
(26) Financial income on loan portfolio…. .......................................................................... -96-
(27) Expenses for obligations with the public… .................................................................. -96-
(28) Expenses for allowances for impairment of assets… ................................................... -97- (29) Income from recovery of assets and decrease in allowance and provisions…. ........... -97-
(30) Service fees and commissions income… ..................................................................... -98-
(31) Administrative expenses….. ......................................................................................... -99-
(32) Components of other comprehensuve income…........................................................ -100- (33) Operating leases… ...................................................................................................... -100-
(34) Fair value of financial instruments…. ........................................................................ -101-
(35) Segments…. ................................................................................................................ -102-
(36) Risk management………. ......................................................................................... .-108-
a) Credit risk…. .......................................................................................................... -108-
b) Liquity risk………………. .................................................................................... -132-
c) Market risk……………. ........................................................................................ -139-
d) Operational risk………………….. ........................................................................ -158-
(37) Financial information of Develpment Financiang Fund…......................................... -164-
(38) Financial information of Develpment Credit Fund ................................................ …-175- (39) Transition to International Financing Reporting Standards (IFRSs)… ...................... -178-
(40) 2013 Figures… ........................................................................................................... -190-
(41) Relevant and subsecuent events…. ............................................................................ -191- (42) Date of autorization from issuance of the financial starements……………………. . -194-
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
(1) Summary of operations and significant accounting policies
(a) Operations
Banco de Costa Rica (the Bank) is an autonomous, independently managed, public law institution organized in 1877. As a State-owned public bank, it is regulated by the Internal Regulations of the National Banking System (IRNBS), the Internal Regulations of the Central Bank of Costa Rica, and by the Political Constitution of the Republic of Costa Rica. It is also subject to oversight by the Superintendency General of Financial Entities (SUGEF) and the Comptroller General of the Republic (CGR). The Bank’s registered office is located at Central Avenue and Second Avenue, 4th street and 6th street, in San José, Costa Rica. The website of the Bank and its subsidiaries located in Costa Rica is www.bancobcr.com. The Bank is mainly dedicated to extending loans; granting bid and performance bonds; issuing certificates of deposit; opening checking accounts in colones, U.S. dollars, and euros; issuing letters of credit; providing collection services; buying and selling foreign currency; managing trusts; providing custodial services for assets; and other banking operations. As of March 31, 2014 the Bank has 247 branches (247 and 246 as of December 31, 2013 and March 31, 2013, respectively) distributed among the national territory and has in operation 531 automated teller machines (531 and 530 as of December 31, 2013 and March 31, 2013, respectively), and has 3.779 employees (3.756 and 3.752 as of December 31, 2013 and March 2013, 2013, respectively). The consolidated financial statements and notes there to are expressed in colones (¢), the monetary unit of the Republic of Costa Rica.
The following subsidiaries are wholly owned by the Bank:
BCR Valores, S.A. (the Brokerage Firm) was organized as a corporation in February 1999 under the laws of the Republic of Costa Rica. Its main activity is securities trading. As of march 31, 2014, the Brokerage Firm has 61 employees (62 and 59 as of December 31, 2013 and March 31, 2013, respectively), and is regulated by the Costa Rican National Securities Commission (SUGEVAL).
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
BCR Sociedad Administradora de Fondos de Inversion, S.A. (the Investment Fund Manager) was organized as a corporation in July 1999 under the laws of the Republic of Costa Rica. Its main activity is investment funds management. As of March 31, 2014, the Investment Fund Manager has 90 employees (86 and 79 as of December 31, 2013 and March 31, 2013, respectively) and is regulated by SUGEVAL. BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A. (the Pension Fund Manager) was organized as a corporation in Octuber 1999 under the laws of the Republic of Costa Rica. Its main activity is managing supplemental pension plans and offering additional services related to disability and death plans to members. As of March 31, 2014, the Pension Fund Manager has 116 employees (81 and 80 as of December 31, 2013 and March 31, 2013, respectively), and is regulated by the Pensions Superintendency (SUPEN). BCR Sociedad Corredora de Seguros, S.A. (the Insurance Broker) was organized as a corporation in February 2009 under the laws of the Republic of Costa Rica. Its main activity is insurance underwriting. As of March 31, 2014 the Insurance Broker has 80 employees (79 and 76 as of December 31, 2013 and March 31, 2013, respectively) and is regulated by the Superintendency General of Insurance (SUGESE). BAN Procesa - TI. S.A. was organized as a corporation in August 2009 under the laws of the Republic of Costa Rica. Its main activity will be to provide IT processing services and technical support, purchase, lease, and maintain hardware and software, including software development, and address the Bank’s IT needs. This entity is not engaged in operations. The Bank holds 51% ownership interest in the following entity:
Banco Internacional de Costa Rica, S.A. and subsidiary (BICSA) was organized as a bank under the laws of the Republic of Panama in 1976. It operates under a general license granted by the Superintendency of Banks of Panama to engage in banking transactions in Panama or abroad. BICSA is located in Panama City, Republic of Panama, Calle Manuel María Icaza No. 25, and has a branch (the Branch) in Miami, Florida, U.S.A. The remaining 49% ownership interest is held by Banco Nacional de Costa Rica. As of March 31, 2014 BICSA has 238 employees (238 and 236 as of December 31, 2013 and March 31, 2013, respectively).
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
In the Republic of Panama, banks are regulated by the Superintendency of Banks of Panama through Executive Order No. 9 of February 26, 1998, and by the resolutions and directives issued by that entity. Among other aspects, that law regulates authorization of banking licenses, minimum capital and liquidity requirements, general oversight, and procedures for credit risk and market risk management, money laundering prevention, and bank takeover and liquidation. Banks are also subject to an audit at least every two (2) years by auditors from the Superintendency of Banks to verify compliance with Executive Order No. 9 and Law No. 42 on Money Laundering Prevention. BICSA wholly owned subsidiaries Arrendadora Internacional, S.A. and Bicsa Capital, S.A, are engaged in providing funding through financial leases and purchase of invoices and brokerage services respectively. The Branch has been operating since September 1, 1983 under an international banking license granted by the office of the State Comptroller and Banking Commissioner of the State of Florida. Regulatory aspects of BICSA and Subsidiary Miami branch The Branch is subject to regulations and periodic oversight by certain federal and state agencies. For such purposes, the Branch has an agreement with federal and state regulatory authorities, which requires the Branch to continually maintain and report certain minimum capital ratios and maturity parameters, e.g. the Branch must maintain a minimum ratio of eligible assets to thirdparty liabilities of 110%, on a daily basis.
Panama branch
Executive Order No. 9 of February 26, 1998 requires that banks operating under a general license maintain capital funds for an amount greater than or equal to 8% of risk-weighted assets, including off-balance sheet operations. This law also limits the amount that can be loaned to a single economic group to a maximum of 25% of capital funds. It also limits the amount that can be loaned to related parties to a maximum of 5% and 10% of capital funds, depending on the guarantee provided by the borrower, up to a cumulative maximum of 25% of BICSA’s capital funds.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(b) Accounting policies for consolidated financial statement preparation
The consolidated financial statements have been prepared in accordance with the legal provisions, rules, and accounting regulations issued by the Central Bank of Costa Rica (BCCR), the General Superintendence of Financial Entities (SUGEF), and the National Financial System Oversight Board (CONASSIF).
(c) Investments in other companies
Valuation of investments by the equity method
i. Subsidiaries
Subsidiaries are entities controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its actives. As prescribed by regulations, the financial statements must present investments in subsidiaries by the equity method rather than on a consolidated basis. Transactions that affect the equity of those companies, such as conversion adjustments and unrealized gain or loss on valuation of investments, are recognized in the same manner in the Bank's equity, the effects are recorded in the “Adjustment for valuation of investments in other companies" account.
The consolidated financial statements include the financial figures of the Bank and of the following subsidiaries:
Subsidiary
Ownership interest
BCR Valores, S.A. (the Brokerage Firm) 100% BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A. (the Pension Funds Manager)
100%
BCR Sociedad Administradora de Fondos de Inversión, S.A. (the Investment Funds Manager)
100%
Banco Internacional de Costa Rica, S.A. and subsidiary (Arrendadora Internacional, S.A. which are wholly-owned subisidiary)
51%
BCR Sociedad Corredora de Seguros, S.A. (the Insurance Broker)
100%
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
All significant intercompany balances and transactions have been eliminated on consolidation.
(d) Foreign currency
i. Foreign currency transactions
Assets and liabilities held in foreign currency are converted to colones at the exchange rate ruling at the consolidated balance sheet date. Transactions in foreign currency during the year are converted at the foreign exchange rate ruling at the date of the transaction. Conversion gains or losses are presented in the consolidated income statement.
ii. Monetary unit and foreign exchange regulations
On October 17, 2006, the Central Bank of Costa Rica (BCCR) revised the country’s foreign exchange system, replacing mini-devaluations with an adjustable band. Under the new system, the BCCR’s board agreed to establish a rate floor and ceiling, which will be adjusted based on the country’s financial and macroeconomic conditions. In accordance with the Chart of Accounts, monetary assets and liabilities denominated in foreign currency should be expressed in colones using the reference buy rate published by BCCR. As of March 31, 2014, monetary assets and liabilities denominated in U.S. dollars were valued at the exchange rate of ¢538,34 to US$1,00 (¢495,01 and ¢492,72 as of December 31, 2013 and March 31, 2013 to US$1,00, respectively).
Valuation in colones of monetary assets and liabilities in foreign currency during the year ended March 31, 2014 gave rise to foreign exchange losses and gains of ¢227.837.079.565 (2013: ¢25.390.507.141) and ¢227.041.284.412 (2013: ¢26.557.883.416), respectively, which are presented net in the consolidated income statement.
Additionally, valuation of other assets and other liabilities gave rise to gains and losses, respectively, which are booked in “Other operating income” and “Other operating expenses”, respectively. For the year ended March 31, 2014, valuation of other assets gave rise to gains of ¢617.280.597 (2013: ¢46.781.367) and valuation of other liabilities gave rise to losses of ¢495.377.490 (2013: ¢121.950.737).
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
iii. Financial statements of foreign subsidiaries (BICSA)
The financial statements of BICSA are presented in U.S. dollars, which is its functional currency. Those financial statements were converted to Costa Rican colones as follows:
Assets and liabilities at the closing exchange rate. Income and expenses at the average exchange rates in effect during each year. Equity at historical exchange rates, using the exchange rate in effect on the
dates of the transactions.
For the year ended March 31, 2014, the Bank’s investment in BICSA gave rise to a net gain of ¢1.170.429.406 (2013: ¢1.673.893.430), which is included in the consolidated income statement.
For the year ended March 31, 2014, translation of BICSA’s financial statements gave rise to foreign exchange gain of ¢3.818.024.378 (2013: losses for ¢746.127.799), which are presented in equity under the “Adjustment for financial statement translation” account.
(e) Basis of consolidated financial statement preparation
The consolidated financial statements have been prepared on the fair value basis for available-for-sale assets and trading financial instruments. Other financial and non-financial assets and liabilities are stated at amortized cost or historical cost. The accounting policies have been consistently applied.
(f) Financial instruments
A financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity. The Bank’s financial instruments include primary instruments: cash and due from banks, investments in financial instruments, loan portfolio, other accounts receivable, obligations with the public, obligations with entities, and accounts payable.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(i) Classification
Trading financial instruments are instruments held by the Bank for short-term profit taking. Originated instruments are loans and other accounts receivable created by the Bank providing money to a debtor rather than with the intention of short-term profit taking. Available-for-sale assets are financial assets that are not held for trading purposes, originated by the Bank, or held to maturity. Available-for-sale assets include certain debt securities. In accordance with accounting standards issued by CONASSIF, as of January 1, 2008, investments in financial instruments made by regulated entities are to be classified as available for sale. Own investments in open investment funds are to be classified as trading financial assets. Own investments in closed investment funds are to be classified as available for sale. Until December 31, 2007, SUGEF allowed investments in financial instruments to be classified as held-to-maturity. Entities regulated by SUGEVAL, SUGEF, SUPEN, and SUGESE may classify other investments as trading financial instruments, provided there is an express statement of intent to trade them within 90 days from the acquisition date.
(ii) Recognition The Bank recognizes available-for-sale assets on the date at which the Bank becomes a party to the contractual provisions of the instrument. From this date, any gains or losses arising from changes in the fair value of the assets are recognized in equity.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Held-to-maturity assets and originated loans and other accounts receivable are recognized using settlement date accounting, i.e. on the date they are transferred to the Bank. In 2014 and 2013, the Bank did not classify financial instruments as held to maturity, except for the securities received to capitalize the Bank (see notes 5 and 18).
(iii) Measurement Financial instruments are measured initially at fair value, including transaction costs. Subsequent to initial recognition, available-for-sale assets are measured at fair value, except that any instrument that does not have a quoted market price in an active market and whose fair value cannot be reliably measured is stated at cost, including transaction costs less impairment losses. All non-trading financial assets and liabilities, originated loans and other accounts receivable, and held-to-maturity investments are measured at amortized cost less impairment losses. Any premium or discount is included in the carrying amount of the underlying instrument and amortized to finance income or expense using the effective interest method. Article 17 of the Accounting Regulations Applicable to Entities Regulated by SUGEF, SUGEVAL, SUPEN and SUGESE and to Non-financial Issuers prescribes available-for-sale classification for investments in financial instruments by regulated entities.
(iv) Fair value measurement principles The fair value of financial instruments is based on their quoted market price at the consolidated balance sheet date without any deduction for transaction costs.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(v) Gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value of available-for-sale assets are recognized directly in equity until the investment is considered to be impaired, at which time the loss is recognized in the consolidated income statement. When the financial assets are sold, collected, or otherwise disposed of, the cumulative gain or loss recognized in equity is transferred to the consolidated income statement.
(vi) Derecognition A financial asset is derecognized when the Bank loses control over the contractual rights that comprise the asset. This occurs when the rights are realized, expire, or are surrendered. A financial liability is derecognized when it is extinguished.
(g) Cash and cash equivalents
The Bank considers cash and due from banks, demand and term deposits, and investment securities that the Bank has the intent to convert into cash within two months or less to be cash and cash equivalents, except for BICSA, which applicable term is 90 days or less.
(h) Investments in financial instruments
Investments in financial instruments are classified as available-for-sale investments which are valued at market prices using the price vector furnished by Proveedor Integral de Precios de Centroamérica, S.A. (PIPCA). In accordance with accounting standards issued by CONASSIF, starting January 1, 2008, the Bank no longer classifies investments in financial instruments as held-to-maturity. However, pursuant to Law No. 8703 “Amendment to Law No. 8627 on the Ordinary and Extraordinary Budget of the Republic for Fiscal Year 2008”, securities received to capitalize State-owned banks are to be classified as held-to-maturity and are not subject to market price valuation.
The effect of market price valuation of available-for-sale investments and restricted financial instruments is included in the equity account with the caption “Adjustment for valuation of available-for-sale investments” until those investments are realized or sold.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Regular purchases or sales of financial assets are recognized by the settlement date method, date of delivery in exchange for an asset.
Investments in repurchase agreements (term seller positions) and investment securities with original maturities of less than 180 days are not valued at market prices.
Trading investments are measured at fair value through profit or loss and are acquired with the intention of selling the financial instrument in the immediate future.
Held-to-maturity investments are measured at amortized cost by the effective interest method. In accordance with Law No. 8703, the Bank no longer classifies investments as held to maturity, except investments in financial instruments received to capitalize the Bank.
When a financial asset is acquired with accrued interest, that interest is booked in a separate account as accrued interest receivable.
BICSA’s investments
The fair values of BICSA’s investment securities that are quoted in active markets are based on recent purchase prices. If a security is not quoted in an active market, its fair value is determined by using a valuation technique, such as the use of recent transactions, the analysis of discounted cash flows, and other valuation techniques commonly used by market participants. Shares for which fair values cannot be reliably determined are measured at cost less impairment losses.
(i) Loan portfolio
The Bank loan portfolio SUGEF defines credits as any operation formalized by a financial intermediary irrespective of the type of underlying instrument or document, whereby the intermediary assumes the risks of either directly providing funds or credit facilities or guaranteeing that their customer will honor its obligations with third parties. Credits include loans, factoring, purchases of securities, guarantees in general, advances, checking account overdrafts, bank acceptances, interest, open letters of credit, and preapproved lines of credit.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The loan portfolio is presented at the value of outstanding principal. Interest on loans is calculated based on the outstanding principal and contractual interest rates and is accounted for as income on the accrual basis of accounting. The Bank follows the policy of suspending interest accruals on loans with principal or interest that is more than 180 days past due.
BICSA loan portfolio
Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are originated by BICSA providing money, goods, or services directly to a borrower without the intention of selling the loan.
(j) Allowance for loan losses
The Bank loan portfolio
The loan portfolio is valued in accordance with provisions established in SUGEF Directive 1-05 “Regulations for Borrower Classification”, which was approved by CONASSIF on November 24, 2005, published in Official Gazette No. 238 on Friday, Octuber 9, 2005, and became effective on October 9, 2006. Loan operations approved for individuals or legal entities with a total outstanding balance exceeding ¢65.000.000 (Group 1 under SUGEF Directive 1-05) are classified by credit risk. This classification takes into account the following considerations:
Creditworthiness, which includes an analysis of projected cash flows, an analysis of
financial position, consideration for experience in the line of business, quality of management, stress testing for critical variables, and an analysis of the creditworthiness of individuals, regulated financial intermediaries, and public institutions.
Historical payment behavior, which is determined by the borrower’s payment
history over the previous 48 months, considering servicing of direct loans, both current and settled, in the National Financial System as a whole. SUGEF calculates the level of historical payment behavior for borrowers reported by entities during the previous month.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Arrears
Pursuant to the aforementioned Directive, collateral may be used to mitigate risk for purposes of calculating the allowance for loan impairment. The market value of collateral should be considered and adjusted at least once annually. The percentage of acceptance of collateral is also a mitigating factor. Collateral must be depreciated six months after the most recent appraisal. Risk categories are summarized below:
Risk
category
Arrears Historical payment
behavior Creditworthiness
A1 30 days or less Level 1 Level 1 A2 30 days or less Level 2 Level 1 B1 60 days or less Level 1 Level 1 or Level 2 B2 60 days or less Level 2 Level 1 or Level 2 C1 90 days or less Level 1 Level 1, Level 2 or C2 90 days or less Level 2 Level 3
D 120 days or less Level 1 or Level 2 Level 1, Level 2,
Level 3 or Level 4
Remaining loan operations, for which the borrower’s total outstanding balance is less than ¢65.000.000 (Group 2 under SUGEF Directive 1-05), are classified in the following categories based on historical payment behavior and arrears:
Risk category
Arrears Historical
payment behavior Creditworthiness
A1 30 days or less Level 1 Level 1 A2 30 days or less Level 2 Level 1 B1 60 days or less Level 1 Level 1 or Level 2 B2 60 days or less Level 2 Level 1 or Level 2
C1 90 days or less Level 1 Level 1, Level 2 or Level 3
C2 90 days or less Level 2 Level 1, Level 2 or Level 3
D 120 days or less Level 1 or Level
2 Level 1, Level 2, Level 3 or Level 4
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Borrowers are to be classified in risk category E if they fail to meet the conditions for classification in risk categories A through D mentioned above, are in bankruptcy, a meeting of creditors, court protected reorganization procedure, or takeover, or if the Bank considers classification in such category to be appropriate. Until December 31, 2013, allowance percentages for each borrower risk category are as follows:
Risk category Allowance Percentage
A1 0,5% A2 2% B1 5% B2 10% C1 25% C2 50% D 75% E 100%
Pursuant to SUGEF Directive 1-05: "Regulation for qualifying Debtors", as of January 1, 2014, the Bank must maintain a minimum amount of allowance resulting from the sum of generic and specific allowances, calculated in accordance with the Transitory XII. The generic allowance will be equal to 0.5% of the total due balance, corresponding to the loan portfolio classified in A1 and A2 risk categories, without reducing the effect of mitigators of loan operations which apply to contingent claims. The specific allowance is calculated on the covered and uncovered portion of each loan. The allowance on the exposed portion is equal to the total outstanding balance of each loan transaction minus the weighted adjusted value of the relevant security. The resulting amount is multiplied by the percentage that corresponds to the risk category. The allowance on the covered of each credit operation is equal to the amount corresponding to the covered part of the operation, multiplied by the appropriate percentage.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Specific allowance percentages for each borrower risk category are as follows:
Risk category
Specific allowance percentage on the uncovered portion of the loan
Specific allowance percentage on the covered portion of the loan
A1 0% 0% A2 0% 0% B1 5% 0,5% B2 10% 0,5% C1 25% 0,5% C2 50% 0,5% D 75% 0,5% E 100% 0,5%
Until December 31, 2013, as an exception in the case of risk category E, the minimum allowance for loans to a borrower whose historical payment behavior is rated as level 3 is to be calculated as follows:
Arrears Allowance Percentage
0 to 30 days 20% 31 to 60 days 50%
More than 61 days 100% As of January 1, 2014, as an exception in the case of risk category E, the minimum allowance for loans to a borrower whose historical payment behavior is rated as level 3 is to be calculated as follows:
Arrears
Specific allowance
percentage on the uncovered portion of the
loan
Specific allowance
percentage on the covered
portion of the loan
Creditworthiness (Borrowers Group
1)
Creditworthiness (Borrowers Group
2)
30 days or less
20% 0,5% Level 1 Level 1
30 days or less 50% 0,5% Level 2 Level 2
30 days or less 100% 0,5% Level 1 or Level 2 or Level 3 or Level
4
Level 1 or Level 2
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Pursuant to SUGEF Directive 1-05, as of March 31, 2014, the minimum allowance is ¢33.987.423.747 (¢31.135.553.174 and ¢33.364.294.155 as of December and March 2013, respectively) of which ¢33.867.205.970 (¢30.934.747.789 and ¢32.802.487.302 as of December 31, 2013 and March 31, 2013, respectively) correspond to direct loans and stand-by credits and ¢120.217.777 (¢200.805.385 and ¢561.806.853 as of December 31, 2013 and March 31, 2013) correspond to stand-by credits.
As of March 31, 2014, an allowance was booked for ¢34.037.423.949 (¢31.663.496.555 and ¢36.752.176.518 as of December 31, 2013 and March 31, 2013, respectively).
As of March 31, 2014, December 31, 2013 and March 31, 2013, increases in the allowance for loan impairment resulting from the minimum allowance are included in the accounting records in conformity with article 17 of SUGEF Directive 1-05, under prior authorization from SUGEF in conformity with article 10 of IRNBS. As of March 31, 2014, December 31, 2013 and March 31, 2013, management considers the allowance to be sufficient to absorb any potential losses that could be incurred on recovery of the portfolio.
The Bank accounts and accrued interest receivable In order to assess the risk of accounts and accrued interest receivable unrelated to loan operations, the Bank considers the arrears of the accounts based on ranges established for other assets in SUGEF Directive 1-05 adopted by CONASSIF.
Arrears Allowance percentage 30 days or less 2% 60 days or less 10% 90 days or less 50% 120 days or less 75%
More than 120 days 100%
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
BICSA allowance for loan impairment
BICSA first assesses whether there is any objective evidence of impairment for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If BICSA determines that there is no objective evidence of impairment for a financial as set assests individually, irrespective of whether the financial asset is individually significant, the asset is collectively tested for impairment by grouping it together with financial assets with similar credit risk characteristics. Assets that are individually tested for impairment and for which an impairment loss has been previously recognized are not collectively tested for impairment.
When a loan is considered to be uncollectible, it is charged against the allowance for loan impairment. Such loans are derecognized after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recovery of any amounts previously derecognized results in a credit to the allowance.
If in a subsequent period the amount of the impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognized, the impairment loss is reversed through the consolidated income statement through an adjustment to the allowance.
Management considers the allowance for loan impairment to be sufficient. The regulatory authority periodically reviews the allowance for loan impairment as an integral part of its audits. The regulatory authority may require that additional allowances are recognized based on its evaluation of information available as of the date of the audits. As of March 31, 2014, a consolidated allowance has been booked for ¢47.517.515.641 (¢44.222.064.420 and ¢45.757.246.945 as of December 31, 2013 and March 31, 2013, respectively).
BICSA Accounts and accrued interest receivable
In order to assess the allowance for accounts and accrued interest receivable, BICSA applies the criteria mentioned in the section on the allowance for loan impairment.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(k) Securities sold under repurchase agreements
The Bank enters into sales of securities under repurchase agreements for a certain date in the future at a fixed price. The obligation to repurchase securities sold is reflected as a liability in the consolidated balance sheet and stated at the value of the original agreement. The underlying securities are held in asset accounts. Finance expense recognized is calculated by the effective interest method. Interest is presented as finance expense in the consolidated income statement, and accrued interest payable in the consolidated balance sheet.
(l) Accounting for accrued interest receivable
Interest receivable is accounted for on the accrual basis. Under current regulations, interest accrual is suspended on loan operations that are more than 180 days past due. Accrued interest receivable on those loans is recorded when collected. BICSA does not suspend interest accrual.
(m) Other receivable
The recoverability of these accounts is assessed by applying criteria similar to those established by SUGEF for the loan portfolio. If an account is not recovered within 120 days from the due date or the date booked, an allowance is created for 100% of the outstanding balance. Accounts with no specified due date are considered payable immediately. BICSA applies the criteria mentioned in the section on the allowance for loan impairment.
(n) Foreclosed assets
Foreclosed assets are assets owned by the Bank for realization or sale. Included in this account are assets acquired in lieu of payment, assets adjudicated in judicial auctions, assets purchased to be leased under finance and operating leases, goods produced for sale, idle property and equipment, and other foreclosed assets.
Foreclosed assets are valued at the lower of cost and fair value. If fair value is less than the cost booked in the accounting records, an impairment allowance must be booked for the amount of the difference between both values. Cost is the historical acquisition or production value in local currency, these assets should not be revalued or depreciated for accounting purposes, and they are to be booked in local currency. The cost booked in the accounting records for a foreclosed asset may only be increased by the amount of improvements or additions, up to the amount by which they increase the asset’s realizable value. Other expenditures related to foreclosed assets are to be expensed in the period incurred.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The net realizable value of an asset should be used as its fair value, net realizable value is determined by applying strictly conservative criteria and is calculated by subtracting expenses to be incurred on the sale of the asset from its estimated selling price. The estimated selling price of the asset is determined by an appraiser (independent from the Bank and the borrower) based on current market conditions. Future expectations for market improvements are not considered and it is assumed that the assets must be sold in the shortest period of time possible to enable the Bank to recover the money invested and use it for its business activities. For all foreclosed assets, the Bank should have reports from the appraisers who made the appraisals and those reports are to be updated at least annually.
If an asset booked in this group is used by the Bank, it should be reclassified to the appropriate account in the corresponding group.
Pursuant to article 20-b of SUGEF Directive 1-05, regulated entities are required to book an allowance for retired assets and for foreclosed assets that were not sold or leased under operating or finance leases within two years from the acquisition or production date for an amount equivalent to the carrying amount of the assets. The allowance must be established gradually by booking one-twenty-fourth of the value of such assets each month until the allowance is equivalent to 100% of the carrying amount of the assets, without exception. The booking of the allowance shall begin at month-end of the month in which the asset was i) acquired, ii) produced for sale or lease, or iii) retired from use.
(o) Offsetting
Financial assets and liabilities are offset and the net amount presented in the consolidated financial statements when the Bank has a legal right to set off the recognized amounts and intends to settle on a net basis.
(p) Property and equipment
(i) Own assets
Property and equipment (buildings, furniture, and equipment) is depreciated on the straight-line method over the estimated useful lives of the assets for both tax and financial purposes. Leasehold improvements are amortized straight line over a period of sixty months, starting the month after the deferred charge is booked. Leasehold improvements are amortized solely at the end of the term of the lease agreement. When the lessor or the Bank notifies the other party that it does not intend to renew the lease at the end of the original lease term or extension, the remaining balance is amortized over the remainder of the lease term.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Pursuant to requirements established by regulatory authorities, the Bank must have its real property appraised by an independent appraiser at least once every five years, in order to determine its net realizable value. If the realizable value is less than the carrying amount, the carrying amount must be adjusted to the appraisal value.
(ii) Leased assets
Leases in terms of which the Bank assumes substantially all the risks and rewards of ownership are classified as finance leases. At the beginning of the lease term, this is recognized in the statement of financial position, as an asset and a liability by the same amount, the fair value of the leased assets, or the present value of minimum lease payments, if this were the lowest between the present value of the stipulated payments in the contract discounted at the interest rate implicit in the operation, determined at the beginning of the lease. To calculate the present value of the minimum payments by the lease, is taken as a discount factor the interest rate implicit in the lease, wherever practicable to determine; otherwise the incremental interest rate of the tenant loans is used. Any initial direct cost of the tenant will be added to the amount recognized as an asset.
(iii) Subsequent cost
Costs incurred to replace a component of an item of property and equipment are capitalized and accounted for separately. Subsequent costs are only capitalized when they increase the future economic benefits. All other costs are recognized in the consolidated income statement when incurred.
(iv) Depreciation and amortization Depreciation and amortization are charged to the income statement on the straight-line method using the annual depreciation rates established for tax purposes. When appraisals made by independent appraisers determine that the technical useful life is less than the remaining useful life calculated using applicable rates for tax purposes, the technical useful life is to be used. Estimated useful lives are as follows:
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Useful lives of assets owned by the Bank and subsidiaries, except BICSA
Building 50 years Vehicles 10 years Furniture and equipment 10 years Computer hardware 5 years Improvements 5 years
Useful lives of assets owned by BICSA Buildings 40 years Furniture and equipment 3 to 5 years Computer hardware 3 years Vehicles 3 to 5 years
(v) Revaluation
At least every five years financial entities should evaluate the real estate by appraisals, stating the net realizable value of the property. If the realizable value of the assets is different than the one included in the accounting registers, the Bank must adjust the book value to the resulting value of the appraisal. These assets are depreciated by the straight line method for financial and tax purposes, based on the expected life of the respective assets. The last appraisal was done on January 2011 and the accounting register on April 29, 2011.
(q) Deferred charges
Deferred charges are valued at cost and stated in local currency. These charges are not subject to revaluations or adjustments.
(r) Intangible assets
Intangible assets acquired by the Bank are stated at cost less accumulated amortization and impairment losses.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014, December 31, 2013 and March 31, 2013, the Bank recognizes amortization expense on goodwill acquired on shares, which will be amortized over 5 years in accordance with the Accounting Regulations Applicable to Entities Regulated by SUGEF, SUGEVAL, SUPEN, and SUGESE and to Non-financial Issuers. Amortization of IT systems is charged to profit or loss on a straight-line basis over the estimated useful lives of the related assets. The estimated useful life is five years. Subsequent expenditures or disbursements are capitalized only when they increases the future economic benefits; otherwise are recognized on results as incurred.
(s) Impairment of assets
The carrying amount of an asset is reviewed at each consolidated balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in the consolidated income statement for assets carried at cost, and treated as a decrease in revaluation surplus for assets recorded at revalued amounts, until the amount of the surplus of the specific asset is sufficient to absorb the impairment loss. The recoverable amount of an asset is the greater of its net selling price and value in use. The net selling price is equivalent to the value obtained in an arm’s length transaction. Value in use is the present value of future cash flows and disbursements derived from continuing use of an asset and from its disposal at the end of its useful life. If in a subsequent period the amount of the impairment loss decreases and the decrease can be linked objectively to an event occurring after impairment loss was determined, the loss is reversed through the consolidated income statement or consolidated statement of changes in equity, as appropriate.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Pursuant to SUGEF regulations, the Bank is to obtain a report from an independent appraiser at least every five years indicating the net realizable value of real property (land and buildings) for use that has a net carrying amount in excess of 5% of the entity’s equity. If the net realizable value of the assets appraised, taken as a whole, is less than the corresponding net carrying amount, the carrying amount is to be reduced to the appraisal value by adjusting assets that are significantly overstated. The decrease in the value of real property for use is taken against account “331 – Adjustments for revaluation of assets”. In cases where an entity is aware of a significant overstatement in the carrying amount of one or more assets, regardless of the cause of the reduction in their value and/or the useful life originally assigned, the entity must hire an appraiser to perform a technical appraisal, immediately notify SUGEF of the results, and book the applicable adjustments in the accounting records.
(t) Accounts payable and other payables
Accounts payable and other payables are recognized at cost.
(u) Provisions
A provision is recognized in the consolidated balance sheet if, as a result of a past event, the Bank has a present legal or constructive obligation and it is probable that an outflow of economic benefits will be required to settle the obligation. The provision made approximates settlement value; however, final amounts may vary. The estimated value of provisions is adjusted at the consolidated balance sheet date, directly affecting the consolidated income statement.
Severance benefits Costa Rican legislation requires to the Bank and its subsidiaries domiciled in Costa Rica payment of severance benefits to employees dismissed without just cause, equivalent to seven days’ salary for employees with three to six months of service, 14 days salary for employees with between six months to one year of service, and compensation in accordance with the Employee Protection Law for those with more than one year of service. In the specific case of the Bank, this limit is increased to twenty months for personnel who have worked for more than twenty years and for those who have fewer years, it corresponds to seniority in the Solidarity Association up to twenty months.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
In February 2000, the Employee Protection Law was enacted and published. Such law modifies the existing severance benefit system and establishes a mandatory supplemental pension plan, thereby amending several provisions of the Labor Code. Pursuant to the Employee Protection Law, all public and private employers must contribute 3% of monthly employee salaries during the entire term of employment. Contributions are collected through the Costa Rican Social Security Administration (CCSS) and are then transferred to pension fund operators selected by employees The Bank follows the practice of transferring to the Employees Association the severance benefits corresponding to each employee based on the employee’s current salary. From severance obligation, amounts not transferred to the Solidarity Association are provisioned as stated in the Collective Agreement, according to the article 29 subsection 3 and the laws of the country, where only 50% is provisioned for the employee belonging to the Association. By agreement of the Board of Directors, session 30-12 of July 30, 2012, it was agreed that 100% provision should be accrued from November 2012 thereafter. The Bank pension, retirement and outgoing personnel
A fund was created by Law No. 16 of November 5, 1936, which has been amended on a number of occasions. The most recent amendment was included in Law No. 7107 of October 26, 1988. Pursuant to Law No. 16, the fund was established as a special wage protection and retirement system for the Bank’s employees. The fund is comprised of allotments established by the laws and regulations related to the fund, and monthly contributions made by the Bank and employees equivalent to 10% and 0,5% of total wages and salaries, respectively. As of October 1, 2007, this fund is managed by BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A. (subsidiary) under a comprehensive management agreement. The Bank’s contributions to the fund are considered to be defined contribution plans. Consequently, the Bank has no additional obligations.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
BICSA retirements savings plan for employees
BICSA offers its employees defined contribution pension plans in accordance with the conditions and practices in the jurisdictions where it operates. Under those plans, BICSA contributes specified amounts to a fund managed by a third party, and is under no legal obligations to make additional contributions in the event the fund has insufficient assets to pay employees their benefits. BICSA has adopted a voluntary retirement savings plan in which BICSA contributes twice the amount contributed by employees, up to a maximum of 10% of monthly salaries. As of March 31, 2014, the contributions made by BICSA and subsidiary under this plan amounted to ¢74.754.969, which is equivalent to US$138.862 (¢339.374.896, which is equivalent to US$685.592 and ¢72.071.632, which is equivalent to US$146.273 as of December 31, 2012 and March 31, 2013, respectively).
BICSA years-of-service premium and indemnity for employees
Under Panamanian labor law, companies are required to establish a severance fund to guaranty payment of a years-of-service premium and indemnity to eligible employees on resignation or dismissal without just cause. To create the fund, quarterly contributions equivalent to 1,92% of salaries paid in the Republic of Panama are made to cover the years-of-service premium, while monthly contributions equivalent to 5% are made to cover the indemnity. Quarterly contributions are to be placed in a trust. As of March 31, 2014, the severance fund has a balance of ¢323.468.049, equivalent to US$600.862. (¢290.703.038, equivalent to US$587.267 and ¢305.600.711 equivalent to US$620.232 as of December 31, 2013 and March 31, 2013, respectively) and is presented in the consolidated financial statements as prepaid expenses.
(v) Legal reserve
According to Article 12 of the Organic Law of the National Banking System the Bank sets aside 50% of net earnings after income tax to increase its Legal Reserve. The Bank’s subsidiaries, except BICSA, appropriate 5% of their earnings after taxes to a legal reserve.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(w) Revaluation surplus
Revaluation surplus included in equity may be transferred directly to prior period retained earnings when the surplus is realized. The whole surplus is realized on the retirement, disposal, or use of the asset. The transfer of revaluation surplus to prior period retained earnings should not be made through the consolidated income statement. The Bank was authorized by SUGEF to capitalize revaluation surplus by increasing share capital.
(x) Use of estimates Management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, profit or loss, and the disclosure of contingent liabilities in preparing these consolidated financial statements. Actual results may differ from those estimates. Material estimates that are particularly susceptible to significant changes are related to the determination of the allowance for loan impairment.
(y) Recognition of main revenue and expenses
(i) Financial income Financial income and expense is recognized in the consolidated income statement as it accrues considering the effective yield or interest rate. Financial income and expense includes amortization of any premium or discount during the term of the instrument and until its maturity, and is calculated on an effective interest basis.
(ii) Fees and commissions income
When loan origination fees are generated, they are taken against effective yield, provided income exceeds costs incurred to generate those fees, and they are deferred over the loan term. Service fees and commissions are recognized when the services are rendered. In the case of other commissions related to the provision of services, these are recognized when the service is provided.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(iii) Net income on trading securities
Net income on trading securities includes gains and losses arising from sales and from changes in the fair value of trading assets and liabilities.
(iv) Operating lease expenses Payments for operating lease agreements are recognized in the consolidated income statement over the term of the lease.
(z) Income tax
Pursuant to the Income Tax Law, the Bank and its subsidiaries are required to file their income tax returns for the twelve months ending December 31 of each year. (i) Current:
Current tax is the expected tax payable on taxable income for the year, using tax rates enacted at the consolidated balance sheet date, and any adjustment to tax payable in respect of previous years.
(ii) Deferred:
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for taxation purposes. In accordance with this method, temporary differences are identified as either taxable temporary differences (which result in future taxable amounts) or deductible temporary differences (which result in future deductible amounts). A deferred tax liability represents a taxable temporary difference, while a deferred tax asset represents a deductible temporary difference. A deferred tax asset is recognized only to the extent there is a reasonable probability that it will be realized. BICSA’s Miami branch is subject to state and federal income taxes in the United States of America. Income tax expense is determined by using the separate currency pools method, as described in Section 1.882-5 of the U.S. Treasury Department Regulations.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(aa) BICSA financial leases
BICSA’s financial lease operations mainly consist of leases for transportation, machinery, and equipment. Average lease terms are between 36 and 60 months. Lease receivables represent the present value of future lease payments. The difference between the gross receivable and the present value of the receivable is presented as unearned income, which is recognized in profit or loss over the life of the lease.
(bb) The Bank pension, retirement and outgoing personnel
A fund was created by Law No. 16 of November 5, 1936, which has been amended on a number of occasions. The most recent amendment was included in Law No. 7107 of October 26, 1988. Pursuant to Law No. 16, the fund was established as a special wage protection and retirement system for the Bank’s employees. The fund is comprised of allotments established by the laws and regulations related to the fund, and monthly contributions made by the Bank and employees equivalent to 10% and 0,5% of total wages and salaries, respectively. As of October 1, 2007, this fund is managed by BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A. (subsidiary) under a comprehensive management agreement. The Bank’s contributions to the fund are considered to be defined contribution plans. Consequently, the Bank has no additional obligations.
(cc) Statutory allocations
Under article 12 of IRNBS, the net earnings of commercial State-owned banks are allocated as follows: 50% to a legal reserve; 10% to increase the capital of the National Institute for Cooperative Develabond (INFOCOOP); and the remainder to increase the Bank’s capital, pursuant to article 20 of Law No. 6074. Transition provision III of Law No. 8634 “Development Banking System” establishes that for a five-year period starting in 2007, the contributions made by State-owned banks equivalent to 5% of their annual net earnings (prescribed by article 20 of the Law for the Creation of the National Commission for Educational Loans (CONAPE) will be allocated as follows: 2% to CONAPE and 3% to the capital of the Development Financing Fund (FINADE). On January 2013 transitory III is removed and will continue calculating a 5% for Conape, in accordance with law 9092, National Comissions for Educational Loans.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
In accordance with article 46 of the “National Emergency and Risk Prevention Act”, all institutions of the central administration and decentralized public administration, as well as State-owned companies, must contribute three percent (3%) of their reported earnings before taxes and statutory allocations and of their accumulated budget surplus to CNE. Such funds are deposited in the National Emergency Fund to finance the National Risk Management System.The expenditure for CNE is calculated as 3% of income hefure taxes and profit appropriations. Pursuant to article 78 of the Employee Protection Law, State-owned public entities must contribute up to fifteen percent (15%) of their earnings with the purpose of strengthening the funding base for the Disability, Old Age, and Death Benefit System of CCSS and to provide universal CCSS coverage for impoverished non-salaried workers. According to Executive Decree number 37127-MTSS, beginning in 2013 a progressive yearly contribution from net earnings must be set aside beginning with 5% in 2013, up to 7% beginning in 2015 and 15% from 2017.
(dd) Development Financing Funds In accordance with article 32 of Law No. 8634 “Development Banking System”, all State-owned banks, except Banco Hipotecario para la Vivienda (BANHVI), shall appropriate each year at least five percent (5%) of their net earnings after income taxes to the creation and strengthening of its own development funds. The objective of that appropriation is to provide financing to individuals and legal entities that present viable and feasible projects in conformity with the provisions of the aforementioned law (see note 18-a).
(ee) Development Credit Funds
The Development Credit Fund (DCF), comprised of the resources provided in Article 59 of the Organic Law of the National Banking System, No.1644, commonly called "Banking Toll ". Will be administered by the State Banks, in compliance with Law No. 9094 "Derogatory of Transitory VII-Law No. 8634"; and in accordance with Article 35 of Law No. 8634 "Development Banking System", in meeting 119 of January 16, 2013, by agreement number AG 1015-119-2013, agreed to appoint Banco de Costa Rica and Banco Nacional de Costa Rica as administrators for a five years period from the signature of the respective management agreements. Each bank is responsible for managing fifty percent (50%) of the fund.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The Technical Secretariat of the Governing Board through written communication CR/SBD-014-2013 informed all private banks to open up checking accounts with each of the administrators’ banks (Banco Nacional and Banco de Costa Rica), both in colones and foreign currency with the obligation to distribute fifty percent of the resources to each bank. The powers granted by the Governing Board to the administrators are:
a) Administrators’ Banks can perform services with the beneficiaries of the Development Banking System as recognized by Article 6 of Law 8634.
b) In accordance with Article 35 of the Law 8634 with funds from the
Development Credit Fund the Banks can perform services for other financial entities except for private banks provided they meet the objectives and obligations under Law 8634 and that are duly accredited by the Board.
c) The Banks may proceed or carry on in accordance with Article 35 Law 8634 the resources of the Development Credit Fund through: associations, cooperatives, foundations, NGO, producers organizations or other entities if they have credit operations in programs that meet the objectives established in the Law 8634 and are duly accredited by the Board.
The contract signed for a five years term will be renewable for equal and successive periods unless otherwise decided by the Governing Board, notified in writing at least three months in advance. It may be terminated as provided for in Article 12 paragraph j) of the Law 8634 and its executive regulations, if the Banks administrators demonstrate proven lack of capacity and expertise.
(ff) BICSA trust
BICSA has a license to manage trusts in or from the Republic of Panama. Fee and commission income derived from trust management is recognized on the accrual basis. BICSA is required to manage trust funds in accordance with the contractual terms and independently of its own equity.
(gg) Economic period The economic fiscal period corresponds to the period ended on December 31 of every year.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(2) Collateralized or restricted assets Collateralized or restricted assets are as follows:
March December March
2014 2013 2013
Cash and due from banks – BCCR (note 4) ¢ 394.284.038.948 378.302.772.579 367.259.584.661
Cash and due from banks - restricted (note 4) 552.302.236 483.611.595 718.971.991
Total cash and due from banks 394.836.341.184 378.786.384.174 367.978.556.652
Investments in financial instruments (note 5) 160.606.893.429 58.250.544.377 93.644.861.035
Other assets 353.496.654 318.315.190 333.085.125
¢ 555.796.731.267 437.355.243.741 461.956.502.812
(3) Balances and transactions with related parties
The consolidated financial statements include balances and transactions with related parties, as follows:
March December March
2014 2013 2013
Assets:
Loan portfolio ¢ 740.382.495 869.399.079 850.513.047
Other accounts receivable 81.416.397 216.529.907 423.236.946
Investments in other companies 10.000.000 10.000.000 5.000.000
Total assets ¢ 831.798.892 1.095.928.986 1.278.749.993
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(4) Cash and cash equivalents
Cash and cash equivalents are as follows for purposes of reconciliation with the consolidated cash flow statement:
March December March
2014 2013 2013
Cash ¢ 51.971.115.122 68.941.845.807 53.080.374.370
Demand deposits in BCCR 414.984.824.425 379.197.904.449 367.453.533.119
Checking accounts and demand deposits
in local financial entities 4.089.150.438 3.199.496.575 2.753.162.540
Checking accounts and demand deposits
in foreign financial entities 158.478.767.838 147.978.259.090 92.501.639.778
Notes payable on demand 10.361.216.523 3.476.999.746 6.649.733.557
Cash and due from banks – restricted 552.302.236 483.611.596 718.971.991
Total cash and due from banks 640.437.376.582 603.278.117.263 523.157.415.355
Investments in short-term financial instrument 136.565.316.779 145.595.097.780 102.787.312.766
Total cash and cash equivalents ¢ 777.002.693.361 748.873.215.043 625.944.728.121
As of March 31, 2014, demand deposits in BCCR are restricted as a minimum legal reserve in the amount of ¢394.282.128.459 (¢378.300.133.368 and ¢367.256.204.992 as of December 31, 2013 and March 31, 2013, respectively). As of March 31, 2014, the Pension Fund Manager’s deposits in BCCR are restricted as a minimum legal reserve in the amount of ¢1.286.015 (¢2.639.211 and ¢3.379.669 as of December 31, 2013 and March 31, 2013, respectively). As of March 31, 2014, the Brokerage Firm holds restricted demand deposits in BCCR in the amount of ¢624.474, for a total of ¢394.284.038.948 (¢378.302.772.579 and ¢367.259.584.661 as of December 31, 2013 and March 31, 2013, respectively). As of March 31, 2014, the Brokerage Firm holds restricted assets as part of the guarantee fund in the amount of ¢552.302.236 (¢483.611.595 and ¢718.971.991 as of December 31, 2013 and March 31, 2013, respectively) (see note 2). As of March 31, 2014, the Bank has a liability for outstanding checks in the amount of ¢7.902.928.164 (¢2.553.308.639 and ¢3.042.158.773 as of December 31, 2013 and March 2013, respectively), which is offset by notes payable on demand cashed the next day once cleared by the clearing house.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(5) Investments in financial instruments
Investments in financial instruments are as follows:
March December March
2014 2013 2013
Trading ¢ 7.787.896.695 8.963.126.645 4.430.966.866
Available for sale 688.701.718.006 680.472.340.982 680.068.284.486
Held to maturity (note 18-a) 26.281.113.178 25.824.180.960 34.068.398.974
Accrued interest receivable on available-for
sale investments 6.349.662.279 5.454.047.979 8.603.856.729
¢ 729.120.390.158 720.713.696.566 727.171.507.055
March December March
2014 2013 2013
Trading Fair Value Fair Value Fair Value
Local issuers:
Other (Open investmenst funds) ¢ 7.787.896.695 8.963.126.645 4.430.966.866
¢ 7.787.896.695 8.963.126.645 4.430.966.866
March December March
2014 2013 2013
Available for sale: Fair Value Fair Value Fair Value
Local issuers:
Government ¢ 504.950.331.962 485.267.350.651 497.228.791.857
State-owned banks 66.930.310.324 78.017.014.722 57.495.395.494
Private banks 23.044.241.724 10.623.776.647 12.343.125.141
Private issuers 1.667.560.141 5.918.963.839 1.517.797.767
Other 7.266.102.555 6.699.324.398 5.080.136.630
603.858.546.706 586.526.430.257 573.665.246.889
Foreign issuers:
Governments 5.897.588.183 5.576.752.395 22.794.255.192
State-owned banks 46.694.300.172 43.928.454.700 26.754.913.270
Private banks 22.209.680.371 23.787.529.841 41.411.004.278
Private issuers 10.041.602.574 20.653.173.789 15.442.864.857
¢ 688.701.718.006 680.472.340.982 680.068.284.486
March December March
2014 2013 2013
Held to maturity: Fair Value Fair Value Fair Value
Local issuers:
Government (note 18) ¢ 26.281.113.178 25.824.180.960 34.068.398.974
¢ 26.281.113.178 25.824.180.960 34.068.398.974
- 38 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014, the loan portfolio amounts to ¢137.273.233.221 (¢126.952.810.974 and ¢114.511.719.069 as of December 31, 2013 and March 31, 2013, respectively) corresponding to the Development Credit Fund (See note 38). Investments have been pledged as follows:
March December March
2014 2013 2013
Clearing house guaranty deposited in BCCR
(SINPE) ¢ 135.641.629.330 22.451.387.218 59.516.910.300
Bid bonds 44.061.782 44.507.735 31.423.335
Guarantee for deposits received 3.283.611.289 1.603.246.802 1.177.320.935
Minimum restricted capital of Pension Fund
Manager - 2.346.030.857 -
Guarantee for repurchase agreements of Brokerage
Firm 21.637.591.028 31.805.371.765 32.919.206.465
¢ 160.606.893.429 58.250.544.377 93.644.861.035
(6) Loan portfolio
a) Loan portfolio by sector Total loans originated by the Bank by sector are as follows:
March December March
Sector 2014 2013 2013
Agriculture, livestock, hunting and
related services ¢ 189.365.827.310 180.355.704.237 152.731.625.991
Fishing and aquaculture 12.464.096.120 10.545.663.109 19.838.622
Manufacturing 366.935.191.357 336.232.421.105 301.400.064.110
Telecomunication and public utilities 44.739.076.454 45.029.550.111 44.965.604.483
Mining and quarrying 1.642.583.735 1.528.774.887 1.559.194.961
Retail 155.418.867.783 148.431.805.748 155.020.561.954
Services 998.485.625.219 901.695.700.620 836.167.214.285
Transportation 90.305.622.806 92.094.843.618 44.238.982.775
Real estate, business and leasing activities 1.220.027.287 1.246.449.570 1.152.274.689
Construction, purchase and repair
of real estate 695.013.087.414 664.592.678.449 622.364.993.382
Consumer 347.899.391.862 344.250.861.305 335.675.014.950
Hospitality 91.098.386.938 74.149.365.137 65.595.541.045
Education 982.272.275 979.147.770 -
2.995.570.056.560 2.801.132.965.666 2.560.890.911.247
Plus accrued interest receivable 24.187.547.238 22.107.627.810 22.612.594.251
Less allowance for loan impairment (47.149.968.108) (43.992.576.678) (44.918.483.517)
¢ 2.972.607.635.690 2.779.248.016.798 2.538.585.021.981
- 39 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
b) Current loans
Total current loans originated by the Bank are as follows:
March December March
2014 2013 2013
Checking account overdrafts ¢ 8.671.178.855 5.321.576.824 5.315.185.421
Loans with other funds 2.643.327.340.445 2.466.473.426.505 2.252.801.522.962
Credit cards 40.652.701.635 41.929.354.144 40.514.398.021
Factoring 27.787.313.651 34.983.965.237 36.851.956.448
Finance leases 6.679.999.901 7.363.656.927 6.538.735.298
Issued and used letters of credit 96.580.877 117.543.639 74.705.049
Confirmed and used letters of credit 3.925.204.998 4.899.266.023 6.264.567.397
¢ 2.731.140.320.362 2.561.088.789.299 2.348.361.070.596
BICSA finance lease receivable The balance of finance lease receivables is as follows:
March December March
2014 2013 2013
Total minimum payments ¢ 10.082.456.642 11.466.534.536 9.479.542.600
Unearned interest collected - (1.306.035.869) -
¢ 10.082.456.642 10.160.498.667 9.479.542.600
Finance leases mature as follows:
March December March
2014 2013 2013
Less than one year ¢ 1.614.058.471 468.181.106 1.309.381.770
Between 1 and 5 years 8.468.398.171 9.298.147.038 8.170.160.830
More than 5 years - 394.170.523 -
¢ 10.082.456.642 10.160.498.667 9.479.542.600
- 40 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
c) Loan portfolio by arrears
The loan portfolio by arrears is as follows:
March December March
2014 2013 2013
Current ¢ 2.731.140.320.362 2.561.088.789.299 2.348.361.070.596
1 to 30 days 123.813.450.327 124.811.194.711 109.272.488.116
31 to 60 days 55.765.606.156 39.575.296.486 31.805.148.143
61 to 90 days 24.508.616.933 25.464.983.332 24.431.575.968
91 to 120 days 5.005.455.159 6.389.413.909 7.258.465.378
121 to 180 days 9.290.532.227 4.552.209.103 2.597.390.800
More than 180 days 14.243.149.367 7.725.462.923 6.103.478.445
Legal colections 31.802.926.029 31.525.615.903 31.061.293.801
¢ 2.995.570.056.560 2.801.132.965.666 2.560.890.911.247
As of March 31, 2014, the Bank has granted loans to financial entities in the amount of ¢1.550.419.200 (¢2.773.585.071 and ¢3.039.713.998 as of December 31, 2013 and March 31, 2013, respectively). As of March 31, 2014, BICSA has granted loans to financial entities in the amount of ¢25.808.534.985 (¢34.494.155.067 and ¢35.442.370.437 as of December 31, 2013 and March 31, 2013, respectively). The Bank classifies loans as past due when no principal or interest payments have been made by 1 day after the due date.
d) Past due loans Past due loans, including loans in accrual status (for which interest is recognized on a cash basis) and unearned interest on past due loans, are as follows:
March December March
2014 2013 2013
Past due loans
in nonaccrual status
(2014: 4.383 loans)
(2013: 1.289 and 1.671 loans respetively) ¢ 14.243.149.367 7.725.462.923 6.103.478.445
Past due loans
in accrual statu ¢ 218.383.660.802 200.793.097.541 175.365.068.405
Total unearned interest ¢ 6.356.834.775 5.935.367.396 6.518.431.757
- 41 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Loans in legal collections as of March 31, 2014:
Percentage Balance
2.391 1,06% ¢ 31.802.926.029
No. of loans
Loans in legal collections as of December 31, 2013:
Percentage Balance
2.324 1,13% ¢ 31.525.615.903
No. of loans
Loans in legal collections as of March 31, 2013:
Percentage Balance
2.781 1,21% ¢ 31.061.293.801
No. of loans
As of March 31, 2014, total restructured loans amount to ¢100.586.460 (¢614.605.062 y ¢62.055.970 as of December 31, 2013 and March 31, 2013, respectively). As of that date, BICSA’s restructured loans amount to ¢25.010.937.246 (¢19.852.292.977 and ¢16.080.209.171 as of December 31, 2013 and March 31, 2013, respectively). As of March 31, 2014, the average annual interest rate earned on loans is 10,89% (11,18% and 11,74% as of December 31, 2013 and March 31, 2013, respectively) in colones and 6,32% in U.S. dollars (6,30% and 6,18% in U.S. dollars as of December and March 2013, respectively). As of March 31, 2014, BICSA’s average annual interest rate earned on loan in U.S dollar is 6,26% (6,37% as of December 31, 2013 and March 31, 2013).
e) Accrued interest receivable on loan portfolio
Accrued interest receivable is as follows:
March December March
2014 2013 2013
Current loans ¢ 14.252.128.432 12.967.240.357 13.136.950.921
Past due loans 6.982.112.984 6.239.321.541 6.271.604.771
Loans in legal collections 2.953.305.822 2.901.065.912 3.204.038.559
¢ 24.187.547.238 22.107.627.810 22.612.594.251
- 42 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
f) Allowance for loan impairment
Movement in the allowance for loan impairment is as follows:
2014 opening balance ¢ 43.992.576.678
Conversion effect 1.110.324.938
Plus:
Allowance charged to profit or loss (note 28) 4.578.216.977
Recoveries 2.859.662
Movement of balances 572.545.200
Adjustment for foreign exchange differences 337.712.588
Less:
Transfer to unpaid balances (610.015.068)
Reversal of allowance against income (note 29) (2.834.252.867)
Balance at March 31, 2014 ¢ 47.149.968.108
2013 opening balance ¢ 43.745.708.395
Conversion effect (126.470.796)
Plus:
Allowance charged to profit or loss (note 28) 12.538.495.806
Recoveries 22.267.530
Less:
Adjustment for foreign exchange differences (66.776.918)
Transfer to unpaid balances (6.902.183.897)
Reversal of allowance against income (note 29) (5.218.463.442)
Balance at December 31, 2013 ¢ 43.992.576.678
2013 opening balance ¢ 43.745.708.395
Conversion effect (168.520.085)
Plus:
Allowance charged to profit or loss (note 28) 2.285.978.019
Recoveries 4.794.658
Movement of balances 81.943.278
Less:
Adjustment for foreign exchange differences (81.511.870)
Transfer to unpaid balances (21.976.297)
Reversal of allowance against income (note 29) (927.932.581)
Balance at March 31, 2013 ¢ 44.918.483.517
- 43 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
g) Syndicated loans
BICSA syndicated loans: As of March 31, 2014, the Bank’s syndicated loan portfolio with other banks is as follows:
Syndicated loans with Banco General, S. A. (General):
No. of loans BICSA GENERAL
US dollars 4 ¢ 461.499.276 26.810.391.453Total 4 ¢ 461.499.276 26.810.391.453
Syndicated loans with el Banco Citigroup (Citigroup) :
No. of loans BICSA CITIGROUP
US dollars 8 ¢ 6.460.080.000 42.501.071.428Total 8 ¢ 6.460.080.000 42.501.071.428
Syndicated loans with Credicorp Bank (Credicorp) :
No. of loans BICSA CREDICORP
US dollars 7 ¢ 1.276.772.365 4.381.631.626Total 7 ¢ 1.276.772.365 4.381.631.626
Syndicated loans with Amerra Capital Management LLC (Amerra):
No. of loans BICSA AMERRA
US dollars 1 ¢ 4.665.613.335 6.998.420.000Total 1 ¢ 4.665.613.335 6.998.420.000
- 44 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Banco Latinoamericano de Comercio Exterior (BLADEX) :
No. of loans BICSA BLADEX
US dollars 1 ¢ 845.193.800 2.691.700.000Total 1 ¢ 845.193.800 2.691.700.000
Syndicated loans with Bancolombia :
No. of loans BICSA BANCOLOMBIA
US dollars 1 ¢ 3.359.241.600 125.088.682.400Total 1 ¢ 3.359.241.600 125.088.682.400
Syndicated loans with Banco Hipotecario Dominicano (BHD) :
No. of loans BICSA BHD
US dollars 1 ¢ 2.942.149.765 28.550.740.235Total 1 ¢ 2.942.149.765 28.550.740.235
Syndicated loans with Citibank :
No. of loans BICSA CITIBANK
US dollars 4 ¢ 18.166.855.302 19.342.914.734Total 4 ¢ 18.166.855.302 19.342.914.734
Syndicated loans with Banco Aliado :
No. of loans BICSA ALIADO
US dollars 1 ¢ 3.775.550.167 4.037.550.000Total 1 ¢ 3.775.550.167 4.037.550.000
- 45 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Corporación Interamericana de Inversión (CIE) :
No. of loans BICSA CIE
US dollars 3 ¢ 6.964.811.434 7.435.837.400Total 3 ¢ 6.964.811.434 7.435.837.400
Syndicated loans with Global Bank (Global):
No. of loans BICSA GLOBAL
US dollars 3 ¢ 10.037.973.532 12.801.725.200Total 3 ¢ 10.037.973.532 12.801.725.200
Syndicated loans with Multibank:
No. of loans BICSA MULTIBANK
US dollars 4 ¢ 6.866.363.583 6.998.420.000Total 4 ¢ 6.866.363.583 6.998.420.000
Syndicated loans with Banco Industrial Guatemala (Industrial):
No. of loans BICSA INDUSTRIAL
US dollars 1 ¢ 4.158.907.695 5.383.400.000Total 1 ¢ 4.158.907.695 5.383.400.000
Syndicated loans with BAC Nicaragua (BAC):
No. of loans BICSA BAC
US dollars 3 ¢ 6.090.117.678 4.963.933.547Total 3 ¢ 6.090.117.678 4.963.933.547
Syndicated loans with Espiritú Santo Bank (Espiritú Santo) :
No. of loans BICSA ESPIRITU SANTO
US dollars 1 ¢ 1.756.152.921 1.947.949.913Total 1 ¢ 1.756.152.921 1.947.949.913
- 46 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Citibank New York:
No. of loans BICSA CITIBANK
US dollars 7 ¢ 5.450.278.517 6.123.160.449Total 7 ¢ 5.450.278.517 6.123.160.449
Syndicated loans with Union Bank (Union):
No. of loans BICSA UNION
US dollars 3 ¢ 2.691.700.000 5.383.400.000Total 3 ¢ 2.691.700.000 5.383.400.000
Syndicated loans with Banco Itau BBA (BBA)
No. of loans BICSA BBA
US dollars 3 ¢ 4.845.060.000 6.998.420.000Total 3 ¢ 4.845.060.000 6.998.420.000
Syndicated loans with MMG Bank (MMG)
No. of loans BICSA MMG
US dollars 3 ¢ 375.511.783 1.076.680.000Total 3 ¢ 375.511.783 1.076.680.000
- 47 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loan con HSBC:
No. of loans BICSA HSBC
US dollars 3 ¢ 1.016.116.750 1.076.680.000Total 3 ¢ 1.016.116.750 1.076.680.000
Syndicated loans with Centro Corporativo El Cafetal (Cafetal)
No. of loans BICSA CAFETAL
US dollars 3 ¢ 3.197.472.583 1.477.318.011Total 3 ¢ 3.197.472.583 1.477.318.011
Syndicated loans with Standard Bank NY (Standard)
No. of loans BICSA STANDARD
US dollars 3 ¢ 7.948.659.331 7.948.659.546Total 3 ¢ 7.948.659.331 7.948.659.546
Syndicated loans with Rabobank Curacao (Rabobank)
No. of loans BICSA RABOBANK
US dollars 3 ¢ 2.153.360.000 7.948.659.546Total 3 ¢ 2.153.360.000 7.948.659.546
Syndicated loans with Caja de Ahorros (Caja)
No. of loans BICSA CAJA
US dollars 2 ¢ 7.348.012.074 9.097.946.000Total 2 ¢ 7.348.012.074 9.097.946.000
Syndicated loans with Banco Agromercantil (Agromercantil)
No. of loans BICSA AGROMERCANTIL
US dollars 2 ¢ 2.153.360.000 2.153.360.000Total 2 ¢ 2.153.360.000 2.153.360.000
- 48 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Banco Financiera Comercial Hondureña (Financiera)
No. of loans BICSA FINANCIERA
US dollars 2 ¢ 2.839.743.500 2.839.743.500Total 2 ¢ 2.839.743.500 2.839.743.500
As of Decemebr 31, 2013, the Bank’s syndicated loan portfolio with other banks is as follows:
Syndicated loans with Banco General, S. A. (General):
No. of loans BICSA GENERAL
US dollars 4 ¢ 424.354.045 24.652.472.180Total 4 ¢ 424.354.045 24.652.472.180
Syndicated loans with Banco Citigroup (Citigroup) :
No. of loans BICSA CITIGROUP
US dollars 8 ¢ 6.367.066.140 39.080.238.079Total 8 ¢ 6.367.066.140 39.080.238.079
Syndicated loans with Credicorp Bank (Credicorp) :
No. of loans BICSA CREDICORP
US dollars 7 ¢ 1.247.916.255 4.028.962.127Total 7 ¢ 1.247.916.255 4.028.962.127
Syndicated loans with KFG, GML y Federated:
No. of loans BICSA FEDERATED
US dollars 1 ¢ 5.289.833.085 10.147.705.000Total 1 ¢ 5.289.833.085 10.147.705.000
- 49 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Banco Latinoamericano de Comercio Exterior (BLADEX) :
No. of loans BICSA BLADEX
US dollars 1 ¢ 806.866.300 2.475.050.000Total 1 ¢ 806.866.300 2.475.050.000
Syndicated loans with Bancolombia :
No. of loans BICSA BANCOLOMBIA
US dollars 1 ¢ 3.346.267.600 115.020.523.600Total 1 ¢ 3.346.267.600 115.020.523.600
Syndicated loans with Banco Hipotecario Dominicano (BHD) :
No. of loans BICSA BHD
US dollars 1 ¢ 2.705.341.522 26.252.743.478Total 1 ¢ 2.705.341.522 26.252.743.478
Syndicated loans with Prival:
No. of loans BICSA PRIVAL
US dollars 9 ¢ 2.524.551.000 1.995.642.220Total 9 ¢ 2.524.551.000 1.995.642.220
Syndicated loans with Citibank :
No. of loans BICSA CITIBANK
US dollars 4 ¢ 16.957.249.882 17.989.953.396Total 4 ¢ 16.957.249.882 17.989.953.396
Syndicated loans with Banco Aliado :
No. of loans BICSA ALIADO
US dollars 1 ¢ 3.471.663.053 3.712.575.000Total 1 ¢ 3.471.663.053 3.712.575.000
- 50 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Corporación Interamericana de Inversión (CIE) :
No. of loans BICSA CIE
US dollars 4 ¢ 8.054.259.862 11.688.438.475Total 4 ¢ 8.054.259.862 11.688.438.475
Syndicated loans with Global Bank (Global):
No. of loans BICSA GLOBAL
US dollars 3 ¢ 9.230.035.439 11.771.337.800Total 3 ¢ 9.230.035.439 11.771.337.800
Syndicated loans with Multibank:
No. of loans BICSA MULTIBANK
US dollars 4 ¢ 6.293.682.026 6.435.130.000Total 4 ¢ 6.293.682.026 6.435.130.000
Syndicated loans with Banco Industrial Guatemala (Industrial):
No. of loans BICSA INDUSTRIAL
US dollars 1 ¢ 2.735.142.837 4.950.100.000Total 1 ¢ 2.735.142.837 4.950.100.000
Syndicated loans with BAC Nicaragua (BAC):
No. of loans BICSA BAC
US dollars 3 ¢ 3.350.519.508 4.564.395.633Total 3 ¢ 3.350.519.508 4.564.395.633
Syndicated loans with Espiritú Santo Bank (Espiritú Santo) :
No. of loans BICSA ESPIRITU SANTO
US dollars 1 ¢ 1.614.803.391 1.791.162.994Total 1 ¢ 1.614.803.391 1.791.162.994
- 51 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Citibank New York:
No. of loans BICSA CITIBANK
US dollars 7 ¢ 5.011.595.587 5.630.318.487Total 7 ¢ 5.011.595.587 5.630.318.487
Syndicated loans with Union Bank (Union):
No. of loans BICSA UNION
US dollars 3 ¢ 2.475.050.000 4.950.100.000Total 3 ¢ 2.475.050.000 4.950.100.000
Syndicated loans with Banco Itau BBA (BBA)
No. of loans BICSA BBA
US dollars 3 ¢ 4.455.090.000 6.435.130.000Total 3 ¢ 4.455.090.000 6.435.130.000
Syndicated loans with MMG Bank (MMG)
No. of loans BICSA MMG
US dollars 3 ¢ 222.191.179 990.020.000Total 3 ¢ 222.191.179 990.020.000
Syndicated loans with HSBC:
No. of loans BICSA HSBC
US dollars 3 ¢ 934.331.375 990.020.000Total 3 ¢ 934.331.375 990.020.000
Syndicated loans with Centro Corporativo El Cafetal (Cafetal)
No. of loans BICSA CAFETAL
US dollars 3 ¢ 1.358.411.372 1.358.411.392Total 3 ¢ 1.358.411.372 1.358.411.392
- 52 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Standard Bank NY (Standard)
No. of loans BICSA STANDARD
US dollars 3 ¢ 7.308.886.308 7.308.886.506Total 3 ¢ 7.308.886.308 7.308.886.506
Syndicated loans with Rabobank Curacao (Rabobank)
No. of loans BICSA RABOBANK
US dollars 3 ¢ 1.980.040.000 7.308.886.506Total 3 ¢ 1.980.040.000 7.308.886.506
Syndicated loans with Caja de Ahorros (Caja)
No. of loans BICSA CAJA
US dollars 2 ¢ 5.217.385.595 8.365.669.000Total 2 ¢ 5.217.385.595 8.365.669.000
Syndicated loans with Banco Agromercantil (Agromercantil)
No. of loans BICSA AGROMERCANTIL
US dollars 2 ¢ 3.182.206.931 1.980.040.000Total 2 ¢ 3.182.206.931 1.980.040.000
- 53 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 2014, the Bank’s syndicated loan portfolio with other banks is as follows:
No. of loans BICSA GENERAL
US dollars 5 ¢ 3.519.847.796 24.538.425.432Total 5 ¢ 3.519.847.796 24.538.425.432
Syndicated loans with Banco Citigroup (Citigroup) :
No. of loans BICSA CITIGROUP
US dollars 9 ¢ 7.612.524.000 38.899.446.434Total 9 ¢ 7.612.524.000 38.899.446.434
Syndicated loans with Credicorp Bank (Credicorp) :
No. of loans BICSA CREDICORP
US dollars 5 ¢ 1.252.593.415 4.010.323.496Total 5 ¢ 1.252.593.415 4.010.323.496
Syndicated loans with KFG, GML y Federated:
No. of loans BICSA FEDERATEDUS dollars 1 ¢ 5.912.640.000 10.100.760.000Total 1 ¢ 5.912.640.000 10.100.760.000
Syndicated loans with Banesco (Banesco) :
No. of loans BICSA BANESCOUS dollars 1 ¢ 769.376.574 33.780.692.286
Total 1 ¢ 769.376.574 33.780.692.286
Syndicated loans with Bancolombia :
No. of loans BICSA BANCOLOMBIA
US dollars 1 ¢ 3.587.001.600 114.488.419.200
Total 1 ¢ 3.587.001.600 114.488.419.200
- 54 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Banco Hipotecario Dominicano (BHD) :
No. of loans BICSA BHD
US dollars 2 ¢ 2.979.318.401 29.786.561.599 Total 2 ¢ 2.979.318.401 29.786.561.599
Syndicated loans with Prival Bank (Prival) :
No. of loans BICSA PRIVALUS dollars 1 ¢ 2.597.044.998 1.986.410.042Total 1 ¢ 2.597.044.998 1.986.410.042
Syndicated loans with Citibank :
No. of loans BICSA CITIBANKUS dollars 4 ¢ 17.103.689.525 17.991.174.138
Total 4 ¢ 17.103.689.525 17.991.174.138
Syndicated loans with Banco Aliado (Aliado) :
No. of loans BICSA ALIADOUS dollars 1 ¢ 2.392.117.552 3.695.400.000 Total 1 ¢ 2.392.117.552 3.695.400.000
Syndicated loans with Corporación Interamericana de Inversión :
No. of loans BICSA CIE
US dollars 4 ¢ 8.788.363.060 15.274.320.000
Total 4 ¢ 8.788.363.060 15.274.320.000
Syndicated loans with Global Bank (Global):
No. of loans BICSA GLOBAL
US dollars 3 ¢ 9.412.374.655 11.716.881.600
Total 3 ¢ 9.412.374.655 11.716.881.600
- 55 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Syndicated loans with Multibank:
No. of loans BICSA MULTIBANK
US dollars 2 ¢ 6.213.199.200 6.405.360.000
Total 2 ¢ 6.213.199.200 6.405.360.000
Syndicated loans with Banco Industrial Guatemala (Industrial):
No. of loans BICSA INDUSTRIAL
US dollars 1 ¢ 579.157.604 4.927.200.000
Total 1 ¢ 579.157.604 4.927.200.000
Syndicated loans with BAC Nicaragua (BAC):
No. of loans BICSA BAC
US dollars 23 ¢ 3.672.235.932 4.543.280.065
Total 23 ¢ 3.672.235.932 4.543.280.065
Syndicated loans with Espiritú Santo Bank (Espiritú Santo) :
No. of loans BICSA ESPIRITU SANTO
US dollars 1 ¢ 1.782.876.944 1.782.876.944
Total 1 ¢ 1.782.876.944 1.782.876.944
Syndicated loans with Citibank New York:
No. of loans BICSA CITIBANK
US dollars 7 ¢ 7.509.240.758 5.604.271.774
Total 7 ¢ 7.509.240.758 5.604.271.774
Syndicated loans with Union Bank (Union):
No. of loans BICSA UNION
US dollars 3 ¢ 3.695.400.000 4.927.200.000
Total 3 ¢ 3.695.400.000 4.927.200.000
Syndicated loans with Amerra Capital Management LLC (Amerra):
No. of loans BICSA AMERRA
US dollars 1 ¢ 6.405.360.000 6.405.360.000
Total 1 ¢ 6.405.360.000 6.405.360.000
- 56 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(7) Foreclosed assets, net
Foreclosed assets are presented net of the allowance for impairment and per legal requirement, as follows:
March December March
2014 2013 2013
Real property ¢ 39.937.001.127 37.116.652.349 31.713.979.886
Other acquired assets 209.114.300 232.289.075 705.044.973
Idle property and equipment 59.391.443 8.305.401 33.852.799
40.205.506.870 37.357.246.825 32.452.877.658
Allowance for impairment and per legal requirement (27.895.269.925) (25.153.101.003) (19.295.205.812)
¢ 12.310.236.945 12.204.145.822 13.157.671.846
Movement in the allowance for impairment and per legal requirement is as follows:
March December March
2014 2013 2013
Opening balance ¢ 25.153.101.003 16.632.344.196 16.632.344.196
Translation effect 455.572 (119.872) (157.974)
Increases 3.678.630.213 12.686.096.785 2.930.267.070
Reversals (936.916.863) (3.934.363.756) (267.247.480)
Elimination of allowance due to sale of
property - (230.856.350) -
Closing balance ¢ 27.895.269.925 25.153.101.003 19.295.205.812
(8) Investments in other companies
Investments in other companies are as follows:
March December March
2014 2013 2013
Costa Rican National Stock ¢ 29.057.201 29.057.201 29.057.201
BAN Procesa - TI, S.A. 10.000.000 10.000.000 5.000.000
¢ 39.057.201 39.057.201 34.057.201
- 57 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
In accordance with the General Board’s Agreement in Article VII, of meeting 12-13, of April 1, 2013, and in addition to the 50 ordinary registered shares already held, Banco Nacional de Costa Rica transfers to Banco de Costa Rica 50 ordinary registered shares of ¢100,000 par value each, from the Ban Procesa - IT, S.A. share capital. As of December 31, 2013, Banco de Costa Rica holds a 100% interest in the company, represented by 100 ordinary registered shares of ¢100,000 par value each, subscribed and paid in full. As of March 31, 2013, the share capital of BAN Procesa - TI, S.A. is represented by 100 ordinary registered shares of ¢100.000 par value each, subscribed and paid up as follows: 50 ordinary registered shares by Banco de Costa Rica and 50 ordinary registered shares by Banco Nacional de Costa Rica.
Ownership interest in BICSA As of March 31, 2014, the accumulated minority interest of Banco Nacional de Costa Rica presented in the equity section of the consolidated balance sheet amounts to ¢46.251.875.321 (¢41.306.254.028 and ¢39.134.236.763 as of December 31, 2013 and March 31, 2013, respectively) and the results for the period represents the minority interest in the consolidated income statement in the amount of ¢1.124.530.475 and ¢1.608.250.522, respectively. The Bank’s consolidated income statement as of March 31, 2014 and 2013 includes ¢1.170.429.406 and ¢1.673.893.430, respectively for BICSA’s results of operations.
The Bank’s consolidated statement of changes in equity for the years ended March 31, 2014 and 2013 includes a increase in equity for ¢¢3.818.024.378 and a decreade in equity for ¢746.127.799, respectively, corresponding to changes arising from translation of BICSA’s financial statements. Ordinary shares are as follows:
Shares Amount in U.S. Shares Amount in U.S. Shares Amount in U.S.
Opening balance 12.569.900 125.699.000 11.275.800 112.758.000 11.275.800 112.758.000
Shares issued 0 - 1.294.100 12.941.000 0 -
Closing balance 12.569.900 125.699.000 12.569.900 125.699.000 11.275.800 112.758.000
2014 20132013
March December March
- 58 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The Bank owns a 51% ownership interest in BICSA (domiciled in Panama). As of March 31, 2014, that ownership interest is represented by 6.410.649 ordinary shares of US$10 par value each (6.410.649 and 5.750.658 ordinary shares of US$10 par value as of December and March 2013, respectively). The remaining 49% of shares is owned by Banco Nacional de Costa Rica. On July 2013, BICSA increased its capital stock in the amount of US$12.94 million from Retained Earnings US$125.70 million, distributed over a total of 12,569,900 shares with a nominal value of US$10 par value each duly recognized in the Financial Statements in 2013.
- 59 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(9) Property and equipment
As of March 31, 2014, property and equipment is as follows:
Cost: Land Buildings
Furniture and
equipment Computer hardware Vehicles Finance leases Total
Balance at December 31, 2013 ¢ 19.359.347.252 55.361.553.742 25.356.986.652 25.616.097.135 5.712.917.857 - 131.406.902.638
Conversion effect 33.923.044 539.957.465 33.234.654 135.307.348 4.159.680 - 746.582.191
Additions - 7.306.967 508.913.984 163.709.342 - - 679.930.293
Retirements (314.930.295) - (22.214.681) (87.613.081) (115.812.397) - (540.570.454)
Transfers - - (110.991.348) (12.746.187) - - (123.737.535)Balance at March 31, 2014 19.078.340.001 55.908.818.174 25.765.929.261 25.814.754.557 5.601.265.140 - 132.169.107.133
Accumulated depreciation and
impairment:
Balance at December 31, 2013 - 13.368.324.763 13.314.451.693 17.891.799.349 2.891.095.570 - 47.465.671.375
Conversion effect - 14.219.566 18.022.959 98.332.584 1.748.535 - 132.323.644
Depreciation expense - 249.006.710 493.351.535 649.803.910 142.274.082 - 1.534.436.237
Retirements - - (20.623.046) (87.562.509) (85.077.055) - (193.262.610)
Transfers - - (60.578.605) (12.123.926) - - (72.702.531)
Balance at March 31, 2014 ¢ - 13.631.551.039 13.744.624.536 18.540.249.408 2.950.041.132 - 48.866.466.115
Balance, net:
¢ 19.078.340.001 42.277.267.135 12.021.304.725 7.274.505.149 2.651.224.008 - 83.302.641.018March 31, 2014
- 60 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of December 31, 2013, property and equipment is as follows:
Cost: Land Buildings
Furniture and
equipment Computer hardware Vehicles Finance leases Total
Balance at December 31, 2012 ¢ 19.177.652.772 48.624.410.057 24.483.814.872 23.579.393.946 4.813.298.804 3.816.761.061 124.495.331.512
Conversion effect (2.894.600) (2.360.971) (3.847.962) (19.892.371) (587.434) - (29.583.338)
Additions 184.589.080 6.739.518.972 1.999.180.305 3.877.552.489 928.532.450 - 13.729.373.296
Retirements - - (460.753.728) (613.341.092) (28.325.963) (3.816.761.061) (4.919.181.844)
Transfers - - (661.406.835) (1.207.615.837) - - (1.869.022.672)
Revaluation - (14.316) - - - - (14.316)Balance at December 31, 2013 19.359.347.252 55.361.553.742 25.356.986.652 25.616.097.135 5.712.917.857 - 131.406.902.638
Accumulated depreciation and
impairment:
Balance at December 31, 2012 - 12.481.076.359 12.151.435.092 16.587.460.827 2.419.627.251 3.816.761.061 47.456.360.590
Conversion effect - (1.852.013) (2.508.655) (13.845.472) (300.227) - (18.506.367)
Depreciation expense - 889.150.131 1.984.091.987 3.013.193.816 493.618.897 - 6.380.054.831
Retirements - - (383.145.512) (492.321.360) (21.850.351) (3.816.761.061) (4.714.078.284)
Transfers - (33.186) (435.421.219) (1.202.688.462) - - (1.638.142.867)
Revaluation - (16.528) - - - - (16.528)
Balance at December 31, 2013 ¢ - 13.368.324.763 13.314.451.693 17.891.799.349 2.891.095.570 - 47.465.671.375
Balance, net:
¢ 19.359.347.252 41.993.228.979 12.042.534.959 7.724.297.786 2.821.822.287 - 83.941.231.263December 31, 2013
- 61 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013, property and equipment is as follows:
Cost: Land Buildings
Furniture and
equipment Computer hardware Vehicles Finance leases Total
Balance at December 31, 2012 ¢ 19.177.652.772 48.624.410.057 24.483.814.872 23.579.393.946 4.813.298.804 3.816.761.061 124.495.331.512
Conversion effect (3.833.500) (3.126.782) (5.096.097) (26.344.712) (777.974) - (39.179.065)
Additions - 115.878.793 635.314.381 346.859.849 - - 1.098.053.023
Retirements - - (67.805) - - - (67.805)
Transfers - - (115.992.163) (516.262.707) - - (632.254.870)
Revaluation - (14.316) - - - - (14.316)Balance at March 31, 2013 19.173.819.272 48.737.147.752 24.997.973.188 23.383.646.376 4.812.520.830 3.816.761.061 124.921.868.479
Accumulated depreciation and
impairment:
Balance at December 31, 2012 - 12.481.076.359 12.151.435.092 16.587.460.827 2.419.627.251 3.816.761.061 47.456.360.590
Conversion effect - (2.462.492) (3.367.858) (18.613.467) (404.683) - (24.848.500)
Depreciation expense - 215.472.532 492.242.592 766.739.435 121.894.332 - 1.596.348.891
Retirements - - (15.255) - - - (15.255)
Transfers - - (77.215.656) (516.717.684) - - (593.933.340)
Adjustments - (16.528) - - - - (16.528)
Balance at March 31, 2013 ¢ - 12.694.069.871 12.563.078.915 16.818.869.111 2.541.116.900 3.816.761.061 48.433.895.858
Balance, net:
¢ 19.173.819.272 36.043.077.881 12.434.894.273 6.564.777.265 2.271.403.930 - 76.487.972.621March 31, 2013
- 62 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(10) Intangible assets
Intangible assets, correspond to software and goodwill acquired from the purchase of BICSA shares.
As of March 31, 2014, movement in intangible assets is as follows:
Cost:
Balance at December 31, 2013 ¢ 25.437.950.328
Conversion effect 233.818.255
Additions to- software 475.000.663
Retirements (449.583)
Balance at March 31, 2014 26.146.319.663
Accumulated amortization and impairment:
Balance at December 31, 2013 16.097.155.486
Conversion effect 105.946.938
Accumulated amortization and impairment: 922.327.591
Amortization expense for goodwil acquired 38.670.590
Balance at March 31, 2014 17.164.100.605
Net balance
March 31, 2014 ¢ 8.982.219.058
As of December 31, 2013, movement in intangible assets is as follows:
Cost:
Balance at December 31, 2012 ¢ 20.884.230.445
Conversion effect (34.424.071)
Additions to- software 4.896.875.532
Retirements (308.731.578)
Balance at December 31, 2013 25.437.950.328
Accumulated amortization and impairment:
Balance at December 31, 2012 12.593.125.312
Conversion effect (14.295.033)
Accumulated amortization and impairment: 3.656.612.826
Amortization expense for goodwil acquired 154.682.360
Retirements (292.969.979)
Balance at December 31, 2013 16.097.155.486
Net balance
December 31,2013 ¢ 9.340.794.842
- 63 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013, movement in intangible assets is as follows: Cost:
Balance at December 31, 2012 ¢ 20.884.230.445
Conversion effect (45.590.175)
Adiciones 979.289.280
Balance at March 31, 2013 21.817.929.550
Accumulated amortization and impairment:
Balance at December 31, 2012 12.593.125.312
Conversion effect (18.931.717)
Accumulated amortization and impairment: 840.149.683
Amortization expense for goodwil acquired 38.670.590
Balance at March 31, 2013 13.453.013.868
Net balance
March 31, 2013 ¢ 8.364.915.682
(11) Demand obligations with public
Demand and term obligations with the public as follows:
March December March
2014 2013 2013
Checking accounts ¢ 893.311.679.417 870.387.015.019 797.511.427.689
Certified checks 810.964.453 626.121.050 279.257.164
Demand savings deposits 466.773.915.596 444.179.564.224 397.023.230.318
Matured term deposits 5.152.466.171 4.782.368.992 5.826.605.962
Overnight matured deposits 15.471.654.612 21.715.502.930 18.133.603.595
Other demand deposits 39.564.520.878 47.293.354.823 23.448.414.707
Other demand obligations with the public 16.188.171.118 8.709.150.217 8.034.384.556
¢ 1.437.273.372.245 1.397.693.077.255 1.250.256.923.991
- 64 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(12) Demand and term obligations with public and entities
Demand and term obligations with the public as follows:
March December March
2014 2013 2013
Public Demand Demand Demand
Deposits ¢ 1.421.085.201.127 1.388.983.927.038 1.242.222.539.436
Other obligations with the public 16.188.171.118 8.709.150.217 8.034.384.555
(Note 11) 1.437.273.372.245 1.397.693.077.255 1.250.256.923.991
Entities
Deposits from State-owned entities 4.344.904.977 6.774.751.009 9.019.105.699
Deposits from other 144.384.455.448 131.767.779.387 122.329.532.447
Other obligations with entities 20.226.695.642 21.472.553.874 26.999.643.544
168.956.056.067 160.015.084.270 158.348.281.690
¢ 1.606.229.428.312 1.557.708.161.525 1.408.605.205.681
March December March
2014 2013 2013
Public Term Term Term
Deposits ¢ 1.419.488.660.014 1.339.741.823.656 1.339.717.373.241
(Note 11) 1.419.488.660.014 1.339.741.823.656 1.339.717.373.241
Entities
Deposits from State-owned entities 33.780.019.836 45.288.827.970 37.808.158.460
Deposits from other 3.108.814.700 4.587.860.050 1.180.957.800
Other obligations with entities 824.427.873.681 719.408.554.799 570.363.640.162
861.316.708.217 769.285.242.819 609.352.756.422
¢ 2.280.805.368.231 2.109.027.066.475 1.949.070.129.663
As of March 31, 2014, demand deposits from customers include court-ordered deposits for ¢172.899.057.386 (¢157.702.441.024 and ¢143.591.861.368 as of December 31, 2013 and March 31, 2013, respectively), which are restricted because of their nature.
As of March 31, 2014 the Bank has a total of 1.154.320 customers with demand deposits (1.105.491 and 1.033.625 as of December 31, 2013 and March 31, 2013, respectively) and has a total of 32.017 customers with term deposits (31.294 and 32.610 as of December31, 2013 and March 31, 2013, respectively). BICSA has a total of 1.092 customers with demand deposits (1.084 and 1.047 as of December 31, 2013 and March 31, 2013, respectively) and 1.085 (1.065 and 1.006 as of December 31, 2013 and March 31, 2013, respectively).
- 65 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(13) Other obligations with the public
Other obligations with the public are as follows:
March December March
2014 2013 2013
Confirmed letters of credit ¢ 5.115.191.438 2.802.219.093 8.177.169.881
Term buyer position-tri-party repurchase
Agreement 14.855.080.967 29.398.250.115 27.125.898.042
¢ 19.970.272.405 32.200.469.208 35.303.067.923 Repurchase agreements The Bank raises funds through the sale of financial instruments under agreements in which the Bank commits to repurchase them at future dates and at a predetermined price and return. As of March 31, 2014, the Bank’s repurchase agreements are as follows:
Fair value ofunderlying
assetCarrying amount of
corresponding liability Repurchase date Repurchase price
Investments ¢ 21.637.591.027 14.855.080.967 01/04/2014 al 20/05/2014 100%
As of December 31, 2013, the Bank’s repurchase agreements are as follows:
Fair value ofunderlying
asset
Carrying amount of
corresponding liability Repurchase date Repurchase price
Investments ¢ 31.805.371.765 29.398.250.115 06/01/2014 al 20/02/2013 100%
As of March 31, 2013, the Bank’s repurchase agreements are as follows:
Fair value ofunderlying
asset
Carrying amount of
corresponding liability Repurchase date Repurchase price
Investments ¢ 32.919.206.465 27.125.898.042 01/04/2013 al 07/05/2013 100%
- 66 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Reverse repurchase agreements: The Bank purchases financial instruments under agreements whereby the Bank commits to sell the financial instruments at future dates at a predetermined price and return. As of March 31, 2014 the Bank have no reverse repurchase agreements. As of December 31, 2013, the Bank’s reverse repurchase agreements are as follows:
Carrying amount of the
asset Fair value of guarantee Repurchase date Repurchase price
BCCR ¢ 789.253.308 783.300.000 01-01-14 al 21-01-14 100%
Local government 1.037.136.993 1.029.300.000 01-01-14 al 23-01-14 100%
¢ 1.826.390.301 1.812.600.000
Issuer
As of March, 2013, the Bank’s reverse repurchase agreements are as follows:
Carrying amount of the
asset Fair value of guarantee Repurchase date Repurchase price
BCCR ¢ 1.695.380.250 1.686.111.375 01-04-13 al 18-04-13 100%
Local government 3.861.561.599 3.838.270.000 01-04-13 al 18-04-13 100%
¢ 5.556.941.849 5.524.381.375
Issuer
(14) Obligations with entities
Obligations with entities are as follows:
- 67 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
March December March
2014 2013 2013
Obligations with Central
Bank of Costa Rica ¢ 61.000.000.000 - -
Financial charges payable on borrowings with
Bank of Costa Rica 8.354.167 - -
61.008.354.167 - -
Checking accounts of local financial entities ¢ 12.954.399.655 13.126.270.948 16.728.777.583
Checking accounts in foreign entities 357.750.558 394.143.139 -
Overdrafts on demand ckecking accounts in
foreign financial entities 2.538.552.256 5.254.542.669 4.871.440.109
At sight liabilities statutory legal mandate 139.381.543.412 129.367.214.793 119.467.445.992
Outstanding checks 7.902.928.164 2.553.308.639 3.042.158.773
Overnight deposits 5.820.882.023 9.319.604.083 14.238.459.233
Term deposits from local financial entities 75.928.763.127 105.584.226.011 39.741.435.261
Term deposits from foreign financial entities 319.503.810.318 277.426.411.615 43.082.414.692
Loans from foreing financial entities
(note 14-a) 335.073.785.017 290.682.729.083 405.502.024.552
Obligations for resources obtaide from the
liquidity market 4.649.961.675 - 2.920.912.478
Charges payable for obligations with financial
and non-financial entities 5.319.796.966 8.177.222.942 5.539.333.763909.432.173.171 841.885.673.922 655.134.402.436
Loans from local financial entities
(note 4-a) 101.860.388.080 95.591.876.110 98.397.169.440
Liquidity market obligations
(note 14-a) 24.300.000.000 - 19.708.800.000
1.035.592.561.251 937.477.550.032 773.240.371.876
Subordinated obligations or debentures 16.150.200.000 14.850.300.000 14.781.600.000
Charges payable for subordinated obligations 33.646.277 33.413.175 35.337.263
16.183.846.277 14.883.713.175 14.816.937.263
¢ 1.112.784.761.695 952.361.263.207 788.057.309.139
As of March 31, 2014 term obligations with foreign financial entities include the international issuance for ¢269.170.000.000 with an interest rate of 5,25% and 5 years term. (¢247.505.000.000 as of December 31, 2013).
- 68 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(a) Maturities of loans payable
As of March 31, 2014, loans payable mature as follows:
BCCR Local financial entities
Foreign financial
entities
International
organizations Total
Less than one year ¢ 61.000.000.000 76.976.349.755 227.045.687.340 - 365.022.037.095
Between 1 and 2years - 46.028.070.000 72.447.339.613 29.906.346.571 148.381.756.184
Between 3 and 5 years - 7.805.930.000 5.674.411.493 - 13.480.341.493
More than 5 years - - - 16.150.200.000 16.150.200.000
Total ¢ 61.000.000.000 130.810.349.755 305.167.438.446 46.056.546.571 543.034.334.772
As of December 31, 2013, loans payable mature as follows:
BCCR Local financial entities
Foreign financial
entities
International
organizations Total
Less than one year ¢ - 46.090.876.110 222.687.120.625 12.375.250.000 281.153.246.735
Between 1 and 2years - 42.323.355.000 22.080.121.955 27.974.702.094 92.378.179.049
Between 3 and 5 years - 7.177.645.000 5.565.534.409 - 12.743.179.409
More than 5 years - - - 14.850.300.000 14.850.300.000
Total ¢ - 95.591.876.110 250.332.776.989 55.200.252.094 401.124.905.193
As of March 31, 2013, loans payable mature as follows:
BCCR Local financial entities
Foreign financial
entities
International
organizations Total
Less than one year ¢ - 68.931.035.280 280.744.993.390 55.750.259.895 405.426.288.565
Between 1 and 2years - 49.174.934.160 45.875.547.257 - 95.050.481.417
Between 3 and 5 years - - 17.245.200.000 - 17.245.200.000
More than 5 years - - 5.886.024.010 14.781.600.000 20.667.624.010
Total ¢ - 118.105.969.440 349.751.764.657 70.531.859.895 538.389.593.992
The Bank has no obligations from financial leases at March 31, 2014, December 31, 2013 and March 31, 2013.
- 69 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(15) Income tax Pursuant to the Costa Rican Income Tax Law, the Bank is required to file income tax returns for the twelve months ending December 31 of each year. As of March 31, 2014, the Bank’s consolidated balances of income tax payable and expected income tax amount to ¢3.353.002.357 (¢8.088.042.888 and ¢2.220.012.677 as of December 31, 2013 and March 31, 2013, respectively) (see note 17) and ¢131.650.885 (¢6.385.475.347 and ¢130.982.815 as of December 31, 2013 and March 31, 2013, respectively), and are booked under “Other assets”. Income tax is detailed as follows:
March December March
2014 2013 2013
Current income tax ¢ 3.166.313.559 10.147.940.135 2.438.485.489
Prior year income tax 186.688.798 (429.911.965) (218.472.812)
Prepaid income tax - (1.629.985.282) -
3.353.002.357 8.088.042.888 2.220.012.677
Deferred income tax 9.000.000 66.307.050 13.620.000
Decrease in deferred income tax (94.448.544) (832.249.974) (52.980.271)
Income tax ¢ 3.267.553.813 7.322.099.964 2.180.652.406
Realization of deferred tax ¢ 85.448.544 765.942.924 39.360.271
BICSA is subject to tax legislation in the following jurisdictions: Panama According to tax legislation in effect in Panama, BICSA is exempt from payment of income tax on foreign source income. BICSA is further exempt from payment of income tax on interest income earned on term deposits placed in local banks and on securities issued by the Panamanian and foreign governments and on investments in securities traded in the Panamanian Stock Exchange.
- 70 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Miami Income tax is not levied on any income that is unrelated to transactions or business dealings in the United States of America. Finance expense is calculated based on the cost of liabilities denominated in U.S. dollars. A deferred tax liability represents a taxable temporary difference and a deferred tax as set represents a deductible temporary difference. Deferred tax assets and liabilities are attributed to the following: As of March 31, 2014:
Assets Liabilities Net
Valuation of investments ¢ 1.558.840.955 (271.544.989) 1.287.295.966
Revaluation of assets - (4.891.955.235) (4.891.955.235)
Provisions 116.637.800 - 116.637.800
Financial leases 362.372.891 - 362.372.891
Unused fiscal/tax credits and losses 4.541.633.322 - 4.541.633.322
Allowance for doubtful receivables 123.670.835 - 123.670.835
¢ 6.703.155.803 (5.163.500.224) 1.539.655.579
As of December 31, 2013:
Assets Liabilities Net
Valuation of investments ¢ 1.260.255.899 (789.056.790) 471.199.109
Revaluation of assets - (4.922.278.262) (4.922.278.262)
Provisions 77.173.212 - 77.173.212
Financial leases 333.206.160 - 333.206.160
Unused fiscal/tax credits and losses 4.176.085.579 - 4.176.085.579
Allowance for doubtful receivables 108.009.906 - 108.009.906
¢ 5.954.730.756 (5.711.335.052) 243.395.704
- 71 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013:
Assets Liabilities Net
Valuation of investments ¢ 1.797.727.298 (1.336.095.220) 461.632.078
Revaluation of assets - (5.013.814.023) (5.013.814.023)
Provisions 69.482.231 - 69.482.231
Financial leases 294.810.705 (24.104.247) 270.706.458
Unused fiscal/tax credits and losses 3.673.848.920 - 3.673.848.920
Allowance for doubtful receivables 27.026.243 - 27.026.243
¢ 5.862.895.397 (6.374.013.490) (511.118.093)
As of March 31, 2013, the Brokerage Firm holds an income tax receivable balance in the amount of ¢37.170.221 due to excess on income tax advances for the period 2012. As of March 31, 2014 BICSA subsidiary recognized a deferred tax asset on unused fiscal/tax credits and losses for the amount of ¢4.541.633.322 equivalent to US$8.436.366 (¢4.176.085.579 equivalent to US$8.436.366 and ¢3.673.848.920 equivalent to US$7.456.261 as of December 31, 2013 and March 31, 2013, respectively) related to evidence that future taxable profit will be available. In conducting the analysis of the deferred tax BICSA management considers whether it is probable that some or all portion of the deferred tax asset is not realizable. Performing or not the deferred tax assets depends on the generation of future taxable income during the periods in which those temporay differences become deductible. BICSA administration considers the detail of reversals of deferred tax assets and liabilities project future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income for the periods in which the deferred tax assets will be deductible, BICSA administración believes that it may be able to realize the benefits of this deductible temporary difference.
- 72 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Deferred tax assets and liabilities are attributed to the following: As of March 31, 2014:
December 31, 2013
Included in income
statement Included in equity March 31, 2014
Liability account
Valuation of investments ¢ (789.056.790) - 517.511.801 (271.544.989)
Revaluation of assets (4.922.278.262) 30.323.027 - (4.891.955.235)
Asset account
Valuation of investments 1.260.255.899 - 298.585.056 1.558.840.955
Financial leases 333.206.160 - 29.166.731 362.372.891
Unused fiscal/tax credits and losses 4.176.085.579 - 365.547.743 4.541.633.322
Provisions 77.173.212 39.464.588 - 116.637.800
Allowance for doubtful accounts 108.009.906 15.660.929 - 123.670.835
¢ 243.395.704 85.448.544 1.210.811.331 1.539.655.579
As of December 31, 2013:
December 31, 2012
Included in income
statement Included in equity December 31, 2013
Liability account
Valuation of investments ¢ (374.281.930) - (414.774.860) (789.056.790)
Revaluation of assets (5.047.665.177) 125.258.140 128.775 (4.922.278.262)
Financial leases (24.561.656) 24.213.626 348.030 -
Asset account
Valuation of investments 2.199.458.505 - (939.202.606) 1.260.255.899
Financial leases 337.938.461 - (4.732.301) 333.206.160
Unused fiscal/tax credits and losses 3.706.031.620 522.128.720 (52.074.761) 4.176.085.579
Provisions 54.671.020 22.292.548 209.644 77.173.212
Allowance for doubtful accounts 35.960.016 72.049.890 - 108.009.906
¢ 887.550.859 765.942.924 (1.410.098.079) 243.395.704
- 73 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013:
December 31, 2012
Included in income
statement Included in equity March 31, 2013
Liability account
Valuation of investments ¢ (374.281.930) - (961.813.290) (1.336.095.220)
Revaluation of assets (5.047.665.177) 33.722.379 128.775 (5.013.814.023)
Financial leases (24.561.656) - 457.409 (24.104.247)
Asset account
Valuation of investments 2.199.458.505 - (401.731.207) 1.797.727.298
Financial leases 337.938.461 - (43.127.756) 294.810.705
Unused fiscal/tax credits and losses 3.706.031.620 - (32.182.700) 3.673.848.920
Provisions 54.671.020 14.571.665 239.546 69.482.231
Allowance for doubtful accounts 35.960.016 (8.933.773) - 27.026.243
¢ 887.550.859 39.360.271 (1.438.029.223) (511.118.093)
- 74 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(16) Provisions
Movement in provisions is as follows:
Severance
benefits Litigation Others Total
Balance at December 31, 2013 24.421.984.625 1.588.321.753 4.995.908.926 31.006.215.304
Conversion effect 39.905.549 2.137.088 - 42.042.637
Provisioned 25.153.920 76.593.163 757.619.368 859.366.451
Used (52.156.227) (150.030.258) (877.000) (203.063.485)
Adjustment for forein - 19.115.234 - 19.115.234
exchange differences
Reversal - (30.000.000) - (30.000.000)
Balance at March 31, 2014 ¢ 24.434.887.867 1.506.136.980 5.752.651.294 31.693.676.141
- 75 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Severance
benefits Litigation Others Total
Balance at December 31, 2012 ¢ 27.475.869.441 1.441.789.265 5.289.816.205 34.207.474.911
Conversion effect (6.692.529) (348.208) - (7.040.737)
Provisioned 65.612.660 791.262.714 2.739.980.461 3.596.855.835
Used (3.112.804.947) (641.114.843) (2.761.151.789) (6.515.071.579)
Adjustment for forein - (3.267.175) - (3.267.175)
exchange differences
Reversal - - (272.735.951) (272.735.951)
Balance at December 31, 2013 24.421.984.625 1.588.321.753 4.995.908.926 31.006.215.304
Severance
benefits Litigation Others Total
Balance at December 31, 2012 ¢ 27.475.869.441 1.441.789.265 5.289.816.205 34.207.474.911
Conversion effect (8.863.385) (461.154) - (9.324.539)
Provisioned 14.913.156 180.621.797 849.615.786 1.045.150.739
Used (87.604.074) (65.600.000) (121.722.221) (274.926.295)
Adjustment for forein
exchange differences - (4.110.913) - (4.110.913)
Balance at March 31, 2013 27.394.315.138 1.552.238.995 6.017.709.770 34.964.263.903
- 76 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014 the Bank is a defendant in litigation, for which the following provisions have been established. Ordinary suits filed against the Bank estimated at ¢4.319.964.188 and
US$37.393.182, for which the Bank has provisioned ¢395.870.042 and US$481.065, respectively.
Proceedings in which the Bank is the defendant estimated at ¢460.489.305 and
US$203.998, for which the Bank has provisioned ¢120.000.000 Labor suits by nature are difficult to estimate. However, they have been estimated at
¢2.336.931.705 and US$186.200, for which the Bank has provisioned ¢271.000.000, corresponding to cases where a provisional judgment has been handed down.
As of March 31, 2014, other provisions correspond to employee incentives, self-insurance booked for a fidelity policy, a policy covering detached auxiliary teller offices, and a policy covering the transportation of securities.
As of December 31, 2013 the Bank is a defendant in litigation, for which the following provisions have been established. Ordinary suits filed against the Bank estimated at ¢4.382.756.488 and
US$37.394.296, for which the Bank has provisioned ¢446.988.892 and US$450.520, respectively.
Proceedings in which the Bank is the defendant estimated at ¢455.819.163 and
US$207.018, for which the Bank has provisioned ¢120.000.000 Labor suits by nature are difficult to estimate. However, they have been estimated at
¢1.720.931.705 and US$186.200, for which the Bank has provisioned ¢306.000.000, corresponding to cases where a provisional judgment has been handed down.
As of December 31, 2013, other provisions correspond to employee incentives, self-insurance booked for a fidelity policy, a policy covering detached auxiliary teller offices, and a policy covering the transportation of securities.
- 77 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013 the Bank is a defendant in litigation, for which the following provisions have been established. Ordinary suits filed against the Bank estimated at ¢4.094.149.907 and
US$31.707.060, for which the Bank has provisioned ¢610.942.975 and US$435.644, respectively.
Proceedings in which the Bank is the defendant estimated at ¢283.749.305 and
US$200.000, for which the Bank has provisioned ¢131.190.000. Labor suits by nature are difficult to estimate. However, they have been estimated at
¢1.595.000.000 and US$185.000, for which the Bank has provisioned ¢310.000.000 corresponding to cases where a provisional judgment has been handed down.
As of March 31, 2013, other provisions correspond to employee incentives, self-insurance booked for a fidelity policy, a policy covering detached auxiliary teller offices, and a policy covering the transportation of securities. As of March 31, 2014 BCR Sociedad Administradora de Fondos de Inversión, S.A., has no legal provisions for lawsuits (¢30.000.000 and ¢131.935.921 as of December and March 2013, respectively).
As of March 31, 2014, BICSA’s subsidiary mantains a provision for litigation for ¢26.551.580, equivalent to US$49.322 (¢24.414.883 equivalent to US$49.332 and ¢24.301.546 equivalent to US$49.332 as of December 31, 2013 and March 31, 2013, respectiveley). As of March 31, 2014, December 31, 2013 and March 31, 2013, BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A. has pending litigation estimating probable outflow of economic benefits by ¢261.153.751 for infringements to article 11 subsection a) of the Ley de Promoción de la Competencia y Defensa Efectiva al Consumidor (Act on promotion of competition and effective consumer). As of December 31, 2013 BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A., has pending lawsuits for an administrative process for ¢15.000.000. As of March 31, 2014 BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A., has ¢135.704.367 as other provisions (¢133.344.965 and ¢131.935.921 as of December 31, 2013 and March 31, 2013, respectively), which correspond to a precautionary measure of affiliates equity with a voluntary agreement.
- 78 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(17) Other laundy accounts payable
Other sundry accounts payable are as follows: March December March
2014 2013 2013
Interest rates swaps
(Hedging operation/transaction) ¢ - - 4.706.362.088
Professional fees - - 123.180
Due for goods and services 81.111.747 49.827.608 46.390.677
Tax liability 3.353.002.357 8.088.042.888 2.220.012.677
Tax on gain on DU 585.300.636 552.327.216 532.643.235
Employer payrol taxes 2.096.528.040 2.076.824.871 1.751.648.739
Court-ordered withholdings 859.835.407 906.935.722 779.247.402
Tax withholdings 1.295.228.243 1.012.252.027 1.048.963.777
Employee withholdings 869.730.893 915.974.422 861.895.730
Other third-party withholdings 6.126.867.817 6.111.588.741 5.524.345.729
Compensation and salaries 2.061.496.496 7.317.293.165 2.046.357.082
Statutory allocations 2.437.612.990 8.880.165.074 4.208.411.264
Accrued vacation 6.083.679.907 6.310.262.833 5.628.700.620
Accrued statutory Christmas bonus 1.869.050.908 1.290.169.500 2.922.288.339
Contributions to Superintendency 49.775.308 17.592.680 36.874.232
Various creditors 21.350.099.544 24.683.460.442 19.444.671.930
¢ 49.119.320.293 68.212.717.189 51.758.936.701
As of March 31, 2014 and December 31, 2013; BICSA does not have positions on such instruments. Positions on Deutsche Bank, constituted on February 2011 with a notional of US$25 million were cancelled on August 2013 as required by the Board of Directors on session 1814 of August 14, 2013. JP Morgan positions constititued on July 25, 2012 with a notional of US$60 million, were cancelled on October 17, 2013 as required by the Board of Directors on session 1820 of October 16, 2013.
As of March 31, 2013, BICSA maintained hedging interest rate contracts with liability fair value of ¢4.706.362.088, equivalent to US$9,551,798.
- 79 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(18) Equity
a) Capital
The Bank’s capital is as follows:
March December March
2014 2013 2013
Capital under Law No. 1644 ¢ 30.000.000 30.000.000 30.000.000
Bank capitalization bonds 1.288.059.486 1.288.059.486 1.288.059.486
Capital increase under Law No. 7107 79.107.385.015 69.451.288.741 69.451.288.741
Capital increase under Law No. 8703 27.619.000.002 27.619.000.002 27.619.000.002
Increase from revaluation of assets 13.020.197.845 12.966.901.983 12.966.901.983
Other 697.630.970 697.630.970 697.630.970
¢ 121.762.273.318 112.052.881.182 112.052.881.182
On December 23, 2008, the Executive Branch of the Costa Rican Government authorized a capital contribution funded under Law No. 8703 “Amendment to the Law on the Ordinary and Extraordinary Budget of the Republic for Tax Year 2008 (Law No. 8627)”. Such law grants funds to capitalize three State-owned banks, including the Bank, in order to stimulate productive sectors, particularly small and medium-sized enterprises. For such purposes, the Bank received four securities for a total of US$50.000.000 (¢27.619.000.002) and denominated in DU maturing in 2013, 2017, 2018, and 2019 (No. 4191, No. 4180, No. 4181, and No. 4182 for DU10.541.265,09 each, at a reference exchange rate of ¢655.021 to DU1.00). As of March 31, 2014 and based on the exchange rate, the balance of those investments is ¢26.281.113.178 (¢25.824.180.960 and ¢34.068.398.974 as of December 31, 2013 and March 31, 2013, respectively) (see note 5). On Februrary 12, 2014 the National Financial System Oversight Board authorized the increase of the capital stock of the Bank for ¢9.656.096.274 from accumulated earnings and from assets revaluation surplus’s for ¢53.295.862 a total ¢9.709.392.136. As of March 31, 2014, the Bank has appropriated ¢12.027.329.325 (¢9.255.323.171 as of December 31, 2013 and March 31, 2013) to form the equity of its Development Financial Fund.
- 80 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
b) Surplus from revaluation of property and equipment
Revaluation surplus corresponds to the increase in fair value of real property owned by the Bank. As of March 31, 2014, revaluation surplus amounts to ¢27.183.449.854 (¢27.236.745.716 as of December 31, 2013 and March 31, 2013).
c) Adjustments for valuation of available-for-sale investments The adjustment corresponds to variations in the fair value of available-for-sale investments. As of March 31, 2014, the balance of the adjustment for valuation of available-for-sale investments corresponds to unrealized net losses in the amount of ¢7.403.043.584 (¢4.482.411.256 and ¢3.953.408.922 as of December 31, 2013 and March 31, 2013, respectively).
d) Adjuments for valuations of investments in other companies This item mainly corresponds to foreign exchange differences arising from conversion of BICSA’s consolidated financial statements and the unrealized gain or loss on valuation of investments in subsidiaries. As of March 2014, changes in equity include foreign exchange differences corresponding to investments in other companies in the amount of ¢10.469.627.079 (¢6.651.602.701 and ¢6.379.631.016 as of December 31, 2013 and March 31, 2013, respectively).
- 81 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(19) Commitments and contingencies
The Bank has off-consolidated balance sheet commitments and contingencies that arise in the normal course of business and involve elements of credit and liquidity risk. Off-balance sheet financial instruments with risk are as follows:
March December March
2014 2013 2013
Guarantees granted:
Performance bonds ¢ 104.999.864.048 92.897.662.962 89.037.607.880
De participación Bid bonds 2.844.676.572 4.380.885.917 3.618.130.769
Otras garantiaOther guarantees 61.368.005.287 51.524.100.400 54.387.760.510
Issued non-negociated letters of credit 16.250.428.357 24.007.650.735 21.468.735.009
Confirmed non-negociated but letters of credit 15.555.388.435 21.680.336.484 23.864.432.354
Preapproved lines of Credit 121.777.753.395 104.433.896.248 104.678.141.809
Other contingencies 26.411.843.348 24.168.703.601 20.518.515.445
Credits pending disbursement 9.897.144.938 9.427.806.105 15.896.724.953
¢ 359.105.104.380 332.521.042.452 333.470.048.729
Off-balance sheet financial instruments with risk by type of deposit are as follows:
March December March
2014 2013 2013
Prior deposit ¢ 4.065.792.339 9.580.145.503 4.375.793.195
No prior deposit 328.627.468.692 298.772.193.348 308.575.740.089
Pending litigation
and claims 26.411.843.349 24.168.703.601 20.518.515.445
¢ 359.105.104.380 332.521.042.452 333.470.048.729
These commitments and contingent liabilities expose the Bank to credit risk since commissions and losses are recognized in the consolidated balance sheet until the obligations are fulfilled or expire. As of March 31, 2014, December 31, 2013 and March 31, 2013 letters of credit are backed by 100% of the stand-by balance or by lines of credit. As of March 31, 2014, floating guaratees in custody are for ¢136.029.055.722 (¢140.708.308.806 and ¢103.622.015.401, as of December 31, 2013 and March 31, 2013, respectively).
- 82 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The Bank has off-balance sheet financial instruments with risk that arise in the normal course of business to meet the financial needs of its customers. Those financial instruments include letters of credit and guarantees thatinvole varying levels of credit risk. Other contingencies
As of March 31, 2014, the Bank’s Legal Division reported the following contingencies and commitments: Administrative suits against the Bank estimated at ¢3.924.094.146 and
US$36.912.117. In addition other contentious processes are filed for preliminary
injunction with no estimate.
Ordinary labor suits estimated at ¢2.065.931.705 and US$186.200
Criminal proceedings in which the Bank is a third-party defendant estimated at
¢340.489.305 and US$203.998.
As of December 31, 2013, the Bank’s Legal Division reported the following contingencies and commitments: Administrative suits against the Bank estimated at ¢3.935.767.596 and
US$36.943.775. In addition other contentious processes are filed for preliminary
injunction with no estimate.
Ordinary labor suits estimated at ¢1.414.931.705 and US$186.200
Criminal proceedings in which the Bank is a third-party defendant estimated at
¢335.819.163 and US$207.018.
As of March 31, 2013, the Bank’s Legal Division reported the following contingencies and commitments: Administrative suits against the Bank estimated at ¢3.483.206.932 and
US$31.271.416. In addition other contentious processes are filed for preliminary
injunction with no estimate.
- 83 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Ordinary labor suits estimated at ¢1.285.000.000 and US$185.000.
Criminal proceedings in which the Bank is a third-party defendant estimated at
¢152.559.305 and US$200.000.
Other matthers: To guarantee recovery arrangement by US$2,008,000 to China Construction Bank, the Bank does not execute the guarantee because the lawsuit was filed in China, Hefei city by AFECC against Palacio Oriental, S.A. It was a precautionary measure pronouncement against the financial entity, ordering no guarantee payment until lawsuit resolution on that jurisdiction. China Construction Bank maintain recognized the guarantee in favor to Banco de Costa Rica until process conclusion. However, Banco de Costa Rica filed a precautionary protest because Costa Rica held an arbitration process to resolve the conflict between China AFECC and Palacio Oriental, S.A. based on the principle that same case cannot be tried twice according to New York Convection, ratified by China. This arrangement is pending resolution until China judicial pronouncement, therefore Banco de Costa Rica does not discard a judicial process in Costa Rica.
Suit filed against BICR
Until 2004, Banco Internacional de Costa Rica, S.A. (BICR) was a subsidiary of BICSA Corporación Financiera, S.A. The latter entity (holding) merged with Banco Internacional de Costa Rica, S.A. (Panama) in September 2005, which was involved in a legal process filed by TELESIS, S.A. related to a condemnatory resolution against BICR based on an ordinary civil process to discuss unfulfillments related to a software contract subscribed by the parties. In 1989, the court action was estimated by the plaintiff at US$192.000. In September 2002, the plaintiff claimed US$12.595.684, plus interest accrued until the payment date, plus other legal expenses. As part of legal above mentioned process, BICR interposed a prescription appeal which was stayed by the Second Civil Court of San José, first Section, issued ruling No. 408 on November 16, 2004, which upheld the defense motion filed by BICR. With this ruling, BICR is released from further payment obligations. TELESIS, S.A. filed a formal appeal to overturn the ruling by the Second Civil Court. On December 21, 2006, the First Chamber of the Supreme Court of Justice dismissed the formal appeal filed by TELESIS, S.A., confirming the statute of limitations had lapsed on all claims filed by TELESIS, S.A. and releasing BICR from payment obligations.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Therefore this final resolution, BICR recovered the amount of US$2.096.804 from Banco Nacional de Costa Rica in 2007, entity which later absorbed BICR operations and other group subsidiaries due such amount constituted a reserve created to face possible contingencies.
To handle its defense in the above-mentioned case, BICR hired three Costa Rican attorneys through an agreement that clearly stipulated the fees to be paid by BICR in exchange for litigation services. BICR promptly paid the full amount due under the agreement; however, the attorneys filed a claim for fees payment in the amount of ¢501.134.949 (approximately US$967.704), plus 2% monthly interest (¢70.845.379 (approximately US$136.804) that had been paid as of July 23, 2007). This file was processed by the First Board of Appeal of the Supreme Chamber under an action of this nature interposed by claimants, because its action was overruled in first and second instance recognizing the validity and effectiveness of the professional services contract signed by BICR and aforementioned lawyers. The Court resolution of April 12, 2013 summoned the parties to appear before the First Civil Court, which was carried on April 18, 2013. Likewise, in resolution of June 13, 2013, the said Chamber admitted the appeal for processing. Therefore, it is expected the Board to rule on the merits. Income tax - BICSA Costa Rica On November 9, 2006, the Bank received Conclusion of Tax Audit Notice No. 2752000016446 from the Large Taxpayer Division of the Costa Rican Tax Administration indicating an outstanding tax liability, were not property presented corresponding to the tax years running from 1999 through 2004 for BICR. Until 2004 that entity operated as a subsidiary of BICSA Corporación Financiera, S.A., which merged with BICSA in September 2005. The scope of the claim amounts to ¢707.639.319 (approximately US$1.366.468 since interest, penalties and fines were eliminated from the transfer of the original charges. The transfer of charges originated in treatment by the current tax administration of certain items of expenditure and income differently from the previously authorized and notified in writing by the Tax Administration to BICR and other banks of the Costa Rican banking system. BICR challenged charges transfer arguing among other things that the settlement of tax in those years was conducted in accordance with guidelines issued directly from that Directorate.
- 85 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
By order liquidating SFGCN-AL-075-12 2910612012, the Tax Autorities determine a tax debt amounting to the sum of ¢621,992,593 for interest and the sum of ¢809,228,709, for a total of ¢1,431,221,302. On July 23, 2012 the Bank interposed a new claim against that decision No. 035-2012 TFA Administrative Tax Court of Costa Rica. Besides, based on resolution DGH-153-08 as of December 8, 2008 it was requested nullity of condoned interests. Thru resolution OT10R-041-13 of April 24, 2013, notified on May 14, 2013 Tax Authority partially sustain the revocatory claim interposed by the company against the resolution. Total debt amounts to ¢621.992.593 plus ¢174.614.907 of interests for a total of ¢796.607.500 (equivalent to US$1.609.276). On June 5, 2013 the company presented an appeal against resolution SFGN-AL-075 and resolution TFA-497-2013 of November 4, 2013. Tax Authority overrules nullity condemned BICSA and confirming income tax payment for fiscal periods from 1999 to 2004. BICSA paid penalty amounts on November 29, 2013 for US$1.243.985. On November 22, 2013 BICSA presented a claim to Tax Authority requesting amendment of the judge’s decision related to Interests Condemn Resolution No.153-08 of Finance Ministry and also recommended discharge of interestes determined on resolution OT10R-041-13 of April 24, 2013 confirmed by Tax Authority sentence 497-2013 for ¢174.614.907 and discharge of interests from fiscal period 2005. Independently from liquidation (income tax calculation exactness and interests origin) against Tax Authority judgement, on February 1, 2013 it was interposed an contentious administrative process related to income tax of periods from 1999-2004. On April 19, 2013 the claim presented in February 1, 2013 was extended, the State answered the claim. On July 17, 2013 the State answered the extended claim negatively and in September 25, 2013 it was presented the claim’s answer by the State. It was presented a second claim extention on November 13, 2013 and in November 20, 2013 the General Law Office answered the claim. On November 7, 2013 it was the preliminary hearing, claim extention presented on April 19, 2013 was rejected. Tax Authority integrate judgement No.497 as a new fact and reprogrammed second preliminary hearing. Labor processes against Miami agency have been solve in favor to BICSA. It is pending resolution by Caja Costarricense del Seguro Social amounts determination by contributions if proceeded. In management opinion, final resolutions of such matters would not affect financial position, operational or liquidity result of BICSA and its agency.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014, December 31, 2013 and March 31, 2013 there were no contingencies for BCR Pensión Operadora de Planes de Pensiones Complementarias, S.A., BCR Sociedad Administradora de Fondos de Inversión, S.A., BCR Valores, S.A. and BCR Sociedad Corredora de Seguros, S.A that should be disclose on this report.
(20) Trusts
The Bank provides trust services, whereby it manages assets at the direction of the customer. The Bank receives a fee for providing those services. The underlying assets and liabilities are not recognized in the Bank’s consolidated financial statements. The Bank is not exposed to any credit risk and it does not guarantee these assets.
The types of trusts managed by the Bank are as follows:
Management and investment trusts Management trusts with a testamentary clause Guarantee trusts Housing trusts Management and investment public trusts. Trust capital is invested in the following assets:
March December March
2014 2013 2013
Cash and due from banks ¢ 13.001.866.164 17.010.312.418 14.677.653.489
Investments in financial instruments 146.943.015.898 138.148.948.105 83.991.195.614
Loan portfolio 153.555.863.823 144.611.251.747 110.035.556.822
Allowance for loan impairment (19.832.607.596) (19.759.136.434) (13.826.522.185)
Foreclosed assets 5.237.631.380 5.352.055.809 5.609.285.327
Investments in other companies 38.595.799.452 38.305.034.004 32.799.147.587
Other accounts receivable 45.999.399.870 44.899.751.853 49.688.931.492
Property and equipment 427.511.204.006 446.204.876.028 461.906.343.140
Other assets 21.618.402.203 17.740.747.054 11.629.455.919
¢ 832.630.575.200 832.513.840.584 756.511.047.205
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Trust capital held by subsidiaries and invested in assets by entity is as follows:
March December March
2014 2013 2013
Banco de Costa Rica ¢ 723.615.795.137 736.532.860.935 666.407.976.333
BICSA 107.020.734.960 93.880.520.133 88.094.785.109
BCR Valores, S.A. (see note 22) 1.994.045.103 2.100.459.516 2.008.285.763
¢ 832.630.575.200 832.513.840.584 756.511.047.205
(21) Other debit memoranda accounts
Other debit memoranda accounts are as follows:
March December March
2014 2013 2013
Assets and securities held in custody ¢ 6.377.728.787 7.595.388.537 5.620.316.484
Guarantees received and held in custody 730.207.560.271 670.678.850.380 634.116.975.339
Guarantees received and held by third parties 807.547.197 764.363.409 1.167.057.336
Unused authorized lines of credit 612.898.885.325 520.753.222.541 489.428.791.021
Write-offs 29.670.448.023 29.586.552.479 23.034.822.482
Interest income on non- accrual loans 12.617.992.815 11.945.319.561 11.755.612.515
Other memoranda accounts 1.205.113.576.137 823.278.349.248 763.351.891.135
Assets and securities held in custody
for third parties 126.785.380.698 81.690.005.348 138.726.809.650
Assets of funds managed by the Bank 1.026.443.171.517 937.640.621.173 853.596.613.451
Management of individual portfolios
by Brokerage Firm 336.340.520.868 334.310.834.551 329.237.371.361
Trading securities held in custody 611.958.334 1.286.058.285 3.336.545.279
Trading securities received as guarantee
(Guarantee Trust) 2.065.500.000 1.888.400.000 6.501.807.705
Confirmed outstanding cash contracts 1.721.877.738 - -
Repurchase agreements pending settlement (own) 21.283.054.297 29.590.302.089 30.223.659.368
Cash and receivables from custodial activities 74.188.165.416 19.493.015.132 28.287.554.898
Trading securities held in custody 3.786.168.946.345 3.585.696.371.103 3.304.423.241.315
Third-party trading securities received as
guarantees (Guarantee trust) 28.638.274.005 32.431.112.708 43.113.044.289
Third-party trading securities pledged as
guarantees (Guarantee trust) 35.623.251.144 46.252.306.165 64.369.268.148
Confirmed outstanding cash contracts 10.144.837.690 - 42.226.459
Repurchase agreements pending settlement 39.984.955.260 44.882.183.768 57.178.724.546¢ 8.087.693.631.867 7.179.763.256.477 6.787.512.332.781
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Other memoranda accounts by entity are as follows:
March December March
2014 2013 2013
Banco de Costa Rica ¢ 5.299.425.899.008 4.695.112.059.839 4.431.147.006.933
BICSA 1.345.695.156.991 1.130.379.240.350 1.079.645.348.364
BCR Valores, S.A. (note 22) 409.502.325.579 408.784.422.168 417.249.103.658
BCR Sociedad Administradora de
Fondos de Inversión S.A (note 23) 424.238.140.564 351.132.906.713 325.048.018.376
BCR Pensión Operadora de Planes de
Pensiones Complementarias, S.A. (note 24) 608.832.109.725 594.354.627.407 534.422.855.450
¢ 8.087.693.631.867 7.179.763.256.477 6.787.512.332.781
(22) Currents and term brokerage operations and portfolio management operations
Memoranda accounts of the Brokerage Firm are as follows:
March December March
2014 2013 2013
Other memoranda accounts
Other registered accounts 71.411 13.261 13.200
Total of other memoranda accounts 71.411 13.261 13.200
Own memoranda accounts
Confirmed outstanding cash contracts ¢ 1.721.877.738 - -
Repurchase agreements pending settlement -
term buyer (note 22-a) 21.283.054.297 29.590.302.089 30.223.659.368
Total own memoranda accounts ¢ 23.004.932.035 29.590.302.089 30.223.659.368
Third-party memoranda accounts
Portfolio management ¢ 336.340.520.868 334.310.834.551 329.237.371.361
Cash and receivables from custodial activities 27.008.316 1.088.497 25.116.724
Trading securities in custody (note 22-d) - - 541.992.000
Confirmed outstanding cash contracts 10.144.837.690 - 42.226.459
Repurchase agreements pending settlement
11.338.428.985 12.982.574.140 17.422.339.116
Reverse repurchase agreements pending -
settlement term seller (note 22-a) 28.646.526.274 31.899.609.630 39.756.385.430
Total third-party memoranda accounts 386.497.322.133 379.194.106.818 387.025.431.090
Total memoranda accounts (note 21) 409.502.325.579 408.784.422.168 417.249.103.658
Managed trust (note 20) 1.994.045.103 2.100.459.516 2.008.285.763
Total memoranda accounts and trusts ¢ 411.496.370.682 410.884.881.684 419.257.389.421
term buyer (note 22-a)
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
In repurchases, reverses repurchases and term operations, the Brokerage Firm is contingently liable for the short balance that arises when a security is bought for an amount that is less than the amount payable to the respective buyer. In conformity with the Regulations for Repurchase Operations and the Regulations for Term Operations, all such transactions have guarantees to cover those contingencies.
Securities backing repurchases and reverse repurchase agreements are held in the custody of the Central Securities Depository Institution of the Costa Rican National Stock Exchange (CEVAL) or foreign depositories with which CEVAL has custody agreements.
a) Repurchase and reverse repurchase agreements
The Brokerage Firm enters into agreements to buy or sell securities at certain future dates (repurchase and reverse repurchase agreements). Those agreements are comprised of securities that the parties commit to sell or buy on an agreed upon date and at a stated price. The difference between the contractual value and the value of the security represents an additional guarantee for the operation, and corresponds to a portion of the security held in custody.
As of March 31, 2014, term buyer and seller positions in repurchase and reverse repurchase agreements in which the Brokerage Firm participates are as follows:
Third parties Colones U.S. dollars Total Colones U.S. dollars Total
1 to 30 days ¢ 3.811.758.416 4.272.121.378 8.083.879.794 20.148.826.073 3.154.271.542 23.303.097.615
31 to 60 days 917.477.766 1.212.148.728 2.129.626.494 3.546.059.467 948.931.003 4.494.990.470
61 to 90 days 188.894.271 936.028.426 1.124.922.697 188.894.271 659.543.918 848.438.189
Total third parties ¢ 4.918.130.453 6.420.298.532 11.338.428.985 23.883.779.811 4.762.746.463 28.646.526.274
Own
1 to 30 days ¢ 15.963.724.156 4.405.713.318 20.369.437.474 - - -
31 to 60 days 98.189.795 815.427.028 913.616.823 - - -
Total own 16.061.913.951 5.221.140.346 21.283.054.297 - - -
Total ¢ 20.980.044.404 11.641.438.878 32.621.483.282 23.883.779.811 4.762.746.463 28.646.526.274
Term buyer Term seller
As of December 31, 2013, term buyer and seller positions in repurchase and reverse repurchase agreements in which the Brokerage Firm participates are as follows:
Third parties Colones U.S. dollars Total Colones U.S. dollars Total
1 to 30 days ¢ 5.741.388.948 5.008.088.526 10.749.477.474 18.470.006.091 3.723.811.301 22.193.817.392
31 to 60 days 972.957.679 1.189.979.106 2.162.936.785 6.942.674.588 2.692.957.769 9.635.632.357
61 to 90 days - 70.159.881 70.159.881 - 70.159.881 70.159.881
Total third parties ¢ 6.714.346.627 6.268.227.513 12.982.574.140 25.412.680.679 6.486.928.951 31.899.609.630
Own
1 to 30 days ¢ 21.681.283.752 4.047.234.866 25.728.518.618 - - -
31 to 60 days 3.861.783.471 - 3.861.783.471 - - -
Total own 25.543.067.223 4.047.234.866 29.590.302.089 - - -
Total ¢ 32.257.413.850 10.315.462.379 42.572.876.229 25.412.680.679 6.486.928.951 31.899.609.630
Term buyer Term seller
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013, term buyer and seller positions in repurchase and reverse repurchase agreements in which the Brokerage Firm participates are as follows:
Third parties Colones U.S. dollars Total Colones U.S. dollars Total
1 to 30 days ¢ 4.078.603.705 8.799.429.482 12.878.033.187 25.586.262.554 7.489.227.344 33.075.489.898
31 to 60 days 1.610.282.863 2.133.167.645 3.743.450.508 3.399.711.341 2.480.328.770 5.880.040.111
61 to 90 days 310.040.631 469.477.846 779.518.477 310.040.631 469.477.846 779.518.477
More than 91 days - 21.336.944 21.336.944 - 21.336.944 21.336.944
Total third parties ¢ 5.998.927.199 11.423.411.917 17.422.339.116 29.296.014.526 10.460.370.904 39.756.385.430
Own
1 to 30 days ¢ 23.042.626.557 3.921.022.381 26.963.648.938 - - -
31 to 60 days 3.260.010.430 - 3.260.010.430 - - -
Total own 26.302.636.987 3.921.022.381 30.223.659.368 - - -
Total ¢ 32.301.564.186 15.344.434.298 47.645.998.484 29.296.014.526 10.460.370.904 39.756.385.430
Term buyer Term seller
b) Guarantees granted
In order to comply with the Costa Rican National Stock Exchange requirement for a system of guarantees to secure operations executed by the Brokerage Firm on behalf of third parties, the Brokerage Firm may either hold a performance bond in colones issued by a private Costa Rican bank or make a contribution to the Guarantee Fund, described below.
In order to establish a risk management system, SUGEVAL set up a guarantee fund comprised of contributions from brokerage firms. Contributions are made proportionally based on the net buy positions during the last six months. As of March 31, 2014, the Brokerage Firm made contributions for a total of ¢301.609.819 (¢280.846.764 and ¢300.790.344 as of December 31, 2013 and March 31, 2013, respectively). These contributions are booked in the subaccount “Guarantee fund – National Stock Exchange” under “Cash and due from banks”.
c) Agreements subscribed with customers of BCR Valores, S.A. (the Brokerage Firm)
As of December 31, 2012, BCR Valores, S.A., (the Brokerage Firm) has subscribed 5 types of agreements with customers for the brokerage services it provides, namely:
Purchase and sale of local securities Purchase and sale of foreign securities Repurchases Reverse repurchases Individual portfolio management
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Starting 2012, a multiple agreement was implemented, which includes all the products offered by the Brokerage Firm, except for individual portfolio management services. Accordingly, as of March 31, 2014, the Brokerage Firm has two types of agreements available: Commission agreement to perform brokerage operations, foreign exchange
operations, and operations with foreign exchange and financial derivatives Individual portfolio management agreement.
d) Customers securities in custody As of March 31, 2014 and December 31, 2013 BCR Valores does not have investment securities in custody. As of March 31, 2013, securities in the custody of the Brokerage Firm are as follows:
Type of custody Balance
U.S. dollar At face time value-available ¢ 541.992.000
Total custody of third-party
securities in U.S. dollars ¢ 541.992.000
Place of custody
(23) Investments fund managment agreements
The value of net assets in each investment fund managed by the BCR Sociedad Administradora de Fondos de Inversión, S.A. (Investment Fund Manager) is as follows:
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
March December March
2014 2013 2013
Type of fundIn colones
BCR non diversified short term
Financial, open ¢ 94.198.751.960 91.542.566.796 72.718.695.899
BCR non diversified quarterly
colones BCR non diversified
mixed colones Financial, open medium term 39.296.210.761 27.858.502.598 47.826.110.845
BCR 360 fund Financial, open medium term 603.729 502.554
Closed non financial mixed
portfolio 7.887.676.549 7.716.080.080 7.783.836.078
¢ 141.383.242.999 127.117.652.028 128.328.642.822
In U.S. dollars
Equivalent in colones of investment funds in U.S. dollares 282.854.897.565 224.015.254.685 196.719.375.554
(note 21) ¢ 424.238.140.564 351.132.906.713 325.048.018.376
Investment funds
BCR non diversified liquidity
U.S. dollars Open
US$
169.038.884 105.428.380 87.237.594
BCR non diversified real estate
U.S. dollars Real estate, closed, long-term 169.756.698 166.722.703 168.372.325
BCR non diversified commercial,
real estate and industry U.S.
dollars Real estate, closed, long-term 122.666.110 120.321.229 105.873.059
BCR non diversified international
liquid fund U.S. dollars
Open, money market 40.281.740 38.387.499 28.020.331
BCR non diversified real estate
development fund U.S. dollars Real estate, closed 23.677.116 21.687.116 9.729.096
BCR non diversified real estate
development fund U.S. dollars Real estate, closed - - 19.453
US$ 525.420.548 452.546.927 399.251.858
Investment funds
BCR non diversified real estate
Colones
- 93 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(24) Pension fund managment agreements
The value of assets in each fund managed by the Pension Fund Manager is as follows:
March December March
2014 2013 2013
Assets and securities held in custody ¢ 6.377.728.787 7.595.388.537 5.620.316.484
Guarantees held by the entity 200.000.000 200.000.000 200.000.000
Administration of funds and securities by
third parties 49.349.985 51.524.410 53.943.892
Mandatory Pension Fund 442.994.051.043 419.941.885.636 382.026.841.796
Voluntary Pension Fund 18.284.125.289 17.979.532.381 18.063.124.250
Compulsory Retirement Savings Account 50.564.341.402 60.394.796.072 45.418.235.055
Supplemental Pension Fund
created by special laws 90.362.513.219 88.191.500.371 83.040.393.973
(note 21) ¢ 608.832.109.725 594.354.627.407 534.422.855.450
The detail of assets for each pension fund in the reports issued separately is detailed as follows: Funds received by the Pension Fund Manager are invested in the following securities and other investments:
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
March December March
2014 2013 2013
Voluntary Pension Fund – Colones ¢ 13.291.715.179 13.248.493.621 13.031.221.101
In securities issued by BCCR 2.168.114.592 2.441.040.279 2.340.560.137
In securities issued by the Government 5.269.419.226 5.663.955.502 6.490.878.051
In securities issued by private banks 2.788.648.320 1.601.982.560 984.467.056
In securities issued by private non-financial entities 757.096.470 685.437.230 291.854.840
In securities issued by private financial entities 1.016.462.634 930.417.116 736.953.147
In securities issued by non-financial State-owned 291.292.800 345.412.400 345.850.600
In securities issued by State-owned banks created by 70.168.050 235.398.250 660.743.650
In securities issued by State-owned commercial banks 524.915.680 1.006.822.390 1.023.841.140
Investments in open investment funds 363.746.080 273.470.679 91.713.098
Investments in closed investment funds 41.851.327 64.557.215 64.359.382
Voluntary Pension Fund - U.S. dollars US $ 8.681.693 8.664.537 8.560.241
In securities issued by the Government 1.732.498 2.007.464 2.844.897
In securities issued by private banks 3.338.583 3.316.340 2.122.449
In securities issued by private non-financial entities 472.155 327.667 629.750
In securities issued by private financial entities 1.391.633 1.291.699 1.153.417
In securities issued by non-financial State-owned 184.477 186.152 137.757
In securities issued by State-owned banks created by 733.943 634.775 726.535
In securities issued by State-owned commercial banks 354.705 404.649 500.791
Investments in open investment funds 182.599 200.291 125.937
Investments in closed investment funds 291.100 295.500 292.800
In investment securities issued by financial entities - - 25.908
March December March
2014 2013 2013
Mandatory Supplemental Pension Fund – Colones ¢ 525.605.403.620 497.611.872.290 454.653.847.488
In securities issued by BCCR 102.407.973.149 102.149.791.048 82.404.736.114
In securities issued by the Government 229.091.534.171 218.556.387.417 224.895.516.650
In securities issued by private banks 38.752.745.175 34.736.452.254 27.428.541.113
In securities issued by private non-financial entities 18.867.082.388 17.059.159.911 11.965.185.237
In securities issued by private financial entities 32.444.594.170 30.180.788.647 24.968.094.763
In securities issued by non-financial State-owned 24.601.506.050 23.009.239.855 21.868.977.776
In securities issued by State-owned banks created by 19.076.756.795 17.297.456.619 21.577.338.975
In securities issued by State-owned commercial banks 38.185.581.205 46.664.543.827 31.694.158.721
Investments in open investment funds 8.247.567.548 474.777.336 1.235.194.474
Investments in closed investment funds 6.500.447.161 6.311.569.465 6.461.046.406
Investments in repurchase agreements 7.288.062.535 1.041.546.002 -
In investment securities issued by financial entities 141.553.273 130.159.909 155.057.259
Compulsory Retirement Savings Account - Colones ¢ 49.752.319.566 58.474.502.085 43.889.417.372
In securities issued by BCCR 5.013.420.328 9.899.505.572 4.782.508.980
In securities issued by the Government 18.859.969.749 23.414.316.315 21.357.764.829
In securities issued by private banks 8.474.403.209 8.332.700.162 3.923.936.629
In securities issued by private non-financial entities 2.583.360.738 2.606.788.657 1.183.703.507
In securities issued by private financial entities 4.299.135.400 4.535.155.330 3.988.217.470
In securities issued by non-financial State-owned 253.064.500 480.310.740 482.022.080
In securities issued by State-owned banks created by - 2.638.024.350 2.023.235.800
In securities issued by State-owned commercial banks 5.548.759.100 6.432.177.500 4.728.514.040
Repurchase agreements and Reports 2.003.267.923 - -
Investments in open investment funds 2.716.938.619 135.523.459 1.419.514.037
- 95 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The agreements subscribed by the Pension Fund Manager are found in chapter II of the Employee Protection Law, articles 14, 15, and thereafter. The applicable agreement is known as “Voluntary Supplemental Pension Plan Affiliation Agreement”.
Following is a general description of the nature of the agreements subscribed:
The Employee Protection Law puts mechanisms in place to expand coverage and strengthen the funding base for the Disability, Old Age, and Death System of CCSS through supplemental pension funds. The aforementioned Law establishes a voluntary personal savings system, whereby contributions are recorded and controlled by the Centralized Collection System of CCSS, or directly by pension fund operators. A close relationship exists between the funds, plans, and agreements, the latter being a formal requirement for eligibility to access pension funds. The agreements define and stipulate the rights and obligations of both parties.
The funds are separate equity funds administered by pension fund operators for a stated purpose, i.e. long-term savings to be used by the member as a supplemental pension fund. The funds are comprised of voluntary contributions from members and third-party contributors. The plans are a set of complementary conditions and benefits offered to plan beneficiaries.
(25) Financial income on investments in financial instuments
Financial income on investments in financial instruments is as follows:
2014 2013
Trading ¢ 374.584 106.780
Available-for-sale 7.330.643.884 7.226.687.572
At maturity and restricted 449.836.147 700.237.369
¢ 7.780.854.615 7.927.031.721
March
- 96 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(26) Financial income on loan portfolio
Financial income on loan portfolio is as follows:
2014 2013
Checking account overdrafts ¢ 336.916.740 281.427.223
Loans with other funds 56.483.092.118 56.079.021.952
Credit cards 2.959.492.966 2.798.146.310
Factoring 42.989.750 29.787.971
Issued and used letters of credit 3.690.440 1.046.789
Loans to State-owned banks 26.210 -
Past due loans and loans in legal collections 3.913.687 19.597.581
59.830.121.911 59.209.027.826
Financial leases 761.311.607 883.943.055
¢ 60.591.433.518 60.092.970.881
March
(27) Expenses for obligations with the public Financial income on loan portfolio is as follows:
2014 2013
Demand deposits ¢ 5.197.087.646 4.231.450.096
Term deposits 16.674.758.457 24.593.470.756
Repurchase agreements – securities 251.729.248 465.299.620
¢ 22.123.575.351 29.290.220.472
March
- 97 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(28) Expenses for allowances for impairment of assets
Expenses for allowances for impairment of assets are a follows:
2014 2013
Allowance for loan impairment (note 6-f) ¢ 4.578.216.977 2.285.978.019
Allowance for other doubtful receivables 319.774.016 361.141.503
Allowance for stand-by credit losses 4.818.635.268 73.462.700
¢ 9.716.626.261 2.720.582.222
March
(29) Income from recovery of assets and decrease in allowances and provisions
Income from recovery of assets and decreases in allowances and provisions is as follows:
2014 2013
Recovery of loan writte-off ¢ 261.313.265 50.618.153
Recovery of receivable 2.541.979.175 927.932.581
Decrease in allowance for loan impairment (note 6-f) 109.855.452 111.478.208
Decrease in allowance for other doubtful receivables 3.885.242.448 -
Generic allowance decrease and countercyclical
for loan portfolio 292.273.692 -
Generic allowance decrease and countercyclical for
contingent claims 230.728.252 -
¢ 7.321.392.284 1.090.028.942
March
- 98 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(30) Service fees and commissions income
Service fees and commissions income is as follows:
2014 2013
Drafts and transfers ¢ 521.943.207 506.689.713
Foreign trade 85.363.165 106.385.007
Certified checks 3.258.676 2.673.458
Trust management 760.792.321 427.840.900
Custodial services 53.050.309 54.008.787
Banking mandates 304.093 1.897.590
Collections 100.553.075 106.445.211
Credit cards 7.372.684.123 6.702.069.648
Investment fund management 1.479.619.245 1.223.066.794
Pension fund management 1.173.318.794 1.381.084.538
Insurance underwriting 666.119.285 592.362.764
Brokerage operations
(third parties in local market) 344.766.664 645.930.684
Brokerage operations
(third parties in other markets) 54.371.905 28.652.128
Individual portfolio management - 63.727.001
Authorized custodial services
for securities 14.320.087 20.072.690
Other 4.597.772.517 5.313.966.220
¢ 17.228.237.466 17.176.873.133
March
- 99 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(31) Administrative expenses
Administrative expenses are as follows:
2014 2013
Salaries and bonuses, permanent staff ¢ 13.413.069.246 12.828.176.533
Salaries and bonuses, contactors 646.609.625 613.840.469
Compensation for directors and statutory 58.193.484 52.676.334
Overtime 353.846.601 317.461.918
Per diem 187.989.412 180.277.392
Statutory Christmas bonus 1.253.282.206 1.188.613.816
Vacation 1.407.068.820 1.422.267.178
Performance incentives 757.521.763 835.366.292
Fixed representation expenses 83.285.858 104.986.111
Other compensation 506.820.675 601.153.952
Contribution to severance payment 563.933.955 -
Employer social security taxes 4.628.028.922 4.852.239.080
Refreshments 71.038.492 72.735.321
Uniforms 2.592.189 23.985.984
Training 191.539.917 148.277.536
Employee insurance 138.396.045 138.379.185
Assets for personal use 475.744 1.349.399
“Back-to-school” bonus 1.808.527.586 1.726.749.514
Compulsory retirement savings account 411.624.275 387.239.210
Other personnel expenses 187.439.089 201.619.987
Outsourcing 2.579.440.987 1.913.249.289
Transportation and communications 1.445.144.893 1.323.482.378
Property insurance 37.754.808 11.392.558
Property maintenance and repairs 871.050.123 769.853.983
Public utilities 767.940.039 749.083.316
Leasing of property 1.263.701.288 1.110.137.091
Leasing of furniture and equipment 300.716.061 177.869.948
Depreciation of property and equipment 1.392.162.156 1.474.454.563
Amortization of leasehold property 179.376.817 212.767.409
Other infrastructure expenses 123.236.275 150.770.243
Overhead 3.731.738.308 3.108.246.210
¢ 39.363.545.659 36.698.702.199
March
- 100 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(32) Components of others comprehensive income
As of March 31, the components of other comprehensive income are as follows:
Amount before
income tax
Profit/tax
(expense)Net taxes
Amount before
income tax
Profit/tax
(expense)Net taxes
Surplus from revaluation, property and
equipment ¢ - - - (429.251) 128.775 (300.476)
Adjustment for valuation of available-for-
sale investments (3.979.463.319) 1.210.811.331 (2.768.651.988) 3.791.608.804 (1.438.157.998) 2.353.450.806
Exchange differences for conversion of
financial statements, foreign entities 8.611.665.341 - 8.611.665.341 145.255.366 - 145.255.366
¢ 4.632.202.022 1.210.811.331 5.843.013.353 3.936.434.919 (1.438.029.223) 2.498.405.696
March March
2014 2013
(33) Operating leases
Lessee The fair values of the Bank’s main financial assets and liabilities are as follows:
March December March
2014 2013 2013
Less than one year ¢ 852.026.216 923.921.704 300.779.032
Between one and five years 1.523.026.952 1.301.250.774 349.787.348
More tha five years 1.246.007.310 1.145.718.465 1.455.961.486
¢ 3.621.060.478 3.370.890.943 2.106.527.866
These leases correspond to leases of furniture and equipment.
- 101 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(34) Fair value of financial instuments
The fair values of the Bank’s main financial assets and liabilities are as follows:
Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value
Cash and due from banks ¢ 640.437.376.582 640.437.376.582 603.278.117.263 603.278.117.263 523.157.415.354 523.157.415.354
Investments 729.120.390.158 722.770.727.879 720.713.696.566 715.259.648.587 727.171.507.055 718.567.650.326
Loan portfolio 3.019.757.603.798 2.785.592.545.751 2.823.240.593.475 2.614.867.023.568 2.583.503.505.498 2.403.348.623.263
4.389.315.370.538 4.148.800.650.212 4.147.232.407.304 3.933.404.789.418 3.833.832.427.907 3.645.073.688.943
Demand deposits 1.467.365.624.695 1.467.365.624.695 1.441.096.231.427 1.441.096.231.427 1.298.308.836.020 1.298.308.836.020
Term deposits 1.419.488.660.014 1.415.539.917.814 1.339.741.823.656 1.490.073.952.664 1.339.717.373.241 1.334.194.247.745
Financial obligations 1.112.793.438.849 1.129.889.759.732 952.370.611.291 988.271.874.710 788.066.883.925 794.237.696.920
¢ 3.999.647.723.558 4.012.795.302.241 3.733.208.666.374 3.919.442.058.801 3.426.093.093.186 3.426.740.780.685
20132013
December
2014
MarchMarch
As of March 31, 2014, the financial obligations include ¢16.183.846.277 (¢14.883.713.175 and ¢14.816.937.262 as of December 31, 2013 and March 31, 2013, respectively) for subordinated obligations. Where practicable, the following assumptions were used by management to estimate the fair value of each class of financial instrument both on and off the consolidated balance sheet:
a) Cash and cash equivalents, accrued interest receivable, accounts receivable,
demand deposits and customer savings deposits, accrued interest payable, and other liabilities.
The carrying amounts approximate fair value because of the short maturity of these instruments.
b) Investments in financial instruments
The fair value of available-for-sale financial instruments is based on quoted market prices or prices quoted by brokers.
c) Securities sold under repurchase agreements
The carrying amount of funds owed under repurchase agreements maturing in one year or less approximates their fair value because of the short maturity of these instruments.
- 102 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
d) Loan portfolio
Management determined the fair value of the loan portfolio by the discounted cash flow method.
e) Term deposits and loans payable
Management determined the fair value of term deposits and loans payable by the discounted cash flow method.
Fair value estimates are made at a specific date, based on relevant market information and information concerning the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale a particular financial instrument at a given point in time. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Estimates could vary significantly if changes are made to those assumptions.
(35) Segments
The Bank has defined its business segments based on the administrative and reporting structure, and on the structure of banking, stock brokerage, investment and pension fund management, and insurance brokerage services it provides.
- 103 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014 assets, liabilities, of each segment are as follows:
ASSETS
Cash and due from banks ¢ 508.718.615.444 28.277.807 128.374.615 872.454.441 135.197.455.965 145.621.445 645.090.799.717 (4.653.423.134) 640.437.376.583
Investments in financial instruments 617.388.075.762 6.434.311.009 8.911.832.697 30.038.373.136 75.980.548.148 2.799.668.246 741.552.808.998 (12.432.418.840) 729.120.390.158
Loan portfolio 2.328.267.805.723 - - - 644.339.829.965 - 2.972.607.635.688 - 2.972.607.635.688
Accounts and fees and comissions receivable 3.931.003.211 507.985.914 601.991.515 536.891.691 6.451.539.457 258.593.709 12.288.005.497 (247.301.241) 12.040.704.256
Foreclosed assets 11.907.338.180 - - - 402.898.765 - 12.310.236.945 - 12.310.236.945
Investments in other companies 77.501.898.403 - - 29.057.201 - - 77.530.955.604 (77.491.898.404) 39.057.200
Property and equipment, net 75.693.528.881 - - - 7.598.383.995 10.728.142 83.302.641.018 - 83.302.641.018
Other assets 58.910.960.845 58.917.844 24.836.688 318.060.290 14.217.170.202 85.329.298 73.615.275.167 - 73.615.275.167
TOTAL ASSETS ¢ 3.682.319.226.449 7.029.492.574 9.667.035.515 31.794.836.759 884.187.826.497 3.299.940.840 4.618.298.358.634 (94.825.041.619) 4.523.473.317.015
LIABILITIES AND EQUITY
LIABILITIES
Obligation with the public ¢ 2.521.208.720.833 - - 14.855.080.967 353.068.018.104 - 2.889.131.819.904 (2.277.535.196) 2.886.854.284.708
Obligation with BCCR 61.008.354.167 - - - - - 61.008.354.167 - 61.008.354.167
Obligation with entities 617.306.568.472 - - 4.674.115.526 428.420.184.031 - 1.050.400.868.029 (14.808.306.777) 1.035.592.561.252
Accounts payable and provisions 79.173.779.548 980.211.988 754.847.384 752.374.108 4.227.856.538 348.769.816 86.237.839.382 (247.301.243) 85.990.538.139
Other liabilities 15.068.386.593 - - - 4.080.185.468 73.714.530 19.222.286.591 - 19.222.286.591
Subordinated obligations 16.183.846.277 - - - - - 16.183.846.277 - 16.183.846.277
TOTAL LIABILITIES ¢ 3.309.949.655.890 980.211.988 754.847.384 20.281.570.601 789.796.244.141 422.484.346 4.122.185.014.350 (17.333.143.216) 4.104.851.871.134
EQUITY
Capital 121.762.273.318 3.853.270.124 4.089.200.000 7.626.000.000 35.550.559.940 750.000.000 173.631.303.382 (51.869.030.064) 121.762.273.318
Non-capitalized contributions - 1.513.017.962 - - - - 1.513.017.962 (1.513.017.962) -
Equity adjustmensts 30.250.033.349 (20.788.193) (129.059.437) (614.035.563) 36.801.311.967 (3.439.369) 66.284.022.754 (36.033.989.405) 30.250.033.349
Capital reserves 178.560.730.574 288.890.000 424.888.163 550.415.436 129.314.611 88.674.710 180.042.913.494 (1.482.182.921) 178.560.730.573
Prior period retained ernings 22.632.060.768 - 3.975.315.470 3.290.893.281 19.615.435.957 1.805.731.318 51.319.436.794 (28.687.376.025) 22.632.060.769
Profit for the year 7.137.143.225 414.890.693 551.843.935 659.993.004 2.294.959.881 236.489.835 11.295.320.573 (4.158.177.347) 7.137.143.226
Develepment Financing Fund Equity 12.027.329.325 - - - - - 12.027.329.325 - 12.027.329.325
Minority interest - - - - - - - 46.251.875.321 46.251.875.321
TOTAL EQUITY 372.369.570.559 6.049.280.586 8.912.188.131 11.513.266.158 94.391.582.356 2.877.456.494 496.113.344.284 (77.491.898.403) 418.621.445.881
TOTAL LIABILITIES AND EQUITY ¢ 3.682.319.226.449 7.029.492.574 9.667.035.515 31.794.836.759 884.187.826.497 3.299.940.840 4.618.298.358.634 (94.825.041.619) 4.523.473.317.015
DEBIT MEMORANDA ACCOUNTS ¢ 274.188.637.883 - - - 84.916.466.496 - 359.105.104.379 - 359.105.104.379
TRUST ASSETS ¢ 723.615.795.137 - - 1.994.045.103 107.020.734.960 - 832.630.575.200 - 832.630.575.200
TRUST LIABILITIES ¢ 345.886.457.610 - - 23.961.460 - - 345.910.419.070 - 345.910.419.070
TRUST CAPITAL ¢ 377.729.337.527 - - 1.970.083.643 107.020.734.960 - 486.720.156.130 - 486.720.156.130
OTHER MEMORANDA ACCOUNTS ¢ 5.299.425.899.008 608.832.109.724 424.238.140.564 409.502.325.579 1.345.695.156.991 - 8.087.693.631.866 - 8.087.693.631.866
EliminationsTotal ConsolidatedInsurance BrokerBICSABank Pension Fund
Investment Fund
Manager Brokerage Firm
- 104 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of December 31, 2013 assets, liabilities, of each segment are as follows:
ASSETS
Cash and due from banks ¢ 495.272.495.927 75.946.007 275.825.887 857.274.886 109.988.995.950 197.001.959 606.667.540.616 (3.389.423.353) 603.278.117.263
Investments in financial instruments 611.580.751.357 7.828.940.624 8.411.826.806 40.717.296.645 80.782.589.570 2.826.456.460 752.147.861.462 (31.434.164.896) 720.713.696.566
Loan portfolio 2.175.603.913.768 - - - 603.644.103.030 - 2.779.248.016.798 - 2.779.248.016.798
Accounts and fees and comissions receivable 3.127.564.385 636.890.116 533.734.313 464.343.616 6.243.866.164 167.047.124 11.173.445.718 (259.869.068) 10.913.576.650
Foreclosed assets 11.956.150.574 - - - 247.995.248 - 12.204.145.822 - 12.204.145.822
Investments in other companies 72.576.370.018 - - 29.057.201 - - 72.605.427.219 (72.566.370.018) 39.057.201
Property and equipment, net 76.883.442.382 - - - 7.046.352.735 11.436.146 83.941.231.263 - 83.941.231.263
Other assets 45.508.859.297 49.072.483 16.302.611 276.817.686 9.118.516.600 208.743.747 55.178.312.424 - 55.178.312.424
TOTAL ASSETS ¢ 3.492.509.547.708 8.590.849.230 9.237.689.617 42.344.790.034 817.072.419.297 3.410.685.436 4.373.165.981.322 (107.649.827.335) 4.265.516.153.987
LIABILITIES AND EQUITY
LIABILITIES
Obligation with the public ¢ 2.435.392.066.780 - - 29.398.250.115 318.471.737.293 - 2.783.262.054.188 (2.423.999.105) 2.780.838.055.083
Obligation with entities 566.924.611.700 - - 102.651.684 402.849.875.792 - 969.877.139.176 (32.399.589.144) 937.477.550.032
Accounts payable and provisions 95.682.879.642 1.677.985.009 845.899.717 1.223.445.478 5.173.496.036 598.655.651 105.202.361.533 (259.869.068) 104.942.492.465
Other liabilities 15.291.241.127 - - - 6.278.832.756 162.980.047 21.733.053.930 - 21.733.053.930
Subordinated obligations 14.883.713.175 - - - - - 14.883.713.175 - 14.883.713.175
TOTAL LIABILITIES ¢ 3.128.174.512.424 1.677.985.009 845.899.717 30.724.347.277 732.773.941.877 761.635.698 3.894.958.322.002 (35.083.457.317) 3.859.874.864.685
EQUITY
Capital 112.052.881.182 3.790.480.858 4.089.200.000 7.626.000.000 35.550.559.940 750.000.000 163.859.121.980 (51.806.240.798) 112.052.881.182
Non-capitalized contributions - 370.203.696 - - - - 370.203.696 (370.203.696) -
Equity adjustmensts 29.405.937.160 52.082.604 (97.613.733) 153.134.040 29.009.336.963 4.643.710 58.527.520.744 (29.121.583.583) 29.405.937.161
Capital reserves 162.853.210.411 240.928.809 360.767.763 422.905.735 129.314.611 50.000.000 164.057.127.329 (1.203.916.918) 162.853.210.411
Prior period retained ernings 21.552.740.443 - 2.757.027.863 868.208.962 10.838.171.336 1.070.911.834 37.087.060.438 (15.534.319.995) 21.552.740.443
Profit for the year 29.214.942.917 2.459.168.254 1.282.408.007 2.550.194.020 8.771.094.571 773.494.194 45.051.301.963 (15.836.359.046) 29.214.942.917
Develepment Financing Fund Equity 9.255.323.171 - - - - - 9.255.323.171 - 9.255.323.171
Minority interest - - - - - - - 41.306.254.018 41.306.254.018
TOTAL EQUITY 364.335.035.284 6.912.864.221 8.391.789.900 11.620.442.757 84.298.477.421 2.649.049.738 478.207.659.321 (72.566.370.018) 405.641.289.303
TOTAL LIABILITIES AND EQUITY ¢ 3.492.509.547.708 8.590.849.230 9.237.689.617 42.344.790.034 817.072.419.298 3.410.685.436 4.373.165.981.323 (107.649.827.335) 4.265.516.153.988
DEBIT MEMORANDA ACCOUNTS ¢ 254.011.188.351 - - - 78.509.854.101 - 332.521.042.452 - 332.521.042.452
TRUST ASSETS ¢ 736.532.860.935 - - 2.100.459.516 93.880.520.133 - 832.513.840.584 - 832.513.840.584
TRUST LIABILITIES ¢ 331.892.128.845 - - 50.006.240 - - 331.942.135.085 - 331.942.135.085
TRUST CAPITAL ¢ 404.640.732.090 - - 2.050.453.276 93.880.520.133 - 500.571.705.499 - 500.571.705.499
OTHER MEMORANDA ACCOUNTS ¢ 4.695.112.059.839 594.354.627.407 351.132.906.713 408.784.422.168 1.130.379.240.349 - 7.179.763.256.476 - 7.179.763.256.476
Insurance Broker Total Eliminations ConsolidatedBank Pension Fund
Investment Fund
Manager Brokerage Firm BICSA
- 105 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013 assets, liabilities, of each segment are as follows:
ASSETS
Cash and due from banks ¢ 445.324.880.857 364.271.939 1.397.804.893 1.087.068.787 79.528.432.527 124.696.027 527.827.155.030 (4.669.739.675) 523.157.415.355
Investments in financial instruments 612.487.206.031 6.031.815.240 6.024.451.592 39.953.430.739 61.029.485.059 2.054.167.542 727.580.556.203 (409.049.148) 727.171.507.055
Loan portfolio 1.963.581.496.115 - - - 575.003.525.866 - 2.538.585.021.981 - 2.538.585.021.981
Accounts and fees and comissions receivable 3.785.596.802 693.635.382 529.640.270 552.617.047 5.612.275.380 43.146.236 11.216.911.117 (215.110.784) 11.001.800.333
Foreclosed assets 12.884.672.003 - - - 272.999.843 - 13.157.671.846 - 13.157.671.846
Investments in other companies 66.918.698.781 - - 29.057.201 - - 66.947.755.982 (66.913.698.781) 34.057.201
Property and equipment, net 75.614.668.593 126.080.413 - - 738.172.267 9.051.347 76.487.972.620 1 76.487.972.621
Other assets 22.863.390.889 43.687.095 13.536.426 178.318.186 14.641.153.347 92.834.721 37.832.920.664 (1.414.969) 37.831.505.695
TOTAL ASSETS ¢ 3.203.460.610.071 7.259.490.069 7.965.433.181 41.800.491.960 736.826.044.289 2.323.895.873 3.999.635.965.443 (72.209.013.356) 3.927.426.952.087
LIABILITIES AND EQUITY
LIABILITIES
Obligation with the public ¢ 2.336.658.007.434 - - 27.125.898.042 276.887.995.411 - 2.640.671.900.887 (2.645.691.626) 2.638.026.209.261
Obligation with BCCR - - - - - - - - -
Obligation with entities 406.973.431.459 - - 3.039.198.914 365.660.838.701 - 775.673.469.074 (2.433.097.198) 773.240.371.876
Accounts payable and provisions 79.947.999.624 1.250.104.502 533.098.731 979.317.476 10.378.713.187 239.547.321 93.328.780.841 (216.525.752) 93.112.255.089
Other liabilities 21.724.182.700 - - - 4.032.707.544 - 25.756.890.244 - 25.756.890.244
Subordinated obligations 14.816.937.263 - - - - - 14.816.937.263 - 14.816.937.263
TOTAL LIABILITIES ¢ 2.860.120.558.480 1.250.104.502 533.098.731 31.144.414.432 656.960.254.843 239.547.321 3.550.247.978.309 (5.295.314.576) 3.544.952.663.733
EQUITY
Capital 112.052.881.182 5.160.684.554 4.089.200.000 5.026.000.000 29.117.071.200 250.000.000 155.695.836.936 (43.642.955.754) 112.052.881.182
Equity adjustmensts 29.662.967.810 87.242.645 (97.931.829) 584.846.281 29.600.888.377 6.130.098 59.844.143.382 (30.181.175.572) 29.662.967.810
Capital reserves 162.853.210.411 240.928.809 360.767.763 422.905.735 55.122.000 50.000.000 163.982.934.718 (1.129.724.307) 162.853.210.411
Prior period retained ernings 21.552.740.443 - 2.757.027.863 3.468.208.962 17.810.563.917 1.570.915.456 47.159.456.641 (25.606.716.198) 21.552.740.443
Profit for the year 7.962.928.574 520.529.559 323.270.653 1.154.116.550 3.282.143.952 207.302.998 13.450.292.286 (5.487.363.712) 7.962.928.574
Develepment Financing Fund Equity 9.255.323.171 - - - - - 9.255.323.171 - 9.255.323.171
Minority interest - - - - - - - 39.134.236.763 39.134.236.763
TOTAL EQUITY 343.340.051.591 6.009.385.567 7.432.334.450 10.656.077.528 79.865.789.446 2.084.348.552 449.387.987.134 (66.913.698.780) 382.474.288.354
TOTAL LIABILITIES AND EQUITY ¢ 3.203.460.610.071 7.259.490.069 7.965.433.181 41.800.491.960 736.826.044.289 2.323.895.873 3.999.635.965.443 (72.209.013.356) 3.927.426.952.087
DEBIT MEMORANDA ACCOUNTS ¢ 241.833.799.275 - - - 91.636.249.454 - 333.470.048.729 - 333.470.048.729
TRUST ASSETS ¢ 666.407.976.333 - - 2.008.285.763 88.094.785.109 - 756.511.047.205 - 756.511.047.205
TRUST LIABILITIES ¢ 340.074.764.763 - - 24.786.950 - - 340.099.551.713 - 340.099.551.713
TRUST CAPITAL ¢ 326.333.211.570 - - 1.983.498.812 88.094.785.111 - 416.411.495.493 - 416.411.495.493
OTHER MEMORANDA ACCOUNTS ¢ 4.431.147.006.933 534.422.855.450 325.048.018.376 417.249.103.658 1.079.645.348.364 - 6.787.512.332.781 - 6.787.512.332.781
Insurance Broker Total Eliminations ConsolidatedBank Pension Fund
Investment Fund
Manager Brokerage Firm BICSA
- 106 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014 proft of each segment are as follows:
Total
Financial income ¢ 284.433.012.431 224.637.189 352.084.943 1.420.002.881 10.767.987.235 86.642.973 297.284.367.652 (155.410.847) 297.128.956.805
Financial expense 251.566.548.446 37.938.792 1.993.397 669.569.827 4.998.202.318 7.148.129 257.281.400.909 (155.410.847) 257.125.990.062
Allowance for impairment of assets 9.306.972.782 656.552 - - 408.996.928 - 9.716.626.262 - 9.716.626.262
Recovery of assets and decreases in allowance and provisions 7.309.385.850 - - - - 12.006.434 7.321.392.284 - 7.321.392.284
FINANCIAL INCOME 30.868.877.053 186.041.845 350.091.546 750.433.054 5.360.787.989 91.501.278 37.607.732.765 - 37.607.732.765
Other operating income 26.313.015.783 1.255.175.027 1.514.853.462 725.024.513 602.469.991 743.005.208 31.153.543.984 (3.881.102.291) 27.272.441.693
Other operating expense 11.345.077.265 268.599.829 443.331.301 172.876.402 684.383.416 70.577.933 12.984.846.146 (847.455.418) 12.137.390.728
GROSS OPERATING INCOME 45.836.815.571 1.172.617.043 1.421.613.707 1.302.581.165 5.278.874.564 763.928.553 55.776.430.603 (3.033.646.873) 52.742.783.730
Personnel expense 22.997.584.908 509.123.401 589.060.421 454.044.611 1.709.969.538 411.501.021 26.671.283.900 - 26.671.283.900
Other administrative expenses 11.483.387.191 103.440.162 32.562.606 41.836.243 1.003.979.406 27.056.151 12.692.261.759 - 12.692.261.759
Total administrative expenses 34.480.972.099 612.563.563 621.623.027 495.880.854 2.713.948.944 438.557.172 39.363.545.659 - 39.363.545.659
NET OPERATING INCOME BEFORE TAX AND
STATUTORY ALLOCATIONS 11.355.843.472 560.053.480 799.990.680 806.700.311 2.564.925.620 325.371.381 16.412.884.944 (3.033.646.873) 13.379.238.071
Income tax 2.286.452.161 134.950.991 229.600.822 138.167.227 269.965.739 107.176.620 3.166.313.560 - 3.166.313.560
Deferred tax - - 9.000.000 - - 1 9.000.001 - 9.000.001
Decrease in income tax 30.323.027 6.793.616 14.453.797 15.660.929 - 27.217.175 94.448.544 - 94.448.544
Statutory allocations 2.132.606.053 17.005.412 23.999.720 24.201.009 - 8.922.100 2.206.734.294 - 2.206.734.294
PROFIT FOR THE YEAR 7.137.143.225 414.890.693 551.843.935 659.993.004 2.294.959.881 236.489.835 11.295.320.573 (3.033.646.873) 8.261.673.700
Profit for the year attributed to minority interest - - - - - - - (1.124.530.475) 1.124.530.475
Profit for the year attributed to Financial Conglomerate 7.137.143.225 414.890.693 551.843.935 659.993.004 2.294.959.881 236.489.835 11.295.320.573 (4.158.177.348) 7.137.143.225
NET PROFIT FOR THE YEAR ¢ 7.137.143.225 414.890.693 551.843.935 659.993.004 2.294.959.881 236.489.835 11.295.320.573 (4.158.177.348) 7.137.143.225
BICSABank Pension Fund
Investment Fund
Manager Brokerage Firm Consolidated
Insurance
Broker Eliminations
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013 proft of each segment are as follows:
Total
Financial income ¢ 59.687.076.092 127.816.776 154.646.512 1.706.256.800 10.356.643.516 43.451.001 72.075.890.697 (61.262.305) 72.014.628.392
Financial expense 28.892.857.483 8.600.381 25.012.320 508.907.156 4.294.507.126 12.582.551 33.742.467.017 (61.262.304) 33.681.204.713
Allowance for impairment of assets 2.646.328.494 2.745.589 - - 71.508.138 - 2.720.582.221 1 2.720.582.222
Recovery of assets and decreases in allowance and provisions 1.073.356.277 - - - 16.672.665 - 1.090.028.942 - 1.090.028.942
FINANCIAL INCOME 29.221.246.392 116.470.806 129.634.192 1.197.349.644 6.007.300.917 30.868.450 36.702.870.401 (2) 36.702.870.399
Other operating income 23.717.015.513 1.458.578.192 1.224.482.346 968.564.828 1.110.725.661 664.445.623 29.143.812.163 (4.608.831.601) 24.534.980.562
Other operating expense 9.070.525.635 256.672.944 362.420.362 167.403.901 964.696.471 52.520.838 10.874.240.151 (729.718.413) 10.144.521.738
GROSS OPERATING INCOME 43.867.736.270 1.318.376.054 991.696.176 1.998.510.571 6.153.330.107 642.793.235 54.972.442.413 (3.879.113.190) 51.093.329.223
Personnel expense 22.207.945.766 466.417.889 517.438.264 427.905.947 1.775.232.807 302.454.537 25.697.395.210 - 25.697.395.210
Other administrative expenses 9.990.716.964 122.743.252 33.532.926 11.601.319 809.697.125 33.015.403 11.001.306.989 - 11.001.306.989
Total administrative expenses 32.198.662.730 589.161.141 550.971.190 439.507.266 2.584.929.932 335.469.940 36.698.702.199 - 36.698.702.199
NET OPERATING INCOME BEFORE TAX AND
STATUTORY ALLOCATIONS 11.669.073.540 729.214.913 440.724.986 1.559.003.305 3.568.400.175 307.323.295 18.273.740.214 (3.879.113.190) 14.394.627.024
Income tax 1.407.069.780 192.014.533 111.139.833 349.182.883 286.256.223 92.822.238 2.438.485.490 (1) 2.438.485.489
Deferred tax - - - 13.620.000 - - 13.620.000 - 13.620.000
Decrease in income tax 33.722.379 5.366.625 7.120.876 4.686.227 - 2.084.165 52.980.272 (1) 52.980.271
Statutory allocations 2.332.797.565 22.037.446 13.435.376 46.770.099 - 9.282.224 2.424.322.710 - 2.424.322.710
Decrease in statutory allocations - - - - - - - - -
PROFIT FOR THE YEAR 7.962.928.574 520.529.559 323.270.653 1.154.116.550 3.282.143.952 207.302.998 13.450.292.286 (3.879.113.190) 9.571.179.096
Profit for the year attributed to minority interest - - - - - - - (1.608.250.522) 1.608.250.522
Profit for the year attributed to Financial Conglomerate 7.962.928.574 520.529.559 323.270.653 1.154.116.550 3.282.143.952 207.302.998 13.450.292.286 (5.487.363.712) 7.962.928.574
NET PROFIT FOR THE YEAR ¢ 7.962.928.574 520.529.559 323.270.653 1.154.116.550 3.282.143.952 207.302.998 13.450.292.286 (5.487.363.712) 7.962.928.574
Bank Pension Fund
Investment Fund
Manager Brokerage Firm BICSA
Insurance
Broker Eliminations Consolidated
- 108 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
(36) Risk managment
The Bank has exposure to the following risks from financial instruments: credit risk liquidity risk market risk, which includes:
- interest rate risk - currency risk - inflation risk - Price risk of financial assets of the investment portfolio
operational risk. The Financial Risk Division, through the Market Risk Office and Balance Sheet Risk Office, is responsible for identifying and measuring the risk of investment portfolios as well as interest rate, currency, and liquidity risks, respectively. For such purposes, all types of risks to which the Bank is exposed are monitored by those Offices on an ongoing basis by using a mapping procedure, and risks are classified based on their severity or impact and their frequency or probability of occurrence. Policies and procedures for managing market and liquidity risks are also update formalized through the design of specific manuals that describe the applicable methodologies used. This activity has been extended to the Bank’s subsidiaries: Puesto de Bolsa, Sociedad Administradora de Fondos de Inversión, Operadora de Pensiones y Corredora de Seguros, S. A., same as the BCR Financial Congromerate.
Following is a description of how the Bank manages the above risks. a) Credit Risk
This is the risk that the borrower or issuer of a financial asset will not comply, fully and on time, with repayment of any obligation due to the Bank according to the terms and conditions established at the time the Bank acquired or originated the financial asset. Credit risk is mainly related to the loan portfolio and investments in financial instruments (see notes 5 and 6). Management of credit risk on investments is represented by the carrying amount of the assets in the consolidated balance sheet. The Bank also has exposure to credit risk for off-balance sheet credits, such as commitments, letters of credit, sureties, and guarantees.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
The Bank monitors credit risk on an ongoing basis through reports on the status of the current loan portfolio and its classification. Credit analyses include periodic assessments of the financial position of customers, an analysis of the country’s economic, political, and financial environment, and the potential impact on each sector. For such purposes, a thorough understanding is obtained of customers on an individual basis and their ability to generate cash flows that enable them to honor their debt commitments.
Risk management policies establish the following limits to mitigate credit risk:
Arrears limit
The balance of the portfolio more than 90 days past due may not exceed the percentage of the total current portfolio set by the General Board of Directors based on its level of risk aversion.
Foreign currency limit
The Bank establishes a limit on the portfolio of customers who do not generate cash flows in U.S. dollars with consideration for allowances and equity.
BCR Valores, S.A. (The Brokerage Firm) may invest 100% of its foreign currency holdings in instruments issued by the Government of Costa Rica, BCCR, or State-owned banks. It may also invest 30% of its portfolio in international public securities issued by G7 countries in equivalent and non-equivalent markets, with the full backing of the State and A to AAA ratings from at least two of the following rating agencies: Standard & Poor’s, Fitch Ratings, and Moody’s.
In coordination with the Brokerage Firm and the Investment Fund Manager, every six months the Bank presents an analysis of the ratings of private issuers and authorizes investments.
BCR Pensión Operadora de Pensiones Complementarias, S.A. (The Pension Fund Manager) may invest in local issuers, such as the Ministry of Finance, BCCR, non-financial State-owned institutions, public and private financial entities, private companies, and investment vehicles such as investment funds and securitizations with a risk rating of A or higher, depending on the equivalency terms used by the Pensions Superintendency. Eligible assets must have a short-term risk rating of at least P-3, A-3, F3, R3, or AMB-3 from Standard & Poor’s, Moody’s Investor Services, Fitch Ratings, Dominion Bond Rating, or A.M. Best, respectively.
- 110 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
Amount Limit
The Prudential Standard issued by SUGEF establishes a maximum limit for the Bank’s total lending operations with an individual or legal entity or individuals comprising a Bank-related group. Specifically, SUGEF Directive 5-04 sets the maximum limit for economic interest groups. This notwithstanding, a maximum limit has been set at the internal level for the Bank’s total lending operations with individuals comprising a Bankrelated group. That limit is more restrictive than the limit defined by SUGEF. Sector Limit The Bank defines an ideal portfolio structure by sector to achieve a level of diversification that is consistent with the growth strategy or with the risk appetite defined in that strategy. Such “ideal” loan portfolio structure will be reviewed at least once annually, which shall not preclude other reviews at the request of the Board of Directors, Credit Committee, or Risk Committee. The appropriate committees appointed by the Board of Directors periodically monitor the financial position of borrowers and issuers involving credit risk for the Bank. The Bank has established certain credit risk management procedures, which are summarized below. Methodologies used to control credit risk include those imposed by the current Prudential Standard and methodologies developed by the Credit Risk Office, with consideration for best practices, as follows: Application of the models is limited to:
Credit approval: Development of parametric analysis models for extending credit to companies and the respective determination of the risk classification, as well as assignment of interest rates based on that classification, with consideration for both quantitative and qualitative management aspects.
- 111 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
Early warning: Simulation models are used to estimate portfolio performance under a specific expected scenario and to facilitate implementation of corrective action. This permits an analysis of the performance of loan arrears in the event of changes in macroeconomic variables such as income and interest rate. In the case of the loan portfolio in U.S. dollars extended to customers who do not generate cash flows in that currency, the reaction of loan arrears to increases in the exchange rate is also analyzed.
Credit risk model:
For a quantitative analysis of the consolidated loan portfolio by activity, by the Commercial Banking Division, and by currency, the Bank uses a Credit Risk Model to determine average payment losses, probability of arrears, expected losses, and Value at Risk (VaR). From these results, the Bank can anticipate loss margins associated with credit risk. All of these indicators are part of a dynamic process aimed at achieving an increasing level of maturity in credit risk management.
Foreign exchange impact measurement model:
This model measures the impact of exchange rate volatility on the loan portfolio in foreign currency placed with customers defined as non-generators of cash flows in foreign currency. This report is segregated by individuals and legal entities.
Credit management information:
As of March 31, 2014, the allowance for loan losses amounted to ¢33.670 million (¢31.434 million and ¢35.925 millon as of December 31, 2013 and March 31, 2013, respectively). As of the same date, the capital adequacy requirement (CAR) is above 10% (the SUGEF minimum limit), considering credit risk, price risk, interest rate risk, operational risk, and currency risk.
As of March 31, 2014, the rate of arrears greater than 90 days is 2,26% (2,20% and 2,5% as of December 31, 2013 and March 31, 2013, respectively). This indicator is 0,74 percentage points (0,8 and 0,5 percentage points as of December 31, 2013 and March 31, 2013, respectively) below the maximum limit permitted by SUGEF to be considered normal levels. The value of this indicator reflects the importance of risk-based management exercised by the Bank for the loan portfolio combined with ambitious underwriting targets.
- 112 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
As of March 31, 2014, the portfolio in U.S. dollars represented 42,41% (41,14% and 37,76% as of December 31, 2013 and March 31, 2013, respectively) of the total portfolio. Growth in the loan portfolio has been strategically controlled so as to only attract customers with an acceptable risk profile. The established limit for extending credit in U.S. dollars to customers who do not generate cash flows in that currency is periodically monitored. Concentration by customer or economic interest group has been controlled by establishing limits. The Bank’s regulations set a maximum limit on loans to an individual or legal entity or economic interest group at 10% of the Bank’s equity. This limit may be lower, depending on the number of activities carried out by the economic interest group. Percentages above that limit may be approved by a unanimous vote in favor by the Credit Committee. In the case of private financial groups, this amount should represent at least 10% of the income of the group. Finally, SUGEF sets a maximum limit of 20% of equity for economic interest groups. Although there is a relative concentration in 2014 in sectors like trade (15,90%), housing (23,90%), services (19,30%), and consumer loans (12,50%) (trade (16,01% and 17,16%), housing (24,70% and 25,97%), services (17,50% and 16,43%) and sonsumer loans (13,20% and 14,10%), respectivily), limits on annual growth by sector have been enforced in order to achieve a loan portfolio structure in the medium and long term that suits the risk appetite defined by senior management. This forces the Bank to effectively manage collections and to monitor its portfolio more closely. In order to monitor each segment of the loan portfolio using the beta model, starting 2011, the Bank tracks credit risk indicators such as expected losses, average probability of payment, and VaR based on limits approved by the General Board of Directors for current loans and loans more than 90 days past due by sector, division, regional management office, and branch. At the balance sheet date, there were no significant concentrations of credit risk.
- 113 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
The maximum exposure to credit risk is represented by the carrying amount of each financial asset (See note 6):
March December March
2014 2013 2013
Banco de Costa Rica
Gross portfolio ¢ 2.342.132.648.290 2.188.470.208.655 1.980.375.881.519
Plus accrued interest receivable 19.805.033.849 18.567.713.926 19.130.877.602
Less allowance for loan impairment (33.669.876.416) (31.434.008.813) (35.925.263.006)
Net portfolio ¢ 2.328.267.805.723 2.175.603.913.768 1.963.581.496.115
BICSA
Gross portfolio ¢ 653.437.408.269 612.662.757.011 580.515.029.728
Plus accrued interest receivable 4.382.513.389 3.539.913.883 3.481.716.648
Less allowance for loan impairment (13.480.091.692) (12.558.567.865) (8.993.220.511)
Net portfolio ¢ 644.339.829.966 603.644.103.029 575.003.525.865
Total net consolidated portfolio ¢ 2.972.607.635.689 2.779.248.016.797 2.538.585.021.980 Set out below is an analysis of the Bank’s gross and net (of allowance for loan impairment) amounts of individually assessed loans with allowance by risk category according to applicable regulations:
- 114 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
March December March March December March
Note 2014 2013 2013 Note 2014 2013 2013
Principal 6a 2.342.132.648.290 2.188.470.208.655 1.980.375.881.519 243.711.002.196 220.262.339.247 216.939.490.635
Interest 19.805.033.849 18.567.713.926 19.130.877.602 - - -
2.361.937.682.139 2.207.037.922.581 1.999.506.759.121 243.711.002.196 220.262.339.247 216.939.490.635
Allowance for loan impairment (33.669.876.416) (31.434.008.813) (35.925.263.006) (367.547.533) (229.487.742) (826.913.512)
Carrying amount ¢ 2.328.267.805.723 2.175.603.913.768 1.963.581.496.115 19 243.343.454.663 220.032.851.505 216.112.577.123
Loan impairment
Total balances :
A1 ¢ 1.859.095.261.127 1.768.889.143.200 1.524.199.525.214 225.242.819.358 204.569.770.702 190.192.641.111
A2 15.730.709.288 14.116.979.653 11.954.472.766 697.673.225 576.521.019 773.955.160
B1 249.757.025.424 214.386.533.248 263.469.129.120 5.655.719.807 3.929.461.139 11.639.253.129
B2 8.035.471.851 8.170.277.165 7.022.006.977 223.190.725 223.729.600 79.233.858
C1 55.700.494.732 44.585.804.392 38.358.404.129 2.685.861.886 2.424.803.060 2.597.702.644
C2 17.163.095.253 14.331.097.199 24.772.944.257 83.920.948 100.313.129 97.967.602
D 59.053.007.775 51.199.199.403 42.079.714.900 716.460.360 675.784.445 580.526.750
E 97.402.616.689 91.358.888.321 87.650.561.758 8.405.355.887 7.761.956.153 10.978.210.381
2.361.937.682.139 2.207.037.922.581 1.999.506.759.121 243.711.002.196 220.262.339.247 216.939.490.635
Structural allowance (33.867.205.970) (30.934.747.789) (32.802.487.302) (120.217.777) (200.805.385) (561.806.853)
Carrying amount , net 2.328.070.476.169 2.176.103.174.792 1.966.704.271.819 243.590.784.419 220.061.533.862 216.377.683.782
Individually assessed loans with
allowance :
A1 ¢ 1.859.095.260.239 655.449.089.628 556.874.177.945 135.406.462.051 107.424.810.966 96.885.526.951
A2 15.730.709.266 4.150.670.338 3.059.565.031 91.026.318 57.767.028 10.000.000
B1 249.757.025.424 31.135.363.023 36.727.786.556 3.635.005.076 220.055.551 6.190.881.021
B2 8.035.471.851 1.815.442.601 2.106.085.230 103.180.280 93.684.518 5.825.338
C1 55.700.494.732 3.651.502.381 4.007.404.576 492.422.935 85.623.456 16.744.084
C2 17.163.095.253 1.588.137.708 1.713.247.203 - - 8.464.620
D 59.053.007.775 14.306.424.600 13.304.215.511 13.495.424 108.000.000 -
E 97.402.616.696 54.590.815.264 57.704.271.400 265.807.630 196.639.541 3.023.957.447
2.361.937.681.236 766.687.445.543 675.496.753.452 140.007.399.714 108.186.581.060 106.141.399.461
Allowance for loan losses (33.867.205.970) (30.934.747.789) (32.802.487.302) (120.217.777) (200.805.385) (561.806.853)
Carryng amount, net 2.328.070.475.266 735.752.697.754 642.694.266.150 139.887.181.937 107.985.775.675 105.579.592.608
Direct loans Stand- by credits
- 115 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
March December March March December March
Note 2014 2013 2013 Note 2014 2013 2013
Past due loans
with out allowance :
A1 2 35.970.299.547 36.801.492.308 2.079.638.389 1.691.908.083 2.789.789.706
A2 - 3.513.586.938 3.693.273.571 90.186.392 68.762.788 124.660.467
B1 - 34.207.273.792 16.465.123.020 935.726.116 701.927.801 550.653.200
B2 - 5.256.557.437 3.734.343.738 83.279.430 94.314.295 61.949.320
C1 - 4.967.923.261 4.893.608.590 361.826.370 478.310.132 365.233.034
C2 - 11.844.489.485 14.331.037.097 44.838.614 63.436.919 72.667.224
D - 14.639.319.722 5.579.873.146 234.521.551 309.056.599 214.511.968
E - 25.713.527.732 20.912.820.740 7.139.228.813 6.632.521.678 7.039.606.197
Carryng amount 2 136.112.977.914 106.411.572.210 10.969.245.675 10.040.238.295 11.219.071.116
Balance aging of past due loans
with out allowance :
1 to 30 days 2 72.493.059.769 55.566.907.319 2.481.083.901 2.018.269.960 3.294.147.164
31 to 60 days - 28.538.836.088 18.813.741.203 1.069.505.928 887.232.608 641.266.992
61 to 90 days - 20.009.200.754 17.891.748.279 361.766.222 499.450.966 375.108.949
91 to 180 days - 6.121.899.120 5.632.599.318 577.714.397 696.908.406 510.811.522
More than 181 days - 8.949.982.183 8.506.576.091 6.479.175.227 5.938.376.355 6.397.736.489
Carryng amount 2 136.112.977.914 106.411.572.210 10.969.245.675 10.040.238.295 11.219.071.116
Current loans with out allowance :
A1 880 1.077.469.754.025 930.523.854.961 87.756.718.918 95.453.051.653 90.517.324.454
A2 21 6.452.722.376 5.201.634.164 516.460.516 449.991.203 639.294.693
B1 - 149.043.896.433 210.276.219.543 1.084.988.615 3.007.477.788 4.897.718.908
B2 - 1.098.277.128 1.181.578.009 36.731.018 35.730.787 11.459.200
C1 - 35.966.378.751 29.457.390.962 1.831.612.581 1.860.869.472 2.215.725.526
C2 - 898.470.006 8.728.659.957 39.082.334 36.876.210 16.835.758
D - 22.253.455.081 23.195.626.243 468.443.385 258.727.846 366.014.782
E - 11.054.545.324 9.033.469.620 1.000.319.440 932.794.933 914.646.737
Carryng amount 901 1.304.237.499.124 1.217.598.433.459 92.734.356.807 102.035.519.892 99.579.020.058
Carryng amount 2.361.937.682.139 2.207.037.922.581 1.999.506.759.121 243.711.002.196 220.262.339.247 216.939.490.635
Allowance for loan impairment (33.867.205.970) (30.934.747.789) (32.802.487.302) (120.217.777) (200.805.385) (561.806.853)
Excess of allowance
over structural allowance 197.329.554 (499.261.024) (3.122.775.704) (247.329.756) (28.682.357) (265.106.659)
Carryng amount, net 6a ¢ 2.328.267.805.723 2.175.603.913.768 1.963.581.496.115 243.343.454.663 220.032.851.505 216.112.577.123
Restructured loans 6c ¢ 100.586.460 614.605.062 62.055.970 - - -
Direct loans Stand- by credits
- 116 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
Set out below is an analysis of the Bank’s gross and net (of allowance for loan impairment) amounts of individually assessed loans with allowance by risk category according to applicable regulations:
March 31, 2014 Gross Net
Risk category:
A1 ¢ 1.859.095.261.127 1.858.701.087.701
A2 15.730.709.288 15.727.563.145
B1 249.757.025.424 249.137.836.352
B2 8.035.471.851 7.972.876.460
C1 55.700.494.732 54.725.498.309
C2 17.163.095.253 17.000.822.532
D 59.053.007.775 54.257.996.550
E 97.402.616.689 70.546.795.120
¢ 2.361.937.682.139 2.328.070.476.169
Loans to customers
December 31, 2013 Gross Net
Risk category:
A1 ¢ 1.768.889.143.200 1.766.811.205.815
A2 14.116.979.653 14.085.404.697
B1 214.386.533.248 213.977.666.274
B2 8.170.277.165 8.108.581.257
C1 44.585.804.392 44.104.466.281
C2 14.331.097.199 14.129.563.187
D 51.199.199.403 48.243.477.442
E 91.358.888.321 66.642.809.839
¢ 2.207.037.922.581 2.176.103.174.792
Loans to customers
- 117 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
March 31, 2013 Gross Net
Risk category:
A1 ¢ 1.524.199.525.214 1.522.470.154.747
A2 11.954.472.766 11.929.599.462
B1 263.469.129.120 262.860.474.378
B2 7.022.006.977 6.957.167.514
C1 38.358.404.129 37.874.712.251
C2 24.772.944.257 24.559.343.879
D 42.079.714.900 39.118.438.273
E 87.650.561.758 60.934.381.315
¢ 1.999.506.759.121 1.966.704.271.819
Loans to customers
Set out below is an analysis of BICSA’s gross and net (of allowance for loan impairment) amounts of individually assessed loans with allowance by risk category according to applicable regulations:
- 118 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
March December March
2014 2013 2013
BICSA
Principal ¢ 653.437.408.269 612.662.757.011 580.515.029.728
Interest 4.382.513.389 3.539.913.883 3.481.716.648
657.819.921.658 616.202.670.894 583.996.746.376
Allowance for loan impairment (13.480.091.692) (12.558.567.865) (8.993.220.511)
Carrying amount ¢ 644.339.829.966 603.644.103.029 575.003.525.865
Loan portfolio, net of allowance ¢ 635.590.356.331 597.970.034.619 564.397.854.678
Individualy assessed loans with allowance:
B: Deficient 33.956.819.423 28.252.555.167 14.448.408.447
C: Below normal 15.856.948.437 12.056.275.951 1.363.326.184
D: Doubtful 8.695.297.289 6.798.096.083 6.763.262.446
E: Uncolectible 4.483.770.874 691.189.309 825.710.523
62.992.836.023 47.798.116.510 23.400.707.600
Allowance for specific loans (2.563.060.427) (10.201.803.653) (2.607.220.982)
Carrying amount 60.429.775.596 37.596.312.857 20.793.486.618
Past due loans without allowance:
A: Normal 34.007.095.534 1.314.354.512 30.481.992.722
Carrying amount 34.007.095.534 1.314.354.512 30.481.992.722
Arrears
30 to 60 days 8.080.792.946 1.444.536.202 3.288.834.556
60 to 90 days 257.502.557 510.209.777 350.125.354
Carrying amount 8.338.295.503 1.954.745.979 3.638.959.910
Structural allowance (10.917.031.265) (2.356.764.212) (6.385.999.529)
Current loans without allowance:
A: Normal 552.070.516.466 561.416.131.462 519.508.374.867
Carrying amount 552.070.516.466 561.416.131.462 519.508.374.867
Customers' liabilities under acceptances
Carrying amount ¢ 4.366.960.246 2.134.154.527 7.123.954.539
Accrued interest receivable ¢ 4.382.513.389 3.539.913.883 3.481.716.648
Net portfolio (carrying amount) ¢ 644.339.829.966 603.644.103.029 575.003.525.865
- 119 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
Individually assessed loans with allowance:
According to regulations established in SUGEF Directive 1-05, all loan operations are assigned a risk classification and the applicable allowance percentages are determined based on that classification. Individually assessed loans with allowance are loan operations for which, after considering the guarantee for the loan, a balance remains to which the allowance percentage determined by the risk category assigned by the Bank will be applied.
Past due loans without allowance:
Past due loans without allowance correspond to loan operations with a guarantee for at least the outstanding balance due to the Bank. Accordingly, no allowance is established.
Restructured loans:
Restructured loans are those for which the Bank has changed the original contractual terms due to deterioration in the borrower’s financial position and where the Bank has made concessions that it would not otherwise consider. Once the loans are restructured, they remain in this category irrespective of any strengthening of the borrower’s financial position after the restructuring. Following are the various types of restructured loans.
a. Extended loan: Loan operation in which at least one full or partial payment of principal or interest due under the current contractual terms has been postponed.
b. Modified loan: Loan operation in which at least one of the current contractual repayment terms has been modified, excluding extensions, additional payments not included in the loan repayment schedule, additional payments to reduce the amount of installments, and a change in the currency used, while respecting the original loan maturity date.
c. Refinanced loan: Loan operation in which at least one payment of principal or interest is made fully or partially with the proceeds of another loan extended to the borrower or to an individual from its economic interest group by the same financial intermediary or any other entity of the same financial group or conglomerate. In the event of full settlement of the loan, the new loan operation is considered to be refinanced. In the event of partial settlement, both the new and existing loan operations are considered to be refinanced.
- 120 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Loan write-off policy:
The Bank writes off a loan (and any allowance for loan impairment) when it determines the loan to be uncollectible based on an analysis of significant changes in the financial conditions of the borrower preventing the borrower from meeting the payment obligation, or when it determines that the guarantee is insufficient to cover the entire amount of the loan facility granted. For standard loans with smaller balances, write-offs are generally based on the level of arrears of the loan granted.
Allowance for loan impairment:
Borrower classification
The Bank must classify its borrowers into the following two groups:
a. Group 1: Borrowers with total outstanding balances due to the Bank that
exceed the SUGEF limit.
b. Group 2: Borrowers with total outstanding balances due to the Bank that are less than or equal to the SUGEF limit.
For purposes of borrower classification, the following should be considered when calculating total outstanding balances:
a. Balances of back-to-back operations and the portion of bonds, sureties, and
letters of credit covered by a previous deposit are excluded; and b. The stand-by principal balance should be treated as a credit equivalent.
Risk categories
The Bank must individually classify its borrowers in one of eight risk categories, identified as A1, A2, B1, B2, C1, C2, D, and E, with category A1 as the lowest credit risk and category E as the highest credit risk.
- 121 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Borrower classification
Analysis of borrower’s creditworthiness
The Bank must define effective mechanisms to determine the creditworthiness of borrowers in Group 1. Based on whether the borrowers are individuals or legal entities, those mechanisms should enable the Bank to evaluate the following:
a. Financial position and expected cash flows: Analysis of the stability and
continuity of main sources of income. The effectiveness of the analysis depends on the quality and timeliness of information.
b. Experience in the line of business and quality of management: Analysis of
management’s ability to lead the business with appropriate controls and adequate support from the owners.
c. Business environment: Analysis of the main sector variables that affect the
borrower’s creditworthiness. d. Vulnerability to changes in interest rates and foreign exchange rates:
Analysis of the borrower’s ability to confront unexpected adverse changes in interest rates and foreign exchange rates.
e. Other factors: Analysis of other factors that affect the borrower’s
creditworthiness. In the case of legal entities, considerations include, but are not limited to, environmental issues, technological aspects, development and operating licenses and permits, representation of products or foreign offices, relationships with significant customers and suppliers, sales agreements, legal risks, and country risk (the latter in the case of foreign-domiciled borrowers). In the case of individuals, borrower characteristics taken into consideration may include marital status, age, level of education, profession, and gender.
When a borrower has been assigned a risk rating by a rating agency, that rating should be an additional consideration when evaluating the borrower’s creditworthiness.
- 122 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
The Bank must classify the borrower’s creditworthiness into 4 levels: level 1 has the ability to pay, level 2 - has minor weaknesses in ability to pay, level 3 - has serious weaknesses in ability to pay, and level 4 - has no ability to pay. For purposes of this classification, the borrower and co-borrower(s) must be assessed jointly. Joint classification of creditworthiness may only be used to determine the allowance percentage for operations in which the parties are borrower and co-borrower. For the borrower the sum of total balances owed to the Bank is greater than the limit set by the supervising entity. Unconsolidated financial statements are required to qualify the payment capacity at Level 1.
Analysis of historical payment behavior
The Bank must determine a borrower’s historical payment behavior based on the level assigned by SUGEF’s Credit Information Center (CIC).
The Bank must classify historical payment behavior into 3 levels: (level 1) good historical payment behavior, (level 2) acceptable historical payment behavior, and level 3 - poor historical payment behavior.
Borrower classification
Borrowers in Group 1 are to be classified by the Bank in accordance with evaluation parameters for arrears, historical payment behavior, and creditworthiness. Borrowers in Group 2 are to be classified in accordance with parameters for arrears and historical payment behavior, as follows:
Risk
category Allowance Percentage
Arrears
Historical payment Creditworthiness
A1 0,5% 30 days or less Behavior A2 2% 30 days or less Level 1 Level 1 B1 5% 60 days or less Level 2 Level 1 B2 10% 60 days or less Level 1 Level 1 or Level 2 C1 25% 90 days or less Level 2 Level 1 or Level 2 C2 50% 90 days or less Level 1 Level 1, Level 2, or
Level 3 D 75% 120 days or less Level 1 or
Level 2 Level 1, Level 2, or
Level 3
- 123 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
In all cases, borrowers without valid authorization for a credit check through SUGEF’s CIC cannot be classified in risk categories A1 to B2. Likewise, borrowers with at least one loan operation purchased from a financial intermediary domiciled in Costa Rica and regulated by SUGEF must be rated for at least one month in the category of greatest risk between the rating assigned by the selling bank and the rating assigned by the buying bank at the time of the purchase.
Direct classification in risk category E
The Bank must classify borrowers in risk category E who do not meet the conditions to be classified in any of the risk categories defined above, are in bankruptcy, a meeting of creditors, a court protected reorganization procedure, or takeover, or if the Bank considers classification in this risk category to be appropriate. Minimum allowance
Until December 31, 2013, the structural allowance is equivalent to the total outstanding balance of each loan operation less the weighted adjusted value of the corresponding guarantee, multiplying the resulting amount (or resulting balance) by the allowance percentage corresponding to the risk category of the borrower or co-borrower classified in the category of lowest risk. If the result of this calculation is negative or zero, the allowance is zero. If the total outstanding balance includes a stand-by principal balance, the credit equivalent indicated below should be considered.
The adjusted amount of guarantees must be weighted at 100% when the borrower or co-borrower with the lowest risk category is classified in category C2 or lower, at 80% when classified in category D, and at 60% when classified in category E.
Until December 31, 2013, allowance percentages based on borrower risk category are as follows:
Risk category Allowance percentage A1 0,5% A2 2% B1 5% B2 10% C1 25% C2 50% D 75% E 100%
- 124 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
Pursuant to SUGEF Directive 1-05: "Regulation for qualifying Debtors", as of January 1, 2014, the Bank must maintain a minimum amount of allowance resulting from the sum of generic and specific allowances, calculated in accordance with the Transitory XII. The generic allowance will be equal to 0.5% of the total due balance, corresponding to the loan portfolio classified in A1 and A2 risk categories, without reducing the effect of mitigators of loan operations which apply to contingent claims. The specific allowance is calculated on the covered and uncovered portions of each loan (credit operation). The allowance on the exposed portion is equal to the total outstanding balance of each loan transaction less the weighted adjusted value of the relevant security. The resulting amount is multiplied by the percentage that corresponds to the risk category. The allowance on the covered portion of each loan (credit operation) is equal to the amount corresponding to the covered part of the operation, multiplied by the appropriate percentage. The classification categories and percentages of specific allowance for each category are as follows:
Risk category
Specific allowance percentage on the uncovered portion of the
loan
Specif allowance percentage on the covered portion of the loan
A1 0% 0% A2 0% 0% B1 5% 0,5% B2 10% 0,5% C1 25% 0,5% C2 50% 0,5% D 75% 0,5% E 100% 0,5%
Until December 31, 2013, as an exception in the case of risk category E, the minimum allowance for loans to a borrower whose historical payment behavior is rated as level 3 should be calculated as follows:
- 125 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
Arrears Allowance percentage
0 to 30 days 20% 31 to 60 days 50%
More than 61days 100%
As of January 1, 2014, as an exception in the case of risk category E, the minimum allowance for loans to a borrower whose historical payment behavior is rated as level 3 is to be calculated as follows:
Arrears
Specific allowance
percentage on the uncovered portion of the
loan
Specific allowance
percentage on the covered
portion of the loan
Creditworthiness Borrowers (Group 1)
Creditworthiness Borrowers (Group 2)
30 days or less
20% 0,5% Level 1 Level 1
30 days or less 50% 0,5% Level 2 Level 2
30 days or less 100% 0,5% Level 1 or Level 2 or Level 3 or Level
4
Level 1 or Level 2
In compliance with SUGEF Directive 1-05, as of March 31, 2014, the Bank must maintain a structural allowance in the amount of ¢33.987.423.747 (corresponding to direct loans for ¢33.867.205.970 and stand-by credits for ¢120.217.777). As of December 31, 2013 and March 31, 2013, the minimum structural allowance amounted to ¢31.135.553.174 and ¢33.364.294.155, respectively (corresponding direct loans for ¢30.934.747.789 and ¢32.802.487.302, respectively and stand-by loans for ¢200.805.385 and ¢561.806.853). SUGEF External Circular Letter 02 1-2008 dated May 30, 2008 indicates that the expense for the allowance for loan losses corresponds to the amount necessary to achieve the minimum structural allowance. Furthermore, there must be a duly documented technical justification for any excess above the minimum structural allowance, which is to be sent to SUGEF with the authorization request. The excess may not surpass 15% of the minimum required allowance for the loan portfolio. This notwithstanding, if any additional allowances are required above the 15%, they must be taken from net earnings for the period pursuant to article 10 of IRNBS.
- 126 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
As of March 31, 2014, BICSA’s allowance for loan impairment amounts to ¢13.480.091.692 (¢12.558.567.865 and ¢9.005.070.426 as of December 31, 2013 and March 2013, respectively).
Credit equivalent
The following stand-by loan operations must be converted to credit equivalents based on the credit risk they represent. The credit equivalent is obtained by multiplying the balance of the stand-by principal by the credit conversion factor as follows:
a) bid bonds and export letters of credit without prior deposit: 0,05; b) other sureties and guarantees without prior deposit: 0,25; and
c) Pre-approved lines of credit: 0,50.
Allowance for other assets
Allowances should be established for the following assets:
a. Accounts and accrued interest receivable unrelated to loan operations based on arrears calculated from the first day overdue or the date booked in the accounting records, as follows:
Arrears Allowance percentage
30 days or less 2% 60 days or less 10% 90 days or less 50% 120 days or less 75%
More than 120 days 100%
b. The allowance must be established gradually by booking one-twenty-fourth of the value of such assets each month until the allowance is equivalent to 100% of the carrying amount of the assets, without exception. The booking of the allowance shall begin at month-end of the month in which the asset was i) acquired, ii) produced for sale or lease, or iii) retired from use.
- 127 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
The concentration of the portfolio of direct loans and stand-by loans by sector (economic activity) is as follows:
Direct loans Stand-by Direct loans Stand-by Direct loans Stand-by
credits credits credits
Retail ¢ 155.418.867.783 40.039.073.363 148.431.805.748 33.887.756.277 155.020.561.954 35.122.800.215
Manufacturing 366.935.191.357 8.270.980.503 336.232.421.105 10.275.724.983 301.400.064.110 2.723.200.887
Construction, purchase and repair of real
estate 695.013.087.414 23.825.161.830 664.592.678.449 17.798.154.503 622.364.993.382 23.465.173.175
Agriculture, livestock, hunting and related
services 189.365.827.310 - 180.355.704.237 26.024.656 152.731.625.991 582.456.773
Fishing and aquaculture 12.464.096.120 - 10.545.663.109 - 19.838.622 -
Consumer 347.899.391.862 124.332.315.868 344.250.861.305 107.212.227.420 335.675.014.950 113.012.323.828
Education 982.272.275 100.000.000 979.147.770 651.433.715 - 88.500.000
Transportation 90.305.622.806 621.227.714 92.094.843.618 417.116.783 44.238.982.775 -
Public utilities 44.739.076.454 - 45.029.550.111 - 44.965.604.483 154.524.228.441
Services 998.485.625.219 157.998.914.733 901.695.700.620 153.135.407.890 836.167.214.285 -
Hospitality 91.098.386.938 - 74.149.365.137 - 65.595.541.045 -
Mining and quarrying 1.642.583.735 - 1.528.774.887 - 1.559.194.961
Real estate, business and leasing -
activities 1.220.027.287 - 1.246.449.570 - 1.152.274.689 3.951.365.410
Government - 3.917.430.369 - 9.117.196.225 - -
Notes 6 and 19 ¢ 2.995.570.056.560 359.105.104.380 2.801.132.965.666 332.521.042.452 2.560.890.911.247 333.470.048.729
2014
March MarchDecember
20132013
- 128 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
Concentration of the Bank’s loan portfolio by geographic area is as follows:
March December March
2014 2013 2013
Costa Rica ¢ 2.342.132.648.290 2.188.470.208.655 ¢ 1.980.375.881.519
¢ 2.342.132.648.290 2.188.470.208.655 ¢ 1.980.375.881.519 As of March 31, 2014, concentrations by geographic area based on the VaR of the beta model for direct loans and stand-by loans are as follows:
March December March 2014 2013 2013
Location Percentage Percentage Percentage Business Division 46,36% 48,38% 62,32% Retail Commercial Division 53,64% 51,62% 37,68%
As of March 31, 2014, Decemeber 31, 2013 and March 31, 2013, the Bank’s risk associated to the loan portfolio is concentrated in Costa Rica. As of March 31, 2014, the Bank has banking mandates for ¢1.638.000 (¢3.385.475 and ¢3.900.438 as of December 31, 2013 and March 31, 2013, respectively).
- 129 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
Concentration of BICSA’s loan portfolio by geographic area is as follows:
March December March
2014 2013 2013
Germany ¢ - 1.435.407.723 -
Argentina - 12.258.986.506 -
Bolivia - 990.020.000 -
Brazil 16.600.340.528 12.045.243.168 9.197.440.164
Chile - 2.411.978.301 -
China - 990.020.000 -
Colombia - 5.289.833.283 -
Costa Rica 279.959.861.947 252.025.973.851 252.975.514.442
Ecuador 10.985.603.986 9.394.177.513 -
El Salvador 29.516.951.252 27.130.427.393 25.750.407.982
Spain - 1.676.196.922 -
United States of America 17.180.389.496 30.954.283.611 33.167.709.420
Guatemala 25.091.840.596 23.300.426.121 20.584.528.994
Holland 4.665.613.513 5.478.325.171 6.405.360.000
Honduras 4.509.047.552 4.870.608.819 5.567.266.931
British Virgin Islands 88.969.837 76.240.450 83.865.378
Nicaragua 37.785.551.643 32.425.432.541 38.349.763.913
Panamá 173.843.527.943 158.737.817.850 144.674.275.377
Perú 11.443.265.124 14.303.557.000 9.498.276.766
Dominican Republic 5.633.849.765 5.180.391.522 2.979.318.199
Uruguay 7.536.760.000 6.930.140.000 11.825.280.000
Others 28.595.835.087 4.757.269.266 19.456.022.162
¢ 653.437.408.269 612.662.757.011 580.515.029.728
Total assets foreclosed by the Bank are as follows (see note 7):
March December March
2014 2013 2013
Real Property ¢ 39.937.001.127 37.116.652.349 31.713.979.886
Others 209.114.300 232.289.075 705.044.973
¢ 40.146.115.427 37.348.941.424 32.419.024.859
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
The portfolio of direct loans by type of guarantee is as follows (see notes 6 and 19):
March December March
2014 2013 2013
Guarantee
Pledged Assets ¢ 13.143.170.575 12.136.832.394 9.985.371.381
Bonds 371.844.358 450.927.874 3.988.030.350
Collections 5.211.572.100 4.507.675.902 62.174.946.344
Fiduciary 372.019.162.801 378.049.949.682 360.161.209.043
Mortgage 1.064.957.286.642 965.714.080.015 821.731.207.699
Chattel 564.481.773.906 533.381.059.532 462.401.876.737
Other 975.385.246.178 906.892.440.267 840.448.269.693
¢ 2.995.570.056.560 2.801.132.965.666 2.560.890.911.247
Guarantees:
Collateral: The Bank accepts collateral guarantees – usually mortgages or chattel mortgages – to secure its loans. The value of collateral is determined by an appraisal made by an appraiser who determines the estimated fair value of land and buildings based on comparable market offerings and prior appraisals made by the appraiser.
Personal: The Bank also accepts sureties from individuals or legal entities. The Bank evaluates the guarantor’s ability to honor the debt obligations on the borrower’s behalf, as well as the integrity of the guarantor’s credit history.
The Bank conducts strict credit analyses and requires collateral from its borrowers. As of March 31, 2014 59% of the loan portfolio is secured by mortgage or chattel mortgage (59% and 58% as of December 31, 2013 and March 31, 2013, respectively).
Pursuant to SUGEF Directive 5-04: "Regulations on Credit Limits to Individual Persons and Economic Interest Groups", the Bank debugs information on reported data of economic interest groups as part of their responsibility to identify significant administrative and stockholder’s equity relationships among debtors with total active operations. As of March 31, 2014, groups of borrowers (members) having operations that add 2% or more of adjusted capital and in groups report 5% or more of adjusted capital, are reported.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
The concentration of the loan portfolio by economic interest group is as follows: As of March 31, 2014:
No. Percentage Band Total amount No. Of customers
1 0-4,99% 15.016.150.195 ¢ 416.432.673.403 289
2 5-9,99% 30.032.300.389 235.553.658.684 145
3 10-14,99% 45.048.450.584 63.266.213.917 2
4 15-20% 60.064.600.778 752.254.323.380 599
Total ¢ 1.467.506.869.384 1.035
As of Decemeber 31, 2013:
No. Percentage Band Total amount No. Of customers
1 0-4,99% 13.745.304.580 ¢ 447.778.475.887 419
2 5-9,99% 27.490.609.159 183.334.069.348 84
3 10-14,99% 41.235.913.739 128.787.422.671 4
4 15-20% 54.981.218.319 665.593.183.347 225
Total ¢ 1.425.493.151.253 732
As of March 31, 2013:
No. Percentage Band Total amount No. Of customers
1 0-4,99% 13.745.304.580 ¢ 448.282.110.417 451
2 5-9,99% 27.490.609.159 64.997.205.984 3
3 10-14,99% 41.235.913.739 187.868.489.920 81
4 15-20% 54.981.218.319 569.154.243.502 645
Total ¢ 1.270.302.049.823 1.180
- 132 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
b) Liquity risk Liquidity risk arises when a financial entity is unable to honor its commitments or obligations with third parties due to insufficient cash flows resulting from a mismatch between the term that assets are recovered (lending operations) and the term that obligations are due (borrowing operations). Pursuant to risk definitions included in SUGEF Directive 2-10 “Regulations for Comprehensive Risk Management”, liquidity risk is the risk of monetary losses due to a shortage of funds causing a financial entity to be unable to honor its obligations in accordance with the respective contractual terms. Liquidity risk may also be associated with a specific financial instrument, in which case the risk relates to the financial depth of the market in which the instrument is traded with the intention of putting or calling the instrument without significant changes in the instrument’s value. Liquidity risk can result in potential losses due to premature or forced sales of assets, such as investment portfolios, in order to fulfill commitments, or when a position cannot be liquidated, acquired, or hedged in a timely manner by offsetting with an equivalent position. The main objective of the Bank’s liquidity policy is to ensure that the Bank is able to honor its payment and disbursement commitments under any circumstances with its own resources, without incurring high costs or experiencing a loss of profitability. The following variables are considered to minimize liquidity risk: volatility of deposits, debt levels, liability structure, asset liquidity, availability of financing, and general effectiveness of term gaps. With the implementation of this policy, the Bank has had during the years 2014 to 2007 strict control over the liquidity index, according to the methodology established by the General Superintendence of Financial Entities (SUGEF); as well as in the use of internal models that facilitate the control of liquidity to calibrate the amount necessary to bring the business operations in order to minimize the opportunity costs associated, to the point of these reports to be automated and delivered on a weekly basis with sophisticated programs offered by a tool known as MatLab from Mathworks®
- 133 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
The Bank has access to different sources of funding, including term deposits, the liquidity market, the foreign exchange market, standardized bond issues, and repurchase operations. The Bank periodically reviews its liquidity limits based on its expected growth in order to manage liquidity risk. Once that risk is determined, stress testing is done to help manage the risk. Information obtained during stress testing is reviewed and approved by the Risk Committee. Liquidity and financing risk is monitored daily by the Treasury Area and actual results versus approved limits are presented to and discussed monthly with the Asset and Liability Committee. The gap report (rate-sensitive assets and liabilities) in local currency presents the difference in recovered assets less matured liabilities as of March 31, 2014 of ¢744.962.463.340 (¢857.137.934.177 and ¢860.633.367.907 as of December 31, 2013 and March 31, 2013, respectively). In foreign currency, that difference amounts to ¢281.434.538.592 (¢321.525.201.724 and ¢350.538.375.742 as of December 31, 2013 and March 31, 2013, respectively), which shows improvements in the balances due to positive changes in interest rates, since the Bank’s assets exceed its liabilities in both currencies. With respect to term matching (sum of liquidity of assets and liabilities), as of March 31, 2013 the total in local currency is ¢289.560.177.949 (¢312.123.268.584 and ¢336.429.782.208 as of December 31, 2013 and March 31, 2013, respectively) and foreign currency is ¢116.291.315.309 (¢116.717.030.287 and ¢89.126.489.776, as of Decemebr 31, 2013 and March 31, 2013, respectively). This demonstrates that the Bank has the necessary liquidity to meet its current liability commitments. Liquidity management is evaluated periodically by updating six-month projected cash flows on a daily basis (which is being computerized using an in-house application, providing lower operational risk in data management) and preparing the one-month and three-month term matching report. The Bank also uses the Miller-Orr cash balance optimization model prepared jointly by Financial Risk Management and the Bank’s Treasury on a semimonthly basis. In essence the model raises the determination of the upmost point of return that shows how to provide local and foreign currency cash through the minimization of costs, not been possible to estimate cash flows due to the contingency of both currencies quotations. Treasury funds fluctuate up to the upper limit at which point the purchase of securities brink the balance back to regular level. When fluctuations bring cash balances down for the entity to cash investments to recover the balance. Results of those operations are fortnight monitored by the Treasury and the results are present to the Assets and Liabilities Committee to monitor liquidity and to review the limits when necessary
- 134 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
These elements are considered in the liquidity management policies, which are extensively followed by the Treasury and Marketing Risk Management. The models are adjusted for the volatility of the inputs that feed cash flows, such as checking and savings accounts.
As of March 31, 2014, the Bank has a one-month term matching adjusted for volatility of 1,19 times (1,47 and 1,24 as of December 31, 2013 and March 31, 2013, respectively). Normal levels have thus been maintained given that applicable regulations require a level of 1 time or higher.
This indicator has decreased inter annually by -4,03% (decrease by -10,08% and increase by 16,36% as of December 31, 2013 and March 31, 2013, respectively), which evidences the efforts from the Treasury to increase the liquidity to less than a month, without inconvenience of keeping normal levels required by the regulator. It is noteworthy that the use of Eurobonds in the amount of US$500 million allowed the restructuring of short-term liabilities to long-term, providing more freedom to manage three month matching of terms. This change results from inter annual increase in the maturities of 30-day liabilities in foreign currency for ¢23.248 million, (increase for ¢26.368 milion and ¢50.901 million as of December 31, 2013 and March 31, 2013, respectively), increases in the maturities of demand liabilities in local currency ¢83.719 million (¢168.778 and ¢172,116 million as of December 31, 2013 and March 31, 2013, respectively) and increases in obligations with the public in local currency for ¢77.833 million (¢120.251 million and ¢133.212 million as of December 31, 2013 and March 31, 2013, respectively). The latter two items in foreign currency increased by ¢113.172 million (increases ¢61.541 million and ¢26.470 million as of December 31, 2013 and March 31, 2013, respectively) and ¢99.657million (increase for ¢14.636 million and decrease for ¢48.184 millon as of December 31, 2013 and March 31, 2013, respectively), respectively. Additionally, recovery of 30-day assets in local currency increased inter annually by ¢26.099 million (¢91.855 and ¢19.200 million as of December 31, 2013 and March 31, 2013, respetively), and the recovery of demand assets in foreign currency increased by 27.667 million (increase for ¢19.545 millon and ¢30.419 million as of December 31, 2013 and March 31, 2013, respectively), which explains the results obtained by the December 2011 close. These variations in the items used to calculate the indicator of the CAMELS table evidence liquidity close to regulatory limits, as the numerator components have increased by 15,09% (22,47% and 35,38% as of December 31, 2013 and march 31, 2013, respectively) versus an inter annual increase of 19,53% (36,20% and 16,35% as of December 31, 2013 and March 31, 2013, respectively) in the denominator components. This suggests stricter monitoring of liquidity management by the Bank.
- 135 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
As of December 31, 2013, the three-month matching of terms adjusted for volatility is 0,98 times (0,97 and 0,89 times as of Decemebr 31, 2013 and March 31, 2013, respectively) which is equivalent to a increase of 10,11%.(2,46% and 7,23% as of Decemebr 31, 2013 and March 31, 2013, respectively). Accordingly, the level is normal, pursuant to regulations that define “normal” as 0,85 times or greater. This increased in the indicator is the result of an inter annual increase in the numerator of 17,32% (23,69% and 21,86% as of Decmeber 31, 2013 and March 31, 2013, respectively) and an increase in the denominator 6,88% (20,72% and 14,14% as of Decemebr 31, 2013 and March 31, 2013, respectively) behaviors that draw attention to the study period justifying the figures obtained, since the growth of liabilities is 10,44% greater than the assets. Those indicators have been sensitized with computer techniques and stress testing that weekly monitor the behavior of liquidity according to terms (in two installments) to avoid deviations according to CAMELS.
- 136 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
The Bank’s assets and liabilities mature as follows: March 31, 2014:
Demand 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days
More than 30 days
past due TOTAL
Cash and due from banks ¢ 224.900.249.919 240.692.419 - - - - 311.609.819 - 225.452.552.157
Cash reserve-BCCR 222.241.846.786 48.732.591.071 19.509.831.200 19.797.613.435 70.764.388.426 24.367.408.186 9.571.145.321 - 414.984.824.425
Investments 198.080.355 77.665.934.034 61.211.852.782 50.075.666.837 98.471.663.980 210.108.993.902 225.038.535.989 - 722.770.727.879
Interest on investments - 2.406.825.933 1.359.748.149 970.782.307 909.358.662 465.452.771 237.494.457 - 6.349.662.279
Loan portfolio 8.671.178.855 113.614.277.257 60.147.410.375 62.899.592.659 184.717.622.804 2.013.563.004.276 505.958.296.276 45.998.674.058 2.995.570.056.560
Interest on loans - 10.954.167.801 182.217.743 199.017.736 367.344.390 5.348.426.256 4.473.922.767 2.662.450.545 24.187.547.238
¢ 456.011.355.915 253.614.488.515 142.411.060.249 133.942.672.974 355.230.378.262 2.253.853.285.391 745.591.004.629 48.661.124.603 4.389.315.370.538
Obligations with public ¢ 1.437.273.372.245 333.276.010.106 162.424.973.834 133.836.581.182 464.847.233.948 209.485.728.702 135.588.404.646 - 2.876.732.304.663
Obligations with BCCR - 61.000.000.000 - - - - - - 61.000.000.000
Obligations with financial
entities 168.956.056.067 119.737.790.003 31.812.671.245 24.948.608.840 90.593.463.914 144.862.405.815 449.361.768.400 - 1.030.272.764.284
Charges payable 10.111.303 2.709.042.527 1.397.405.927 1.664.942.117 5.303.010.807 2.492.168.392 1.882.127.260 - 15.458.808.333
1.606.239.539.615 516.722.842.636 195.635.051.006 160.450.132.139 560.743.708.669 356.840.302.909 586.832.300.306 - 3.983.463.877.280
¢ (1.150.228.183.700) (263.108.354.121) (53.223.990.757) (26.507.459.165) (205.513.330.407) 1.897.012.982.482 158.758.704.323 48.661.124.603 405.851.493.258
ASSETS
LIABILITIES
Assets and liabilities spread
- 137 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
Dececember 31, 2013:
Demand 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days
More than 30 days
past due TOTAL
Cash and due from banks ¢ 223.596.601.219 132.742.362 60.022.471 - - - 290.846.762 - 224.080.212.814
Cash reserve-BCCR 202.743.820.239 48.620.992.502 31.152.296.961 25.109.280.686 41.287.243.878 26.032.333.154 4.251.937.029 - 379.197.904.449
Investments 808.741.177 144.242.079.854 16.843.321.622 40.641.185.734 99.057.374.807 184.364.990.842 229.301.954.551 - 715.259.648.587
Interest on investments - 976.033.770 310.612.759 1.968.744.329 1.544.837.291 263.640.993 390.178.837 - 5.454.047.979
Loan portfolio 5.321.576.824 103.834.609.975 55.430.959.096 85.007.950.119 164.228.834.052 1.934.589.471.140 411.665.183.885 41.054.380.575 2.801.132.965.666
Interest on loans - 10.051.416.802 218.556.444 286.963.430 205.730.745 4.995.392.514 4.383.149.162 1.966.418.713 22.107.627.810
¢ 432.470.739.459 307.857.875.265 104.015.769.353 153.014.124.298 306.324.020.773 2.150.245.828.643 650.283.250.226 43.020.799.288 4.147.232.407.305
Obligations with public ¢ 1.397.693.077.255 344.773.604.252 223.451.178.380 186.386.985.034 294.994.022.048 204.553.193.668 117.783.309.482 - 2.769.635.370.119
Obligations with financial
entities 160.015.084.268 92.846.496.671 47.903.101.741 56.802.026.657 77.222.773.474 146.948.300.557 347.562.543.721 - 929.300.327.089
Charges payable 11.423.924 3.288.196.209 7.210.124.816 2.178.236.992 2.736.716.455 2.321.145.710 1.643.411.885 - 19.389.255.991
1.557.719.585.447 440.908.297.132 278.564.404.937 245.367.248.683 374.953.511.977 353.822.639.935 466.989.265.088 - 3.718.324.953.199
¢ (1.125.248.845.988) (133.050.421.867) (174.548.635.584) (92.353.124.385) (68.629.491.204) 1.796.423.188.708 183.293.985.138 43.020.799.288 428.907.454.106
ASSETS
LIABILITIES
Assets and liabilities spread
- 138 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
March 31, 2013:
Demand 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days
More than 30 days
past due TOTAL
Cash and due from banks ¢ 154.984.910.244 408.181.649 - - - - 310.790.342 - 155.703.882.235
Cash reserve-BCCR 184.515.981.019 42.569.032.337 16.421.255.165 20.962.470.921 50.065.878.205 48.395.593.897 4.523.321.575 - 367.453.533.119
Investments 148.344.800 78.591.867.437 32.975.093.662 17.978.894.061 52.951.424.561 238.266.365.814 297.655.659.992 - 718.567.650.327
Interest on investments - 2.781.694.334 2.222.457.561 1.654.214.325 928.578.695 325.551.474 691.360.340 - 8.603.856.729
Loan portfolio 5.247.494.622 82.838.730.438 67.070.174.968 66.156.478.410 167.974.935.004 1.723.444.746.230 414.843.174.587 33.315.176.988 2.560.890.911.247
Interest on loans - 10.507.212.809 329.303.785 182.117.545 244.957.369 5.386.607.390 1.858.812.122 4.103.583.231 22.612.594.251
¢ 344.896.730.685 217.696.719.004 119.018.285.141 106.934.175.262 272.165.773.834 2.015.818.864.805 719.883.118.958 37.418.760.219 3.833.832.427.908
Obligations with public ¢ 1.250.256.923.887 296.004.738.286 115.382.968.976 139.509.147.542 362.411.072.402 340.656.172.153 121.056.341.909 - 2.625.277.365.155
Obligations with financial
entities 158.348.281.690 94.390.048.933 50.970.198.585 91.864.655.919 123.161.858.558 140.667.079.210 108.298.915.217 - 767.701.038.112
Charges payable 13.145.311 4.275.957.141 1.651.486.119 2.594.032.281 4.040.428.320 3.833.488.127 1.889.215.358 - 18.297.752.657
1.408.618.350.888 394.670.744.360 168.004.653.680 233.967.835.742 489.613.359.280 485.156.739.490 231.244.472.484 - 3.411.276.155.924
¢ (1.063.721.620.203) (176.974.025.356) (48.986.368.539) (127.033.660.480) (217.447.585.446) 1.530.662.125.315 488.638.646.474 37.418.760.219 422.556.271.984
ASSETS
LIABILITIES
Assets and liabilities spread
- 139 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014 (With corresponding figures for 2013)
(Continued)
c) Market risk
Market risk analyzes interest rate and currency risks, which determine the price of financial assets. As a result of considerations related to the banking system as a whole, the Bank is required to apply the following definitions of country risk and price risk included in article 3 of SUGEF Directive 2-10:
Country risk: Risk assumed by holding or committing resources in a foreign country and resulting from potential difficulties on the recovery of such resources due to factors affecting the foreign country as a whole. Country risk comprises “sovereign risk” and “transfer risk”. Transfer risk is defined as the possibility that official restrictions will prevent a debtor from honoring the debt commitments, even though sufficient funds are available. Sovereign risk is assumed on loans extended to a State or Government and is the risk of difficulties arising from enforcing the repayment of debt by the borrower or other party responsible for payment due to sovereignty.
Price risk: Possibility of monetary loss due to adverse changes in market prices of financial instruments.
The objective of market risk management is to manage and control market risk exposure within acceptable parameters, while optimizing the return.
Market risk is the risk of potential losses due to an adverse change in the aforementioned market variables that determine the Bank’s value.
VaR is also tracked by applying the RiskMetrics methodology to the Bank’s investment portfolio using the new SAP-TRM IT platform, which permits consolidating the correlations of the different risk factors, such as yield curves and foreign exchange rates, in order to determine a more robust VaR.
Market risk management
For purposes of market risk management, the Bank and its subsidiaries use the SAP system, which offers several methodologies for VaR analysis. VaR is defined as the maximum expected loss over an objective time horizon, within a given confidence interval. Specifically, follow-up is provided by calculating exposure to market risk. Of the methodologies offered by the IT system, the delta-normal methodology is the most frequently used, which applies a one-month holding period (21 business days) and a confidence level of 99%.
- 140 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
This permits more precise calculations since it shows the distribution of expected losses and determines the value of those losses. It also shows the greatest loss scenarios and thus makes it possible to hedge part of the unexpected risk. The analysis is more robust if a region of confidence is obtained, which provides certainty as to the worst loss in the market value of the portfolios. The Bank is currently gathering a representative sample for back-testing purposes. In applying the stress testing with SPA-TRM to the whole portfolio of the Banks funds beneath four different scenarios, the following chart show results: The following chart shows the information at March 31, 2014:
Scenarios Market value Stress market value Difference Variation
Scenario 1: Mov. Curve 100 points base ¢ 607.824.696.439 ¢ 600.979.255.407 ¢ -6.845.441.032 -1,126%
Scenario 2: Mov. Curve short term 607.824.696.439 601.525.676.387 -6.299.020.052 -1,036%
Scenario 3: Variation TC 2.5% 607.824.696.439 594.120.961.030 -13.703.735.408 -2,255%
Scenario 4: Scenario 2 + Scenario 3 ¢ 607.824.696.439 ¢ 594.677.036.509 ¢ -13.147.659.929 -2,163%
Investment portfolio of stress scenario
VaR ¢ 681.664.004
Capital requirement ¢ 4.089.984.022
Risk price 40.900
Observation 25 (0,0018611586)
Exchange rate UDES ¢ 831,05500
Exchange rates USD ¢ 538,34000
Nominal value investment portfolio ¢ 360.303.761.692
Market value investment portfolio ¢ 366.257.880.288
Investment Portfolio
The first scenario applies 100 base points to the proceeds. The second scenario moves on short term nodes between 150 and 175 base point. In the third scenario on stress 2,5% variations on the rate of exchange applies. Finally in the fourth scenario second and third scenario are simultaneously applied.
By stress testing the investment portfolio for the different scenarios, the portfolio could present losses between 0.79% and 2.00%.
- 141 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The following chart shows the information at December 31, 2013:
Scenarios Market value Stress market value Difference Variation
Scenario 1: Mov. Curve 100 points base ¢ 578.950.460.908 ¢ 571.969.597.304 ¢ -6.980.863.604 -1,206%
Scenario 2: Mov. Curve short term 578.950.460.908 574.382.955.771 -4.567.505.137 -0,789%
Scenario 3: Variation TC 2.5% 578.950.460.908 591.482.901.215 12.532.440.307 2,165%
Scenario 4: Scenario 2 + Scenario 3 ¢ 578.950.460.908 ¢ 589.073.700.630 ¢ 10.123.239.722 1,749%
Investment portfolio of stress scenario
VaR ¢ 870.283.175
Capital requirement ¢ 5.221.699.052
Risk price 52.217
Observation 25 (0,0021395000)
Exchange rate UDES ¢ 816,61000
Exchange rates USD ¢ 495,01000
Nominal value investment portfolio ¢ 399.424.645.310
Market value investment portfolio ¢ 406.769.377.553
Investment Portfolio
The following chart shows the information at March 31, 2013:
Scenarios Market value Stress market value Difference Variation
Scenario 1: Mov. Curve 100 points base ¢ 423.092.602.311 ¢ 414.982.943.000 ¢ -8.109.659.311 -1,917%
Scenario 2: Mov. Curve short term 423.092.602.311 418.440.204.498 -4.652.397.813 -1,100%
Scenario 3: Variation TC 2.5% 423.092.602.311 413.021.854.363 -10.070.747.948 -2,380%
Scenario 4: Scenario 2 + Scenario 3 ¢ 423.092.602.311 ¢ 416.468.501.276 ¢ -6.624.101.035 -1,566%
Investment portfolio of stress scenario
VaR ¢ 1.002.936.986
Capital requirement ¢ 6.017.621.919
Risk price 60.176
Observation 25 (0,0022547943)
Exchange rate UDES ¢ 806,92000
Exchange rates USD ¢ 492,69000
Nominal value investment portfolio ¢ 439.890.455.195
Market value investment portfolio ¢ 444.801.987.693
Investment Porfolio
- 142 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The Bank´s Board of Directors has determined that market risk should be managed and monitored dirfectly by the Risk Commnittee, wich is comprised of representative of the entities of the financial conglomerate.
Market risk exposure
The Bank and its subsidiaries use VaR limits to monitor the price risk of their investment portfolios. The structure of the VaR limits is subject to review and approval by the Board of Directors. Those limits are based on the corresponding limits of the trading portfolio. VaR is measured at each month-end. Reports on the VaR limits are sent to the Risk Committee and the Assets and Liability Committee.
i. Interest risk
Interest rate risk, as defined in SUGEF Directive 2-10, is the risk of monetary losses due to adverse variations in interest rates.
The Bank is sensitive to this type of risk due to the mix of rates and terms for both assets and liabilities. This sensitivity is mitigated by managing variable interest rates and ensuring matched asset and liability positions. The effect may vary due to a number of factors, including prepayments, late payments, fluctuations in interest rates, and foreign exchange rate variations.
The Bank’s Risk Committee periodically monitors this risk in the Strategic/ Tractic Risk Committes.
SUGEF Directive 24-00 “Regulations for Determining the Economic and Financial Status of Regulated Entities” defines interest rate risk as exposure to losses due to fluctuations in interest rates when asset and liability terms are mismatched and the entity does not have the required flexibility to make a timely adjustment.
According to SUGEF Directive 24-00, the interest-rate sensitivity of assets and liabilities is evaluated by determining term gaps and the interest rate risk indicator. As of March 31, 2014, the interest rate risk indicator in local currency was 0,24% (1,07% and 1,90% as of December 31, 2013 and March 31, 2013, respectively), which means that the Bank is still at a normal level (applicable regulations require a value of 5% or less). In foreign currency, this indicator is on the order of -0,03% (-0,02% and 0,06% as of December 31, 2013 and March 31, 2013, respectively). The Bank is getting further from the 5% maximum due to growing local interest rates and the current historical lows of the U.S. dollar, which value may decrease in the second half of 2014.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Additionally, the impact of variations in interest rates on the Bank’s financial margin as of March 31, 2014 is as follows:
Colones U.S. dollars Consolidated
Impact on balances 3.581 1,46 7.842
Impact on rates 1.508 -2,59 -1.081
Combined impact 61 -7,00 -45
Change in net income 5.028 -1,06 6.805
-in millons of colones-
Change in net financial margin
The impact of variations in interest rates on the Bank’s financial margin as of December 31, 2013 is as follows:
Colones U.S. dollars Consolidated
Impact on balances 966 3 2.994
Impact on rates 1.549 -25,00 1.048
Combined impact 94 -2,00 8
Change in net income 2.421 3,00 4.034
-in millons of colones-
Change in net financial margin
The impact of variations in interest rates on the Bank’s financial margin as of March 31, 2013 is as follows:
Colones U.S. dollars Consolidated
Impact on balances -3.132 -2 -4.846
Impact on rates -2.736 -72,00 -2.176
Combined impact 200 -10,00 368
Change in net income -6.068 -2,66 -7.389
Change in net financial margin
-in millons of colones-
- 144 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
As of March 31, 2014, interest rate terms for assets and liabilities are matched as follows:
Effective
rate 1 to 30 days 31 to 90 days 91 to 180 days 181 to 360 days 361 to 720 days
More than 720
days Total
Colones:
Assets
Investments 8,59% ¢ 52.298.198.420 35.201.745.464 36.157.556.238 106.716.771.059 47.803.458.048 122.925.904.213 401.103.633.442
Loan portfolio 10,89% 931.991.988.595 8.663.157.116 15.600.811.225 20.032.280.637 35.715.922.899 157.308.992.428 1.169.313.152.900
Total recovered assets (*) 984.290.187.015 43.864.902.580 51.758.367.463 126.749.051.696 83.519.380.947 280.234.896.641 1.570.416.786.342
Liabilities
Obligations with the public 14.595.587.376 3.081.500.865 2.050.566.645 564.742.143 23.345.794 35.184.849 20.350.927.672
Demand 1,91%
Term 6,05%
Obligations with the BCCR 61.000.000.000 - - - - - 61.000.000.000
Obligations with financial
entities 4,81% 219.910.585.541 162.638.167.112 239.050.860.837 108.305.676.330 7.194.494.737 7.003.610.773 744.103.395.330
Total matured liabilities (*) 295.506.172.917 165.719.667.977 241.101.427.482 108.870.418.473 7.217.840.531 7.038.795.622 825.454.323.002
Assets and liabilities spread ¢ 688.784.014.098 (121.854.765.397) (189.343.060.019) 17.878.633.223 76.301.540.416 273.196.101.019 744.962.463.340
U.S. dollars
Assets
Investments 2,23% ¢ 4.519.831.686 71.339.171.656 26.614.971.428 32.814.533.457 37.916.742.304 55.253.351.036 228.458.601.567
Loan portfolio 7,78% 857.710.058.517 176.684.399.472 41.125.594.738 184.128.134.717 73.411.560.801 163.823.945.830 1.496.883.694.075
Total recovered assets (*) 862.229.890.203 248.023.571.128 67.740.566.166 216.942.668.174 111.328.303.105 219.077.296.866 1.725.342.295.642
Liabilities
Obligations with the public 171.379.118.001 67.007.193.713 106.461.784.654 51.664.451.952 71.368.085.327 26.401.772.953 494.282.406.600
Demand 1,50%
Term 1,46%
Obligations with financial
entities 0,03% 28.024.360.428 46.338.950.010 249.763.291.513 196.586.224.047 63.057.971.270 365.854.553.182 949.625.350.450
Total matured liabilities (*) 199.403.478.429 113.346.143.723 356.225.076.167 248.250.675.999 134.426.056.597 392.256.326.135 1.443.907.757.050
Assets and liabilities spread ¢ 662.826.411.774 134.677.427.405 (288.484.510.001) (31.308.007.825) (23.097.753.492) (173.179.029.269) 281.434.538.592
(*) Rate-sensitive
- 145 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
As of December 31, 2013, interest rate terms for assets and liabilities are matched as follows:
Effectiv
e rate 1 to 30 days 31 to 90 days 91 to 180 days 181 to 360 days 361 to 720 days
More than 720
days Total
Colones:
Assets
Investments 5,97% ¢ 91.457.022.787 21.671.008.603 78.113.784.322 106.600.950.249 67.951.530.564 134.689.549.618 500.483.846.143
Loan portfolio 11,18% 890.498.303.468 43.212.606.234 6.480.236.607 27.784.774.360 36.893.756.968 144.886.074.319 1.149.755.751.956
Total recovered assets (*) 981.955.326.255 64.883.614.837 84.594.020.929 134.385.724.609 104.845.287.532 279.575.623.937 1.650.239.598.099
Liabilities
Obligations with the public 27.401.808.463 6.819.323.143 1.290.210.783 339.162.612 28.622.707 33.855.737 35.912.983.445
Demand 2,26%
Term 6,46%
Obligations with financial
entities 3,79% 225.344.419.581 239.630.199.599 161.937.828.345 118.678.553.638 5.372.383.442 6.225.295.872 757.188.680.477
Total matured liabilities (*) 252.746.228.044 246.449.522.742 163.228.039.128 119.017.716.250 5.401.006.149 6.259.151.609 793.101.663.922
¢ 729.209.098.211 (181.565.907.905) (78.634.018.199) 15.368.008.359 99.444.281.383 273.316.472.328 857.137.934.177
U.S. dollars
Assets
Investments 1,81% ¢ 52.972.423.756 18.002.339.515 11.237.847.173 4.752.789.548 15.335.183.179 50.627.901.016 152.928.484.187
Loan portfolio 6,30% 790.199.677.219 185.251.769.873 116.791.444.843 31.241.875.044 89.135.747.542 189.493.756.853 1.402.114.271.374
Total recovered assets (*) 843.172.100.975 203.254.109.388 128.029.292.016 35.994.664.592 104.470.930.721 240.121.657.869 1.555.042.755.561
Liabilities
Obligations with the public 179.014.806.153 121.543.214.711 31.871.946.352 69.394.155.685 67.848.417.718 25.182.388.200 494.854.928.819
Demand 0,57%
Term 1,59%
Obligations with financial
entities 0,06% 33.971.646.097 61.465.296.283 147.889.691.374 146.356.158.962 67.455.867.393 281.523.964.909 738.662.625.018
Total matured liabilities (*) 212.986.452.250 183.008.510.994 179.761.637.726 215.750.314.647 135.304.285.111 306.706.353.109 1.233.517.553.837
¢ 630.185.648.725 20.245.598.394 (51.732.345.710) (179.755.650.055) (30.833.354.390) (66.584.695.240) 321.525.201.724
(*) Rate-sensitive
Assets and liabilities spread
Assets and liabilities spread
- 146 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
As of March 31, 2013, interest rate terms for assets and liabilities are matched as follows:
Effectiv
e rate 1 to 30 days 31 to 90 days 91 to 180 days 181 to 360 days 361 to 720 days
More than 720
days Total
Colones:
Assets
Investments 7,81% ¢ 32.935.419.498 15.924.734.175 30.634.785.373 209.443.407.568 116.717.912.663 179.802.576.016 585.458.835.293
Loan portfolio 11,69% 827.217.091.198 92.883.998.122 4.904.830.859 13.724.382.574 30.393.441.542 126.397.030.587 1.095.520.774.882
Total recovered assets (*) 860.152.510.696 108.808.732.297 35.539.616.232 223.167.790.142 147.111.354.205 306.199.606.603 1.680.979.610.175
Liabilities
Obligations with the public 24.874.652.114 5.839.963.383 2.614.840.894 1.214.287.980 48.491.914 19.713.752 34.611.950.037
Demand 4,06%
Term 9,16%
Obligations with financial
entities 0,02% 167.300.921.197 152.042.121.486 190.097.772.661 264.443.836.033 5.153.041.338 6.696.599.516 785.734.292.231
Total matured liabilities (*) 192.175.573.311 157.882.084.869 192.712.613.555 265.658.124.013 5.201.533.252 6.716.313.268 820.346.242.268
¢ 667.976.937.385 (49.073.352.572) (157.172.997.323) (42.490.333.871) 141.909.820.953 299.483.293.335 860.633.367.907
USDólares:
Assets
Investments 3,32% ¢ 30.158.969.308 18.552.585.200 7.351.153.753 24.851.881.809 4.611.234.525 60.820.318.215 146.346.142.810
Loan portfolio 6,26% 614.709.279.944 237.142.745.958 96.839.761.692 42.988.198.095 87.084.282.183 157.488.204.164 1.236.252.472.036
Total recovered assets (*) 644.868.249.252 255.695.331.158 104.190.915.445 67.840.079.904 91.695.516.708 218.308.522.379 1.382.598.614.846
Liabilities
Obligations with the public 146.858.970.807 60.527.002.334 44.673.169.967 31.351.414.756 53.696.137.230 38.082.873.921 375.189.569.015
Demand 1,22%
Term 1,79%
Obligations with financial
entities 1,59% 52.619.116.519 127.008.220.245 183.719.243.900 136.350.132.562 34.215.261.905 122.958.694.958 656.870.670.089
Total matured liabilities (*) 199.478.087.326 187.535.222.579 228.392.413.867 167.701.547.318 87.911.399.135 161.041.568.879 1.032.060.239.104
¢ 445.390.161.926 68.160.108.579 (124.201.498.422) (99.861.467.414) 3.784.117.573 57.266.953.500 350.538.375.742
(*) Rate-sensitive
Assets and liabilities spread
Assets and liabilities spread
- 147 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
ii. Currency risk
Pursuant to SUGEF Directive 2-10, currency risk is the risk of monetary losses due to adverse changes in foreign exchange rates. This risk also arises when net foreign exchange differences do not proportionally offset the changes in the value of assets denominated in foreign currency, causing a decrease in an entity’s capital adequacy indicator. Currency risk may also result in increased credit risk in the event of default by borrowers that hold loans in a foreign currency in which they do not generate cash flows, as a result of variations in foreign exchange rates. In October 2006, BCCR introduced a foreign exchange adjustable band system. Since then, the exchange rate had remained consistently at the floor of that band. However, with the significant band adjustment that occurred starting May 2008, the Bank’s management has decided to take a neutral foreign currency position with the purpose of protecting the Bank from any variation in the exchange rate and, meanwhile, is watching developments in the foreign exchange market. The Bank’s foreign currency position is monitored daily by the Market Risk Area. Currently this position has been eliminated given the high uncertainty from the political point of view as to the decision of moving the system floor. Through written communication CCAP 02-13 of January 16, 2013´s meeting, the Assets and Liabilities Corporate Committee, in its Article 9 decided by determined period to skip this limit so the Treasury can count on an own minimum level position in order to prevent exchange losses in the case of a variation of the band floor. The Bank’s foreign currency position is monitored daily by the Market Risk Area. As of March 31, 2014, the Bank is in a normal level of currency risk, in accordance with the provisions of regulations, since the indicator is a 1,16%% (0,30% and 0,17% as of December 31, 2013 and March 31, 2013, respectively), and consideration of “normal” establishes the indicator must be less or equal to a 5%. The increase of foreign exchange risk in 582.35% finds its genesis in the beginning of the volatility of this macro price for the first quarter of 2014, with a level of appreciation of 8.80% to closure. The above by pull factors such as reducing incentives used by the Federal Reserve in the last quarter and decreases in direct foreign investment. The data of the Central Bank show that, in 2013, the sector received-between new investments and reinvestments-US$528 million, down 12% compared to 2012. In 2010, the direct foreign investment in this sector had the greatest historical investment with US$790 million and from that year began to decrease.
- 148 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The above is reflected in the Monte Carlo simulations prepared by Financial Risk Management as of March 31, 2014, where in the event of a variation in the exchange rate of 0,183% (0,29% as of December 31, 2013 and March 31, 2013) and applying the Garch methodology to this variable, equity sensitive to this type of risk would be reduced by ¢1.292.361.751 (¢1.920.065.713 and ¢1.024.425.980 as of December 31, 2013 and March 31, 2013, respectively), with a confidence level of 99% over a period of one year. Assets and liabilities denominated in U.S. dollars are as follows:
March December March
2014 2013 2013
Assets:
Cash and due from banks US$ 579.663.563 543.428.528 455.308.267
Investments in financial instruments 570.260.829 455.831.836 426.789.398
Loan portfolio 3.038.835.051 3.037.847.190 2.681.458.779
Accounts and accrued interest receivable 4.056.925 4.202.974 4.079.248
Other 26.545.282 19.161.097 26.701.003
Total assets 4.219.361.650 4.060.471.625 3.594.336.695
Liabilities
Obligation with the public 2.326.166.397 2.133.006.390 2.050.839.483
Other financial obligations 1.682.854.521 1.702.156.713 1.365.515.298
Other accounts payable and provisions 33.954.189 44.010.976 37.834.705
Other 10.997.940 15.544.639 12.850.519
Subordinated obligations 30.062.500 30.067.500 30.071.719
Total liabilities 4.084.035.547 3.924.786.218 3.497.111.724
Net position US$ 135.326.103 135.685.407 97.224.971
- 149 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Monetary assets and liabilities in foreign currency are valued by using the reference buy rate established by BCCR on the last business day of each month. As of March 31, 2014, that rate was ¢538,34 per US $1,00 (¢495,01 and ¢492,72 as of December 31, 2013 and March 31, 2013, respectively). Net exposure is not hedged. However, the Bank considers its position to be acceptable since it can buy or sell U.S. dollars in the market when necessary.
- 150 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
The terms of the Bank’s most important accounts in U.S. dollars as of March 31, 2014 are matched as follows:
Demand 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days
More than 30 days
past due TOTAL
Cash and due from banks US$ 318.572.292 74.768 - - - - 560.259 - 319.207.319
Cash reserve-BCCR 136.075.575 32.943.067 11.022.582 9.701.929 52.314.247 12.772.684 5.626.160 - 260.456.244
Investments 367.947 24.498.856 113.240.184 31.579.053 97.231.560 151.803.832 148.904.060 - 567.625.492
Interest on investments - 94.362 1.540.540 129.290 496.401 403.318 260.739 - 2.924.650
Loan portfolio 16.107.254 171.524.984 82.038.228 84.512.072 244.393.527 1.577.691.822 851.982.296 30.446.619 3.058.696.802
Interest on loans - 6.971.197 338.481 369.688 682.365 436.077 5.289.588 2.041.359 16.128.755
US$ 471.123.068 236.107.234 208.180.015 126.292.032 395.118.100 1.743.107.733 1.012.623.102 32.487.978 4.225.039.262
Obligations with public US$ 1.038.823.383 260.438.854 152.836.472 88.973.187 399.940.243 197.549.708 180.205.371 - 2.318.767.218
Obligations with public BCCR - - - - - - - - -
Obligations with financial
entities 196.415.659 151.715.566 51.680.000 38.384.150 145.017.675 259.538.635 831.144.530 - 1.673.896.215
Charges payable 2.664 1.456.690 1.456.078 1.137.831 6.223.012 3.141.537 2.939.673 - 16.357.485
1.235.241.706 413.611.110 205.972.550 128.495.168 551.180.930 460.229.880 1.014.289.574 - 4.009.020.918
US$ (764.118.638) (177.503.876) 2.207.465 (2.203.136) (156.062.830) 1.282.877.853 (1.666.472) 32.487.978 216.018.344
ASSETS
LIABILITIES
Assets and liabilities spread
- 151 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
The terms of the Bank’s most important accounts in U.S. dollars as of December 31, 2013 are matched as follows:
Demand 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days
More than 30 days
past due TOTAL
Cash and due from banks US$ 317.273.364 66.073 - - - - 567.356 - 317.906.793
Cash reserve-BCCR 115.194.504 28.562.396 23.083.458 17.103.144 28.957.312 11.797.503 823.418 - 225.521.735
Investments 1.633.788 137.095.494 23.484.291 37.712.871 30.900.787 109.682.346 114.347.163 - 454.856.740
Interest on investments - 249.855 202.522 419.330 437.881 145.484 569.559 - 2.024.631
Loan portfolio 10.750.443 173.775.757 85.147.680 130.848.789 242.025.153 1.589.083.413 803.207.074 21.683.079 3.056.521.388
Interest on loans - 6.288.921 441.519 579.712 415.609 512.330 5.488.284 528.325 14.254.700
US$ 444.852.099 346.038.496 132.359.470 186.663.846 302.736.742 1.711.221.076 925.002.854 22.211.404 4.071.085.987
Obligations with public US$ 961.259.791 212.038.923 191.442.372 163.710.167 251.275.270 155.021.227 191.821.577 - 2.126.569.327
Obligations with financial
entities 199.164.963 168.618.121 85.933.410 105.604.504 141.192.721 285.764.246 700.020.047 - 1.686.298.012
Charges payable 4.194 1.453.993 11.953.618 2.178.711 1.869.406 2.023.395 2.812.449 - 22.295.766
1.160.428.948 382.111.037 289.329.400 271.493.382 394.337.397 442.808.868 894.654.073 - 3.835.163.105
US$ (715.576.849) (36.072.541) (156.969.930) (84.829.536) (91.600.655) 1.268.412.208 30.348.781 22.211.404 235.922.882
LIABILITIES
Assets and liabilities spread
ASSETS
- 152 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
The terms of the Bank’s most important accounts in U.S. dollars as of March 31, 2013 are matched as follows:
Demand 1 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days 181 to 365 days More than 365 days
More than 30 days
past due TOTAL
Cash and due from banks US$ 206.429.831 82.807 - - - - 610.469 - 207.123.107
Cash reserve-BCCR 124.796.005 38.871.126 12.393.793 14.810.118 37.767.407 18.964.809 581.903 - 248.185.161
Investments 90.000 77.886.060 39.827.001 11.617.236 32.953.183 112.260.889 148.330.498 - 422.964.867
Interest on investments - 227.917 1.858.573 137.216 152.614 158.278 1.289.934 - 3.824.532
Loan portfolio 10.650.054 139.107.791 111.866.923 110.226.701 272.379.844 1.292.217.408 745.124.049 14.099.814 2.695.672.584
Interest on loans - 6.003.456 668.339 369.617 497.153 482.284 3.772.553 1.589.169 13.382.571
US$ 341.965.890 262.179.157 166.614.629 137.160.888 343.750.201 1.424.083.668 899.709.406 15.688.983 3.591.152.822
Obligations with public US$ 916.262.011 250.897.027 91.369.593 102.642.109 320.243.029 175.565.967 189.730.241 - 2.046.709.977
Obligations with financial
entities 205.017.933 170.445.836 96.753.252 177.576.312 229.550.067 260.149.817 217.048.878 - 1.356.542.095
Charges payable 7.247 2.066.490 1.506.355 1.699.539 3.149.986 1.518.196 3.154.897 - 13.102.710
1.121.287.191 423.409.353 189.629.200 281.917.960 552.943.082 437.233.980 409.934.016 - 3.416.354.782
US$ (779.321.301) (161.230.196) (23.014.571) (144.757.072) (209.192.881) 986.849.688 489.775.390 15.688.983 174.798.040Assets and liabilities spread
ASSETS
LIABILITIES
- 153 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The Bank incurs currency risk when the value of its dollar-denominated assets and liabilities is affected by exchange rate variations, which is recognized in the consolidated income statement. For the years ended March 31, 2014 and 2013, the consolidated financial statements show a net foreign exchange loss of ¢795.795.153 and a net foreign exchange gain ¢1.167.376.275, respectively. The sensitivity analysis for currency risk is mainly considered for measuring the position in a specific currency. The analysis consists of verifying each month how much the position in the functional currency would represent with respect to the currency it would be converted into and, therefore, the mix of the currency risk. The analysis performed by the Bank is described below.
s 0,18%
Gap 82.767.992
VaR Daily ¢ 81.411.138
VaR Annual ¢ 1.292.361.751
Exchange risk index 2,90%
Exchange rate USD 538,34000
Exchange Currency risk
Garch Methodology
As of March 31, 2014
s 0,30%
Gap 82.870.584
VaR Daily ¢ 120.952.771
VaR Annual ¢ 1.920.065.713
Exchange risk index 4,68%
Exchange rate USD 495,01000
Exchange Currency risk
As of December 31, 2013
Garch Methodology
- 154 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
s 0,35%
Gap 37.557.268
VaR Daily ¢ 64.532.771
VaR Annual ¢ 1.024.425.980
Exchange risk index 5,54%
Exchange rate USD 492,72000
As of March 31, 2013
Garch Methodology
Exchange Currency risk
The fair value of the Bank’s own investments is shown below:
Colones U.S. dollars EUR DU
March 31, 2014 ¢ 331.047.927.786 US$ 427.767.749 € 3.251.909 47.923.334.647
December 31, 2013 ¢ 393.040.406.399 US$ 332.548.549 3.251.078 47.163.137.648
March 31, 2013 ¢ 408.387.542.053 US$ 287.078.046 € 1.251.541 54.429.528.841
Percentage variation -18,94% 49,01%
Portfolio of Own Funds
March 31, 2014, December 31, 2013 and March 31, 2013
As of March 31, 2014, the fair value of the Bank’s investments is shown below:
Colones
U.S. dollars
expressed in colones
EUR expressed in
colones DU Total
Instruments ¢ 327.030.212.767 ¢ 222.175.256.839 ¢ 2.415.873.470 ¢ 47.923.334.647 ¢ 599.544.677.724
Funds 4.017.715.019 8.109.232.898 - - 12.126.947.917
Total ¢ 331.047.927.786 ¢ 230.284.489.737 ¢ 2.415.873.470 ¢ 47.923.334.647 ¢ 611.671.625.640
XRT USDCRC 538,34
XRT DU 831,0550
XRT EUR 1,3800
Fair Value of Investments
As of March 31, 2014
- 155 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Colones U.S. dollars
U.S. dollars
expressed in colones
Percentage of
investments in U.S.
dollars
BIPANCD$ - US$ 20.000.000 ¢ 10.766.800.000 4,68%
BOEN bbo15 - 4.651.322 2.503.992.470 1,09%
CAMEB bca14 - 1.129.129 607.855.268 0,26%
CANAD bcg14 - 10.955.137 5.897.588.183 2,56%
Total ¢ - US$ 36.735.587 ¢ 19.776.235.921 8,59%
XRT 538,34
Fair Value of Foreign Investments
As of March 31, 2014
As of December 31, 2013, the fair value of the Bank’s investments is shown below:
Colones
U.S. dollars
expressed in colones
EUR expressed in
colones DU Total
Instrumens ¢ 389.037.976.692 ¢ 155.879.186.327 ¢ 2.211.683.016 ¢ 47.163.137.648 ¢ 594.291.983.683
Funds 4.002.429.707 8.735.670.729 - - 12.738.100.436
Total ¢ 393.040.406.399 ¢ 164.614.857.056 ¢ 2.211.683.016 ¢ 47.163.137.648 ¢ 607.030.084.119
XRT 495,01
XRT DU 816,6060
XRT EUR 1,3743
Fair Value of Investments
As of December 31, 2013
Colones U.S. dollars
U.S. dollars
expressed in colones
Percentage of
investments in U.S.
dollars
AFDB baf14 - US$ 2.201.012 1.184.892.800 0,51%
BIPANCD$ - 60.000.000 29.700.600.000 18,04%
BOEN bbo15 - 4.652.296 2.504.517.029 1,09%
BOEN boe14 - 3.157.466 1.699.789.977 0,74%
CANAD bcg14 - 11.016.331 5.930.531.361 2,58%
CAMEB bca14 - 1.143.354 565.971.604 0,34%
EIB bek13 - 4.818.253 2.385.083.635 1,45%
Total ¢ - US$ 86.988.711 ¢ 43.971.386.406 24,75%
XRT 495,01
Fair Value of Foreign Investments
As of December 31, 2013
- 156 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013, the fair value of the Bank’s investments is shown below:
Colones
U.S. dollars
expressed in colones
EUR expressed in
colones DU Total
Instrumens ¢ 404.143.455.900 ¢ 136.765.230.861 ¢ 787.597.121 ¢ 54.429.528.841 ¢ 596.125.812.723
Funds 4.244.086.153 4.683.863.931 - - 8.927.950.084
Total ¢ 408.387.542.053 ¢ 141.449.094.792 ¢ 787.597.121 ¢ 54.429.528.841 ¢ 605.053.762.807
XRT 492,72
XRT DU 806,9200
XRT EUR 629,3020
As of March 31, 2013
Fair Value of Investments
Colones U.S. dollars
U.S. dollars
expresed in colones
Percentage of
investments in U.S.
dollars
CAFOM caf13 ¢ - US$ 100.667 ¢ 49.600.644 0,04%
CAMEB bca14 - 1.170.243 576.602.087 0,41%
CAMEB cam13 - 1.655.783 815.837.439 0,58%
AFDB baf14 - 2.202.838 1.085.382.339 0,77%
BASIA bia13 - 4.196.719 2.067.807.386 1,46%
BOEN bbo15 - 8.926.700 4.398.363.624 3,11%
BOEN bbo14 - 4.950.029 2.438.978.289 1,72%
COE bcol13 - 3.908.970 1.926.027.698 1,36%
EIB bei14 - 10.759.973 5.301.653.897 3,75%
IAB bid13 - 1.664.454 820.109.775 0,58%
INTBK bib13 - 5.259.450 2.591.436.204 1,83%
SWED bsd13 - 349.562 172.236.189 0,12%
SWED bsw14 - 13.611.510 6.706.663.207 4,74%
USTES pcu13 - 3.498.670 1.723.864.682 1,22%
USTES pcu14 - 10.990.540 5.415.258.869 3,83%
CANAD bcg14 - 11.180.491 5.508.851.526 3,89%
Total ¢ - US$ 84.426.599 ¢ 41.598.673.855 29,41%
XRT 492,72
Fair Value of Foreign Investments
As of March 31, 2013
- 157 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014, the share of investment funds in the Bank’s portfolio is as follows:
Colones Share Price Fair value
Amount expressed
in colones
BCRSF - inm3 569 3.010.000 ¢ 1.712.690.000 ¢ 1.712.690.000
PSFI - FI006 1.019.020.786 2.262 ¢ 2.305.025.019 ¢ 2.305.025.019
4.017.715.019
U.S. dollars
BCRSF - F1022 8.197.889 1 US$ 9.894.852 ¢ 5.326.794.572
INTSF - inm1$ 892 2.900 2.586.791 1.392.573.110
INTSF - inm2$ 637 4.053 2.581.761 1.389.865.216
US$ 15.063.404 ¢ 8.109.232.898
Total 12.126.947.916
XRT 538,34
Share of Investment Funds
As of December 31, 2013, the share of investment funds in the Bank’s portfolio is as follows:
Colones Share Price Fair value
Amount expressed
in colones
BCRSF - inm3 569 3.010.000 ¢ 1.712.690.000 ¢ 1.712.690.000
PSFI - FI006 1.019.020.786 2.247 ¢ 2.289.739.707 2.289.739.707
4.002.429.707
U.S. dollars
BCRSF - F1022 10.274.134 1 US$ 12.359.783 6.118.216.252
INTSF - inm1$ 892 2.900 2.586.800 1.280.491.868
INTSF - inm2$ 637 4.240 2.700.880 1.336.962.609
US$ 17.647.463 ¢ 8.735.670.729
Total 12.738.100.436
XRT 495,01
Share of Investment Funds
- 158 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of December 31, 2013, the share of investment funds in the Bank’s portfolio is as follows:
Colones Share Price Fair value
Amount expressed
in colones
BCRSF - inm3 673 2.985.000 ¢ 2.008.905.000 ¢ 2.008.905.000
PSFI - FI006 1.017.842.055 2 ¢ 2.235.181.153 2.235.181.153
4.244.086.153
U.S. dollars
INTSF - inm1$ 892 2.950 US$ 2.631.400 1.296.543.408
INTSF - inm2$ 637 4.269 2.719.353 1.339.879.610
BCRSF - F1022 3.494.856 1 4.155.384 2.047.440.913
US$ 9.506.137 ¢ 4.683.863.931
Total 8.927.950.084
XRT 492,72
Share of Investment Funds
d) Operational risk
Operational risk is the risk of direct or indirect loss associated with the Bank’s processes, personnel, technology, and infrastructure, and from external factors other than credit, market, and liquidity risks, such as those arising from legal and regulatory requirements and generally accepted standards of corporate behavior. This is an inherent risk for the sector in which the Bank operates and for all of its main activities. This risk may take various forms, particularly failures, errors, business interruptions, or inappropriate employee conduct, and may result in financial losses, sanctions imposed by regulatory authorities, or damage to the Bank’s reputation. The Bank’s objective is to manage operational risk in order to minimize financial losses and damage to the Bank’s reputation, as well as to achieve efficient and effective processes and optimize its internal control system. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management in each business and support unit. Periodic reports are submitted to the Risk Committee and, where appropriate, to the Executive Committee and General Board of Directors.
- 159 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
This responsibility is supported by the development of standards or specific regulations for the management of operational risk included in the following areas:
- Corporate Policies for Integrated Risk Management. - Corporate Regulation for Integrated Risk Management.
To manage operational risk both qualitative and quantitative methods are used. The first are performed by:
- Assessment of risks by strategic objectives - Assessment of substantial process risks
These assessments are made based on the framework, which involves development of management plans for the risks identified, as well as informing the appropriate committees of the results of the assessments and follow-up. The Bank has also defined:
appropriate segregation of duties, including the independent authorization of
transactions. requirements for effective reconciliation and monitoring of transactions. compliance with regulatory and legal requirements. documentation of controls and procedures; periodic assessments of operational risk management and effective controls
and procedures for the risks identified. monthly reporting of operational losses and proposed remedial action. development of the contingency plan. development of training activities for Bank personnel. application of standards of business ethics. development of risk mitigation activities, including security policies. communication and application of corporate conduct guidelines. risk mitigation, including insurance where this is effective; comprehensive planning for resuming activities, including plans to restore key
operations and internal and external support to ensure that services are not interrupted.
- 160 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
These policies established by the Bank are supported by a program of periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with management of each business unit, with summaries submitted to the Bank’s Audit Committee and Risk Department. In turn, the quantitative assessment of operational risk is made through the Exponential Smoothing Methodology, which projects losses. A maximum limit has been issued for operational risk losses with respect to equity.
Capital management: Regulatory capital Based on the CAR defined in recent SUGEF regulations, as of March 31, 2014, the Bank’s risk-weighted assets amount to ¢2.510.320 million (¢2.269.715 and ¢1.990.336 as of December 31, 2013 and March 31, 2013, respectively). The Bank’s capital must always comply with the CAR established by SUGEF, which require that banks maintain a ratio of at least 10% at all times. That ratio is calculated by dividing the Bank’s base capital by total riskweighted exposures. Management periodically monitors these requirements and reports to the Board of Directors on compliance. As of March, 31 2014, December 31, 2013 and March 31, 2013, the Bank’s CAR is above the minimum ratio (10%) required by applicable regulations. A directive has been issued by the Board of Directors requiring that the CAR not fall below 11%.
- 161 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014, the capital adequacy of the Bank’s financial conglomerate is as follows:
Companies of the Fianancial Conglomerate Base capital
Individual minimium
capital requirement
Individual surplus or
deficit Non-tranferable items
Transferable surplus
and individual deficit
Holding company
Banco de Costa Rica ¢ 307.946.911.085 270.234.678.333 37.712.232.752 - 37.712.232.752
307.946.911.085 270.234.678.333 37.712.232.752 - 37.712.232.752
Regulated entities
Banco Internacional de Costa Rica, S. A
and subsidiary 94.648.990.375 62.933.636.769 31.715.353.606 15.540.523.267 16.174.830.339
BCR Valores, S. A. 10.231.461.970 2.301.186.152 7.930.275.818 - 7.930.275.818
BCR Sociedad Administradora de
Fondos de inversión, S.A. 8.295.102.660 2.186.852.620 6.108.250.040 - 6.108.250.040
BCR Pensión Operadora de Planes de
Pensiones Complementarias, S.A. 5.786.592.668 2.757.802.010 3.028.790.658 - 3.028.790.658
¢ 118.962.147.673 70.179.477.551 48.782.670.122 15.540.523.267 33.242.146.855
Non regulated entities
BCR Corredora de Seguros, S.A. 1.677.349.419 659.988.168 1.017.361.251 1.017.361.251
¢ 1.677.349.419 659.988.168 1.017.361.251 - 1.017.361.251
Global surplus or deficit of the financial
Conglomerate ¢ 71.971.740.858
- 162 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of December 31, 2013, the capital adequacy of the Bank’s financial conglomerate is as follows:
Companies of the Fianancial Conglomerate Base capital
Individual minimium
capital requirement
Individual surplus or
deficit Non-tranferable items
Transferable surplus
and individual deficit
Holding company
Banco de Costa Rica ¢ 299.580.645.494 246.546.409.880 53.034.235.614 - 53.034.235.614
299.580.645.494 246.546.409.880 53.034.235.614 - 53.034.235.614
Regulated entities
Banco Internacional de Costa Rica, S. A
and subsidiary 84.863.723.250 58.918.448.404 25.945.274.846 12.713.184.675 13.232.090.171
BCR Valores, S. A. 10.387.190.760 3.108.897.240 7.278.293.520 - 7.278.293.520
BCR Sociedad Administradora de
Fondos de inversión, S.A. 7.610.379.220 1.853.816.640 5.756.562.580 - 5.756.562.580
BCR Pensión Operadora de Planes de
Pensiones Complementarias, S.A. 5.586.844.479 2.684.573.005 2.902.271.474 - 2.902.271.474
¢ 108.448.137.709 66.565.735.289 41.882.402.420 12.713.184.675 29.169.217.745
Non regulated entities
BCR Corredora de Seguros, S.A. 1.600.000.000 682.137.087 917.862.913 - 917.862.913
¢ 1.600.000.000 682.137.087 917.862.913 - 917.862.913
Global surplus or deficit of the financial
Conglomerate ¢ 83.121.316.272
- 163 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013, the capital adequacy of the Bank’s financial conglomerate is as follows:
Companies of the Fianancial Conglomerate Base capital
Individual minimium
capital requirement
Individual surplus or
deficit Non-tranferable items
Transferable surplus
and individual deficit
Holding company
Banco de Costa Rica ¢ 284.058.621.269 216.330.981.318 67.727.639.951 - 67.727.639.951
284.058.621.269 216.330.981.318 67.727.639.951 - 67.727.639.951
Regulated entities
Banco Internacional de Costa Rica, S. A
and subsidiary 79.464.521.673 54.559.094.525 24.905.427.148 12.203.659.302 12.701.767.846
BCR Valores, S. A. 9.174.746.970 3.117.799.880 6.056.947.090 - 6.056.947.090
BCR Sociedad Administradora de
Fondos de inversión, S.A. 6.889.157.740 1.538.087.650 4.759.068.180 - 4.759.068.180
BCR Pensión Operadora de Planes de
Pensiones Complementarias, S.A. 5.577.278.442 2.421.070.369 3.021.202.434 - 3.021.202.434
¢ 101.105.704.825 61.636.052.424 38.742.644.852 12.203.659.302 26.538.985.550
Non regulated entities
BCR Corredora de Seguros, S.A. 600.000.000 464.779.175 135.220.825 - 135.220.825
¢ 600.000.000 464.779.175 135.220.825 - 135.220.825
Global surplus or deficit of the financial
Conglomerate ¢ 94.401.846.326
- 164 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(37) Financial information of Development Financing Fund
The Bank presents the following financial information as manager of its Finnancial information of development Finang Fund (FINADE).
March December March
2014 2013 2013
ASSETS
Availabilities 385.287.423 - 1.420.384.059
Cash 385.287.423 - 1.420.384.059
Loan portfolio 11.840.325.250 10.866.818.474 8.073.043.669
Current 10.434.316.355 9.291.480.967 7.292.969.415
Past due 1.419.649.895 1.497.297.276 760.808.443
Legal collections 156.558.131 97.842.775 78.071.568
Accrued interest receivable 102.147.743 94.180.141 64.399.138
(Allowance for loan impairment) (272.346.874) (113.982.685) (123.204.895)
TOTAL ASSETS 12.225.612.673 10.866.818.474 9.493.427.728
LIABILITIES
Accounts payable and provisions 38.805.912 577.325.630 8.580.425
Other sundry accounts payable 38.805.912 577.325.630 8.580.425
Other liabilities 24.539.090 2.079.885 676.971
Deferred income 24.539.090 2.079.885 676.971
TOTAL LIABILITIES 63.345.002 579.405.515 9.257.396
EQUITY
Contributions from Banco de Costa Rica 9.898.139.668 8.158.223.302 8.158.223.302
Profit from prior year 2.129.189.656 1.097.099.869 1.097.099.869
Profit from current year 134.938.346 1.032.089.788 228.847.161
TOTAL EQUITY 12.162.267.671 10.287.412.959 9.484.170.332
TOTAL LIABILITIES AND EQUITY 12.225.612.673 10.866.818.474 9.493.427.728
OTHER DEBIT MEMORANDA ACCOUNTS
Own debit memoranda accounts 951.495.679 917.376.712 370.231.021
DEVELOPMENT FINANCING FUND
BALANCE SHEET
As of March 31, 2014, December 31, 2013 and March 31, 2013
(In colones)
Financial information
- 165 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
March March
2014 2013
FINANCE INCOME
Loan portfolio 301.613.945 239.482.916
Gain on foreing exchange differences 22.907.091 -
TOTAL FINANCE INCOME 324.521.037 239.482.916
Financial expenses
Foreign exchange loss - 3.283.164
Total financial expenses - 3.283.164
Recovery of assets and decrease in allowances 155.112.982 8.740.600
FINANCE INCOME 169.408.055 227.459.152
OTHER OPERATING INCOME
Other operating income 3.293.683 1.388.100
TOTAL OTHER OPERATING INCOME 3.293.683 1.388.100
Other operating expenses
Other operating expenses 37.763.391 91
Total other operating expenses 37.763.391 91
GROSS OPERATING INCOME 134.938.346 228.847.161
PROFIT FOR THE YEAR 134.938.346 228.847.161
DEVELOPMENT FINANCING FUND
INCOME STATEMENT
For the year ended March 31,
(In colones)
Financial information
- 166 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Loan porftolio corresponding to FINADE The information contained in notes a) through f) below corresponds to financial information.
a) Loan portfolio by sector
The loan portfolio by sector is as follows:
March December March
2014 2013 2013
Sector
Agriculture, livestock, hunting and
related servicies ¢ 3.125.697.743 2.822.271.858 1.795.312.750
Fisheries and aquaculture 19.239.198 19.404.161 19.838.622
Manufacturing 2.593.675.360 2.493.853.136 1.730.420.369
Explotation of mines and quarries 93.416.496 32.465.312 37.390.980
Trade 6.716.938 7.010.785 -
Services 5.107.029.354 4.552.347.453 3.854.400.068
Transport 689.415.486 655.606.852 609.943.181
Real state, renting and business activities 55.333.901 23.724.929 -
Construction, purchase and repair of
properties 152.337.813 115.282.588 17.500.000
Consumption 22.411.860 10.372.173 11.313.907
Hotels and Restaurants 67.143.038 72.922.375 55.729.549
Education 78.107.193 81.359.396 -
12.010.524.381 10.886.621.018 8.131.849.426
Plus accrued interest receivable 102.147.743 94.180.141 64.399.138
Less allowance for loan losse (272.346.874) (113.982.685) (123.204.895)
¢ 11.840.325.250 10.866.818.474 8.073.043.669
- 167 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
b) Loan portfolio by arrears
The loan portfolio by arrears is as follows:
March December March
2014 2013 2013
Current ¢ 10.434.316.355 9.291.480.967 7.292.969.415
1 to 30 days 545.547.352 560.408.755 608.868.830
31 to 60 days 524.560.290 545.242.647 54.044.611
61 to 90 days 154.344.643 160.114.354 81.893.969
91 to 120 days 142.604.936 200.000.000 4.181.238
121 to 180 days 45.670.651 24.609.497 -
More than 181 days 6.922.023 6.922.023 11.819.795
Legal collections 156.558.131 97.842.775 78.071.568
¢ 12.010.524.381 10.886.621.018 8.131.849.426
c) Past due loans
Past due loans, including loans in accrual status (for which interest is recognized on a cash basis) and unearned interest on past due loans, are as follows:
March December March
2014 2013 2013
Past due loans in
nonaccrual status
5 operation as of March 31, 2014 (5 and 6
as of December 31, 2013 and March 31, 2013) ¢ 6.922.023 6.922.023 11.819.795
Past due loans in
accrual status ¢ 1.412.727.872 1.490.375.253 748.988.648
Total interest not collected ¢ 23.034.075 16.211.098 8.594.982
- 168 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014, loans on legal collection, are as follows:
Percentage Balance
8 1,30% ¢ 156.558.131
No. of loans
As of December 31, 2013, loans on legal collection, are as follows:
Percentage Balance
6 0,90% ¢ 97.842.775
No. of loans
As of March 31, 2013, loans on legal collection, are as follows:
Percentage Balance
2 0,96% ¢ 78.071.568
No. of loans
d) Acrrued interest recivable on loan portfolio
Accrued interest receivable is as follows:
March December March
2014 2013 2013
Current loans ¢ 58.549.517 51.524.335 45.432.881
Past due loans 33.928.825 36.650.357 14.388.287
Loans in legal collections 9.669.401 6.005.449 4.577.970
¢ 102.147.743 94.180.141 64.399.138
- 169 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
e) Allowance for loan impairment
Movement in the allowance for loan impairment is as follows:
Opening balance, 2013 ¢ 113.982.685
Plus:
Estimación cargada a resultadosAllowance charged to profit or loss 155.112.982
Ajuste por diferencial cambiarioExchange rate differential adjustment 3.251.207
Less:
Balance at March 31, 2014 ¢ 272.346.874
Opening balance, 2012 ¢ 114.477.424
Plus:
Estimación cargada a resultadosAllowance charged to profit or loss 23.193.917
Less:
Ajuste por diferencial cambiarioExchange rate differential adjustment (6.921)
Reversión de estimación contra ingresosReversal of allowance against income (23.681.735)
Balance at December 31, 2013 ¢ 113.982.685
Opening balance, 2012 ¢ 114.477.424
Plus:
Estimación cargada a resultadosAllowance charged to profit or loss 8.740.600
Less:
Reversión de estimación contra ingresosReversal of allowance against income (13.129)
Balance at March 31, 2013 ¢ 123.204.895
- 170 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
f) Loan portfolio by type of guarantee
The loan portfolio by type of guarantee is as follows:
March December March
2014 2013 2013
Guarantee
Mortgage ¢ 1.653.253.249 1.465.001.576 859.422.183
Chattel mortgage 4.540.705.471 4.035.311.723 3.597.194.988
Others 5.816.565.661 5.386.307.719 3.675.232.255¢ 12.010.524.381 10.886.621.018 8.131.849.426
g) Financial intruments of FINADE with credit risk exposure
- 171 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
March December March
2014 2013 2013
Principal 12.010.524.381 10.886.621.018 8.131.849.426
Accrued interest receivable 102.147.743 94.180.141 64.399.138
12.112.672.124 10.980.801.159 8.196.248.564
Allowance for loans losses (272.346.874) (113.982.685) (123.204.895)
Carrying amount ¢ 11.840.325.250 10.866.818.474 8.073.043.669
Loan portfolio
Total balance:
A1 ¢ 10.045.623.610 9.190.606.147 7.542.250.536
A2 335.981.873 178.728.716 100.952.669
B1 578.235.888 625.493.389 266.385.023
B2 195.069.913 220.307.859 4.019.483
C1 417.491.388 129.320.657 122.449.188
C2 17.609.959 88.665.936 28.829.536
D 217.099.856 344.223.452 4.410.039
E 305.559.637 203.455.003 126.952.090
12.112.672.124 10.980.801.159 8.196.248.564
Structural allowance (274.423.194) (113.982.606) (106.886.655)
Carrying amount, net 11.838.248.930 10.866.818.553 8.089.361.909
Individually assessed loans
with allowance:
A1 ¢ 10.045.623.610 1.914.654.447 1.419.628.623
A2 335.981.873 79.636.797 -
B1 578.235.888 161.426.863 143.229.554
B2 195.069.913 166.765.153 -
C1 417.491.388 9.212.267 122.449.188
C2 17.609.959 33.570.383 28.829.536
D 217.099.856 118.096.646 4.410.039
E 305.559.637 136.400.408 122.873.092
12.112.672.124 2.619.762.964 1.841.420.032
Allowance for loan losses (274.423.194) (113.982.606) (106.886.655)
Carrying amount, net 11.838.248.930 2.505.780.358 1.734.533.377
Direct loans
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
March December March
2014 2013 2013
Past due loans
without allowance:
A1 - 278.136.152 309.098.688
A2 - 20.951.909 -
B1 - 275.222.684 21.549.344
B2 - 53.542.706 -
C1 - 76.787.946 -
C2 - 51.514.773 -
D - 160.635.556 -
E - 44.105.666 4.078.998
Carrying amount - 960.897.392 334.727.030
Balance aging of past due loans
without allowance:
1 to 30 days - 310.562.224 309.098.688
31 to 60 days - 317.291.228 21.549.344
61 to 90 days - 128.302.719 -
91 to 181 days - 200.662.222 -
Mora than 181 days - 4.078.999 4.078.998
Carrying amount - 960.897.392 334.727.030
Current loans without allowance:
A1 - 6.997.815.547 5.813.523.225
A2 - 78.140.010 100.952.669
B1 - 188.843.842 101.606.125
B2 - - 4.019.483
C1 - 43.320.444
C2 - 3.580.780
D - 65.491.250 -
E - 22.948.930 -
Carrying amount - 7.400.140.803 6.020.101.502
Carrying amount 12.112.672.124 10.980.801.159 8.196.248.564
Allowance for loan impairment (274.423.194) (113.982.606) (106.886.655)
(Surplus/excess) of
structural allowance 2.076.320 (79) (16.318.240)
Carrying amount, net ¢ 11.840.325.250 10.866.818.474 8.073.043.669
Direct loans
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2014 Gross Net
Risk category:
A1 ¢ 10.045.623.610 10.043.614.487
A2 335.981.873 335.914.676
B1 578.235.888 574.780.622
B2 195.069.913 184.401.770
C1 417.491.388 389.909.271
C2 17.609.959 10.902.668
D 217.099.856 118.727.563
E 305.559.637 179.997.873
¢ 12.112.672.124 11.838.248.930
Loans to customers
As of December 31, 2013 Gross Net
Risk category:
A1 ¢ 9.190.606.147 9.184.951.411
A2 178.728.716 177.485.831
B1 625.493.389 617.422.046
B2 220.307.859 210.738.651
C1 129.320.657 127.017.590
C2 88.665.936 81.037.823
D 344.223.452 339.584.055
E 203.455.003 128.581.146
¢ 10.980.801.159 10.866.818.553
Loans to customers
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of March 31, 2013 Gross Net
Risk category:
A1 ¢ 7.542.250.536 7.537.665.705
A2 100.952.669 100.952.669
B1 266.385.023 262.352.975
B2 4.019.483 4.019.483
C1 122.449.188 105.812.548
C2 28.829.536 17.481.466
D 4.410.039 2.548.162
E 126.952.090 58.528.901
¢ 8.196.248.564 8.089.361.909
Loans to customers
- 175 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(38) Financial information of the Development Credit Fund
The Bank presents the following financial information as manager of its Development Credit Fund (DCF):
March December March
2014 2013 2013
ASSETS
Availabilities ¢ 1.219.843.448 ¢ 1.946.151.196 ¢ 3.036.583.781
Central Bank of Costa Rica 1.219.843.448 1.946.151.196 3.036.583.781
Investments in financial instruments 138.545.693.591 128.013.322.592 116.408.197.703
Available-for-sale 137.273.233.219 126.952.810.972 114.511.719.069
Accrued interest receivable 1.272.460.372 1.060.511.620 1.896.478.634
Accounts and fees and commissions receivable 2.161.105 5.367.733 -
Deferred tax and income tax receivable 2.161.105 5.367.733 -
TOTAL ASSETS ¢ 139.767.698.144 ¢ 129.964.841.521 ¢ 119.444.781.484
LIABILITIES
Obligation with entities ¢ 139.381.543.412 ¢ 129.367.214.793 ¢ 119.467.445.991
Demand obligations 139.381.543.412 129.367.214.793 119.467.445.991
Accounts payable and provisions 236.036.719 218.302.809 -
Deferred income 6.482.522 24.002.497 -
Other sundry accounts payable 229.554.197 194.300.312 -
TOTAL LIABILITIES 139.617.580.131 129.585.517.602 119.467.445.991
EQUITY
Equity adjustments 42.594.194 43.519.190 (22.664.507)
Adjustment for valuation of
available-for-sale investments 42.594.194 43.519.190 (22.664.507)
Profit for current year 107.523.819 335.804.729
TOTAL EQUITY 150.118.013 379.323.919 (22.664.507)
TOTAL LIABILITIES AND EQUITY ¢ 139.767.698.144 ¢ 129.964.841.521 ¢ 119.444.781.484
DEVELOPMENT FINANCING FUND
BALANCE SHEET
As of March 31, 2014, December 31, 2013 and March 31, 2013
Financial information
(In colones)
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
March March
2014 2013
Financial income
Investments in financial instruments ¢ 1.191.843.507 197.377.042
Gain on available for-sale financial instruments 11.692.354 -
Total financial income 1.203.535.861 197.377.042
Financial expenses
Obligations with the public 434.442.682 77.684.000
Loss on exchange foreign currency 83.566.413 -
Total financial expenses 518.009.095 77.684.000
FINANCIAL INCOME 685.526.766 119.693.042
Other operating income
Exchange and arbitrage, foreign currency 10.611.240 -
Other operating income 20.860.537 -
Total other operating income 31.471.777 -
Other operating expenses
Exchange and arbitrage, foreign currency 164.455 -
Other operating expenses 8.627 1.368.000
Total other operating expenses 173.082 1.368.000
GROSS OPERATING INCOME 716.825.461 118.325.042
Statutory allocations of earnings (DFF) 609.301.642 100.576.286
RESULT FOR THE PERIOD ¢ 107.523.819 17.748.756
DEVELOPMENT FINANCING FUND
INCOME STATEMENT
As of March 31,
Financial information
(In colones)
The investments in financial instruments corresponding to Development Credit Fund (DCF) are a follow:
- 177 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
March December March
2014 2013 2013
Trading ¢ 137.273.233.219 126.952.810.972 114.511.719.069
Accrued interest receivable on
available for sale investments 1.272.460.372 1.060.511.620 1.896.478.634
¢ 138.545.693.591 128.013.322.592 116.408.197.703
March December March
2014 2013 2013
Trading Fair value Fair value Fair value
Local issuers:
Govermment ¢ 87.665.023.331 76.067.867.076 61.102.682.222
State-owned banks 41.206.629.236 38.091.233.512 13.252.403.217
128.871.652.567 114.159.100.588 74.355.085.439
Foreign issuers:
Govermment 5.897.588.183 5.453.193.761 12.850.138.093
Private issuers 2.503.992.469 7.340.516.623 27.306.495.537
¢ 137.273.233.219 126.952.810.972 114.511.719.069
- 178 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(39) Transition to International Financing Reporting Standards (IFRSs)
Through various resolutions, CONASSIF (the Board) agreed to partial adoption starting January 1, 2004 of IFRSs promulgated by the International Accounting Standards Board (IASB). In order to regulate application of those Standards, the Board issued the Terms of the Accounting Regulations Applicable to Entities Regulated by SUGEF, SUGEVAL, SUPEN, and SUGESE and to Nonfinancial Issuers and approved a comprehensive revision of those regulations on March 17, 2007 the Council adopted a comprehensive reform of the “Accounting regulations/standards applicable to supervised entities by SUGEF, SUGEVAL, SUPEN and SUGESE and non-financial issuers”.
On May 11, 2010, the Board issued private letter ruling CNS 413-10 to revise the Accounting Regulations Applicable to Entities Regulated by SUGEF, SUGEVAL, SUPEN, and SUGESE and to Non-financial Issuers (the Regulations), which mandate application by regulated entities of IFRSs and the corresponding interpretations issued by the IASB in effect as of January 1, 2008, except for the special treatment indicated in Chapter II of the aforementioned Regulations. Pursuant to the Regulations and in applying IFRSs in effect as of January 1, 2008, any new IFRSs or interpretations issued by the IASB, as well as any other revisions of IFRSs adopted that will be applied by regulated entities, will require the prior authorization of the Board. As part of the regulations, and applying NIIF (IFRS) effective to January 2008, the issue of new NIIF (IFRS) or interpretations issued by the IASB, and any changes to the NIIF (IFRS) adopted supervised entities applying, will require previous authorization from the National Council of Supervision of the Financial System (CONASSIF). Following are some of the main differences between the accounting standards issued by the Board and IFRSs, as well as the IFRSs or interpretations of the International Financial Reporting Interpretations Committee (IFRICs) yet to be adopted:
a) IAS 1: Presentation of Financial Statements
The presentation of financial statements required by the Board differs in some respects from presentation under IAS 1. Following are some of the most significant differences:
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
SUGEF Standards do not allow certain transactions, such as clearing house balances, gains or losses on the sale of financial instruments, income taxes, etc. to be presented on a net basis. Given their nature, IFRSs require those balances to be presented net to prevent assets and liabilities or profit or loss from being overstated.
b) Revised IAS 1: Presentation of Financial Statements
The revised Standard introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the statement of operations and all non-owner changes in equity in a single statement), or in a statement of operations and a separate statement of comprehensive income. Revised IAS 1 became mandatory for 2009 financial statements. These changes have not been adopted by the Board.
c) IAS 7: Statement of Cash Flows
The Board has only authorized preparation of the cash flow statement using the indirect method. The direct method is also acceptable under IAS 7.
d) IAS 8: Accounting Policies, Changes in Accounting Estimates, and Errors
In some cases, SUGEF has authorized the booking of notices of deficiencies received from Tax Authorities against prior period retained earnings.
e) IAS 16: Property, Plant and Equipment
The Standard issued by the Board requires the revaluation of property through appraisals made by independent appraisers at least once every five years, eliminating the option to carry these assets at cost or to revalue other types of assets.
Furthermore, SUGEF permits the conversion (capitalize) of the surplus revaluation directly in equity shares (only for state banks), without having to relocate previously to retained earnings, as required by IAS 16.
Moreover, under IAS 16, depreciation continues on property, plant and equipment, even if the asset is idle. The Standard issued by the Board allows entities to suspend the depreciation of idle assets and reclassify them as foreclosed assets.
- 180 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
f) IAS 18: Revenue
The Board has allowed regulated financial entities to recognize loan fees and commissions collected prior to January 1, 2003 as revenue. Additionally, the Board has permitted the deferral of 25%, 50%, and 100% of loan fees and commissions for transactions completed in 2003, 2004, and 2005, respectively. IAS 18 prescribes deferral of 100% of those fees and commissions over the loan term.
The Board has also allowed deferral of the net excess of loan fee income minus expenses incurred for activities such as assessment of the borrower’s financial position, evaluation and recognition of guarantees, sureties, or other collateral instruments, negotiation of the terms of the instrument, preparation and processing of documents, and settlement of the operation. IAS 18 does not allow deferral on a net basis of loan fee income. Instead, it prescribes deferral of 100% of loan fee income, and permits the deferral of only certain incremental transaction costs, rather than all direct costs. Accordingly, when costs exceed income, loan fee income is not deferred, since the Board only allows the net excess of income over expenses to be deferred. This treatment does not conform to IAS 18 and IAS 39, which prescribe separate treatment for income and expenses (see comments on IAS 39).
g) IAS 21: The Effects of Changes in Foreign Exchange Rates
The Board requires that the financial statements of regulated entities be presented in colones as the functional currency.
h) IAS 27: Consolidated and Separate Financial Statements
The Board requires that the financial statements of a parent be presented separately, measuring its investments by the equity method. Under IAS 27, a parent is required to present consolidated financial statements. A parent need not present consolidated financial statements when the ultimate or any intermediate parent of the parent produces consolidated financial statements available for public use, provided certain other requirements are also met. However, in this case, IAS 27 requires that investments be accounted for at cost.
- 181 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
In the case of financial groups, the holding company must consolidate the financial statements of all of the companies of the group in which it holds an ownership interest of twenty-five percent (25%) or more, irrespective of control. For such purposes, proportionate consolidation should not be used, except in the consolidation of investments in joint arrangements.
Amended IAS 27 (2008) requires accounting for changes in ownership interests by the Bank in a subsidiary, while maintaining control, to be recognized as an equity transaction. When the Bank loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in profit or loss. The amendments to IAS 27 became mandatory for the Bank’s 2010 consolidated financial statements. These amendments have not been adopted by the Board.
i) IAS 28: Investments in Associates
The Board requires consolidation of investments in companies in which an entity holds twenty-five percent (25%) or more equity interest, irrespective of any considerations of control. Such treatment does not conform to IAS 27 and IAS 28.
j) Revised IAS 32: Financial Instruments: Presentation
Revised IAS 32 provides new guidelines clarifying the classification of financial instruments as liabilities or equity (e.g. preferred shares). SUGEVAL determines whether those shares fulfill the requirements of share capital.
k) Amendments to IAS 32: Financial Instruments – Presentation and IAS 1: Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation
The amendments to the Standards require puttable instruments and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation to be classified as equity if certain conditions are met. These changes have not been adopted by the Board.
- 182 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
l) IAS 37: Provisions, Contingent Liabilities and Contingent Assets
SUGEF prescribes recognition of a provision for possible losses on contingent assets. This type of provision is prohibited under IAS 37.
m) IAS 38: Intangible Assets
The commercial banks listed in article 1 of Internal Regulations National Banking System (Law No. 1644) may present organization and installation expenses as an asset in the balance sheet, however, those expenses must be fully amortized on the straight-line method over a maximum of five years. This is not in accordance with IAS 38.Automated applications must be amortized systematically by the straight line method during the period expected to produce economic benefits for the entity, which cannot exceed five years. Similar procedure and term must be used for the amortization of goodwill acquired. IAS 38 allows different methods to distribute the depreciable amount of an asset in a systematic way, over the lifetime. The lifespan of the automated applications could be higher to five years as established by the norms and regulations of CONASSIF. On the other hand, IFRS do not require that goodwill is amortized; it requires to be assessed for impairment annually.
n) IAS 39: Financial Instruments: Recognition and Measurement
The Board requires that the loan portfolio be classified pursuant to SUGEF Directive 1-05 and that the allowance for loan impairment be determined based on that classification. It also allows excess allowances to be booked. IAS 39 requires that the allowance for loan impairment be determined based on a financial analysis of actual losses. IAS 39 also prohibits the booking of provisions for contingent accounts. Any excess allowances must be reversed in the income statement.
Revised IAS 39 introduced changes with respect to classification of financial instruments, which have not been adopted by the Board. The revised version includes the following changes:
- 183 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The option of classifying loans and receivables as available for sale was
established.
Securities quoted in an active market may be classified as available for sale, trading, or held to maturity.
The “fair value option” was established to designate any financial instrument to be
measured at fair value through profit or loss, provided a series of requirements are met (e.g. the instrument has been measured at fair value since the original acquisition date).
The category of loans and receivables was expanded to include purchased loans
and receivables that are not quoted in an active market.
The Board has also allowed capitalization of direct costs incurred for assessment of the borrower’s financial position, evaluation and recognition of guarantees, sureties, or other collateral instruments, negotiation of the terms of the instrument, and preparation and processing of documents, net of income from loan fees. However, IAS 39 only permits capitalization of incremental transaction costs, which are to be presented as part of the financial instrument and may not be netted against loan fee income (see comments on IAS 18).
Regular purchases and sales of securities are to be recognized using the settlement date accounting only.
Depending on the type of entity, financial assets are to be classified as follows:
a) Pooled portfolios
Investments in pooled investment funds, pension and retirement savings accounts, and similar trusts are to be classified as available for sale.
b) Own investments of regulated entities
Investments in financial instruments of regulated entities are to be classified as available for sale.
Own investments in open investment funds are to be classified as trading financial assets. Own investments in closed investment funds are to be classified as available for sale.
- 184 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Entities regulated by SUGEVAL and SUGEF may classify other investments in financial instruments as trading investments, provided there is an express statement of intent to trade them within 90 days from the acquisition date.
Banks regulated by SUGEF may not classify investments in financial instruments as held to maturity.
The above classifications do not necessarily adhere to the provisions of IAS 39.
The amendment to IAS 39 clarifies the existing principles that determine whether specific risks or portions of cash flows are eligible for designation in a hedging relationship. The amendments to IAS 39 became mandatory for 2010 financial statements, with retrospective application. This amendment has not been adopted by the Board.
o) IAS 40: Investment Property
IAS 40 allows entities to choose between the fair value model and the cost model to measure their investment property. The Standard issued by the Board only allows entities to use the fair value model to measure this type of assets, unless clear evidence for determining the fair value of the assets is unavailable.
p) Revised IFRS 3: Business Combinations
The revised Standard (2008) incorporates the following changes:
The definition of a business has been broadened, which is likely to result in more
acquisitions being treated as business combinations.
Contingent consideration will be measured at fair value, with subsequent changes therein recognized in profit or loss.
Transaction costs, other than share and debt issue costs, will be expensed as
incurred.
Any pre-existing interest in the acquirer will be measured at fair value, with the related gain or loss recognized in profit or loss.
- 185 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
Any non-controlling (minority) interest will be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquirer, on a transaction-by-transaction basis.
Revised IFRS 3, which became mandatory for 2010 financial statements, will be applied prospectively. This Standard has not been adopted by the Board.
q) IFRS 5: Non-current Assets Held for Sale and Discontinued Operations
The Board requires that an allowance be booked for 100% of the carrying amount of assets that have not been sold within two years. IFRS 5 requires that such assets be recorded and measured at the lower of cost or fair value, discounting the future cash flows of assets to be sold in more than one year. Accordingly, assets could be understated, with excess allowances.
r) Amendments to IFRS 7: Financial Instruments – Disclosures
In March 2009, the IASB issued certain amendments to IFRS 7, Financial Instruments: Disclosure, which requires enhanced disclosures about fair value measurements and liquidity risk in respect of financial instruments.
The amendments require that fair value measurement disclosures use a three-level fair value hierarchy that reflects the significance of the inputs used in measuring fair values of financial instruments. Specific disclosures are required when fair value measurements are categorized as Level 3 (significant unobservable inputs) in the fair value hierarchy. The amendments require that any significant transfers between Level 1 and Level 2 of the fair value hierarchy be disclosed separately, distinguishing between transfers into and out of each level. Furthermore, changes in valuation techniques from one period to another, including the reasons therefor, are required to be disclosed for each class of financial instruments.
Further, the definition of liquidity risk has been amended and it is now defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.
The amendments require disclosure of a maturity analysis for non-derivative and derivative financial liabilities, but contractual maturities are required to be disclosed for derivative financial liabilities only when contractual maturities are essential for an understanding of the timing of cash flows. For issued financial guarantee contracts, the amendments require the maximum amount of the guarantee to be disclosed in the earliest period in which the guarantee could be called. These amendments have not been adopted by the Board.
- 186 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
s) IFRS 9: Financial Instruments
IFRS 9 deals with classification and measurement of financial assets. The requirements of this Standard represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The Standard contains two primary measurement categories for financial assets: amortized cost and fair value. The Standard eliminates the existing IAS 39 categories of held to maturity, available for sale, and loans and receivables. For an investment in an equity instrument which is not held for trading, the Standard permits an irrevocable election, at initial recognition, on an individual share-by-share basis, to present all fair value changes in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss at a later date.
The Standard requires that derivatives embedded in contracts with a host contract that is a financial asset within the scope of the standard not be separated; instead the hybrid financial instrument is assessed in its entirety as to whether it should be measured at amortized cost or fair value.
This Standard requires entities to determine whether presenting the effects of changes in the credit risk of a liability designated at fair value through profit or loss would create an accounting mismatch based on facts and circumstances at the date on which the financial liability is initially recognized. The Standard is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. This Standard has not been adopted by the Board.
t) IFRS 10: Consolidated Financial Statements
This Standard provides a revised control definition and an application guidance therefor. This IFRS supersedes IAS 27 (2008) and SIC 12, Consolidation - Special Purpose Entities, and is applicable to all investees.
Early application is permitted. Entities that apply this IFRS earlier must disclose that fact and apply IFRS 11, IFRS 12, IAS 27 (as amended in 2011), and IAS 28 (as amended in 2011) simultaneously.
- 187 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
An entity is not required to make adjustments to the accounting for its involvement with an investee when entities that were previously consolidated or unconsolidated in accordance with IAS 27 (2008), SIC 12, and this IFRS, continue to be consolidated or continue not to be consolidated.
When application of this IFRS results in an investor consolidating an investee that is a business that was not previously consolidated, the investor must:
1) determine the date when the investor obtained control of that investee on the basis
of the requirements of this IFRS; and
2) measure the assets, liabilities, and no-controlling interests as if acquisition accounting had been applied from that date.
If (2) is impracticable, then the deemed acquisition date must be the beginning of the earliest period for which retroactive application is practicable, which may be the current period.
The Standard is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. This Standard has not been adopted by the Board.
u) IFRS 11: Joint Arrangements
This Standard was issued in May 2011 with an effective date of January 1, 2013. The Standard addresses the inconsistencies in the accounting for joint arrangements and requires a single accounting treatment for interests in jointly controlled entities. This Standard has not been adopted by the Board.
v) IFRS 12: Disclosure of Interests in Other Entities
This Standard was issued in May 2011 with an effective date of January 1, 2013. This Standard requires an entity to disclose information that enables users of financial statements to evaluate the nature and financial effects of its interests in other entities, including joint arrangements, associates, structured entities, and “off balance sheet” activities. This Standard has not been adopted by the Board.
- 188 -
BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
w) IFRS 13: Fair Value Measurement
This Standard was issued in May 2011 and clarifies the definition of fair value, establishes a single procedure for measuring fair value, and defines the measurements and applications required or permitted by IFRSs. This Standard is to be applied for annual periods beginning on or after January 1, 2013. Earlier application is permitted. This Standard has not been adopted by the Board.
x) IFRIC 10: Interim Financial Reporting and Impairment
This Interpretation prohibits the reversal of an impairment loss recognized in a previous interim period in respect of goodwill, an investment in an equity instrument, or a financial asset carried at cost. IFRIC 10 applies to goodwill, investments in equity instruments, and financial assets carried at cost from the date that the Bank first applied the measurement criteria of IAS 36 and IAS 39 (i.e. January 1, 2004). The Board permits reversal of the allowances.
y) IFRIC 12: Service Concession Arrangements
This Interpretation gives guidance on the accounting by operators for public-to-private service concession arrangements. This Interpretation applies to both:
infrastructure that the operator constructs or acquires from a third party for the
purpose of the service arrangement; and
existing infrastructure to which the grantor gives the operator access for the purpose of the service arrangement.
This Interpretation became mandatory for annual periods beginning on or after July 1, 2009 and has not been adopted by the Board.
z) IFRIC 13: Customer Loyalty Programs
This Interpretation gives guidance on the accounting by entities that grant loyalty award credits to customers as part of a sales transaction which, subject to meeting any further qualifying conditions, the customers can redeem in the future for free or discounted goods or services. This Interpretation became mandatory for annual periods beginning on or after January 1, 2011 and has not been adopted by the Board.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
aa) IFRIC 14, IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction
This Interpretation applies to all post-employment defined benefits and other long-term employee defined benefits. Also, it considers the minimum funding requirements to fund a post-employment or other long-term defined benefit plan. It also addresses when a minimum funding requirement might give rise to a liability. IFRIC 14 became mandatory for 2011 financial statements with retrospective application required. This Interpretation has not been adopted by the Board.
bb) IFRIC 16: Hedges of a Net Investment in a Foreign Operation
This Interpretation allows entities that use the step-by-step consolidation method to choose an accounting policy that hedges currency risk to determine the amount of the cumulative foreign currency translation reserve that is reclassified to profit or loss on the disposal of a net investment in a foreign operation, which is equivalent to the amount that would have been reclassified had the entity used the direct method of consolidation. This Interpretation became mandatory for annual periods beginning on or after July 1, 2009 and has not been adopted by the Board.
cc) IFRIC 17: Distributions of Non-cash Assets to Owners
This Interpretation gives guidance on the accounting of distributions of non-cash assets to owners at the beginning and end of the reporting period.
If, after the end of a reporting period but before the financial statements are authorized for issue, an entity declares a dividend to distribute a non-cash asset, it must disclose:
a) the nature of the asset to be distributed;
b) the carrying amount of the asset to be distributed as of the end of the reporting period; and.
c) whether fair values are determined, in whole or in part, directly by reference to
published price quotations in an active market or are estimated using a valuation technique, and the method used to determine fair value and, when a valuation technique is used, the assumptions applied.
This Interpretation became mandatory for annual periods beginning on or after July 1, 2009 and has not been adopted by the Board.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
dd) IFRIC 18: Transfers of Assets from Customers
This Interpretation gives guidance on the accounting of transfers of items of property, plant and equipment by entities that receive such transfers from their customers. This Interpretation also applies to agreements in which an entity receives cash when that amount of cash must be used only to construct or acquire an item of property, plant and equipment, and the entity must then use the item either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services, or to both. This Interpretation became mandatory for annual periods beginning on or after July 1, 2009 and has not been adopted by the Board.
ee) IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments
This Interpretation gives guidance on the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability. This Interpretation became mandatory for annual periods beginning on or after July 1, 2010 and has not been adopted by the Bank.
(40) 2013 Figures
As of December 31 and March 2013, financial statement figures have been reclassified for comparison with those at 2014, per modifications to the Chart of Accounts and SUGEF Directive 31-04: "Regulation on the financial information of entities, groups and financial conglomerates" approved by CONASSIF and effective from January 1, 2014. On the Balance sheet, subordinated loans include ¢14.850.300.000 and ¢14.781.600.000, which in the consolidated financial statements at December 31, 2013 and March, respectively, are presented in subordinated debentures. In the Statement of Comprehensive Income, foreign exchange gains and losses amount to ¢ 26.436.622.725 and ¢25.229.158.706 respectively, which in the consolidated financial statement at March 31, 2013, are presented as a net foreign exchange gain.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
(41) Relevant and subsecuent events As of March 31, 2014, there are significant subsequent events (facts) to disclose as follows: On January 11, 2013, Law N° 9092 was published; Refund of Income to the National Commission Education Loan (CONAPE), derogatory of article 41 and the Transitory III of the Law N°8634, from October 23 2008: Article I: is repealed article N°41 and the transitory III of the Law N° 8634, Banking System Development from October 23 2008. The Executive Secretary of CONAPE will coordinate with the Regents of Development Banking, the implementation of this Law, since there is uncertainty whether it applies to the results of the year 2012 or 2013. On January 30, 2013, the Board of Directors of the Central Bank of Costa Rica in its article 7 minute of the session 5582-2013, took the following agreements in relation to the portfolio:
1- Establish an overall limit of 9% to the accrued growth between February 1 and
October 31 2013 for the balance of the portfolio loan and investments to the non
financial private sector granted by financial intermediaries supervised by the
General Superintendence (Superintendent) of Financial Entities; rate expressed in
annualized terms corresponds to a 12,2%.
2- Establish an overall limit to the accrued growth between February 1 and October 31
2013 for the balance of the portfolio loan and investments to the non financial
private sector in foreign currency and granted by financial intermediaries supervised
by the General Superintendence of Financial Entities as follows:
a) If the financial intermediary showed as of December 31 2012 an annual growth
equal or less to 20%, the increase accumulated on the balance of the portfolio
between February 1 and October 31 2013 may not exceed 6,0%. This rate
expressed in annualized terms corresponds to an 8%.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
b) If the financial intermediary presented as of December 31 2012 an annual rate
more than 20%, the increase accumulated on the balance of the portfolio between
February 1 and October 31 may not exceed 30% of the annual rate registered on
December 31 2012.
3- The follow-up on the present agreement will be conducted on a quarterly basis,
based on the Information provided by the financial intermediaries as at April 30,
July 31 and October 31, 2013, as follows:
a) The follow-up will be conducted based on the projection of balances that each
institution provides the Central Bank of Costa Rica and the General
Superintendence of Financial Entities, 15 calendar days to the entry into force
of this measure.
b) In it´s absence, for the follow-up of the limits established in paragraphs 1 and 2,
the resulting flow is distributed evenly in the three quarters comprising the
measure.
c) As follow-up, the balance of the portfolio in foreign currency for each and every
reference date, must be expressed in collones using the Exchange reference rate
of the Central Bank of Costa Rica as of December 31, 2012 (¢502,07 per US$
dollar).
Therefore, among the measures to consider will be in first instance:
1. Tracking the required limit according to the parameters established by the Central Bank of Costa Rica.
2. The Bank will need to act diligently with the granting credit and more stringent with
the credit analysis for companies and people in light of the stress scenarios suggested by the regulator.
3. Review the budget targets for 2013.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
As of July 31, 2013, the Board of the Central Bank decides to eliminate the global constraint to the growth of the financial system credit to the private sector.
On July 8, 2013, the return of capital to the Banco de Costa Rica.is approved in the Extraordinary General Meeting of Shareholders of BCR Pension Operadora de Planes de Pensiones Complementarias through minute No. 02-13. In accordance with Chapter VII of the "Regulation on the opening and operation of authorized entities and operation of pension funds, labor capitalization and voluntary savings under the Worker Protection Law" establishes capital adequacy guidelines for authorized entities, where the different levels of requirements are set for market risk, operational and credit, as well as calculations of capital base. In that sense, BCR Pensions held since early 2012 an average level of capital adequacy ratio of 2.19 times, which is well above the regulatory requirement (1 time) and internal risk limit set at 1.5 times. This reflects a comfortable capital position against risk requirements faced by the entity. Given the above circumstances, it is considered appropriate to make a return of surplus capital Pensiones in the amount of ¢1,000 million colones to the Banco de Costa Rica as sole shareholder of BCR, in order to optimize the financial resources of the institution.
The detail of the return is as follows:
Cash ¢ 877.642.491
Computer equipment, furniture and computer licenses 122.357.509
Total return Capital ¢ 1.000.000.000
The capital of Operadora de Pensiones decreases in the amount indicated, from 2,444,450,000 shares with a nominal value of ¢1 per share each to 1,444,450,000 shares with the same par value. On August 5, 2013, the Bank performs the first international bond issuance for US$ 500 million, which had a close demand of 8.75 times. Bond orders from more than 290 investors accounts were received for a total amount of US$ 4.363 million.
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BANCO DE COSTA RICA AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 2014
(With corresponding figures for 2013)
(Continued)
The bonds were issued under regulations 144a to institutional investors in the United States of America and Regulation "S", to market outside the United States, including non-institutional investors. The issue only traded in international markets, for a term of 5 years, with a facial rate of 5.25%. The Bank hired Barclays Capital Inc. and Deutsche Bank Securities Inc. to perform the structuring and issuance of bonds. Recently, as part of this process, the international firm Moody's Investment Service, gave the bank a rating of Baa3, the same granted to the Republic of Costa Rica, and is classified as investment grade. This indicator represents a high degree of confidence to investors. Moreover, Fitch Ratings Inc., with same rating established by the Government of Costa Rica, rated the bond issue BB+. On September 6, 2013, the documents are signed in order to settle negotiations with Consejo Nacional de Produccion (CNP), for the acquisition of land and building of its headquarters, close to La Sabana, which will develop the real estate project to install the bank headquarters. However, a period of one year for the delivery of the property is given to CNP, while Sociedad Administradora de Fondos de Inversión S. A. (SAFI), introduces a real estate solution to the entity. The amount paid for the purchase of the property is ¢6,430,087,005.
(42) Date of autorization for issuance of the financial statements
The General Management of the Bank authorized the issuance of the unaudited consolidated financial statements as of March 31, 2014 on Abril 30, 2014. SUGEF can require modifications to the financial statements after the authorization for issuance date.