(Convenience translation into English from the Original previously issued in Portuguese)
Consolidated Financial Statements under IFRS for the years ended December 31, 2012
and 2011 and the Independent Auditor’s Report
Banco Pine S.A.
PricewaterhouseCoopers Independent Auditors
Independent auditor’s report
To the Board of Directors and Shareholders
Banco Pine S.A.
We have audited the accompanying consolidated financial statements of Banco Pine S.A. and its subsidiaries (the
“Tnstitution”), which comprise the consolidated balance sheet as at December 31, 2012 and the consolidated statements of
income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant
accounting policies and other explanatory information.
Management’s responsibility for
the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB),
and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our
audit in accordance with Brazilian and International Standards on Auditing. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the Institution’s preparation and fair presentation of the
consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Institution’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluatingthe overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Banco Pine S.A. and its subsidiaries as at December 31, 2012, and their financial performance and their cash flows
for the year then ended, in accordance with the International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB).
Sáo Paulo, February 26, 2013
PricewaterhouseCoopers
Auditores Independentes
CRC 28P000160/0-5
Edison Arisa Pereira
Contador CRC 18P127241/ 0-0
PINE
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2012 AND AT DECEMBER 31, 2011
(In thousands of reais)
31/12/2011
ASSETS
Financial assets 9,700,135 10,616,040
Cash and cash equivalents 5 432,076 345,740
Financial assets at fair value 4,268,898 5,119,069
Financial assets held for trading 3,776,085 4,541,995
Debt instruments 7 3,438,752 4,242,983
Derivative financial instruments 8 337,333 299,012
Available-for-sale financial assets 492,813 555,754
Debt instruments 7 418,623 530,031
Equity instruments 7 74,190 25,723
Hedging derivatives 8 – 21,320
Financial assets at amortized cost 4,999,161 5,151,231
Loans and receivables 4,999,161 5,151,231
Loans and advances to financial institutions 6 100,299 270,313
Loans and advances to customers 9 4,898,862 4,880,918
Other assets 506,802 438,957
Non-current assets held for sale 10 176,279 58,017
Other 330,523 380,940
Deposits in guarantee 11 199,189 182,909
Recoverable income tax 36,478 49,823
Other assets 12 94,856 148,208
Deferred tax assets 72,021 88,238
Deferred income tax and social contribution 39.c.d 72,021 88,238
Fixed assets 13 28,968 7,471
Property and equipment in use 28,968 7,471
Intangible assets 14 2,053 2,475
Intangible assets 2,053 2,475
TOTAL ASSETS 10,309,979 11,153,181
PINE
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2012 AND AT DECEMBER 31, 2011
(In thousands of reais)
31/12/2011
LIABILITIES
Financial liabilities 8,894,589 9,956,870
Financial liabilities held for trading 100,393 99,468
Derivative financial instruments 8 100,393 99,468
Financial liabilities at amortized cost 8,794,196 9,843,472
Deposits from financial institutions 15 121,000 105,885
Deposits from customers 16 3,595,159 3,688,280
Funds obtained in the open market 17 1,832,661 3,190,416
Securities issued abroad 18 891,632 341,217
Borrowings and onlendings 19 1,985,137 2,101,157
Sale or transfer of financial assets 20 334 65,395
Subordinated debt 21 312,202 297,731
Other financial liabilities 22 56,071 53,391
Hedging derivatives 8 – 13,930
Provisions 23 93,382 107,115
Provisions for contingent liabilities, commitments and other provisions 50,791 77,541
Provisions for tax risks 42,591 29,574
Tax liabilities 24 10,409 5,568
Other liabilities 62,237 57,714
Correspondent banks 37 6,366
Other liabilities 25 62,200 51,348
TOTAL LIABILITIES 9,060,617 10,127,267
EQUITY 26 1,249,362 1,025,914
Capital – Local 842,654 723,551
Capital – Foreign 93,029 72,494
Capital reserves 11,685 14,032
Revenue reserves 285,136 190,590
Dividends proposed 18,559 26,726
(+) Treasury shares (12,750) –
Carrying value adjustments 27 11,049 (1,479)
TOTAL LIABILITIES AND EQUITY 10,309,979 11,153,181
The accompanying notes are an integral part of these consolidated financial statements.
FA PINE
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
Interest and similar income 28 740,487 754,557
Interest and similar expense 29 (517,816) (576,610)
NET INTEREST INCOME 222,671 177,947
Gains from (losses for) financial assets and lial 248,835 252,974
Financial assets and liabilities held for trading 30.a) 238,959 268,790
Derivatives 50,794 129,459
Debt instruments 188,165 141,423
Equity instruments – (2,092)
Exchange variations (net) 9,876 (15,816)
Fee and commission income 31 95,453 45,578
Fee and commission expense 32 (7,072) (5,526)
TOTAL INCOME 559,887 470,973
Administrative expenses (218,704) (259,456)
Personnel expenses 35 (124,365) (132,535)
Tax expenses (16,996) (36,408)
Other administrative expenses 36 (77,343) (90,513)
Other operating income (expenses) 34 (65,162) 134,910
Depreciation and amortization (4,590) (3,998)
Provisions (net) 37 24,769 (20,516)
Impairment of financial assets 9.f) (54,583) (59,943)
Loans and receivables (52,660) (59,943)
Debt instruments (1,923) –
Result from sales of non-recurring assets 38 15,651 3,647
OPERATING INCOME BEFORE TAXES 257,268 265,617
Income tax and social contribution 39 (62,722) (81,426)
CONSOLIDATED NET INCOME 194,546 184,191
Attributable to controlling stockholders 194,546 184,191
EARNINGS PER SHARE (R$)
Basic and diluted earnings per share (R$)
Common shares 1.83 2.19
Preferred shares 1.83 2.19
Net income attributable/diluted (R$)
Common shares 106,724 99,606
Preferred shares 89,826 84,585
Weighted average of shares issued – basic
Common shares 58,444,889 45,443,872
Preferred shares 49,191,371 38,590,394
The accompanying notes are an integral part of the consolidated financial statements.
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
Consolidated net income for the period 194,546
Available-for-sale financial assets 27 8,493
Fair value variation 14,163
Income tax (5,660)
Other (10)
Cash flow hedges 27 4,035
Fair value variation 6,726
Income tax (2,691)
Comprehensive net income 207,074
AN
184,191
(1,551)
(2,813)
1,149
113
6,096
10,499
(4,403)
188,736
The accompanying notes are an integral part of these consolidated financial statements.
FA PINE
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In thousands of reais)
Capital Capital OE MCU ES IRE
Capital __ increase reserve reserve shares additional dividend _____earmings ______adjustments|
At December 31, 2010 422,606 – 223,342 225,685 (10,319) – – (6,024) 855,290
Consolidated net income for the period – – – – – – 184,191 – 184,191
Other comprehensive income – – – – – – – 4,545 4,545
Available-for-sale financial assets – – – – – – – (2,813) (2,813)
Cash flow hedges – – – – – – – 10,499 10,499
Deferred income tax – – – – – – – (3,254) (3,254)
Other comprehensive income – – – – – – – 113 113
Other changes in equity – 373,439 (209,310) (35,095) 10,319 26,726 (184,191) – (18,112)
Capital increase (Note 26) – 373,439 (200,000) (129,690) – – – – 43,749
Premium on sale of treasury shares – – 713 – – – – – 713
Sale of treasury shares – – – – 700 – – – 700
Cancellation of treasury shares – – (9,619) – 9,619 – – – –
Reclassification of reserves – – (404) 404 – – – – –
Legal reserve – – – 8,076 – – (8,076) – –
Statutory reserve – – – 86,115 – – (86,115) – –
Approval/payment of proposed additional dividend – – – – – 26,726 (26,726) – –
Dividends (Note 26) – – – – – – (63,274) – (63,274)
At December 31, 2012 422,606 373,439 14,032 190,590 – 26,726 – (1,479) 1,025,914
At December 31, 2011 422,606 373,439 14,032 190,590 – 26,726 – (1,479) 1,025,914
Consolidated net income for the period – – – – – – 194,546 – 194,546
Other comprehensive income – – – – – – – 12,528 12,528
Available-for-sale financial assets – – – – – – – 14,163 14,163
Cash flow hedges – – – – – – – 6,726 6,726
Deferred income tax – – – – – – – (8,351) (8,351)
Other comprehensive income (10) (10)
Other changes in equity 513,077 (873,439) (2,347) 94,546 (12,750) (8,167) (194,546) – 16,374
Capital increase (Note 26) 513,077 (373,439) – – – – – – 139,638
Acquisition of treasury shares – – – – (12,750) – – – (12,750)
Recognition of share-based payment (Resolution. n? 3.921
(Note 44.a) – – (2,347) – – – – – (2,347)
Legal reserve – – – 9,373 – – (9,373) – –
Statutory reserve – – – 85,173 – – (87,177) – –
Approval/payment of proposed additional dividend – – – – – (8,167) (39,755) – (47,922)
Dividends (Note 26) – – – – – (60,245) > (60,245)
At December 31, 2012 935,683 – 11,685 285,136 (12,750) 18,559 – 11,049 1,249,362
PINE
BANCO PINE S.A. E CONTROLADAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (INDIRECT METHOD) FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In thousands of reais)
3 2012 2011
OPERATING ACTIVITIES
Adjusted net income 293,258 317,323
Consolidated net income for the period 194,546 184,191
Effect of changes in exchange rates on cash and cash equivalents 10,378 13,148
Depreciation and amortization 4,590 3,998
Deferred taxes 25,541 43,170
Impairment of loans and receivables 54,583 59,943
Provisions for/Reversal of contingencies (net) 2,927 12,782
Net gains on sale of tangible assets, non-operating assets and investments 693 91
Changes in operating assets and liabilities (207,249) (143,015)
(Increase) Decrease in loans and advances to financial institutions 170,014 (223,246)
(Increase) Decrease in debt instruments 867,172 (1,241,919)
(Increase) Decrease in equity instruments 12,528 9,127
(Increase) Decrease in derivatives(net) (30,006) (94,431)
(Increase) Decrease in loans and advances to customers (72,527) (59,568)
(Increase) Decrease in deferred income tax and social contribution (9,324) 3,256
(Increase) Decrease in non-current assets held for sale (118,262) (22,613)
(Increase) Decrease in recoverable income tax 13,345 (46,176)
(Increase) Decrease in deposits in guarantee (16,280) (26,304)
(Increase) Decrease in other assets 53,193 (84,258)
Increase (Decrease) in securities issued abroad 550,415 222,212
Increase (Decrease) in share loans – (398)
Increase (Decrease) in deposits (78,006) 75,062
Increase (Decrease) in funds obtained in the open market (1,357,755) 831,576
Increase (Decrease) in borrowings and onlendings (116,020) 725,223
Increase (Decrease) in correspondent banks (6,329) (4,284)
Increase (Decrease) in sale or transfer of financial assets (65,061) (114,853)
Increase (Decrease) in other financial liabilities 2,680 50,865
Increase (Decrease) in provisions (16,660) (137,441)
Increase (Decrease) in tax liabilities 4,841 (64)
Increase (Decrease) in other liabilities 4,793 (4,781)
Net cash provided by (used in) operating activities 86,009 174,308
INVESTING ACTIVITIES
Acquisition of property and equipment in use (25,553) (1,143)
Acquisition of intangible assets (646) (871)
Net cash provided by (used in) investing activities (26,199) (1,514)
FINANCING ACTIVITIES
Capital increase 139,638 43,749
Increase (Decrease) in subordinated debt 14,471 85,352
Premium on subscription of shares (2,347) –
Acquisition/Sale of treasury shares (net) (12,750) 1,413
Dividends/Interest on own capital (102,108) (63,009)
Net cash used in financing acti 36,904 67,505
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 96,714 240,299
Cash and cash equivalents at the beginning of the period 5 345,740 118,589
Effect of changes in exchange rates on cash and cash equivalents (10,378) (13,148)
Cash and cash equivalents at the end of the period 5 432,076 345,740
Additional information
Interest received 537,953 528,838
Interest paid 294,588 193,789
The accompanying notes are an integral part of these consolidated financial statements,
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
1. OPERATIONS
Banco Pine S.A. (the “Institution” or “Banco Pine”) is a corporation headquartered at Avenida das Nacóes Unidas, 8501, 29th floor – Pinheiros, Sáo Paulo, SP,
listed on the Sáo Paulo Stock, Commodities and Futures Exchange (BM8FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros), and authorized to
operate commercial, credit and financing and foreign exchange portfolios.
The Institution’s operations are conducted in the context of a group of institutions which act jointly, and certain transactions involve the co-participation or
intermediation of a subsidiary institution, member of the Pine Financial Group. The benefits from the intercompany services and the costs for the operating and
administrative structures are absorbed, either jointly or individually, by the institutions as is most practicable and reasonable in the circumstances.
2. FINANCIAL INFORMATION PRESENTATION
a. Statement of Compliance
The Institution’s consolidated financial information was prepared in accordance with International Financial Reporting Standards (IFRS) as from January 1, 2009,
the initial adoption date.
The parent company financial information was prepared locally in accordance with accounting practices adopted in Brazil, applicable to institutions authorized to
operate by the Brazilian Central Bank (BACEN), with Brazilian corporation law and the regulations established by the Brazilian Securities Commission (CVM),
hereinafter referred to as “BRGAAP”, and is presented separately from these statements. Note 47 presents the reconciliation of equity to net income.
The financial information under IFRS includes the standards issued by the International Accounting Standards Board (IASB) and the interpretations issued by the
International Financial Reporting Interpretation Committee (IFRIC) and their respective antecedent bodies, in compliance with all rules, whose application was
mandatory without exceptions.
In compliance with Resolution 505/06, of the CVM, the Consolidated financial statements as December 31, 2012, was authorized for issue on February 04, 2013
by the Institution’s Board of Directors, among other matters.
b. Significant standards, amendments and interpretations issued by lASB but not yet in force
The following new standards, amendments and interpretations were issued by the lASB, but are not in force for the year ended December 31, 2012. The early
adoption of these standards, although encouraged by IASB, has not yet been authorized, in Brazil, by the Brazilian Accounting Pronouncements Committee
(CPC) and CVM:
+ AS 1 – “Presentation of financial statements”. The main change is the segregation of “other components”, now presented in the Statements of Comprehensive
Income in two separate groups: those that will be recognized in the Income Statement and those that will be maintained in equity. These changes will be applied
as from January 1*, 2013. The main impact of its adoption will be the presentation and disclosure requirements.A63
+ 1AS 19 – “Employee Benefits” was changed in June 2011. The main changes will be as follows: (i) elimination of the corridor approach (ii) recognition of
actuarial gains and losses in other comprehensive income as they occur, (iii) immediate recognition of past service costs in income, and (iv) replacement of the
interest cost and expected return on plan assets with a net interest amount, calculated by applying the discount rate to the net defined benefit asset (liability). The
full impact of these changes on the Group is under analysis by management. The standard is applicable from January 1, 2013.
+ 1AS 32 – “Financial Instruments” This change was issued to clarify the offsetting requirements for financial instruments in the Balance Sheet. The change is
applicable for years beginning January 1, 2014. The possible impacts arising from its adoption are under analysis.
+ IFRS 7 – “Financial Instruments” In December 2011, a new change to this pronouncement was issued requiring additional disclosures on the offsetting
process. These requirements are applicable for the years beginning on or after January 1, 2013. The possible impacts arising from the adoption of these
changes are under analysis.
+ |FRS 9 – “Financial instruments” addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in
November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires
financial assets to be classified into either of two categories: those measured at fair value and those measured at amortized cost. The assets are classified at the
time of initial recognition and their classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow
characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair
value option is used for financial liabilities, the portion of the change in fair value resulting from an entity’s own credit risk is recorded in other comprehensive
income rather than in the Income Statement, unless this creates an accounting mismatch. The full impact of IFRS 9 is under analysis by the Group. The standard
is applicable as from January 1, 2015.
IFRS 10 – “Consolidated Financial Statements” builds on existing principles by identifying the concept of control as the determining factor in whether an entity
should be included in the parent company’s consolidated financial statements. The standard provides additional guidance to assist in the determination of control.
The full impact of IFRS 10 is under analysis by the Group. The standard is applicable as from January 1, 2013.
+ IFRS 11 Joint Arrangements”, published in May 2011. The standard provides a more realistic reflection of joint arrangements by focusing on the rights and
obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise
where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and
expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional
consolidation of joint ventures is no longer permitted. The standard will be applicable as from January 1, 2013.
+ IFRS 12 – “Disclosure of Interests in Other Entities” addresses the disclosure requirements for all forms of interest in other entities, including joint arrangements,
associates, special purpose vehicles and other off Balance Sheet vehicles. The full impact of IFRS 12 is under analysis by the Group. The standard is applicable
as from January 1, 2013.
+ |FRS 13 – “Fair Value Measurement” issued in May 2011 seeks to improve consistency and reduce complexity by providing a precise definition of fair value and
a single source of fair value measurement and disclosure requirements for use across the IFRSs. The requirements, which are largely aligned between IFRSs
and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by
other standards within IFRSs or US GAAP. The full impact of IFRS 13 is under analysis by the Group. The standard is applicable as from January 1, 2013.
Banco Pine considers that the adoption of the standards and interpretations described above will have no significant effect on consolidated financial statements
as a whole, except for IFRS 9 and IAS 19, and is analyzing the impacts resulting from the adoption of these standards. There are no other IFRS standards or
IFRIC interpretations that are not yet effective and which could have a significant impact on the Institution.
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands o! reais, except share data)
3. Significant Accounting Practices
The accounting practices detailed below were applied for the reporting period covered by this financial information and have been applied on a consistent basis
by Institution’s companies.
The standards and amendments to existing standards have been published and are mandatory for the accounting periods beginning on or after January 1, 2011.
a. Basis of consolidation
The consolidated financial information includes the operations of Banco Pine S.A., including its Grand Cayman and Pine Securities branches, its subsidiaries,
and those of the special purpose entity, as well as the investment funds in which the Institution is the sole shareholder.
Transactions, balances and unrealized gains on transactions between group companies are eliminated. The unrealized losses are also eliminated unless the
transaction provides evidence of a loss (impairment) of the transferred asset. The accounting policies of subsidiaries are changed where necessary to ensure
consistency with the policies adopted by the group.
We present below the entities included in the consolidated financial information:
EA
Business Industry 2012 2
Overseas Branches
Grand Cayman Agency Foreign Branches 100.000 100.0000
Pine Securities USA LLC (5) overseas subsidiary 100.0000 100.0000
Subsidiaries
Pine Investimentos Distribuidora de Títulos e Valores Mobiliários Ltda. Securities dealer 99.998 99.998
Pine Comercializadora de Energia Elétrica Ltda. * Consulting 100.0000 100.0000
Pine Corretora de Seguros Ltda. (” Insurance broker 99.9998 99.9998
Pine Assessoria e Consultoria Ltda. Consulting 9.9998 99.998
Pine Assessoria em Comercializacáo de Energia ‘? Consulting 10.0000 –
Pine Planejamento e Servicos Ltda ‘” Consulting 99.9900
Special Purpose Entity (SPE)
Pine Crédito Privado Fundo de Investimento em Direitos Creditórios Financeiros
Investment funds – sole shareholder
Pine High Yield Fundo de Investimento Multimercado Crédito Privado
Pine CM Fundo de Investimento Multimercado Crédito Privado
Pine RB Capital Fundo de Investimento Multimercado Credito Privado
Fundo de Investimento Pine Referenciado DI Crédito Privado
Receivables investment fund (FIDC)
Multimarket investment fund
Multimarket investment fund
Multimarket investment fund
Fundo de investimento DI
“7 Pine Assessoria e Consultoria Ltda. and Pine Corretora de Seguros Ltda. were constituted on December 12, 2011
On February 16, 2012, approval was given to transform the corporation into a limited liability partnership and its name was changed from BP Empreendimentos e Participagóes S.A. to Pine Comercializadora de Energia Elétrica
Ltda.
6 Pine Assessoria em Comercializagáo de Energia Ltda. was constituted on April 24, 2012. Capital is R$10, comprising 10,000 quotas of RS1 each, full subscribed and paid up in Brazilian currency and distributed as follows
between the partners: Pine Comercializadora de Energia Elétrica – 90% and the Institution – 10%
Y Pine Planejamento e Servigos Ltda. was constituted on June 26, 2012. Capital is R$10, comprising 10,000 quotas of R$1 each, fully subscribed and paid up in Brazilian currency and distributed as follows between the partners:
0.01% – Pine Comercializadora de Energia Elétrica, 99.99% – the Institution.
1 in October, 2012, Pine Securities USA LLC Limited Liability’s Company Agreement was established.
Subsidiaries
Companies over which the Institution exercises control, defined as the ability to govern their financial and operating policies in order to obtain the benefits of their
activities, are classified as subsidiaries. The Institution’s subsidiaries are fully consolidated from the effective date of control up to the date that the control
ceases. The financial statements of subsidiaries are consolidated in the Institution’s financial statements. As a result, all intercompany balances and transactions
are eliminated upon consolidation.
Special purpose entity – Pine Crédito Privado Fundo de Investimento em Direitos Creditórios Financeiros (Pine Crédito Privado FIDC).
Since the control over the receivables assigned to the fund remains with the Bank (receipt, transfer and collection), and the Institution holds the subordinated
shares of the Fund, management decided to consolidate the FIDC, as provided for by CVM Official Circular 01/2007, and SIC12 – Consolidation – Special
Purpose Entities.
In accordance with Article 5 of CVM Instruction 408/04, we present below the information on Pine Crédito Privado, considered in preparing the consolidated
financial information:
i) Name, nature, purpose and activities of the FIDC.
Pine Crédito Privado Fundo de Investimento em Direitos Creditórios Financeiros (FIDC), administered by Citibank Distribuidora de Títulos e Valores Mobiliários
S/A. was formed as a private condominium entity on December 7, 2010. The start date of the distribution was March 28, 2011. The Fund offered 207,000 senior
shares with a unit value of R$1. The closing date of the distribution was April 6, 2011. The Fund will terminate its activities within 180 days of the redemption in
full of the senior shares outstanding (54 months after the distribution date of the Fund).
The purpose of the Fund is to increase shareholder value, through the acquisition of financial segment receivables, comprising exclusively corporate loans
(working capital) originated and assigned by Pine, that meet the eligibility criteria, subject to all indices of composition and diversification of the portfolio
established in the Regulation. The Fund also invests ¡ts resources in other assets.
ii) Participation in the equity and results of the FIDC
In accordance with Article 24, section XV, of CVM Instruction 356, amended by CVM Instruction 393, and Chapter 21 of the Fund Regulation, the ratio of the
value of senior shares to the Fund’s net assets shall be 69%. Accordingly, 31% of the Fund’s net assets must consist of subordinated shares. This ratio will be
calculated daily and shall be made accessible monthly to the Fund’s shareholders.
iii) The nature of the Institution’s involvement with the FIDC and type of loss exposure, if any, arising from this involvement.
Verification of the compliance of the credit rights with the securitization conditions is, according to the transfer agreement, the sole responsibility of the Assignor
(Banco Pine), without prejudice to the right of the assignee (the Fund), directly or through third parties, to perform this verification also.
Non-compliance with any obligation originating from the credit rights by the debtors and other assets of the Fund’s portfolio is allocated to the subordinated
shares up to the equivalent of their total value . Once this sum is exceeded, the default of receivables held by the Fund is allocated to the senior shares. The
subordinated shares do not have a profitability target, but should benefit from any excess returns generated by the receivables portfolio.
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
In the event that the percentage of subordinated shares falls below 31% of the net assets of the Fund, the Bank will have 5 days to arrange the restoration of this
minimum ratio, through the subscription of new subordinated shares, and if this does not occur, the Administrator should declare an Evaluation Event as
established in the Regulation. In the event that the subordinated shares come to represent more than 31% of the net assets of the Fund, the administrator may
make a partial repurchase of subordinated shares in an amount necessary to re-balance this factor.
iv) The amount and nature of the receivables, liabilities, revenues and expenses between the company and the FIDC, assets transferred by the company and
rights to use assets of the FIDC.
No loans were assigned to the FIDC as at December 31, 2012 (R$ 303,651 at December 31, 2011).
Investment funds – Sole shareholder
The investment funds in which Banco Pine is the sole shareholder were consolidated, since the Institution holds the majority of the risks and rewards of their
operations.
b. Basis of valuation
The financial information has been prepared under the historical cost convention, except for the financial instruments held for trading, available-for-sale financial
instruments, derivative financial instruments and financial instruments recognized and designated as hedged items in transactions which meet the qualifying
criteria for fair value hedge accounting.
c. Use of estimates and judgments
The preparation of financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect how the
accounting practices are applied to the amounts of the assets, liabilities, revenues and expenses presented. Actual results could differ from those estimates.
These estimates and assumptions are reviewed on a periodic basis. Reviews related to the accounting estimates are recognized in the period in which estimates
are reviewed and in any affected future periods.
(1) Fair value measurement of certain financial instruments
The fair value of financial instruments with no active market or whose prices are not available is calculated using available valuation techniques. In these cases,
fair values are estimated using observed data in similar instruments or through templates. When observable market data are not available, they are estimated
based on assumptions deemed appropriate. When pricing techniques are used, these are validated and periodically reviewed in order to maintain their reliability.
In some situations it is necessary to include credit risk in the measurement of fair value. For this, we use statistical techniques (correlation and volatility) that
necessarily requires management’s judgment.
The Bank determines that investments “available for sale” are impaired when there is a significant and extended decrease in the fair value of the asset below its
cost.
The determination of what is considered “significant” or “prolonged” requires judgment. To reach this judgment the Bank evaluates among other factors, the price
volatility of the instruments. Additionally, the objective evidence of the impairment may be the deterioration in the financial health of the company, the
performance of the industry and of the sector, the variation of technology; or the operational and financial cash flow.
(ii) Impairment of loans and advance payments
A review is performed of the necessity for impairment of loans and the advance payments portfolio monthly. The Bank uses judgments to verify the existence of
evidence of impairment. This evidence include observable data indicating that there were adverse changes in the payment status of debtors classified in the
same category, beyond the economic conditions that may affect the book value of assets. When verified the need to recognize the impairment loss, it should be
recognized in the financial statements
Management performs judgments based on historical losses for assets with similar credit risk and objective evidence of impairment.
The methodology and assumptions used for impairment calculations are constantly reviewed.
(iii) Deferred taxes
Deferred tax assets are recognized due to temporary differences that are likely and for which the Bank and its subsidiaries will have taxable income in the future
in relation to the deferred tax assets that can be used.
Tax credits and tax loss carryforwards are recognized when it is probable that there will be sufficient future taxable income to use these credits.
(iv) Contingent liabilities
The Bank periodically reviews its contingencies. These contingencies are evaluated based on Management’s best estimates, considering the opinion of legal
counsel when there ¡is a probability that financial resources are required to settle the obligation and the amount of the obligations can be reasonably estimated.
Contingencies classified as Probable Losses are recognized in the Balance Sheet under Provisions.
The values of the contingencies are quantified using templates and criteria which allow their adequate measurement, despite uncertainty deadlines and values,
as detailed in Note 3.ac and Note 23
d. Accrual basis
The Institution prepares its financial information on the accrual basis of accounting.
e. Capital management
The regulatory capital management is based on an analysis of BACEN capital ratios.
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
f. Foreign currency
Functional currency and reporting currency
Each company in the Group establishes its own functional currency in accordance with IAS 21 -” The Effects of Changes in Foreign Exchange Rates”. The items
included in the financial statements of each Group entity are measured using the currency of the primary economic environment in which the entity operates
(functional currency).
The financial information is presented in reais (R$), which is the Institution’s functional currency and that of its overseas branches.
Transactions and balances in foreign currency
Foreign currency transactions are those originally denominated in or settled in a foreign currency. These transactions are translated into the functional currency
using the exchange rates effective on the transaction date or the valuation date, upon which the operations are remeasured.
Exchange gains and losses related to cash and cash equivalents, loans and advances, other assets, securities issued abroad, deposits from clients, borrowings
and onlendings, correspondent banks and subordinated debt are presented in the Income Statement as income (expense) interest.
Translation from functional currency to reporting currency for overseas units
Considering that none of the units of the Group operate with a functional currency in a hyperinflationary economy, the results and financial position of Group
entities whose functional currency is different from that of their reporting currency are translated as follows:
. Assets and liabilities are translated based on the closing exchange rate on the Balance Sheet date;
. Revenues and expenses are translated at the average rates for the determination period.
Upon consolidation, exchange differences arising from the translation of net investments in foreign entities are recorded in “Other comprehensive income”.
In the case of a sale of all or part of an overseas unit, exchange differences are recognized in income as part of the gain (loss) on sale.
9. Interest income (expense)
Interest income and expenses are recognized in the Income Statement using the effective interest rate method. The effective interest rate is the rate that exactly
discounts estimated future payments and receipts over the expected life of the financial asset or liability (or, when appropriate, a shorter period) to the net
carrying amount of the financial asset or liability. The effective interest rate is established at the time of the initial recognition of the financial asset or liability,
considering all the contractual terms, but does not consider future credit losses.
The interest arising from the application of the effective rate are recorded under “Interest and similar income” in the Income Statement.
The calculation of the effective interest rate includes all fees and commissions, transaction costs, discounts and premiums which are paid or received and that
are an integral part of the effective interest rate. The transaction costs include the incremental costs which are directly attributable to the acquisition or issue of a
financial asset or liability.
Interest income and expenses presented in the Income Statement include the following:
+ Interest from financial assets and liabilities recorded at amortized cost, based on the effective interest rate;
+ Interest from available-for-sale investment assets, based on the effective interest rate;
+ The effective portion of qualified and designated hedge derivatives in a cash flow-hedge relationship, at the same time at which the hedged item is recorded in
interest income/expenses;
+ Changes in the fair value of qualified derivatives (including hedge ineffectiveness) and of the respective hedged items, when the interest rate risk is the risk
protected risk.
Interest income and expenses from all financial assets and liabilities held for trading are deemed to be the result of the Institution’s trading operations and are
presented in an aggregate form together with all the changes in the fair value of assets and liabilities held for trading in “Income from financial assets and
liabilities held for trading”.
h. Cash and cash equivalents
Cash and cash equivalents comprise cash in local and foreign currencies, short-term financial investments and time deposits, with maturities at the original
investment date equal to or less than 90 days and which present an immaterial risk of change in fair value. These are used by the Institution to manage its short-
term commitments.
i. Fees and commissions
Income and expenses related to fees and commissions that are an integral part of the effective interest rate of a financial asset or liability are included in the
calculation of the effective interest rate, and are recorded in “Fee and commission income”.
Other revenues and expenses in terms of fees and commissions are recognized as and when the related services are provided in the Income Statement in “Fee
and commission income”.
Other expenses for fees and commissions mainly comprise amounts which are recognized in results as the services are received.
j. Results of financial instruments held for trading
Income from financial instruments held for trading consists of the net gains and losses related to assets and liabilities held for trading, and includes all realized
and unrealized changes in fair value, as well as interest, dividends and foreign exchange differences on these financial instruments, and are recorded in “Debt
instruments” and “Derivatives” in the Income Statement.
k. Results of other financial instruments recorded at fair value
Income from other financial instruments recorded at fair value refers to non-qualified derivatives maintained for risk management purposes and financial assets
and liabilities recorded at fair value, and includes all realized and unrealized changes in fair value, as well as interest, dividends and exchange differences on
these financial instruments.
10
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
I. Dividends
Dividend income is recognized when the right to receive payment is established. Dividends are booked as a component of the Income from financial instruments
held for trading or Income from other financial instruments recorded at fair value in accordance with the classification of the equity instrument, and are recorded in
“Equity instruments”.
m. Income tax
Current income tax is the expectation of payment of taxes on the taxable income for the year, using current rates as of the Balance Sheet date, and any
adjustment to tax payable in relation to prior years.
Deferred income tax arises on the temporary differences between the accounting balances of assets and liabilities and the fiscal balances for tax computation
purposes. Tax credits related to tax loss carryfowards should only be recognized when there is an expectation that they will be realized with the generation of
estimated taxable profits. Tax credits are measured at the rates that are expected to be applied to the temporary differences when these are reversed, based on
current laws as of the Balance Sheet date.
Deferred tax assets are recognized to the extent that it is likely that future taxable profits will be generated enabling the credits to be utilized, and should be
revised at each Balance Sheet date, being decreased as and when it is no longer likely that these tax benefits will be utilized.
Income tax expense includes taxes on current and deferred income, and is recognized in the Income Statement, recorded in “Income tax and social contribution
except in those cases which refer to items that are recognized directly in equity.
n. Financial instruments (asset and liability)
i Definitions
“Financial instrument” is any contract that gives rise to a financial asset of the Institution and a financial liability or equity instrument of another entity.
“Equity instrument” means any contract representing a residual interest in the assets of an issuer after deducting all of its liabilities.
“Financial derivative” means the instrument whose value changes in response to the change in an observable market variable (e.g., interest rate, foreign
exchange rate, financial instrument price or market index).
Investments in subsidiaries, jointly-controlled entities and associates are not treated as financial instruments for accounting purposes.
ii. Recognition
Initially, the Institution recognizes loans and advances, deposits, securities issued and subordinated liabilities at the date on which they are originated. All other
financial assets and liabilities, including those designated at fair value through profit or loss, are initially recognized on the trade date at which the Institution
becomes party to the instrument’s contractual provisions.
Financial assets and liabilities are initially recognized at their fair value, plus (for instruments not subsequently valued at fair value through profit or loss) the
transaction costs that are directly attributable to their acquisition or issue.
iii. Classification
Financial instruments are classified in one of the categories presented in the accounting practices 3(0), (p), (q) and (r).
iv. Derecognition
Financial assets are written off when the contractual rights over their cash flows expire, or when the rights to receive the contractual cash flows are transferred by
means of a transaction in which all the risks and benefits of ownership of the financial asset are substantially transferred. Any interest over transferred financial
assets created or retained by the Institution, is recognized as a separate asset or liability.
The Institution writes-off financial liabilities when their contractual obligations are extinguished, canceled or expired.
The Institution carries out transactions whereby recognized financial assets are transferred, but all or the majority of the risks and rewards are retained by the
Institution and are not written-off in the Balance Sheet. Transfers of assets with retention of all or the majority of the risks and rewards include, for instance, loan
assignments with co-obligation and sales of securities with repurchase agreements.
In the case of transactions where the Institution does not retain or substantially transfer all the risks and rewards of ownership of a financial asset, the asset is
written off when the Institution ceases to exercise control over it. In the case of transfers where the Institution retains control over the asset, ¡it continues to
recognize the asset in proportion to its involvement, which is determined by the duration for which it is exposed to the changes in the value of the transferred
asset.
In certain transactions the Institution maintains the obligation to provide services in connection with the financial assets transferred. In this case the assets
transferred are written off in full provided that they meet the write-off criteria. The rights and obligations retained in transfer transactions are recognized
separately as assets and liabilities as is appropriate.
The Institution writes-off loans and advances to customers and credit institutions when these are overdue for more than 360 days.
v. Grouping of financial assets and liabilities
Financial assets and liabilities may be grouped and the net amount may be presented in the Balance Sheet when, and only when, the Institution has the legal
right to offset the amounts, and has the intention to settle them at their net amount or to simultaneously realize the assets and settle the liabilities.
vi. Regular acquisition of financial assets
Regular acquisitions of financial assets are recognized on the transaction date. Assets are reversed when the rights to receive cash flows expire or when the
Institution has substantially transferred all risks and rewards of ownership.
vii. Measurement at amortized cost
The amortized cost of a financial asset or liability is the amount at which the financial asset or liability is valued when it is initially recognized, less amortizations
of the principal, plus or minus the cumulative amortization utilizing the effective interest rate method of any differences between the initial amount recognized and
the redemption amount at maturity, subtracting any reductions for impairment or impossibility of collection.
Income from loans and advances overdue for more than 60 days, irrespective of their rating, is recognized as revenue when received. Revenue from
assignments of loans, with or without recourse, is recognized on the date on which the assignments are made.
1
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
The “effective interest rate” is the discount rate which corresponds exactly to the initial amount of the financial instrument with respect to estimated total cash
flows, of all types, over its remaining useful life.
vil
. Measurement at fair value
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction on the
Balance Sheet date.
When available, the Institution determines the fair value of financial instruments based on quoted prices in the active market for that instrument. A market is
recognized as active if the quoted prices are readily and regularly available and represent market transactions that are authentic and regular and which take
place fairly on an arm’s length basis.
All derivatives are recognized in the Balance Sheet at fair value from the transaction date. When the fair value is positive, derivatives are recognized as assets;
otherwise, if it is negative, derivatives are recognized as liabilities. The changes in the fair value of derivatives since the transaction date are recognized under
“Gains (losses) on financial assets and liabilities” in the Consolidated Income Statement.
ix. Valuation techniques
a) Financial instruments measured at fair value
The financial instruments that are measured at fair value after the initial recognition should be grouped in Levels 1 to 3 based on the degree to which fair value is
observable.
Level 1 fair value measurements are obtained based on prices quoted (unadjusted) in active markets for identical assets and liabilities.
Level 2 fair value measurements are obtained based on variables other than the quoted prices included in Level 1, which are directly observable for an asset or a
liability (i.e., as prices) or indirectly observable (i.e., based on prices).
Level 3 fair value measurements are obtained based on valuation techniques that include variables for an asset or a liability, but which are not based on
observable market inputs
The table below provides a summary of the fair values of financial assets and liabilities for the period and year ended, respectively, December 31, 2012 and
2011, classified based on the various measurement methods adopted by the Institution for fair value determination purposes:
EN]
E ME TJ
Financial assets held for trading 3,080,766 695,319 3,776,085 3,961,815 580,180 4,541,995
Available-for-sale financial assets 285,663 207,150 492,813 540,736 15,018 555,754
Financial liabilities held for trading 46,004 54,389 100,393 5,963 93,505 99,468
Hedging derivatives (Assets) – – – – 21,820 21,320
Hedging derivatives (Liabilities) – – – – 13,930 13,930
Financial instruments at fair value, determined based on public price quotations in active markets (Level 1), include public debt securities, private debt securities
and shares of publicly held companies.
When observable price quotations are not available, Management, based on own internal models, makes ¡ts best market price estimate. This model generally
uses observable market inputs as an important reference (Level 2). Various techniques are used to make these estimates, including the extrapolation of
observable market input and extrapolation techniques. The best evidence of the fair value of a financial instrument upon initial recognition is ¡ts transaction price,
unless the fair value of the instrument can be obtained based on other market transactions carried out with the same instrument or similar instruments or can be
measured by using a valuation technique where the variables used only include observable market input, mainly interest rates.
At December 31, 2012 and 2011, there were no transfers between levels 1 and 2. The Institution has no financial instruments designated as Level 3.
b) Financial instruments not measured at fair value
According to IFRS 7 and CPC 40 – Financial Instruments -Disclosures, we present a comparison between book value of financial assets and liabilities measured
and their corresponding fair values at period end
2012
EAT AT Book value
Financial assets
Cash and cash equivalents ‘ 432,076 432,076 345,740 345,740
Debt instruments ‘ 3,857,375 3,857,375 4,773,014 4,773,014
Equity instruments % 74,190 74,190 25,723 25,723
Derivative financial instruments ‘ 337,333 337,333 320,332 320,332
Loans and advances to financial institutions % 100,299 100,299 270,313 270,313
Loans and advances to customers (” 4,906,402 4,898,862 4,844,094 4,880,918
Total financial assets 9,707,675 9,700,135 10,579,216 10,616,040
Financial liabilities
Derivative financial instruments” 100,393 100,393 113,398 113,398
Deposits from financial institutions ‘”” 121,000 121,000 105,885 105,885
Deposits from customers ‘”” 3,395,225 3,595,159 3,726,158 3,688,280
Funds obtained in the open market” 1,832,661 1,832,661 3,190,416 3,190,416
Securities issued abroad ‘”” 908,488 891,632 318,562 341,217
Borrowings and onlendings ‘” 1,972,096 1,985,137 2,095,596 2,101,157
Sale or transfer of financial assets ‘”” 334 334 65,395 65,395
Other financial liabilities 56,071 56,071 53,391 53,391
Subordinated debt ‘” 332,168 312,202 299,317 297,731
Total financial liabilities 8,718,436 8,894,589 9,968,118 9,956,870
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
We present below the methods and assumptions used to estimate fair value:
i) Fair value of cash and cash equivalents, debt instruments, equity instruments, derivatives financial instruments and loans and advances to financial institutions
is substantially close to book value.
li) Loans and advances to customers are measured net of the provision for impairment. The fair value of these operations represents the discounted value of the
future cash flows expected to be received. The expected cash flows are discounted at current market rates to determine the fair value.
iii) The estimated fair value of demand deposits from financial institutions, funds obtained in the open market, sale or transfer of financial assets and other
financial liabilities reflect their book value.
iv) The estimated fair value of deposits from customers and other borrowings with no quotation in an active market are based on discounted cash flows using
interest rates for new debts with similar maturities. The fair value of deposits without specified maturity, which includes deposits with no interest rate, is
substantially close to their book value.
x. Purchase and sale commitments
Purchases (sales) of financial instruments based on a required resale (repurchase) agreement at a fixed price are recognized in the Consolidated Balance Sheet
as financing granted (received), based on the nature of the debtor (creditor), under the heading “Debt instruments”.
xi. Impairment identification and measurement
On each Balance Sheet date, the Institution makes an assessment as to whether there is objective evidence that the financial assets not recorded at fair value
through profit or loss are impaired. Financial assets are considered to be impaired when objective evidence shows that a loss occurred after the asset’s initial
recognition, and that this loss represents an impact on the asset’s future cash flows which can be reliably estimated.
The Institution considers evidence of impairment both for specific assets as well as at the collective level. All the financial assets that are individually significant
are assessed in order to detect specific losses. All the significant assets which the assessment fails to indicate as being specifically deteriorated are evaluated
collectively to detect any impairment that has been incurred, but which has not yet been identified. Assets which are not individually significant are assessed
collectively in order to detect impairment, by grouping together financial assets (recorded at amortized cost) which exhibit similar risk characteristics.
Objective evidence that the financial assets (including equity instruments) show impairment may include default by the borrower, restructuring of financing or
advances by the Institution on terms that it would not accept in another situation, indications that the borrower or issuer will become bankrupt, the absence of an
active market for a security, or other observable data in relation to a series of assets, such as, adverse changes in the payment history of borrowers or issuers
with the Institution, or economic conditions that correlate with default with the Institution. In addition, for investments in equity instruments, a significant or
prolonged loss in its fair value to below the initial cost represents objective evidence of impairment.
Losses from the impairment of assets recorded at amortized cost are measured considering the risk classification, especially, all clients with a given risk
classification lower than or equal level “D”. Under the terms of National Monetary Council’s (NMC) 2.682 Resolution, as well as for the breach of obligations
overdue by 90 days. The losses are recognized in results in the “Losses on impairment of financial assets” account. Interest from assets continues to be
recognized as long as there is an expectation that it will be received. When a subsequent event causes a reduction in the value of a previously recognized
impairment loss, it is reversed against the period’s result.
Losses for impairment on available for sale financial assets are recognized, transferring the difference between the amortized acquisition cost and the current fair
value, from equity to the result for the period. When a subsequent event reduces the value of a previously recognized loss for impairment in available-for-sale
financial assets, it is reversed against the result for the period. However, any subsequent recoveries in the fair value of a financial instrument available for sale,
which was previously adjusted for a loss due to impairment, are recognized directly in equity. Changes in the provisions for impairment attributable to the time
value are reflected as a component of interest income.
o. Financial assets and liabil
ies held for trading
Assets and liabilities held for trading are initially recognized at fair value, with the transaction costs recorded directly in results for the period. All changes in fair
value are recognized as a portion of the net revenue from trading in the Income Statement for the period. Assets and liabilities held for trading are not reclassified
after their initial recognition.
Derivatives, except for those designated as hedging instruments (hedge accounting), are classified into this sub-category.
p. Available for sale
Available-for-sale financial assets are non-derivatives which are classified in this category when they are initially recognized or which are not classified in other
financial asset categories.
Interest income is recognized in results using the effective interest rate method. Dividend revenue is recognized in results when the Institution acquires the right
to receive the dividends. Asset or liability foreign exchange rate variations on investments in financial assets classified as available for sale are recognized in
results.
Other changes in the fair value are recognized directly in equity until the investment is sold or a loss on account of impairment is confirmed, at which time the
balance of the reserve in equity is transferred to results.
4. Held to maturity
Held-to-maturity financial assets are assets with fixed or determinable payments and fixed maturity that the Institution has the intention and the ability to hold to
maturity.
Financial assets held to maturity are recorded at amortized cost using the effective interest rate method. Any sale or reclassification of a significant amount of
investments held to maturity which are not close to their maturity will result in the reclassification of all “held-to-maturity” financial assets to “available-for-sale”,
and will prevent the Institution from classifying the financial assets as “held-to-maturity” in the current fiscal year as well as for the following two years.
At both December 31, 2012 and 2011, there were no operations classified as held to maturity.
13
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
r. Loans and receivables
Loan operations and advances are non-derivative financial assets with fixed or determinable payments, which are not quoted in an active market, and which the
Institution has no intention of selling either immediately or in the short term.
Loan operations and advances are initially measured at fair value plus the transaction costs that are directly attributable to the operation, and are subsequently
valued at amortized cost using the effective interest rate method.
s. Derivatives held for risk management
Derivatives held for risk management include all asset and liability derivatives that are classified as held for trading. These derivatives are measured at fair
value.
All hedge ineffectiveness is recognized in results, recorded in “Other operating income (expenses)”.
Cash flow hedge
When a derivative is designated as a hedge of changes in cash flows attributable to a specific risk associated with a recognized asset or liability that may affect
the Income Statement, the effective proportion of changes in fair value of the derivative is recognized immediately in equity. The amount recognized in equity is
subtracted and transferred to results in the same period as the hedged item. Any ineffective portion of changes in fair value of the derivative is recognized
immediately in results. At December 31, 2012, there were no operations classified as a cash flow hedge.
If the derivative matures or is sold, canceled or realized, it no longer complies with the criteria of cash flow hedge accounting, or if its designation is revoked, it
will cease to be recorded as a fair value hedge and the amount recognized in equity remains recorded up until such time as the anticipated transaction has an
impact on the result. If it is no longer probable that the anticipated transaction will occur, the cash flow hedge ceases to be recorded and the balance recorded in
equity is subtracted and transferred immediately to the result for the period.
t. Non-current assets held for sale
Non-current assets held for sale include the carrying amount of properties or other non-current assets received by the consolidated entities for purposes of full or
partial settlement of the payment obligations of their debtors through auctions which generally take place within one year. Non-current assets held for sale are
generally measured at the lower of the fair value less the cost of sales and the carrying amount on the date they were classified under this category. Non-current
assets held for sale are not depreciated, provided that they remain classified in this category.
u. Tangible assets
Property and equipment items correspond to those assets and rights related to physical assets used for the maintenance of activities or exercised for this
purpose, including those resulting from operations that transfer the risks, rewards and control of the entity’s assets.
i. Recognition and measurement
Tangible assets are valued at cost less cumulative depreciation and losses on account of impairment.
The cost includes the expenses directly attributable to the asset’s acquisition. The costs of tangible assets constructed by the company include the cost of
materials and direct labor, any other directly attributable costs necessary in order to ensure that the asset is operational for its intended function, the removal
costs of the items and the recovery of the place where the assets are located. Software acquired that is integrated into the operation of a tangible asset is
recorded as an integral part of that tangible asset.
When the main components of a tangible asset have different useful lives, they are recorded as items that are separate from the tangible asset.
ii. Depreciation
Depreciation is recognized under the straight line method based on the estimated useful life of each portion of a tangible asset.
The estimated useful lives of tangible assets for current and prior years are as follows:
Vehicles 5 years
Software systems 5 years
Aircraft 10 years
Other items 10 years
v. Intangible assets
Intangible assets correspond to the rights acquired to non-physical assets which are used for maintaining the Institution’s business or exercised for this purpose.
Intangible assets with identifiable useful lives are generally amortized on the straight-line method over the estimated period of economic benefit.
i. Use of software licenses
According to the IFRS (IAS 38), expenses for software acquired and developed are classified in three distinct stages: 1. Project’s Preliminary Stage (expense); 2.
Project’s Implementation Stage (capitalization) and 3. Project’s Post-Implementation Stage (expense):
Software acquired by the Institution is recorded at cost, with deductions made for cumulative amortization and for losses on account of impairment.
The expense for developing software in-house is recognized as an asset when the Institution is able to demonstrate its intention and its ability to complete
development, measuring its cost and software utilization in a way that gives rise to future economic benefits. The capitalized costs of software developed in-
house include all costs that are directly attributable to development and are amortized over the software’s estimated useful life. Software developed in-house is
recorded at its capitalized cost, with deductions made for cumulative amortization and for losses on account of impairment.
Subsequent software expenses are only capitalized when they increase the future economic benefits of the specific asset to which they relate. All other expenses
are recorded directly in the result as and when they are incurred.
ii. Amortization
Amortization is recognized in the results using the straight-line method over the software’s estimated useful life, beginning on the date at which it becomes
The estimated useful lives of intangible assets for current and prior years are as follows:
Software 5 years
14
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
iii. Other intangible assets
Other intangible assets with a useful life that are acquired by the Institution are recorded at cost, with deductions made for cumulative amortization and for losses
on account of impairment.
Amortizations are recognized in results using the straight-line method over the estimated useful life of the assets.
X. Other assets
This includes the balance of all advances and any other assets which are not considered financial assets.
y. Other liabilities
Other obligations include the balance of all expenses recorded as a provision and deferred revenue from advances as well as the amount of any other liabilities
not regarded as financial liabilities.
z. Impairment of non-financial assets
According to IFRS (IAS 36), the impairment of non-financial assets is based on the recoverable amount of an asset or of a cash generating unit which is the
greater of the net sales value of an asset and its value in use. In general terms, impairment for IFRS purposes is tested based on the “recoverable amount”,
which is the greater of the fair value less the selling cost or the value in use which comprises the cash flow that is expected from the continued use of the asset,
discounted to present value.
aa. Deposits, securities issued, subordinated debt and funds obtained in the open market
Deposits, securities issued and subordinated debt are the sources used by the Institution to fund its operations.
Deposits, securities issued and subordinated debt are initially measured at fair value plus the incremental transaction costs that are directly attributable to their
issue, and are subsequently valued at their amortized cost utilizing the effective interest rate method, except in those cases where the Institution designated the
liabilities at fair value through profit or loss.
When the Institution sells a financial asset and simultaneously signs a repurchase agreement in relation to the asset (or a similar asset) at a fixed price or at a
future date (“sale with repurchase agreement” or “share loan”), the contract is recorded as a deposit received under a repurchase agreement and the underlying
asset continues to be recognized in the Institution’s financial statements.
ab. Provisions
A provision is recorded if, as a result of a past event, the Institution has a present obligation, which can be reliably estimated, and where it is likely that an outflow
of resources will be required to settle the obligation.
ac. Contingent assets and liabilities and legal obligations
Contingent assets and liabilities and legal obligations (tax and social security) are recognized and disclosed in accordance with IAS 37, as follows:
Contingent assets: are not recorded in the financial statements, except when there is evidence which assures a high degree of confidence that they will be
realized, generally through a final and unappealable court decision.
Provisions: The probability of any unfavorable judgments or results in relation to these lawsuits is determined, as well as the likely interval until the loss
becomes definite and when an outflow of resources to settle this loss is deemed probable. The establishment of the provision needed for these contingencies is
made after analyzing each lawsuit and based on the opinions of the Institution’s legal advisors. Contingency provisions are recorded for those lawsuits where it is
considered that the likelihood of loss is probable. The provisions required for these lawsuits may be subject to changes in the future on account of the changes
regarding the progress of each case;
Contingent liabilities: this is a possible obligation resulting from past events and which will be only confirmed upon the occurrence or not of one or more
uncertain future events beyond the Institution’s control or an unrecognized present obligation since an outflow of funds is not probable. Such contingencies are
reported if deemed as possible by the legal counsel.
Legal obligations (tax and social security): these comprise administrative proceedings or lawsuits related to tax and social security obligations, the legality or
constitutionality of which is being contested, whose amounts, regardless of the related probability of success, are recorded at the full amount in dispute and
adjusted in accordance with the legislation in force.
ad. Financial guarantees
Financial guarantees are defined as contracts by means of which an entity undertakes to make specific payments on behalf of a third party when said third-party
fails to do so, regardless of the various legal forms that these may take, such as guarantees, irrevocable documentary credits issued or confirmed by the entity,
eto.
The Institution recognizes the present value of fees, commissions and interest receivable from the financial guarantees provided under “Other financial liabilities”.
Financial guarantees, regardless of the guarantor, the instrument and other circumstances, are periodically revised in order to determine the credit risk to which
they are exposed and, depending upon the case, in order to consider whether or not it is necessary to record a provision. The credit risk is determined by
applying similar criteria to those established for quantifying losses as a result of the non-recovery of loans and advances valued at amortized cost.
The provisions recorded for these operations are recognized under the item “Reserves – Reserves for contingent liabilities, commitments and other provisions” in
the Consolidated Balance Sheet. No provisions were recorded for these operations at December 31, 2012 and 2011.
ae. Distribution of dividends and interest on own capital
The distribution of dividends and interest on own capital to the Institutions stockholders is recorded as a liability in the period-end financial statements, in
accordance with the bylaws. Any amount above the minimum required is only accrued on the date at which the dividend distribution is approved by the
stockholders.
The tax benefit of interest on own capital is recognized in the Income Statement.
15
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
af. Capital stock and reserves
Incremental costs directly attributable to the issue of capital instruments are deducted from the initial valuation of the respective capital instruments issued.
ag. Treasury shares
Preferred and common shares repurchased are recorded in Equity as Treasury Shares in treasury by the average purchase price.
The shares that are sold subsequently, for example, those sold to the beneficiaries of the Stock Options Plan, are recorded as a reduction of treasury stock,
measured at the average price of the shares held in treasury at that date.
The difference between the sale price and average price of treasury shares is recorded in a specific account in the shareholders’ equity. Cancellation of treasury
shares is recorded as a reduction in treasury shares account against reserves in equity, in the average price of treasury shares on the cancellation date.
ah. Earnings per Share
The Institution presents information in terms of basic and diluted earnings per share for its common and preferred shares, separated by class. Basic earnings per
share are calculated by dividing the profit or loss attributable to the shareholders of the Institution’s common and preferred shares by the weighted average
number of common and preferred shares in free float during the period. Diluted earnings are determined by adjusting the profit or loss attributable to holders of
common and preferred shares and the weighted average number of common and preferred shares in free float for the effects of all common and preferred shares
with potential dilution.
As at December 31, 2012, the Institution has no instruments with potential for dilution.
ai. Consolidated statement of cash flows
The terms used in the Consolidated Statement of Cash Flows have the following meanings:
Cash flows: inflows and outflows of cash and cash equivalents.
Operating activities: the main revenue-generating activities of financial institutions and other activities, other than financing or investing activities.
Investing activities: acquisition and sale of long-term receivables and tangible assets.
Financing activities: activities resulting in changes in the amount and composition of equity and liabilities not related to operating activities.
4. OPERATING SEGMENTS
Pursuant to IFRS 8, an operating segment is a component of an entity:
. that engages in activities which will generate revenues and incur expenses (including revenues and expenses related to transactions with other components
of the same entity).
. whose operating income (loss) is regularly reviewed by the person in charge of the entity for the operating decisions on the allocation of funds to the segment
and evaluation of its performance.
. about which optional financial information is made available.
The Institution operates in Brazil and abroad through the Cayman and Pine Securities branches with Brazilian customers and, therefore, is not geographically
segmented.
The Institution comprises the following reportable operating segments:
Corporate
The corporate segment has a wide range of products, including various modalities of loans and onlendings (working capital, BNDES onlendings and trade
finance, among others) in both local and foreign currency, financial and strategic advisory services, treasury products for customers and investments.
The Institution has a broad relationship network with companies in various sectors, such as sugar/ethanol, infrastructure, electric and renewable energy and civil
contraction, among others.
Retail
Banco Pine discontinued its paycheck-deductible loan granting activities at the end of 2007, substantially reducing the volume of its portfolio each quarter.
The Institution is still incurring expenses related to the paycheck-deductible loan business, and this will continue until the final maturity of the paycheck-deductible
loan operations assigned with co-obligation. The main expenses relate to pre-payment, provision for loan losses and loan protection insurance.
The Income Statement and other significant figures are as follows:
16
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
UE
E Lu Total
Interest and similar income 727,867 12,620 740,487
Interest and similar expense (514,710) (3,106) (517.816)
NET INTEREST INCOME 213,157 9,514 222,671
Gains from (losses for) financial assets and liabilities (net) 248,835 – 248,835
Financial assets and liabilities held for trading 238,959 – 238,959
Derivatives 50,794 – 50,794
Debt instruments 188,165 – 188,165
Exchange rate variations (net) 9,876 – 9,876
Fee and commission income 95,453 – 95,453
Fee and commission expense (4,681) (2,391) (7,072)
TOTAL INCOME 552,764 7,123 559,887
Administrative expenses (205,228) (13,476) (218,704)
Personnel expenses (115,982) (6,383) (124,365)
Tax expenses (16,996) – (16,996)
Other administrative expenses (72,250) (6,093) (77,343)
Other operating income (expenses) (65,230) 68 (65,162)
Depreciation and amortization (4,292) (298) (4,590)
Provisions (net) 25,000 (231) 24,769
Impairment of financial assets (net) (65,338) 10,755 (54,583)
Loans and receivables (63,415) 10,755 (52,660)
Debt instruments (1,923) (1,923)
Result from sales of non-recurring assets 15,651 – 15,651
OPERATING INCOME BEFORE TAXES 253,327 3,941 257,268
Income tax (62,128) (594) (60,718)
CONSOLIDATED NET INCOME FOR THE PERIOD 191,199 3,347 196,550
Other:
Total assets 10,175,377 134,602 10,311,983
Loans and advances to customers 4,864,111 34,751 4,898,862
Total liabilties 8,077,222 983,395 9,060,617
Deposilts from customers 3,595,159 – 3,595,159
EU
E 52) EJ
Interest and similar income 733,651 20,906 754,557
Interest and similar expense (572,673) (8,937) (576.610)
NET INTEREST INCOME 160,978 16,969 177,947
Gains from (losses for) financial assets and liabilities (net) 252,974 – 252,974
Financial assets and liabilities held for trading 268,790 – 268,790
Derivatives 129,459 – 129,459
Debt instruments 141,423 – 141,423
Equity instruments (2,092) – (2,092)
Exchange rate variations (net) (15,816) – (15,816)
Fee and commission income 45,578 – 45,578
Fee and commission expense (8,550) (1,976) (6,526)
TOTAL INCOME 455,980 14,993 470,973
Administrative expenses (241,379) (18,077) (259,456)
Personnel expenses (121,863) (10,672) (132,535)
Tax expenses (36,408) – (86,408)
Other administrative expenses (83,108) (7,405) (90,513)
Other operating income (expenses) 122,430 12,480 134,910
Depreciation and amortization (8,659) (839) (8,998)
Provisions (net) (13,033) (7,483) (20,516)
Impairment of financial assets (net) (46,861) (13,082) (59,943)
Loans and receivables (46.861) (13,082) (69,943)
Result from sales of non-recurring assets 3,647 – 3,647
OPERATING INCOME (LOSS) BEFORE TAXES 277,125 (11,508) 265,617
Income tax (84,267) 2.841 (81,426)
CONSOLIDATED NET INCOME (LOSS) FOR THE PERIOD 192,858 (8,667) 184,191
Other:
Total assets 11,023,599 129,582 11,153,181
Loans and advances to customers 4,783,450 97.468 4,880,918
Total liabilties 10,054,812 72,455 10,127,267
Deposilts from customers 3,688,280 – 3,688,280
5. CASH AND CASH EQUIVALENTS
2012 2011
Cash 127,788 114,016
Loans and advances to financial institutions ‘” 304,288 231,724
Total cash and cash equivalents 432,076 345,740
These are transactions with maturities at the original investment date equal to or less than 90 days.
17
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
6. LOANS AND ADVANCES TO FINANCIAL INSTITUTIONS
Loans and advances to financial institutions, at December 31, 2012 and 2011, were comprised as follows:
2012 En
Classificatios
Loans and receivables 100,299 270,313
Total 100,299 270,313
Type:
Investment in interbank deposits 100,299 270,313
Total 100,299 270,313
7. DEBT INSTRUMENTS AND EQUITY INSTRUMENTS
Debt instruments, at December 31, 2012 and 2011, were comprised as follows:
2012
At interest Y] At interest 0
Ea adjustment ESO adjustment
Classification:
Financial assets held for trading 3,438,752 3,404,143 34,609 4,242,983 4,227,841 15,142
Available-for-sale financial assets 492,813 481,129 11,684 555,754 558,232 (2,478)
Total 3,931,565 3,885,272 46,293 4,798,737 4,786,073 12,664
IATA
NE From 91 to E More than SS
EST maturity TO 360 days EA O
Available-for-sale financial assets
Own portfoll
Federal Treasury Notes (NTN) – – – – 150,403 150,403 150,694
Promissory Note – – 61,070 – – 61,070 61,362
Eurobond – – – – 2,123 2,123 2,109
Investment fund shares 74,190 – – – – 74,190 74,190
Debentures – – – – 188,051 188,051 175,524
Certificates of real estate receivables (CRI) – – – – 16,976 16,976 17,250
Subtotal 74,190 – 61,070 – 357,553 492,813 481,129
Total available-for-sale financial
assets 74,190 – 61,070 – 357,553 492,813 481,129
Financial assets held for trading (”.
Own portfoli
National Treasury Bills (LTN) – 599,836 30,067 12,813 194,053 836,769 831,261
Federal Treasury Notes (NTN) – 209,704 – – 144,427 354,131 345,710
Debentures % – – 4,018 91,190 226,373 321,581 321,400
CCB – – – 7,705 – 7,705 7,705
Promissory notes – – 101,124 – – 101,124 101,124
Subtotal – 809,540 135,209 111,708 564,853 1,621,310 1,607,200
Subject to repurchase agreements
National Treasury Bills (LTN) – 1,680,794 – – – 1,680,794 1,663,090
Debentures – 65,528 – – – 65,528 63,016
Subtotal – 1,746,322 – – – 1,746,322 1,726,106
Subject to repurchase agreements
National Treasury Bills (LTN) – 71,120 – – – 71,120 70,837
Subtotal – 71,120 – – – 71,120 70,837
Total financial assets held
for trading – 2,626,982 135,209 111,708 564,853 3,438,752 3,404,143
Total 74,190 2,626,982 196,279 111,708 922,406 3,931,565 3,885,272
18
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
TEO
No stated Mrs AS RO OS
ETA OT EA 360 days EA AT
Available-for-sale financial assets
Own portfolio:
LTN – – 3,334 – 3,334 3,307
NIN 222,489 222,489 223,462
Investment fund shares 25,723 – – – 25,723 25,723
CRI – – – 15,018 15,018 15,018
Subtotal 25,723 – 3,334 237,507 266,564 267,510
Subject to guarantees:
NIN – 289,190 – – 289,190 290,722
Subtotal – 289,190 – – 289,190 290,722
Total available-for-sale financial
assets 25,723 289,190 3,334 237,507 555,754 558,232
En 1ssets held for trading (”:
Own portfolio:
LFT – 36,652 36,652 36,652
LTN – – 85,158 106,566 191,724 191,404
NIN – 629,027 – 27,135 656,162 656,136
ccB – – 4,922 4,922 4,922
Debentures – – – 251,034 251,034 251,034
Subtotal – 629,027 85,158 426,309 1,140,494 1,140,148
Subject to repurchase
commitments: – 2,575,197 – – 2,575,197 2,563,730
LTN – 310,534 – – 310,534 308,953
NIN – 30,812 – – 30,812 30,812
Debentures – 2,916,543 – – 2,916,543 2,903,495
Subtotal
Brazilian Central Bank deposits: – – 45,392 – 45,392 44,968
LTN – – 45,392 – 45,392 44,968
Subtotal
Subject to
guarantees – – 140,036 – 140,036 138,726
LTN – – – 518 518 504
NTN – – 140,036 518 140,554 139,230
Subtotal
Total financial assets held – 3,545,570 270,586 426,827 4,242,983 4,227,841
for trading
Total 25,723 3,834,760 273,920 664,334 4,798,737 4,786,073
“Y Securities classilied as “trading” are stated based on their maturity dates.
1? At December 31, 2012, a provision for devaluation of securites was recorded in the amount of RS1,554,
8. DERIVATIVES HELD FOR TRADING (ASSETS AND LIABILITIES) AND HEDGES
a) Utilization policy
The growing level of corporate sophistication in a global market prompted an increase in the demand for derivative financial instruments to manage Balance
Sheet exposure to market risks, arising mainly from fluctuating interest and foreign exchange rates, the price of commodities and other asset prices. As a result,
Banco Pine offers its customers alternatives for mitigating market risks through appropriate instruments, as well as to meet its own needs for managing these
risks.
b) Management
The management of portfolio risks is controlled using techniques which include the following: VaR, sensitivity and liquidity analysis and stress scenarios. Based
on this information, the necessary derivative financial instruments are contracted by the treasury department, pursuant to Management’s previously defined
market, sensitivity and liquidity analysis policy. Derivative transactions carried out by Banco Pine with customers are neutralized to eliminate market risks.
The sale of derivative financial instruments to customers is subject to prior credit limit approval. The credit limit approval process also considers potential stress
scenarios.
Knowing their customer, their operating sector and their risk appetite profile, as well as being able to provide information on the risks involved in the transaction
and in the terms and conditions negotiated, ensures that the relationship between the parties is transparent and permits the Institution to offer customers the
products which are most appropriate to their specific needs.
The majority of the derivative contracts negotiated by the Institution with customers in Brazil, comprise swaps, forward transactions, options and futures
registered at BMá/FBovespa or CETIP S.A. – Balcáo Organizado de Ativos e Derivativos. The derivative contracts negotiated abroad comprise futures, forward
transactions, options and swaps mainly registered at the Chicago, New York and London exchanges. We stress that although certain trades abroad are carried
out over-the-counter (OTC), the related risks are low in relation to the Institution’s total transactions.
The main market risk factors monitored by Pine include exchange rates, local interest rate volatility (fixed, reference rate (TR), General Price Index – Market (IGP-
M) long-term interest rate (TJLP) and Extended Consumer Price Index (IPCA)), exchange coupon and commodities. The Institution adopts a conservative
approach, minimizing its exposure to risk factors and to the mismatching of portfolio terms.
19
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
c) Evaluation and measurement criteria, methods and assumptions used to determine fair value
The Institution uses the market reference rates disclosed principally by BM8FBovespa, Intercontinental Exchange (ICE) and Bloomberg to determine the fair
value of the derivative financial instruments. For derivatives whose prices are not directly disclosed by the exchanges, the fair values are obtained through pricing
models that use market information, determined based on the prices disclosed for assets with the greatest liquidity. Based on these prices, the Institution
extracts the interest curves and market volatilities which are used as entry data for the models. The OTC derivatives, forward contracts and securities with low
liquidity are determined in this way.
d) Position of derivative financial instruments held for trading and hedging:
2012 2011
Liabilities
Derivatives held for tradin:
Swaps 216,102 37,625 197,066 45,984
Market risk 216,102 37,625 197,066 45,984
Interest rate risk 115,778 22,302 181,589 22,622
Foreign currency risk 95,927 15,323 2,135 22,695
Commodities 47 – 7,428 379
Variable income 4,350 – 5,914 288
Currency forwards 85,122 21,647 89,876 41,722
Interest rate risk 8,034 8,847 81,774 25,648
Foreign currency risk 73,294 12,767 8,102 16,074
Commodities 3,794 33 – –
Options 36,109 41,121 12,070 11,762
Foreign currency risk 10,052 15.858 6,470 5,799
Commodities 26,057 25,263 5,600 5,963
Total derivatives held for trading 337,333 100,393 299,012 99,468
Hedging derivatives
S – – 21,320 13,930
Hedging derivatives – – 21,320 13,930
Interest rate risk – – 21,320 13,980
Total hedging derivatives – – 21,320 13,930
Total derivatives 337,333 100,393 320,332 113,398
€) Notional values and fair values of derivatives for trading and hedging:
A 7 INT
TO E OA
Derivatives held for trading
Swaps
Market risk
Asset position: 2,794,342 3,207,127 3,020,976 186,151
Interest rate risk 2,067,246 2,312,680 2,202,483 110,197
Foreign currency risk 644,261 805,350 731,310 74,040
Commodities 19,028 19,011 18,970 41
Variable income 63,807 70,086 68,213 1,873
Liability position: 2,794,342 3,028,650 2,915,600 113,050
Interest rate risk 1,919,858 2,110,067 2,018,062 92,005
Foreign currency risk 874,984 918,583 897,538 21,045
Net amount 178,477 105,376 73,101
Forward contracts
Asset position: 2,579,250 2,634,263 2,648,976 (14,713)
Interest rate risk 554,932 554,085 558,167 (4,082)
Foreign currency risk 1,874,582 1,927,728 1,938,929 (11,201)
Commodities 149,736 152,450 151,880 570
Liability position: 2,579,250 2,570,788 2,593,764 (22,976)
Interest rate risk 1,375,129 1,388,212 1,406,871 (18,659)
Foreign currency risk 998,478 997,204 1,002,419 (5,215)
Commodities 205,643 185,372 184,474 898
Net amount 63,475 55,212 8,263
Options
Premium on unexercised options: 1,200,312 36,109 36,260 (151)
Foreign currency risk 661,386 10,052 14,977 (4,924)
Commodities 538,926 26,057 21,284 4,773
Premium on written options: 1,842,841 41,121 48,072 (6,951)
Foreign currency risk 1,160,633 15,859 19,084 (3.226)
Commodities 682,208 25,263 28,988 (8,725)
Net amount (5,012) (11,812) 6,800
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
PINE
Futures
Purchase 1,985,824
Interest rate risk 1,063,206
Foreign currency risk 840,567
Commodities 82,051
Sale 2,563,454
Interest rate risk 2,424,256
Foreign currency risk 48,362
Commodities 90,836
Net amount
Total receivable (payable) and gain (loss) from derivatives held for trading
Total receivable (payable) and gain (loss) from derivatives
TA]
236,940
236,940
Market
Ya
148,776
148,776
At interest
rate curve
(3,295)
(167)
(8,128)
5,997
5,832
171
(6)
2,702
90,866
90,866
PARE value
Derivatives held for tradin:
Swaps
Market risk
Asset position: 3,361,674
Interest rate risk 2,551,354
Foreign currency risk 692,150
Commodities 68,936
Variable income 49,234
Liability position: 3,361,674
Interest rate risk 2,253,571
Foreign currency risk. 1,107,084
Commodities 1,019
Net amount
Forward contracts
Asset position: 1,911,012
Interest rate risk 1,623,686
Foreign currency risk. 287,326
Liability position: 1,911,012
Foreign currency risk 1,644,086
Commodities 266,926
Net amount
Options
Premium on unexercised options: 116,737
Foreign currency risk 68,087
Commodities 48,650
Premium on written options: 301,316
Commodities 199,087
Variable income 102,229
Total
Futures
Purchase 1,064,871
Interest rate risk 883,792
Foreign currency risk 35,974
Commodities 145,105
Sale 4,115,825
Interest rate risk 3,154,424
Foreign currency risk 871,105
Commodities 90,296
Net amount
Net amount
Total receivable (payable) and gain (loss) from derivatives held for trading
Hedging derivatives_
Swaps 378,378
Cash flow hedge 176,755
Asset positio! 201,623
Foreign currency risk
Cash flow 378,378
Liability position: 378,378
Interest rate risk
Net amount
Total receivable (payable) and gain (loss) from hedging derivatives
Total receivable (payable) and gain (loss) from derivatives
3,668,486
2,718,439
810,262
82,088
57,697
3,517,404
2,344,982
1,171,308
1,114
151,082
2,017,793
1,708,350
309,443
1,969,639
1,664,603
305,036
48,154
12,070
6,471
5,599
11,762
5,799
5,963
308
199,544
513,066
203,048
310,018
505,676
505,676
7,390
7,390
206,934
3,558,486
2,650,710
769,158
82,088
56,530
3,514,720
2,346,322
1,167,284
1,114
43,766
2,072,136
1,753,913
318,223
1,996,274
1,704,045
292,229
75,862
8,192
2,198
5,994
15,815
3,117
12,698
(7,623)
112,005
455,213
200,945
254,268
448,102
448,102
7111
7111
119,116
110,000
67,729
41,104
1,167
2,684
(1,340)
4,024
112,684
(54,343)
(45,563)
(8.780)
(26,635)
(39,442)
12,807
(80,978)
3,878
4,273
(395)
(4,053)
2,682
(6,735)
7,931
(10,300)
(741)
(9,559)
13,184
1,776
11,400
8
2,884
42,521
57,853
2,103
55,750
57,574
57,574
115,427
115,427
157,948
21
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
EE E E REE More than
60 days 90 days EDO 360 days EDO
Asset position:
Swaps 416,506 61,832 37,590 371,916 244,977 2,074,306 3,207,127
Currency fonwards 528,921 542,766 251,175 628,976 424,161 258,264 2,634,263
Options 4,427 10,252 – 15,600 5,830 – 36,109
Futures 253,621 863,967 – 63,513 271,637 533,086 1,985,824
Liability position:
Swaps 398,096 59,832 36,677 359,265 233,501 1,941,279 3,028,650
Currency fonwards 525,369 533,868 243,298 597,121 413,609 257,523 2,570,788
Options 4,954 13,745 206 14,706 7,510 – 41,121
Futures 89,151 100,009 2,361 352,469 949,454 1,070,010 2,563,454
EE From 61 to E From 181 to AA
180 days ESTO ESOO
Asset position:
Swaps 70,507 348,539 14,245 805,415 290,667 2,652,179 4,181,552
Currency forwards 160,686 309,844 308,763 524,459 562,406 151,635 2,017,793
Options – 28 4,141 6,375 1,526 – 12,070
Futures 364,469 362,163 84,804 119,907 – 133,528 1,064,871
Liability position:
Swaps 72,109 360,569 13,612 796,381 270,994 2,509,415 4,023,080
Currency forwards 162,099 310,283 301,848 496,136 546,694 152,579 1,969,639
Options 9 237 4,295 5,695 1,526 – 11,762
Futures 985,334 23,437 24,087 89,189 1,850,687 1,143,091 4,115,825
f) Hedge accounting
At March 31, 2012, there were derivative financial instruments used as a cash flow hedge, consisting of swaps, the fair value of which totaled R$436,278. The
hedged items were subordinated debt and securities issued abroad, the balances of which, adjusted to market value, totaled R$359,530. The adjustments to
market value were recorded in a specific equity account. In the second quarter of 2012, the Institution decided to discontinue this hedge accounting and, as
established in CPC 38 (IAS 39), the cumulative gain or loss resulting from the hedging instrument which had been recognized in other comprehensive income
while the hedge was in effect was retained separately recognized in equity and deferred until the maturity of the object of the hedge. The gain retained in equity
at December 31, 2012 is R$3,674, net of tax effects.
9. LOANS AND ADVANCES TO CUSTOMERS, GUARANTEES PROVIDED AND SECURITIES WITH CREDIT RISK
a) Composition
Loans and receivables 4,898,862 4,880,918
Loans and receivables at amortized cost 5,012,596 5,010,114
Provision for impairment (113,734) (129,196)
Loans and advances to customers, net 4,898,862 4,880,918
Securities with credit risk
Securities with credit risk held for trading 497,492 281,846
Available-for-sale securities with credit risk 268,220 42,676
Securities with credit risk at amortized cost 30,767 3,313
Provision for impairment (1,554) –
Securities with credit risk, net 794,925 327,835
Guarantees provided and responsibilities 2,123,110 1,701,585
Total expanded portfolio, net 7,816,897 6,910,338
Total expanded portfolio 7,932,185 7,039,534
22
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
b) Types of loan
E E
Working capital 2,319,158 2,626,169
Resolution 3844 (formerly Resolution 2770) – 9,616
Overdraft account 12,086 23,265
BNDES/FINAME onlending 852,643 873,177
Paycheck deductible loans 36,399 98,605
Foreign currency financing 280,156 217,859
Export financing 798,784 503,819
Discounted trade bills and others – 65,653
Direct consumer financing (CDC) – vehicles 229 1,766
Buyer financing (Compror) 18,407 9,236
Debtors for purchase of assets 114,120 31,185
Credit Receivables 89,075 –
Advances on foreign exchange contracis and income receivable 491,539 549,764
Credit portfolio 5,012,596 5,010,114
Loans for imports 8,814 14,220
Guarantees provided 2,114,296 1,687,365
Guarantees provided and responsibilities 2,123,110 1,701,585
Credits receivable!” 30,767 3,313
Corporate bonds 765,712 324,522
Securities with credit risk 796,479 327,835
Total expanded portfolio 7,932,185 7,039,534
11 Recorded in “Other receivables” (Note 12).
*) Mostly debentures, promissory notes and receivables certificates in the funds’ portfolio and in Banco Pine’s portfolio (Note7).
c) By business activity:
Sugar and ethanol 1,140,962 1,274,878
Civil construction 925,388 681,986
Electric and renewable energy 1,039,048 549,941
Agriculture 689,671 518,686
Building and engineering – Infrastructure 523,777 595,831
Transportation and logistics 395,830 387,220
Foreign trade 332,186 372,916
Specialized services 365,897 293,264
Metal products 350,883 165,452
Vehicles and parts 242,934 205,342
Foodstufís 246,208 230,529
Beverages and tobacco 94,262 175,782
Telecommunications 156,508 219,175
Chemical and petrochemical 158,890 168,111
Financial institution 155,766 223,104
Construction material and decor 148,696 88,725
Mining 192,512 34,460
Meat processing 130,581 236,907
Paper and pulp 111,674 63,415
Information technology 62,537 28,675
Individuals 53,481 126,623
Pharmaceuticals and cosmetics 23,757 80,605
Textiles and clothing 45,039 75,375
Retail trade 51,299 33,693
Plastic and rubber 42,721 13,216
Medical services 39,224 16,383
Communications and printing 20,668 27,182
Electronics 15,604 52,581
Mechanics 19,912 33,670
Steel products 95,467 –
Wholesale trade 11,415 20,705
Water and sanitation 42,901 13,313
Leather and footwear 6,487 13,335
Teaching institution – 18,454
Total expanded portfolio 7,932,185 7,039,534
23
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
d) By sector
Agricultural 107,391 59,907
Housing 27,811 15,390
Manufacturing 1,382,815 1,477,057
Commerce 188,500 163,125
Financial intermediation 99,188 31,930
Other services 5,925,167 5,192,339
Individuals 201,313 99,786
Total expanded portfolio 7,932,185 7,039,534
€) Non-recoverable assets – Impairment
Gross balance 247,962 166,210
Provision for impairment (94,072) (81,667)
Carrying amount 153,890 84,543
Operations with impairment analysis – Other
Gross balance 4,735,716 4,765,682
Provision for impairment’” (16,171) (44,940)
Carrying amount 4,719,545 4,720,742
Operations with collective impairment analysis – Retail
Gross balance 28,918 78,222
Provision for impairment” (3,491) (2,589)
Carrying amount 25,427 75,633
Securities with credit risk
Operations with evidence of impairment – individually significant
Gross balance 796,479 327,835
Provision for impairment (1,554) –
Carrying amount 794,925 327,835
Total expanded portfolio, net 5,693,787 5,208,753
Total (gross) 5,809,075 5,337,949
Interest accrued and unpaid from transactions evidencing impairment were reversed from the portfolio in the amount of R$8.089 (December 31, 2011 –
R$19,558).
f) The details of the variations in the balance of financial assets classified as “Loans and receivables – Loans and advances to customers” and
considered as non-recoverable due to credit risk are as follows:
Opening balance 129,196 101,131
Additions/reversals, net 54,583 59,943
Assets wrtten-off (70,356) (34,394)
Allowance for loan losses (PDD) – Funds 1,602 –
Exchange variation 263 2,516
Closing balance 115,288 129,196
9) Loan assignments
For the year ended 31 December, 2012, loans were assigned without coobligation in the amount of R$94,436 to parties not related to the Institution (December
31, 2011 -R$441,622, of which R$303,651 was assigned to Pine Crédito Privado Fundo de Investimento em Direitos Creditórios Financeiros with no gain or
loss). These assignments generated a loss in relation to their face value of R$74,156 (December 31, 2011 – R$ 63,716), without discounting the allowance for
loan losses in the amount of R$70,353 (December 31, 2011 – R$38,248). The results of the assignments are recorded in the “Other operating income/expenses”
account. Additionally, contracts previously written off with a loss of R$ 63,841 were transferred. These disposals generated a gain of R$ 1,062, recorded in “Loan
Operations” .
h) Credit recovery
For the period ended December 31, 2012, credits previously written off as loss were recovered in the amount of R$4.009 (period ended December 31, 2011 –
R$12.618) recorded in the “Loan Operations” account.
i) Renegotiation of contracts
At December 31, 2012, renegotiated contracts totaled R$130,152 (December 31, 2011 – R$17,935). The original ratings attributed to these contracts were
maintained.
10. NON-CURRENT ASSETS HELD FOR SALE
2012 2011
Non-operating assets 176,279 58,017
Total 176,279 58,017
24
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
11. DEPOSITS IN GUARANTEE
At December 31, 2012, these comprise judicial deposits related to tax matters, mainly PIS and COFINS in the amount of R$199,189 (December 31, 2011 –
R$182,909).
12. OTHER ASSETS
2012 2011
Reserves at the Brazilian Central Bank 1,426 12,677
Advances 5,209 4,066
Credits receivables 30,767 3,313
Commission on sureties and guarantees 46,295 36,246
Transactions in progress ‘” (1,977) 82,539
Other receivables 13,136 9,367
Total 94,856 148,208
TT Relers lo lhe sellement ol the Y
Refers to the settlement of the purchase and sale of foreign exchange contracts.
13. PROPERTY AND EQUIPMENT IN USE
We present below the details, by category, of the property and equipment in use reported in the consolidated Balance Sheets:
LN]
CA) DS
Facilities 10,690 (8,932) 1,758
Furniture and equipment in use 2,962 (1,459) 1,503
Communication systems 1,428 (739) 689
Data processing systems 921 (849) 72
Security systems 31 (19) 12
Transportation systems 26,267 (1,333) 24,934
At December 31, 2012 42,299 (13,331) 28,968
LOTA]
CA) DS
Facilities 10,446 (7,221) 3,225
Furniture and equipment in use 3,599 (1,763) 1,836
Communication systems 1,868 (923) 945
Data processing systems 1,074 (972) 102
Security systems 147 (119) 28
Transportation systems 1,812 (477) 1,335
At December 31, 2011 18,946 (11,475) 7,71
The changes in “Property and equipment in use” in the consolidated Balance Sheets were as follows:
2012 E
Cost:
Opening balance 18,946 18,016
Additions 26,210 1,247
Amount written off (2,857) (317)
Closing balance 42,299 18,946
Accumulated depreciation
Opening balance (11,475) (8,787)
Amount written off 1,667 101
Depreciation (8,523) (2,789)
Closing balance (13,331) (11,475)
Property and equipment in use, net 28,968 7,471
14. INTANGIBLE ASSETS
2012
Accumulated LN]
E) DEN AO
Licenses for use of software 9,915 (7,862) 2,053 9,537 (7,062) 2,475
Total 9,915 (7,862) 2,053 9,537 (7,062) 2,475
25
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
The changes in “Intangible Assets” in the consolidated Balance Sheets were as follows:
A A
Cost:
Opening balance 9,537 9,166
Additions 717 371
Amount written off (839) –
Closing balance 9,915 9,537
Accumulated depreciation
Opening balance (7,062) (5,874)
Amount written off 268 –
Depreciation (1,068) (1,188)
Closing balance (7,862) (7,062)
Intangible, net 2,053 2,475
15. DEPOSITS FROM FINANCIAL INSTITUTIONS
NN A
Classification:
Financial liabilities at amortized cost 121,000 105,885
Total 121,000 105,885
By maturity
Up to 30 days 32,749 24,059
From 31 to 60 days 40,128 36,553
From 61 to 90 days 10,282 8,542
From 91 to 180 days 1,506 25,034
From 181 to 360 days 24,266 3,639
More than 360 days 12,069 8,058
Total 121,000 105,885
16. DEPOSITS FROM CUSTOMERS
Classification:
Financial liabilities at amortized cost 3,595,159 3,688,280
Total 3,595,159 3,688,280
Type:
Demand deposits 30,054 111,826
Time deposits 3,167,942 3,265,818
Agribusiness letters of credit 385,198 307,055
Real estate letters of credit 11,965 3,581
Total 3,595,159 3,688,280
By maturity
No stated maturity 30,054 111,826
Up to 30 days 444,780 542,453
From 31 to 60 days 317,543 176,038
From 61 to 90 days 491,191 311,313
From 91 to 180 days 487,686 454,125
From 181 to 360 days 387,564 420,534.
More than 360 days 1,436,341 1,671,991
Total 3,595,159 3,688,280
17. FUNDS OBTAINED IN THE OPEN MARKET
LTN 1,674,484 2,565,657
NIN – 593,961
Debentures 158,177 30,798
Total 1,832,661 3,190,416
18. SECURITIES
Local
NN AE
Financial bills 574,265 23,002
Total 574,265 23,002
26
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
Foreign – Fixed rate notes
Interest Final
[TECLA Ed TD pue 2011
US$ 20%a.a+Libor Jun/2014 8,320 12,612
US$ 1,85% a.a + Libor Nov/2014 16,347 22,505
US$ 20%a.a+ Libor Ocv2013 19,023 34,914
us$ 8,7% a.a + Libor Jan/2017 2,226 2,042
US$ 3,/0%a.a+ Libor Jan/2014 81,427 199,685
US$ 42%a.a+ Libor Apr/2022 51,157 46,457
CLP 6,0% a.a + Var.UF Dec/2017 138,867 –
317,367 318,215
19. BORROWINGS AND ONLENDINGS
LN ET From 1to ET EN
3 months PTS SEO EE ELO
Local borrowings – other institutions – – – 128,426 – 128,426
Local onlendings – official institutions ‘” 70,958 251,418 330,475 132,022 107,435 892,308
Foreign onlendings – 10,236 – – – 10,236
Foreign borrowings 389,617 503,245 – – 61,305 954,167
Total 460,575 764,899 330,475 260,448 168,740 1,985,137
y From 3 to E From 3 to EN
ELO PS Ea TIO 15 years
Local borrowings – other institutions – 2,012 – 228,292 – 230,304
Local onlendings – official institutions 75,854 223,746 327,930 137,586 102,145 867,261
Foreign onlendings 985 139 9,379 56,253 – 66,756
Foreign borrowings 481,430 451,448 – 3,958 – 936,836
Total 558,269 677,345 337,309 426,089 102,145 2,101,157
At December 31, 2012, mostly FIDC senior shares in the amount of R$118,735 (December 31, 2011 – R$228,292).
20. SALE OR TRANSFER OF FINANCIAL ASSETS
2011
Assets ETS
Credit assignments – loans 334 334 2,066 2,181
Credit assignments – retail – – 56,373 63,214
Total 334 334 58,439 65,395
At December 31, 2012, there were no assignments to FIDC Pine Crédito Privado, consolidated entity. At December 31, 2011, there were assignments to FIDC
Pine Crédito Privado valuated in R$ 303,651 and for these operations, retained risks and rewards were limited to the amount of subordinated shares held by
Banco Pine, in the amount of R$ 105,214.
21. SUBORDINATED DEBT
We present below the details of the balance of “Subordinated debts”:
Issue Maturity Amount Interest rate 2012 2011
Fixed rate notes Public 1/6/2017 US$125.000 8.75% p.a 262,635 239,634
Fixed rate notes Private 12/29/2016 US$15.000 9.33% p.a – 27,956
Financial bills Private 8/21/2017 R$45.152 119.4% of CDI 49,567 30,141
Total 312,202 297,731
22. OTHER FINANCIAL LIABILITIES
4UE 2011
Deferred income – commission of guarantee 56,071 53,391
Total 56,071 53,391
23. PROVISIONS
a) Provisions for contingent liabilities, tax risks, commitments and other provisions:
qu 2011
Labor contingencies 4,665 7,124
Civil contingencies 18,298 16,025
Tax contingencies 42,591 29,574
Provision for guarantees – 15,178
Provision for credit instruments 27,828 39,214
Provision for personnel expenses 93,382 107,115
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
b) Contingent assets and liabilities and legal obligations
i) Provision for tax risks
These are legal and administrative processes related to tax and social security obligations. The main processes are as follows:
PIS: R$32,538 (December 31, 2011 – R$27,201): the Institution and Pine Investimentos filed legal proceedings designed to suspend the provisions of Article 3,
paragraph 1, of Law 9718/1998, which changed the calculation basis of PIS and COFINS so that they are levied on all corporate revenues. Prior to this rule,
suspended in inumerous recent decisions by the Federal Supreme Court, only revenues derived from services rendered and the sale of merchandise were liable
to this tax. The injunction filed by Banco Pine received a partially favorable judgement and the appeal lodged by the Federal Government was dismissed.
Currenlty awaiting judgment of the admissibility of the Special and Extraordinary Appeals filed by the Federal Government.
COFINS: In November 2005, the Federal Supreme Court (STF) judged as unconstitutional Article 3, paragraph 1 of Law 9718/98, which introduced the new
calculation base for COFINS determination purposes from February 1999, broadening the concept of revenue. Accordingly, the calculation base of COFINS was
decreased and gave rise to the unquestionable right to recover the amount of overpaid tax. The injunction filed against the Federal Government by the Institution
claiming the right to offset the refund of the incorrectly paid amount of COFINS against other current taxes was successful.
Based on the decision of May 21, 2010 which rejected the two extraordinary appeals lodged by the Federal Government, an interlocutory appeal for writ of
certiorari on extraordinary appeal was filed. Upon referral to the Federal Supreme Court, the Chief Justice ordered the remand of the case records to the Court
of origin, on the grounds of Article 543-B of the Code of Civil Procedures, considering the analysis of the General Repercussion already issued through Special
Appeal RE 585235. As a result of this decision, on May 18, 2011, the interlocutory appeal was dismissed and the Federal Government filed petitions seeking
clarification of the decision, claiming that a material error had occurred in respect of the aforementioned RE and indicating that RE 609096 was correct. 096. The
petitions for clarification were dismissed. Further, as a result of this sentence, a special appeal was lodged for the same purpose. The Deputy Chief Judge of the
Regional Federal Court of the 3rd Region received the special appeal as a request for reconsideration and upheld the appealed sentence. Notified of this
decision, the Federal Government lodged no further appeal. The final and unappealable sentence was handed down on October 21, 2011 and ratified on
November 8, 2011.
Supported by the opinion of its legal advisors and responsible attorneys, according to whom the case is settled at the STF with no possibility of any further
appeal by the National Treasury, the Institution reversed the corresponding provision for contingencies, for the period from May 2005 to October 2011,
considering that it no longer consists of a legal obligation and no loss is probable, and recognized a net revenue in the total amount of R$151,357, for the second
half of 2011 recorded in the “Other operating income” account and in the “Tax expenses” account.
In this respect, the Institution will file a request for proof of claim at the Brazilian Federal Revenue Department (RFB) regarding COFINS which was overpaid
during the period from June 2000 to April 2005, in the historical amount of R$ 15,872, which adjusted for inflation based on the variation in the SELIC rate up to
December 31, 2012, totals R$34,919 (December 31, 2011- R$33,565). Based on the final and unappealable decision and the administrative procedure at the
RFB, a corresponding tax credit was recorded in “Other receivables – Tax recoverable”, as a counter entry to the “Other operating income” account.
The amounts of the legal obligations and respective judicial deposits are presented below:
2012 E
AT
OVAS) deposits Net OVAS) TOO Toa Net
PIS 32,588 32,452 86 27,201 27,071 130
Cofins – 161,197 (161,197) – 151,573 (151,573)
Total 32,538 193,649 (161,111) 27,201 178,644 (151,443)
i) Contingencies classified as probable are regularly recorded as a provision and at December 31, 2012 and 2011 total:
ETA 2011
AGE
Provision COTO Net Provision TATTOO Net
Tax contingencies 10,053 2,347 7,706 2,373 1,917 456
Labor contingencies 4,665 536 4,129 7,124 746 6,378
Civil contingencies 18,298 2,657 15,641 16,025 1,602 14,423
Total 33,016 5,540 27,476 25,522 4,265 21,257
Changes in liability provisions
ETA 2011
Tax ETT = Tax Labor E
Opening balance 29,574 7,124 16,025 167,015 5,788 5,238
Amount recorded (reversed) 11,116 (2.980) 1,294 (150,648) 1,132 10,426
Adjustments 1,901 521 979 13,207 204 361
Closing balance 42,591 4,665 18,298 29,574 7,124 16,025
iv) We present below the main law suits and proceedings for which the likelihood of loss was deemed possible:
Labor: At December 31, 2012 and 2011, the Institution had no labor claims classified as possible.
Civil: At December 31, 2012, the Institution had no civil claims classified as possible (R$6,663 – December 31, 2011).
24. TAX LIABILITIES
Income tax payable 6,621 3,513
Social contribution payable 3,788 2,055
Total 10,409 5,568
28
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
PINE
25. OTHER LIABILITIES
Taxes and contributions payable 8,087 6,727
Dividends and bonuses payable 9,018 11,160
Lawyers’ fees 9,374 11,841
Payment orders in foreign currency 26,324 13,643
Other 9,397 7,977
Total 62,200 51,348
26. EQUITY
a) Capital
Subscribed and paid-up capital totals R$935,683 and comprises 108,631,100 (December 31, 2011 – 84,034,266) nominative shares, of which 58,444,889
(December 31,2011 – 45,443,872) are common shares and 50,186,211 (December 31, 2011 – 38,590,394) are preferred shares with no par value. The
Institution is authorized to increase its capital, without the necessity of any amendment to the bylaws, by up to a further 100,000,000 common or preferred
shares, all of which shall be nominative, book-entry and with no par value, by decision of the Board of Directors.
As deliberated at a meeting of the Board of Directors held on September 25, 2012 and approved by the Central Bank on November 12, 2012, the capital
increased in the amount of R$139,635 through the issue of 3,220,203 shares, (2,100,839 to shareholder DEG – Deutsche Investitions und
Entwicklungsgesellschaft mbH (“DEG”) and 1,119,364 to other shareholders), nominative preferred shares and 6,558,123 nominative common shares to the
controlling shareholder, from R$796,048 to R$935,683, divided into 108,631,100 nominative shares, of which 58,444,889 are common shares and 50,186,211
are preferred shares, with no par value.
At the Extraordinary General Meeting held on December 22, 2011 and approved by Central Bank on February 9, 2012, it was decided: a) a capital increase from
R$466,358 to R$ 666,358, with no new issue of shares, through the incorporation of a portion of the balance of the Premium on Subscription of Shares reserve,
in the amount of R$ 200,000; b) a further capital increase to R$ 796,048, with the issue of 12,274,766 nominative new shares, of which 6,442,894 were common
shares and 5,831,872 were preferred shares, which will be distributed to the stockholders as a bonus, based on a ratio of 14.17769510243 new bonus shares for
each lot of 100 shares held. Subsequent to the issue of the new stock, the total number of shares increased from 86,578,008 nominative shares to 98,852,774
nominative shares, of which 51,886,766 are common shares and 46,966,008 are preferred shares.
As deliberated at a meeting of the Board of Directors held on September 8, 2011 and October 25, 2011 and approved by the Central Bank on January 6, 2012,
an increase in share capital in the value of R$ 43,752 was approved with the issuance of 2,543,742 preferred shares, 2,543,604 in favour of the shareholder DEG
– Deutsche Investitions – und Entwicklungsgesellschaft Mbg (“DEG””),and 138 in favour of others shareholders.
b) Capital reserve
The capital reserve, pursuant to the provisions of Law 11638/07, may only be used to (i) absorb losses which are in excess of retained earnings and the revenue
reserves: (ii) increase capital; (iii) cancel treasury shares; and (iv) pay dividends on preferred shares provided that they are entitled to this benefit.
Cc) Revenue reserve
The Institution’s revenue reserve comprises the legal and statutory reserves. The balance of the revenue reserves may not exceed the Institution’s capital, and
any excess must be capitalized or distributed as dividends. The Institution has no other revenue reserves.
Legal reserve – Pursuant to Law 11638/07 and the bylaws, the Institution must appropriate 5% of its net income for each year to the legal reserve. The legal
reserve shall not exceed 20% of the Institution’s paid-up capital. However, the Institution may choose not to appropriate a portion of its net income to the legal
reserve for the year in which the balance of this reserve plus the capital reserves, exceeds 30% of its capital.
Statutory reserve – Pursuant to Law 11638/07, the bylaws may constitute other reserves, provided that their purpose, the percentage of net income to be
appropriated thereto and the maximum amount to be maintained in each such reserve is specified. The appropriation of funds to these reserves should not be
approved to the detriment of the mandatory dividend. The Institution recorded a statutory reserve of 100% of its net income, in the amount of R$85,173, after the
appropriation of 5% to the legal reserve of R$9,373, the deduction of the payment of interest on own capital of R$60,245 and dividends in the amount of
R$39,755, to maintain the Institution’s operating margin compatible with its asset transactions.
d) Dividends and interest on own capital
Stockholders are entitled to a minimum dividend of 25% of annual net income, adjusted pursuant to Brazilian corporate legislation, subject to the approval of the
General Meeting of stockholders.
In accordance with the provisions of Law 9249/95, of December 26, 1995, interest on own capital was accrued, calculated based on the variation in TJLP for the
period. This interest on own capital decreased the expense for income tax and social contribution for the period ended December 31, 2012 by R$24,098
(R$17,961 -December 31, 2011).
We present below the approved dividends and interest on own capital for the net income of period:
AT TI
Description Release Date
Total gross amount
O O ET
Interest on own capital 12/26/2012 1/11/2013 0.1501 16,154 0.1276 13,731
Interest on own capital 9/24/2012 10/11/2012 0.1430 14,083 0.1216 11,971
Interest on own capital 6/22/2012 7/12/2012 0.1529 15,113 0.1300 12,846
Interest on own capital 3/27/2012 4/12/2012 0.1507 14,895 0.1281 12,661
Dividends 12/26/2012 1/11/2013 0.1286 13,846
9/24/2012 10/11/2012 0.1617 15,917
Dividends 6/22/2012 7/12/2012 0.1011 9,887
Dividends 3/27/2012 4/12/2012 0.0011 105
In accordance with ICPC 08, the proposed additional dividend in excess of the minimum dividend, in the amount of R$18,559 (R$26,726 in December 31, 2011)
is classified in a specific equity account.
29
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
€) Treasury shares
At a meeting of the Board of Directors on September 16, 2011,the acquisition of self-issued shares of Pine was authorized for up to 2,154,011 preference shares
to be held in treasury for subsequent sale, as well as payment of variable remuneration for the statutory directors of the Bank in agreement with the terms of
Resolution 3.921/11, without reducing equity. 713,395 shares were repurchased in the amount of R$ 9.588 at an average cost of R$ 13.44. The authorisation
prevailed until August 31, 2012.
At a meeting of the Board of Directors on December 6, 2012, the acquisition of self-issued shares of Pine was authorized for up 1,219,659 preference shares, to
be held in treasury for subsequent sale, as well as payment of variable remuneration for the statutory directors of the Bank in accordance with the terms of
Resolution 3.921/11, without reducing equity. This plan has already repurchased 600,000 shares in the amount of R$ 7.679 with an average cost of R$ 12.80.
Authorization for issue can be granted until December 5, 2013.
During the second semester Pine transferred 318,555 preferred shares of its own issuance, which were held in treasury, for the Board of Directors as variable
remuneration in accordance with Resolution 3.9211/11 in the amount of R$ 4,517 with an average cost of R$ 14.18.
At 31 December, 2012 the bank had 994,840 preferred shares on treasury of its own issuance in the amount of R$ 12,750. The market value of these shares
corresponded to R$ 14,923. At 31 December, 2011 there were no treasury shares.
27. CARRYING VALUE ADJUSTMENTS
The balances of the “Carrying value adjustments” account include the amounts, net of the corresponding tax effect, of the adjustments to assets and liabilities
recognized temporarily in equity presented in the statement of changes in equity and income and expenses recognized until they are extinguished or realized,
when they are definitively recognized in the Consolidated Income Statement. The amounts generated by subsidiaries are shown on a line by line basis, under the
appropriate headings depending on their nature.
The Consolidated Statement of Comprehensive Income includes the changes in the “carrying value adjustments” account.
Available-for-sale financial assets 11,684 (2,478)
Debt instruments 11,684 (2,478)
Cash flow hedges 3,974 (102)
Hedging instrument 6,624 (381)
Income tax (2,650) 279
Other 59 69
Income tax (4,668) 1,032
Total 11,049 (1,479)
When securities classified as available-for-sale are sold, or become impaired, the cumulative fair value adjustments, previously recognized in equity, are
presented in results.
At December 31, 2012, the bank sold securities classified as available-for-sale. This operation resulted in a profit of R$33,142 (R$ 13,560 at December 31,
2011) which was transferred to income.
28. INTEREST AND SIMILAR INCOME
Interest and similar income in the consolidated Income Statement consists of interest that has accumulated during the period on the financial assets, calculated
based on the effective interest rate method, regardless of the fair value measurement.
Loans and advances to financial institutions 16,650 8,992
Available-for-sale debt instruments 125,056 103,898
Loans and advances to customers 598,781 641,667
Total 740,487 754,557
29. INTEREST AND SIMILAR EXPENSE
Interest and similar expenses in the Consolidated Income Statement consist of interest that has accumulated during the period on the financial liabilities,
calculated based on the effective interest rate method, regardless of the fair value measurement.
Deposits from financial institutions 14,424 23,290
Deposits from customers 354,338 375,376
Funds obtained in the open market 4,501 1,577
Borrowings and onlendings 90,177 93,350
Securities Liabilities 6,222 11,429
Subordinated debts 26,181 55,183
Other interest 21,973 16,405
Total 517,816 576,610
30.GAINS (LOSSES) FROM FINANCIAL ASSETS AND FINANCIAL LIABILITIES (NET) MEASURED AT FAIR VALUE
Gains from (losses from) financial assets and financial liabilities consist of the carrying value adjustments of financial instruments, except for those accrued as a
result of the application of the effective interest rate method and the gains or losses resulting from the sale or purchase of financial instruments.
a) Classification
Financial assets held for trading 238,959 268,790
Total 238,959 268,790
30
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
b) Financial assets held for trading – Deri:
Futures (155,581) 47,261
Options 67,731 18,303
Swaps 128,533 83,896
Forward contracts 10,111 (20,001)
Total 50,794 129,459
31. FEE AND COMMISSION INCOME
The “Fee and commission income” account consists of fees and commissions paid to the Institution that have accumulated during the period, except for those
that comprise the effective interest rate on financial instruments.
NN A
Commission on guarantees 28,865 17,637
Structuring fee: 56,461 11,871
Customer account charges 6,622 4,741
Other 3,505 11,329
Total 95,453 45,578
32. FEE AND COMMISSION EXPENSES
The “Fee and commission expenses” account consists of fees and commissions paid or payable by the Institution during the period, except for those which
comprise the effective interest rate on financial instruments.
We present below the breakdown of this account balance:
Commissions 2,790 1,415
Banking services 861 1,098
Teleprocessing 2,890 1,976
Other 1,031 1,037
Total 7,072 5,526
33. FOREIGN EXCHANGE VARIATION (NET)
Foreign exchange variation mainly includes the gains and losses on currency trading, changes arising from the translation of monetary items from foreign to
functional currency and the gains or losses disclosed for foreign-currency non-monetary assets at the sale transaction date.
34. OTHER OPERATING INCOME(EXPENSES)
AA A
Reversal of provision for COFINS legal process ‘” – 33,565
Recovery of expense for COFINS legal process ‘” – 162,322
Recovery of expenses 947 4,088
Charges on credits granted ? (74,387) (65,103)
Income of rentals 2,954 –
Other 5,324 38
Total (65,162) 134,910
7 Ar December 31,201, the amount is related to the COFINS legal process described in the note 24.b 1.
(2 R$74.156 refers to losses with loans assigned without coobligation, as mencioned at note 9.9.
35. PERSONNEL EXPENSES
NN A
Salaries 59,668 47,176
Benefits, training 8,607 6,930
Social charges 20,504 16,991
Profit sharing 35,586 61,438
Total 124,365 132,535
31
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
36. OTHER ADMINISTRATIVE EXPENSES
2012 En
Water, electricity and gas 439 395
Rents 8,412 7,440
Leased assets 2,585 3,062
Communications 3,603 3,155
Charitable contributions 104 83
Maintenance and repair of assets 2,227 1,360
Materials 157 448
Data processing 8,280 7,563
Promotion and public relations 2,413 1,539
Publicity and advertising 2,182 1,500
Publications 986 736
Insurance 397 773
Financial system services 4,266 3,545
Third-party services 7,686 5,654
Surveillance and security services 3,274 2,095
Specialized technical services 12,280 33,697
Transportation 1,616 1,388
Travel 3,438 2,468
Fines imposed by BACEN 1 to
Court decisions 9,307 8,638
Other administrative expenses 3,690 4,964
Total 77,343 90,513
37. NET PROVISIONS
4UE 2011
Indexation – asset 12,393 14,466
Indexation – liability (456) (17,068)
Reversion/Provision for civil and labor proceedings (8,312) 5,799
Reversion/Provision for tax processes (218) (11,197)
Reversal of provision for guarantees 15,178 (15,178)
Other 1,184 2,662
Total 24,769 (20,516)
38. RESULT OF SALE OF ASSETS
At December 31, 2012 the amount of R $ 15,651 (R $ 3,647 at December 31, 2011) corresponds mainly to the sale of assets received in lieu of payment for the
settlement of loans.
39. INCOME TAX AND SOCIAL CONTRIBUTION
a) Reconciliation of expenses for income tax and social contribution on net income:
E E]
Income before taxes, net of profit sharing 257,268 265,617
Interest on own capital (60,245) (52,827)
Income before taxes on income 197,023 212,790
Rate (25% income tax and 15% social contribution) 40% 40%
Expected expense for IRPJ and CSLL, based on current tax rate (78,808) (85,116)
Other adjustments 16,086 3,690
Income tax and social contribution (62,722) (81,426)
Of which:
Current tax (87,181) (38,256)
Deferred tax (25,541) (43,170)
Expense recorded (62,722) (81,426)
b) Tax calculation at the effective rates
4UE 2011
Income before taxes on income. 257,268 265,617
Income tax and social contribution 62,722 81,426
Effective rate 24.38% 30.66%
C) Deferred taxes recognized in income
qu 2011
Impairment 73,517 65,846
Losses for loan operations not yet deducted 23,099 20,036
Provision for tax risks and contingent liabilities 21,879 20,595
Provision for profit sharing 8,306 13,260
Provision for other assets 3,983 3,983
Other IFRS adjustments (11,949) 4,121
Martcto-market adjustment of derivative financial instruments (28,149) (39,238)
Other adjustments (11,347) (1,396)
Total 79,339 87,207
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
d) Taxes recognized in equity
Valuation of (fixed income) available-for-sale securities (4,668) 991
Valuation of cash flow hedges (2,650) 40
Total (7,318) 1,031
€) Changes in deferred taxes
Opening balance 88,238 134,664
Debit (credit) to income (23,587) (43,170)
Debit (credit) to equity 9,324 (8,256)
Closing balance 74,025 88,238
f) Estimated realization
Up to 1 year 155,949 158,440
From 1 to 2 years 14,872 18,622
From 2to 3 years 9,518 6,401
From 3 to 4 years 6,550 3,043
From 4 to 5 years 2,832 2,771
From 5 to 10 years 22,827 21,456
Subtototal Assets – Tax credits 212,048 210,733
Up to 1 year 104,765 91,988
From 1 to 2 years 5,936 3,050
From 210 3 years 10,013 7,958
From 3 to 4 years 7,115 7,260
From 4 to 5 years 9,101 7,308
From 5 to 10 years 3,097 4,931
Subtototal Liabilities – Tax Credits 140,027 122,495
Total 72,021 88,238
40.EMPLOYEE BENEFITS
The Institution makes monthly contributions to a private pension company for VGBL and PGBL plans, at the option of the participant, in an amount equivalent to
1% of the employee’s gross salary, provided that the employee also contributes at least 1% of his/her gross salary, to supplement their social security benefits,
as part of a defined contribution plan, and this is the sole responsibility of the Institution as sponsor.
For the period ended December 31, 2012, the amount of this contribution was R$342 (December 31, 2011 – R$279).
41. PROFIT SHARING PROGRAM
Banco Pine has a profit sharing program (PPLR) ratified by the Bank Employees’ Trade Union, as defined by the Institution’s bylaws.
The general assumptions of this program are: (a) business unit performance; (b) establishment of a fund for distribution organization wide; and (c) skills
assessment and achievement of targets by the various areas. These expenses were recorded in the “Personnel expenses” account.
42. OPERATING LIMITS
a) Basel ratio
At December 31, 2012, the Institution’s Basel ratio was 16,19% (December 31, 2011 – 18,48%), calculated based on the consolidated financial information, as
required by BACEN.
Reference equity (PR) 1,477,645 1,313,674
Tier! 1,220,446 1,016,629
Equity in BRGAAP 1,219,946 1,015,081
Maricto-market adjustments 500 1,548
Tier 257,199 297,045
Subordinated debt 257,699 298,593
Martcto-market adjustments (500) (1,548)
Required reference equity (PRE) 1,004,123 781,922
Credit risk 899,670 760,492
Market risk 95,559 11,749
Operational risk 8,894 9,681
Excess PR 473,522 531,752
Basel ratio – % 16.19% 18.48%
Banco Pine, pursuant to Circular 3477/09, publishes quarterly information related to the management of risk and required reference equity (PRE). The report
containing further details, structure and methodologies is available on the following website link: www.pine.com.br/ri.
b) Equity to fixed-assets ratio
In accordance with BACEN Resolution 2286/96, the equity to fixed-assets ratio is limited to 50.0%. At December 31, 2012, the equity to fixed assets ratio was
10.21% (December 31, 2011 – 6.99%).
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
43. GUARANTEES PROVIDED
The Institution offers a series of guarantees to help its customers improve their credit position and ability to compete. We present below all of the guarantees at
December 31, 2012 and 2011:
Guarantees provided to financial institutions 9,664 59,571
Guarantees provided to individuals and corporations 2,104,632 1,627,794
Letters of credit 8,814 14,220
Total 2,123,110 1,701,585
The Institution provides financial guarantees to its customers for third-party agreements. The Institution has the right to be reimbursed by these customers for any
amount that it has to pay on account of these guarantees. These contracts are subject to the same credit assessments that are carried out for loans.
44. RELATED PARTY TRANSACTIONS
a) Management compensation
In the first half of 2012, the Institution approved the new Compensation Plan which addresses the standards and guidelines for the payment of fixed and variable
compensation applicable to the members of the Board of Directors and statutory directors and, at the discretion of the specific committee, other executive officers
with important positions and functions, in accordance with the provisions of Resolution 3921/10, of the National Monetary Council.
The new Plan has the following main objectives: (i) alignment of the Institution’s executive compensation practices with its risk management policy; (ii) prevention
of conduct that increases risk exposure to levels above those considered prudent in the short, medium and long-term strategies adopted by the Institution; (iii)
creation of an instrument designed to attract and retain talent for the Institution’s key positions; and (iv) adaptation of the compensation policy to meet the
requirements of Resolution 3921/10.
The compensation defined in the Plan takes the following into consideration: (i) the Institution’s current and potential risks; (ii) the Institution’s overall result, in
particular, recurring realized income (net book income for the period adjusted based on unrealized results and excluding the effects of controllable non-recurring
events); (iii) capacity to generate cash flows; (iv) the economic environment in which the Institution operates and its related trends; (v) long-term sustainable
financial bases and adjustments to future payments, based on the risks assumed, fluctuation in capital costs and liquidity projections; (vi) the individual
performance of the Directors based on the target agreements entered into by each director as established in the PLR and filed at the Institution’s head office; (vii)
the performance of the business unit; and (viii) the relation between the Directors’ individual performance, the business unit performance and the Institution’s
overall performance.
Variable compensation is calculated as follows:
a) up to 50% of the amount established for variable compensation is paid in kind, at the same time as payment of Profit Sharing (PLR).
b) An amount corresponding to 10% of that established for variable compensation will be paid in preferred shares of the Institution at the same time as PLR
payment.
c) An amount corresponding to the remaining 40% of variable compensation will be paid in preferred shares of the Institution and will be granted to the employee
at the same time as the payment of the amount in kind. The right to dispose of these shares will be on a “Deferred” basis, increasing in line with the Director’s
level of responsibility.
The delivery of the shares related to deferred variable compensation attributable to the Directors will only occur if none of the following is verified during the
applicable deferral period: (i) a significant decrease in realized recurring income;(ii) loss by the Institution or business unit, or (iii) verification of errors in
accounting and/or administrative procedures which affect the results determined during the vesting period of the variable compensation.
The Institution’s Compensation Committee, constituted at the general meeting held on January 16, 2012, will be responsible for (i) presenting proposals to the
board of directors regarding the various forms of fixed and variable compensation, as well as benefits and the special recruitment and termination programs; (ii)
monitoring the implementation and operation of the Institution’s directors’ compensation policy; (iii) annually reviewing the Institution’s directors’ compensation
policy, recommending adjustments or improvements to the board of directors; (iv) recommending to the board of directors the total amount of the directors’
compensation to be submitted to the general meeting, in accordance with Article 152 of Brazilian Corporation Law; (v) evaluating future internal and external
scenarios and their possible impact on the Institution’s directors’ compensation policy; (vi) analyzing the Institution’s directors’ compensation policy in relation to
market practices, to identify significant differences as compared to peer companies, proposing necessary adjustments; (vii) ensuring that the directors’
compensation policy is permanently in line with the risk management policy, the Institution’s current and expected financial position and the provisions of this
resolution; and (viii) preparing annually, within a period of ninety days following from December 31, of each year, a Compensation Committee Report, as required
by CMN Resolution 3921/10.
At December 31, 2012, variable remuneration was determined in the amount of R$5,872, in accordance with the criteria defined in the new plan.
A AO CA ENS En
Fixed compensation , 5,549
Variable compensation 17,669 13,357
Short-term Benefits 2,997 952
Total 28,507 19,858
Short-term benefits granted to Management mainly comprise compensation and social security contributions, paid leave and sick pay, profit sharing and bonuses
(when payable within twelve months subsequent to the year-end) and non-monetary benefits (such as health care and free or subsidized goods or services).
Employment termination agreement
The employment agreements are valid for an indefinite period. The officer is not entitled to any financial compensation when the employment relationship is
terminated voluntarily or due to the non-fulfillment of obligations. If the employment agreement is terminated by the Institution, the officer may receive
indemnification. During the quarter ended December 31, 2012, compensation in the amount of R$1,246 was paid to officers who left the Institution. No
compensation was paid for the period ended December 31, 2011.
34
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
PINE
b) Related parties
Marketable securities
Pine Crédito Privado – FIDC 59,731
Demand deposits 144
Pine Investimentos 55
Pine Comercializadora de Energía Elétrica –
Pine Corretora 8
Pine Assessoria 5
Pine Assesoria em Comercializacáo de Energia 3
Pine Planejamento Ltda 9
Directors and immediate family'” 64
Interbank deposits 9,152
Pine Investimentos 9,152
Time deposits 161,590
Pine Investimentos 26,546
Pine Comercializadora de Energía Elétrica 80,541
Pine Corretora 220
Pine Assessoria 35,421
Pine Planejamento Ltda 4,782
Directors and immediate family” 14,080
1% The amounts relating to directors and immediate family are not consolidated.
Cc) Capital ownership
105,214
105,214
649
546
40
1
1
61
20,504
20,504
108,528
14,145
81,293
750
2,001
10,339
a)
(1,224)
(1,224)
(10,209)
(1,602)
(7.065)
(45)
(1,403)
(86)
(58)
The following table presents the direct investment in common and preferred shares, at December 31, 2012 and 2011, of stockholders with more than five percent
of the total shares and of members of the Board of Directors and Executive Board.
O
EI
Total
Ca
(A (TS NOE]
¡Stockholders E shares(%) ES
Individuals 58,444,889 100.00 15,595,863
Board of Directors – il 3,281,010
Executives . – 2,635,774
Total 58,444,889 100.00 21,512,647
31.08
6.54
5.25
42.87
TO
EI
74,040,752
3,281,010
2,635,774
79,957,536
o]
Ca
shares(%)
68.16
3.02
2.39
73.57
Common ed MOI)
¡Stockholders RUE shares(%) RIE
Individuals 45,443,872 100.00 14,370,556
Board of Directors – – 2,150,452
Executives – – 602,994.
Total 45,443,872 100 17,124,002
45. OTHER INFORMATION
a) Insurance
37.23
5.57
1.56
44.36
59,814,428
2,150,452
602,994
62,567,874
shares(%)
71.18
2.56
0.72
74.46
The Institution’s insurance strategy is based mainly on risk concentration and materiality, and policies are contracted at amounts established by Management,
considering the nature of its business and the advice of its insurance brokers. Insurance coverage at December 31, 2012 is as follows:
Ma ¡pe of Cover
AA
Directors and Officers Liability (D8/O) Management Civil Liability 20,000
Vehicles Fire, robbery and collision for 11 vehicles 2,286
Buildings, machines, fumiture and fixtures Any material damage to facilities,
machinery and equipment 12,000
Banker’s insurance Cash 300
Aircraft insurance Aircraft-part guarantees 339,560
46. RISK MANAGEMENT
a) Introduction and overview
Banco Pine is exposed to risks resulting from the use of financial instruments which are continuously measured and monitored and has an analysis structure
made up of a board of directors, a council and a committee that assess the following risks:
. Credit risk
Liquidity risk
Market risks
Operational risks
35
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
Risk management framework
The Board of Directors is responsible for identifying and controlling risks; however, there are other independent areas which are also responsible for managing
and monitoring risks.
b) Credit risk
Definition
Credit risk is the exposure to loss in the case of total or partial default of customers or counterparties in fulfilling their financial obligations with the Institution.
Credit risk management seeks to support the definition of strategies, in addition to establishing limits, including an analysis of exposure and trends, as well as the
effectiveness of the credit policy.
Credit risk measurement
Loans to customers and financial institutions
As a general rule, the measurable amount of collateral is used to mitigate and decrease the percentage of impairment to be applied, as well as when there is a
significant amortization of the loan or when new significant facts justify a decrease in the percentage of impairment.
Among the objective criteria for determining possible impairment of an asset, the Bank considers a risk classification,especially, all clients with a given risk
classification lower or equal to level “D”, under the terms of the National Monetary Council’s (NMC) 2.682 Resolution, as well as for the breach of obligations
overdue 90 (ninety) days, as shown hereinafter.
Impairment calculation for operations evidenced
At least one of the borrower’s obligations with a financial institution is past due for more than ninety days.
i. Operations without warranties.
For exposures evidence Impairment not associated with guarantees, percentage of the Potential Credit Risk should be applied to the amount of exposure.
ii. Operations with warranties.
The guarantees of exposures that evidence Impairment will be used as mitigators, not being necessary to apply the percentage of Potential Credit Risk. The
amount of the impairment will be the difference between the exposure value and the present value of the security associated with this exposure. The present
value of the guarantee is calculated based on the average cost of funds of the Bank for a 3 (three) year period.
Criteria for creating impairment for unidentifiable risks
The institution, for the purpose of containing any credit losses that have not been yet identified within their criteria for evidence of impairment, adopts,
conservatively, the evaluation of its historic loss for its application to the percentage of expected loss on unidentifiable risks.
Credit risk management
Duties:
+ Formulate Credit Policies with all the Institution’s units, including collateral requirements, credit assessment, risk rating and presentation of reports, legal and
documentary procedures, as well as compliance with regulatory and statutory requirements.
+ Establish the structure for approval and renewal of Credit lines. Limits are established and approved by the Credit Committee.
+ Revise and assess Credit risk. The Credit area evaluates all credit exposure which exceeds established limits, prior to the release of the credit lines to the
customers by the related business unit. Renewals and revisions of credit lines are subject to the same review process.
* Limit concentration of exposure by counterparties, geographic regions and economic sectors, and by credit rating, market liquidity and country.
+ Develop and maintain the Institution’s risk classification to categorize exposure according to the degree of risk of financial loss and focus management on
inherent risk. The risk classification system is used to calculate credit exposure. The current risk classification structure includes degrees of credit risk and
availability of guarantees or other tools to mitigate credit risk.
+ Offer advice, guidance and specialized techniques to promote credit risk management best practices throughout the Institution.
Credit policy
Contains the guidelines and recommendations adopted by Banco Pine to apply and monitor the granting of credit. It establishes rules for:
+ Granting credit to Companies, Financial Institutions, Treasury Operations and Individuals, as well as monitoring performance according to normative features,
presenting restrictions to certain practices and concentrating on establishing minimum requirements that steer the activity;
+ Provide basic routines to all the areas involved in credit operations to ensure that the related professionals and executives have a complete understanding of
the policy rules and the importance of strict compliance with the required standards.
As a general rule, this policy is flexible and suggestions for its improvement are encouraged, and should be submitted to the Vice-President of the Credit Risk
Department and the Compliance Department so that they can be properly analyzed and submitted to the Credit Committee.
Banco Pine’s credit policy is based on the risk classification of each customer and the risk of the transaction, respectively “Customer Rating” and “Operation
Rating”.
The methodology used for classification is based on a model developed internally, containing technical criteria consistent with an objective assessment based on
the company’s financial information and its credit history, as well as considering subjective aspects inherent to the customers operations which cannot be
otherwise measured.
36
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
The criteria were developed, tested and applied by the Vice-President of Credit Risk Department for all of the Institution’s active customers in implementing the
Credit Policy. After a thorough analysis and evaluation of the rating methodologies available on the market, Banco Pine acquired a license to use the Risk
Analyst tool from Moody’s Analytics. This methodology is used by the Bank as an additional parameter for rating customers.
Credit risk assessment for derivatives is based on an assessment of the fractional risk, ¡.e., the potential for future adjustments that the operations may generate
in the Institution’s favor. Fractional risk is calculated based on the market price and rate volatility of the derivatives in the portfolio.
The concept of credit approval will always be “Total Risk”, including the operations themselves and the risks presented thereby.
All credit lines should be analyzed based on the customer’s payment ability, as well as the guarantees they provide.
The sovereign risk of Brazilian government securities is considered free of credit risk.
Corporate bonds are analyzed in the same manner as the Institution’s other lending operations.
Maximum credit risk exposure
2012 E
Cash equivalents 231,724
Debt instruments 4,242,983
Derivatives 299,012
Loans and receivables 5,280,427
Hedging instruments – 21,320
Guarantees provided 2,123,110 1,701,585
Quality of credit
We present below the segregation of loans, considering the following: loans falling due and loans past due with or without impairment:
a]
MATA] AS contracts with
2682) with impairment IS OTTO IET
AA – C (Collective) 25,185 4,710,531 4,735,716 16,171
D-H (Individual analysis) 73,420 174,542 247,962 94,072
Retail 4,047 24,871 28,918 3,491
Securities with credit risk – 796,479 796,479 1,554
Total 102,652 5,706,423 5,809,075 115,288
e]
SIGA SEO ST
PELA] with impairment O TO O
AA -C (Collective) 10,686 4,735,067 4,745,753 44,940
D – H (Individual analysis) 50,964 134,804 185,768 81,667
Retail 5,042 73,551 78,593 2,589
Securities with credit risk – 327,835 327.835 –
Total 66,692 5,271,257 5,337,949 129,196
The risk concentration by sector of the portfolio of loans and advances to customers is presented in Note 9.
Mission of the Chief Risk Office (CRO)
Credit analysis and granting
Assess the risks involved in transactions and the customers’ ability to settle their obligations according to the contracted terms.
Credit risk controls and management
Perform preventive monitoring of active customers designed to anticipate default in the portfolio of operations involving credit risk, support decisions and
commercial strategies and provide data that permit the Credit Committee and Executive Board to monitor compliance with Banco Pine’s Strategic Planning.
Market risk controls and management
Analyze, measure and control Banco Pine’s Market Risk and Liquidity Risk, calculate the Treasury Management Results and provide support for controlling the
Institution’s derivative credit risk, in both the managerial and regulatory environment.
CRO Composition
Credit analysis oversight board
Responsible for credit granting analysis and recommendation. Comprising 4 management areas, divided into regional business units. Represented by managers,
coordinators and credit analysts, all of whom are economic sector specialists.
Risk control oversight board
Responsible for credit risk control and management. Comprising an executive superintendent, managers, coordinators and credit, liquidity and market risk
analysts.
37
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
Credit processing and approval
The Credit Process commences with the preparation of a credit proposal and the respective visit report by the commercial area. This credit proposal will be
analyzed by the Credit Analysis management (with the corresponding economic and financial analysis) and by the commercial area and by the Credit Committee.
The Credit Committee has the following responsibilities:
+ Define the credit policy and respective changes;
+ Analyze, approve or refuse credit limits/loans;
+ Monitor the ongoing utilization, designed to compare the approved parameters vs. actual utilization of the credit lines, avoiding excesses.
Voting Credit Committee members:
+ Chairman of the Board of Directors and Board Members;
+ CEO – Chief Executive Officer;
+ COO – Chief Operations Officer;
+ CAO – Chief Administrative Officer;
+ CRO – Chief Risk Officer.
Observations:
+ Unanimous approval;
+ The Credit Origination Executive Officer and Executive Superintendent participate in the Credit Committee meetings as observers;
+ The Credit Risk Superintendent participates in the Credit Committee meetings but without the right to vote.
+ The Credit Committee may call upon, exceptionally as participants, the executives of the identified risks origination.
Credit risk controls and management
In a broad concept, analyzing all customers independent of the sectors in which they operate and focusing in particular on the internal control structure, Banco
Pine’s Executive Board and Credit Risk Department decided, together, to create a separate cell within their structure’s hierarchy for credit control called the
Credit Controls Board, reporting directly to the Risk Control Oversight Board, whose chief mission is to preventively monitor active customers to anticipate default
in the portfolio of operations involving all types of credit risk, support decisions and commercial strategies and to provide information that enables the Executive
Committee to monitor compliance with the Institution’s Strategic Planning.
It should be noted that Banco Pine has an integrated operating risk consolidation system that includes credit limits, collateral positions, types, terms and limits
contractually established with customers, decisions and recommendations of the Credit Committee, as well as the liability position of customers with the
Institution and information related to the abovementioned items.
In addition to the management tools provided chiefly to the Commercial Department, this instrument enables the consolidation of information fundamental to
monitoring the credit portfolio, creating an automatic link with the procedures adopted by the Processing Department and connected to operation processing.
As a result, when applied to the risk monitoring matrix determined for this stage of the process, the system can provide daily information on the closing positions
and indicate any exceptions.
Also under the standardized model, any of the pre-defined combinations of these exceptions will result in the issue of alert reports and, depending on the
severity, in blocking credit transactions and limits for customers.
Special Asset Management (Credit recovery department)
The Institution has a specific credit recovery area which is designed to support the areas involved in the collections process, and to identify and resolve potential
risks to the Institution, seeking agile and effective solutions to minimize possible losses, to be a source of information regarding payments which are overdue or
which for some reason are no longer certain, and to promote control over the risks which, pursuant to the policy established by the Institution, are managed by
the Special Assets Area.
Recovery stages
This area operates in the prevention and recovery process which is divided into two stages: “Monitoring” and “Credit Recovery”.
The Monitoring activities are designed to minimize the impact of risks both in loans falling due and loans past due in their entirety.
In this sense, it seeks to provide Senior Management with information regarding risks that involve overdue operations, as well as positioning the Commercial
Area as regards the risks involved, so that ultimately decisions can be made in adequate time frames with the appropriate accuracy.
The “Special Asset Management – Credit Recovery” activities are designed to recommend the collection measures to be used in cases where the Institution’s
customers are in default and for which, from a commercial standpoint, there are no effective solutions for regularizing payment and which therefore require more
effective collection methods.
Concerning preventive actions, it seeks to adopt measures for risks that, in some manners, present indications of possible default, be they insufficient
guarantees, reduced liquidity of notes under collection, uncovered overdrafts or have exceeded credit limits without due approval, operation successions or
renewals, in particular, working capital when there has not been a sizeable reduction of the balance payable or transactions incompatible with the type of
operation, order for write-off for bonds in the portfolio, origination of direct credit funds from the customer, as well as when the customer is in poor financial
health, and such information is obtained in the market, from newspapers or magazines and could place in doubt the certainty of the receipt of the funds loaned.
38
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
For objective evidence of impairment, we adopt the following practices:
i. – Change in customer risk
Any economic/financial change related to a customer with whom the Institution maintains a relationship indicating an increase in the credit risk of that customer or
economic group.
Risks that, under some aspect, present indication of a possibility of default that is detected by insufficient guarantees, reduced liquidity of securities in collection,
transactions incompatible with the type of operation, order for write-off of notes in the portfolio, among others.
For purposes of this analysis, the Risk and Controls Oversight Board will observe said changes through monitoring of the Institution’s active customers and
identifying any changes in the risk of any customer, assessing the necessity (or not) of impairment for that customer or group.
Impairment percentages to be practiced will consider guarantees provided in the operation and the financial analysis of the customer, among others, so as to
justify any percentage that may be applied to any specific customer or economic group.
As a general rule, the measurable amounts of the collateral will be used to mitigate and decrease the impairment percentage to be applied, as well as when there
is a significant amortization of the loan or when new material facts justify decreasing the impairment percentage.
ii. Overdue operations
For purposes of objective evidence of impairment, based on the evaluation of overdue payments and to consider material facts for assessment and application of
impairment, in addition to other aspects, the Institution has established that all customers with payments past due for more than ninety days must be tested
regarding the need or not to apply impairment”.
The application of minimum percentages shall be subject to the assessment of each risk and may be increased or decreased, in particular, as a result of the
assessment of risk mitigators such as guarantees, financial conditions of the customer or economic group, among others.
As a general rule, the measurable amounts of the collateral provided will be used to mitigate and decrease the impairment percentage (recoverable value of the
assets) to be applied, as well as when there is a significant amortization of the loan or when new material facts justify decreasing the impairment percentage.
iii. “Renegotiated” operations
Firstly, the defi
¡on of a “Renegotiated” operation is necessary to establish the criteria for objective evidence of impairment for said operations”:
According to the rules established by the Brazilian Central Bank, in principle, a renegotiation is considered a debt composition, extension, renewal, granting of a
new loan for partial or full settlement of the prior operation, or any other type of agreement which entails a change in the maturity or payment terms originally
contracted.
In relation to this preliminary definition and the stringency of certain regulations issued by the regulators of Financial Institutions, all concepts are generalized as
“agreements”.
Accordingly, within the nature of our commercial relationship with our customers, “agreements” cannot be confused with “renegotiations”, since the latter is when
our customers fails to meet their contractual obligations and we are obliged to formalize a pact to renegotiate the conditions of the operation and seek the
solvency of the credit.
It is normal for financial institutions to change their current operations with contractual amendments stipulating term extensions and new rates, though not in the
context of “Renegotiation”, to retain their customers and business. It is often necessary to seek a solution to maintain the relationship, such as, for example,
collateral offered with satisfactory performance, operations that involve guarantees and that require public instruments, registration and, as a consequence,
additional costs in the event of offering a new limit or opening a new operation.
Accordingly, for the purpose of defining “Renegotiated” operations and in line with the rules issued by the regulatory body, the Institution classifies and registers
in its legacy system as “Renegotiated” all operations that, based on their specific characteristics, indicate a probability of loss and as a result whose contract
terms are renegotiated in the pursuit of solvency.
As a result, operations identified as “Renegotiated” will be treated similar to other cases, that is, when such an operation is identified and for the purposes of
defining the impairment percentage, guarantees provided in the operation and a financial analysis of the customer, among others will be considered to justify any
percentage to be applied for a given customer or economic group.
As a general rule, the measurable amounts of the guarantees provided will be used to mitigate and decrease the impairment percentage to be applied, as well as
when there is a significant amortization of the loan or when new material facts justify decreasing the impairment percentage.
The following table presents an estimate of the fair value of the quarantees and other types of quarantee held against financial assets.
Macia
2012 2011
Operations with impairment
Receivables 622 115,810
Pledge / sale of products, inventories and equipment 107,751 14,120
Mortgage / sale of real estate 3,230 24,491
Subtotal 111,603 154,421
Operation without impairment
Receivables 933,952 903,117
Pledge / sale of products, inventories and equipment 1,421,962 1,460,628
Financial investments 39,939 107,988
Mortgage / sale of real estate 755,850 556,836
Guarantees 57,316 61,996
Subtotal 3,209,019 3,090,565
Total 3,320,622 3,244,986
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
For the purpose of preventing possible losses with receivables which have not yet been identified, according to its criteria for objective evidence of impairment,
the Institution adopts a conservative approach and uses its historical losses as a basis for applying a generic percentage to the portfolio base.
Accordingly, the Institution adopts an evaluation model for losses incurred for the prior three years, including the period under evaluation.
All new customers are analyzed, as well as losses incurred with those customers, calculating the percentage of these losses on the customer base by historical
aamounts, not considering any changes in the credit volume over the commercial relationship maintained with these customers.
Once the loss percentage has been calculated for the period under analysis, this percentage is applied to customers who did not present evidence of impairment.
C) Liquidity risk
Definition
Liquidity risk is associated with possible difficulties the Institution may face in meeting its obligations resulting from its financial liabilities.
Liquidity risk management
Liquidity risk management seeks to protect the Institution from possible market developments that generate liquidity issues. Accordingly, the Institution monitors
its portfolios with regards to maturities, volumes and the liquidity of its assets.
Daily control is carried out through reports in which the following items are monitored:
+xx Maturity mismatches between payment and receipt flows Group wide;
+ Projection of liquidity stress scenarios defined by the Asset-Liability Committee (ALCO).
This information is checked against the Institution’s cash position each day and assessed each week by ALCO.
Liquidity is managed by the Market, Liquidity and PL Risk Oversight Board, which reports to the Risk Control Oversight Board.
Balance Sheet by maturity
We present below the Balance Sheet by contractual maturity:
Up to RE AN
90 days 360 days EMO
ASSETS
Financial Assets 5,300,398 2,110,531 2,289,206 9,700,135
Cash and cash equivalent 5 432,076 – – 432,076
Financial assets held for trading 3,402,150 216,834 157,101 3,776,085
Debt instruments 7 3,329,922 108,830 – 3,438,752
Derivatives 8 72,228 108,004 157,101 337,333
Available-tor-sale financial assets 74,190 – 418,623 492,813
Debt instruments 7 – 418,623 418,623
Equity instruments 74,190 – 74,190
Loans and receivables 1,391,982 1,893,697 1,713,482 4,999,161
Loans and advances to credit institutions 6 – 79,948 20,351 100,299
Loans and advances to customers 9 1,391,982 1,813,749 1,693,131 4,898,862
Other assets 173,039 90,186 315,598 578,823
Non-current assets held for sale 10 144,874 31,405 – 176,279
Other 28,165 58,781 315,598 402,544
Deposits in guarantee 41 – – 199,189 199,189
Recoverable income tax 855 – 35,623 36,478
Other assets 12 13,840 21,066 59,950 94,856
Deferred income tax and social contribution 39 13,470 37,715 20,836 72,021
TOTAL ASSETS ‘” 10,278,958
LIABILITIES
Financial llabilities 3,848,029 1,733,578 3,312,982 8,894,589
Derivatives 8 34,804 42,256 23,333 100,393
Deposits from financial institutions 15 83,159 25,772 12,069 121,000
Deposits from customers 16 1,283,568 875,250 1,436,341 3,595,159
Funds obtained in the open market 17 1,832,661 – – 1,832,661
Securities issued abroad 18 74,279 35,636 781,717 891,632
Borrowings and onlendings 19 470,811 754,664 759,662 1,985,137
Sale or transfer of financial assets 20 334 – – 334
Other financial liabilities 22 56,071 – 56,071
Subordinated debt 21 12,342 – 299,860 312,202
Provisions 23 7,063 20,765 65,554 93,382
Reserves for contingent liabilities, commitments and other provisions 7,063 20,765 22,963 50,791
Provision for tax risks – – 42,591 42,591
Tax liabilities 24 – 10,409 – 10,409
Other liabilities 52,863 – 9,374 62,237
Other liabilities 25 52,826 – 9,374 62,200
Correspondent banks 37 – 37
TOTAL LIABILITIES 9,060,617
” Does not include the total Property and equipment or intangible assets.
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
US From 91 to More than
MEA 360 days 360 days
ASSETS
Financial Assets 6,379,638 1,783,101 2,453,301 10,616,040
Cash and cash equivalents 5 345,740 – – 345,740
Financial assets held for trading 4,034,430 203,527 304,038 4,541,995
Debt instruments 7 4,009,684 85,158 148,141 4,242,983
Derivatives 8 24,746 118,369 155,897 299,012
Available-for-sale financial assets 289,190 3,334 263,230 555,754
Debt instruments 7 289,190 3,334 263,230 555,754
Loans and receivables 1,710,278 1,576,240 1,864,713 5,151,231
Loans and advances to credit institutions 6 6,352 258,708 5,253 270,313
Loans and advances to customers 9 1,703,926 1,317,532 1,859,460 4,880,918
Hedging derivatives – – 21,320 21,320
Other assets 137,162 117,524 272,509 527,195
Non-current assets held for sale 10 11,300 46,717 – 58,017
Other 125,862 70,807 272,509 469,178
Deposits in guarantee $1 – – 182,909 182,909
Recoverable income tax 7,341 5,009 37,473 49,823
Other assets 12 88,046 33,816 26,346 148,208
Deferred income tax and social contribution 39 30,475 31,982 25,781 88,238
TOTAL ASSETS ‘” 11,121,915
LIABILITIES
Financial liabilities 5,191,117 1,711,968 3,053,785 9,956,870
Derivatives 8 31,157 42,870 25,441 99,468
Securities issued abroad 18 70,142 111,425 159,650 341,217
Deposits from financial institutions 15 69,154 28,673 8,058 105,885
Deposits from customers 16 1,141,629 851,655 1,694,996 3,688,280
Funds obtained in the open market 17 3,190,416 – – 3,190,416
Borrowings and onlendings 19 558,269 677,345 865,543 2,101,157
Sale or transfer of financial assets 20 65,395 – – 65,395
Other financial liabilities 22 53,391 – – 53,391
Subordinated debt 21 11,564 – 286,167 297,731
Hedging derivatives – – 13,930 13,930
Provisions 23 6,064 33,150 67,901 107,115
Reserves for contingent liabilities, commitments and other provisions 6,064 33,150 38,327 77,541
Provision for tax risks – – 29,574 29,574
Tax liabilities 24 – 5,568 – 5,568
Other liabilities 45,871 2 11,841 57,714
Other liabilities 25 39,505 2 11,841 51,348
Correspondent banks 6,366 – – 6,366
TOTAL LIABILITIES 10,127,267
“T Does not include the total Property and equipment or intangible assets.
d) Market risk
i) Definition
Market risks are related to possible monetary losses due to fluctuations in variables that impact market prices and rates. Oscillations of financial variables such
as the price of input material and end products, inflation, interest rates and foreign exchange rates have the potential for causing losses in almost all companies
and, therefore, represent financial risk factors.
The Market Risk to which an institution is exposed is mainly due to three factors: a) exposure – amount exposed to risk; b) sensitivity – the impact of price
fluctuations; and c) variation – the magnitude of price variations. We stress that, among these factors, exposure and sensitivity are controlable by the Institution
as part of its appetite for risk, while variation is a market characteristic, and as a result if out of the Institution’s control:
Market risks can be classified under different types, as interest rate risk, foreign exchange risk, commodities price risk and share price risk. Each type represents
the risk of incurring losses due to oscillations in the respective variable.
li) Market risk management
Market risk is managed in a centralized manner by an area that is independent in relation to the trading desk and is chiefly responsible for monitoring and
analyzing market risk originating in positions assumed by the Institution vis-a-vis its appetite for risk as defined by ALCO and approved by the Board of Directors.
Market risk is managed daily by the Market Risk department, which calculates the Value at Risk (VaR) and generates the Duration Gap of Primitive Risk Factor
mismatches of assets in the Institution’s portfolio.
Amounts are compared daily to the VaR limits, exposure by Primitive Risk and Stop Loss Factors established by ALCO and approved by the Institution’s Board
of Directors.
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
For stress tests, scenarios considering bear and bull markets on the Commodities and Futures Exchange, as well as changes to the interest rate curves, are
Used. Scenarios generated by ALCO may also be used.
iii) Methodologies
Fair value
The purpose of marking to market (Fair Value) is to ensure that the pricing of assets and liabilities in the Institution’s portfolio is as transparent as possible for
shareholder protection.
Value at risk (VaR)
VaR measures the worst expected loss in a horizon given by normal market conditions in a given confidence level, that is, VaR provides a measure of market
risk.
Market risk management uses VaR as a measure of the Group’s potential losses. For the calculations, the parameters used are the horizon of one day and a
99% confidence interval. The calculation is based on closing market prices, taken from different sources (Anbima, BMáFBovespa, and the Brazilian Central
Bank, among others).
The VaR analysis is performed by market, vertex and risk factors associated with the interest curve, share prices, foreign exchange and commodities. If the VaR
limit is surpassed, an evaluation of the operations will be performed and those that present more risks will be readjusted by the Treasury in order to reduce risks
and seek alignment with the maximum exposure limit. Market liquidity will be evaluated as these operations are readjusted.
iv) Analyses
GAP Analysis
The mismatch between the maturities of asset and liability operations creates a Duration Gap, originating from the difference between the weighted average
maturities of both assets and liabilities. As a result, it is a graphic representation by risk factor of cash flows expressed at market value, allocated on maturity
dates, used to assess risk exposure over a specific time horizon.
Sensitivity analysis for risk factors
This analysis is designed to evaluate the response of the market value variation of the portfolio to a minor variation in interest rate structures. The applied
scenario is a shift of 1 basis point (DVO01) in the interest rates included in the Institution’s portfolios. This analysis is important as it takes into account the maturity
(duration) of the assets in the portfolios.
Stress tests
Stress tests, which are performed daily, are disclosed with the Institution’s risk figures for each exposure (pre-fixed-interest, US dollar, inflation and shares)
considering the scenario disclosed by BM8.FBOVESPA for each risk factor. Two increase and two decrease scenarios are considered.
v) Risks
Interest rate risk
Interest rate risk arises from the possibility that variations in interest rates will affect the future cash flows or the fair value of financial instruments.
Currency risk
Currency risk is the risk of variation in the value of a financial instrument due to changes in exchange rates. The Board has established limits for positions in
foreign currencies. According to the Institution’s policies, positions are monitored daily and hedging strategies are used to keep the positions within the pre-
established limits.
Share price risk
Share price risk is the risk that the fair value of shares will decrease as a result of the variations in share indexes or individual shares.
Commodities risk
Commodities risk is due to the oscillation of prices in physical products (agricultural products, oil, metals, etc.).
vi) Risk exposure
Portfolios held for trading
This portfolio consists only of the Institution’s trading operations, transacted with the intention of trading, resale, benefit from changes in price or arbitrage.
Operations for hedging this portfolio may also be included.
Market risk exposure – Portfolios held for trading
We present below a summary of the VaR position of the Institution’s tradable portfolios as at December 31, 2012 and 2011, considering the 99% reliability
criteria and one-day holding period:
Maximum. Minimum
December 31, 2012 200
December 31, 2011 1,713 2,753 932
42
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
Sensitivity analysis
Pursuant to CVM Instruction 475, of December 17, 2008, we present below the possible effects on the results arising from the sensitivity scenarios for all
transactions including financial instruments, which expose the Institution to risks arising from foreign exchange and interest rate variations or any other sources at
December 31, 2012:
Sensitivity analysis
Scenarios ***
O ATEO) RETA AT)
Fixed interest rate (PRE) Fixed interest rate variations (541) (28,484) (56,969)
General Market Price index (IGPM) IGPM coupon variations so (756) (1,511)
Price index (IPCA) IPCA coupon variations (272) 2,767 5,534
Long-term interest rate (TULP) TJLP variations 671 913 1,826
US dollar coupon rate Exchange coupon variation (553) 234 469
Other currency coupon rate Exchange coupon variation 1 (9) (19)
Offshore rates (Libor + other Offshore) Offshore rates variation (265) (2,419) (4,837)
Currencies Change in exchange variation 8 (833) (667)
Total (uncorrelated sum)” (3,159) (39,381) (78,762)
Total (correlated sum)” (861) (28,087) (56,174)
*Uncorrelated sum: sum of the results obtained in the worst stress scenarios for each risk factor.
**Correlated sum: the worst result of the sum of the stress scenarios of all of the risk factors considering the correlation between them.
Scenario comprising the variation in market factors between December 31, 2012 and January 7, 2013 (variation in the fixed rate
Scenario | – Probable from 7.14% to 7.12% in a 1-year curve and from 8.44% to 8.49% in a 4-year curve, variation in the US dollar from 2.044 to 2.031,
and variation in the IPCA coupon from 0.82% to 0.94% in a 1 year curve).
“Scenario comprising a 25% shock lo the market interest rate curve amounts (disclosed by BMEF), and to the closing prices (US
Scenario Il – Possible dollar and equity), as in the following example:
Market rate New market rate
Curve (1 year) Shock (1 year)
Fixed interest rate (PRE) 7.14% 25% 8.92%
Price index (IGPM) 1.60% 25% 2.00%
Price index (IPCA) 0.82% 25% 1.02%
TJLP rate 1.47% -25% 1.10%
US dollar coupon rate 1.34% -25% 1.01%
Other currency coupon rate 0.91% 25% 1.14%
LIBOR – USD 0.83% -25% 0.62%
Currencies 2.0435 25% 2.5544
Scenario comprising a 50% shock to the market interest rate curve values (disclosed by BMEF), and in the closing prices (US
Scenario lII – Remote (*) dollar and equity), as in the following example:
Market rate New market rate
Curve (1 year) Shock (1 year)
Fixed interest rate (PRE) 7.14% 50% 10.71%
Price index (IGPM) 1.60% 50% 2.40%
Price index (IPCA) 0.82% 50% 1.23%
TJLP rate 1.47% -50% 0.73%
US dollar coupon rate 1.34% -50% 0.67%
Other currency coupon rate 0.91% 50% 1.37%
LIBOR – USD 0.83% -50% 0.41%
Currencies 2.0435 50% 3.0653
Sensitivity analysis
2011
SEO MOUEO) Possible (11) GE)
Fixed interest rate (PRE) Fixed interest rate variations (4,678) (54,357) (102,987)
General Market Price index (IGPM) IGPM coupon variations 135 (477) (930)
Price index (IPCA) IPCA coupon variations 412 (8,239) (6,294)
Long-term interest rate (TJLP) TJLP variations (8,143) (6,489) (13,356)
Reference rate (TR) TR variations (87) (8,610) (7,390)
US dollar coupon rate Exchange coupon variation 451 (623) (1,239)
Other currency coupon rate Exchange coupon variation 28 (38) (75)
LIBOR – USD Variation in LIBOR (462) (274) (550)
LIBOR Other currencies Variation in LIBOR 0) (17) (34)
Currencies Change in exchange variation – – 0)
Total (uncorrelated sum)* (7,345) (69,123) (132,854)
Total (correlated sum)* (9,402) (48,104) (90,736)
*Uncorrelated sum: sum of the results obtained in the worst stress scenarios for each risk factor.
**Correlated sum: the worst result of the sum of the stress scenarios of all of the risk factors considering the correlation between them.
43
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
PINE
Scenario 1 – Probable
Scenario comprising the variation in market factors between December 30, 2011 and January 18, 2012 (variation in the fixed rate
from 10.04% to 10.02% in a 1-year curve and from 10.98% to 11.11% in a 5-year curve and variation in the US dollar from
1.8758 to 1.7791).
Scenario Il – Possible
Risk Factor
Fixed interest rate (PRE)
General Market Price index (IGPM)
Price index (IPCA)
Long-term interest rate (TJLP)
Reference rate (TR)
US dollar coupon rate
Other currency coupon rate
LIBOR – USD
LIBOR Other currencies
Currencies
Equity (IBOVESPA)
‘Scenario comprising a 25% shock to the market interest rate curve amounts (disclosed by BME.F), and to the closing prices (US
dollar and equity), as in the following example:
Market rate New market rate
(1 year) Shock (1 year)
10.04% 25% 12.55%
5.52% 25% 6.90%
4.28% 25% 5.35%
2.61% -25% 1.96%
9.53% -25% 7.15%
2.95% 25% 3.68%
3.38% 25% 4.23%
1.10% -25% 0.83%
1.31% -25% 0.98%
1.8758 -25% 1.4069
56,754 25% 70,943
Scenario Ill – Remote
Scenario comprising a 50% shock to the market interest rate curve values (disclosed by BMEF), and in the closing prices (US
dollar and equity), as in the following example:
Market rate New market rate
Risk Factor (1 year) Shock (1 year)
Fixed interest rate (PRE) 10.04% 50% 15.06%
General Market Price index (IGPM) 5.52% 50% 8.28%
Price index (IPCA) 4.28% 50% 6.42%
Long-term interest rate (TJLP) 2.61% 50% 1.30%
Reference rate (TR) 9.53% -50% 4.76%
US dollar coupon rate 2.95% 50% 4.42%
Other currency coupon rate 3.38% 50% 5.07%
LIBOR – USD 1.10% -50% 0.55%
LIBOR Other currencies 1.31% -50% 0.65%
Currencies 1.8758 -50% 0.9379
Equity (Ibovespa) 56,754 50% 85,131
“For Scenarios Il and 1Il, the results of the high or low stress scenario was considered to oblain the most significant portfolio losses.
viii) Balance Sheet by currency
2012 EE
(7757
ASSETS
Cash and cash equivalents 130,143 3,034 13 69,223 40,901 18
Loans and advances to credit institutions – – – 24,434 – –
Loans and advances to customers 1,025,834 – – 1,108,807 2,871 –
Other assets 2,122 – – 9,067 – –
Total 1,158,099 3,034 13 1,211,531 43,772 18
LIABILITIES
Deposits from customers 1,348 86 – 78,266 24,561 –
Securities issued abroad 179,368 – 147,014 278,368 – –
Borrowings and onlendings 958,944 – – 1,061,636 832 –
Correspondent banks 22,431 – – 1,691 – –
Subordinated debt 267,641 – – 267,590 – –
Other liabilities – – – –
Total 1,429,732 86 147,014 1,687,551 25,393 –
Derivatives 274,957 (3,006) 142,402 510,585 (11,910) –
GAP 3,324 (58) (4,599) 34,565 6,469 18
44
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reais, except share data)
ix) Balance Sheet by interest rate
PUES
AE EA AAA CU
ASSETS
Debt instruments 3,274,874 539,657 – – – 44,398
Loans and advances to credit institutions 100,299 – – – – –
Loans and advances to customers 2,929,455 – 695,527 146,072 852,643 649
Other assets 89,385 – – – – –
Total 6,394,013 539,657 695,527 146,072 852,643 45,047
LIABILITIES
Deposits from customers 3,211,598 514,490 107 – – 15,876
Deposit from financial institutions 121,299 – – – – –
Funds obtained in the open market 1,832,661 – – – – –
Securities issued abroad 638,956 19,360 188,177 – – 138,867
Borrowings and onlendings 128,426 – 950,871 – 892,308 –
Sale or transfer of financial assets 334 – – – – .
Subordinated debt 56,640 7,788 265,071 – – –
Total 5,989,914 541,638 1,404,226 – 892,308 154,743
Derivatives (1,040,451) (290,062) – 340,998 (41,908) 2,044
GAP (636,352) (292,043) (708,699) 487,070 (81,573) (107,652)
2011
UTE) [173 LIBOR _ Exchange coupon uo Other
ASSETS
Debt instruments 4,278,345 453,469 – – – –
Loans and advances to credit institutions 273,201 – – – – –
Loans and advances to customers 2,838,803 182,649 838,787 113,592 873,177 –
Total 7,390,349 636,118 838,787 113,592 873,177 –
LIABILITIES
Deposits from customers 3,060,296 532,654 36,484 – – 13,053
Deposit from financial institutions 106,182 – – – – –
Securities issued abroad 62,605 8,583 323,086 – – –
Borrowings and onlendings 230,304 – 840,517 109,909 867,261 –
Sale or transfer of financial assets 65,395 – – – –
Subordinated debt – – 29,192 311,774 – –
Total 3,524,782 541,237 1,229,279 421,683 867,261 13,053
Derivatives (2,829,405) (69,047) – 450,033 (77,505) (150,107)
GAP 1,036,162 25,834 (390,492) 141,942 (71,589) (163,160)
€) Operating Risk Management
Definition
The possibility of losses resulting from failure, deficiency or inadequacy of internal processes, people and systems or from external events. Includes the legal risk
associated with inadequacy or deficiency in agreements signed by the Bank, as well as penalties due to noncompliance with laws and indemnities for damages
to third parties arising from activities performed. To mitigate this risk, the Bank adopts a structure to ensure continuous updating and mapping of risks and
controls as well as to capture information related to any operational failure.
Management and methodology
The Operational Risk Management area, which reports to the Risk Control Oversight Board, is responsible for centralizing operational risk management and
disseminating its methodology and the compliance focus points, acting in the Institution’s various activities, helping to promote a culture of compliance and risk
control across the Organization, designed to improve and enhance internal processes and reduce operating risks.
According to this methodology, periodic self-assessments of the area’s activities and processes are performed, which include the identification of inherent risks,
evaluation of the efficacy of the controls and recommendations for action plans to mitigate the identified risks and/or improve controls.
From June 2011, the Institution changed the methodology used to calculate the portion of required reference equity(PRE) related to operational risk (POPR) from
the Basic Indicator Approach (BIA) to the Simplified Alternative Standardized Approach (ASA 11), in accordance with BACEN Circular 3383/08.
47.RECONCILIATION OF EQUITY TO NET INCOME (BRGAAP and IFRS)
In accordance with CVM Instruction 457 of July 13, 2007, we present below the reconciliation of equity and net income attributed to the parent company between
BRGAAP and IFRS for the related periods:
La 2012 2011
Consolidated equity under BRGAAP 1,219,946 1,015,081
Impairment loss on loans and receivables – Impairment a 66,433 34,282
Deferral of bank fees and commissions under the effective interest rate method b (17,407) (9.061)
Transactions for the sale or transfer of financial assets c – (6,956)
Write-off of investment evaluated at cost d – (209)
Income tax and social contribution on IFRS adjustments e (17,606) (7,223)
Equity under IFRS 1,251,366 1,025,914
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT DECEMBER 31, 2012 AND 2011
(In thousands of reals, except share data)
E
Consolidated net income under BRGAAP 187,453 161,514
Impairment loss on loans and receivables – Impairment a 32,151 22,481
Deferral of bank fees and commissions under the effective interest rate method b (8,344) 4,069
Transactions for the sale or transfer of financial assets e 6,956 11,244
Write-off of investment stated at cost d 209 –
Hedge Accounting f (3,974)
Transfer of category in securities g (7,517) –
Income tax and social contribution on IFRS adjustments e (12,388) (15,117)
Net income under IFRS 194,546 184,191
a) Impairment of loans and receivables
Under IFRS, based on the guidance in IAS 39 “Financial Instruments: Recognition and Measurement”, the Institution estimates the allowance for loan losses
based on its historical impairment and other circumstances known at the time of assessment. These criteria differ in certain aspects from the criteria under
BRGAAP, which uses certain regulatory limits defined by the Brazilian Central Bank to calculate the allowance for loan losses.
b) Deferral of bank charges and commissions under the effective interest rate method:
Under IFRS, in accordance with IAS 39 “Financial Instruments: Recognition and Measurement”, inherent bank charges, commissions and financial costs that are
included in the effective interest rate of financial instruments calculated at amortized cost are recognized in income during the period that the respective contracts
are in effect. Under BRGAAP, these fees and expenses are recognized directly in income when received or paid.
Cc) Transactions for the sale or transfer of financial assets:
The Institution wrote off assets related to credit assignments with substantial retention of risks and rewards as from January 1, 2004 and, in accordance with
IFRS 1 requirements, the assets transferred with retention of risks and rewards were recomposed and recorded, and liabilities related to the co-obligation in
credit assignments were recorded on the IFRS transition date, and subsequently. Revenues (expenses) recorded at the time of the credit assignments are
recognized in income during the effective period of the respective agreements.
d) Derecognition of investments stated at cost:
On the date of transition, the Institution wrote off investments stated at cost, previously recorded in assets, as they did not meet the requirements for recognition
of assets under IFRS.
€) Income tax and social contribution on IFRS adjustments
In accordance with IAS 12, deferred income tax and social contribution on taxable, or deductible, temporary differences must be recorded.
Adjustments to deferred income tax and social contribution, calculated on IFRS adjustments, were reflected in the reconciliation.
f) Hedge Accounting
Pursuant to IAS 39, on discontinuance of hedge accounting for cash flows, the cumulative gain or loss resulting from the hedging instrument that remains
recognized as comprehensive income from the period when the hedge was in force shall remain separately recognized in “Equity” until the hedged item is
settled.
9) Transfer of category in securities
¡AS 39 prohibits the reclassification of financial instruments between categories, thus, financial assets available for sale can not be reclassified to other
categories, nor from other categories to it.
48. SUBSEQUENTS EVENTS
On February 4, 2012 at a meeting of the Board of Directors an increase of capital was approved for a minimum of R$ 26,954,999.40 and maximum of R$
86,124,004.60, through the issue of a minimum of 1,887,605 and maximum of 6,031,093 new preferred shares, all nominative without par value. The issue price
will be R$14.28.
A Proparco – Société de Promotion et de Participation Pour La Cooperation Economique S.A. (“Proparco”) has a strong commitment to subscribe 1,887,605
preference shares of the Bank, to the value of R$ 26,954,999.40, as a consequence of the preferred subscription rights of the controlling shareholders of the
Bank.
Rights will be given to all ordinary shareholders that hold a shareholder position in the Bank on February 4, 2013, for a period of 30 days, to exercise their pre –
emptive rights, from February 5, 2013 to March 6, 2013. The shareholders holding these preference shares can subscribe for the preferred shares arising from
the increase in proportion to their equity holding.
After the subscription of shares and the integralization of the capital increase a new meeting of the Board of Directors will be announced, to approve partial or
complete capital increases, within the limit of authorized capital. After approval by the Board of Directors, the capital increase will be subject to authorization by
the Brazilian Central Bank.
46
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