BANCO DE BOGOTÁ S.A. AND SUBORDINATES Notes to the Consolidated Financial Statements
At June 30, 2014 and December 31, 2013 (In Millions, Except the Exchange Rate and Net Profit per Share)
(1) Reporting Entity
Banco de Bogotá S.A. is a private entity headquartered in the city of Bogotá D.C. It was incorporated through Public Instrument No. 1923, drawn up and authenticated on November 15, 1870 by Notary Public No. 2 in Bogotá D.C. Its license to operate was renewed once and for all by the Colombian Superintendency of Finance. The duration of the Bank, as established in its by-laws, extends to June 30, 2070. However, the organization may be dissolved or it duration extended prior to that date. The business of the Bank is to perform all operations and to enter into all contracts legally authorized for commercial banks, subject to the requirements and limitations imposed by Colombian law.
The Bank was operating at June 30, 2014 with ten thousand four (10.004) employees on contract, three hundred thirty-three (333) working under civil apprenticeship agreements, one thousand one hundred twenty-one (1,121) temporary staff members and one thousand two hundred eighty-five (1,285) employees contracted with Megalínea. In addition, through outsourcing with specialized companies, the Bank also employs a total of three thousand five hundred thirty-nine (3.539) individuals through six hundred three (603) offices, five (5) corporate service centers (CSC), four (4) small-business service centers, fifty (50) collection and payment offices, eighteen (18) business advisory offices, ninety-three (93) non-own-code bank branch extension offices, thirteen (13) bank branch extension offices, eleven (11) premium offices, six (6) centers specialized in home mortgages, one thousand eight hundred seventeen (1,817) banking correspondents, thirteen (13) Servicajas, two (2) customer-only service offices, eight (8) payroll installment lending offices with special services, twenty-five (25) payroll installment lending centers, five (5) core offices, two (2) agencies abroad, one in New York City and the other in Miami, and one (1) branch in Panama City, which is licensed to operate as a local bank.
These consolidated financial statements include the following companies.
Almacenes Generales de Depósito ALMAVIVA S. A. is involved primarily in the deposit, preservation and custody, management and distribution, purchase and sale of merchandise and products of domestic and foreign origin for its clients. The company also issues warehouse receipts and collateral certificates or warehouse liens. ALMAVIVA S. A. consolidates with its subordinates Almaviva Global Cargo, Comercializadora Internacional S. A., South Logistic S. A. and Zona Franca S.A.
Fiduciaria Bogotá S.A. enters into mercantile trust and agency trust agreements without transfer of ownership, as provided for by law. Its primary business is to acquire, dispose of, encumber and manage movable assets and real estate, and to invest as a debtor or creditor in all types of lending operations.
Corporación Financiera Colombiana S.A. raises and allocates capital to promote the creation, reorganization, merger, transformation and expansion of all types of companies, to acquire ownership interest in those companies, and to encourage third parties to do so. It also offers these companies medium and long-term financing and specialized financial services that contribute to their development. These companies do not include those subject to control and supervision by the Colombian Superintendency of Finance, with the exception of financial service firms and lending institutions. Corporación Financiera Colombiana S.A. consolidates with a number of financial subordinates; namely, Leasing Corficolombiana S.A., Banco Corficolombiana (Panama) S.A. (a finance company located outside the country), Fiduciaria Corficolombiana S.A. and real-sector subordinates Organización Pajonales S.A., Hoteles Estelar de Colombia S.A., Gas Comprimido del Perú S.A. (a company outside the country), Valora S.A., Proyectos de Infraestructura S.A., Epiandes S.A., Promotora y Comercializadora Turística Santamar S.A., Colombiana de Licitaciones y Concesiones Ltda., Tejidos Sintéticos de Colombia S.A., Plantaciones Unipalma de los Llanos S. A., Pizano S.A. (currently being restructured), Estudios y Proyectos del Sol S.A. (formerly Inversora en Aeropuertos S.A.), Industrias Lehner S.A., Proyectos de
2
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Ingeniería y Desarrollos S.A.S., CFC Gas Holding S.A.S., CFC Private Equity Holdings S.A.S. and CFC Energy Holding S.A.S..
The financial sector shareholders of Corporación Financiera Colombiana S.A. signed an agreement giving Banco de Bogotá control of the company, as it is the largest shareholder. The purpose was to consolidate the financial statements pursuant to External Circular 100/1995, issued by the Colombian Superintendency of Finance, and Law 222/2005.
Sociedad Administradora de Pensiones y Cesantías Porvenir S. A. was incorporated on October 22, 1991 and is headquartered in Bogotá. Its business is to administer and manage the type of pension and severance funds authorized by law. Under the law, both these funds are third-party portfolios separate from the portfolio of the company managing them. Porvenir consolidates its financial statements with Gestión y Contacto S.A.
Ninety-nine point ninety-nine percent (99.99%) of AFP Horizonte Pensiones y Cesantías S.A. was acquired on April 18, 2013. The merger by absorption of AFP Horizonte S.A., was completed, thereby consolidating Porvenir as the largest pension and severance fund manager in the country in terms of the resources it manages and the number of affiliates.
Casa de Bolsa S.A. Sociedad Comisionista de Bolsa (formerly Valores de Occidente Sociedad Comisionista de Bolsa S.A.) is a private company established through Public Instrument No. 6771 drawn up on July 22, 1993. Under a brokerage agreement, it offers financial services that include the purchase and sale of securities listed on the stock exchange, securities and mutual fund management, proprietary trading, securities brokerage and consulting on capital markets, under the terms and conditions determined by the Board of Directors of the Central Bank of Colombia (Banco de la República). It was authorized by the Colombian Superintendency of Finance to conduct its business pursuant to Resolution No. 1024 issued on August 13, 1993. The duration of the company is until 2043.
Banco de Bogotá is invested directly in this subordinate, with twenty-two point seventy-nine percent (22.79%) ownership interest, and indirectly through Corporación Financiera Colombiana S.A., a subordinate company in which it has thirty-eight point ninety-five percent (38.95%) ownership interest.
Banco de Bogotá S.A. Panamá operates in the Republic of Panama with a general and international license to conduct banking business in and outside that country. It consolidates with the subordinate entity known as Banco de Bogotá (Nassau) Limited.
Bogotá Finance Corporation is a financial entity created specifically to issue floating-rate securities guaranteed by the parent company (the Bank). In recent periods, the company has maintained an investment as its only income-earning activity.
Leasing Bogotá S.A. Panamá was established in 1972 under the Corporate and Partnership Act of the Republic of Panama and currently operates solely as a company holding shares in other financial-sector firms. It is owned entirely by Banco de Bogotá, S.A. and consolidates with BAC Credomatic Inc. and Banco Bac Panama (formerly BBVA Panama).
(Continued)
3
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
- Acquisitions
On December 19, 2013, Banco de Bogota S.A., through its subsidiary Credomatic International Corporation (CIC), which operates as part of BAC Credomatic in Central America, acquired 100 % of all issued and outstanding shares in Banco Reformador de Guatemala and Transcom Bank (Barbados) Limited , a subsidiary of the Bank. The acquisition cost US$421 and the resources available in CIC were used to fund it, as follows: (i) $282 from securitization of future American Express credit card flows: and (ii) a short-term loan for $ 139.
On December 19, 2013, Banco de Bogota S.A., through its subsidiary Leasing Bogota S.A. Panama, acquired 98.92 % of the issued and outstanding shares in Banco Bilbao Vizcaya Argentaria (Panama) S.A. (BBVA Panama ), now BAC Bank Panama, for US$505. Banco de Bogota S.A. issued $1.3 billion in ordinary shares, with preferential subscription rights (Note 20), to provide Leasing Bogota S.A. Panama with the resources required for the transaction.
The following are the assets and liabilities received in these purchases, as registered according to U.S. GAAP at December 31, 2013.
Grupo Reformador Banco BAC Panamá Total Acquisitions ( Figures in USD) Assets Cash and cash equivalents USD 270,778,042 387,778,961 658,557,003 Certificates of deposit 51,567,509 1,428,878 52,996,387 Investments in securities 208,680,690 29,495,402 238,176,092 Loans receivable 1,005,313,232 1,417,286,521 2,422,599,753 Property and equipment 24,628,106 8,969,231 33,597,337 Assets awarded 11,909,715 0 11,909,715 Investments in equity securities 0 4,220,720 4,220,720 Other assets 26,504,036 30,077,779 56,581,815 Total acquired assets USD 1,599,381,330 1,879,257,492 3,478,638,822 Liabilities Deposits 1,204,250,781 1,533,408,497 2,737,659,278 Obligations payable 209,657,059 46,571,429 256,228,488 Other liabilities 32,481,657 109,219,039 141,700,696 Non-controlling interest 0 2,043,148 2,043,148 Total assumed liabilities 1,446,389,497 1,691,242,113 3,137,631,610 Total acquired net assets USD 152,991,833 188,015,379 341,007,212
The following equivalents were developed to determine goodwill, pursuant to Colombian accounting principles and instructions from the Colombian Superintendency of Finance.
(Figures in USD)
Detail Transcom Reformador Banco BAC Panamá Total Equity US Gaap 40,622,587 112,369,246 190,058,528 343,050,361 Percentage acquired 100% 100% 98.92% Acquired equity US Gaap 40,622,587 112,369,246 188,015,379 341,007,212 Impact of equating adjustments (779,450) (1,137,096) (650,033) (2,566,579) Loan portfolio (862,634) (3,373,164) (4,782,273) (9,018,071) Interest suspension 0 (12,575) (49,508) (62,083) Costs & commissions for execution 0 (518,920) (329,212) (848,132) Long-life assets 0 (325,651) 2,868,742 2,543,091 Foreclosures 122,490 365,706 (488,637) (441) Guarantees 0 0 580,000 580,000 Deferred tax 0 1,418,343 0 1,418,343
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4
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Detail Transcom Reformador Banco BAC Panamá Total Deferred tax on adjustments from equating 76,638 1,492,132 1,394,103 2,962,873 Reappraisal of investments (115,944) (21,597) 149,688 12,147 Deferred charges 0 (161,370) 0 (161,370) Non-controlling interest 0 0 7,064 7,064 Acquired equity: Banking Gaap 39,843,137 111,232,150 187,365,346 338,440,633 Total amount paid 82,881,006 338,090,700 505,139,760 926,111,466 Goodwill: Banking Gaap 43,037,869 226,858,550 317,774,414 587,670,833
Corporación Financiera Centroamericana S.A. (FICENTRO) is incorporated under Panamanian law and has its headquarters in Panama City. It was engaged primarily in managing loans granted to companies operating outside the Republic of Panama.
Ficentro currently is dedicated solely to loan recovery and administering the disposal of assets received for sale. The company’s management has expressed its intention to keep the firm functioning, but with no additional operations. There are no plans to liquidate it in the near future.
Megalinea S.A. is involved in loan management and collection through pre-trial, trial and out-of-court action.
The following is the value of the assets, liabilities and earnings of the Bank and its subordinates at June 30, 2014 and December 31, 2013, as included in the consolidation.
June 30 Profit Direct % % % % (Loss) % Assets Liabilities Equity Operating Entity Held Held Held Held for the Held Profit Period
Banco de Bogotá S.A. 62.305.013 54,1 50.438.102 54,7 11.866.911 51,7 870.152 49,0 734.528 55,6 (Bank) $ Almacenes Generales de Depósito Almaviva 207.478 0,2 48.353 0,1 159.125 0,7 10.073 0,6 8.045 0,6
SA & Subordinates Fiduciaria Bogotá S.A. 255.784 0,2 47.900 0,1 207.884 0,9 38.034 2,1 28.815 2,2 Corporación Financiera 14.390.479 12,5 10.268.887 11,1 4.121.592 17,9 270.352 15,2 179.916 13,6 Colombiana S.A. & Subordinates Sociedad Administradora de Pensiones y Cesantías 1.781.230 1,5 578.162 0,6 1.203.068 5,2 203.325 11,5 135.168 10,2
Porvenir S.A & Subordinates Banco de Bogotá S.A. - Panamá & 1.633.816 1,4 1.494.900 1,6 138.916 0,6 13.291 0,7 12.911 1,0
Subordinate Bogotá Finance 159 0,0 0 0,0 159 0,0 1 0,0 1 0,0 Corporation Leasing Bogotá S.A. – 34.572.319 30,0 29.327.481 31,8 5.244.838 22,8 369.606 20,8 220.949 16,7 Panamá Corporación Financiera 5 0,0 5 0,0 0 0,0 0 0,0 0 0,0 Centroamericana S.A Ficentro Megalínea S.A. 9.616 0,0 7.258 0,0 2.358 0,0 69 0,0 (26) 0,0
Casa de Bolsa S.A. 30.043 0,0 2.776 0,0 27.267 0,1 (235) 0,0 11 0,0
115.185.942 92.213.824 22.972.118 1.774.668 49,0 1.320.318
Eliminations (10.247.437) 2.427.152 (12.674.589) (470.405) (633.320)
Consolidated $ 104.938.505 94.640.976 10.297.529 1.304.263 686.998
(Continued)
5
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Profit Direct % % % % (Loss) % Assets Liabilities Equity Operating Entity Held Held Held Held for the Held Profit Period Banco de Bogotá S.A. 57,327,276 51.8 45,773,175 51.8 11,554,101 51.7 747,957 44.9 635,969 49.5 (Bank) $ Almacenes Generales de Depósito Almaviva 209,253 0.2 54,225 0.1 155,028 0.7 13,222 0.8 6,026 0.5
SA & Subordinates Fiduciaria Bogotá S.A. 234,572 0.2 50,450 0.1 184,122 0.8 31,308 1.9 24,477 1.9 Corporación Financiera 14,061,412 12.7 10,033,974 11.3 4,027,438 18.0 393,613 23.6 250,114 19.5 Colombiana S.A. & Subordinates Sociedad Administradora de Pensiones y Cesantías 1,645,366 1.5 516,070 0.6 1,129,296 5.1 142,551 8.6 114,700 8.9
Porvenir S.A & Subordinates Banco de Bogotá S.A. - Panamá & 2,004,534 1.8 1,881,520 2.1 123,014 0.6 4,225 0.3 3,964 0.3
Subordinate Bogotá Finance 162 0.0 0 0.0 162 0.0 1 0.0 1 0.0 Corporation Leasing Bogotá S.A. – 35,213,284 31.8 30,085,047 34.0 5,128,237 23.0 333,100 20.0 249,821 19.4 Panamá Corporación Financiera 6 0.0 6 0.0 0 0.0 0 0.0 0 0.0 Centroamericana S.A Ficentro Megalínea S.A. 7,316 0.0 4,932 0.0 2,384 0.0 (260) 0.0 39 0.0
Casa de Bolsa S.A. 48,998 0.0 21,537 0.0 27,461 0.1 174 0.0 20 0.0
110,752,179 88,420,936 22,331,243 1,665,891 1,285,131
Eliminations (10,083,147) 2,350,730 (12,433,877) (456,076) (640,489)
Consolidated $ 100,669,032 90,771,666 9,897,366 1,209,815 644,642
(2) Principal Accounting Policies
(a) Basic Policy on Accounting and Consolidation
The accounting policies and preparation of the financial statements of the Bank and its national subordinates are in keeping with the accounting principles generally accepted in Colombia and the instructions imparted by the Colombian Superintendency of Finance.
Intercompany accounts and transactions are eliminated when consolidating the financial statements.
(b) Equating and Standardizing the Accounting Policies of National and Foreign Subsidiaries
As part of the process to consolidate the financial statements, the Bank coordinates with its national and foreign subordinates to equate their financial statements to the Single Plan of Accounts for the Colombian Financial System (PUC in Spanish), as defined by the Colombian Superintendency of Finance.
The Bank also coordinates efforts to adjust the accounting policies of its subordinates to the accounting policies generally accepted by the financial sector in Colombia, quantifying the respective adjustments that affect each subsidiary.
It is the responsibility of the parent company to ensure accounting policies and practices are applied uniformly to similar transactions and events in comparable circumstances. The requirement to equate
(Continued)
6
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
does not apply when the controlling company has no transactions similar to those of the companies it controls.
Standardizing the financial statements of the Bank’s foreign subordinates has the following impact on the consolidated financial statements.
June 30 Earnings for Assets Liabilities Equity the Period Leasing Bogotá Panamá
US Gaap figures $ 34,329,863 29,127,999 5,201,864 307,733 Reversal purchase price allocation – Us Gaap 27,344 (93,378) 120,722 28,486 Derivative operations, net 323,972 323,972 0 0 Reclassification of non-controlling interest 0 886 (886) 0 Equating adjustments to Colombian financial principles - Banking Gaap (108,861) (31,998) (76,863) (115,270) Figures in the consolidated statement $ 34,572,318 29,327,481 5,244,837 220,949
December 31 Earnings for Assets Liabilities Equity the Period
US Gaap figures $ 35,126,134 30,025,211 5,100,923 326,937 Derivative operations, net (27,399) (117,915) 90,516 (40,563) Reversal purchase price allocation – Us Gaap 200,247 200,247 0 0 Reclassification of non-controlling interest 0 4,280 (4,280) 0 Equating adjustments to Colombian financial principles - Banking Gaap (85,699) (26,777) (58,922) (36,553) Figures in the consolidated statements $ 35,213,283 30,085,046 5,128,237 249,821
June 30 Earnings for Assets Liabilities Equity the Period Banco de Bogotá Panamá IFRS figures $ 1,631,611 1,495,230 136,381 13,577 Equating adjustments to Colombian financial principles - Banking Gaap 2,206 (330) 2,536 (667) Figures in the consolidated statements $ 1,633,817 1,494,900 138,917 12,910
December 31 Earnings for Assets Liabilities Equity the Period
IFRS figures $ 2,002,057 1,882,192 119,865 3,159 Equating adjustments to Colombian financial principles - Banking Gaap 2,477 (672) 3,149 805 Figures in the consolidated statements $ 2,004,534 1,881,520 123,014 3,964
(Continued)
7
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
c) Cash Flow Statement and Cash Equivalents
The cash flow statement is prepared using the indirect method. For that purpose and in addition to cash, the Bank regards as cash equivalents asset positions that mature in less than 90 days and are readily convertible to cash with insignificant risk of changes in value.
(d) Conversion of the Financial Statements of Foreign Subordinates
The assets, liabilities and equity in foreign currency included in the consolidation were converted into Colombian pesos at the representative market rate of exchange (TRM in Spanish), as calculated on the last business day of the month and certified by the Colombian Superintendency of Finance. The respective rates at June 30, 2014 and December 31, 2013 were $1,881.19 (in pesos) and $1,926.83 (in pesos).
The nominal accounts were converted into Colombian pesos at $1,961.82 (in pesos) y $1,910.56 (in pesos) per dollar. These are the average representative market exchange rates posted between January 1 and June 30, 2014, in that order. The average rate was calculated excluding Saturdays, Sundays and holidays, then divided by the number of business days in the respective six-month period.
(e) Money Market Assets and Liability Operations and Similar Positions
This account groups interbank operations, repos, simultaneous operations and temporary transfers of securities, as explained below.
Ordinary Interbank Funds
These are funds the Bank and its subordinates place with or receive directly from another financial institution, with no agreement to transfer investments or loans. Also included in this category are overnight operations conducted with financial institutions outside the country, using own funds.
The interest income generated by these operations is entered on the statement of operations.
Repurchase Operations (Repos)
Asset Position
Repos are transactions involving the placement of secured funds with other financial institutions. The Bank and its subordinates purchase investments in debt securities under a commitment to resell them to the counterparty at a set price, plus interest at a fixed rate, on a specific date not to exceed one year. The amount entered in this account is the value of the disbursed funds, and the purchased investments are recorded in contingent accounts. The accrued interest is entered under accounts receivable.
Liability Position
These are transactions involving the receipt of secured funds. The Bank sells investments in debt securities with a commitment to repurchase them at a certain price, plus interest, on a specified date not to exceed one year. The values received are entered as liabilities and the sold investment is reclassified
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8
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
within the investment portfolio in the account entitled "Investments sold under repurchase agreements". Accrued interest is recorded under accounts payable.
Simultaneous Operations
The asset and liability positions in simultaneous operations are similar to those in repo operations. In transactions of this type, no restrictions may be placed on the mobility of the securities in question and the initial amount may not be calculated with a discount on the market price of the securities involved.
The securities received in money market operations (repos and simultaneous) are valued daily at fair market prices, based on the prices published by the trading systems, and the guarantees received or pledged are valued the same way in memorandum accounts.
Money market operations are entered in contingent accounts to recognize and disclose receipt of the respective value.
The yields agreed on in money market operations are calculated exponentially during the term of the transaction. Consequently, these returns represent income (for asset operations) or an outlay (for liability operations) and are recognized in the statement of operations according to the principal of accrual accounting.
Securities delivered in repo and simultaneous transactions are reclassified to a transfer rights account, within the same investment account, until the operation is complete. They also are recorded in contingent memorandum accounts.
The collateral received in repo and simultaneous transactions is recorded in contingent memorandum accounts and is only recorded in balance sheet accounts when the so-called short position is sold.
Securities Lending
Securities lending or temporary transfer operations are those in which one party (the "originator") transfers possession of the securities (involved in the transaction) to the other party (the "recipient"), under an agreement to re-transfer them on the same date or on a later date. Concurrently, the recipient will transfer to the originator possession of other securities or a sum of money equal to or greater than the value of the securities in the transaction.
When the transaction is reversed, both the originator and the recipient must restore possession of securities of the same kind and characteristics as those received in the transaction, or the amount of money received, as applicable.
(f) Investment Securities
This account includes investments acquired by the Bank and its subordinates to maintain a secondary liquidity reserve, to gain direct or indirect control of any company in the financial or service sector, to comply with legal or regulatory requirements, or solely to eliminate or reduce the market risk to which assets, liabilities and other items on the financial statements are exposed.
(Continued)
9
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
All investments by the Banks and its subordinates are reappraised using information provided by INFOVALMER S.A., which is a pricing service. It supplies the information required to reappraise investments in each segment of the market (prices, rates, curves, margins, etc.) and issues and provides methods to reappraise the investments needed to comply with the corporate business, doing so in accordance with the parameters outlined in Chapter I of the Basic Accounting and Financial Circular issued by the Colombian Superintendency of Finance.
The different types of investments are classified, reappraised and entered on the books as indicated in the following table.
Trading
Characteristics Valuation Entered on the Books
Short term
Investments in the form of debt The difference between the actual market Securities acquired to turn a profit securities are valued based on the price value and the immediately preceding on short-term price fluctuations determined by the valuation pricing value is entered as a gain or loss in the service. value of the investment, and the balancing item affects earnings for the period. This
On days when the fair price cannot be procedure is performed daily. found or estimated, these securities are valued exponentially, based on the Investments are valued at market prices internal rate of return. as of the same day they are acquired. Therefore, changes or differences
between the purchase price and market This procedure is performed daily. value of investments also are recorded as of the purchase date.
Held to Maturity
Characteristics Valuation Entered on the Books
Term to maturity
The present value is entered as an These are securities the Bank and Exponentially, according to the internal increase in the value of the investment, its subordinates seriously intend to rate of return calculated at the time of and its balancing item is recorded in the hold to maturity or to the purchase, based on a year with 365 earnings for the period. redemption date and have the days legal, contractual, financial and Required yield pending collection is operational capacity to do so. recorded as an increase in the value of When there is objective evidence of a the investment. Consequently, collection loss due to deterioration in the value of of any such yield should be entered as a These investments may not be these assets, the book value will be decline in the value of the investment. used in liquidity operations, nor for reduced directly and the loss will be
repos, simultaneous operations or recognized in the earnings for the
securities lending, unless they are period. This procedure is performed daily. forced or mandatory investments
subscribed in the primary market This procedure is performed daily. and the other party in the operation
is the Central Bank of Colombia
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10
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Held to Maturity
Characteristics Valuation Entered on the Books (Banco de la República), the General Office of Public Credit and the National Treasury, or an entity supervised by the Colombian Superintendency of Finance.
They also may be delivered to a central counterparty clearing house as collateral to back compliance with operations it has accepted for clearing and settlement.
Available for Sale – Debt Securities
Characteristics valuation Entered on the Books
One year up to November 22,
2013 and six (6) months as of that date.
These are securities the Bank and Investments in debt securities are Changes in these securities are entered its subordinates seriously intend to valued on the basis of the price on the books as follows. hold for at least six (6) months determined by the valuation pricing from the date they were classified service. - The difference between the present in this category, and have the value on reappraisal day (calculated legal, contractual, financial and On days when the fair price cannot be exponentially from the internal rate of operational capacity to do so. found or cannot be estimated, these return assessed at the time of purchase, securities are valued exponentially, based on a year with 365 days) and the On the first business day following based on the internal rate of return. immediately preceding value is recorded completion of that six-month as an increase or decrease in the value of period, these securities may be This is a daily procedure. the investment, and is credited or charged reclassified as “held for trading” or to the nominal accounts. “held to maturity”. If not, they will remain classified as “available for - The difference between market value and the present value calculated sale”. according to the preceding paragraph is entered in the equity accounts as an Securities classified as unrealized accumulated gain or loss. investments “available for sale” may be pledged as collateral guarantees to a central This procedure is performed daily. counterparty clearing house to back compliance with operations it has accepted for clearing and settlement.
These investments also may be used for liquidity operations,
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11
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Available for Sale – Debt Securities
Characteristics valuation Entered on the Books repos, simultaneous operations or securities lending.
Available for Sale – Equity Securities
Characteristics Valuation Entered on the Books
No term Equity securities listed in the national Investments whereby the Bank registry of securities (RNVE) Low or minimum turnover or unlisted becomes joint owner of the issuer. (Spanish acronym):
- The difference between the market or These are valued according to the updated value of the investment and This category includes securities price determined by the valuation the book value is recorded as follows: with high, medium, low or minimal pricing services authorized by the turnover or unlisted securities and Colombian Superintendency of those held by the Bank as Finance. If greater, it is used first to reduce the controlling interest in its capacity allowance or for a downward Mutual funds and securitizations are as a parent company or head adjustment in value until exhausted, valued according to the unit of value office, in or outside the country. and the excess is recorded as an equity calculated by the management reappraisal surplus. company on the day prior to For the purpose of their sale, reappraisal. these investments need not be If less, the difference is used to reduce Equity securities quoted only on held for six (6) months. the equity reappraisal surplus until foreign stock exchanges: exhausted, and the remainder is
recorded as a loss in market value. These are valued based on the price
determined by the valuation pricing - When dividends or profits are distributed services authorized by the Colombian in kind, including those from Superintendency of Finance. If there capitalization of the equity reappraisal is no reappraisal method, the most account, the portion entered on the recent closing price in the last five (5) books as an equity surplus is treated trading days shall be used, including as income, chargeable to the the reappraisal day or the simple investment, and that surplus is average of the closing prices reported reversed. in the last 30 days.
If they are traded on more than one - When dividends or profits are distributed foreign stock exchange, the value on in cash, the amount entered as an the home market will be used. equity reappraisal surplus is recorded The price of the security is converted under income, thereby reversing that into domestic currency. surplus. The amount of dividends that exceeds it is recorded as a decline in the value of the investment. Equity securities listed in foreign
securities exchange systems authorized in Colombia: High and Medium Turnover The updated market value of securities with high and medium turnover or those Are valued at the price supplied by
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12
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Available for Sale – Equity Securities
Characteristics Valuation Entered on the Books the valuation pricing services quoted on internationally recognized authorized by the Colombian foreign stock exchanges is recorded in the Superintendency of Finance. equity accounts as an unrealized accumulated gain or loss and credited or charged to the investment, as the case Equity securities not listed on a stock may be. exchange:
This procedure is performed daily. Are valued at the price determined by the valuation pricing service designated as official for the Dividends or profits distributed in cash or respective segment. kind, including those from capitalization of the equity reappraisal account, are When the pricing service has no entered as income up to the amount method for valuing these investments, pertaining to the investor with respect to institutions shall increase or decrease profits or reappraisal of the issuer’s the acquisition cost in proportion to equity, as recorded by the latter from the the percentage of ownership interest date the investment was acquired, the investor has in subsequent chargeable to accounts receivable. variations in the issuer’s equity, calculated on the basis of certified financial statements at December 31 and June 30 of each year, or the most recent ones, if known.
Investment Reclassification
For an investment to remain in any of the classification categories, it must comply with the characteristics or conditions particular to the type of investments in that category.
The Colombian Superintendency of Finance may order the institution to reclassify a security at any time, if it does not comply with the characteristics particular to the category in which it is classified or when reclassification is required for better disclosure of the financial situation.
Investments may be reclassified pursuant to the following provisions:
Reclassification from investments held to maturity to investments held for trading is possible in any of the circumstances listed below:
Significant deterioration in the conditions of the issuer, its parent company, its subordinates or its affiliates
Changes in regulations that make it impossible to maintain the investment
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Mergers that lead to reclassification or sale of the investment to maintain the previous interest-rate risk position or to adjust to the credit risk policy established beforehand by the resulting entity.
Other unforeseen events, subject to prior authorization from the Colombian Superintendency of Finance.
Reclassification from investments available for sale to investments held for trading or held to maturity is possible in any of the following circumstances:
Completion of the six-month period applying to this classification.
When the investor loses its capacity as a parent or controlling company, provided this circumstance involves a decision to dispose of the investment or the primary intent is to profit from short-term price fluctuations, as of that date.
When the conditions of the issuer, its parent company, its subordinates or its affiliates have deteriorated significantly.
When changes in regulations make it impossible to maintain the investment.
When mergers lead to reclassification or sale of the investment to maintain the previous interest-rate risk position or to adjust to the credit risk policy established beforehand by the resulting entity.
When the investment goes from low or minimum turnover or unquoted to high or medium turnover.
When investments held to maturity or available for sale are reclassified as trading investments, the rules applicable to the latter with respect to reappraisal and accounting are to be observed. Consequently, unrealized gains or losses are treated as income or expenses on the date of reclassification.
Securities reclassified as trading investments may not be reclassified again.
Investment Repurchase Rights
This account records investments that represent collateral guarantees for investment repurchase agreements.
All economic rights and benefits associated with the value of these investments are preserved and all risks inherent in that value are retained, even though legal ownership is transferred when the operation is conducted in the money market.
These securities continue to be valued daily and entered on the balance sheet and the statement of operations pursuant to the method and procedure applicable to investments classified as “trading,” “held to maturity” and “available for sale,” depending on the category in which they were listed before the repurchase agreement was acquired.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Investments Pledged as Collateral Guarantees
These are investments in debt securities pledged as collateral to back compliance with operations accepted for clearing and settlement by the Central Counterparty Clearing House.
They are valued daily and entered on the balance sheet and the statement of operations pursuant to the method and procedure applicable to the category in which they were listed before being pledged as collateral.
Allowances or Losses, by Credit Risk Rating
The price of “trading” investments for which there is no fair price on the day of reappraisal and the price of investments classified as “held to maturity” must be adjusted on each reappraisal date, based on the credit risk rating and pursuant to the following criteria:
Unrated Issues or Allowances:
Securities with no external rating or those issued by unrated entities are classified as follows.
Category/Risk Characteristics Allowances
They comply with the terms agreed on in the A-Normal instrument, and the issuer has sufficient capacity to pay None required the principal and interest. This classification pertains to issues with uncertainty factors that could affect the capacity to continue to service the debt adequately. In addition, the financial The net value may not exceed eighty percent B- Acceptable statements and other available data show weaknesses (80%) of the acquisition cost, net face value that might affect the issuer’s financial situation. of amortization up to the reappraisal date.
The net value may not exceed sixty percent These are issues with high or medium probability of (60%) of the acquisition cost. default on prompt payment of principal and interest. C- Appreciable Moreover, the financial statements and other available In the case of debt securities, their book data show weaknesses in the issuer’s financial situation value may not exceed eighty percent (80%) that could jeopardize recovery of the investment. of the net face value of amortization prior to the reappraisal date. These are issues that default on the terms agreed in the instrument. In addition, the respective financial statements and other available data show serious The net value may not exceed forty percent D- Significant weaknesses in the issuer’s financial situation, so much (40%) of the acquisition cost. so that there is very little likelihood of recovering the investment.
Issuers with financial statements and other available The value of these investments is provisioned data suggesting the investment is uncollectible. Also, if E-Uncollectable in its entirety. there are no financial statements at December 31 and June 30 of each year.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Externally-rated Issues or Issuers
Debt securities with one or more ratings and those ranked by external credit rating agencies recognized by the Colombian Superintendency of Finance may not be recorded for an amount that exceeds the following percentages of the net face value of amortization prior to the reappraisal date.
Maximum Long-term Rating Maximum Value % Short-term Rating Value %
BB+, BB, BB- Ninety (90) 3 Ninety (90) B+, B, B- Seventy (70) 4 Fifty (50) CCC Fifty (50) 5 and 6 Zero (0) DD,EE Zero (0) 5 and 6 Zero (0)
The respective issuer’s rating is used to estimate the allowances for time deposits.
The allowance for investments classified as “held to maturity” and for which a fair value can be determined, as stipulated in the case of “trading” securities or those “available for sale,” is the difference between the book value and said price.
Domestic or foreign government debt securities issued or guaranteed by the nation, those issued by the Central Bank of Colombia and those issued or backed by the Guarantee Fund for Financial Institutions (FOGAFIN) are not subject to these provisions.
Method Used to Calculate the Proportional Value of Equity
In cases involving purchases made prior to December 31, 1976, the proportional equity value of the sum of those acquisitions is calculated with the equity recorded by the institution on that date, applying the percentage of equity investment accumulated at December 31, 1976 to each component of equity.
The step-by-step method is used for each subsequent purchase representing an increase in that interest or equity investment, regardless of the percentage.
The sum of the value of each equity component determined according to the percentage of interest or equity investment acquired with each purchase is matched against the cost of each purchase to identify a difference of greater or lesser value between the cost versus the acquired equity.
If the cost is greater than the acquired equity, it is treated as a surplus investment cost, or an investment cost shortfall, if it is less.
The amortization period for these surpluses or shortfalls is five (5) years from the moment control is acquired. Those obtained in subsequent acquisitions are amortized during the period remaining to complete the five (5) years. Those obtained after the five (5) years must be amortized in full at the time they are determined.
Amortization is entered against the earnings for the accounting period or previous periods, as appropriate.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
g) Loans and Financial Leases
These accounts record loans made according to the different types of authorized lending. The funds used to extend loans come from the Bank’s own resources, the public (in the form of deposits), and other external and internal sources of funding.
Loans are entered on the books at their disbursement value, except in the case of factoring operations, which are recorded at cost.
The loan portfolio is classified according to four (4) types of credit:
Commercial
These are loans made to persons or legal entities to develop organized business activities. They are different from microcredit.
Consumer
These loans, regardless of the amount, are made to persons to finance the acquisition of consumer goods or the payment of non-commercial or non-business services. They are different from microcredit.
Mortgage
These loans, regardless of the amount, are granted to persons for the purchase of new or used housing, or the construction of individual homes. As provided for under Law 546/ 1999, they are denominated in constant-value units (UVR-Spanish acronym) or in domestic currency, and are backed by a first mortgage on the property being financed.
The payback period ranges from a minimum of five (5) years to a maximum of thirty (30). These loans may be prepaid all or in part at any time, without penalty. In the event of partial prepayments, the borrower is entitled to decide if the amount paid will go to reduce the monthly installment or the mortgage payback period. Moreover, these loans have a remunerative rate of interest, which is applied to the outstanding balance denominated in pesos or UVR. Interest is charged in arrears and may not be capitalized. The amount of the mortgage may be for as much as seventy-percent (70%) of the value of the property, as determined by the purchase price or by a professional appraisal done within six (6) months before the loan is granted. Loans to finance low-income housing may be for as much as eighty percent (80%) of the value of the property. In all cases, the property being financed must be insured against fire and earthquake.
Microcredit
These are the loans referred to in Article 39, Law 590/2000, as amended, substituted or expanded, and those made to micro-businesses where the primary source of repayment is the income derived from their commercial activity.
The borrower’s debit balance may not exceed one hundred twenty (120) times the minimum monthly wage (SMMLV: Spanish acronym) in effect at the time the loan is approved. The “debit balance” is understood
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
as the sum of what the micro-business still owes on loans from the financial system and other sectors, as listed in the records of the database operators consulted by the respective lender, excluding home mortgages and adding the value of the new loan.
A micro-business is understood as any unit of economic pursuit established by a private person or legal entity to engage in rural or urban business, farming, industrial, commercial or service activities, with a staff of no more than ten (10) workers and total assets that do not exceed five hundred (500) times the minimum monthly wage (SMMLV) in effect at the time.
Credit Risk Assessment Criteria
The Bank and its subordinates continuously assess the risk inherent in their loan assets. This is done when the loan is granted and throughout its life, even in cases of restructuring. The Credit Risk Management System (SARC – Spanish acronym) was designed and adopted for that purpose. It is comprised of credit-risk management policies and processes, reference models to estimate or quantify anticipated losses, a system of allowances to cover credit risk, and processes for internal control.
Loans are granted on the basis of what is known about the potential borrower and the borrower’s creditworthiness. The terms of the loan agreement to be entered into are taken into account as well. Among others, these include the financial terms of the loan, the collateral, sources of payment and the macroeconomic conditions to which the borrower might be exposed.
The loan approval process involves a series of variables established for each of the portfolios. These make it possible to identify borrowers who fit the organization’s risk profile. The segmentation and discrimination processes for loan portfolios and their potential borrowers serve as the basis for their rating. The methods and procedures included in the loan approval process make it possible to monitor and control credit exposure for the various individual portfolios and the aggregate portfolio alike, thereby avoiding an excessive concentration of lending per borrower, economic sector, economic group, risk factor, etc.
The Bank and its subordinates constantly monitor and rank lending operations pursuant to the loan approval process, which is founded on several criteria. These include information on the historical pattern of the portfolios and individual loans; the particular characteristics of borrowers, their loans and the collateral backing them; the borrower’s credit history or reputation with other institutions; financial information that provides an understanding of the borrower’s financial situation; and the macroeconomic and sector variables that might affect the normal development of lending operations.
When assessing regional government agencies, the Bank and its subordinates verify compliance with the provisions contained in laws 358/1997, 550/1999 and 617 / 2000.
Loan Assessment and Re-rating
The Bank and its subordinates evaluate the risk to their loan portfolio, making changes in the respective ratings when justified in light of new analysis or information.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
The Banks and its subordinates fulfill this obligation by considering the borrower’s credit history with other lenders, particularly if the information provided by credit reporting agencies or other sources shows the borrower has restructured loans at the time of the assessment.
In any case, the Bank and its subordinates assess and reclassify the loan portfolio i) when loans fall into arrears after being restructured, in which case they must be reclassified immediately, and ii) during May and November, at the very least, recording the results of the assessment and reclassifying as needed at the close of following month.
Credit Risk Rating
The Bank and its subordinates classify and rate commercial and consumer loans in the respective risk categories, taking into account the following objective conditions, at the very least.
Commercial and consumer loans are classified and rated in the respective risk categories, pursuant to the rules outlined in Chapter II of Basic Accounting and Financial Circular 100/ 1995, as detailed in Attachment 3 concerning application of the Commercial Loan Reference Model (MRC in Spanish) and Attachment 5 containing instructions on the Consumer Loan Reference Model (MRCO in Spanish). Credit risk assessment is based on a variety of criteria; namely, loan arrears aging, information related to the historical performance of portfolios and loans, the particular characteristics of the borrowers, their credit history with other lenders, financial information, and sector and macroeconomic variables, as indicated below.
Category New Existing Commercial Loans Existing Consumer Loans
New loans that are rated “AA” Loans with a rating equivalent to “AA” Loans with a rating equivalent to “AA” when approved. based on the legally approved MRC “AA” based on the legally approved method. MRCO method.
New loans that are rated “A” Loans with a rating equivalent to ”A” Loans with a rating equivalent to “A” when approved should be based on the legally approved MRC ”A” based on the legally approved assigned to this category. method. MRCO method.
New loans that are rated “BB” Loans with a rating equivalent to ”BB” Loans with a rating equivalent to “BB” when approved should be based on the legally approved MRC ”BB” based on the legally approved assigned to this category. method MRCO method.
New loans that are rated “B” Loans with a rating equivalent to ”B” Loans with a rating equivalent to “B” when approved should be based on the legally approved MRC ”B” based on the legally approved assigned to this category. method MRCO method.
New loans that are rated “CC” Loans with a rating equivalent to ”CC” Loans with a rating equivalent to “CC” when approved should be based on the legally approved MRC ”CC” based on the legally approved assigned to this category. method. MRCO method. .
Existing loans 150 days past due, or Consumer loans more than 90 “Default” more. days past due.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
The following table shows the equivalent risk ratings for commercial and consumer loans used in the borrowing reports and for entries in the financial statements of the Bank and its subordinates.
Reporting Categories Group Category Commercial Consumer AA A AA “A” - currently 0-30 days past due “A” - currently over 30 days past A B due BB BB B B C CC CC C C D D D E E E
The following equivalences are used when the Bank and its subordinates classify their customers as being in default, based on application of the reference models adopted by Colombian Superintendency of Finance.
Group E = Clients in default with an assigned LGD equal to one hundred percent (100%).
Group D = All other clients rated as being “in default”.
For the purpose of equivalence in consumer loans, the “current arrears” shown in the foregoing table are understood at the maximum posted by the borrower for aligned products at the evaluation date.
The Bank and its subordinates must classify borrowers in higher risk categories when they are aware of additional elements of risk to support this change.
Mortgage loans and microcredit are placed in the following categories, taking “loan arrears aging” into account:
Category Microcredit Mortgage Loans
“A” Normal Risk Existing loans up to one (1) month past With installments current or up to two (2) months due past due
“B” Acceptable Loans over (1) and up to two (2) months Over two (2) and up to five (5) months past due Risk past due
“C” Appreciable Loans over two (2) and up to three (3) Over five (5) and up to 12 months past due Risk months past due
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Category Microcredit Mortgage Loans
“D” Significant Loans over three (3) and up to four (4) Over 12 and up to 18 months past due Risk months past due
“E” Risk of Being Loans over four (4) months Over 18 months past due Uncollectible past due
Restructuring Processes
Restructuring a loan is understood as any exceptional mechanism implemented through legal steps taken to enable borrowers to discharge their obligations appropriately in the face of real or potential constraints to their ability to pay by amending the terms originally agreed on. Agreements reached under laws 550/ 1999, 617/ 2000 and 1116/ 2006, or norms that add to or supplement them, also are regarded as restructured, as are special restructurings and novations.
Tax Reform Act 617/ 2000
In restructuring derived from the tax and financial reform programs subscribed under the terms of Act 617/ 2000, sovereign guarantees were supplied for loans contracted by regional government agencies with financial institutions supervised by the Colombian Superintendency of Finance, provided the requirements set forth in that legislation were met and the fiscal adjustment agreements were entered into before June 30, 2001. The respective guarantee could be as much as forty percent (40.0%) for loans outstanding at December 31, 1999 and up to one hundred percent (100.0%) in the case of new loans used for tax adjustment.
These restructurings reversed the allowances constituted for the sovereign-guaranteed portion of the restructured debt. The restructured portion not guaranteed by the government kept the rating it had at June 30, 2001.
If the restructuring agreement is not fulfilled, the borrower is classified in the category occupied prior to restructuring or in a higher risk category.
To improve their rating after respective restructuring, borrowers must comply fully with all terms and conditions outlined in the restructuring agreement.
If a regional government agency defaults on the agreement, the portion of the outstanding debt not backed by a sovereign guarantee on the date of default is reclassified in risk category ”E”.
Restructuring Agreements
For loans restructured before Law 550/1999 took effect, the Bank and its subordinates suspended interest accrual on the outstanding balance at the onset of restructuring negotiations and maintained the rating the loans had at that point. However, a client in risk category “A” was reclassified at least to category “B” and an allowance equal to one hundred percent (100.0%) of accounts receivable was made.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
When a client is admitted to the restructuring process under the terms of Law 1116/ 2006, the Bank and its subordinates suspend interest accrual and classify the client in a risk category consistent with the situation at the time. If that situation subsequently worsens or the proposed agreement is perceived as not meeting the expectations of the Bank and its subordinates, the rating is reviewed and the debt is reclassified in the pertinent risk category. If no agreement is reached or if the courts order a legal settlement, the client is classified as being “in default.
Special Criteria for Classifying Restructured Loans
Restructured loans may keep the rating they had immediately prior to restructuring, provided the restructuring agreement leads to an improvement in the borrower’s ability to pay and/or reduces the likelihood of default. If restructuring contemplates grace periods for the repayment of principal, the rating is maintained only when those periods do not extend beyond one year, as of the date the agreement is signed.
It is possible for loan ratings to improve or the “default” condition to be changed after loans have been restructured, but only if the borrower demonstrates a pattern of repaying the principal regularly and effectively, in accordance with normal credit behavior, and provided the borrower’s ability to pay is maintained or improves. h) Write-offs
A fully provisioned loan (100%) may be written off if the management of the Bank and its subordinates believes it is uncollectable or offers only a remote or uncertain possibility of recovery, provided the Bank’s legal counsel and agencies specializing in debt collection through the courts believe all possible means of collection have been exhausted.
A write-off does not relieve officers of whatever their responsibility might be for having approved and managed the loan, nor does it release them from the obligation to continue efforts to collect it.
The Board of Directors is the only body with the authority to approve writing off operations considered to be losses. i) Allowance for the Loan Portfolio and Accounts Receivable
The Bank and its subordinates have a system of allowances to cover credit risk. These are calculated on the outstanding balance, using the reference models for the commercial loan portfolio (MRC in Spanish) and the consumer loan portfolio (MRCO in Spanish). Mortgages and microcredit are provisioned based on the client’s record of arrears.
Commercial and Consumer Loans
The Bank and its subordinates adopted the commercial and consumer reference models established by the Colombian Superintendency of Finance to estimate allowances.
The allowances based on the reference models are calculated as the sum of the "pro-cyclical individual component (PIC)" and the "counter-cyclical individual component (CIC)". These methods are defined in
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
terms of the accumulative phase applied by the Bank and its subordinates, which includes indicators of deterioration, efficiency and loan portfolio growth.
The PIC is the expected loss calculated for the entire portfolio with matrix A; that is, the result obtained by multiplying the debtor’s exposure, by the probability of default (hereinafter PD) for matrix A and the loss given default (hereafter LGD) associated with the debtor’s collateral, as provided for in the respective reference model.
The CIC is the maximum value between the counter-cyclical individual component in the previous period (t-1) affected by the exposure, and the difference between the expected loss calculated with matrix B and the expected loss calculated with matrix A at the time the allowance (t) was estimated.
The processes used to segment and discriminate the loan portfolio and potential borrowers constitute the basis for estimating expected losses using the Commercial Loan Reference Model (MRC), which is founded on segments differentiated by the level of the borrower’s assets, pursuant to the following criteria:
Commercial Loan Classification by Asset Level
Company Size Asset Level
Large companies More than 15,000 SMMLV
Medium-sized companies Between 5,000 and 15,000 SMMLV
Small companies Less than 5,000 SMMLV
Persons with commercial loans are grouped into the category of the model labeled “Persons”.
The Consumer Reference Model (MRCO, in Spanish) is based on segments differentiated by products and the lending institutions that grant them. The idea is to preserve the peculiarities of the market niches and the products being made available.
The following are the segments defined for MRCO by the Bank: General - Automobiles: Loans to purchase automobiles. General - Others: Loans to purchase consumer goods other than automobiles. Credit cards are not included in this segment. Credit Card: Revolving credit to purchase consumer goods with a credit card.
The commercial and consumer reference models make it possible to identify the components of expected losses according to the following parameters.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
a. Probability of Default (PD)
This is the probability that a borrower will default within a 12-month period.
Probability of default is defined pursuant to the following formats established by the Colombian Superintendency of Finance.
Commercial Loans
Rating Large Company Medium-sized Company Small Company Persons
Matrix A Matrix B Matrix A Matrix B Matrix A Matrix B Matrix A Matrix B AA 1.53% 2.19% 1.51% 4.19% 4.18% 7.52% 5.27% 8.22% A 2.24% 3.54% 2.40% 6.32% 5.30% 8.64% 6.39% 9.41% BB 9.55% 14.13% 11.65% 18.49% 18.56% 20.26% 18.72% 22.36% B 12.24% 15.22% 14.64% 21.45% 22.73% 24.15% 22.00% 25.81% CC 19.77% 23.35% 23.09% 26.70% 32.50% 33.57% 32.21% 37.01% Default 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Consumer Loans
Matrix A Matrix B Rating General - General - General - General - Credit Card Credit Card Automobiles Others Automobiles Others AA 0.97% 2.10% 1.58% 2.75% 3.88% 3.36% A 3.12% 3.88% 5.35% 4.91% 5.67% 7.13% BB 7.48% 12.68% 9.53% 16.53% 21.72% 18.57% B 15.76% 14.16% 14.17% 24.80% 23.20% 23.21% CC 31.01% 22.57% 17.06% 44.84% 36.40% 30.89% Default 100.0% 100.0% 100.0% 100.00% 100.00% 100.00%
The probability of migrating between the current rating and “default” status within the next 12 months is calculated for each borrower-segment of the commercial and consumer loan portfolios, based on the general credit-risk behavior cycle. b. Loss Given Default (LGD)
Loss given default is defined as the economic loss the Bank would incur if any of the default situations were to materialize. The LGD for borrowers in the “default category” would increase gradually, concordant with the days that transpire after their classification in that category.
The loan collateral backing the operations must be taken into account to calculate the losses expected in the event of default and, therefore, to determine the extent of allowances.
The Bank defines admissible collateral as a guarantee that has been duly developed, has a value established on the basis of technical and objective criteria, offers legally effective support for payment of the secured loan, and is reasonably easy to execute.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
To evaluate the backing offered and the possibility of collecting on each guarantee, the Bank take into account the nature, value, coverage and liquidity of a guarantee, as well as the potential cost of its collection and the legal requirements necessary to make it enforceable.
The following is the LGD by type of collateral guarantee.
Commercial Loans
Days after Days after Type of Guarantee LGD New LGD New LGD Default Default
Inadmissible guarantee 55% 270 70% 540 100% Subordinated loans 75% 270 90% 540 100% Admissible financial collateral 0 – 12% - - - - Commercial and residential real estate 40% 540 70% 1080 100% Assets furnished in real estate leasing 35% 540 70% 1080 100% Assets furnished in non-real estate leasing 45% 360 80% 720 100% Other collateral 50% 360 80% 720 100% Collection rights 45% 360 80% 720 100% Unsecured 55% 210 80% 420 100%
Consumer Loans
Days after Days after Type of Guarantee LGD New LGD New LGD Default Default Inadmissible guarantee 60% 210 70% 420 100% Admissible financial collateral 0-12% - - - - Commercial and residential real estate 40% 360 70% 720 100% Assets furnished in real estate leasing 35% 360 70% 720 100% Assets furnished in leasing other than real estate 45% 270 70% 540 100% Other collateral 50% 270 70% 540 100% Collection rights 45% 360 80% 720 100% Unsecured 75% 30 85% 90 100%
To equate the different types of collateral in loan agreements with the segments listed earlier, the Bank classify them by groups, as follows:
1. Inadmissible guarantees: These include, among others, cosigners, endorsers and guarantees through payroll deductions.
2. Admissible financial collateral includes the following:
Cash collateral deposits: This collateral guarantee has zero percent (0%) LGD. Stand-by letters deemed as admissible guarantees: This collateral guarantee has zero percent (0%) LGD. Loan insurance: This collateral guarantee has twelve percent (12%) LGD. Sovereign guarantees (Law 617/2000): This collateral guarantee has zero percent (0%) LGD.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Collateral issued by guarantee funds: This collateral guarantee has twelve percent (12%) LGD. Pledge on securities issued by financial institutions: This collateral guarantee has twelve percent (12%) LGD.
3. Collection rights represented by:
Escrow accounts Revenue pledged by regional and decentralized agencies of all types
4. Real estate and residential property. The following classify as collateral:
Mortgage trusts Collateral in the form of real estate
5. Property rented out under real estate leasing agreements. Properties leased out under the following contracts are classified in this category:
Real estate leasing Residential leasing
6. Assets rented out under non-real estate leasing agreements. Assets leased out under the following contracts are classified in this category:
Machinery and equipment leasing Vehicle leasing Leasing of furniture and fixtures Leasing of ships, trains and airplanes Leasing of computer equipment Leasing of livestock Leasing of software
7. Other collateral. The following collateral is classified in this category:
Pledges on processed inventories Pledges on input – commodities Pledges on equipment and vehicles Collateral certificates or warehouse bonds
8. No guarantee: All guarantees not listed in any of the foregoing sections and all unsecured loans are classified in this category by the Bank and its subordinates.
Accordingly, each borrower has a different LGD, depending on the type of collateral guarantee supporting the operation.
Because collateral guarantees are an important factor in calculating expected losses, the respective policies and criteria applied by the Bank are described below.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Policy on Admitting and Managing Collateral Guarantees
Collateral guarantees are additional support the Bank require from clients to reduce the risks inherent in lending. Collateral guarantees are not considered payment instruments.
Policy on Requiring Additional Collateral Guarantees
When required pursuant to the law on credit limits. Preferably, loans for more than three (3) years should have admissible collateral guarantees. Collateral guarantees may not be shared with any of the client’s other creditors, unless shared to the same degree with subordinates of the Bank located outside the country, with its affiliates or in syndicated loans.
Formalities for Constituting Collateral Guarantees when Granting Loans
Collateral guarantee incorporation documents must be written according to the instructions prepared for that purpose by the Legal Department of the Bank.
The following applies to collateral guarantees, when furnished:
In the case of a collateral guarantee constituted on non-residential property, the value on the date it is pledged is that obtained through a professional appraisal done not more than three (3) years earlier.
For collateral guarantees constituted on machinery and/ or equipment, the value is determined according to the age of the item. Specifically, if the machinery or equipment is less than one year old, the value will be the invoiced value for three years. If more than one year old, it will be the professionally appraised value at the execution date.
In the case of collateral guarantees constituted on vehicles, the reference values published by Fasecolda are used or, if not available, the commercial appraisals published by the Ministry of Transport are used.
With respect to collateral guarantees constituted on other goods or assets, the value of the guarantee on the date of constitution pertains to the professionally appraised value.
Managing Guarantees
It is the borrower’s responsibility to maintain the collateral guarantee appropriately. The commercial officer for the account must verify compliance with this rule by:
- Supervising the constitution of collateral guarantees - Verifying the existence and validity of insurance policies - Verifying all required documentation and information, and making sure it is filed properly.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
The Collateral Guarantee Control System facilitates this job by providing:
- Information on expiration of insurance policies - Information on documents
The Document Management Center is responsible for the suitable custody of collateral guarantees.
Distribution of Collateral Guarantees
A loan may be backed by collateral belonging to the borrower or by collateral owned by someone other than the borrower.
Collateral guarantees are allocated for up to 100% of the outstanding balance on the loan.
Open Collateral Guarantees
When a collateral guarantee covers several borrowers, priority in allocation is given to those with the largest PD.
When several loans have the same PD, because they pertain to the same borrower, priority in allocation is given the loan with the largest outstanding balance.
Collateral guarantees pending allocation to the loans they secure are allocated in ascending order of LGD.
For loans with no deferred payments, the exposed balance of the loan (principal, interest, others) is sent for distribution.
For loans with deferred payments, the exposed balance of the loan is sent once the deferred payments have been deducted.
Closed Collateral Guarantees
The respective loan is covered only up to 100% of the outstanding balance, without exceeding the legal limit of the value of the guarantee.
Reappraising Collateral Guarantees
External Circular 043/2011 included the instructions on mandatory assessment of admissible collateral for loans, based on the following criteria:
Real estate for residential use:
A professional appraisal is required to furnish the guarantee. The appraisal must be valid for one year, after which the value of the collateral must be updated pursuant to the following indexes:
. Urban and Rural Real Estate Reappraisal Index (IVIUR in Spanish) for property in Bogotá D.C.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
. Landed Property Reappraisal Index (IVP in Spanish) for the rest of the country.
Non-residential real estate:
To furnish collateral, it must be professionally appraised. The appraisal is valid for no more than three (3) years. At the end of that period, and at least every three (3) years thereafter, a new professional appraisal is required to update the value of the property.
Machinery and equipment
In the case of machinery and equipment that is new or less than one year old, the purchase price shown on the respective invoice or on the borrower’s books is used as the value of the collateral.
In the case of machinery and equipment that is more than one year old, the value of the collateral at the time it is furnished is the professionally appraised value.
This amount is valid for three (3) years. Afterwards, and at least every three (3) years, a new professional appraisal must be done to update the value of the collateral.
Collateral constituted on vehicles
Vehicles classified in the Fasecolda Price Listing: The value of the respective vehicle when the collateral is furnished and at subsequent monthly updates shall be the price published in this listing.
Vehicles not classified in the Fasecolda Price Listing: The information on commercial appraisals published by the Ministry of Transportation may be used to determine the value of these assets; if not, the procedure described earlier for machinery and/or equipment may be applied.
Collateral constituted on securities
Using the value provided by a valuation price supplier authorized by the Colombian Superintendency of Finance.
Collateral constituted on other assets
This is the value obtained through a professional appraisal and updating of the same. The appraisal must be done according to the particular characteristics of the asset. c. Exposed value of the Asset
In the commercial and consumer loan portfolio, the exposed value of an asset is understood as the outstanding balance with respect to principal, interest, accounts receivable for interest and other receivables.
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29
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Mortgage Loans and Microcredit Loans
General Allowance
The general allowance is at least one percent (1%) of total gross mortgage loans and microcredit.
The Bank invariably maintain allowances equal to no less than the following percentages of the balance pending payment:
Microcredit loans Mortgage loans Interest and Interest and Principal Secured Unsecured Category Other Items Other Items % Principal (%) Principal (%) % % A – Normal 1 1 1 1 1 B – Acceptable 3.2 100 3.2 100 100
C – Appreciable 20 100 10 100 100
D – Significant 50 100 20 100 100 E – Uncollectible 100 100 30 100 100
In the case of mortgage loans, if the loan remains in category “E” for two (2) consecutive years, the rate of provisioning on the secured portion increases to sixty percent (60.0%). If one (1) more year transpires under the same conditions, the provisioning rate on the secured portion is raised to one hundred percent (100.0%).
Effect of Admissible Guarantees on the Establishment of Individual Allowances
For the purpose of establishing individual allowances, a collateral guarantee secures only the principal of a loan. Therefore, the amortizable balance of loans secured with admissible collateral guarantees is provisioned according to the percentage pertaining to the loan category, applied as follows:
For the unsecured portion of mortgage loans, the percentage is applied to the difference between the unpaid balance and one hundred percent (100%) of the value of the collateral. For the secured portion, it is applied to one hundred percent (100%) of the balance of the secured debt.
For microcredit, the percentage is applied to the difference between the unpaid balance and seventy percent (70%) of the value of the collateral. In these cases, depending on the nature of the guarantee and the amount of time the loan is past due, only the percentages of the total value of the guarantee listed in the following tables are considered when constituting the allowances.
Non-mortgage Guarantee Percentage of Time past due coverage 0 to 12 months 70% Over 12 and up to 24 months 50% Over 24 months 0%
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30
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Mortgage Guarantee or Admissible Mortgage Trust Guarantee Percentage of Time past due coverage 0 to 18months 70% Over 18 and up to 24 months 50% Over 24 and up to 30 months 30% Percentage of Time past due coverage Over 30 and up to 36 months 15% Over 36 months 0%
Alignment Rules
The Bank align the ratings of their borrowers according to the following criteria. a. Prior to making allowances and equalizing ratings, the Bank conduct a monthly internal alignment for each borrower, placing loans of the same type to the same borrower in the highest risk category. b. The Bank are obliged, by law, to consolidate their financial statements. For that reason, loans of the same type to the same borrower are assigned to the same risk category.
Equating the Loan Allowance of Consolidated Leasing Bogota Panamá
Equating the loan allowances of Leasing Bogotá Panama and its subordinates to the accounting principles on loan allowances established by the Colombian Superintendency of Finance is being done in two stages: i ) taking, as a base, the allowances it calculates according to accepted accounting principles in the United States ( US GAAP); and ii ) estimating the required additional adjustment to that base.
Expected loss models are used to determine the allowances for Leasing Bogotá Panama and its subordinates, under US GAAP, based on internal client ratings that reflect actual economic conditions and experience with historic loss and default, according to the type of portfolio (commercial, consumer and mortgage loans).
Methods that incorporate additional risk criteria to adjust risk ratings for the clients of Leasing Bogotá Panama and its subsidiaries were designed for each of the different types of loans (commercial, consumer and mortgage) to estimate the required additional adjustment. Countercyclical factors were included as well, the idea being that larger allowances than would be necessary during periods of better loan quality could be established to compensate for those that would be necessary in periods when loan quality deteriorates.
Accordingly, the required adjustments for risk and countercyclical factors, based on the criteria outlined above, were added to the loan portfolio allowances for Leasing Bogotá Panamá and its subsidiaries, under USGAAP, to bring portfolio allowances in line the accounting standards established to that effect by the Financial Superintendency of Colombia.
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31
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
j) Recognizing Income from Yield and Financial Leases
Interest income on loans and financial leases is entered on the books when accrued.
Suspension of Interest Accrual
In the case of loans, the Bank suspend the accrual of interest, monetary correction, exchange adjustments and other income when a loan is in arrears. This is done according to the following table:
Type of Loan Arrears Over: Commercial 3 months Consumer 2 months Mortgage loan 2 months Microcredit 1 month
Consequently, the statement of operations is not affected until these items are actually collected. Up to that time, the respective entry is made in memorandum accounts.
Moreover, interest accrual is suspended as of the first day past due in the event of loans for which interest accrual has been suspended in the past.
In cases where interest recorded in memorandum accounts or balances of loans written off, including principal, interest and other proceeds, is to be capitalized as a result of restructuring or other types of agreements, it is recorded as a deferred credit and amortized on the statement of operations in proportion to the amounts actually received.
Special Rule on Allowances for Receivables (Interest, Monetary Correction, Leasing Payments, Exchange Adjustment and Other Items)
When the Bank suspend the accrual of yield, monetary correction, exchange adjustments, leasing payments and other income from these items, a full allowance is made for the total amount accrued and not collected under those headings. k) Customers´ Acceptances, Spot Transactions and Derivatives
Banker’s Acceptances
These are commercial transactions in which the Bank and its Subordinates, by signing a bill of exchange as the accepter, are obliged to pay a third party (the beneficiary), within a specified period, a bill of exchange drawn by one of their clients (the requester) due to the purchase/sale of merchandise for a certain amount.
Banker’s acceptances have a maximum maturity of one (1) year and may originate only with transactions involving the import or export of merchandise or the purchase/sale of movable goods within the country. When these bills of exchange are accepted, their value is entered simultaneously under assets and
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32
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
liabilities as “current bankers’ acceptances”. If not presented for payment at maturity, they are classified as “non-current bankers’ acceptances”. If, upon payment, they have not been covered by the purchaser of the merchandise, they are reclassified to the loan account as “covered bankers’ acceptances”.
At maturity, banker’s acceptances are subject to the reserve requirement applicable to instruments payable on demand and before thirty (30) days.
Spot Transactions and Derivatives
Spot transactions are cleared and settled within three (3) business days immediately after the date they are agreed.
The Bank and its subordinates record transactions with financial derivatives. The main feature of these operations is the fact that their fair value depends on one or more underlying factors and their clearing or settlement is done later. These transactions are conducted for various reasons, the following being the main ones.
To offer products tailored to the client’s needs. One such function, among others, is to hedge the client’s financial risks.
To structure portfolios for the Bank and its subordinates by taking advantage of opportunities for arbitrage between different curves, assets and markets.
The Bank and its subordinates use derivative operations to hedge asset and liability risk positions on their balance sheets and to act as brokers with clients involving exchange and interest rates on local and foreign markets.
Types of Financial Derivatives:
The Bank and its subordinates employ different strategies by mixing basic derivatives (forwards, call and put options and swaps) or by combining them with other financial instruments. Strategies of this type can be put together and marketed as a “product,” thereby creating a wide range of solutions with different functions in terms of cost and earnings, all within the established limits and without incurring unauthorized risk.
The different combinations and/or strategies are valued, managed, controlled and entered on the books according to their basic components.
Forwards
A forward contract is a tailor-made derivative drawn up between two (2) parties who agree to purchase/sell a specific quantity of an underlying instrument at a future date. The basic terms and conditions are established when the contract is entered into; namely, the price, the date the underlying instrument will be delivered and how. Forwards are settled on the due date through physical delivery of the underlying instrument or by settling any differences, depending on the agreed mode of delivery. The latter may be modified during the term of the forward contract, by mutual agreement between the parties.
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33
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Forwards traded in the over the counter market (OCM) may be settled and cleared through the Central Counterparty Clearing House.
Options
An option is a contract that gives the holder the right or option, but not the obligation, to purchase or sell a specific amount of an asset at a set price on a set date, or during a specified period of time. The other party to the contract is obliged to sell or buy the asset on the date the holder chooses to exercise the option, pursuant to the conditions established to that effect in the contract with respect to quantity, quality and price.
Swaps
A swap or financial exchange is an operation in which two parties agree to exchange a series of cash flows that are calculated according to certain contractual conditions and are to be settled on specific dates agreed at the onset of the operation.
The purpose of swaps is to reduce risks generated by fluctuations in currency exchange rates and/or interest rates. Generally speaking, these contracts are used to hedge long-term operations with more than one residual flow.
Swaps may involve interest rates or contracts in which the cash flows paid by both parties are denominated in the same currency. There also are foreign exchange or currency swaps where the operational flows are denominated in different currencies.
There are two types of interest rate swaps: fixed-for-floating and floating-for-floating.
An interest rate swap (IRS) is a contract between two parties who want to exchange one stream of future interest rate payments for another, held at different interest rates. In this type of swap, there is normally no exchange of the principal, and the swap is expressed in a single currency.
A cross-currency swap (CCS) is an agreement between two parties to exchange the principal of a loan in one currency for the principal of a loan in other currency, for a set period of time.
While the contract is in effect, each party pays the interest on the principal received in the swap. On the amortization dates and/or when the contract expires, the principals are exchanged back into the original currencies at the agreed rate of exchange.
There are three types of currency swaps: fixed-for-fixed, floating-for-floating, and fixed-for-floating.
Futures
A futures contract is a standardized agreement with respect to its expiration date, size or face value, the characteristics of the respective underlying instrument, and where and how it is to be delivered (in cash or kind). It is negotiated on a stock exchange and settled through a central counterparty clearing house (CRCC in Spanish).
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34
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
The Bank and its subordinates trade standardized financial derivatives on the Colombian Stock Exchange (BVC, hereinafter), which in turn establishes the rules for trading and participation by the different members of the market. The trading system managed by the BVC is known as X-Stream.
The CRCC manages the clearing and settlement of operations and respective risk control. It also acts as the central counterparty in the market for standardized derivatives traded on the BVC, or operations traded in the over-the-counter market (OCM) and novations with the CRCC.
Accordingly, once these operations are entered into the trading system, the CRCC comes between the participants, acting as the buyer and reciprocal seller of all open positions in the market.
Banco de Bogotá acts as a general settlement member of the CRCC. It is, therefore, able to settle and clear its own operations and those of non-settlement members and third party non-settlement members with whom it has signed an agreement to that effect.
The Bank has structured two types of financial services pursuant to the operating requirements of the CRCC-organized market for standardized derivatives:
The first, which is designed to support its condition as an investor in its own position, deals in standardized derivatives.
The second is focused on non-settlement members (persons and legal entities). It uses the Bank’s position as a settlement member to manage guarantees and to conduct clearing and settlement with the Central Counterparty Clearing House.
The Bank registers notional bond futures and specific reference securities under this item, as well as dollar/peso exchange futures, according to the general terms and conditions listed below:
Notional Bond Futures Exchange Rate Futures A theoretical bond known as a notional The TRM for the day, as calculated and certified Underlying Asset bond and fixed-rate class B TES in by the Colombian Superintendency of Finance pesos, specific references Contract Size COP$ 250 USD 50,000 or USD5,000 (mini contract) Monthly and quarterly cycle Quarterly cycle within the March cycle, to have Contract Generation within the March cycle maturities up to one year / six (6) maturities Settlement Method Physical delivery Financial Wednesday in the first week of the Wednesday in the second week of the maturity Last Trading Day maturity month month Contract Expiration Friday in the first week of the maturity Thursday in the second week of the maturity (Maturity) Date month month
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35
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Recording and Valuing Financial Derivatives:
Financial derivatives may be traded for any of the following purposes:
Hedging other risk positions Speculation for profit
The way financial derivatives are entered on the books depends on why they were negotiated.
In addition to derivatives for speculative purposes, the Bank reported derivatives to hedge assets and liabilities in foreign currency, as authorized by its Board of Directors on October 26 and December 28, 2010.
Yet, regardless of the purpose of the operation, financial derivatives that yield a positive fair value; that is, one favorable for the institution, are recorded under assets, separating the value of the right from the value of the obligation, except in the case of options, where the entry is made in a single account. Those yielding a negative fair value; that is, one unfavorable for the institution, are entered under liabilities, with the same separation being made. Also, there is no netting between the favorable and unfavorable balances of different operations, even if they are of the same type.
1. Financial Derivates for Speculative Purposes
These operations are listed on the balance sheet as of the date they are entered into and at their fair value.
On the date financial derivatives are settled, the balances in the balance sheet accounts are cancelled out, and any difference is entered as a profit or loss in the respective account in the statements of operations, as appropriate. If the cumulative balance of the derivative is positive on that date, it is recorded as income; if negative, it is entered as an outlay. This procedure is performed separately for each instrument and for each settlement.
In the case of basic financial derivatives, the price supplier provides the information for their reappraisal, such as interest and discount rates, reference curves, margins and indexes, among others. This is according to of Chapter 16, Title I of the Basic Legal Circular issued by the Colombian Superintendency of Finance.
Type of Operation Reappraisal and Accounting In forward purchases of securities, the right is calculated as the value of the security at market prices and the obligation, as the present value of the agreed purchase amount.
Securities Forwards In the case of forward sales of securities, the right is calculated by obtaining the present value of the agreed sale amount, while the obligation is calculated by valuing the security at market prices.
The reappraisal method used by the Bank for forward and spot currency operations involves bringing the future flows (obligations and rights) in the operation to present value (usually, one of these two flows is denominated in US dollars and the other in Colombian pesos). Each flow is brought to present value Currency Forwards using the market discount rates for dollars and Colombian pesos for the term remaining in each operation. Once the present values of the flows are identified, those denominated in foreign currency are converted into US dollars and re-expressed in Colombian pesos using the representative market rate
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36
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Type of Operation Reappraisal and Accounting of exchange (TRM) calculated and certified by the Colombian Superintendency of Finance. The market value of currency options taken by the Bank is estimated using the Black and Scholes method.
The data used in the model to value options are obtained from the authorized price supplier.
The initial entry is the premium actually paid/received, and the changes in fair value with respect to the initial value actually paid are recorded on the statement of operations. The rights and obligations are entered in contingent accounts.
Options When the Bank purchases a call or put option, the premium paid and the daily variations in fair value are entered under assets.
When the Bank sells an option, the premium received and the daily variations in fair value are recorded under liabilities.
On the contract settlement date, the balances for the value of the right and the obligation are cancelled out, and any difference is entered as a profit or loss on the reappraisal of derivatives.
Valuing a swap involves bringing each of the future flows to present (discounted) value, then converting them into the base accounting currency. To do so, the Bank updates the market data (interest and exchange-rate curves) and, in accordance with the particular features of each operation, it projects the future flows on each swap operation. Swaps
The sum of the present values of the flows projected for receipt is recorded as a right, and the sum of the series of flows projected for delivery is entered as an obligation.
With derivatives of this type, losses and gains are settled daily. The Central Counterparty Clearing House (CRCC) reports daily on the results of settlement between the parties and proceeds to debit or credit the losses or gains made.
In the case of notional bond futures and specific reference TES, if the Bank has a short position at contract maturity, it notifies the CRCC of the security with which it wants to fulfill its obligation, according to the specifications of the basket of deliverables, and transfers it through security depositories (DCV and / or DECEVAL).
For dollar/peso exchange futures, settlement at contract maturity is made against the underlying price (TRM) published on the last trading day.
The value of the obligation to be recorded on the seller’s balance sheet in Colombian pesos (a right for Futures the buyer) is the price of each unit of the futures contract, as reported by the BVC on the reappraisal date, multiplied by the number of contracts and by the face value of each one. The value of the right to be registered on the seller’s balance sheet in Colombian pesos (an obligation for the buyer) is the price of each unit established in the futures contract, multiplied by the number of contracts and by the face value of each one.
Because futures are subject to daily clearing and settlement, the value of the obligation is equal to the value of the right. These values are updated day by day, according to the market price of the respective future, and the effect on profit and loss is equivalent to the variation in the fair price of the future.
Novation forwards are forward operations traded initially in the over-the-counter market, and the counterparts in these operations mutually agree to take them to a central counterparty clearing house for clearing and settlement. The agreement is governed by the framework contract between the respective parties until the date the risk exchange intervenes as a counterpart in the operation. As of that moment, its rules apply and, therefore, the framework contract signed previously by the initial
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37
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Type of Operation Reappraisal and Accounting counterparts to the financial instrument ceases to have effect. The respective central counterparty clearing house also must ensure the Colombian Superintendency of Finance has access to information on these operations, if required.
The accumulated balance registered on the balance sheet up to the day the central counterparty clearing house actually accepts the operation is entered that same day as an account receivable or an account payable in the name of said exchange, as appropriate. That account is cancelled out in the process of clearing and settling these operations, pursuant to the rules of the respective Central Counterparty Clearing House.
2. Financial Derivatives for Hedging
Derivates used to hedge the exchange risk posed to the Bank by its investments in affiliates and agencies outside the country are handled in a special way from an accounting standpoint.
These operations are intended to protect the Bank’s assets and liabilities in foreign currency from exchange risk generated by the structural positions of its affiliates and agencies abroad.
The Board of Directors of Banco de Bogotá, in compliance with its policy to protect the organization’s exchange risk balance in the structural positions of its foreign subsidiaries, decided as of December 2010, to designate a series of derivative transactions (dollar-peso forward operations) as hedging instruments. These are clearly identified in the application used.
The way financial derivatives for hedging are entered on the books depends on the type of hedging involved. The following applies to hedging for assets and liabilities in foreign currency.
The value of the daily aliquot resulting from accrual of the implicit revaluation or devaluation agreed in the financial derivative and the movement in the exchange rate is entered in the respective sub- account on the statement of earnings, according to the implicit revaluation or devaluation agreed in the derivative, calculated using the representative market rate of exchange (TRM) for the trading day.
Accumulated profit or loss on a financial derivative is recorded in the statement of operations, as indicated in the preceding paragraph, and the difference is entered in the equity account under “Unrealized accumulated gain or loss on financial derivatives for hedging – Hedging assets or liabilities in foreign currency,” with the respective sign.
On the date hedging ends, the accumulated result of the financial derivative used for this type of coverage, which appears in the equity sub-account under “unrealized accumulated gain or loss on financial derivatives for hedging assets or liabilities in foreign currency,” is transferred to the statement of operations, specifically to the respective sub-account for derivatives.
The primary positions hedged are registered as follows:
a. The primary position continues to be registered at its respective face value on each date, in the same balance sheet and statement of operations accounts, using the same method and procedure as would be the case if it were not hedged.
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38
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
b. At the start of hedging with financial derivatives, the present value of the primary position is entered in memorandum accounts.
Peso/US dollar forward operations with different maturity profiles are the financial derivatives used for hedging. Although these derivatives hedge against exchange risk, they generate volatility in the statement of operations, given the variation in other associated risk factors, such as dollar/peso devaluation curves (interest rate differential). The objective in the way hedging is treated from an accounting standpoint is to isolate the impact on the statement of operations caused by the volatility originating with variations in risk factors other than the exchange risk. This is done by only recording income/losses from agreed exchange re-expression and devaluation in the statement of operations, while the portion of the variation in fair value pertaining to other factors (changes in the forward curve, the passing of time, etc.) is entered in the equity accounts.
(l) Foreclosed Assets, Salable and Returned Assets and Those Not Used in the Corporate Business
The value of assets received by the Bank and its subordinates through foreclosures on outstanding loans in their favor is registered in this account.
Foreclosed real estate is accepted on the basis of a professional commercial appraisal. Movable assets, shares and equities are accepted at their market value.
The following are the conditions for recording assets received through foreclosure:
The initial entry is based on the value decided by the courts or agreed on with the debtors.
When a foreclosed asset is not in marketable condition, its cost increases with the necessary expenses incurred to make it so.
If the difference between the value for which the asset was received and the value of the loan to be paid off represents a credit for the borrower, it is registered as an account payable. If the value of the asset does not cover the entire liability, an allowance equivalent to the difference is constituted.
Salable assets are registered at their acquisition or production cost, which includes the direct and indirect costs and expenses incurred by the Bank to place them in condition for sale or use.
Leased assets returned to the Bank and its subordinates by clients or tenants who default or do not exercise their option to buy are recorded as returned assets and are not subject to depreciation.
Assets not employed in the corporate business are ones the Bank and its subordinates have for their own use, but are no longer dedicated to the pursuit of their business activities. These assets depreciate until disposed of and are calculated together with the fixed assets of the Bank and its subordinates to determine compliance with the limits established by the Colombian Superintendency of Finance with respect to investments in construction and the acquisition of real estate.
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39
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(m) Allowance for Salable Assets, Foreclosed Assets, Returned Assets and Those Not Used in the Corporate Business
Real Estate
The Bank and its subordinates calculate individual allowances for real estate, using the model approved by the Colombian Superintendency of Finance. The model estimates the maximum loss expected on the sale of foreclosed real estate, based on the history of recovery on assets sold and including expenses incurred in the receipt, upkeep and sale of such properties, which it groups into common categories to estimate the base allowance rate. This rate is adjusted by means of a factor that takes into account the time transpired since receipt of the asset and is applied over a maximum period of forty-eight (48) months until eighty percent (80.0%) of the allowance is achieved. However, in the event an extension is not requested prior to expiration of the deadline for disposal of the property, or if an extension is not granted, the Bank must establish, pursuant to its internal models, an additional allowance up to 80% of the value of the foreclosed asset. This is done once the two-year period has transpired.
Almacenes Generales de Depósito - ALMAVIVA S.A., a subordinate company, calculates individual allowances for foreclosed assets and returned property based on the provisions in External Circular 100/ 1995 and in view of the fact that it has no model to calculate anticipated losses.
In the case of real estate, an allowance equivalent to thirty percent (30.0%) of the acquisition cost of the property is established in monthly aliquots within the year following receipt of the property, and is increased in monthly aliquots during the second year by an additional thirty percent (30.0%), until it equals sixty percent (60.0%) of the acquisition cost. Once the legal deadline for sale has expired, and if no extension is authorized, the allowance must equal eighty percent (80.0%). If an extension is granted, the other twenty percent (20.0%) can be established within that extended time period.
When the commercial value of real estate is less than the book value of the foreclosed property, an allowance is registered for the difference. In the case of real estate received two (2) or more years prior to the aforementioned circular, an additional allowance up to eighty percent (80%) of the acquisition cost of the property was established through monthly aliquots.
Movable Assets
In the case of movable assets received through foreclosure, an allowance equivalent to thirty-five percent (35.0%) of the acquisition cost is established within the year following receipt, and increased during the second year by another thirty-five percent (35.0%) until the allowance represents seventy percent (70.0%) of the book value of the asset prior to provisioning. If the legal deadline for sale expires and no extension is authorized, the allowance must equal one hundred percent (100.0%) of the book value. If an extension is granted, the remaining thirty percent (30.0%) will be provisioned within that extended time period.
Allowances for assets received through foreclosure or returned assets on lease may be recovered when these assets are sold for cash. If they are loaned or leased, the profits originating with their transfer from
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40
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
assets to the loan and financial leasing account are deferred during the term agreed on for the operation in question.
Rules on the Legal Deadline for Sale
Assets received through foreclosure are to be sold within two (2) years of the date of their acquisition. However, they may be registered on the books as fixed assets when they are necessary in the normal course of business and provided the limits on investment in assets are met.
An extension in the deadline for their disposal may be requested from the Colombian Superintendency of Finance. However, regardless of the situation, the request must be submitted before the legal deadline expires.
The respective request must demonstrate it has been impossible to sell the property, notwithstanding due diligence to that effect. In any case, the deadline may not be extended for more than two (2) years as of the date when the initial legal deadline expired. During the extension period, efforts to dispose of these non-performing assets must continue.
(n) Property and Equipment
This account registers tangible assets acquired, constructed or in the process of being imported, built or assembled that are employed routinely to develop the business and have a useful life of more than one (1) year. The amounts include the direct and indirect costs and expenses accrued until such time as the asset is placed in working condition.
Non-routine additions, improvements and repairs that significantly increase the useful life of assets are entered as increased value. Outlays for maintenance and repairs made to preserve these assets are charged to expenses, as accrued.
Depreciation is recorded using the straight-line method, based on the useful life estimated for the asset (in years). The following are the annual depreciation rates applied to each item listed under assets:
Buildings 5% Silos and warehouses 5% Office equipment, furniture and fixtures 10% Moving equipment and machinery 10% Computer equipment 20% Vehicles 20%
The Bank record the acquisition cost and all other expenses accrued to import assets for lease as “property, plant and equipment,” even if they have yet to be received.
(o) Branches and Agencies
The account records movement in operations between general management of the Bank and its national subordinates and their branches and agencies, as well as movement through operations between offices in Colombia and agencies outside the country.
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41
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
The balances are reconciled daily and pending items are put in order within no more than thirty (30) calendar days.
Each time the accounts are closed, the Bank and its national subordinates reclassify the net balances reflected the sub-accounts for branches and agencies by moving them to the asset or liability accounts, and respective income and expenses are acknowledged.
(p) Prepaid Expenses and Deferred Charges
Prepaid expenses are outlays made by the Bank and its subordinates to develop their business, the benefits of which are received in different periods. These expenses can be recoverable and assume successive delivery of the services to be received.
Deferred charges are costs and expenses the benefits of which are received in future periods. They cannot be recovered and amortization is recognized as of the date they help to generate income.
Accrual or amortization is done as follows:
Prepaid Expenses
Interest during the prepaid period
Insurance, over the life of the policy
Rent during the prepaid period
Equipment maintenance, during the life of the contract
Prepaid cost of work not yet billed to the real sector
Fees prepaid to the real sector during the period
Licenses and permits processed during the period
Services prepaid during the period
Software and hardware updated and maintained
Other prepaid expenses during the period when the services are received
Deferred Charges
Pre-operative and organizational charges are amortized within a maximum period of five (5) years.
Remodeling is amortized during a period of no more than two (2) years.
(Continued)
42
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Studies and projects are amortized within a maximum period of two (2) years.
Computer software is amortized in a period of no more than three (3) years.
Stationary and office supplies are amortized when actually consumed.
Improvements to rented property are amortized over the shorter term of the respective lease, excluding renewals and the probable useful life of the improvements.
A discount on the sale of securities in foreign currency is amortized within 10 years.
A deferred income tax “debit” for temporary differences is amortized upon compliance with the legal and regulatory requirements stipulated in the tax law.
Advertising and publicity are amortized during a period equal to the accounting period, if the amount is more than 20 times the SMLV (minimum monthly wage). In the case of expenses for advertising and publicity to launch a new product or to bring about a change in image, the amortization period may be no more than three (3) years.
The equity tax is amortized during the period from 2011 to 2014 based on Decree 514/2010, which added Article 78 in Decree 2649/1993.
Contributions and memberships, during the prepaid period
Loss from adjustment in the appraisal of securities is amortized in daily aliquots using the straight line method.
Surplus investment cost over book value generated in the acquisition of investments is amortized at five (5) years.
Commissions and fees paid for issues and acquisitions are amortized during a period of three (3) years.
“Construction project for concessions” pertains to the costs incurred for the project up to completion of the work. The costs per section are amortized using the straight line method, as of the moment the respective section begins to operate and up to the end of the concession contract.
Other deferred charges are amortized during the estimated period, and awarding costs are amortized during the life of the loan.
(q) Intangible Assets
The unamortized balance for goodwill originating with the purchase of Banco de Crédito y Desarrollo Social MEGABANCO S.A. and AFP Horizonte Pensiones y Cesantías S.A. is amortized over a period of
(Continued)
43
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
twenty (20) years, using the exponential method outlined in Chapter XVII of the Basic Accounting and Financial Circular issued by the Colombian Superintendency of Finance.
r) Assets to be Placed under Lease Contracts
New assets that were acquired by the Bank and its subordinates, but have yet to be leased out under contract because some requirement for their legalization is lacking, are registered in this account.
(s) Trust Rights
This account records the rights acquired in a mercantile trust that afford the trustee or the beneficiary the possibility of exercising them in accordance with the trust agreement or under the law.
The transfer of one or more assets to the trustee by the trustor or the beneficiary is registered at the adjusted cost, for accounting purposes, so the transfer generates no profit for the trustor and profits will affect earnings only when the asset or assets placed in trust are “actually” sold to third parties.
(t) Reappraisals
Reappraisals of investments in equity securities available for sale are recorded on the basis of variations in the issuer’s equity.
Real estate reappraisals are determined by the difference between the net cost of the property and the value of commercial appraisals done by recognized, independent professional appraisers or appraisal firms. In the event of a loss in market value, an individual allowance is made for each property, based on the standard of prudence.
Reappraisals of artistic and cultural works are recorded based on the condition of such works, their originality, size, technique and the prices quoted for similar works.
(u) Prepaid Income
The Bank and its subordinates use this account to record deferred income and income received in advance in the development of their business. It is amortized during the period when it is accrued or the respective services are rendered.
(v) Retirement Pensions
At the close of each period, the Bank and its subordinates prepare an actuarial study according to the method indicated by the Colombian Superintendency of Finance. This is done to determine the present value of all future obligations, by charging them to the statement of operations.
Pursuant to Decree 4565 of December 7, 2010, the Bank determined the percentage amortized by December 2009 and the portion yet to be provisioned, in order to amortize the outstanding balance based on the financial statements at December 31, 2010 and up to the year 2029.
(Continued)
44
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Retirement pension payments are charged to the established allowance.
(w) Estimated Liabilities and Provisions
The Bank and its subordinates register allowances to cover estimated liabilities, considering:
A right has been acquired and, consequently, there is an obligation; Payment becomes due or is likely; The allowance is justifiable, quantifiable and verifiable.
Estimates for taxes, contributions and memberships also are registered in this account.
(x) Converting Transactions into Foreign Currency
Transactions in foreign currencies other than U.S. dollars are converted into U.S. dollars then restated in Colombian pesos at the representative market rate of exchange calculated on the last business day of the month and certified by the Colombian Superintendency of Finance. The rates at June 30, 2014 and December 31, 2013 were $1,881.19 (in pesos) and $1,926.83 (in pesos), in that order.
(y) Equity Tax
Through Tax Reform Act 1370, which was passed in December 2009, the national government created a net worth tax for the tax years from 2011 to 2014. It is charged to persons and legal entities at a rate of 6% on their net worth at January 1, 2011.
For accounting purposes, the Bank and its subordinates made it a policy to treat the entire tax as a liability, payable in eight (8) installments during the period from 2011 to 2014 against deferred charges, which are amortized during the same 2011-2014 period. This is based on Decree 514/2010, which added Article 78 of Decree 2649/1993.
(z) Deferred Tax Debit/Credit
This account lists the temporary differences between commercial income and taxable income. It is canceled out when the differences generating it are reversed.
(aa) Contingent Accounts
These accounts register operations whereby the Bank and its subordinates acquire a right or assume an obligation contingent on a future event that might or might not occur, depending on future, eventual or remotely possible factors. Financial returns and the financial component of leasing payments are registered in debtor contingent accounts as of the moment accruals in the loan and leasing accounts are suspended.
Leases due to expire are an important aspect of these accounts. The current portion consists of payments and options to buy that are set to expire within the coming year. The non-current portion of such agreements is the part that expires after the first year.
(Continued)
45
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Values transferred under repo or simultaneous operations are recorded in debtor and creditor contingent accounts.
(bb) Memorandum Accounts
These asset and liability accounts record thirty-party operations that do not affect the financial situation of the Bank and its subordinates, due to their nature. They also include tax memorandum accounts registering the data required to prepare tax returns, as well as accounts used for fiscal purposes, internal control or those containing general information of interest to management.
(cc) Fiduciary Memorandum Accounts
Fiduciary memorandum accounts reflect third-party assets, liabilities, equity and operations that, by virtue of legal rules or contracts, are being managed by the fiduciary company of a broker.
The values on record pertain to the consolidated value from each of the activities developed by the managing company, without detriment to independent accounting for each portfolio or business being managed and the need to prepare separate financial statements.
dd) Related Parties
The Bank records asset and liability balances as well as income and expenses accrued in each period for transactions with economically related parties, such as shareholders, members of its Board of Directors and senior management, as well as entities that are subordinate and part of the combined operation. This is done according to External Circular No. 100/1995, Chapter IX; External Circular No. 002/1998, Chapter III; Single Decree 2555/2010, Part 6, Section I and the Commercial Code, Chapter V.
ee) Alignment with International Accounting Standards
The Technical Regulatory Framework (TRF) applicable to the preparers of financial information in Group 1 was established in Decree 2784/2012 and its amendments. Banco de Bogotá is part of that group, according to the classification criteria outlined in said decree. The TRF includes the International Financial Reporting Standards (IFRS) issued in Spanish on January 1, 2013 by the International Accounting Standards Board (IASB) and must be applied in the preparation of consolidated financial statements. The Bank and its subordinates must apply the TRF in the preparation of individual statements, apart from non-application of International Accounting Standard (IAS) 39 and International Financial Reporting Standard (IFRS) 9 with respect solely to treatment of the loan portfolio and its deterioration on individual financial statements, as per Colombian Government Decree 1851/2013. Chapter II of the Basic Accounting and Financial Circular, with its attachments, and the Single Accounts Plan currently in effect are applied instead, as per External Circular 038/2013 issued by the Financial Superintendency of Colombia. Decree 1851 is in the process of being amended and proposes including non-application of ISA 39 and IFRS 9 for the entry and reappraisal of investments.
Application of these standards is mandatory for the Bank and its subordinates as of January 1, 2014. The financial statements at December 31, 2014 will be the last ones prepared according to the current accounting standards in effect for the Bank and its subordinates, pending transition to the IFRS.
(Continued)
46
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
According to Article 4, Law 1314/2009, the tax rules are autonomous and independent of those applicable to accounting and financial information. Pursuant to Article 165, Law 1607/2012, during the four (4) years after the date the IFRS take effect, the tax bases for the items included in tax returns will remain unchanged.
(3) Principal Differences between the Special Accounting Rules and the Accounting Standards Generally Accepted in Colombia
The special accounting rules established by the Colombian Superintendency of Finance differ somewhat from the accounting standards generally accepted in Colombia. The following are some examples.
Investments in Equity Securities Available for Sale
Reappraisal losses (a negative difference between the book value and the market or cash value) in low or medium turnover or unlisted equity securities available for sale are registered under assets and under equity as a reduction in their value. According to the generally accepted standard, an allowance is made in these instances and charged to expenses. In the case of investments in high or medium turnover equity securities available for sale, updating the market value directly affects the book value listed under assets and the unrealized accumulated gain or loss in equity.
Property, Plant and Equipment
The generally accepted accounting standards indicate the net value of property, plant and equipment with an adjusted value more than twenty (20) times the minimum monthly wage (SMMLV – Spanish acronym) at the close of the accounting period must be marked to market or present value, with the necessary reappraisals and allowances entered. The special rules contain no such requirements for assets of this type.
Additional Paid-in Capital
The special rules require additional paid-in capital to be entered as part of the legal reserve, while the generally accepted accounting standard calls for it to be entered separately under equity.
Adjustments in Inflation
The inflation adjustments provided for in regulatory decrees 2649 and 2650 of December 29, 1993 were eliminated for accounting purposes as of January 1, 2001 under the special rule established in External Circular No. 014 issued on April 17, 2001 by the Colombian Superintendency of Finance. The general rule outlined in Decree 1536 of May 7, 2007 eliminates them as of January 1, 2007.
Financial Statements
Decree 2649/1993 indicates the statement of changes in financial position is a basic financial statement. The Colombian Superintendency of Finance does not require it.
(Continued)
47
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(4) Cash and due from banks
Detail of cash and due from banks:
June 30 December 31 Domestic currency: Cash $ 959,558 838,030 Banco de la República 2,799,623 2,585,110 Banks and other financial institutions 400,395 259,317 Clearing 5,643 406 Remittances in transit 264 1,092 Cash allowance (7,255) (2,548) 4,158,228 3,681,407
Foreign currency expressed in domestic currency: Cash 616,298 774,033 Banco de la República 29 29 Banks and other financial institutions 6,569,253 5,037,165 Clearing 253,172 240,129 Remittances in transit 17,626 13,482 Cash allowances (1,168) (59) 7,455,210 6,064,779 $ 11,613,438 9,746,186
Cash allowance
Opening balance: $ 2,607 1,638 Expensed allowance 6,132 1,254 Recovery of allowance (235) (284) Write-offs (32) 0 Exchange difference (49) (1) Closing balance: $ 8,423 2,607
Cash and deposits in domestic currency with Banco de la República (Central Bank of Colombia) are part of the mandatory cash reserve the Bank and its subordinates are required by law to maintain on deposits received from their customers, given their capacity as lending institutions.
Pursuant to Article 1271 in the Commerce Code, the subordinate known as Almaviva S.A. may not use the funds provided to it by the principal for its own business. If it does, it shall pay the latter the legal rate of interest as of the day this rule is violated and shall compensate for any damages caused to the principal.
(Continued)
48
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
The reconciliation items in domestic and foreign currency outstanding for more than thirty (30) days at June 30, 2014 and December 31, 2013 came to $8,423 y $2,607, respectively. They are provisioned in full.
There are no other restrictions on cash, except for the legal reserve.
(5) Money market assets and similar positions
Detail of interbank funds sold and repos: June 30 December 31 Average Average Balance Balance Yield Yield Operations at 0 to 90 days (Cash equivalents)
Domestic currency Ordinary interbank funds $ 28,700 3.91% 87,200 3.15% Transfer commitments in closed repos 813 6.49% 0 0 Investment transfer commitments in simultaneous operations 322,854 3.79% 891,701 3.21% Total asset positions in domestic currency 352,367 978,901
Foreign Currency Ordinary interbank funds sold 598,473 1.86% 1,210,677 1.51% Total asset positions in foreign currency 598,473 1,210,677 Cash equivalents 950,840 2,189,578
Operations over 90 days
Foreign currency Ordinary interbank funds sold 263,273 2.63% 310,827 2.82%
Total money market positions $ 1,214,113 2,500,405
There are no restrictions on these operations.
(6) Investment securities, net
Debt securities for trading
June 30 December 31 Domestic currency: Sovereign issued $ 459,006 1,208,000 Other public debt 103,246 121,081 Mortgage loans 62 92 Mortgage loan securitization issues 55,464 89,380 Non-mortgage loan securitization issues 4,305 8,213 Financial institutions 197,253 356,235 Institutions not supervised by the Colombian Superintendency of Finance 636 9,271 Foreign banks 1,925 7,230 Other securities 0 3,222 Total domestic currency 821,897 1,802,724
(Continued)
49
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31 Foreign currency: Sovereign issued 14,036 6,874 Other public debt 225 224 Mortgage loan securitization issues 10 13 Non-mortgage loan securitization issues 82 85 Foreign governments 10,937 14,389 Foreign central banks 192,473 52,964 Foreign banks 319,851 581,428 Multilateral lenders 15,261 15,813 Other securities 20,471 21,336 Total foreign currency 573,346 693,126 $ 1,395,243 2,495,850
Available for sale
June 30 December 31 Domestic currency: Sovereign issued or guaranteed public debt $ 2,509,889 2,644,882 Mortgage loan securitization issues 1,198 35,921 Non-mortgage loan securitization issues 1,192 1,367 Total domestic currency 2,512,279 2,682,170
Foreign currency: Sovereign issued 33,681 18,008 Other public debt 122,389 157,623 Financial institutions 145,050 116,786 Institutions not supervised by the Colombian Superintendency of Finance 75,730 68,336 Foreign governments 1,083,980 1,185,439 Foreign central banks 212,013 207,278 Foreign banks 1,458,118 1,387,728 Multilateral lenders 29,032 27,325 Securities issued by residents abroad 927 0 Other securities 865,838 850,640 Total foreign currency 4,026,758 4,019,163 $ 6,539,037 6,701,333
Held to maturity
June 30 December 31 Domestic currency: Sovereign issued $ 175,261 215,750 Other public debt 1,469,738 1,276,484 Total domestic currency 1,644,999 1,492,234
Foreign currency: Sovereign issued 1,911 1,986 Other public debt 4,364 4,513 Non-mortgage loan securitization issues 13,209 13,594 Financial institutions 2,992 3,090 Institutions not supervised by the Col. Supr. of Finance 7,728 8,121 Foreign governments 24,641 23,278 Foreign banks 943 965 Multilateral lenders 5,734 5,886 Total foreign currency 61,522 61,433 $ 1,706,521 1,553,667
(Continued)
50
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Investment repurchase rights
Detail of investment repurchase rights:
June 30 December 31 Held for trading
Domestic currency: Sovereign issued or guaranteed $ 1,088,755 1,644,767 Other public debt securities 5,055 0 Financial institutions 2,520 649 Total domestic currency 1,096,330 1,645,416
Foreign currency Other public debt 2,312 4,164 Financial institutions 5,916 17,470 Institutions not supervised by the National Superintendent of Fin. Institutions 30,309 39,829 Foreign governments 5,877 2,512 Foreign banks 3,728 22,015 Issued by residents abroad 48,142 85,990 Total foreign currency 1,144,472 1,731,406
Available for sale
Domestic currency Sovereign issued 3,140,633 1,908,489 Total domestic currency 3,140,633 1,908,489
Foreign currency Other public debt 45,501 59,542 Financial institutions 35,507 27,204 Institutions not supervised by the Col. Supr. of Finance 41,805 45,527 Foreign governments 95,808 11,793 Foreign banks 16,773 4,212 Issued by residents abroad 6,492 7,147 Total foreign currency 241,886 155,425 3,382,519 2,063,914
Investments pledged as collateral, in domestic currency
June 30 December 31 Held for trading Sovereign issued 38,502 2,629
Available for sale Sovereign issued 126,211 144,521
Equity securities Shares with high turnover 0 983 164,713 148,133 $ 4,691,704 3,943,453
(Continued)
51
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Equity securities
June 30 December 31 Held for trading
Avianca $ 0 2 Banco Internacional Del Perú Interbank 1,179 1,110 Bancolombia 0 94 Banco de Occidente 0 23,469 Black Rock ILF EUR 27 27 Black Rock ILF USD 12 12 Bolsa de Valores de Colombia 2,446 3,450 Open mutual fund - Valores Bancolombia 2,913 3,417 Mutual funds, liquidity, open fund 1,445 666 Fiducoldex mutual fund 1,384 1,130 Multiplus mutual fund 529 750 Celsia 2 0 Cemargos 0 2 Correval 4,306 3,843 Davivienda 0 2 Ecopetrol 6 222 In severance funds – stabilization reserve 46,816 48,627 In pension funds – stabilization reserve 638,527 588,631 In third-party portfolios – FONPET stabilization fund 157,824 150,354 In thirty-party portfolios –City of Manizales stabilization reserve 232 222 In thirty-party portfolios -. Licorera de Caldas pension liability reserve 1,417 1,353 In thirty-party portfolios - Medellín pension liability reserve 0 1,716 In thirty-party portfolios - Rionegro stabilization reserve 1,032 991 F.C.O BBVA Fiduciaria 1,921 2,069 F.C.O. Fiduciaria Corficolombiana Fondo Renta Plus 39,704 35,356 FAPC Atesorar Compartimiento Pensiones III 0 18,019 Fabricato 23 15 Fiduciaria Popular S.A. 1,581 823 Fiduciaria Banco Bogotá S.A. 1,661 5,047 Fiduciaria Bancolombia – Open Mutual Fund 12,742 14,128 Fiduciaria Corficolombiana Fondo Multiplicar - Vista Plus 5,080 688 Fiduciaria Corficolombiana Fondo Valor Plus 75,626 44,037 Fiduciaria Corficolombiana S.A 22 22 Fiduciaria Colseguros 73 73 Fiduciaria Davivienda 8 8 Fiduciaria de Occidente S.A. 158,289 12,109 Fondo De Capital Privado Corredores Capital I 313,052 304,059 Fondos en Comisionistas de Bolsa 30,087 20,033 Grupo Nutresa 80 0 Helm Fiduciaria S.A. 11 11 ICOLCAP 0 96 Interconexión Eléctrica ISA 0 6 Mineros S.A. 63,847 73,165 Pacific Rubiales Energy 0 169 SURA 0 3 $ 1,563,904 1,360,026
Restriction on investments
As required by law, Sociedad Administradora de Fondos de Pensiones y Cesantías Porvenir maintains a yield stabilization reserve to ensure compliance with the minimum return on the third-party portfolios belonging to the City of Manizales, the City of Medellin, and Liqorera de Caldas and Rionegro, as well as
(Continued)
52
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
for pension and severance funds.
The trading investments in equity securities reported by Fiduciaría Bogotá S.A. and Sociedad Administradora de Pensiones y Cesantías – Porvenir S.A. at June 30, 2014 ($59,776 and $98,058, respectively) are part of the stabilization reserve set up to comply with the minimum return stipulated under Law 1450/2011 and the regulation in Decree 1861/2012, Article 7, with respect to management of the resources of Fondo de Pensiones de Entidades Territoriales (FONPET).
The yield stabilization reserve is equivalent to 1% of the average monthly value, at market prices, of the assets constituting the third-party portfolio managed by the consortium known as FONPET 2012, which includes Sociedad Administradora de Pensiones y Cesantías – Porvenir S.A., with 59% ownership interest, and Fiduciaria Bogotá, with 41 %.
Given the merger with AFP Horizonte S.A. on December 31, 2013, Porvenir acquired a 71% stake with Unión Temporal BBVA Horizonte - Trust BBVA Fonpet 2012, constituted with FiduBBVA S.A.
The Mandatory investments held by Casa de Bolsa on the Colombian stock exchange are pledged, as a general guarantee, to back all its obligations with Bolsa de Valores de Colombia S.A.
The other restrictions pertain to investment repurchase rights and to securities pledged as collateral. The former were pledged to support liquidity operations with counterparts and the latter with the Central Counterparty Clearing House.
Leasing Bogotá Panamá had USD 860 in securities available for sale at June 30, 2014. They secure obligations and repurchase agreements.
Equity securities available for sale
June 30 Capital Adjusted Reappraisal Company name % Held Equity value Allowance Rating stock cost (depreciation) High turnover or listed shares
Investments in Colombia
Bolsa de Valores de Colombia COP 5 0.63% 117 117 0 0 A Celsia S.A. ESP. 0 0.00% 61 61 0 0 A
Ecopetrol 0 0.00% 121 121 0 0 A
Éxito 0 0.00% 70 70 0 0 A
Grupo Argos S.A. 0 0.00% 76 76 0 0 A
Grupo Nutresa S.A. 0 0.00% 199 199 0 0 A
644 644 0 0
Investments abroad
Bladex USD 847 0.01% 136 136 0 0 A Latinex Holding Inc 207 1.90% 986 986 0 0 A
1,122 1,122 0 0
Medium turnover or listed shares
Investments in Colombia
Bolsa de Valores de Colombia COP 18,673 3.36% 14,445 14,445 0 0 A Empresa de Energia de Bogotá S.A. E.S.P. 492,111 3.56% 520,169 520,169 0 0 A
534,614 534,614 0 0
Low and minimal turnover or unlisted shares
Investments abroad Bladex S.A. Class E USD 280 0.01% 39 115 76 0 A Corporación Andina de Fomento 3,941 0.00% 450 496 46 0 A
Grupo APC S.A 7 0.05% 7 0 0 7 A
Petróleos Colombianos Limited 0 0.05% 93 0 0 93 E
Transgas de Occidente S.A. 257,467 2.80% 3,315 3,315 0 0 A
3,904 3,926 122 100
(Continued)
53
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 Capital Adjusted Reappraisal Company name % Held Equity value Allowance Rating stock cost (Depreciation) Investments in Colombia A Toda Hora S.A. COP 333 20.00% 264 1,366 1,102 0 A ACH Colombia S.A 6,595 11.91% 1,139 2,783 1,644 0 A
Aerocali S.A. 3,800 49.99% 7,718 13,561 5,843 0 A
Agroganadera del Valle S.A. In liquidation 500 0.25% 26 4 0 22 E
Alimentos Derivados de la Caña (Adecaña) 20,762 0.32% 26 293 267 0 A
AV Villas (ordinary shares) 22,473 0.02% 159 355 196 0 A
AV Villas (preferred shares) 22,473 0.01% 60 129 69 0 A
Banco Commercial AV Villas S.A. 22,473 0.00% 4 23 19 0 A
Banco Co patria Red Multibank 233,886 0.00% 0 0 0 0 A
Banco de Occidente S.A. 4,677 0.33% 20,211 20,414 203 0 A
C.I Confections y Textiles In liquidation 3 0.00% 0 0 0 0 E
CI Ace alma S.A. 17,005 11.25% 3,314 4,031 717 0 A
Camera de Compensation de Devises de 5,000 6.38% 159 289 130 0 A Colombia S.A. Camera de compensation de la Bolsa 27,539 0.06% 9 5 0 A National Agropecuaria (4) Cámara de Riesgo Central de Contraparte de 80,733 2.22% 897 701 0 A Colombia S.A. (196) Cci Marketplace S.A. 5,028 7.22% 363 224 0 139 C
Centro de Eventos Valle del Pacifico 69,034 0.93% 647 656 9 0 A
Centro de Ferias Exposiciones y 13,705 2.80% 509 399 84 B Convenciones de Bucaramanga (26) Club del Comercio Bucaramanga SA 3 0.07% 3 13 10 0 A
Cifin S.A. 16,546 12.38% 2,076 3,521 1,445 0 A
Cfc Sk El Dorado Latam Capital Partner Ltd. 0 50.00% 0 0 0 0 A
Cfc Sk El Dorado Latam Management 0 50.00% 0 0 0 0 A Company Ltd. Colombiana de Extrusión S.A. Extrucol 2,208 20.00% 1,785 7,831 6,046 0 A
Compañía Aguas de Colombia 2,800 20.00% 1,097 1,315 218 0 A
Concesionaria Ruta Del Sol S.A.S. 262,311 33.00% 86,563 86,969 406 0 A
Concesionaria Tibitoc S.A. 29,143 33.33% 9,823 16,617 6,794 0 A
Cooperativa Serviarroz S.A. 1,335 1.20% 32 95 63 0 A
Deposito Central de Valores - Deceveal S.A. 24,102 6.62% 2,346 3,590 1,244 0 A
Edubar 2,733 0.91% 158 31 0 127 E
Eternit Colombiana S.A. 389 0.00% 0 1 1 0 A
Fiduciaria de Occidente S. A. 16,404 4.44% 4,026 7,514 3,488 0 A
Fondo Ganadero del Tolima S.A. 3,782 0.62% 57 101 44 0 A
Gas Natural S.A. ESP 27,688 1.68% 53,481 76,179 22,698 0 A
Grupo Argos S.A. 40,338 0.00% 1 6 5 0 A
Grupo Nutresa S.A. 2,301 0.00% 1 5 4 0 A
Inducarbón 420 0.09% 1 0 0 1 E
Industria Colombo Andina Inca S.A. 3,339 0.67% 74 274 200 0 A
Inmobiliaria Selecta 691 3.52% 113 28 0 85 E
Inversiones Sides S.A.S. 22 0.38% 73 49 0 24 C
Jardin Plaza 50 17.76% 10,031 15,429 5,398 0 A
Metrex S.A. 3,122 10.31% 168 627 459 0 A
Petróleos Nacionales S.A. 339 19.54% 257 0 0 257 E
Pizano Iberica S.L 202 34.40% 74 0 0 74 E
Proenergia Internacional 1,329 0.00% 0 0 0 0 A
Promesa S.A. 638 0.28% 11 3 (8) 0 A
Promigas S.A. 109,884 44.79% 1,605,594 2,388,617 783,023 0 A
Promisan S.A. In liquidation 3,523 0.00% 30 0 0 30 E
Promotora de Inversiones Ruitoque 8,411 3.34% 696 498 0 198 B S.A.(Promisión) Promotora de Zona Internacional del Caribe 9,934 0.05% 5 15 10 0 A
Promotora Industrial Comercial y Turistica de 127 0.30% 2 0 0 2 E Sevilla S.A.
Promotora la Alborada S.A. 54,248 1.83% 318 0 0 318 E
Promotora la Enseñanza S.A. 20 4.27% 210 0 0 210 E
Redeban Multicolor S.A 10,119 2.44% 966 2,026 1,060 0 A
Reforestadora de Santa Rosalía 0 0.00% 12 0 0 12 E
Semillas e Insumos Algodoneros 103 10.78% 16 36 20 0 A
Sociedad Aeroportuaria de La Costa S. A. 3,699 11.55% 856 3,038 2,182 0 A
Sociedad Hotelera Cien Internacional 350 0.39% 58 71 13 0 A S.A.(Hotel Bogotá Royal) Sociedad Portuaria Regional Buenaventura 87,056 0.24% 209 424 215 0 A
Soforestal S.A. 25,549 0.00% 188 430 242 0 A
Textiles el Espinal S.A. 452 8.56% 2,399 0 0 2,399 E
Triple A B/Quilla 73,445 0.01% 38 19 0 19 D
Ventas y Servicios S.A. 1,660 19.90% 2,462 2,860 398 0 A
Reappraisal trusts 0 0.00% 0 12,460 12,460 0
1,821,815 2,675,925 858,111 4,001
Other securities
Bolsa de Valores de Colombia S.A. COP 91 1.08% 195 467 272 0 A Fideicomiso Bolsa de Bogotá 98 8.70% 98 0 0 0 A
Fogacol 341 3.02% 341 0 0 0 A
634 467 272 0
Total 2,362,733 3,216,698 858,505 4,101
(Continued)
54
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31
Capital Adjusted Equity Reappraisal Company name % Held Allowance Rating stock cost value (Depreciation)
High turnover or listed shares
Investments in Colombia COP
Bolsa de Valores de Colombia 18,673 3.36% $ 14,068 14,068 0 0 A
Empresa de Energia de Bogotá 492,111 3.56% 502,176 502,176 0 0 A
516,244 516,244 0 0
Investments abroad USD
Bladex 847 0.02% 133 133 0 0 A
Preferred shares Fannie Mae 0 0.00% 675 675 0 0 A
Preferred shares Freddie Mac 0 0.00% 692 692 0 0 A
Preferred shares Barclays 0 0.00% 1,470 1,470 0 0 A
Preferred shares Morgan Stanley 0 0.00% 93 93 0 0 A
Preferred shares Hsbc Hldgs Plc 0 0.00% 968 968 0 0 A
Preferred shares General Electric Cap Corp 0 0.00% 1,085 1,085 0 0 A
5,116 5,116 0 0
Low or minimal turnover or unlisted shares
Investments abroad USD
Bladex S.A. Class E 280 0.01% 40 112 72 0 A
Corporación Andina de Fomento 3,686 0.00% 461 554 93 0 A
GRUPO APC S.A. 8 0.05% 8 8 0 0 A
Petróleos Colombianos Limited 339 0.05% 96 0 0 96 E
Transgás de Occidente S.A. 263,713 2.80% 3,691 3,691 0 0 A
4,296 4,365 165 96
Investments in Colombia COP
A Toda Hora 333 19.99% 264 1,350 1,086 0 A
A.C.H. Colombia S.A 6,595 11.91% 1,138 2,785 1,647 0 A
Investments in Colombia COP
Aerocali S.A. 3,800 49.99% 7,718 10,103 2,385 0 A
Agroganadera del Valle S.A. In liquidation 500 0.25% 26 4 0 22 E
Alimentos derivados de la Caña 20,762 0.32% 26 276 250 0 A
AV Villas (ordinary shares) 22,473 0.02% 159 310 151 0 A
AV Villas (preferred shares) 22,473 1.18% 60 116 56 0 A
Banco Comercial AV Villas S.A. 22,473 0.00% 4 21 17 0 A
Banco Colpatria Red Multibanca 233,878 0.00% 0 0 0 0 A
C.I Confecciones y Textiles In liquidation 3 0.00% 0 0 0 0 E
C.I. Acepalma S.A. 15,353 11.25% 3,127 3,449 322 0 A
Cámara de Compensación de Divisas de 5,000 6.38% 159 272 113 0 A Colombia S.A. Camara de Compensacion de la Bolsa 27,539 0.06% 10 10 0 0 A Nacional Agropecuaria Cámara de Riesgo Central de Contraparte de 80,733 2.23% 897 672 (225) 0 A Colombia S.A. Cci Marketplace S.A. 5,028 7.22% 363 224 0 139 C
Centro de Eventos Valle del Pacífico 65,921 0.75% 497 528 31 0 A
Centro de Ferias, Exposiciones y 13,705 2.80% 509 424 (1) 84 B Convenciones de B/Manga Club del Comercio Bucaramanga S.A. 3 0.07% 3 12 9 0 A
Cifín S.A. 12,000 12.38% 743 3,379 2,636 0 A
Cfc Sk El Dorado Latam Capital Partner Ltd 0 50.00% 0 0 0 0 A
Cfc Sk El Dorado Latam Management 0 50.00% 0 0 0 0 A Company Ltd Colombiana de Extrusión S.A. Extrucol 2,208 20.00% 1,785 5,117 3,332 0 A
Coltejer 0 0.00% 0 0 0 0 A
Compañía Aguas de Colombia 2,800 20.00% 1,097 1,315 218 0 A
Concesionaria Ruta del Sol S.A.S. 262,311 33.00% 86,562 91,958 5,396 0 A
Concesionaria Tibitoc S.A. 29,143 33.33% 9,823 15,413 5,590 0 A
Cooperativa Serviarroz 1,335 1.20% 31 94 63 0 A
Depósito Central de Valores-DECEVAL 24,102 6.62% 2,346 4,380 2,034 0 A
Edubar 2,733 0.91% 158 31 0 127 E
Eternit Colombiana S.A. 389 0.00% 0 1 1 0 A
Fiduciaria Occidente S. A. 15,736 4.44% 3,411 5,405 1,994 0 A
Fondo Ganadero del Tolima S.A. 3,782 0.62% 57 104 47 0 A
Gas Natural ESP 27,688 1.68% 53,480 74,431 20,951 0 A
Inducarbón 420 0.09% 1 0 0 1 E
Industria Colombo Andina-Inca S.A. 3,339 0.67% 62 246 184 0 A
Inmobiliaria Selecta 691 3.52% 113 28 0 85 E
Inversiones Argos 40,338 0.00% 1 6 5 0 A
Inversiones Sides S.A.S. 22 0.38% 73 49 0 24 C
Jardín Plaza 50 17.76% 10,031 16,029 5,998 0 A
Metrex S.A. 3,122 10.30% 168 742 574 0 A
Grupo Nutresa 2,301 0.00% 1 8 7 0 A
Petróleos Nacionales S.A. 339 19.54% 257 0 0 257 E
Pizano Ibérica S.L 202 34.40% 76 0 0 76 E
Proenergía Internacional S.A. 1,329 0.00% 0 2 2 0 A
Profilácticos del Tolima S.A 294 0.17% 1 1 0 0 A
Promesa S.A. 638 0.28% 11 4 (7) 0 A
Promigás S.A. 106,339 44.74% 1,575,625 2,319,520 743,895 0 A
Promisán S.A. In liquidation 3,523 0.00% 30 0 0 30 E
Promotora de Inversiones Ruitoque S. A. 8,411 3.34% 696 498 0 198 B (Promisión)
(Continued)
55
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31
Capital Adjusted Equity Reappraisal Company name % Held Allowance Rating stock cost value (Depreciation)
Promotora de Zona Internacional del Caribe 9,934 0.05% 5 15 10 0 A
Promotora Industrial Comercial y Turística De 127 0.03% 2 0 0 2 E Sevilla Promotora la Alborada S.A. 54,248 1.83% 318 0 0 318 E
Promotora la Enseñanza S.A. 20 4.27% 210 0 0 210 E
Redeban Multicolor S.A. 10,119 2.44% 966 1,761 795 0 A
Reforestadora de Santa Rosalía 0 0.00% 12 0 0 12 E
Semillas e Insumos Algodoneros 103 10.78% 16 64 48 0 A
Sociedad Aeroportuaria de la Costa S. A. 3,699 11.55% 856 2,601 1,745 0 A
Sociedad Hotelera Cien Internacional 350 0.39% 58 71 13 0 A S.A.(Hotel Bogotá Royal) Sociedad Portuaria Regional Buenaventura 87 0.24% 209 466 257 0 A
Soforestal S.A. 25,549 0.00% 188 536 348 0 A
Textiles el Espinal S.A. 452 8.56% 2,399 0 0 2,399 E
Triple A B/Quilla 73,445 0.01% 38 19 0 19 D
Ventas y Servicios S. A. 1,387 19.90% 1,974 2,434 460 0 A
Reappraisal of trusts 0.00% 0 12,452 12,452 0
1,768,850 2,579,736 814,889 4,003
Other securities COP
Bolsa de Valores de Colombia S.A. 91 0.49% 195 538 343 0 A
Fideicomiso Bolsa de Bogotá 98 8.70% 98 0 0 0 A
Fogacol 329 3.02% 329 0 0 0 A
622 538 343 0
Total $ 2,295,128 3,105,999 815.397 4,099
Investment Allowances
Investment allowances constituted at June 30, 2014 and December 31, 2013:
June 30 December 31 Debt securities Held for trading $ 60 267
Available for sale 0 31 Total 60 298
Equity securities
Available for sale 4,101 4,099 Total 4,101 4,099 $ 4,161 4,397
Movement in the allowance
June 30 December 31 Opening balance $ 4,397 4,506 Allowance charged to operating expenses 29 354 Write-offs 0 (14) Recovery of the allowance for investments (*) (262) (449) Conversion adjustment (3) 0 Closing balance $ 4,161 4,397
(*) Includes recovery of $4.4 and $75 in respective investment allowances at June 30, 2014 and December 31, 2013. These amounts are registered under “other income” for the purpose of equivalent with the real sector.
(Continued)
56
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Investment maturity
June 30 Up to 1 1 to 3 3 to 5 Over 5 Total year years years years
Trading investments, debt securities $ 561,317 1,199,342 185,865 631,693 2,578,217 Held to maturity, debt securities 1,551,732 144,578 5,847 4,364 1,706,521 Available for sale, debt securities 793,298 1,556,912 2,480,094 5,217,463 10,047,767 Equity securities 931,458 0 0 2,995,179 3,926,637 $ 3,837,805 2,900,832 2,671,806 8,848,699 18,259,142
December 31 Up to 1 1 to 3 3 to 5 Over 5 Total year years years years
Trading investments, debt securities $ 660,607 1,913,577 676,621 979,080 4,229,885 Held to maturity, debt securities 1,397,158 145,984 6,012 4,513 1,553,667 Available for sale, debt securities 706,903 1,608,255 2,709,585 3,885,025 8,909,768 Equity securities 886,622 0 0 2,769,515 3,656,137 $ 3,651,290 3,667,816 3,392,218 7,638,133 18,349,457
(7) Loans and financial leases, net
Detail of the loan portfolio, by type:
June 30 December 31 Ordinary loans $ 43,301,675 40,696,929 Loans made with resources of other entities 1,135,410 950,657 Non-resource factoring 145,648 119,451 Letters of credit, hedged 134,734 120,488 Collateral and guarantees, hedged 18 1,372 Overdrafts, bank current account 354,007 338,274 Discounts 401,928 398,580 Credit cards 5,832,562 5,756,732 Reimbursements, in advance 99,726 410,761 Loans to micro-enterprises and small businesses 1,193,936 1,318,220 Microcredit 327,920 316,304 Home mortgage loans 5,624,614 5,341,180 Foreign loans, repaid 0 168 Leased-out real estate 854,064 649,569 Leased-out movable assets 1,748,143 1,713,348 Loans to builders 83,729 20,477 Total Loans, by Type $ 61,238,114 58,152,510
The Bank and its subordinates assessed the entire loan portfolio (100%) at June 30, 2014 and December 31, 2013. The following is the rating based on that assessment.
(Continued)
57
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 Financial Commercial Consumer Microcredit Mortgage Total leases
Bank and National Subordinates A – Normal $ 27,872,464 6,709,648 292,764 969,479 2,003,033 37,847,388 B – Acceptable 754,265 147,165 9,424 1,999 111,779 1,024,632 C – Appreciable 509,941 135,959 5,776 979 58,701 711,356 D – Significant 223,808 201,818 3,911 197 17,067 446,801 E - Uncollectible 134,410 56,577 16,045 85 3,661 210,778 29,494,888 7,251,167 327,920 972,739 2,194,241 40,240,955 Less allowance (736,953) (421,170) (22,384) (10,268) (53,433) (1,244,208) 28,757,935 6,829,997 305,536 962,471 2,140,808 38,996,747
Foreign Subordinates A – Normal 8,355,326 6,392,401 0 4,200,921 395,945 19,344,593 B – Acceptable 284,259 255,711 0 137,757 4,126 681,853 C – Appreciable 114,287 351,301 0 247,580 6,941 720,109 D – Significant 30,905 97,683 0 26,969 610 156,167 E - Uncollectible 33,220 22,225 0 38,648 344 94,437 8,817,997 7,119,321 0 4,651,875 407,966 20,997,159 Less allowance (134,777) (230,932) 0 (21,789) (2,724) (390,222) 8,683,220 6,888,389 0 4,630,086 405,242 20,606,937 Total loan portfolio $ 59,603,684
December 31 Financial Commercial Consumer Microcredit Mortgage Total leases
Bank and National Subordinates A – Normal $ 25,152,026 6,299,705 283,888 698,777 1,834,082 34,268,478 B – Acceptable 778,387 121,436 7,345 1,087 77,918 986,173 C – Appreciable 478,280 131,996 4,837 359 34,301 649,773 D – Significant 221,407 172,652 3,287 116 16,286 413,748 E - Uncollectible 138,237 63,218 16,947 106 4,567 223,075 26,768,337 6,789,007 316,304 700,445 1,967,154 36,541,247 Less allowance (703,249) (419,706) (22,645) (7,436) (51,236) (1,204,272) 26,065,088 6,369,301 293,659 693,009 1,915,918 35,336,975
Foreign Subordinates A – Normal 8,871,590 6,457,823 0 4,205,516 383,814 19,918,743 B – Acceptable 400,203 219,060 0 109,993 5,041 734,297 C – Appreciable 119,837 334,249 0 252,154 6,383 712,623 D – Significant 18,637 85,259 0 21,379 473 125,748 E - Uncollectible 32,087 36,020 0 51,693 52 119,852 9,442,354 7,132,411 0 4,640,735 395,763 21,611,263 Less allowance (149,441) (248,895) 0 (32,411) (2,478) (433,225) 9,292,913 6,883,516 0 4,608,324 393,285 21,178,038 Total loan portfolio $ 56,515,013
(Continued)
58
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Detail of the loan portfolio, by economic sector:
June 30 % Held December 31 % Held Sector Agriculture, livestock, hunting, forestry and fishing $ 1,656,958 2.71% 1,787,263 3.07%
Capital investor 366,803 0.60% 349,554 0.60%
Wage earners 18,195,868 29.71% 17,642,780 30.34%
Mining and quarrying 1,370,043 2.24% 1,339,268 2.30%
Manufacturing industries 8,494,268 13.87% 7,733,184 13.30%
Supply of electricity, gas, steam & air conditioning 2,345,282 3.83% 2,388,286 4.11%
Water distribution; waste water evacuation and treatment, waste 166,168 0.27% 156,538 0.27% management and environmental sanitation activities Construction 3,884,211 6.34% 3,537,092 6.08%
Wholesale and retail sales; automotive and motorcycle repair 8,915,133 14.56% 8,803,499 15.14%
Transport, storage 3,192,988 5.21% 3,146,530 5.42%
Accommodations and food services 596,956 0.97% 534,910 0.92%
Information and communications 784,419 1.28% 869,228 1.49%
Financial and insurance activities 3,656,786 5.97% 2,936,230 5.05%
Real estate activities 1,627,525 2.66% 1,493,200 2.57%
Professional, scientific and technical activities 2,033,490 3.32% 1,652,532 2.84%
Administrative services and support activities 768,079 1.25% 654,869 1.13%
Public administration and defense; social security plans with 1,000,540 1.63% 926,595 1.59% mandatory affiliation Ports and railroads 9,207 0.02% 0 0.00%
Education 338,365 0.55% 293,612 0.50%
Human health care and social assistance activities 675,748 1.10% 664,956 1.14%
Artistic, entertainment and recreational activities 207,936 0.34% 154,110 0.27%
Other service activities 825,277 1.35% 942,246 1.62%
Activities of individual households as employers 575 0.00% 535 0.00%
Activities of extraterritorial organizations and entities 125,471 0.20% 145,469 0.25%
Petroleum and derivatives thereof 0 0.00% 20 0.00%
Second mortgage 18 0.00% 4 0.00%
Total by economic use $ 61,238,114 100.00% 58,152,510 100.00%
Detail of the loan portfolio, by rating:
June 30
Allowances Interest and Interest and Principal Financial Other Items (1) Principal Financial Others
Component Component Commercial A – Normal $ 36,227,790 270,309 858,998 453,702 29,303 22,466 B – Acceptable 1,038,524 15,599 4,335 38,825 1,764 212 C – Appreciable 624,228 11,322 1,895 72,433 5,932 722 D – Significant 254,713 10,223 6,027 146,176 10,286 5,028 E - Uncollectible 167,630 7,266 6,065 147,111 6,687 7,231 38,312,885 314,719 877,320 858,247 53,972 35,659 Consumer A – Normal 13,102,049 134,444 32,292 230,511 5,873 1,205 B – Acceptable 402,876 6,313 392 30,378 2,010 176 C – Appreciable 487,260 7,237 622 91,256 2,882 535 D – Significant 299,501 7,732 1,912 219,485 6,785 1,900 E - Uncollectible 78,802 2,486 37,061 80,472 2,490 38,189 14,370,488 158,212 72,279 652,102 20,040 42,005
(Continued)
59
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30
Allowances Interest and Interest and Principal financial Other items (1) Principal financial Others
component component Microcredit A – Normal 292,764 6,420 753 2,928 249 165 B – Acceptable 9,424 227 95 301 227 95 C – Appreciable 5,776 136 88 1,155 132 88 D – Significant 3,911 109 73 1,956 109 72 E - Uncollectible 16,045 493 640 16,044 492 640 327,920 7,385 1,649 22,384 1,209 1,060 Mortgages A – Normal 5,170,400 25,551 657 13,573 71 9 B – Acceptable 139,756 1,000 4 1,076 21 4 C – Appreciable 248,559 2,842 5 3,046 16 5 D – Significant 27,166 281 4 5,985 1 4 E - Uncollectible 38,733 1,016 3 8,377 95 3 5,624,614 30,690 673 32,057 204 25 Financial leases A – Normal 2,398,978 11,885 8,153 32,616 206 135 B – Acceptable 115,905 1,040 131 3,328 49 11 C – Appreciable 65,642 1,222 322 6,274 733 147 D – Significant 17,677 720 504 10,141 677 500 E - Uncollectible 4,005 204 990 3,798 204 990 2,602,207 15,071 10,100 56,157 1,869 1,783 General allowance 0 0 0 13,483 0 0 Total loans, by rating $ 61,238,114 526,077 962,021 1,634,430 77,294 80,532
December 31 Allowances Interest and Interest and Principal financial Other Items (1) Principal financial Others
component component Commercial A – Normal $ 34,023,616 244,540 727,447 432,474 22,652 5,714 B – Acceptable 1,178,590 15,747 6,199 51,052 2,458 235 C – Appreciable 598,117 6,640 1,642 69,479 3,488 809 D – Significant 240,044 10,701 4,784 135,680 10,571 4,444 E - Uncollectible 170,324 8,475 5,950 153,396 7,644 6,435 36,210,691 286,103 746,022 842,081 46,813 17,637 Consumer A – Normal 12,757,528 132,613 56,651 246,336 4,340 18,570 B – Acceptable 340,496 5,431 333 29,126 1,445 149 C – Appreciable 466,245 7,160 594 88,569 2,733 495 D – Significant 257,911 7,079 1,804 197,491 6,150 1,796 E - Uncollectible 99,238 2,856 35,924 107,079 2,736 35,988 13,921,418 155,139 95,306 668,601 17,404 56,998 Micro credit A – Normal 283,888 5,871 534 2,839 197 114 A – Normal 7,345 178 67 235 177 67 B – Acceptable 4,837 122 65 967 121 65 C – Appreciable 3,287 82 64 1,643 82 63 D – Significant 16,947 490 698 16,961 490 698 E - Uncollectible 316,304 6,743 1,428 22,645 1,067 1,007
(Continued)
60
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Allowances Interest and Interest and Principal financial Other Items (1) Principal financial Others
component component
Mortgages A – Normal 4,904,293 22,327 421 10,595 45 6 B – Acceptable 111,080 754 2 896 13 2 C – Appreciable 252,513 2,700 2 2,329 4 2 D – Significant 21,495 181 2 3,442 1 2 E - Uncollectible 51,799 1,316 3 22,585 97 3 5,341,180 27,278 430 39,847 160 15 Financial leases A – Normal 2,217,896 11,892 6,890 33,345 179 106 B – Acceptable 82,959 689 152 3,006 39 11 C – Appreciable 40,684 776 157 4,108 466 103 D – Significant 16,759 564 362 8,714 557 361 E - Uncollectible 4,619 231 925 4,541 231 925 2,362,917 14,152 8,486 53,714 1,472 1,506 General allowance 0 0 0 10,609 0 0 Total loans, by rating $ 58,152,510 489,415 851,672 1,637,497 66,916 77,163
(1) “Other Items” include payments on behalf of clients, fees, commissions, staff advances and other sundry accounts receivable.
Detail of the loan portfolio, by monetary unit:
June 30 Domestic currency Foreign currency Total
Commercial $ 24,200,418 14,112,467 38,312,885 Consumer 7,251,167 7,119,321 14,370,488 Microcredit 327,920 0 327,920 Mortgage loans 972,739 4,651,875 5,624,614 Financial leases 2,162,468 439,739 2,602,207 Total portfolio $ 34,914,712 26,323,402 61,238,114
December 31 Domestic currency Foreign currency Total
Commercial $ 22,189,668 14,021,023 36,210,691 Consumer 6,789,007 7,132,411 13,921,418 Microcredit 316,304 0 316,304 Mortgage loans 700,446 4,640,734 5,341,180 Financial leases 1,931,964 430,953 2,362,917 Total portfolio $ 31,927,389 26,225,121 58,152,510
(Continued)
61
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Detail of the loan portfolio, by maturity:
June 30 Up to 1 1 to 3 3 to 5 Over 5 Total year years years years
Commercial $ 18,676,622 8,566,349 4,990,367 6,079,547 38,312,885 Consumer 6,657,039 3,187,392 1,855,586 2,670,471 14,370,488 Microcredit 144,113 156,971 26,720 116 327,920 Mortgage loans 125,866 127,780 171,747 5,199,221 5,624,614 Financial leases 545,967 914,397 566,496 575,347 2,602,207 Total portfolio $ 26,149,607 12,952,889 7,610,916 14,524,702 61,238,114
December 31 Up to 1 1 to 3 3 to 5 Over 5 Total year years years years
Commercial $ 18,029,417 8,080,915 4,483,945 5,616,414 36,210,691 Consumer 6,765,045 2,964,392 1,607,868 2,584,113 13,921,418 Microcredit 200,800 104,805 10,699 0 316,304 Mortgage loans 118,082 99,490 151,937 4,971,671 5,341,180 Financial leases 597,500 838,852 502,336 424,229 2,362,917 Total portfolio $ 25,710,844 12,088,454 6,756,785 13,596,427 58,152,510
At June 30, 2014 and December 31, 2013, Leasing Bogotá Panamá registered USD 464 and USD 467 in loans, respectively, to guarantee obligations and other borrowing facilities.
Detail of restructurings, agreements and debtor restructuring plans:
June 30 December 31 Allowance Allowance on Principal on the Guarantee Principal Guarantee the principal principal
Commercial $ Law 116 318,537 95,802 126,884 280,189 87,038 105,917 Law 550 57,916 33,033 7,793 62,290 34,989 7,555 Law 617 57,034 468 31,159 65,131 566 35,428 Ordinary 584,889 71,830 291,825 590,418 65,678 240,604 Standardized debtor restructuring plans 1,019 833 187 1,046 858 188 Liquidation 64,749 50,244 6,400 65,319 52,416 2,066 1,084,144 252,210 464,248 1,064,393 241,545 391,758 Consumer Law 116 2,936 2,498 333 2,399 2,068 382 Ordinary 272,274 62,654 15,321 256,616 59,161 14,893 Standardized debtor restructuring plans 49 34 0 58 40 0 Liquidation 143 119 0 204 180 0 275,402 65,305 15,654 259,277 61,449 15,275
(Continued)
62
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31 Allowance Allowance on Principal on the Guarantee Principal Guarantee the principal principal Microcredit Law 116 96 5 0 97 5 0 Ordinary 15,579 3,912 5,322 13,360 2,995 4,591 Standardized debtor restructuring plans 6 0 3 7 0 4 15,681 3,917 5,325 13,464 3,000 4,595 Mortgage loans Ordinary 37,124 1,641 36,947 29,599 1,090 29,572 37,124 1,641 36,947 29,599 1,090 29,572 Financial leasing Law 116 27,462 5,352 13,227 17,186 3,099 5,882 Law 550 244 35 0 402 37 0 Ordinary 29,894 2,411 29,511 37,914 2,177 36,548 Standardized debtor restructuring plans 151 152 152 152 152 152 Liquidation 104 104 0 1,051 1,006 0 57,855 8,054 42,890 56,705 6,471 42,582 Totals Law 116 349,031 103,657 140,444 299,871 92,210 112,181 Law 550 58,160 33,068 7,793 62,692 35,026 7,555 Law 617 57,034 468 31,159 65,131 566 35,428 Ordinary 939,760 142,448 378,926 927,907 131,101 326,208 Standardized debtor restructuring plans 1,225 1,019 342 1,263 1,050 344 Liquidation 64,996 50,467 6,400 66,574 53,602 2,066 $ 1,470,206 331,127 565,064 1,423,438 313,555 483,782
Detail of restructurings, agreements and debtor restructuring plans, by rating:
June 30 Allowances Risk Category Principal Interest Other items Principal Interest Others
Commercial A – Normal $ 224,889 5,939 32 3,690 133 24 B – Acceptable 255,660 5,182 85 7,987 1,065 64 C – Appreciable 328,093 6,391 175 39,424 4,073 153 D – Significant 139,214 4,503 991 76,980 4,448 982 E - Uncollectible 136,288 6,365 782 124,129 5,799 782 1,084,144 28,380 2,065 252,210 15,518 2,005 Consumer A – Normal 144,195 2,151 102 4,987 84 78 B – Acceptable 23,854 369 42 4,175 48 35 C – Appreciable 55,263 872 172 11,195 336 151 D – Significant 40,331 843 385 27,513 726 381 E - Uncollectible 11,759 414 200 17,435 396 200 275,402 4,649 901 65,305 1,590 845 Microcredit A – Normal 8,809 56 67 88 27 59 B – Acceptable 1,626 4 20 52 4 20 C – Appreciable 1,258 12 20 252 8 20 D – Significant 926 4 21 463 4 21 E - Uncollectible 3,062 42 130 3,062 42 130 15,681 118 258 3,917 85 250
(Continued)
63
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 Allowances Risk Category Principal Interest Other items Principal Interest Others
Mortgages A – Normal 19,715 283 1 142 1 0 B – Acceptable 2,181 30 0 37 0 0 C – Appreciable 10,818 260 1 368 0 1 D – Significant 3,005 135 3 819 0 3 E - Uncollectible 1,405 64 1 275 0 1 37,124 772 6 1,641 1 5 Financial leases A – Normal 8,922 41 5 294 2 0 B – Acceptable 7,929 130 8 261 5 1 C – Appreciable 35,630 804 140 3,454 636 103 D – Significant 4,070 183 61 2,759 173 60 E - Uncollectible 1,304 96 240 1,286 96 240 57,855 1,254 454 8,054 912 404 Totals A – Normal 406,530 8,470 207 9,201 247 161 B – Acceptable 291,250 5,715 155 12,512 1,122 120 C – Appreciable 431,062 8,339 508 54,693 5,053 428 D – Significant 187,546 5,668 1,461 108,534 5,351 1,447 E - Uncollectible 153,818 6,981 1,353 146,187 6,333 1,353 $ 1,470,206 35,173 3,684 331,127 18,106 3,509
December 31 Allowances Risk Category Principal Interest Other items Principal Interest Others
Commercial A – Normal $ 230,510 4,851 27 5,471 63 16 B – Acceptable 278,013 7,203 89 9,624 1,750 66 C – Appreciable 309,598 2,789 196 38,941 1,916 181 D – Significant 102,621 3,168 877 60,150 3,057 874 E - Uncollectible 143,651 7,135 851 127,359 6,391 851 1,064,393 25,146 2,040 241,545 13,177 1,988 Consumer A – Normal 135,002 2,024 106 5,297 107 77 B – Acceptable 23,786 432 43 4,304 72 32 C – Appreciable 56,907 1,029 177 12,089 426 133 D – Significant 32,490 845 310 22,942 742 308 E - Uncollectible 11,092 401 202 16,817 383 202 259,277 4,731 838 61,449 1,730 752 Microcredit A – Normal 8,268 47 49 83 22 41 B – Acceptable 1,209 8 14 38 8 14 C – Appreciable 1,015 6 15 203 6 15 D – Significant 591 7 12 295 7 12 E - Uncollectible 2,381 36 103 2,381 36 103 13,464 104 193 3,000 79 185 Mortgages A – Normal 15,269 128 0 282 0 0 B – Acceptable 3,770 90 0 58 0 0 C – Appreciable 8,143 140 1 249 0 1 D – Significant 1,634 26 1 332 0 1 E - Uncollectible 783 71 1 169 0 1 29,599 455 3 1,090 0 3
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Allowances Risk Category Principal Interest Other items Principal Interest Others
Financial leases A – Normal 14,646 87 13 435 3 0 B – Acceptable 16,300 141 8 639 7 1 C – Appreciable 21,488 422 60 2,158 307 59 D – Significant 2,121 115 26 1,098 115 25 E - Uncollectible 2,150 152 248 2,141 152 248 56,705 917 355 6,471 584 333 Totals A – Normal 403,695 7,137 195 11,568 195 134 B – Acceptable 323,078 7,874 154 14,663 1,837 113 C – Appreciable 397,151 4,386 449 53,640 2,655 389 D – Significant 139,457 4,161 1,226 84,817 3,921 1,220 E - Uncollectible 160,057 7,795 1,405 148,867 6,962 1,405 $ 1,423,438 31,353 3,429 313,555 15,570 3,261
Loans purchased and sold
Detail of loans purchased and sold (cash and binding):
June 30 December 31
Purchases Acerías Paz del Río S.A. $ 8,756 10,095 Banco Agrario de Colombia 34 0 Banco AV Villas 0 158 Banco BBVA 6,602 39,084 Banco Caja Social 4,659 16,148 Banco Colpatria 6,754 24,946 Banco de Bogotá New York Agency 119,591 122,493 Banco de Bogotá S.A. – Panama 0 20,200 Banco Corbanca 942 3,528 Banco Davivienda 8,622 24,736 Banco Helm Bank 340 462 Bancolombia 23,086 71,898 Banco Bancoomeva 4,418 10,328 Brand Solutions Ltda. 0 1,481 C. I. Denim Factory 2,064 1,560 C.I Color Siete S.A.S. 81 40 Camilo Andres Orozco 0 50 Canal Digital 640 222 Carvajal Pulpa y Papel 2,004 2,389 Cemex Colombia S.A. 0 26,696 Cemex Soluciones 39,898 48,098 Centrogal 262 210 Cesal SAS 0 700 Concrelec Ltda. 0 1,806 Consulcons Ltda. 0 108 Cooperativa Financiera Confiar 99 535 Dupon de Colombia 1,223 1,222 Diaco S.A. 5,246 8,064 Elimarc 58,500 0 Ferraceros 111 59 Finesa S.A. 82,806 82,080 Geoespectro 0 726 Gildardo de Jesus Vargas 0 277
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31
Purchases Hector Tiberio Valencia 0 130 Icollantas 143 562 Inoxideas 287 0 Jose Henry Castro Cerquera 63 99 Kaeser Compresores de Colombia 0 408 Kellogs 169 3,234 Logistica Sanchez Polo 0 472 Machado & Molina 0 56 Metrokia 936 4,621 Minas Paz del Río S.A. 18,851 16,179 Pabsa 424 1,121 Perazza S.A.S. 0 442 Precisagro S.A.S. 1,596 1,083 Productos Quimicos Andinos PQA 245 1,582 Propilco 317 582 Quimicos OMA 0 1,275 Serprocons Ltda. 0 2,466 Servivalores (1) 0 68,980 Sofasa 12,885 16,026 Sigma Petroleum Company S.A.S. 0 10 Synthes 0 300 Vidrio Andino Colombia 800 0 Zapatos y Diseños S.A. 96 171 Total Purchases 413,550 640,198
Sales Banco de Bogotá Miami Agency 14,109 0 Banco de Bogotá New York Agency 31,236 133,655 Banco de Bogotá S.A. - Panamá 19,913 20,396 Banco de Bogotá S.A. - Colombia 24,071 0 Refinancia (2) 0 172,349 Total sales $ 89,329 326,400
(1) Leasing Bogotá Panama acquired a credit card portfolio in Costa Rica during 2013. The transaction, agreed at $ 36 payable in cash, generated $7 in additional paid-in capital associated with the respective credit card relationships. This amount will be amortized over a period of five (5) years,
(2) Portfolio write-offs: Refinance acknowledged 4.43% of the value of its obligations to the Bank.
Loans write-offs
Details of loans written-off:
June 30 December 31 Principal Interest Total Principal Interest Total
Commercial $ 59,642 5,341 64,983 22,452 2,941 25,393 Consumer 306,221 13,847 320,068 254,403 12,915 267,318 Microcredit 14,089 1,598 15,687 7,824 1,109 8,933 Mortgage 9,138 0 9,138 (153) 0 (153) Financial leases 1,566 115 1,681 57 40 97 Total $ 390,656 20,901 411,557 284,583 17,005 301,588
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Loan portfolio allowance
Movement in the loan allowance, by type:
Financial General Commercial Consumer Microcredit Mortgages Total leases allowance Balance at June 30, 2013 $ 734,779 572,619 20,168 19,283 48,274 6,465 1,401,588 Expensed allowance 251,911 431,647 17,079 3,730 16,469 5,231 726,067 Increase from additions or mergers (1) 60,829 42,053 0 17,089 141 0 120,112 Write-offs charged to the allowance (22,452) (254,403) (7,824) 153 (57) 0 (284,583) Recovered allowances (184,040) (123,357) (6,778) (749) (11,115) (1,087) (327,126) Exchange adjustment 1,063 42 0 341 (7) 0 1,439 Balance at December 31, 2013 842,090 668,601 22,645 39,847 53,705 10,609 1,637,497 Expensed allowance 257,777 456,740 19,462 7,694 19,516 4,983 766,172 Write-offs charged to the allowance (59,642) (306,221) (14,089) (9,138) (1,566) 0 (390,656) Recovered allowances (178,466) (158,183) (5,634) (5,669) (15,411) (2,098) (365,461) Exchange adjustment (3,512) (8,835) 0 (677) (87) (11) (13,122) Balance at June 30, 2014 $ 858,247 652,102 22,384 32,057 56,157 13,483 1,634,430
(1) Acquisition value pertaining to the purchase of Grupo Transformador, including Trascom and BBVA Panama.
(8) Customers´ acceptances and derivatives
Detail of acceptances, spot transactions and financial derivatives:
June 30 December 31 Assets Liabilities Net Assets Liabilities Net Banker’s acceptances Current banker’s acceptances $ 138,435 232,494 (94,059) 189,131 190,136 (1,005)
Non -current banker’s acceptances 6,716 6,716 0 6,795 6,795 0
Spot transactions Foreign exchange sale rights 18,167 0 18,167 10,121 0 10,121 Securities sale rights 21,276 0 21,276 98,376 0 98,376 Foreign exchange purchase rights 54,531 0 54,531 37,710 0 37,710 Securities purchase rights 56,825 0 56,825 0 0 0 Foreign exchange sale obligations (18,177) 0 (18,177) (10,110) 0 (10,110) Securities sale obligations (21,262) 0 (21,262) (98,294) 0 (98,294) Foreign exchange purchase obligations (54,532) 0 (54,532) (37,710) 0 (37,710) Securities purchase obligations (56,830) 0 (56,830) 0 0 0 (2) 0 (2) 93 0 93
Speculative forwards Foreign exchange sale rights 6,153,844 (894,979) 7,048,823 7,114,120 (2,226,175) 9,340,295 Foreign exchange purchase rights 874,686 (5,017,806) 5,892,492 2,120,038 (5,232,375) 7,352,413 Foreign exchange sale obligations (5,990,736) 920,749 (6,911,485) (7,078,283) 2,267,277 (9,345,560) Foreign exchange purchase obligations (868,754) 5,159,760 (6,028,514) (2,063,491) 5,269,321 (7,332,812) Securities sale rights 186,170 (1,379,429) 1,565,599 750,213 (226,442) 976,655 Securities purchase rights 34,707 (34,148) 68,855 28,392 (53,044) 81,436 Securities purchase obligations (34,613) 34,200 (68,813) (28,330) 53,094 (81,424) Other rights 0 (7,583) 7,583 2,183 0 2,183 Other obligations 0 8,210 (8,210) (2,115) 0 (2,115) Securities sale obligations (185,216) 1,381,549 (1,566,765) (749,236) 227,690 (976,926) 170,088 170,523 (435) 93,491 79,346 14,145
Forward contracts - Hedging Foreign exchange sale rights 3,601,069 (18,709) 3,619,778 1,361,748 (1,911,299) 3,273,047 Foreign exchange purchase rights 0 (341,442) 341,442 171,478 (1,172,444) 1,343,922 Securities purchase rights 203,986 (1,237,568) 1,441,554 273,976 (1,128,069) 1,402,045 Foreign exchange sale obligations (3,454,639) 18,804 (3,473,443) (1,346,938) 1,943,315 (3,290,253) Foreign exchange purchase obligations 0 343,262 (343,262) (170,734) 1,181,439 (1,352,173) Securities purchase obligations (203,538) 1,246,707 (1,450,245) (272,850) 1,134,798 (1,407,648) 146,878 11,054 135,824 16,680 47,740 (31,060)
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31 Assets Liabilities Net Assets Liabilities Net Futures contracts Currency sale rights 1,097,218 0 1,097,218 1,035,631 (21,777) 1,057,408 Currency purchase rights 1,311,426 (771,988) 2,083,414 1,599,456 (31,066) 1,630,522 Securities sale rights 15,463 0 15,463 23,007 (679) 23,686 Currency purchase rights (1,097,218) 0 (1,097,218) (1,035,631) 21,777 (1,057,408) Currency sale obligations (1,311,426) 771,988 (2,083,414) (1,599,456) 31,066 (1,630,522) Currency purchase obligations (15,463) 0 (15,463) (23,007) 679 (23,686) Securities sale obligations 0 0 0 0 0 0 Swaps Foreign exchange sale rights 700,879 (484,154) 1,185,033 629.577 (695,848) 1,325,425 Interest rate rights 325,227 (85,734) 410,961 128,674 (252,448) 381,122 Rights- others 0 0 0 0 (314) 314 Foreign exchange obligations (675,435) 501,186 (1,176,621) (603,666) 726,673 (1,330,339) Interest rate obligations (307,568) 106,981 (414,549) (106,337) 282,449 (388,786) Obligations – others 0 0 0 0 330 (330) 43,103 38,279 4,824 48,248 60,842 (12,594)
Options Foreign exchange call options 2,831 1,681 1,150 10,239 5,080 5,159 Foreign exchange put options 13,160 26,263 (13,103) 3,069 19,359 (16,290) 15,991 27,944 (11,953) 13,308 24,439 (11,131) $ 521,209 487,010 34,199 367,746 409,298 (41,552)
(9) Accounts receivable, net
Detail of interest and other accounts receivable:
June 30 December 31 Interest Loan portfolio $ 511,198 475,278 Financial component 14,880 14,137 Interbank funds sold and repos 1,521 6,050 527,599 495,465 Commissions and fees 69,319 59,523 Payment on behalf of clients 77,204 75,705 Sundry accounts receivable (1) 815,498 716,444 962,021 851,672 Dividends and shares 33,072 55,318 Storage services 21,162 24,130 Sale of goods and services 246,967 230,984 Rental own property 338 697 Commercial operating lease income 225 208 Promissory notes from sellers 35,446 34,529 Prepayments to contractors and suppliers 577,889 638,446 915,099 984,312 Allowance (157,826) (144,079) $ 2,246,893 2,187,370
June 30 December 31 (1) Detail other accounts receivable: Staff advances personal $ 2,208 2,122 Banco República - Citibank NewYork (penalty) 2,645 2,645 Benefits, allowances and retroactives 12,932 2,125 Checks in transit – received agreements 117 162 Businesses affiliated through TH purchases 1,763 12,988 Credit card vouchers in clearing 12,684 14,778 Contractor chargeable to Panamericana third-party portfolio 35,249 35,102
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31 Securities commission and management contracts 932 1,493 Accounts receivable in foreign currency 3,482 4,318 Accounts receivable, tax withholding on trusts 7,371 13,784 Accounts receivable from employees 2,595 2,486 Forward compliance 387,166 335,947 Trusteeships 431 6,454 Compensation public utilities ATMs 426 117 Cash shortfalls 903 3,070 Clearing shortfalls 876 250 Shortfalls ATM cash withdrawals and advances 1,475 1,813 Voluntary pension fund 788 327 Uncollectibles – undefined responsibility 1,010 0 Sales tax payable – debit 38,456 41,808 Savings account shortfall 15,965 15,208 Credit and debit card exchange 60,522 79,334 Own-originated leasing operations 926 0 Items receivable among different hotel units 28,197 15,920 Claim pending with Interbolsa 795 1,191 Insurance company claims 12,450 10,202 Electronic transactions in process 5,721 2,205 Greater value income tax paid 63,966 0 Transfers to the Nat. Treasury 27,269 26,779 Negative units – AFP settlements 11,138 9,075 Sundries 75,040 74,741 Total other accounts receivable $ 815,498 716,444
Movement in the allowance for accounts receivable:
Financial Commercial Consumer Microcredit Mortgage Total Leases
Balance at June 30, 2014 $ 77,311 58,305 1,705 156 1,219 138,696
24,921 27,635 2,099 81 727 55,463 Allowance charged to oper. expenses (2) 782 0 0 0 0 782 Increase from additions or mergers (4,981) (12,915) (1,109) 0 (40) (19,045) Write-offs (3,021) (1,516) (113) (31) 0 (4,681) Condoned (14,234) (11,958) (507) (32) (400) (27,131) Recoveries (1) (5) 0 0 0 0 (5) Exchange adjustment Balance at December 31, 2013 $ 80,773 59,551 2,075 174 1,506 144,079
29,939 29,832 2,530 103 714 63,118 Allowance charged to oper.expenses (2) (6,255) (13,847) (1,598) 0 (115) (21,815) Write-offs (2,549) (1,604) (138) (7) 0 (4,298) Condoned Recoveries (1) (11,585) (10,514) (600) (39) (331) (23,069)
(187) 0 0 (2) 0 (189) Exchange adjustment $ 90,136 63,418 2,269 229 1,774 157,826
1) Includes recovery of allowances for accounts receivable from the real sector; specifically, Corficolombiana , with $141 and $2,078 registered under “other sundry items” at June 30, 2014 and December 31, 2013, respectively, and an effect of $49 for December 2013 pertaining to the AFP Horizonte merger with Porvenir.
2) Includes reclassifications at December 31, 2013 for AFP Horizonte Pensiones y Cesantías S.A. in the merger process with Porvenir ($557).
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(10) Salable, foreclosed and returned assets and those not used for the corporate business social
Detail:
June 30 December 31 % Depre- % Depre- Cost Allowance Allow.. ciation Net Cost Allowance Allow. ciation Net Salable assets Land $ 2,258 (13) 1% 0 2,245 $ 2,259 (13) 1% 0 2,246
Materials 43,168 (1,864) 4% 0 41,304 38,744 (2,123) 5% 0 36,621
Ongoing constructions 294 0 0% 0 294 294 0 0% 0 294
Products in process 74,461 (281) 0% 0 74,180 71,168 (762) 1% 0 70,406
Finished goods 30,470 (242) 1% 0 30,228 29,432 (276) 1% 0 29,156
Merchandise in transit 3,083 (9) 0% 0 3,074 3,678 (38) 1% 0 3,640
Merchandise 11,880 (37) 0% 0 11,843 12,594 0 0% 0 12,594
Livestock inventory 3,072 0 0% 0 3,072 3,352 0 0% 0 3,352
168,686 (2,446) 1% 0 166,240 161,521 (3,212) 2% 0 158,309
Assets returned from leasing contracts Machinery and equipment 1,214 (931) 77% 0 283 1,141 (863) 76% 0 278
Vehicles 1,859 (759) 41% 0 1,100 1,278 (561) 44% 0 717
Real estate 1,583 (498) 31% 0 1,085 1,054 (163) 15% 0 891
4,656 (2,188) 47% 0 2,468 3,473 (1,587) 46% 0 1,886
Assets not used for the corporate business Land 3,331 (1,239) 37% 0 2,092 3,383 (1,239) 37% 0 2,144
Buildings 3,651 0 0% (26) 3,625 3,526 0 0% (26) 3,500
6,982 (1,239) 18% (26) 5,717 6,909 (1,239) 18% (26) 5,644
Foreclosed assets Movable assets 30,669 (12,369) 40% 0 18,300 23,994 (11,480) 48% 0 12,514
Real estate for housing 30,897 (21,819) 71% 0 9,078 35,761 (23,824) 67% 0 11,937
Non-residential real estate 115,123 (71,197) 62% 0 43,926 112,051 (67,740) 66% 0 44,311
176,689 (105,385) 60% 0 71,304 171,806 (103,044) 60% 0 68,762
Total $ 357,013 (111,258) 31% (26) 245,729 $ 343,709 (109,082) 32% (26) 234,601
The Bank’s share of the total account at June 30, 2014 and December 31, 2013 was seven percent (7%) and eight percent (8%), in that order.
The Bank and its subsidiaries have appraised all foreclosed and returned assets, and those appraisals are no more than three (3) years old. These assets are received based on a technically determined commercial appraisal, which is updated every three (3) years or when prices change due to the effect of the market
Appraisals of the assets received through acquisitions will be updated in 2014.
The following is the movement in the allowance for foreclosed and returned assets, and those not used in the corporate business:
Assets Not Used in Salable Foreclosed and the Corporate Total Assets Returned Assets Business
Balance at June 30, 2013 $ 1,994 83,324 1,279 86,597 Addition through acquisitions or mergers 0 20,520 0 20,520 Expensed allowance (*) 1,652 10,106 0 11,758 Write-offs (413) (526) 0 (939) Allowance used in sales 0 (5,983) 0 (5,983) Recoveries (**) (21) (3,604) (40) (3,665) Exchange adjustment 0 794 0 794
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Assets Not Used in Salable Foreclosed and the Corporate Total Assets Returned Assets Business
Balance at December 31, 2013 3,212 104,631 1,239 109,082 Expensed allowance (*) 239 11,704 0 11,943 Write-offs (966) 488 0 (478) Allowance used in sales 0 (4,319) 0 (4,319) Recoveries (**) (39) (3,382) 0 (3,421) Exchange adjustment 0 (1,549) 0 (1,549) Balance at June 30, 2014 $ 2,446 107,573 1,239 111,258
(*) Includes $54 and $656 in real-sector production costs at June 30, 2014 and December 31, 2013.
(**) Companies in the real sector equate all recoveries under “Other recoveries - 422595 ; $39 and $21 are included at June 30, 2014 and December 31, 2013, in that order.
(11) Property and equipment and assets leased out under operating agreements
Detail of property and equipment:
June 30 Accumulated Cost Allowance Net depreciation Land $ 159,813 0 0 159,813 Ongoing constructions 92,001 0 0 92,001 Buildings 673,099 (241,332) (17,646) 414,121 Office equipment, furniture and fixtures 492,611 (278,879) 0 213,732 Computer equipment 552,901 (335,265) 0 217,636 Vehicles 84,668 (41,159) 0 43,509 Moving equipment and machinery 339,842 (178,571) 0 161,271 Silos 821 (785) 0 36 Warehouses 30,575 (16,781) 0 13,794 Livestock 452 0 0 452 Rural assets 199,247 (3) 0 199,244 Imports in transit 13,184 0 0 13,184 2,639,214 (1,092,775) (17,646) 1,528,793 Deferred depreciation 0 3,146 0 3,146 2,639,214 (1,089,629) (17,646) 1,531,939 Assets leased out under operating agreements 44,399 (6,504) (384) 37,511 Total $ $ 2,683,613 (1,096,133) (18,030) 1,569,450
December 31 Accumulated Cost Allowance Net depreciation Land $ 168,897 0 0 168,897 Ongoing constructions 66,745 0 0 66,745 Buildings 692,018 (248,131) (15,266) 428,621 Office equipment, furniture and fixtures 497,941 (286,988) 0 210,953 Computer equipment 554,548 (342,236) 0 212,312 Vehicles 76,635 (39,242) 0 37,393 Moving equipment and machinery 334,122 (174,090) 0 160,032 Silos 821 (779) 0 42 Warehouses 30,575 (16,168) 0 14,407 Livestock 487 0 0 487 Rural assets 185,749 (3) 0 185,746 Imports in transit 4.801 0 0 4.801 2,613,339 (1,107,637) (15,266) 1,490,436
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Accumulated Cost Allowance Net Depreciation Deferred depreciation 0 2,954 0 2,954 2,613,339 (1,104,683) (15,266) 1,493,390 Assets leased out under operating agreements 35,676 (3,527) (300) 31,849 Total $ 2,649,015 (1,108,210) (15,566) 1,525,239
There were insurance policies at June 30, 2014 and December 31, 2013 to cover risk of theft, fire, earthquake, violent protest, riot, explosion, volcanic eruption, power failure, loss or damage to real estate, offices and vehicles. There are no mortgages or reservations of title on these assets, nor have they been pledged as mortgage collateral.
Total depreciation for own-use property charged to earnings in the six months ended June 30, 2014 and December 31, 2013 came to $84,271 and $77,381 respectively. Depreciation of leased-out assets was $3,369 and $2,125, in that order.
Real estate valuation is supported by appraisals done in 2013, 2012 and 2011.
Movement in property, equipment and assets leased out under operating agreements
Balance at Balance at Exchange assets Additions Withdrawals Reclassifications December June 30 difference 31 Land $ 159,813 (1,842) 7,465 12,362 (2,345) 168,897 Ongoing construction 92,001 (73) 44,456 11,797 (7,330) 66,745 Buildings 673,099 (5,622) 26,997 34,838 (5,456) 692,018 Furniture and fixtures 492,611 4,466 39,453 20,561 (28,688) 497,941 Computer equipment 552,901 4,274 51,732 22,267 (35,386) 554,548 Vehicles 84,668 1,212 13,076 2,429 (3,826) 76,635 Moving equipment and machinery 339,842 (754) 14,437 11,549 3,586 334,122 Silos 821 0 0 0 0 821 Warehouses 30,575 0 0 0 0 30,575 Imports in progress 13,184 (116) 22,893 14,518 124 4,801 Livestock 452 0 0 35 0 487 Assets leased out under operating agreements 44,399 1 10,329 1,607 0 35,676 Rural assets 199,247 43,341 14,875 48,001 3,283 185,749 Total Assets $ 2,683,613 44,887 245,713 179,964 (76,038) 2,649,015
Movement in the allowance for property and equipment:
June 30 December 31 Opening balance $ 15,566 6,723 Expensed allowance (1) 2,866 2,461 Increase from additions and mergers 0 6,690 Recoveries (2) (61) (310) Exchange adjustment (341) 2 Closing balance $ 18,030 15,566
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
1) Includes $125 and $167 in allowances charged to operating lease expenses at June 30, 2014 and December 31, 2013, respectively.
2) Includes $42 and $17 in respective recoveries on leasing operations at June 30, 2014 and December 31, 2013. Does not include $187 from Corficolombiana and $167 from BAC Credomatic at December 31, 2013.
(12) Other assets, net
Prepaid expenses and deferred charges
Balance and movement in prepaid expenses and deferred charges during the period ended June 30, 2014 and December 31, 2013:
Balance at Balance at Exchange Charges Amortization December June 30 difference 31 Prepaid expenses Interest $ 8,099 (26) 147 3,745 11,723 Insurance 16,979 (245) 10,648 8,555 15,131 Rent 2,806 (68) 2,260 589 1,203 Equipment maintenance 965 (1) 482 735 1,219 Cost of work pending billing 497 0 145 0 352 Fees 91 0 116 173 148 Licenses and permits 851 0 86 10 775 Services 736 0 933 473 276 Software & hardware updating & maintenance 1,298 0 1,816 2,454 1,936 Premium on tax stability contract (1) 4,848 0 5,175 327 0 Others 894 (1) 2,285 1,893 503 38,064 (341) 24,093 18,954 33,266 Deferred charges
Organizational and pre-operative 7,414 0 448 1,646 8,612 charges Remodeling 4,587 (31) 1,250 2,660 6,028
Studies and projects 110,428 0 546 5,881 115,763
Computer software 92,760 (1,574) 24,019 18,934 89,249
Stationary and office supplies 38,358 (922) 6,477 3,539 36,342
Improvements to property taken on lease 81,966 (1,138) 5,016 7,387 85,475
Discount on sale of bonds 6,266 0 1,265 2,663 7,664
Deferred income tax “debit” (2) 107,821 (1,758) 74,390 81,913 117,102
Publicity and advertising 3,135 (127) 3,284 110 88
Taxes (3) 61,406 (177) 14,945 70,534 117,172
Contributions and memberships 3,478 (135) 8,502 5,132 243
Loss from reappraisal adjustment on fixed- income 0 0 0 460 460 securities Surplus investment cost over book value (4) 0 0 12,496 91,746 79,250
Commission and fees paid for issues and 6,004 0 1,606 4,232 8,630 acquisitions Construction projects – concessions 1,480,314 0 279,352 114,748 1,315,710
Other deferred charges (6) 55,476 (920) 24,975 15,880 47,301
2,059,413 (6,782) 458,571 427,465 2,035,089
$ 2,097,477 (7,123) 482,664 446,419 2,068,355
(1) Coviandes legal stability premium on contract EJ 002/ 2013; amortized during its lifetime. The starting date is May 1, 2014 and the final date is December 5, 2016.
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(2) Detail of deferred tax debit/credit at June 30,2014 and December 31, 2013:
June 30 December 31 Deferred tax asset: Fixed assets $ 9,648 7,943 Reappraisal of forwards, futures, swaps and options 11,132 14,400 Deferred charges 4,065 4,348 Industry and commerce tax 7,783 7,288 Loan portfolio allowance 49,631 55,070 Tax loses and surplus net income over ordinary income to offset 8,046 8,950 Estimated liabilities 1,143 728 Employee benefits 371 342 Others 16,002 18,033 Deferred tax asset 107,821 117,102
Deferred tax liability: Fixed assets 15,574 11,649 Costs and fees originating with loans 28,637 28,145 Loan portfolio allowance 11,846 5,062 Valuation forwards, futures, swaps and options 61,864 113,775 Deferred charges 32,418 34,061 Retirement pension reserve 4,872 4,872 Others 25,161 20,085 Total deferred tax liability 180,372 217,649
Deferred tax, net $ (72,551) (100,547)
(3) Contains the value of the equity tax applicable to the Bank and its subordinates. The following is a breakdown of amortization of the equity tax and the surcharge at June 30, 2014 and December 31, 2013.
June 30 December 31
Equity tax declared $ 481,487 481,487 Amount amortized (428,267) (371,558) Unamortized balance $ 53,220 109,929
(4) With the acquisition of AFP Horizonte Pensiones y Cesantías S.A., Banco de Bogotá generated a surplus investment cost over book value at March 2013, which was reclassified as goodwill in January 2014.
(5) Pertains mainly to costs generated by the subordinates for items such as licenses, maintenance, remodeling and refurbishing, as well as yield on trust operations by the real-sector subsidiaries of Corficolombiana.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Other assets – Others
Detail of other assets – others:
June 30 December 31
Permanent contributions $ 84,815 84,155 Trust rights (1) 350,098 319,750 Staff loans (2) 65,430 69,261 Deferred payment letters of credit 8,102 4,812 Deferred monetary correction 5,849 6,085 Deposits: guarantee and legal 119,950 91,641 Tax withholding 210,620 23,466 Artistic and cultural works 6,980 7,076 Real estate 1,310 1,310 Movable assets (485) (325) Accumulated amortization of movable assets 0 602 Furniture and fixtures in storage 231 14 Unconfirmed remittances in transit 331 254 Petty cash 164,594 48,969 Prepaid income tax 7,334 1,509 Prepaid industry and commerce tax 79 779 Share of Fonpet consortium profit 10,802 8,291 Consortia or temporary joint ventures (3) 60,889 61,302 Surplus prepayments and withholding 15,431 15,383 Sales tax paid 28,569 26,544 Others $ 1,140,929 770,878
(1) Trust rights:
Detail of trust rights, per consolidated organization:
June 30 December 31
Balance Reappraisal Allowance Balance Reappraisal Allowance Banco de Bogotá S. A.: Non-performing assets Megabanco $ 0 700 0 0 1,657 0 Foreclosed assets. San Jerónimo del Yuste 2,702 0 2,270 2,702 0 2,270 Proyecto Avenida Colombia Cali 33,197 1,648 0 23,611 1,821 0 35,899 2,348 2,270 26,313 3,478 2,270 Corporación Financiera Colombiana S.A
Investments 23,413 9,902 0 23,391 9,894 6,987 Salable and foreclosed assets 22,698 330 0 22,865 331,920 18,427 Administrative trusts 111,549 4,284 2,049 103,241 4,309 7,680 Real estate trusts 32,934 0 0 32,934 0 0 Third-party portfolios 122,137 3,666 0 109,429 27,040 0 Others 1,347 2,286 0 1,347 0 0 314,078 20,468 2,049 293,207 373,163 33,094 Almaviva S.A.: Porvenir S.A. 86 0 0 195 0 0 Escrow contracts 35 0 0 35 0 0 121 0 0 230 0 0 $ 350,098 22,816 4,319 319,750 376,641 35,364
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
The amounts for trust right allowances and reappraisals were adjusted in line with the information certified by each of the fiduciaries. It is their responsibility to apply accounting policies and to prepare the financial statements for the trusts, pursuant to the accounting principles generally accepted in Colombia and the instructions of the Colombian Superintendency of Finance.
(2) Staff loans:
The Bank and its subordinates assessed one hundred percent (100.0%) of the staff loans. The following is the result of that rating at June 30, 2014 and December 31, 2013:
June 30 December 31 Rating Consumer Mortgage Total Allowance Consumer Mortgage Total Allowance
A $ 16,863 48,291 65,154 855 18,367 50,881 69,248 913 B 156 0 156 8 0 0 0 0 C 91 0 91 4 0 0 0 0 D 23 0 23 7 7 0 7 5 E 6 0 6 3 6 0 6 16 $ 17,139 48,291 65,430 877 18,380 50,881 69,261 934
(3) Consortia or temporary joint ventures
Detail of subordinates’ active consortia:
June 30 December 31 Fiduciaria Bogotá S.A. $ 7,060 7,018 Sociedad Administradora de Fondos de Pensiones y Cesantías Porvenir S.A 3,004 679 Corporación Financiera Colombiana S.A. 738 594 $ 10,802 8,291
Allowances for other assets
Detail of allowance for other assets at June 30, 2014 and December 31, 2013:
June 30 December 31 Staff loans $ 877 934 Artistic and cultural works 322 322 Other allowances 32,979 32,088 Permanent contributions 41 42 $ 32,219 33,386
Movement in the allowance for other assets
Detail of movement in the allowance for other assets:
June 30 December 31 Opening balance for the period $ 33,386 32,305 Allowance charged to expenses for the period 454 2,608 Recovery of allowance (1) (1,503) (1,490) Other assets written off (118) (37) Closing balance for the period $ 32,219 33,386
(1) Includes $139 and $6 at June 30, 2014 and December 31, 2013 in recovery of other allowances charged to Corporación Financiera Colombiana S.A.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Goodwill
Detail of amortized goodwill:
Balance at Diff. Increase Balance at Diff. Increase Balance at June 30, exchange from Amortization December exchange from Amortization June 30,
2014 effect shares 31, 2013 effect shares 2013
Megabanco $ 453,898 0 0 12,007 465,905 0 0 11,962 477,867 AFP Horizonte BdB 88,998 0 91,746 2,748 0 0 0 0
Corficolombiana 129,614 0 0 2, 306 131,920 0 0 1,989 133,909 BAC Credomatic 1,827,093 (45,614) 16,074 31,583 1,888,216 (4,266) 0 27,093 1,919,575
Grupo Reformador 427,057 (10,389) 5,826 5,498 437,118 0 437,118 0 0 Transcom Ltd 80,155 (1,931) 203 1,044 82,927 0 82,927 0 0 Banco BAC Panamá 596,019 (14,451) 5,935 7,762 612,297 0 612,297 0 0 AFP Horizonte 341,500 0 0 4,434 345,934 0 0 4,384 350,318
$ 3,944,334 (72,385) 119.784 (*) 67,382 3,964,317 (4,266) 1,132,342 45,428 2,881,669
(*) Includes $1,584 in amortization charged to other sundry expenses from previous periods at June 30.
Banco de Bogotá
Goodwill on the books at June 30, 2014 from acquisitions:
1. Banco de Crédito y Desarrollo Social – MEGABANCO S.A.
Goodwill was generated by the acquisition of ninety-four point ninety-nine percent (94.99%) of the shares in Banco de Crédito y Desarrollo Social - Megabanco S. A. The cost of this operation, which was authorized by the Colombian Superintendency of Finance in Resolution No. 917 issued on June 2, 2006, came to $ 613,294 and will be amortized in twenty (20) years, by the exponential method.
The following table shows the allocation of goodwill initially determined for each business line, accumulated amortization and the balance at June 30, 2014.
Book Value of Accumulated Business line Held (%) Balance goodwill amortization Commercial 32.7% $ 200,794 52,186 148,608 Consumer 30.8% 188,616 49,022 139,594 Payroll installment lending 27.0% 165,774 43,085 122,689 Vehicles 6.7% 41,207 10,710 30,497 Microcredit 2.8% 16,903 4,393 12,510 Total 100.0% $ 613,294 159,396 453,898
Through an independent expert, the Bank annually reappraises, at market prices, the business lines associated with goodwill to determine if there has been any loss owing to a decline in goodwill. If so, the goodwill allocated to that line will be amortized up to the amount of the estimated loss.
The latest reappraisal update on the business lines to which goodwill was allocated was done by Incorbank S.A. on January 31, 2014. It was based on the Bank’s closing financial statements at November 30, 2013 and shows no shortfalls whatsoever that might point to possible deterioration, since the market value (or fair value) exceeds the book value for each line of business. Therefore, no additional amortization for deterioration is required.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
The following are highlights of the opinions expressed by experts who valued the business lines to which the goodwill derived from the acquisition of Megabanco was allocated.
The value of goodwill was allocated to five lines of business: commercial loans, microcredit, consumer loans, payroll installment lending and vehicle loans. The general criteria for defining these lines included their relative share of the firm, their business approach, profitability and their potential for creating value.
The business lines were valued using the dividend discount flow. Experts consider it to be the most appropriate method for valuing financial institutions and it is used widely by first-tier investment banks. It projects the flow of available dividends over a period of 10 years, plus an end value, and discounts them at an appropriate rate.
The reappraisal at market prices is compared to book value of each line of business to determine if there is a loss in the value of the goodwill allocated to each line of business. Consequently, a loss in value exists when the reasonable value of the line of business is less than its book value.
The initial allocation and appraisal on the acquisition date (June 2006), plus reappraisal on the merger date (November 2006) and the first reappraisal update (November 2007) were done by Estrategias Corporativas. The second through the sixth reappraisal updates (November 2008 – November 2013) were done by PricewaterhouseCoopers Asesores Gerenciales. The seventh (November 2013) was done by Incorbank.
2. AFP Horizonte Pensiones y Cesantías S.A.
The goodwill generated by the acquisition of sixteen point seventy-five percent (16.75%) of the shares in AFP Horizonte Pensiones y Cesantías S.A. was entered on the books as instructed by the Colombian Superintendency of Finance. The purchase cost $ 91.746, payable in twenty (20) years, and was authorized through Resolution No. 0628/2013 issued by the Colombian Superintendency of Finance.
Book value of Accumulated Business line Held (%) Balance goodwill amortization
Pension and severance funds 100.0% $ 91,746 2,748 88,998 Total 100.0% $ 91,746 2,748 88,998
In this sense, the depreciation accumulated between the acquisition date (April 18, 2013) and June 30, 2014 was recorded in its entirety in the statement of operations for the first half of 2014.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Leasing Bogotá Panamá
Goodwill on the books at June 30, 2014 derived from the acquisition of:
1. BAC Credomatic
Goodwill was generated through the acquisition of one hundred percent (100.00%) of the shares in BAC Credomatic, Inc., a holding of the Central American financial group known as BAC Credomatic. Banco de Bogotá received authorization from the Colombian Superintendency of Finance to conduct this operation through its subsidiary Leasing Bogotá Panamá, as per official letter no. 2010073017-048 dated December 3, 2010. The cost of the acquisition will be amortized within a period of twenty (20) years, via the exponential method.
The following table shows the initial allocation of goodwill to the line of business, accumulated amortization and the balance at June 30, 2014.
Initial Allocation Accumulated Ownership Balance Line of business (December 9, 2010) amortization interest (%) Dollars Pesos Dollars Pesos Dollars Pesos BAC Credomatic 100% 1,066 2,005,601 95 178,508 971 1,827,093
TRM at December 9, 2010: $1,880,82 (in pesos) TRM at June 30, 2014: $1,881,19 (in pesos)
The latest reappraisal update of the business lines to which goodwill was allocated was done by Ernst & Young on February 3, 2014. It is based on BAC Credomatic’s financial statements at closing on November 30, 2013 and shows no shortfalls whatsoever that might point to possible deterioration, since the market value (or fair value) exceeds the book value of goodwill. Therefore, no additional amortization for deterioration is required.
The following are highlights of the opinions expressed by experts:
The Bac Credomatic business unit was defined as follows:
The nature of the products and services is similar in all the companies in the group and in every country where it operates. Regional policies and procedures are ISO certified. The policies on corporate governance, systems, human resources, risk, credit and treasury are standard for each country. The regulatory environment is similar in the countries where BAC Credomatic operates. Although each country has its own regulatory agency, the Banking Authority of Panama audits the banks in the group through the consolidated supervisory agreements it has with the other local regulators. BAC clients have access to a regional network that allows them to conduct operations and business throughout the region. The companies in the BAC Credomatic Group share certain resources with respect to physical and intellectual capital, assets and financing
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
BAC Credomatic’s goodwill was valued based on the cash-flow-to-equity method in which the cash flow available to the shareholders is projected after computing all movements from or to creditors and complying with the minimum capital requirements. The method projects the available cash flow over ten (10) years, plus a residual or terminal value, all discounted at a rate that reflects the risks of the business in question.
The calculated market value of goodwill is compared to the balance of goodwill to determine whether or not there is a loss in the value of goodwill.
The initial allocation and appraisal on the acquisition date (December 2010), and the first reappraisal update (November 2011), the second (November 2012) and the third (November 2013) were done by the firm Ernst & Young.
2. Banco Reformador and Transcom Bank
Goodwill was generated through acquisition of one hundred percent (100.00%) of the shares in Banco Reformador de Guatemala and Transcom Bank Barbados Limited, declared as Grupo Financiero Reformador de Guatemala. The Colombian Superintendency of Finance authorized Banco de Bogotá to conduct these operations through its subsidiaries Credomatic International Corporation and Bac Credomatic Inc., as per official letter no. 2013068082-062 of December 3, 2013. The acquisition will be amortized within a period of twenty (20) years, through the exponential method.
The following is a breakdown, by business line, of the initial allocation of goodwill, accumulated amortization and the balance at June 30, 2014.
Initial Allocation Accumulated Ownership Balance Line of business (December 31, 2013) amortization interest (%) Dollars Pesos Dollars Pesos Dollars Pesos Banco Reformador 100% 227 437,118 0 10,061 227 427,057 Transcom Bank 100% 43 82,927 0 2,772 43 80,155
TRM at June 30, 2014: $1,881,19 (in pesos)
Goodwill was allocated initially by Ernst & Young on February 7, 2014, based on the financial statements of Banco Reformador and Transcom Bank at closing on December 31, 2013.
It has been less than one year since the acquisitions by Credomatic International Corporation. Therefore, no assessment of deterioration in goodwill has been done. However, an assessment by an expert highlights the following aspects.
The business units of Banco Reformador and Transcom Bank, each with their respective goodwill, were defined as follows:
o Each organization exercises its own operational control, combining all its operations, products and services.
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
o Management adopts comprehensive business decisions on the development and continuity of operations for each of the organizations.
Goodwill was valued using the cash-flow-to-equity method whereby the cash flow available to shareholders is projected after computing all movements from or to creditors and complying with the minimum capital requirements. The method projects the available cash flow over five (5) years, plus a residual or terminal value, all discounted at a rate that reflects the risk of the business being analyzed.
3. BBVA Panamá (now BAC de Panamá)
Goodwill was generated through acquisition of ninety-eight point ninety-two percent (98.92%) of the shares in Banco Bilbao Viscaya Argentaria Panamá S.A. (BBVA Panamá, now BAC de Panamá). Banco de Bogotá was authorized by the Colombian Superintendency of Finance to conduct this operation through its subsidiary Leasing Bogotá Panamá, as per official letter no. 2013072962-052 dated December 12, 2013. The cost of the acquisition will be amortized by the exponential method, within a period of twenty (20) years.
The following is a breakdown, by business line, of the initial allocation of goodwill, accumulated amortization and the balance at June 30, 2014.
Initial Allocation Accumulated Ownership Balance Line of business (December 31,2013) amortization interest (%) Dollars Pesos Dollars Pesos Dollars Pesos BBVA Panamá 100% 318 612,297 1 16,278 317 596,019
TRM at June 30, 2014: $1,881,19 (in pesos)
Goodwill was allocated initially by Ernst & Young on February 7, 2014, based on the financial statements of BBVA Panamá (now Banco BAC de Panamá) at closing on December 31, 2013.
As it has been less than one year since the acquisitions by Leasing Bogotá Panamá, no assessment of deterioration in goodwill has been done. However, an opinion issued by an expert highlights the following aspects.
The BBVA Panamá business unit was defined as follows.
Operational control is exercised at the company level, combining all its operations, products and services.
Management adopts business decisions on the development and continuity of operations in a comprehensive way as an organization.
Goodwill was valued using the cash-flow-to-equity method whereby the cash flow available to shareholders is projected after computing all movements from or to creditors and complying with the minimum capital requirements. The method projects the available cash flow over five (5) years, plus a residual or terminal value, all discounted at a rate that reflects the risk of the business being analyzed.
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
PORVENIR
AFP Horizonte Pensiones y Cesantías S.A.
Goodwill was generated through the acquisition of sixty-four point twenty-eight percent (64.28%) of the shares in BBVA Horizonte Sociedad Administradora de Fondos de Pensiones y Cesantías S.A. This operation was authorized by the Colombian Superintendency of Finance through Resolution No. 0628 dated April 3, 2013. The cost of the acquisition came to $642,625, producing $352,081 in goodwill to be amortized by the exponential method, within a period of twenty (20) years.
The following is a breakdown, by business line, of the initial allocation of goodwill, accumulated amortization and the balance at June 30, 2014.
Book value of Accumulated Business line Held (%) Balance goodwill amortization
Pension and severance funds 100% 352,081 10,581 341,500 Total 100% 352,081 10,581 341,500
The business line is valued using the projected dividend discount method, which is widely recognized for its technical merit. Loss of goodwill is assessed annually as provided for by law.
(13) Deposits and demand accounts
Time deposits
Detail of time certificates of deposit, by maturity:
June 30 December 31 Domestic Currency: Issued for less than 6 months $ 2,086,789 2,496,374 Issued for 6 months to under 12 months 1,713,850 1,682,869 Issued for 12 months to under 18 months 702,299 712,307 Issued for 18 months or more 7,778,243 6,540,275 Total Domestic Currency 12,281,181 11,431,825
Foreign Currency Reduced to Domestic Currency Issued for under 6 months 5,609,454 5,322,710 Issued for 6 months to under 12 months 2,616,893 2,691,506 Issued for 12 months to under 18 months 2,757,742 2,836,675 Issued for 18 months or more 2,464,555 2,399,417 Total Foreign Currency 13,448,644 13,250,308 Total Deposits and Demand Accounts $ 25,729,825 24,682,133
An ordinary reserve on deposits in domestic currency was established at June 30, 2014 and December 31, 2013, calculated with the following percentages.
Reserve
Deposits and demand accounts under 30 days 11.0% Deposits from official agencies 11.0% Deposits and demand accounts over 30 days 11.0%
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Time deposits: Under 180 days 4.5% 180 to under 360 days 4.5% 360 to under 540 days 4.5% Ordinary savings deposits 11.0% Time deposits 11.0% Trust deposits and creditors 11.0% Repurchase agreements on traded investments 11.0%
Other deposits and demand accounts
Detail of other deposits and demand accounts in domestic and foreign currency:
June 30 December 31 Domestic currency
Trust funds $ 316 299 Banks and correspondents 93,452 110,294 Special deposits 1,534 56,629 Demand accounts for banking services 108,249 164,288 Bank collection services 25,998 23,277 Total domestic currency 229,549 354,787
Foreign currency
Banks and correspondents 10,478 28,791 Special deposits 57,617 28,067 Demand accounts for banking services 177,291 153,790 Affiliated establishments 34,467 53,582 Total foreign currency 279,853 264,230 Total other deposits and demand accounts $ 509,402 619,017
(14) Money market liabilities and similar positions
Detail of interbank funds purchased and repo agreements:
June 30 December 31
Balance Average yield Balance Average yield
Domestic currency
Ordinary interbank funds, purchased $ 323,100 3.85% 206,310 3.24% Transfer commitments in closed repo operations 404,813 4.04% 1,191,400 3.27% Investment transfer commitments in simultaneous
operations 3,830,484 3.90% 2,347,314 2.85% Overnight operations 217,485 1.98% 10,680 0.00% Total asset positions in domestic currency 4,775,882 3,755,704
Foreign currency
Ordinary interbank funds, purchased 216,337 0.36% 175,342 0.40% Transfer commitments in open repo operations 238,237 3.82% 210,041 1.51% Transfer commitments in close repo operations 11,532 1.50% 0 0.00% Total asset positions in foreign currency 466,106 385,383
Total money market positions $ 5,241,988 4,141,087
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(15) Borrowing from banks and other financial obligations
Detail in domestic currency and foreign currency reduced to domestic currency:
June 30 Medium Short Term Long Term Long Term Term, (1-3 (1 year) (3 years) Over 5 Years years) Entity Total
Banco de Comercio Exterior $ 65,195 254,077 129,307 29,128 477,707 Fondo para el Financiamiento del Sector Agropecuario FINAGRO 59,532 162,064 80,614 9,826 312,036 Financiera de Desarrollo Territorial S.A FINDETER 24,116 163,113 114,838 166,328 468,395 Foreign banks (1) 2,732,804 2,843,228 1,089,181 1,369,298 8,034,511 Others (2) 385,893 227,964 188,863 988,917 1,791,637 Total $ 3,267,540 3,650,446 1,602,803 2,563,497 11,084,286
(1) The amount listed on the books at June 30, 2014 under CIC Receivables Master Trust, a consolidated special purpose vehicle, came to USD 544, divided into two programs:1) Series 2002-A with a balance of USD194 and 2) Series 2014-A (issued in April 2014) with a balance of USD350. The certificates issued through that vehicle are secured by future cash flows originating with transactions in affiliated businesses in Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica. Transactions in affiliated businesses are those generated by the holders of credit cards issued by international financial institutions through the Visa and MasterCard credit programs, which are processed by the company. The certificates issued in 2002 (Series 2002-A) pay interest quarterly in January, April, July and October, at a rate equivalent to the three-month LIBOR, plus a margin of 1.40 %. The holders began to receive amortization of principal in July 2010. The original duration of the certificates issued in 2002 (Series 2002-A) is 4.68 years. The weighted average duration of the certificates at June 30, 2014 is 1.54. The notes issued in 2014 (Series 2014-A) pay interest in January, April, July and October at a fixed interest rate of 4.89%. Amortization of principal will begin in July 2016.The original duration of these notes (Series 2014-A) is five (5) years. The weighted average duration at June 30, 2014 is 4.75 years.
At June 30, 2014, the books showed USD 282 under the trust known as CIC Central American Card Receivables Limited, a consolidated special purpose vehicle. The certificates issued under this vehicle are secured by future cash flows originating with transaction in affiliated businesses in Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica. Transactions in affiliated businesses are those generated by the holders of credit cards issued by international financial institutions under the American Express credit program, which are processed by the company. The certificates pay interest quarterly in February, May, August and November at a fixed rate of 4.50%. The holders will begin to receive payment of principal in August 2015. The original duration of the certificates is 4.99 years. The weighted average duration of the certificates at June 30, 2014 is 3.99 years.
In December 2013, BAC International Bank signed a subordinated loan (in right of payment to all other ordinary loans) with Grupo Aval Limited for US$ 180. This is an eight-year loan maturing on March 20, 2021. The principal is due in a single payment at maturity, and the interest is payable quarterly as of March 2014, based on a fixed rate of 7.71%
Secured obligations came to USD 1,169 at June 30, 2014.
At June 30, 2014, the Company had USD914 in unused lines of credit ranging in maturity up to 2017. This item includes the obligations Leasing Bogota SA Panama has with Grupo Aval Limited, as described below. They mature in over five (5) years and may be paid in advance, at any time, without penalty.
June 30 Various Book Interest rate maturities up value to Payable in US dollars: Fixed rate 5.0% a 5.50% 2023 USD 252
USD 252
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Medium Long Term Short Term Long Term Term, (1-3 Over 5 (1 year) (3 years) Total years) Years Entity
Banco de Comercio Exterior $ 118,026 132,236 41,383 11,550 303,195 Fondo para el Financiamiento del Sector Agropecuario FINAGRO 107,443 152,861 71,713 6,306 338,323 Financiera de Desarrollo Territorial S.A FINDETER 44,837 165,329 95,820 128,051 434,037 Foreign banks (1) 4,295,217 2,883,377 462,360 877,829 8,518,783 Others (2) 269,971 195,143 177,359 1,064,581 1,707,054 Total $ 4,835,494 3,528,946 848,635 2,088,317 11,301,392
(2) The books showed USD472 at December 31, 2013 under CIC Receivables Master Trust, a consolidated special purpose vehicle. The certificates issued under this vehicle are secured by future cash flows originating with transactions in affiliated businesses in Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica. Transactions in affiliated businesses are those generated by the holders of credit cards issued by international financial institutions under the Visa and Mastercard credit programs, which are processed by the company. The certificates pay interest quarterly in January, April, July and October, at a rate equivalent to the three-month LIBOR, plus a margin of 1.40 % at December 31, 2013. The holders began to receive payment of principal in July 2010. The original duration of the certificates is 4.68 years. The weighted average duration of the certificates at December 31, 2013 is 1.81 years.
On June 10, 2013, through a consolidated special purpose vehicle, Leasing Bogotá Panamá originated USD 282 of its USD 500 issue of series A notes maturing on November 5, 2020. The amount registered on the books at December 31, 2013 under the trust known as CIC Central American Card Receivables Limited, a consolidated, special purpose vehicle, came to USD 282. The certificates issued through this vehicle are secured with future cash flows arising from transactions in affiliated businesses in Guatemala, Honduras, El Salvador, Nicaragua and Costa Rica. Transactions in affiliated businesses are those generated by holders of credit cards that are issued outside the country where the card is being used, by international financial institutions under the American Express credit programs, which are processed by Leasing Bogotá Panamá. The notes pay interest quarterly in February, May, August and November, at a fixed rate of 4.50 % at December 31, 2013. The holders will begin to receive amortization of principal as of August 2015. The weighted average duration of the notes at December 31, 2013 is 4.49 years.
In December 2013, BAC International Bank signed a subordinated loan (in right of payment to all other ordinary loans) with Grupo Aval Limited for US$ 180. This is an eight-year loan that matures on March 20, 2021. The principal is due in a single payment at maturity, and the interest is payable quarterly as of March 2014, based on a fixed rate of 7.71%
USD 1,121 in obligations were secured at December 31, 2013.
(3) This item includes the obligations Leasing Bogota SA Panama has with Grupo Aval Limited, as described below. They mature in over five (5) years and may be paid in advance, at any time, without penalty.
December 31 Various Book Interest rate maturities up value to Payable in US dollars: Fixed rate 5.0% a 5.50% 2023 USD 257
USD 257
(Continued)
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BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(16) Accounts payable
Interest
Detail of interest payable:
June 30 December 31
Deposits and demand accounts $ 207,037 205,429 Money market operations 339 118 Bank loans and other financial obligations 45,592 43,751 Bonds outstanding 52,527 68,489 $ 305,495 317,787
Others
Detail of other accounts payable:
June 30 December 31 Dividends and surpluses $ 228,923 233,653 Rent 6,067 4,821 Bank transaction tax 18,659 25,874 Sales tax payable 46,447 43,508 Purchase commitments 5,170 2,566 Suppliers 301,144 235,368 Contributions and memberships 7,552 9,859 Employee withholding and contributions 123,789 174,350 Insurance premiums 16,083 12,359 Payable payroll 2,385 2,929 Uncashed drawn checks 28,227 88,627 Tax collections 250,550 76,758 Account payable – Visa payments 8,268 7,382 Peace bonds 28,631 28,522 Security bonds 7,302 7,316 Own ATM overages 1,605 2,306 Clearing overages – Grupo Aval 128,161 110,139 Credit card vouchers 32,213 8,135 Credit and debit card accounts payable 1,536 8,050 Debit card use 1,077 9,046 Positive credit card balances 5,085 4,214 Overages in ATMs 265 4,161 CDs, matured 26,213 29,766 Loan collections for third parties 5,385 5,354 Allowance for electronic purse used by coffee growers 62,178 99.740 Liens, distribution payroll installment funds & compensation disbursed own ATMs 41,205 43,183 Accounts payable for derivatives (forwards) 323,729 200,247 Credit card holder payments applicable 15,890 8,077 Third-party portfolios 29,583 33,673 Accounts payable between the different business units of Hoteles Estelar 10,430 9,687 Transport, freight and haulage 6,461 5,323 Payments to settle loan operations 14,747 8,537 Payroll deductions 15,883 0 Intercompany operation 5,402 0 Deposits from clients for leases 4,100 0 Accounts payable to owners 3,551 3,863 Credit balance, loan repayment 5,576 5,122 Technical services 4,530 4,234 Sundry accounts 113,022 76,456 $ 1,937,024 1,633,205
(Continued)
86
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(17) Long-term debt
Detail of bonds outstanding at June 30, 2014 and December 31, 2013:
June 30 December 31 Bank $ 2,492,172 2,537,396 Corporación Financiera Colombiana S.A. and Subordinates 110,203 110,203 Leasing Bogotá Panamá and Subordinates 585,366 552,140 $ 3,187,741 3,199,739
Terms of the bonds:
Issuer Date marketed June 30 December 31 Maturity date Interest rate
CPI + 7% to UVR + Apr-08 $ 215,829 213,801 April 2015 7% to DTF + 3% CPI + 5.33% to UVR + 5.29% to Banco de Feb-10 214,558 211,790 February 2017 To February 2020 CPI + 5.45% to Bogotá UVR+5.45% Dec-11 1,126,833 1,154,171 January 2017 5%
Feb-13 934,952 957,634 February 2023 5.375%
2,492,172 2,537,396
Epiandes Jul-07 29,150 29,150 July 2014 CPI + 5.70%
Lehner Jun-00 1,053 1,053 November 2014 DTF In effect
CPI + 6.59 10.09% Pisa May-09 80,000 80,000 May 2016 to May 2019 a CPI + 6.9 10.39% 110,203 110,203
BAC Jan-13 to Jun- 235,565 238,608 July 2014 To September 2015 4.65% to 8.5% Guatemala 14
BAC El Dec-11 to Jun- 183,401 160,864 July 2014 to February 2020 4.00% to 5.8% Salvador 14
BAC Dec-12 to Jun- 94,209 81,269 December 2015 To July 2018 5.5% to 11.16% Honduras 14
BAC Oct-13 & Nov- 22,057 20,049 October 2014 To November 2017 4.5% to 5.25% Nicaragua 13
Banco BAC Oct-11 to May - 50,134 51,350 May 2016 to October 2021 3.75% to 5.25% Panamá 13 585,366 552,140
$ 3,187,741 3,199,739
(18) Other liabilities
Consolidated labor obligations
Detail of movement in consolidated labor obligations:
Interest on Other Severance Severance Vacation Employee Total Pay Pay Benefits (1)
Balance at June 30, 2013 $ 50,189 2,271 58,124 69,918 180,502 Increase from additions and mergers (3) 14,240 185 1,492 3,263 19,180 Accrued during the period 30,085 4,286 18,514 115,112 167,997 Paid (14,923) (691) (21,352) (125,350) (162,316) Effect of exchange differential (30) 0 (1) (244) (275) Balance at December 31, 2013 79,561 6,051 56,777 62,699 205,088
(Continued)
87
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Interest on Other Severance Severance Vacation Employee Total Pay Pay Benefits (1)
Accrued during the period 35,320 2,417 28,703 155,045 221,485 Paid (46,840) (6,275) (22,299) (125,423) (200,837) Effect of exchange differential (833) 0 (552) (2,171) (3,556) Balance at June 30, 2014 (2) $ 67,208 2,193 62,629 90,150 222,180
(1) Other employee benefits include the legal bonus, voluntary bonus, vacation bonus and other social security benefits. (2) Includes employee liabilities of companies in the real sector entered under estimated liabilities at annual closing on June 30, 2014; namely $ 2,562 in severance pay, $152 in interest on severance pay, $1,232 in vacation pay and $2,043 for the legal bonus. (3) Includes acquisition of Grupo Reformador and Banco BAC Panamá at December 31, 2013.
Prepaid income and deferred credits
Detail of prepaid income and deferred credits:
Balance at Exchange Balance at Credits Charges June 30 difference December 31 Prepaid income
Interest $ 598 0 3,296 3,344 646
Commissions 31,832 (579) 27,578 29,695 34,528
Rent 686 0 98,383 98,883 1,186
Storage services 106 0 997 1,131 240
Contingents for unstable zones 37,434 0 12,429 3,909 28,914
Property tax contingencies 75,055 0 20,389 0 54,666
Credits for works in future periods 763,327 0 185,482 14,901 592,746
Design contingencies 33,062 0 0 2,381 35,443
Geological risk contingencies 9,149 0 0 0 9,149
Transport, freight and haulage from deferred 15,384 0 0 408 15,792 collection - construction stage sections I and II Prepaid income
Leaseback agreement 3,444 (76) 0 554 4,074 Hedging credit cards 5,714 (62) 0 4,279 10,055 Rent from leasing contracts 50 0 1,175 1,312 187 Others 3,712 (119) 4,630 2,049 1,250 Total $ 979,553 (836) 354,359 162,846 788,876
June 30 December 31 Deferred credits
Profits from sale of assets $ 40 61 Interest originating with restructuring processes 18,805 19,346 Profit from reappraisal adjustment on fixed income securities, financial institutions, 0 275 derivatives and structured loans Credit cards 7,557 7,317
Total $ 26,402 26,999
(Continued)
88
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Retirement pensions
Movement in retirement pensions:
Actuarial Pensions to be Total estimate amortized amortized Balance at June 30, 2013 $ 122,666 12,882 109,784 Amortizations (1) 78 (4,109) 4,187 Payments made (5,276) 24 (5,300) Adjustment to the actuarial estimate 7,355 8,435 (1,080) Balance at December 31, 2013 124,823 17,232 107,591 Amortizations 157 (6,791) 6,948 Payments made (6,629) 0 (6,629) Adjustment to the actuarial estimate 564 564 0 Balance at June 30, 2014 $ 118,915 11,005 107,910
(1) Includes recovery of $1,985 in surplus allowance on the Bank’s actuarial estimate.
The following are the main factors used in the actuarial estimates for retirement pensions.
June 30 December 31 Annual interest rate 4.80% 4.80% Future annual increase in pensions 3.26% 3.26%
The last actuarial estimate for retirement pensions pertains to December 31, 2013.
At June 30, 2014 and December 31, 2013, the Bank had amortized eighty-six point zero four percent (85.04%) and eight-five point fifty-nine percent (85.59%) of the actuarial estimate, in that order, while Corporación Financiera de Colombia S.A, a subordinate company, had amortized eighty-nine point sixty- nine percent (89.69%) and eighty-three point fifty-two percent (83.52%), respectively. Almacenes Generales de Depósito Almaviva S.A. has amortized one hundred percent (100.00%) of the actuarial estimate.
Others
Detail of other liabilities during the six months ended June 30, 2014 and December 31, 2013:
June 30 December 31
Deferred payment letters of credit $ 8,696 5,043 Credit for deferred monetary correction 10,164 10,520 Deferred income tax 180,372 217,649 Cancelled accounts 17,404 17,336 Credits applicable to obligations receivable 127,780 117,738 Cash overages 2,506 1,425 Clearing overages 312 472 Consortia or temporary joint ventures 8,975 7,149 Account payable on Unipalma leaseback contract 4,721 4,721 Guarantee contract performance bond 3,697 3,199 Guest deposits to secure a reservation with Hoteles Estelar 148 2,212 Loyalty program 9,348 5,039 Others 19,585 19,958 $ 393,708 412,461
(Continued)
89
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(19) Estimated liabilities and provisions
Detail of estimated liabilities and allowances:
June 30 December 31 Employee obligations Severance pay $ 2,562 0 Interest on severance pay 152 0 Vacation 1,232 0 Voluntary bonus 2,043 126 Bonuses 2,861 1,776 Service bonus 8,643 8,399 Social Security Institute 4,218 475 Other benefits 4,716 2,461 26,427 13,237 Taxes Income tax payable 436,506 120,458 Industry and commerce tax and others 19,979 15,939 Property tax 21 21 Others 15,657 15,674 472,163 152,092 Others Contributions and memberships 0 12 Fines and penalties - Col. Supr. of Finance 27 550 Fines and penalties, litigation, compensation and claims 30,476 26,301 Credit cards 4,185 4,600 Cash custody and storage 137 166 Employee bonuses 1,472 1,472 Suppliers 3,081 4,778 Credivesa contract 4,530 4,259 Fogafin insurance 22,957 25,716 Fees 1,772 639 Allowance for Industrias Lehner disassembly plan and VAT allowance 3,831 16,254 Allowance for client loyalty programs 52,079 51,093 Allowance for pension contingency 31,435 31,250 Allowance for legal fees and costs 3,606 3,708 Others Allowance for VAT interest payable 3,303 2,048 Installation service cost allowance 1,103 104 Legal allowance 2,948 1,089 Sundries 38,909 28,947 205,851 202,986 $ 704,441 368,315
Detail of non-controlling interest:
June 30 December 31
Almaviva S.A. $ 6,683 6,511 Bamer S.A. –Honduras 91 89 Casa de Bolsa S.A. 9,936 10,007 Corficolombiana S.A. 2,547,673 2,489,474 Corporacion Tenedora Baccom -Nicaragua. 216 202 Crédito S.A. –Nicaragua 57 52 Episol -Coninvial S.A. 28,989 15,464 Estudios, Proyectos e Inversiones de los Andes S.A. 83,208 64,253 Fidubogotá S.A. 10,415 9,225 Gas Comprimido del Perú 1,144 1,476
(Continued)
90
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31
Gestión y Contacto S.A. 366 433 Global Cargo S.A. 481 446 Hoteles Estelar de Colombia S.A. 90,585 89,182 Industrias Lehner S.A. 4,289 (7,941) Megalínea S.A. 120 122 Organización Pajonales S.A. 4,066 4,071 Pizano S.A. 89,176 94,880 Plantaciones Unipalma de los Llanos S.A. 61,582 60,695 Porvenir S.A. 638,756 599,634 Promotora y Comercializadora Santamar S.A. 4,528 4,421 Proyectos de Infraestructura S.A. 35,878 35,692 South Logistic S.A. 2 44 Tejidos Sintéticos de Colombia S.A. 78 82 Banco BAC Panamá – BBVA 508 3,923 $ 3,618,827 3,482,437
Income tax
The presentation of consolidated information on income tax returns is not permitted under Colombian law. Therefore, the tax losses of a consolidated subordinate may not be used to offset the taxable income of another consolidated subordinate. Law 1607/2012 set the applicable income tax rate at 25% as of 2013 and created an equality tax (CREE in Spanish) at a rate of eight percent (8%); however, the rate for 2013, 2014 and 2015 is 9%.
According to Law 863/2003, the Bank and its subordinates are subject to the transfer pricing regime on operations with economic affiliates outside the country. The material effect on income tax as a result of the transfer pricing study is not estimated.
(20) Common shares
The Bank had $5,000.0 in authorized capital at June 30, 2014 and December 31, 2013. This amount was represented by 500 million shares at a face value of $10.00 pesos each. Subscribed and paid in capital came to $3,075 and was represented by 307,471,032 shares.
(21) Reserves
Legal
By law, the Bank and its national subordinates are required to create a mandatory reserve by appropriating ten percent (10%) of net profits from each accounting period until the reserve equals fifty percent (50%) of subscribed capital. The reserve may be reduced to less than fifty percent (50%) of subscribed capital, if necessary to cancel out losses in excess of undistributed profits. However, it may not be used to pay dividends or to cover expenses or losses, as long as the company has undistributed profits.
Additional paid-in capital, which is the difference between the value paid per share and its face value, is also registered in this account as a legal reserve.
(Continued)
91
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Legal reserve
June 30 December 31
Through appropriation of net profits 3,358,708 3,182,514 Through additional paid-in capital 4,221,859 4,221,859 $ 7,580,567 7,404,373
Statutory and voluntary reserves
Available to the Board of Directors of the Bank and its subordinates:
June 30 December 31 Statutory reserves Statutory reserves $ 1,460 1,399 1,460 1,399 Voluntary reserves
Available to the Board of Directors 13,198 8,560 For tax provisions 276,001 259,240 To repurchase shares 5,716 5,716 Others 560,992 517,585 855,907 791,101 857,367 792,500 Total reserves $ 8,437,934 8,196,873
(22) Surplus– unrealized accumulated loss on investments and derivatives
June 30 December 31 Unrealized accumulated gains or losses on investments available for sale
Debt securities $ (50,545) (110,927) Equity securities with high or medium turnover 44,291 36,344 (6,254) (74,583)
Unrealized gains or losses on hedging with derivatives
From hedging cash flows (1,456) (2,758) From hedging investments in lending or deposit operations in foreign currency (427) 4,708 (1,883) 1,950 $ (8,137) (72,633)
(23) Contingent accounts
Detail of contingent accounts:
June 30 December 31
Debtor: Securities delivered in repo and simultaneous operations $ 4,555,950 3,795,404 Securities delivered in related operations 23,472 0 Securities delivered in related operations 0 4,650 Commission partial withdrawals 623 502
(Continued)
92
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31
Loan interest 254,956 259,582 Financial leasing interest 8,665 9,267 Monetary correction on the loan portfolio 26 12 Rights in options – speculative 1,282,198 1,138,923 Rents receivable 2,619,771 2,418,589 Receivable options to buy 216,116 148,071 Other debtor contingent accounts 805,311 871,562 $ 9,767,088 8,646,562
Creditor: Warranty bonds $ 7,000 7,000 Securities received in repo and simultaneous operations 151,313 875,701 Bank guarantees 2,151,177 1,845,869 Letters of credit 632,669 752,405 Undisbursed approved loans 58,445 133,600 Unused lines of credit 10,216,936 10,021,974 Obligations in options – speculative 886,796 1,026,035 Other creditor contingent accounts 755,643 665,600 $ 14,859,979 15,328,184
(24) Memorandum accounts
Detail of memorandum accounts:
June 30 December 31 Debtors: Assets and securities delivered in custody $ 5,440,843 5,718,247 Fair price of primary asset positions 4,603,086 4,166,380 Assets and securities delivered in guarantee 1,285,415 476,889 Reappraisal gains on foreclosed assets 95,719 105,568 Remittances and other outward collections 42,878 43,925 Checks negotiated and pending payment 4,625 4,752 Assets written off 3,001,902 3,957,452 Undrawn loans to the Bank 1,877,301 1,541,349 Exchange adjustment due to re-expression of loans 1,731 2,957 Bonds, not sold 2,355,859 2,228,883 Bonds, amortized 465,805 465,805 Asset inflation adjustments 69,546 70,545 Liquidity fund 677 565 Accounts receivable for yield on trading investments in debt securities 364,261 307,943 Accounts receivable for dividends decreed on high and medium turnover equity 2,126 1,088 securities Loans to parent company, branches and subsidiaries 10,902 0
New farm loans 43,839 43,838 Dividend rights in kind from equity reappraisal 4,964 36,741 Property and equipment, fully depreciated 747,748 683,398 Tax value of assets 71,728,116 62,611,673 Allowances for persons in agreement with creditors (moratorium) 200,557 193,000 Trading investments in debt securities 1,888,168 3,388,319 Investments held to maturity 1,536,938 1,424,306 Investments in debt securities available for sale 7,252,931 6,161,740
(Continued)
93
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31
Reciprocal asset operations with parent companies and subordinates 424,114 223,944 Reciprocal operations that affect costs and expenses with parent companies and 7,797 10,952 Subordinates Other debtor memorandum accounts * 79,740,026 72,772,833 $ 183,197,874 166,643,092
* There is a percentage on the books at June 30, 2014 and December 31, 2013 calculated by the Tax Department on the portfolio funded with $15,565,293 and $14,871,354 from savings, $35,191,786 and $31,912,999 from loans and $19,626,493 and $17,041,638 from other sources, based on the savings and loan account balances. This account was created for tax purposes.
June 30 December 31 Creditors : Assets and securities received in custody $ 2,136,141 2,535,424 Assets and securities received in guarantee for future loans 8,151,726 7,883,341 Guarantees pending cancellation 1,508,766 1,260,451 Assets and securities received as admissible guarantees 37,022,680 32,500,176 Other assets and securities received in guarantee – other guarantees 4,522,444 8,861,846 Inward collections 776,260 735,739 Recovery of assets written-off , domestic currency 29,447 29,983 Merchandise deposited in own warehouses 1,385,800 1,644,517 Merchandise in private warehouses 20,141 235,222 Merchandise in transit 9,006 8,944 Merchandise in own silos 13,748 24,743 Merchandise received from other warehouses 323 323 Equity inflation adjustments 441,058 441,058 Capitalization from equity revaluation 441,058 441,058 Consigned merchandise in inward customs clearance 5,310 5,104 Discounted warehouse liens 88,530 99,354 Yield on trading investments in equity securities 1,568,836 2,487,855 Equity securities 19 19 Dividends decreed on trading investments in equity securities 3,027 3,724
Tax value of equity 16,886,074 13,634,119 Classification of financial leasing operations 2,618,014 2,377,933 Classification of operational leasing agreements 38,119 32,358 Classification of home mortgage loans – admissible guarantee 5,655,509 5,368,462 Classification of home mortgage loans – other guarantees 458 223 Classification of consumer loans- admissible guarantee 2,255,208 2,190,919 Classification of consumer loans – other guarantees 12,284,775 11,896,142 Classification of microcredit – admissible guarantee 198,148 187,051 Classification of microcredit – other guarantees 138,717 137,330 Classification of commercial loans – admissible guarantee 7,977,244 7,845,452 Classification of commercial loans – other guarantees 30,683,441 28,683,610 Reciprocal liability operations with parent companies and subsidiaries 34,340 31,822 Reciprocal operations affecting equity, with parent companies and subsidiaries 5,057 3,287 Reciprocal operations affecting income, with parent companies and subsidiaries 6,452 9,528 Other creditor memorandum accounts 2,112,023 2,004,345 $ 139,017,899 133,601,462
(Continued)
94
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(25) Trust memorandum accounts
Detail of trust memorandum accounts:
June 30 December 31 Detail : Investment trusts $ 823,458 916,208 Management trusts 15,939,617 15,903,802 Guarantee and other trusts 5,787,058 4,540,532 Real estate trusts 9,650,292 7,449,107 Pension liability trusts 17,818,692 16,393,223 Mutual funds 7,660,500 7,014,967 $ 57,679,617 52,217,839
(26) Related-party transactions
The following are regarded as related parties.
1) Shareholders who individually possess more than 10% of the Bank´s capital stock and those whose individual ownership interest is less than that amount, but who have options exceeding 5% of the technical equity.
Shareholders with more than 10% ownership interest:
- Grupo Aval Acciones y Valores S.A.
- “Grupo Aval” includes the following subsidiaries of our parent company: o Grupo Aval Limited o Grupo Aval International
Shareholders with less than 10% of the capital stock, but with transactions exceeding 5% of the technical equity.
- The Bank registered no operations at closing in June 30, 2014 and December 31, 2013 with shareholders who have less than 10% ownership interest that would exceed 5% of its technical equity.
2) Members of the Board of Directors (Directors) and Management. Managers are employees of the Bank with legal representation.
3) Subordinate Institutions: Where the Bank owns more than 10% of capital stock, directly or indirectly, and exercises administrative or financial control.
4) Other Non-subordinate Related Institutions: - Banco de Occidente and subordinates - Banco AV Villas and subordinates - Banco Popular and subordinates - Seguros de Vida Alfa S.A - Seguros Alfa S.A.
(Continued)
95
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Operations with related parties:
The Bank may conduct operations and enter into agreements or contracts with related parties, provided it is understood that all operations of this type are to be conducted at reasonable values, consistent with market conditions and rates.
None of the following existed between the Bank and its related parties during the periods ended June 30, 2014 and December 31, 2013:
Loans implying a liability for the borrower that is not in keeping with the essence or the nature of the loan agreement.
Loans with interest rates other than those ordinarily paid or charged to third parties under similar conditions with respect to maturity, risk and the like.
Operations with terms different from operations with third parties.
Banco de Bogotá S.A. has agreements to enable Fiduciaria Bogota and Porvenir to use its network of offices. These arrangements are consistent with the Bank’s manual on agreements; specifically, Chapter VI entitled “Special Agreements with Subsidiaries to Use the Banco de Bogotá Network”.
The national government has authorized trust companies to use the offices of banks. For that purpose, Fiduciaria Bogotá S.A. entered into a contract with Banco de Bogotá S.A. to use the Bank´s network of offices for its operations. The contract defines the operational management of transactions with customers of the mutual fund accounts managed by Fiduciaria Bogotá.
In the case of Porvenir, pursuant to the provisions outlined in Law 50/1990 (Labor Reform Act) and Law 100/1993 (General Comprehensive Social Security System), the Bank entered into an agreement with Sociedad Administradora de Fondos de Pensiones y Cesantías PORVENIR S.A. whereby the Bank offers its offices as a support network for services related to Porvenir’s Severance Fund and Mandatory Pension Fund.
During the six months ended June 30, 2014 and December 31, 2013, the directors were paid $1,282 and $1,178, respectively, to attend meetings of the Board of Directors and those of the committees.
The Bank registered the following balances for loans and deposits with companies related to its directors and managers at closing on June 30, 2014 and December 31, 2013.
June 30 December 31
Loan portfolio $ 476,895 286,192
Deposits and demand accounts $ 240,506 23,071
(Continued)
96
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
All operations were conducted at market prices. The average rate on loans the Bank extended to related parties is equivalent to the DTF+2.94. Credit card transactions and overdrafts are charged at the full rates applicable to those products.
Grouping of balances and operations with related parties:
June 30 Related Parties Grupo Aval Directors Non-subordinates Subordinates ASSETS Cash 0 0 63 7,371
Investments 36,409 0 264 8,924,340 Investment allowance 0 0 0 729 Loan portfolio 186,001 8,999 2,643 22,091 Acceptances and derivatives 448 0 0 0 Accounts receivable 365,940 101 347 33,295 Salable, foreclosed and returned assets 0 0 0 17
Other assets 0 16 0 0 Reappraisals, net 0 0 1,102 414,887
LIABILITIES
Deposits and demand accounts 1,365,329 2,029 4,121 677,048
Liability positions 0 0 5,500 0 Acceptances and derivatives 9,139 0 0 0 Financial obligations 1,162,162 0 0 44 Accounts payable 459,498 16 6,908 5,404 Bonds, outstanding 74,307 0 0 7,525 Other liabilities 0 20 94 0 Estimated liabilities and allowances 0 0 0 360 EQUITY
Unrealized gain or loss 0 0 0 2,029,794
INCOME
Interest 1,172 294 762 1,048
Investment reappraisal 828 0 0 0 Forward valuation 46,950 0 0 0 Commissions 174 10 46 3,272 Rent 249 5 312 177 Dividends received 0 0 0 468,581 Other income 10 4 0 523 EXPENSES
Interest 41,732 33 139 10,550
Forward valuation 136,401 0 0 0 Commissions 0 0 140 1,084 Fees 10,318 1,282 2,229 0 Rent 0 0 0 260 Personnel 0 1,187 796 0 Other expenses 3,406 121 3,276 46,428
December 31 Related Parties Grupo Aval Directors Non-subordinates Subordinates ASSETS Cash 0 0 48 13,062
Investments 37,622 0 264 8,877,537
Investment allowance 0 0 0 747
Loan portfolio 11 6,527 737 20,023
Acceptances and derivatives 1,126 0 0 0
Accounts receivable 326,836 42 719 41,199
Other assets 0 2 0 0
Reappraisal, net 0 0 1,086 383,134
LIABILITIES
Deposits and demand accounts 507,545 1,521 7,653 642,845
Acceptances and derivatives 6,729 0 0 0
(Continued)
97
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Related Parties Grupo Aval Directors Non-subordinates Subordinates
Accounts payable 332,225 10 6,570 3,783
Obligations 1,201,340 0 0 129
Bonds, outstanding 76,110 0 963 7,707
Other liabilities 0 75 0 0
Estimated liabilities and allowances 0 0 0 446
EQUITY
Unrealized gain or loss (1,728) 0 0 2,130,133
INCOME
Interest 43 90 514 1,081
Investment reappraisal 789 0 0 0
Forward valuation 106,611 0 0 0
Commissions 119 10 20 3,738
Rent 248 7 307 146
Dividends received 0 0 0 455,989
Other income 79 12 0 283
EXPE NSES
Interest 47,185 46 92 9,730
Forward valuation 125,104 0 0 0
Commissions 0 0 92 1,161
Fees 6,707 1,178 1,682 0
Rent 0 0 0 249
Personnel 0 0 784 0
Other expenses 2,467 19 2,996 6,509
Summary of Banco de Bogotá S.A.´s transactions with direct Subordinates:
June 30 Banco de Leasing Bogotá BANCO DE BOGOTA Casa de Corfi - Corp. Almaviva Bogotá Fidubogotá Bogota Megalinea Porvenir Finance S.A. Bolsa Colombiana Ficentro Panamá Panamá Corp. ASSETS Cash 0 3,755 0 0 0 0 0 0 0 0 Investments 29,741 114,304 3,940 3,083,869 123,340 5,161,810 0 381,539 94 729 Investment allowance 0 0 0 0 0 0 0 0 0 729 Loan portfolio 14 0 0 22,033 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 0 0 Accounts receivable 2,146 3 0 12,043 7,808 0 24 8,069 0 0 Other assets 0 0 0 0 0 0 0 0 0 0 Reappraisal 118,294 13,043 2,251 0 70,112 643 0 193,932 65 0
LIABILITIES
Deposits and demand 2,013 2,821 28 637,229 8,968 3,593 2,773 15,878 0 0 accounts Active positions 0 0 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 0 0 Accounts payable 2 0 0 121 0 155 1,939 0 0 0 Bonds, outstanding 0 0 0 0 0 7,525 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0 0 0 Estimated liabilities 0 0 0 0 0 360 0 0 0 0
EQUITY Unrealized gain or 0 0 0 2,029,794 0 0 0 0 0 0 loss
INCOME
Interest 3 0 0 969 0 0 0 0 0 0 Commissions 105 9 1 162 12 0 43 1,846 0 0 Rent 18 7 0 0 74 0 0 0 0 0 Dividends received 4,288 10,090 0 95,551 33,694 288,054 0 36,904 0 0 Other income 15 0 0 266 0 0 1 0 0 0
(Continued)
98
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 Banco de Leasing Bogotá Casa de Corfi - Corp. BANCO DE BOGOTA Almaviva Bogotá Fidubogotá Bogota Megalinea Porvenir Finance Bolsa Colombiana Ficentro Panamá Panamá Corp. EXPENSES
Interest 17 0 0 8,702 217 214 39 1,280 0 0 Commissions 0 0 35 0 0 0 0 623 0 0 Fees 0 0 0 0 0 0 0 0 0 0 Rent 196 0 0 0 0 0 0 51 0 0 Personnel 0 0 0 0 0 0 0 0 0 0 Other expenses 0 0 0 389 0 0 45,087 0 0 0
June 30 Leasing Bogotá Banco de Casa de Corp. ALMAVIVA Corficolombiana Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Bolsa Ficentro Panamá Corp. ASSETS Cash 627 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 5 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 15 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Accounts payable 0 0 5 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0 INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 30 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 19 0 0 0 0 0
June 30 Leasing Bogotá Corp. BANCO DE BOGOTA PANAMA Almaviva Casa de Bolsa Corficolombiana Fidubogotá Bogotá Porvenir Finance Ficentro Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 11 0 0 6 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES Deposits and demand accounts 627 72 56 0 2,811 0 159 0 Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Account payable 0 772 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
(Continued)
99
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 Leasing Bogotá Corp. BANCO DE BOGOTA PANAMA Almaviva Casa de Bolsa Corficolombiana Fidubogotá Bogotá Porvenir Finance Ficentro Panamá Corp. INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 1 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 1 0 Commissions 0 346 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 0 35 0 0 0
June 30 Leasing Bogotá Banco de Corp. CASA DE BOLSA Almaviva Corficolombiana Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Ficentro Panamá Corp. ASSETS Cash 0 72 5 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 772 12 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand 0 0 0 0 0 0 0 0 accounts Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 44 0 0 0 0 0 Account payable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 66 0 0 0 0 0 Commissions 0 346 27 0 0 43 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 14 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 13 0 0 0 0 0 Personnel 0 0 0 0 0 0 0 0 Other expenses 0 0 671 0 0 0 0 0
June 30 Leasing Bogotá Banco de Corp. CORFICOLOMBIANA Almaviva Casa de Bolsa Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Ficentro Panamá Corp. ASSETS Cash 0 56 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 44 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 20 0 0 8 0 118 0 0 Salable, foreclosed and 17 0 0 0 0 0 0 0 returned assets Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 5 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0
(Continued)
100
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 Leasing Bogotá Banco de Corp. CORFICOLOMBIANA Almaviva Casa de Bolsa Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Ficentro Panamá Corp.
Account payable 5 0 12 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 9 0 0 0 0 0 Commissions 0 0 668 0 0 0 0 0 Rent 0 0 13 0 0 0 0 0 Other income 19 0 8 22 0 192 0 0
EXPENSES
Interest 0 0 66 0 0 0 0 0 Commissions 0 0 27 9 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 13 0 0 0 0 0 0 0
June 30 Bogotá Banco de Corp. LEASING BOGOTA PANAMA Almaviva Casa de Bolsa Corficolombiana Fidubogotá Porvenir Finance Bogotá Panamá Ficentro Corp. ASSETS Cash 0 2,811 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Account payable 0 11 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 35 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 1 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 0 0 0 0 0
June 30 Leasing BOGOTA FINANCE Banco de Casa de Corp. Almaviva Corficolombiana Fidubogotá Bogotá CORPORATION Bogotá Panamá Bolsa Porvenir Ficentro Panamá ASSETS Cash 0 45 0 0 0 0 0 0 Investments 0 114 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
(Continued)
101
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 Leasing BOGOTA FINANCE Banco de Casa de Corp. Almaviva Corficolombiana Fidubogotá Bogotá CORPORATION Bogotá Panamá Bolsa Porvenir Ficentro Panamá
LIABILITIES
Deposits and demand accounts 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Account payable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 1 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 0 0 0 0 0
June 30 Leasing Bogotá Banco de Corp. FIDUBOGOTA Almaviva Casa de Bolsa Corficolombiana Bogotá Porvenir Finance Bogotá Panamá Ficentro Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 2,250 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisals 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Account payable 0 0 0 8 0 0 0 0 Other assets 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 9 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 22 0 0 0 0
June 30 Leasing Bogotá Banco de Corp. PORVENIR Almaviva Casa de Bolsa Corficolombiana Fidubogota Bogotá Finance Bogotá Panamá Ficentro Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0
(Continued)
102
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 Leasing Bogotá Banco de Corp. PORVENIR Almaviva Casa de Bolsa Corficolombiana Fidubogota Bogotá Finance Bogotá Panamá Ficentro Panamá Corp.
Accounts receivable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Account payable 0 0 0 118 2,250 0 0 0 Other assets 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 43 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 192 0 0 0 0
June 30 Banco de Leasing Bogotá CORP. FICENTRO Almaviva Bogotá Casa de Bolsa Corficolombiana Fidubogota Bogotá Porvenir Finance Panamá Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisals 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand 0 0 0 0 0 0 0 0 accounts Derivatives 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Account payable 0 6 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 0 0 0 0 0
(Continued)
103
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Banco de Leasing Bogotá BANCO DE BOGOTA Casa de Corfi - Corp. Almaviva Bogotá Fidubogotá Bogota Megalinea Porvenir Finance S.A. Bolsa Colombiana Ficentro Panamá Panamá Corp. ASSETS Cash 0 7.848 0 0 0 0 0 0 0 0 Investments 29.741 107.223 3.940 3.147.431 123.340 5.004.761 0 460.256 96 747 Investment allowance 0 0 0 0 0 0 0 0 0 747 Loan portfolio 1 0 0 19.892 0 0 1 0 0 0 Derivatives 0 0 0 0 0 0 0 0 0 0 Accounts receivable 9.568 0 0 13.971 8.245 1.102 13 5.454 0 0 Other assets 0 0 0 0 0 0 0 0 0 0 Reappraisals 111.452 5.779 2.084 0 49.233 30.677 0 183.843 66 0
LIABILITIES
Deposits and demand 4.774 5.213 68 487.411 16.652 2.745 3.990 116.566 0 0 accounts Liability positions 0 0 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 0 0 Accounts payable 12 0 0 610 0 158 256 0 0 0 Obligations 0 0 0 0 0 0 0 0 0 0 Bonds, outstanding 0 0 0 0 0 7.707 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0 0 0 Estimated liabilities 0 0 0 0 0 446 0 0 0 0 EQUITY
Unrealized gain or 0 0 0 2.130.133 0 0 0 0 0 0 loss
INCOME
Interest 0 0 0 1.060 0 0 0 0 0 0
Commissions 92 26 1 174 9 0 31 2.153 0 0 Rent 18 7 0 0 73 0 0 0 0 0 Dividends received 19.974 183 0 118.254 24.581 249.883 0 43.115 0 0 Other income 10 1 0 17 0 0 1 0 0 0
EXPENSES
Interest 43 0 0 8.126 272 24 42 1.194 0 0 Commissions 0 0 10 0 0 0 0 626 0 0 Fees 0 0 0 0 0 0 0 0 0 0 Rent 185 0 0 0 0 0 0 50 0 0 Personnel 0 0 0 0 0 0 0 0 0 0 Other expenses 5 1 0 344 0 0 5.170 0 0 0
December 31 Leasing Bogotá Banco de Casa de Corp. ALMAVIVA Corficolombiana Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Bolsa Ficentro Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 14 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 96 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts payable 0 0 5 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
(Continued)
104
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Leasing Bogotá Banco de Casa de Corp. ALMAVIVA Corficolombiana Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Bolsa Ficentro Panamá Corp.
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 35 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 29 0 0 0 0 0
December 31 Leasing Bogotá Corp. BANCO DE BOGOTA PANAMA Almaviva Casa de Bolsa Corficolombiana Fidubogotá Bogotá Porvenir Finance Ficentro Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 0 0 6 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 55 104 0 5,004 0 162 0 Derivatives 0 0 0 0 0 0 0 0 Accounts payable 0 772 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 104 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 1 0 Commissions 0 296 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 0 0 0 0 0
December 31 Leasing Bogotá Banco de Corp. CASA DE BOLSA Almaviva Corficolombiana Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Ficentro Panamá Corp. ASSETS Cash 0 55 5 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0
(Continued)
105
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Leasing Bogotá Banco de Corp. CASA DE BOLSA Almaviva Corficolombiana Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Ficentro Panamá Corp.
Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 772 8 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand 0 0 0 0 0 0 0 0 accounts Derivatives 0 0 0 0 0 0 0 0 Accounts payable 0 0 115 0 0 0 0 0 Obligations 0 0 129 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME Interest 0 0 4 0 0 0 0 0 Commissions 0 296 82 0 0 33 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 24 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 13 0 0 0 0 0 Personnel 0 0 2 0 0 0 0 0 Other expenses 0 0 733 0 0 0 0 0
December 31 Leasing Bogotá Banco de Corp. CORFICOLOMBIANA Almaviva Casa de Bolsa Fidubogotá Bogotá Porvenir Finance Bogotá Panamá Ficentro Panamá Corp. ASSETS Cash 0 104 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 129 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 101 0 115 2 0 28 0 0 Salable, foreclosed and 15 0 0 0 0 0 0 0 returned assets Other assets 0 0 0 0 0 0 0 0 Reappraisals 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 5 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts payable 14 0 8 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 16 0 0 0 0 0 Commissions 0 0 725 0 0 0 0 0 Rent 0 0 13 0 0 0 0 0 Other income 29 0 18 30 0 177 0 0
EXPENSES
Interest 0 0 4 0 0 0 0 0 Commissions 0 0 82 11 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 21 0 0 0 0 0 0 0
(Continued)
106
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Bogotá Banco de Corp. LEASING BOGOTA PANAMA Almaviva Casa de Bolsa Corficolombiana Fidubogotá Porvenir Finance Bogotá Panamá Ficentro Corp. ASSETS Cash 0 5,004 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES Deposits and demand accounts 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts payable 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 104 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 0 0 0 0 0
December 31 Leasing BOGOTA FINANCE Banco de Casa de Corp. Almaviva Corficolombiana Fidubogotá Bogotá CORPORATION Bogotá Panamá Bolsa Porvenir Ficentro Panamá ASSETS Cash 0 45 0 0 0 0 0 0 Investments 0 117 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts payable 0 0 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 1 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 0 0 0 0 0
(Continued)
107
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Leasing Bogotá Banco de Corp. FIDUBOGOTA Almaviva Casa de Bolsa Corficolombiana Bogotá Porvenir Finance Bogotá Panamá Ficentro Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 1,798 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts payable 0 0 0 2 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 11 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EX PENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 30 0 0 0 0
December 31 Leasing Bogotá Banco de Corp. PORVENIR Almaviva Casa de Bolsa Corficolombiana Fidubogota Bogotá Finance Bogotá Panamá Ficentro Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand accounts 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts payable 0 0 0 28 1,798 0 0 0 Obligations 0 0 0 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 33 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 177 0 0 0 0
(Continued)
108
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
December 31 Banco de Leasing Bogotá CORP. FICENTRO Almaviva Bogotá Casa de Bolsa Corficolombiana Fidubogota Bogotá Porvenir Finance Panamá Panamá Corp. ASSETS Cash 0 0 0 0 0 0 0 0 Investments 0 0 0 0 0 0 0 0 Investment allowance 0 0 0 0 0 0 0 0 Loan portfolio 0 0 0 0 0 0 0 0 Derivatives 0 0 0 0 0 0 0 0 Accounts receivable 0 0 0 0 0 0 0 0 Other assets 0 0 0 0 0 0 0 0 Reappraisal 0 0 0 0 0 0 0 0
LIABILITIES
Deposits and demand 0 0 0 0 0 0 0 0 accounts Derivatives 0 0 0 0 0 0 0 0 Accounts payable 0 6 0 0 0 0 0 0 Obligations 0 0 0 0 0 0 0 0 Other liabilities 0 0 0 0 0 0 0 0
EQUITY
Unrealized gain or loss 0 0 0 0 0 0 0 0
INCOME
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other income 0 0 0 0 0 0 0 0
EXPENSES
Interest 0 0 0 0 0 0 0 0 Commissions 0 0 0 0 0 0 0 0 Fees 0 0 0 0 0 0 0 0 Rent 0 0 0 0 0 0 0 0 Other expenses 0 0 0 0 0 0 0 0
(27) Other income and operating expenses
Detail of other operating income:
June 30 December 31 Finished goods Merchandise $ 742,224 810,194 Consortia and temporary joint ventures 22,588 26,301 Other operating income 6,459 4,410 Other operating income 6,926 5,427 $ 778,197 846,332
Detail of other operating expenses:
June 30 December 31
Storage services $ 0 7 Loss on sale of portfolio 60 86 Fees 84,484 79,106 Taxes 194,210 169,793 Rent 99,508 92,824 Contributions and memberships 88,191 81,296 Operation 3,579 2,209 Compliance 448 427
(Continued)
109
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
June 30 December 31
Power failure 219 280 Group life 388 478 Fire 2,171 2,080 Earthquake 180 128 Pilferage 991 990 Vehicles 48 429 Personal accident 785 568 Other insurance 8,833 8,100 Maintenance and repairs 58,346 53,988 Office adaptation 18,146 23,164 Payment unrecovered claims - Operating risk 0 17
Amortization
Remodeling 2,507 3,205 Studies and projects 824 62 Computer software 39,053 46,185 Improvements to properties taken on lease 9,427 8,836
Software leased out 3 3
Other amortizations 50,501 51,506
Janitorial and surveillance services 36,587 35,838 Temporary services 21,209 35,350 Advertising and publicity 67,039 65,021 Public relations 1,196 2,369 Readjustment in real value unit (UVR) 4,797 813
Public utilities 95,096 94,323 Electronic data processing 19,036 26,901 Travel expenses 15,793 15,522 Transportation 57,057 54,121 Stationary and office supplies 24,742 24,596 Consortia and temporary joint ventures 3,041 3,223 Operating risk 1,190 1,757 Finished goods 343,356 381,808 Merchandise 5,142 5,537 Livestock sale cost 9 16 Other expenses
Building management 5,911 7,289 Reimbursements Grupo Aval 8,606 6,707 Outsourcing - special services 43,250 29,411 Mass incentive 10,322 9,470 Security elements 1,303 1,766 Software service and development 10,262 10,467 Databases 6,869 8,290 Outsourcing – payment centers 7,576 6,866 Cash custody and storage 776 637 Credit card rewards 11,996 5,347 Publicity, Sena apprentices, file custody, operational inspection, highway police, 5,652 6,207 subcontracts Support (SENA) 1,434 1,302
Adjustment for conversion of financial statements (*) 0 15,420
Liquidation Credivesa contract earnings 15,600 14,598
Allowance for uncovered pension claims 34 3,009
Others of lesser amount 71,296 90,293 $ 1,559,079 1,590,041
(*) Reclassified to the exchange account at June 30, 2014 for presentation purposes.
(Continued)
110
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(28) Allowance for other assets, net
Detail of expensed allowances for other assets:
June 30 December 31
Cash $ 6,132 1,254 Investments 29 354 Operational leasing operations (net) 83 150 Salable, foreclosed and returned assets (1) 11,889 11,102 Property and equipment (1) 2,741 2,294 Other assets 454 2,608 Others 1,057 1,235 $ 22,385 18,997
(1) Does not include movement by real-sector companies to equate with the Single Accounts Plan for the financial system. However, these
operations are considered in the notes on allowances and cash flows.
(29) Non-operating income and expenses
Detail of non-operating income:
June 30 December 31 Profit from sale of: Foreclosed assets $ 1,959 2,756 Property and equipment (1) 32,945 13,364 Other assets 0 18 34,904 16,138
Own property rental 2,101 2,898
Recoveries: Assets written off 31,591 30,300 Recovery of allowances for property and equipment 19 430 Recovery of allowances for salable, foreclosed & returned assets and those not used in 3,382 3,644 the corporate business Recovery of investment allowances 257 374 Recovery of other allowances 15,241 31,725 Recovery of allowances for other assets 1,364 1,487 Returns 915 1,067 Recovery on insurance claims 3,755 4,480 Other recoveries (2) 81,135 38,676 137,659 112,183 Other non-operating income Income from foreclosed and returned assets 183 164 Consortia and temporary joint ventures 695 1,067 Amortization investment cost shortfall compared to book value 0 58,511 Recovery allowance disassembly Industrias Lehner 12,441 0 Franchise incentives 1,955 298 Creditor balances declared abandoned 5,717 15,088 Income from previous periods 1,445 3,169 Recovery expenses consortia and third-party portfolios 4,177 0 Others 13,190 12,133 39,803 90,430 $ 214,467 221,649
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111
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(1) Includes $9,983 in profit at December 31, 2013 from the sale of buildings belong to the parent company. (2) Includes $168 at December 31, 2013 from equating for BAC Credomatic.
Detail of non-operating expenses:
June 30 December 31 Loss on sale of foreclosed assets $ 147 205 Loss on sale of property and equipment 13,554 4,663 Loss on damages or claims – operational risk 17,252 15,310 Amortization assets delivered on loan without charge 151 151 Fines, penalties and litigation 9,944 8,284 Interest on fines and penalties –operational risk 633 282 Expenses on foreclosed and returned assets 2,205 1,926 Loss on loan recovery 45 237 Non-operating expenses – consortia or temporary joint ventures 101 338 Amortization surplus investment cost over book value 854 9,398 Operational risk 67 39 Publication and advertisements 49 15 Acknowledgement to customers 609 595 Rent – Proprietors 14,965 14,438 Discounts 258 1,741 Recognition to clients 0 861 Conditioned discount in sales 928 1,636 Administrative and corporate support 800 2,705 Acknowledgement to clients 609 595 Taxes assumed 316 1,486 Administrative counterclaim 0 3,226 Residual from commission or rent 0 2,098 Monetary correction 236 640 Warehouse certificate 0 994 Others 14,936 22,175 $ 78,659 94,037
Net balance of non-controlling interest:
Non-controlling interest, net $ 226,484 264,018
Deferred tax
The following temporary differences were responsible for movement in the deferred tax account during the six months ended June 30, 2014 and December 31, 2013:
June 30 December 31 More (less) amortization of deferred tax charges $ (1,360) 9,337
Employee indemnity and reserve for retirement pensions 665 (1,256)
Industry and commerce tax allowance (495) (24)
Difference between fiscal and book income from reappraisal of investments, (44,341) 22,157 forwards, swaps, futures and options Other allowances 18,715 (32,675)
Tax losses and surplus presumptive income to be amortized 904 (2,118)
Fixed assets (2,084) (5,907)
$ (27,996) (10,486)
The books show a recovery of $1,380 in deferred tax liabilities from previous periods at June 30, 2014. This is why Account 5405- Income Tax was not affected and explains the difference compared to the book entries.
(Continued)
112
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
(30) Balance Sheet Closings
The Bank and its national subordinates are required to balance their books semi-annually. Subordinates outside the country do so annually.
(31) Contingencies
Banco de Bogotá S.A.
Legal action against the Bank
Administrative and legal proceedings pending against the Bank at June 30, 2014 and December 31, 2013 were handled according to the instructions outlined in External Circular 066/ 2001, as amended by External Circular 002/ 2003, both issued by the Colombian Superintendency of Finance. The respective claims were valued based on the opinions of the attorneys in charge and their analysis of the cases.
Labor cases
The claims in labor suits pending at June 30, 2014 and December 31, 2013 came to $11,513 y $10,852, in that order. There were $3,591 and $2,798 in respective allowances constituted to cover probable contingencies. Historically speaking, most claims of this type have been resolved in favor of the Bank.
Civil cases
An assessment of the civil court cases pending at June 30, 2014 and December 31, 2013 showed $203,911 and $208,229 in claims (mostly for contingencies inherited from MEGABANCO, with $74,676 covered by FOGAFÍN under an agreement entered into on June 21, 2006 between the Bank and FOGAFIN to assume contingent liabilities). There were $1,802 and $3,081 in respective allowances on the books to cover probable contingencies.
Two civil cases, one filled by Grupo Empresarial Viva Limitada and Carmen Dora Mariño de Medina and another by Secondo Isidoro Medina Patiño, as part of criminal action charging evidentiary falsehood involving a public document and others, are currently being handled by the Second Deputy Prosecutor assigned to the Bogota Appellate Court and involve claims for $ 80,000 in damages. A request for procedural invalidity was resolved unfavorably, and the prosecution ordered preclusion (estoppel) of the investigation. The plaintiff appealed. The appellate court agreed and the investigation continues. This contingency is considered remote, since the Twelfth Deputy Prosecutor in Pasto issued a resolution on March 6, 2010 declaring the statute of limitations on criminal action brought with respect to the complaint filed by Isidoro Medina Patiño, alleging forgery of private documents concerning promissory notes in favor of Bancoop, had expired. Moreover, the plaintiff and the other debtors entered into a settlement agreement with the creditor (third-party portfolio – Megabanco assets in trust) on July 28, 2008 in which they acknowledged the existence of their commitments to Bancoop, their status as delinquent debtors and presented a payment proposal that was accepted by the creditor. The property placed in trust by Isidoro Medina and his wife Dora Mariño de Medina was not foreclosed and the settlement agreement was accepted by the court handling the executory proceedings against the debtors. In addition, neither Megabanco nor Banco de Bogotá attended the signing of public document no. 2492 in 2001, nor were
(Continued)
113
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
they required to do so, because there is no personnel succession between the fiduciary, FIDUBANCOOP, which was present when the document was signed, and Banco de Bogota, which absorbed Megabanco.
Action for revocation brought by Cooperadores (in liquidation) against Megabanco S.A. (now Banco de Bogotá S.A.) for $12,000 in damages is being heard, in the first instance, by the Civil Division of the Sixth Circuit Court in Cali and a judgment is pending. The risk is regarded as eventual, but this contingency is covered by FOGAFIN, so no allowances have been made. Cooperadores is seeking contractual revocation of the real estate foreclosure agreements entered into with BANCOOP and Coopdesarrollo concerning 100 landed properties and shares in COOPSERFUN.
The contingency derived from the class action suit filed by the group known as Rafael María Leaño and others seeking $23,427 in equity compensation for the former associates of CUPOCRÉDITO, owing to damages suffered due to the decline in the value of their investment, is in the trial phase and is being heard in the first instance. A decision is pending on an objection to the expert opinion, which was raised by the lawyer for the Bank. The case has been at a standstill since November 19, 2009 with the judicial order calling for evidence as part of the objection process in February 2012 requiring an expert to testify. In addition to the contingency being covered by FOGAFIN, the risk is regarded as remote, because the action has prescribed and there are no grounds for the alleged liability. Furthermore, MEGABANCO S.A. is a third party foreign to the situation being claimed.
Administrative cases and others
The tax-related administrative and legal claims brought by national and local tax authorities establish penalties in some cases for irregularities allegedly committed by the Bank in exercise of its activity as a national and regional tax collection agent. In others, higher taxes are determined for the Bank in its capacity as a taxpayer. These claims totaled $4,496 and $5,235 at June 30, 2014 and December 31, 2013; the respective allowances came to $665 and $665.
Almacenes Generales de Depósito Almaviva S.A.
Labor cases.
The labor claims on record at June 30, 2014 and December 31, 2013 came to $1,107 y $1,439. There were $750 and $815 in respective allowances for probable contingencies. Historically, claims of this type have been decided in favor of Almacenadora.
Administrative and other cases
The claims in administrative and judicial proceedings at June 30, 2014 and December 31, 2013 came to $1,579 y $1,238 for each period, with $1,517 and $1,238 in respective allowances having been made.
Fiduciaria Bogotá S.A.
Labor cases
The cases against Fiduciaria Bogotá S.A. at June 30, 2014 and December 31, 2013 represented $6,500 and $1,400 in respective claims, with no allowances on the books.
(Continued)
114
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Civil cases
The claims being sought in civil cases against the company at June 30, 2014 and December 31, 2013 came to $1,152 and $2,022, with no allowances on the books.
Administrative and other cases
The claims being sought in administrative and other cases at June 30, 2014 and December 31, 2013 came to $16,255 and $13,206, respectively, with no allowances on the books.
Corporación Financiera Colombiana S.A.
Labor cases
The company reported $3,066 and $3,411 in labor claims at June 30, 2014 and December 31, 2013, with $862 and $747 in respective allowances entered on the books.
Civil cases
There were $193,413 and $181,109 in civil court claims at June 30, 2014 and December 31, 2013, with $1,205 and $1,107 in respective allowances entered on the books.
Administrative and other cases
The claims in administrative cases and other proceedings at June 30, 2014 and December 31, 2013 totaled $40,484 and $42,396 in that order, with $4,503 and $1,032 in respective allowances entered on the books.
Among others, the most significant contingencies in the group pertain to the subordinates listed below
Fiduciaria Corficolombiana S.A.:
PLAINTIFF CAUSE OF ACTION ASSESSMENT PROVISION TYPE Special Unit for Investigations into To establish if those under investigation are Corruption –Intersectoral Deputy liable fiscally for an alleged property-related Comptroller No. 2, Office of the Case loss to the city of Villavicencio, owing to an $1,664 $ 1,664 Comptroller General of Colombia – closed investment of municipal resources in the 181 – Guarantees Coocafe – Visemsa Trust. Attorney: Juan Carlos Bernal
Special Unit for Investigations into To establish if those under investigation are liable fiscally for an alleged property-related Corruption –Intersectoral Deputy Case loss to the Department of Meta, owing to an $ 2,724 $ 2,724 Comptroller No. 2, Office of the closed Comptroller General of Colombia - investment of the department’s royalties in 203 – Without guarantees the Coocafe – Visemsa Trust. Attorney: Juan Carlos Bernal
(Continued)
115
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Hoteles Estelar S.A.:
A suit on behalf of the public’s interest was filed by Mr. Gari Norberto Garcia on August 16, 2001 against the Nation – Colombian Ministry of Defense – Navy; the Nation –General Maritime Administration (DIMAR); the Nation - Ministry of the Environment; the Nation - Ministry of Transportation; the Nation - Office of the Superintendent of Notaries and Civil Registration – the Cartagena Office of Public Instruments; the Cartagena de Indias Tourism and Cultural District and Compañía Hotelera de Cartagena de Indias S.A., a firm in which Hoteles Estelar S.A. holds 50.2% interest, Fondo de Garantias de Instituciones Financieras, FOGAFIN, 39.5%, Grupo Bavaria, 6.7% and Hilton International, 2.5%, among others.
The suit claimed the collective rights and interests concerning administrative ethics, enjoyment of public space, enjoyment of a healthy environment and the existence of an ecological balance, and the rational management and use of natural resources belonging to the State had been violated and sought a ruling that would order the State to return 37,018 m2 of land claimed from the sea and the illegal contribution of five lots turned over by the city of Cartagena.
The matter was decided, in the first instance, through a ruling that denied the claims of the suit. However, the plaintiff appealed. Subsection C of the Third Section of the Administrative Litigation Division of the Honorable State Council, returned a ruling in the second instance, on March 15, 2013, whereby (i) it was decided no collective right susceptible to protection through action brought on behalf of the public’s interest was violated with respect to the land assigned by the city of Cartagena in the establishment of Compañia Hotelera de Cartagena de Indias S.A.; and (ii) the appealed ruling was overturned. Instead, the collective rights and interests concerning the defense of property for public use and public property were declared to have been violated. Consequently, the land considered to be for public use was ordered to be returned and, in the event there are buildings on that property, Compañia Hotelera de Cartagena S.A. was ordered, as a compensatory measure, to acquire land to build a park, within a period not to exceed three (3) years. The park in question would be intended for the use and enjoyment of the entire community and would be managed by the District of Cartagena. The cost of its maintenance during the first thirty (30) years would be borne by Compañia Hotelera de Cartagena S.A..
Compañía Hotelera de Cartagena de Indias S.A., filed a petition asking for the ruling to be declared null and void. It was denied.
Within the legal opportunity and through its attorney, the Company issued requests for clarification and addition. They were decided by the State Council through a supplementary ruling on May 8, 2013 in which two points in the operative part of the ruling were clarified, a new point was added, and the remaining requests for clarification and addition were denied. The ruling was applicable as of May 30, 2013.
Subsequently, the case file was sent by the State Council to the Bolivar Administrative Appeals Court, which issued a decision on December 18, 2013 in which the judge recused himself from the case.
Considering the decision violated the fundamental right to due process and the constitutional principles of good faith and legitimate confidence, Compañía Hotelera de Cartagena de Indias S.A. granted power of attorney to Mr. Jaime Cordoba Trivino to defend its interest through a writ of protection filed on August 5, 2013 with the Fourth Section of the State Council. It is currently pending a decision in the first instance.
(Continued)
116
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
This contingency is considered probable, as per Article 52, Decree 2649/ 1993. However, given the difficulties in interpreting the ruling, which make it unfeasible to determine the scope of the established sentences, it has not been possible to quantify them and, as a result, no allowance was made at closing on June 30, 2014 and December 31, 2013.
The Verification Committee was established on June 20, 2014 to confirm the orders contained in the aforementioned decision have been carried out. The next hearing will take place in September 2014.
Sociedad Administradora de Fondos de Pensiones y Cesantías Porvenir S.A.
Labor cases
The labor suits pending against Porvenir at June 30, 2014 and December 31, 2013 represented $1,584 and $1,291 in claims, with $742 and $700 in respective allowances entered on the books.
Civil and other cases
There were two thousand five hundred twenty-three (2,523) ongoing court cases against the company at June 30, 2014. They involve social security and employee benefits (survivor pensions, disability and old age pensions, return of balances, invalid affiliation, transfer to other systems, etc.). One thousand five hundred eighty-four (1,584) of these cases pertain to litigation covered by a social security insurance policy. Accordingly, no allowances have been made in those instances, since the amounts would be covered by the insurance company in the event of an adverse ruling, except in cases where the insurer has raised an objection. The allowance for the latter is calculated at $5,710. The other 939 cases are not covered by the policy, and the claims resulting from an eventual sentence would have to be paid by the company. There is an allowance of $8,660 to cover that possibility, for a total of $14,370.
The respective contingency came to $14,549 y $13,730 at June 30, 2014 and December 31, 2013.
There is also a $117 fine levied by the Colombian Superintendent of Corporations, due to a sanction against the voluntary pensions funds known as Horizonte Premium, Plus and Horizonte for foreign exchange operations. It is fully provisioned (100%).
Casa de Bolsa S.A.
Cases against the brokerage firm
There was only one case (a class action suit) pending against the firm at June 30, 2014 and December 31, 2013. The claims were appraised on the basis of the opinion of the lawyer in charge and his analysis of the case.
Class action suit brought by Juan José Arbeláez and others
There was a class action suit pending against Valores del Popular S.A. (now Casa de Bolsa S.A.) at June 30, 2014 for $ 2,000 in damages. As it is likely to succeed, there has been no provisioning. The case file number is 200900494-00 and the suit is being heard by the Civil Division of the Sixteenth Circuit Court of Bogotá.
(Continued)
117
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
After the insurer, as the impleaded party, was notified and replied to the petition, the case went to the judge’s chambers on August 8, 2011 to consider the motion for reconsideration and supplementary appeal filed by the plaintiff (petitioners). This analysis resulted in the prior motions for limitation and dismissal proposed by the impleaded party (the insurer) being declared invalid, and the requested appeal was granted.
With the petitions of both parties and the ruling of the court having been examined, the appellate chamber confirmed the decision of the trial judge, thereby denying the previous motions to dismiss and ordering the appellant to pay the costs. The conciliation hearing was scheduled for November 23, 2012. However, it could not be held on that date, due to a strike by judicial employees of the court, and was rescheduled for June 12, 2013 at 9:00 a.m. The conciliation hearing was held on that date, at the indicated time; however, the judge declared the conciliation stage as unsuccessful, since several of the plaintiffs were absent. As a result, the case will move forward in the court.
Through an order issued on December 10 and notified on December 12 through insertion in the records and posting at the court, the Sixteenth Civil Court of Bogota initiated the evidentiary phase of the class action suit against Casa de Bolsa S.A. and set the dates and times for the various proceedings.
Banco de Bogotá Panamá
There were two civil cases pending against the Bank at June 30, 2014. They are described below.
Yin Siu Siu and Compañía los Delfines, S.A. vs. Assicurazioni Generali, S.P.A., STI Servicios, S.A. Banco de Bogotá Panamá S.A. and Héctor Francisco Perea Montenegro.
This is an ordinary major claim suit being heard by the Third Civil Circuit Court of the First Judicial Circuit of Panama. The plaintiffs are asking the court to " to sentence jointly and severally Banco de Bogotá (sic), STI Services S.A. and Assicurazioni Generallo, S.P.A. (strictly liable) and Mr. Hector Francisco Perea (liable based on breach of duty) to pay damages and other costs incurred due to a traffic accident that occurred on March 17, 2012, as noted in Resolution No.975 issued by the Department of Transportation (sic) in the city of Arraiján on June 21, 2012. These damages and costs come to twenty-two thousand one hundred forty-one US dollars (USD22,141). The evidentiary period was conducted as the final procedural act to date. It included the presentation of evidence, rebuttal and respective objections to evidence and rebuttal of evidence. With the proceedings at this stage, the parties are waiting for the court to rule on admissibility of the evidence produced and submitted and the objections. It is important to note that the plaintiffs offered no evidence or rebuttal at this stage, apart from what is contained in the complaint filed to commence the suit. A probable contingency was set by the plaintiff at USD22,141.
Régulo Antonio Sucre Castillo vs. Banco de Bogotá Panamá S.A.
In an ordinary major claim suit heard by the First Civil Circuit Court of the First Judicial Circuit of Panama, “Banco de Bogota (sic) is ordered to pay Mr. REGULO ANTONIO CASTILLO SUCRE the total amount of the deposits that existed in Fixed-term Bank Account No.05-002690-1 at August 25, 1986 ". State of the Process: The special agent of the plaintiff (the plaintiff’s lawyer) filed a motion for collection of professional fees against his client for non-payment thereof. This incident has not been resolved to date and is the last procedural step on record.
(Continued)
118
BANCO DE BOGOTÁ Y SUBORDINADAS
Notes to the Consolidated Financial Statements
Probable contingency: The total potential liability, including the principal sentence and costs is set at eight hundred and eight thousand seven hundred eighty-four dollars and four cents (USD808,784.04). In our opinion, although payment of "damages and interest" is sought, the fact that they are not broken down renders that claim invalid.
Leasing Bogotá S.A. – Panamá
Management is not aware of any litigation or claim that is likely to have a significantly adverse impact on the organization’s business, its consolidated financial situation, or its operating earnings.
(32) Risk Management
The risk management process used by the Bank and its subordinates adheres to the guidelines designed by the senior management of each institution. These, in turn, are consistent with the general rules on management and administration approved by the Board of Directors.
The Bank and its subordinates have the necessary committees to manage credit, market and liquidity risks and operational, legal, money laundering and terrorist financing risks, all of which are amply disclosed in the individual reports on each institution.
(33) Statutory Controls
The Bank complied with all requirements for mandatory cash reserves, own positions, capital adequacy ratios and mandatory investments during the six months ended June 30, 2014 and December 31, 2013.
(34) Subsequent Events
(a) Procedures are underway to request approval from the respective authorities to merge the operations of Banco Reformador de Guatemala and Banco de América Central S.A.
(b) Steps are now underway to request approval from the respective authorities to merge the operations of BBVA Panama and BAC International Bank, Inc. From the purchase date and until the merger is complete, the acquired company will operate as Banco BAC de Panama S.A.
(Continued)