(Convenience translation into english from the original previously issued in portuguese)
Consolidate Financial Statements under IFRS for the Quarters Ended on
March 31, 2013 and December 31, 2012 and Independent Auditor’s Report
Banco Pine S.A.
PricewaterhouseCoopers Auditores Independentes
Report on Review of Quarterly Information
To the Board of Directors and Shareholders
Banco Pine S.A.
Introduction
We have reviewed the accompanying consolidated interim accounting information of Banco Pine
S.A. and its subsidiaries (“Institution”) included in the Quarterly Information Form (ITR) for the
quarter ended March 31, 2013, comprising the balance sheet as at that date and the statements of
operations, comprehensive income, changes in equity and cash flows for the quarter then ended,
and a summary of significant accounting policies and other explanatory information.
Management is responsible for the preparation of the consolidated interim accounting
information in accordance with IAS 34 – Interim Financial Reporting, issued by the
International Accounting Standards Board – (IASB), as well as the presentation of this
information in accordance with the standards issued by the Brazilian Securities Commission
(CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to
express a conclusion on this interim accounting information based on our review.
Scope of review
We conducted our reviewin accordance with Brazilian and International Standards on Reviews
of Interim Financial Information (NBC TR 2410 – Review of Interim Financial Information
Performed by the Independent Auditor of the Entity and ISRE 2410 – Review of Interim
Financial Information Performed by the Independent Auditor of the Entity, respectively). A
review of interim information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. A review
is substantially less in scope than an audit conducted in accordance with Brazilian and
International Standards on Auditing and, consequently does not enable us to obtain assurance
that we would become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Banco Pine S.A and its subsidiaries
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the
accompanying consolidated interim accounting information included in the quarterly
information referred to above has not been prepared, in all material respects, in accordance with
TAS 34 applicable to the preparation of the Quarterly Information (ITR), and presented in
accordance with the standards issued by the Brazilian Securities Commission (CVM).
Sáo Paulo, May 15, 2013.
PricewaterhouseCoopers
Auditores Independentes
CRC 2SP000160/0-5
Edison Arisa Pereira
Contador CRC 18P127241/0-0
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais)
PINE
ASSETS
Financial assets
Cash and cash equivalents
Financial assets at fair value
Financial assets held for trading
Debt instruments
Equity Instruments
Derivative financial instruments
Available-for-sale financial assets
Debt instruments
Equity instruments
Hedging derivatives
Financial assets at amortized cost
Loans and receivables
Loans and advances to financial institutions
Loans and advances to customers
Other assets
Non-current assets held for sale
Other
Deposits in guarantee
Recoverable income tax
Other assets
Deferred tax assets
Deferred income tax and social contribution
Fixed assets
Property and equipment in use
Intangible assets
Intangible assets
TOTAL ASSETS
Note
10
11
12
39.c.d
13
14
3/31/2013
9.393.879
568.586
3.534.934
2.899.374
2.604.345
1.225
293.804
635.560
635.560
5.290.359
5.290.359
333.411
4.956.948
603.521
180.213
423.308
201.901
74.413
146.994
68.204
68.204
27.839
27.839
1.831
1.831
10.095.274
12/31/2012
9.700.135
432.076
4.268.898
3.776.085
3.438.752
337.333
492.813
418.623
74.190
4.999.161
4.999.161
100.299
4.898.862
506.802
176.279
330.523
199.189
36.478
94.856
72.021
72.021
28.968
28.968
2.053
2.053
10.309.979
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais)
PINE
LIABILITIES
Financial liabilities
Financial liabilities held for trading
Derivative financial instruments
Financial liabilities at amortized cost
Deposits from financial institutions
Deposits from customers
Funds obtained in the open market
Securities issued abroad
Borrowings and onlendings
Sale or transfer of financial assets
Subordinated debt
Other financial liabilities
Provisions
Provisions for contingent liabilities, commitments and other provisions
Provisions for tax risks
Tax liabilities
Other liabilities
Correspondent banks
Other liabilities
TOTAL LIABILITIES
EQUITY
Capital – Local
Capital – Foreign
Capital reserves
Revenue reserves
Dividends proposed
(-) Treasury shares
Carrying value adjustments
TOTAL LIABILITIES AND EQUITY
Note
15
16
17
18
19
20
21
22
23
24
25
26
27
3/31/2013
8.651.961
109.705
109.705
8.542.256
109.786
3.411.142
1.954.411
836.504
1.868.618
209
303.206
58.380
75.420
31.477
43.943
38.120
47.062
15
47.047
8.812.563
1.282.711
873.381
93.878
9.220
301.337
19.185
(9.993)
(4.297)
10.095.274
12/31/2012
8.894.589
100.393
100.393
8.794.196
121.000
3.595.159
1.832.661
891.632
1.985.137
334
312.202
56.071
93.382
50.791
42.591
10.409
62.237
37
62.200
9.060.617
1.249.362
842.654
93.029
11.685
285.136
18.559
(12.750)
11.049
10.309.979
The accompanying notes are an integral part of these consolidated financial statements.
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT FOR THE YEARS ENDED MARCH 31, 2013 AND 2012
(In thousands of reais, except share data)
PINE
Interest and similar income
Interest and similar expense
NET INTEREST INCOME
Gains from (losses from) financial assets and liabilities (net)
Financial assets and liabilities held for trading
Derivatives
Debt instruments
Exchange variations (net)
Fee and commission income
Fee and commission expense
TOTAL INCOME
Administrative expenses
Personnel expenses
Tax expenses
Other administrative expenses
Other operating income (expenses)
Depreciation and amortization
Provisions (net)
Impairment of financial assets
Loans and receivables
Debt instruments
Result from sales of non-recurring assets
OPERATING INCOME BEFORE TAXES
Income tax and social contribution
CONSOLIDATED NET INCOME
Attributable to controlling stockholders
EARNINGS PER SHARE (R$)
Basic and diluted earnings per share (R$)
Common shares
Preferred shares
Net income attributable/diluted (R$)
Common shares
Preferred shares
Weighted average of shares issued – basic
Common shares
Preferred shares
28
29
30.a)
31
32
35
36
34
37
9.1)
38
39
141.176
(116.371)
24.805
91.088
87.028
64.057
22.971
4.060
10.049
(1.635)
124.307
(52.987)
(29.917)
(8.541)
(19.529)
1.181
(1.525)
1.992
(8.602)
(10.156)
1.554
1.249
65.615
(19.414)
46.201
46.201
0,43
0,43
24.857
21.344
58.444.889
50.186.211
3/31/2012
207.621
(140.685)
66.936
66.158
50.353
7.626
42.727
15.805
23.513
(1.306)
155.301
(57.267)
(85.814)
(4.150)
(17.303)
(87.559)
(1.003)
15.605
5.997
5.997
3.476
84.550
(26.411)
58.139
58.139
0,59
0,59
30.517
27.622
51.886.766
46.966.008
The accompanying notes are an integral part of the consolidated financial statements.
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED MARCH 31, 2013
AND 2012
(In thousands of reais, except share data)
Consolidated net income for the period 46.201
Available-for-sale financial assets 27 (15.043)
Fair value variation (25.062)
Income tax 10.019
Cash flow hedges 27 (303)
Fair value variation (505)
Income tax 202
Comprehensive net income 30.855
0 Pa
58.139
1.722
2.869
(1.147)
3.712
6.187
(2.475)
63.573
The accompanying notes are an integral part of these consolidated financial statements.
FR PINE
BANCO PINE S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED MARCH 31, 2013 AND 2012
(In thousands of reais)
Capital Capital TS UTA do] [e RES
ETE increase ICE reserve EUEIESO ETE
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 – – – – – – 58.139 – 58.139
Other comprehensive income – – – – – – – 5.434 5.434
Available-for-sale financial assets – – – – – – – 2.869 2.869
Cash flow hedges – – – – – – – 6.187 6.187
Deferred income tax – – – – – – – (3.622) (3.622)
Other changes in equity 373.442 (873.439) – 43.139 – (22.779) (58.139) – (37.776)
Capital increase 373.442 (373.439) – – – – – – 3
Legal reserve – – – 2.328 – – (2.328) – –
Statutory reserve – – – 40.811 – – (40.811) – –
Approval/payment of proposed additional dividend – – – – – (22.779) – – (22.779)
Dividends (Note 26) – – – – – – (15.000) – (15.000)
At March 31, 2012 796.048 – 14.032 233.729 – 3.947 – 3.954 1.051.710
At December 31, 2012 935.683 – 11.685 285.136 (12.750) 18.559 – 11.049 1.249.362
Consolidated net income for the period – – – – – – 46.201 – 46.201
Other comprehensive income – – – – – – – (15.346) (15.346)
Available-for-sale financial assets – – – – – – – (25.062) (25.062)
Cash flow hedges – – – – – – – (505) (505)
Deferred income tax – – – – – – – 10.221 10.221
Other changes in equity – 31.576 (2.465) 16.201 2.757 626 (46.201) – 2.494
Capital increase (Note 26) – 31.576 – – – – – – 31.576
Acquisition of treasury shares – – – – 2.757 – – – 2.757
Recognition of share-based payment (Resolution. n*
3.921 (Note 44.a) – – (2.465) – – – – – (2.465)
Legal reserve – – – 2.278 – – (2.278) – –
Statutory reserve – – – 13.923 – – (13.923) – –
Approval/payment of proposed additional dividend – – – – – 626 – – 626
Dividends (Note 26) – – – – – – (30.000) – (30.000)
At March 31, 2013 935.683 31.576 9.220 301.337 (9.993) 19.185 – (4.297) 1.282.711
PINE
BANCO PINE S.A. E CONTROLADAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (INDIRECT METHOD) FOR THE YEARS ENDED MARCH 31, 2013 AND 2012
(In thousands of reais)
3 ESTE 3/31/2012
OPERATING ACTIVITIES
Adjusted net income 66.853 69.943
Consolidated net income for the period 46.201 58.139
Effect of changes in exchange rates on cash and cash equivalents (7.261) (3.647)
Depreciation and amortization 1.525 1.003
Deferred taxes 15.920 18.589
Impairment of loans and receivables 8.602 (5.997)
Provisions for/Reversal of contingencies (net) 288 1.330
Net gains on sale of tangible assets, non-operating assets and investments 24 526
Changes in operating assets and liabilities 67.478 (139.573)
(Increase) Decrease in loans and advances to financial institutions (233.112) 183.670
(Increase) Decrease in debt instruments 691.660 775.948
(Increase) Decrease in equity instruments (16.571) 5.433
(Increase) Decrease in derivatives(net) 52.841 20.962
(Increase) Decrease in loans and advances to customers (66.689) (226.633)
(Increase) Decrease in deferred income tax and social contribution (12.102) 2.934
(Increase) Decrease in non-current assets held for sale (3.934) 14.039
(Increase) Decrease in recoverable income tax (37.935) (950)
(Increase) Decrease in deposit in guarantee (2.712) (4.831)
(Increase) Decrease in other assets (52.138) (37.263)
Increase (Decrease) in securities issued abroad (55.128) (72.844)
Increase (Decrease) in deposits (195.232) (4.972)
Increase (Decrease) in funds obtained in the open market 121.750 (788.036)
Increase (Decrease) in borrowings and onlendings (116.519) (31.484)
Increase (Decrease) in correspondent banks (22) (695)
Increase (Decrease) in sale or transfer of financial assets (125) (13.318)
Increase (Decrease) in other financial liabilities 2.309 6.399
Increase (Decrease) in provisions (18.250) (22.641)
Increase (Decrease) in tax liabilities 27.711 (3.040)
Increase (Decrease) in other liabilities (16.770) 57.749
Net cash provided by (used in) operating activities 134.331 (69.630)
INVESTING ACTIVITIES
Acquisition of property and equipment in use (200) (521)
Disposal of property and equipment in use – 190
Acquisition of intangible assets 3 (512)
Net cash provided by (used in) investing activities (197) (843)
FINANCING ACTIVITIES
Capital increase 31.576 3
Increase (Decrease) in subordinated debt (8.996) (13.138)
Premium on subscription of shares (2.465) –
Acquisition/Sale of treasury shares (net) 2.757 –
Dividends/Interest on own capital (27.757) (38.121)
Net cash used in financing activities (4.885) (51.256)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 129.249 (121.729)
Cash and cash equivalents at the beginning of the period 5 432.076 345.740
Effect of changes in exchange rates on cash and cash equivalents 7.261 3.647
Cash and cash equivalents at the end of the period 5 568.586 227.658
Additional information
Interest received 77.146 97.385
Interest paid 210.832 32.983
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 MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
1. OPERATIONS
Banco Pine S.A. (the “Institution” or “Banco Pine”) is a corporation headquartered at Avenida das Nagóes 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 has been 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 March 31, 2013, was authorized for issue on April 29, 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
+ 1AS 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 did not result in
significant impact on the Consolidated Financial Statements.
+ 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).
These changes did not result in significant impact on the Consolidated Financial Statements.
+ IFRS 7 – “Financial Instruments” In December 2011, a new change to this pronouncement was issued requiring additional disclosures on the offsetting
process. These changes did not result in significant impact on the Consolidated Financial Statements.
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.
Apply to investment entities that invest in funds, solely to obtain returns of equity instruments, investment income, or both. Is not apply until January 1, 2014. The
potential impacts of these changes are being evaluated;
+ 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. These changes did not result in significant impact on the Consolidated Financial Statements.
+ |FRS 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. These changes did not result in significant impact on the Consolidated Financial
Statements.
+ |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. These changes did not result in significant impact on the Consolidated Financial Statements.
c. Standards, amendments and interpretations issued by the International Accounting Standards Board (IASB) that are not yet effective:
The following standards, amendments and interpretations were issued by the lASB, but are not yet effective for the period ended March 31, 2013. The early
adoption of these standards, although encouraged by the lASB, has not been required in Brazil by the Accounting Pronouncements Committee (CPC) and CVM:
+ lAS 32 – “Financial Instruments”: This amendment was issued to clarify the requirements for offsetting financial instruments in the balance sheet. This
amendment is effective for annual periods beginning on 1* January 2014. The possible impacts of the adoption of this change are being evaluated.
+ |FRS 9 – “Financial instruments” refers to the classification, measurement and recognition of financial assets and liabilities. The IFRS 9 was issued in November
2009 and October 2010 and replaces some specific parts of IAS 39 relating to the classification and measurement of financial instruments. The IFRS 9 requires
financial assets to be classified into two categories: measured at fair value and mensured at amortized cost. The determination is made at the financial
instruments initial recognition. The basis of classification depends on the entity’s business model and the contractual characteristics of the cash flows of financial
instruments. In relation to financial liabilities, the standard retains most of the requirements established by IAS 39. The main change , is that in cases in which the
fair value option is taken for financial liabilities, the portion of change in fair value due to credit risk of the entity is recorded in other comprehensive income and
not in the income statement, unless when occasioned by an accounting mismatch. The Group is assessing the full impact of IFRS 9. The standard is applicable
from 1% January 2015.
The Bank believes that the adoption of the standards and interpretations mentioned above will have no material effect on the consolidated financial statements as
a whole, except for IFRS 9 and IAS 19, in which the Bank is analyzing the impacts resulting from the adoption of these standards. There are no other IFRS or
IFRIC interpretations that have not yet entered into force that could have significant impact on the Bank.
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of 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:
O
3/31/2013
EEES)
Overseas Branches
Grand Cayman Agency Foreign Branches 100,000 100,000
Pine Securities USA LLC (% Overseas Subsidiary 100,0000 100,0000
Subsidiaries
Pine Investimentos Distribuidora de Títulos e Valores Mobiliários Ltda. Securities dealer 99,9998 99,9998
Pine Comercializadora de Energía Elétrica Ltda. (% Consulting 99,9999 99,9999
Pine Corretora de Seguros Ltda. Insurance broker 99,998 99,998
Pine Assessoria e Consultoria Ltda. Consulting 99,9998 99,9998
Pine Assessoria em Comercializagáo de Energia Consulting 10,0000 10,0000
Pine Planejamento e Servicos Ltda Consulting 99,9900 99,9900
Special Purpose Entity (SPE)
Pine Crédito Privado Fundo de Investimento em Direitos Creditórios Financeiros Receivables investment fund (FIDC) – .
Investment funds – sole shareholder
Pine High Yield Fundo de Investimento Multimercado Crédito Privado Multimarket investment fund – –
Pine CM Fundo de Investimento Multimercado Crédito Privado Multimarket investment fund – –
Pine RB Capital Fundo de Investimento Multimercado Credito Privado Multimarket investment fund – –
Fundo de Investimento Pine Referenciado DI Crédito Privado DI investment fund – –
1 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 Participagdes S.A. lo Pine Comercializadora de Energía Elétrica
Ltda.
(2 Pine Assessoria em Comercializapáo de Energia Ltda. was constituted on April 24, 2012. Capital is R$10, comprising 10,000 quotas of RS1 each, fully subscribed and paid up in Brazilian currency and distributed as follows
between the partners: Pine Comercializadora de Energia Elétrica – 90% and the Institution – 10%.
(% Pine Planejamento e Servigos Ltda. was constituted on June 26, 2012. Capital is RS10, comprising 10,000 quotas of RS1 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.
(% In October, 2012, Pine Securities USA LLC Limited Liabilty’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:
1) 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 its resources in other assets.
li) 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 MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, 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 March 31, 2013 or December 31, 2012
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.
The critical accounting estimates are
(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.
(ii
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.
Deferred taxes
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 MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, 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 both 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 MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
1. 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 carryforwards 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)
¡ 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.
li. 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
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(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 ¡ts remaining useful life.
viii. 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, March 31, 2013 and
December 31, 2012, classified based on the various measurement methods adopted by the Institution for fair value determination purposes:
3/31/2013 12/31/2012|
[5E7 E A) [EE] ETE Total
Financial assets held for trading 2.193.324 706.050 2.899.374 3.080.766 695.319 3.776.085
Available-for-sale financial assets 510.389 125.171 635.560 285.663 207.150 492.813
Financial liabilities held for trading 52.674 57.031 109.705 46.004 54.389 100.393
Financial instruments at fair value, determined based on public price quotations in active markets (Level 1), include public debt securities and shares of publicly
held companies.
When observable price quotations are not available, Management, based on own internal models, makes its 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 its 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 March 31, 2013 and December 31, 2012, there were no transfers between levels 1 and 2. The Institution has no financial instruments designated as Level 3.
b)
ancial 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
3/31/2013
ACTO ETT ACTO Book value
Financial assets
Cash and cash equivalents ‘” 568.586 568.586 432.076 432.076
Debt instruments (% 3.239.905 3.239.905 3.857.375 3.857.375
Equity instruments % 1.225 1.225 74.190 74.190
Derivative financial instruments 293.804 293.804 337.333 337.333
Loans and advances to financial institutions ‘” 333.411 333.411 100.299 100.299
Loans and advances to customers 4.989.396 4.956.948 4.906.402 4.898.862
Total financial assets 9.426.327 9.393.879 9.707.675 9.700.135
Financial liabilities
Derivative financial instruments” 109.705 109.705 100.393 100.393
Deposits from financial institutions “” 109.786 109.786 121.000 121.000
Deposits from customers ‘” 3.186.034 3.411.142 3.395.225 3.595.159
Funds obtained in the open market!” 1.954.411 1.954.411 1.832.661 1.832.661
Securities issued abroad “” 854.115 836.504 908.488 891.632
Borrowings and onlendings ‘” 1.864.481 1.868.618 1.972.096 1.985.137
Sale or transfer of financial assets ‘” 209 209 334 334
Other financial líabilities 58.380 58.380 56.071 56.071
Subordinated debt 335.984 303.206 332.168 312.202
Total financial liabiliti 8.473.105 8.651.961 8.718.436 8.894.589
12
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
We present below the methods and assumptions used to estimate fair value:
1) 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 from 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
ties 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.
q. 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 March 31, 2013 and December 31, 2012, 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 MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, 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 settiement 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 ¡ts 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.
li. 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.
li. 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 MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, 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 March 31, 2013 and December 31, 2012.
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 MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, 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, at 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 March 31, 2013, 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 that 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
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
3/31/2013|
ETA Retail TY
Interest and similar income. 140.266 910 141.176
Interest and similar expense (115.949) (422) (116.371)
NET INTEREST INCOME 24.317 488 24.805
Gains from (losses from) financial assets and liabilities (net) 91.088 – 91.088
Financial assets and liabilities held for trading 87.028 – 87.028
Derivatives 64.057 – 64.057
Debt instruments 22.971 – 22.971
Exchange rate variations (net) 4.060 – 4.060
Fee and commission income 10.049 – 10.049
Fee and commission expense (853) (682) (1.635)
TOTAL INCOME 124.501 (194) 124.307
Administrative expenses (50.032) (2.955) (52.987)
Personnel expenses (28.129) (1.788) (29.917)
Tax expenses (3.541) – (3.541)
Other administrative expenses (18.362) (1.167) (19.529)
Other operating income (expenses) 1.110 mn 1.181
Depreciation and amortization (1.434) (91) (1.525)
Provisions (net) 1.854 138 1.992
Impairment of financial assets (net) (7.825) (777) (8.602)
Loans and receivables (9.379) (777) (10.156)
Debt instruments 1.554 1.554
Result from sales of non-recurring assets 1.249 – 1.249
OPERATING INCOME BEFORE TAXES 69.423 (8.808) 65.615
Income tax (20.541) 1.127 (19.414)
CONSOLIDATED NET INCOME FOR THE PERIOD 48.882 (2.681) 46.201
Other:
Total assets 10.026.970 68.304 10.095.274
Loans and advances to customers 4.933.476 23.472 4.956.948
Total liabilities 8.811.818 745 8.812.563
Deposits from customers 3.411.142 – 3.411.142
ETA
ETA Retail Total
Interest and similar income. 204.208 3.413 207.621
Interest and similar expense (140.100) (585) (140.685)
NET INTEREST INCOME 64.108 2.828 66.936
Gains from (losses from) financial assets and liabilities (net) 66.158 – 66.158
Financial assets and liabilities held for trading 50.353 – 50.353
Derivatives 7.626 – 7.626
Debt instruments 42.727 – 42.727
Exchange rate variations (net) 15.805 – 15.805
Fee and commission income 23.513 – 23.513
Fee and commission expense (770) (536) (1.306)
TOTAL INCOME 153.009 2.292 155.301
Administrative expenses (54.830) (2.437) (57.267)
Personnel expenses (34.171) (1.643) (85.814)
Tax expenses (4.150) (4.150)
Other administrative expenses (16.509) (794) (17.303)
Other operating income (expenses) (37.885) 326 (87.559)
Depreciation and amortization (857) (46) (1.003)
Provisions (net) 15.717 (112) 15.605
Impairment of financial assets (net) 8.135 (2.138) 5.997
Loans and receivables 8.135 (2.138) 5.997
Result from sales of non-recurring assets 3.476 – 3.476
OPERATING INCOME (LOSS) BEFORE TAXES 86.665 (2.115) 84.550
Income tax (27.072) 661 (26.411)
CONSOLIDATED NET INCOME (LOSS) FOR THE PERIOD 59.593 (1.454) 58.139
Other:
Total assets 10.135.697 167.470 10.303.167
Loans and advances to customers 5.014.699 98.849 5.113.548
Total liabilities 8.606.393 645.064 9.251.457
Deposits from customers 3.651.584 – 3.651.584
5. CASH AND CASH EQUIVALENTS
3/31/2013 12/31/2012|
Cash 211.612 127.788
Loans and advances to financial institutions (” 356.974 304.288
Total cash and cash equivalents 568.586 432.076
“These are transactions with maturities at the original investment date equal to or less than 90 days.
17
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
6. LOANS AND ADVANCES TO FINANCIAL INSTITUTIONS
Loans and advances to financial institutions, at March 31, 2013 and December 31, 2012, were comprised as follows:
3/31/2013 ETA
Classification:
Loans and receivables 333.411 100.299
Total 333.411 100.299
Typi
Investment in interbank deposits 333.411 100.299
Total 333.411 100.299
7. DEBT INSTRUMENTS AND EQUITY INSTRUMENTS
Debt instruments, at March 31, 2013 and December 31, 2012, were comprised as follows:
ETE
EN UNS MTM. EN Atinterest
TO EE ETS value ESO
Classification:
Financial assets held for trading 2.605.570 2.593.430 12.140 3.438.752 3.404.143 34.609
Available-for-sale financial assets 635.560 648.937 (13.377) 492.813 481.129 11.684
Total 3.241.130 3.242.367 (1.237) 3.931.565 3.885.272 46.293
TS EOS
a] E ET A Atinterest
[Security/Maturity maturity EA 360 days 360 days O
National Treasury Bills (LTN) – – – 190.695 – 190.695 190.859
Federal Treasury Notes (NTN) – – – – 171.423 171.423 176.267
Promissory Note 42.070 – – – – 42.070 42.066
Debentures – – – – 65.157 65.157 68.532
Certificates of real estate receivables (CRI) – – – 17.944 – 17.944 17.781
Subtotal 42.070 – – 208.639 236.580 487.289 495.505
Subject to repurchase agreements
Federal Treasury Notes (NTN) – – – – 148.271 148.271 153.432
Subtotal – – – – 148.271 148.271 153.432
Total available-for-sale financial
assets 42.070 – – 208.639 384.851 635.560 648.937
Financial assets held for trading %:
Own portfolio:
National Treasury Bills (LTN) – 329.854 – 1.678 21.181 352.713 352.612
Federal Treasury Notes (NTN) – – – 8.041 63.332 71.373 69.930
Debentures ? – – 97.241 – 231.175 328.416 327.859
CCB – – – 5.395 – 5.395 5.395
Promissory notes – 103.675 – – – 103.675 103.675
Eurobonds – 298 – – 24.752 25.050 24.993
Investment fund shares. 1.225 – – – – 1.225 1.225
Subtotal 1.225 433.827 97.241 15.114 340.440 887.847 885.689
Subject to repurchase agreements
National Treasury Bills (LTN) – 1.296.114 – – – 1.296.114 1.291.284
Federal Treasury Notes (NTN) – 219.373 – – – 219.373 217.007
Debentures – 62.023 – – – 62.023 59.511
Subtotal – 1.577.510 – – – 1.577.510 1.567.802
Subject to repurchase agreements
National Treasury Bills (LTN) – 140.213 – – – 140.213 139.939
Subtotal – 140.213 – – z 140.213 139.939
Total financial assets held
for trading 1.225 2.151.550 97.241 15.114 340.440 2.605.570 2.593.430
Total 43.295 2.151.550 97.241 223.753 725.291 3.241.130 3.242.367
18
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
TS EOS
NUS ES RES AN At interest
¡Security/Maturity EOS PEREA 360 days ESA IU
Available-for-sale financial assets
Own portfol
LTN – – – – 150.403 150.403 150.694
NTN
Promissory notes – – 61.070 – – 61.070 61.362
Eurobonds – – – – 2.123 2.123 2.109
Investment fund shares 74.190 – – – – 74.190 74.190
Debentures – – – – 188.051 188.051 175.524
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
LTN – 599.836 30.067 12.813 194.053 836.769 831.261
NTN – 209.704 – – 144.427 354.131 345.710
Debentures – – 4.018 91.190 226.373 321.581 321.400
cca – – – 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
commitments:
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
guarantees – – 140.036 – 140.036 138.726
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
” Securities classified as “trading” are stated based on their maturity dates.
2 At December 31, 2012, a provision for devaluation of securities was recorded in the amount of R$1,554.
8. DERIVATIVES HELD FOR TRADING (ASSETS AND LIABILITIES)
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 BM8FBovespa 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
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
Cc) 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:
3/31/2013 12/31/2012|
LES ETS Assets METEO
Derivatives held for trading
Swaps 204.945 23.271 216.102 37.625
Market risk 204.945 23.271 216.102 37.625
Interest rate risk 126.789 19.795 115.778 22.302
Foreign currency risk 75.866 3.476 95.927 15.323
Commodities – – 47 –
Variable income 2.290 – 4.350 –
Currency forwards 33.763 34.109 85.122 21.647
Interest rate risk 1.613 15.692 8.034 8.847
Foreign currency risk 31.770 18.417 73.294 12.767
Commodities 380 – 3.794 33
Options. 55.096 52.325 36.109 41.121
Foreign currency risk 24.642 18.077 10.052 15.858
Commodities 30.454 34.248 26.057 25.263
Total derivatives 293.804 109.705 337.333 100.393
€) Notional values and fair values of derivatives for trading and hedging:
TA Market UNT]
ET ETS AO
Derivatives held for trading
Swaps
Market risk
Asset position: 2.877.091 3.254.501 3.039.303 215.198
Interest rate risk 2.099.464 2.344.178 2.191.487 152.691
Foreign currency risk 711.450 840.756 782.049 58.707
Commodities 3.312 3.086 3.086 –
Variable income 62.865 66.481 62.681 3.800
Liability position: 2.877.091 3.072.827 2.976.806 96.021
Interest rate risk 2.192.963 2.351.900 2.273.832 78.068
Foreign currency risk 684.128 720.927 702.974 17.953
Net amount 181.674 62.497 119.177
Forward contracts
Asset positiot 2.315.752 2.320.947 2.338.065 (17.118)
Interest rate risk 654,947 652.864 659.645 (6.781)
Foreign currency risk 1.482.679 1.495.755 1.506.977 (11.222)
Commodities 178.126 172.328 171.443 885
Liability position: 2.315.752 2.321.293 2.345.164 (23.871)
Interest rate risk 1.041.179 1.053.289 1.072.093 (18.804)
Foreign currency risk 1.161.837 1.165.818 1.171.841 (6.023)
Commodities 112.736 102.186 101.230 956
Net amount (846) (7.099) 6.753
Options
Premium on unexercised options: 1.764.377 55.096 59.444 (4.348)
Foreign currency risk 1.073.310 24.642 28.337 (3.695)
Commodities 691.067 30.454 31.107 (653)
Premium on written options: 1.728.946 52.325 61.370 (9.045)
Foreign currency risk 832.648 18.077 18.348 (271)
Commodities 896.298 34.248 43.022 (8.774)
Net amount 2.771 (1.926) (4.697)
20
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
Futures
Purchase 1.742.169 – – 2.601
Interest rate risk 809.001 – – (919)
Foreign currency risk 829.589 – – 3.520
Commodities 103.579 – – –
Sale 2.699.949 – – (5.404)
Interest rate risk 2.413.563 – – (4.901)
Foreign currency risk 115.656 – – (502)
Commodities 170.730 – – (1
Net amount – – (2.803)
Total receivable (payable) and gain (loss) from derivatives 184.099 53.472 118.430
Notional Market UNT]
PAE TO value rate curve
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 1.919.358 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 positio! 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 (3.725)
Total (5.012) (11.812) 6.800
Futures.
Purchase 1.985.824 – – (8.295)
Interest rate risk 1.063.206 – – (167)
Foreign currency risk 840.567 – – (3.128)
Commodities 82.051 – – –
Sale 2.563.454 – – 5.997
Interest rate risk 2.424.256 – – 5.832
Foreign currency risk 48.362 – – 171
Commodities 90.836 – – (6)
Net amount – – 2.702
Total receivable (payable) and gain (loss) from derivatives 236.940 148.776 90.866
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
ET A From 91 to CT CA
GEO 90 days 180 days 360 days 360 days
Asset position:
Swaps 115.293 70.400 82.010 342.681 521.219 2.122.898 3.254.501
Currency fonwards 730.375 281.977 152.059 459.910 411.832 284.794 2.320.947
Options 21.852 784 8.442 13.154 10.864 – 55.096
Futures 394.124 398.160 95.650 93.756 163.105 597.374 1.742.169
Liability position:
Swaps 110.259 67.814 81.724 336.437 509.852 1.966.741 3.072.827
Currency fonwards 721.643 281.976 157.628 462.965 410.454 286.627 2.321.293
Options 10.490 2.122 6.102 16.944 16.667 – 52.325
Futures 385.143 99.793 107.876 883.945 518.418 704.774 2.699.949
[nr ESTA A From 91 to a AA
ELA GEO EE ELO 360 days 360 days
Asset positio!
Swaps 416.506 61.832 37.590 371.916 244.977 2.074.306 3.207.127
Currency forwards 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 forwards 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
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
as at March 31, 2013 is R$3,671, net of tax effects.
9. LOANS AND ADVANCES TO CUSTOMERS, GUARANTEES PROVIDED AND SECURITIES WITH CREDIT RISK
a) Composition
3/31/2013 Ta
Loans and receivables 4.956.948 4.898.862
Loans and receivables at amortized cost 5.075.946 5.012.596
Provision for impairment (118.998) (113.734)
Loans and advances to customers, net 4.956.948 4.898.862
Securities with credit risk
Securities with credit risk held for trading 524.559 497.492
Available-for-sale securities with credit risk 125.171 268.220
Securities with credit risk at amortized cost 30.259 30.767
Provision for impairment – (1.554)
Securities with credit risk, net 679.989 794.925
Guarantees provided and responsibilities 2.620.905 2.123.110
Total expanded portfolio, net 8.257.842 7.816.897
Total expanded portfolio 8.376.840 7.932.185
22
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
b) Types of loan
3/31/2013 ETA
Working capital 2.417.753 2.319.158
Overdraft account 18.724 12.086
BNDES/FINAME onlending 826.397 852.643
Paycheck deductible loans 25.962 36.399
Foreign currency financing 230.397 280.156
Export financing 861.455 798.784
Direct consumer financing (CDC) – vehicles 87 229
Buyer financing (Compror) – 18.407
Debtors for purchase of assets 116.937 114.120
Credit Receivables 96.879 89.075
Advances on foreign exchange contracts and income receivable 481.355 491.539
Credit portfolio 5.075.946 5.012.596
Loans for imports 120.446 8.814
Guarantees provided 2.500.459 2.114.296
Guarantees provided and responsibilities 2.620.905 2.123.110
Credits receivable!” 30.259 30.767
Corporate bonds 2 649.730 765.712
Securities with credit risk 679.989 796.479
Total expanded portfolio 8.376.840 7.932.185
1 Recorded in “Other recelvables” (Note 12).
1? Mostly debentures, promissory notes and receivables certificates in the funds’ portfolio and in Banco Pine’s portfolio (Note7),
Cc) By business activity:
3/31/2013 12/31/2012|
Sugar and ethanol 1.215.860 1.140.962
Civil construction 1.013.354 1.039.048
Electric and renewable energy 952.561 925.388
Agriculture 630.669 689.671
Building and engineering – Infrastructure 569.768 523.777
Transportation and logistics 383.079 395.830
Foreign trade 509.326 365.897
Specialized services 331.578 350.883
Metal products 341.863 332.186
Vehicles and parts 213.608 246.208
Foodstuffs 272.211 242.934
Beverages and tobacco 192.787 192.512
Telecommunications 205.939 158.890
Chemical and petrochemical 223.862 156.508
Financial institution 143.385 155.766
Construction material and decor 152.364 148.696
Mining 169.522 130.581
Meat processing 64.958 111.674
Paper and pulp 97.099 95.467
Information technology 286.975 94.262
Individuals 36.912 62.537
Pharmaceuticals and cosmetics 49.585 53.481
Textiles and clothing 61.341 51.299
Retail trade 49.558 45.039
Plastic and rubber 34.279 42.901
Medical services 36.042 42.721
Communications and printing 38.923 39.224
Electronics 20.586 23.757
Mechanics 20.445 20.668
Steel products 14.346 15.604
Wholesale trade 23.327 19.912
Water and sanitation 15.736 11.415
Leather and footwear 4.992 6.487
Total expanded portfolio 8.376.840 7.932.185
23
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
PIN
a) By sector
3/31/2013 12/31/2012
Agricultural 124.043 107.391
Housing 31.289 27.811
Manufacturing 1.403.383 1.382.815
Commerce 202.354 188.500
Financial intermediation 131.609 99.188
Other services 6.257.232 5.925.167
Individuals 226.930 201.313
Total expanded portfolio 8.376.840 7.932.185
€) Non-recoverable assets – Impairment
3/31/2013 ETA
Loans and receivables – Loans and advances to customers
Operations with evidence of impairment – Individually significant
Gross balance 245.289 247.962
Provision for impairment (100.162) (94.072)
Carrying amount 145.127 153.890
Operations with impairment analysis – Other
Gross balance 4.810.837 4.735.716
Provision for impairment'” (16.469) (16.171)
Carrying amount 4.794.368 4.719.545
Operations with collective impairment analysis – Retail
Gross balance 19.820 28.918
Provision for impairment (2.367) (3.491)
Carrying amount 17.453 25.427
credi
Operations with evidence of impairment – individually significant
Gross balance 679.989 796.479
Provision for impairment – (1.554)
Carrying amount 679.989 794.925
Total expanded portfolio, net 5.636.937 5.693.787
Total (gross) 5.755.935 5.809.075
Interest accrued and unpaid from transactions evidencing impairment were reversed from the portfolio in the amount of R$8,819 (December 31, 2012 – R$8,089).
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:
3/31/2013 ETEnTA
Opening balance 115.288 129.196
Additions/reversals, net 8.602 (5.997)
Assets wrtten-off (4.851) (2.565)
Exchange variation (41) 100
Closing balance 118.998 120.734
9) Loan assignments
For the year ended 31 March, 2013, loans were assigned without coobligation in the amount of R$5,559 to parties not related to the Institution (March 31, 2012 –
R$55,490). These assignments generated a loss in relation to their face value of R$5,509 (March 31, 2012 – R$ 38,779), without discounting the allowance for
loan losses in the amount of R$5,559 (March 31, 2012 – R$30,971). The results of the assignments are recorded in the “Other operating income/expenses”
account. Additionally, contracts previously written off with a loss of R$523 were transferred. These disposals generated a gain of R$ 50, recorded in “Loan
Operations” . As at March 31, 2013, the Institution has no Loan assignments written off.
h) Credit recovery
For the period ended March 31, 2013, credits previously written off as loss were recovered in the amount of R$3,079 (period ended March 31, 2012 – R$1.206)
recorded in the “Loan Operations” account.
i) Renegotiation of contracts
At March 31, 2013, renegotiated contracts totaled R$127,718 (December 31, 2012 – R$130,152). The original ratings attributed to these contracts were
maintained.
10. NON-CURRENT ASSETS HELD FOR SALE
ESTE ETA
‘Non-operating assets 180.213 176.279
Total 180.213 176.279
24
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
PIN
11. DEPOSITS IN GUARANTEE
At March 31, 2013, these comprise judicial deposits related to tax matters, mainly PIS and COFINS in the amount of R$201,901 (December 31, 2012 –
R$199,189).
12. OTHER ASSETS
3/31/2013 12/31/2012|
Reserves at the Brazilian Central Bank
Advances
Credits receivables
Commission on sureties and guarantees
Transactions in progress ‘”
Other receivables
Total
‘ 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:
Facilities 10.546
Furniture and equipment in use 3.138
Communication systems 1.429
Data processing systems 1.135
Security systems 32
Transportation systems 26.066
At March 31, 2013 42.346
Facilities 10.690
Furniture and equipment in use 2.962
Communication systems 1.428
Data processing systems 921
Security systems 31
Transportation systems 26.267
At December 31, 2012 42.299
The changes in “Property and equipment in use” in the consolidated Balance Sheets were as follows:
3/31/2013 ETA
Cost:
Opening balance
Additions
Amount written off
Closing balance
Accumulated depreciation
Opening balance
Amount written off
Depreciation
Closing balance
Property and equipment in use, net
14. INTANGIBLE ASSETS
3/31/2013
Accumulated
EA DET
Licenses for use of software 9.512 (7.681) 1.831 9.915
Total 9.512 (7.681) 1.831 9.915
744 1.426
5.664 5.209
30.259 30.767
49.154 46.295
48.422 (1.977)
12.751 13.136
146.994 94.856
ENT]
COTA Net balance
(9.407) 1.139
(1.519) 1.619
(766) 063
(875) 260
(20) 12
(1.920) 24.146
(14.507) 27.839
ESTE]
depreciation Net balance
(8.932) 1.758
(1.459) 1.503
(739) 689
(849) 72
(19) 12
(1.333) 24.934
(13.331) 28.968
42.299 18.946
423 26.210
(876) (2.857)
42.346 42.299
(13.331) (11.475)
129 1.667
(1.305) (8.523)
(14.507) (13.331)
27.839 28.968
Accumulated
EA
(7.862) 2.053
(7.862) 2.053
25
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
The changes in “Intangible Assets” in the consolidated Balance Sheets were as follows:
3/31/2013 12/31/2012
Cost:
Opening balance 9.915 9.537
Additions – 717
Amount written off (403) (339)
Closing balance 9.512 9.915
Accumulated depreciation
Opening balance (7.862) (7.062)
Amount written off 400 268
Depreciation (219) (1.068)
Closing balance (7.681) (7.862)
Intangible, net 1.831 2.053
15. DEPOSITS FROM FINANCIAL INSTITUTIONS
3/31/2013 12/31/2012
Classification:
Financial iabilties at amortized cost 109.786 121.000
Total 109.786 121.000
By maturity
3/31/2013 12/31/2012
Up to 30 days 6.570 32.749
From 31 to 60 days 4.292 40.128
From 61 to 90 days 20.787 10.282
From 91 to 180 days 71.671 1.506
From 181 to 360 days 1.629 24.266
More than 360 days 4.837 12.069
Total 109.786 121.000
16. DEPOSITS FROM CUSTOMERS
3/31/2013 Ta
Classification:
Financial liabilties at amortized cost 3.411.142 3.595.159
Total 3.411.142 3.595.159
Demand deposits 126.363 30.054
Time deposits 2.962.673 3.167.942
Agribusiness letters of credit 313.407 385.198
Real estate letters of credit 8.699 11.965
Total 3.411.142 3.595.159
By maturity
3/31/2013 12/31/2012
No stated maturity 126.363 30.054
Up to 30 days 355.008 444.780
From 31 to 60 days 302.222 317.543
From 61 to 90 days 298.804 491.191
From 91 to 180 days 417.196 487.686
From 181 to 360 days 557.812 387.564
More than 360 days 1.353.737 1.436.341
Total 3.411.142 3.595.159
17. FUNDS OBTAINED IN THE OPEN MARKET
3/31/2013 ETA
LTN 1.356.188 1.674.484
NTN 537.355 –
Debentures 60.868 158.177
Total 1.954.411 1.832.661
18. SECURITIES
Local
3/31/2013 12/31/2012
Financial bills 591.743 574.265
Total 591.743 574.265
26
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
Foreign – Fixed rate notes
SS E
IUCUSA rate EA 3/31/2013 12/31/2012
US$ 20% paa + Libor Jun/2014 8.267 8.320
US$ 1,85% p.a + Libor Nov/2014 16.228 16.347
US$ 20% pa+Libor Oct2013 14.071 19.023
US$ 8,7% pa + Libor Jan/2017 2.146 2.226
US$ 3,0% paa + Libor Jan/2014 12.079 81.427
US$ 4,2% paa + Libor Apr/2022 51.120 51.157
CLP 6,0% p.a + Var.UF Dec/2017 140.850 138.867
244.761 317.367
19. BORROWINGS AND ONLENDINGS
0 E From 1to E EN
ES PS Ea DE 15 years
Local borrowings – other institutions ‘” – 10.018 92.371 – – 102.389
Local onlendings – official institutions 136.330 146.945 348.573 124.971 102.067 858.886
Foreign onlendings 10.165 – – – – 10.165
Foreign borrowings 386.651 450.113 – – 60.414 897.178
Total 533.146 607.076 440.944 124.971 162.481 1.868.618
0 ERE E From 3 to EN
ES TOO O TO ES
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
TT AU March 31, 2013, mostly FIDC senior shares in the amount of R$92,371 (December 31, 2012 – R$118,735)
20. SALE OR TRANSFER OF FINANCIAL ASSETS
3/31/2013 12/31/2012
ETS
Credit assignments – loans 209 209 334 334
Total 209 209 334 334
At March 31, 2013 or December 31, 2012, there were no assignments to FIDC Pine Crédito Privado, consolidated entity.
21. SUBORDINATED DEBT
We present below the details of the balance of “Subordinated debts”:
1 CTN TS 3/31/2013 Ta
Fixed rate notes Public 6/1/2017 US$125.000 8,75% p.a 252.669 262.635
Financial bills Private 21/8/2017 R$45.152 141,45% do CDI 50.537 49.567
Total 303.206 312.202
22. OTHER FINANCIAL LIABILITIES
3/31/2013 ETA
Deferred income – commission of guarantee 58.380 56.071
Total 58.380 56.071
23. PROVISIONS
a) Provisions for contingent li: jes, tax risks, commitments and other provisions:
3/31/2013 ETA
Labor contingencies 3.354 7.510
Civil contingencies 14.653 16.026
Tax contingencies 43.943 31.766
FIDC Provision – 2.197
Provision for personnel expenses 13.470 28.305
Total 75.420 85.804
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(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$33,574 (December 31, 2012 – R$32,538): 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 innumerous 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.
Currently 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
March 31, 2013, totals R$35,180 (December 31, 2012- R$34,919). 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:
EE]
RE
ET CS ET ES
PIS 33.574 33.569 5 26.831 28.593 (1762)
Cofins – 163.047 (163.047) – 154.711 (154.711)
Total 33.574 196.616 (163.042) 26.831 183.304 (156.473)
) Contingencies classified as probable are regularly recorded as a provision and at March 31, 2013 and March 31, 2012 total:
3/31/2013
Depósitos
E judiciais Líquido Provisio Depósitos judiciais
Tax contingencies 10.369 2.366 8.003 4.935 1.676 3.259
Labor contingencies 3.354 545 2.809 7.510 986 6.524
Civil contingencies 14.653 2.374 12.279 16.026 1.774 14.252
Total 28.376 5.285 23.091 28.471 4.436 24.035
Changes in liability provisions
3/31/2013 12/31/2012
Civil
Opening balance 31.766 7.510 16.026 29.574 7.124 16.025
Amount recorded (reversed) 762 (1.376) (4.009) 1.622 204 (208)
Adjustments 590 65 364 570 182 209
Closing balance 33.118 6.199 12.381 31.766 7.510 16.026
iv) We present below the main law suits and proceedings for which the likelihood of loss was deemed possible:
Labor: At March 31, 2013 and December 31, 2012, the Institution had no labor claims classified as possible.
Civil: At March 31, 2013 and December 31, 2012, the Institution had no civil claims classified as possible.
24, TAX LIABILITIES
3/31/2013 Ta
Income tax payable 23.760 6.621
Social contribution payable 14.360 3.788
Total 38.120 10.409
28
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
25. OTHER LIABILITIES
3/31/2013 ETA
Taxes and contributions payable 6.639 8.087
Dividends and bonuses payable 8.569 9.018
Lawyers’ fees 9.257 9.374
Payment orders in foreign currency 13.380 26.324
Other 9.202 9.397
Total 47.047 62.200
26. EQUITY
a) Capital
Subscribed and paid-up capital totals R$967,259 and comprises 110,842,313 (December 31, 2012 – 108,631,100) nominative shares, of which 58,444,889 are
common shares and 52,397,424 (December 31, 2012 – 50,186,211) 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 February 4, 2013 and approved by the Central Bank on April 19, 2013, the capital increase in the
amount of R$31,576 through the issue of 2,211,213 shares, with 2,100,839 (1,887,605 to Societe de Promotion et de Participation Pour la Cooperation
Economique S.A. – PROPARCO (“PROPARCO”) and 323,608 to other shareholder, nominative preferred shares, from R$935,683 to R$967,259, divided into
110,842,313 nominative shares, of which R$58,444,889 are common shares and 52,397,424 are preferred shares, with no par value. This value of capital
increasing ¡is registered in stockholders equity, on initial “Capital Increase”.
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 increase
in the amount of R$139,635 through the issue of 3,220,203 shares, with 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 R$58,444,889 are common shares and 50,186,211 are preferred shares, with no
par value.
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 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 Bank’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$13,923, after the
appropriation of 5% to the legal reserve of R$2,278, the deduction of the payment of interest on own capital of R$14,977 and dividends in the amount of
R$15,023 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 March 31, 2013 by R$5,991 ( March 31,
2012 – R$5,958).
We present below the approved dividends and interest on own capital for the net income of period:
AS
Net of withholding tax Net of withholding
PESTO AO LA
O O EN
Interest on own capital 3/21/2013 4/10/2013 0,1389 14.977 0,1181 12.730
Dividends 3/21/2013 4/10/2013 0,1393 15.023 – –
In accordance with ICPC 08, the proposed additional dividend in excess of the minimum dividend, in the amount of R$19,185 (December 31, 2012 – R$
R$18,559) is classified in a specific equity account.
29
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
e) Treasury shares
At a meeting of the Board of Directors on September 16, 2011,the acquisition of self-issued shares of Pine was authorized for up to 2,154,011 preference shares
to be held in treasury for subsequent sale, as well as payment of variable remuneration for the statutory directors of the Bank in agreement with the terms of
Resolution 3.921/11, without reducing equity. 713,395 shares were repurchased in the amount of R$ 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 738.500 shares in the amount of R$ 9.573 with an average cost of R$ 12.96.
Authorization for issue can be granted until December 5, 2013.
During the first quarter Pine transferred 334,550 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$ 4,767 with an average cost of R$ 14.25.
At March 31, 2013 the bank had 806,996 preferred shares on treasury of its own issuance in the amount of R$ 9,993. The market value of these shares
corresponded to R$ 11,653 (R$ 14,923 – December 31, 2012).
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.
3/31/2013 ETA
Available-for-sale financial assets (13.377) 390
Debt instruments (13.377) 390
Cash flow hedges 3.670 6.085
Hedging instrument 6.118 (2.079)
Income tax (2.448) 8.164
Other 59 69
Income tax 5.351 (2.590)
Total (4.297) 3.954
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 March 31, 2013, the bank sold securities classified as available-for-sale. This operation resulted in a profit of R$238 (R$ 11,524 at December 31, 2012) 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.
3/31/2013 ETEnTA
Loans and advances to financial institutions 1.512 112
Available-for-sale debt instruments 19.947 44.455
Loans and advances to customers 119,717 163.054
Total 141.176 207.621
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.
3/31/2013 ETEnTA
Deposits from financial institutions 1.745 3.739
Deposits from customers 82.085 99.903
Funds obtained in the open market 63 451
Borrowings and onlendings 15.973 23.178
Securities Liabilities 5.364 2.592
Subordinated debts 6.228 4.217
Other interest 4.913 6.605
Total 116.371 140.685
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
3/31/2013 ETA
Financial assets held for trading 87.028 50.353
Total 87.028 50.353
30
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
b) Financial assets held for trading – Derivatives
Futures. 20.946 (75)
Options 21.868 151
Swaps 61.700 46.351
Forward contracts (40.457) (38.801)
Total 64.057 7.626
€) Financial assets held for trading – Debt instruments
3/31/2013 ETA
Debt instruments 22.971 42.727
22.971 42.727
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.
Commission on guarantees 8.005 6.800
Structuring fee 1.338 14.337
Customer account charges 552 –
Other 154 2.376
Total 10.049 23.513
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 515 328
Banking services 225 204
Teleprocessing 682 536
Other 213 238
Total 1.635 1.306
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. At March 31, 2013 the amount for
foreign exchange variation was R$ 4,060 (at March 31, 2012 – R$ 15,805).
34. OTHER OPERATING INCOME(EXPENSES)
3/31/2013 3/31/2012
Recovery of expenses 429 114
Charges on credits granted ‘” (5.515) (38.860)
Income of rentals 986 –
reversal of labor suits 1.539 –
reversal of tax risks 75 –
reversal of civil suits 3.444 –
Other 223 1.187
Total 1.181 (87.559)
R55,509 (R$ 38,779 at March 31,2012) refers to losses with loans assigned without coobligation, as mentioned at note 9.9
35. PERSONNEL EXPENSES
3/31/2013 ETA
Salaries 14.979 14.536
Benefits, training 2.274 2.081
Social charges 5.135 5.250
Profit sharing 7.529 13.947
Total 29.917 35.814
31
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
36. OTHER ADMINISTRATIVE EXPENSES
3/31/2013 ETEnTA
Water, electricity and gas 142 104
Rents 2.131 1.942
Leased assets 242 792
Communications 938 938
Charitable contributions 18 –
Maintenance and repair of assets 553 374
Materials 41 42
Data processing 2.317 2.292
Promotion and public relations 208 476
Publicity and advertising 313 472
Publications 500 446
Insurance 9 eo
Financial system services 1.181 939
Third-party services 1.099 1.734
Surveillance and security services 1.198 517
Specialized technical services 3.881 2.481
Transportation 371 480
Travel 530 547
Court decisions 2.500 –
Other administrative expenses 1.357 2.683
Total 19.529 17.303
37. NET PROVISIONS
3/31/2013 3/31/2012
Indexation – asset 2.304 3.715
Indexation – liability – 96
Reversion/Provision for civil and labor proceedings (288) (1.330)
Reversal of provision for guarantees – 15.178
Other (24) (2.054)
Total 1.992 15.605
38. RESULT OF SALE OF ASSETS
At March 31, 2013 the amount of R $ 1,249 (R $ 3,476 at March 31, 2012) 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:
3/31/2013 3/31/2012
Income before taxes, net of profit sharing 65.615 84.550
Interest on own capital (14.977) (14.895)
Income before taxes on income 50.638 69.655
Rate (25% income tax and 15% social contribution) 40% 40%
Expected expense for IRPJ and CSLL, based on current tax rate (20.255) (20.143)
Temporary differences 15.171 10.779
Effects of income tax and social contribution on temporary differences (15.489) (18.589)
Other adjustments 1.159 1.542
Income tax and social contribution (19.414) (26.411)
Of whicl
Current tax (3.494) (7.822)
Deferred tax (15.920) (18.589)
Expense recorded (19.414) (26.411)
b) Tax calculation at the effective rates
3/31/2013 3/31/2012
Income before taxes on income 65.615 84.550
Income tax and social contribution 19.414 26.411
Effective rate 29,59% 31,24%
C) Deferred taxes recognized in income
3/31/2013 ESTA
Impairment 75.953 72.483
Losses for loan operations not yet deducted 23.201 19.986
Provision for tax risks and contingent liabilities 20.275 21.270
Provision for profit sharing 2.200 8.609
Provision for other assets 3.983 –
Other IFRS adjustments (12.380) (14.941)
Mark-to-market adjustment of derivative financial instruments (50.599) (36.150)
Other adjustments 2.668 (2.264)
Total 65.301 68.993
32
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
d) Taxes recognized in equity
3/31/2013 ETA
Valuation of (fixed income) available-for-sale securities 5.351 (156)
Valuation of cash flow hedges (2.448) (2.122)
Total 2.903 (2.278)
€) Changes in deferred taxes
3/31/2013 ETEnTA
Opening balance 66.715 88.238
Debit (credit) to income (15.920) (18.589)
Debit (credit) to equity 17.409 (2.934)
Closing balance 68.204 66.715
f) Estimated realization
3/31/2013|
Up to 1 year 149.260
From 1 to 2 years 15.554
From 2 to 3 years 11.032
From 3 to 4 years 8.125
From 4 to 5 years 4.138
From 5 to 10 years 22.334
Subtotal Assets – Tax credits 210.443
Up to 1 year 109.344
From 1 to 2 years 4.994
From 2 to 3 years 7.819
From 3 to 4 years 11.176
From 4 to 5 years 5.515
From 5 to 10 years 3.391
Subtotal Liabilities – Tax Credits 142.239
Total 68.204
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 March 31, 2013, the amount of this contribution was R$95 (March 31, 2012 – R$81).
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
Policies and strategies for capital management, considers a prospective position, anticipating capital needs arising from possible changes in market conditions
and are periodically reviewed by the Executive Board and the Board of Directors, in order to determine their compatibility with the strategic plan of the Institution.
Financial Institutions are required to permanently maintain capital compatible with the risks of their activities, represented by Required Regulatory Capital (PRE).
PRE is calculated considering, at least the sum of the portions of credit risk, market risk and operational risk.
On March 2013, the Bank has made public the rules relating to the definition of capital and regulatory capital requirements in order to implement the
recommendations of the Brazil Committee on Banking Supervision (Basel Il). The main objectives are: i) improve the ability of financial institutions to absorb
shocks from the financial system or the other sectors of the economy; ii) reduce the risk of contagion in the financial sector of the company; ¡¡i) assisting the
maintenance of financial stability, and iv) promoting sustainable economic growth. The implementation of the new Basel II! Rules starts from October 1, 2013.
At March 31, 2013, the Institution’s Basel ratio was 17.14% (December 31, 2012 – 16.19%), calculated based on the consolidated financial information.
ESTE 12/31/2012|
Reference equity (PR) 1.453.709 1.477.645
Tier! 1.268.495 1.220.446
Equity in BRGAAP 1.260.469 1.219.946
Mark-to-market adjustments 8.026 500
Tier II 185.214 257.199
Subordinated debt 193.240 257.699
Mark-to-market adjustments (8.026) (500)
Required reference equity (PRE) 933.161 1.004.123
Credit risk 802.258 899.670
Market risk 122.595 95.559
Operational risk 8.308 8.894
Excess PR 520.548 473.522
Basel ratio – % 17,14% 16,19%
33
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
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.brl/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 March 31, 2013, the equity to fixed assets ratio was
10.85% (December 31, 2012 – 10.21%).
34
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, 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
March 31, 2013, and December 31, 2012:
3/31/2013 ETA
Guarantees provided to financial institutions 35.830 9.664
Guarantees provided to individuals and corporations 2.464.629 2.104.632
Letters of credit 120.446 8.814
Total 2.620.905 2.123.110
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 March 31, 2013, variable remuneration was determined in the amount of R$6,545, in accordance with the criteria defined in the new plan.
A e O CENA 3/31/2013 ETEnTA
Fixed compensation 2.173 1.940
Variable compensation 6.571 11.036
Short-term Benefits 984 485
Total 9.728 13.461
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 March 31, 2013, compensation in the amount of R$329 (March 31, 2012 – R$ 814) was paid to officers who left the
Institution.
35
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
PIN
b) Related parties
3/31/2013
3/31/2012
Income (expenses)
3/31/2013 EJEA]
Marketable securities 44.867 110.296 1643 5.082
Pine Crédito Privado – FIDC 44.867 110.296 643 5.082
Demand deposits 112 123 – –
Pine Investimentos 50 68 – –
Pine Comercializadora de Energia Elétrica 4 13 – –
Pine Corretora 5 3 – –
Pine Assessoria 5 12 – –
Pine Asesoria em Comercializagáo de Energía 10 – – –
Pine Planejamento Ltda 9 – – –
Directors and immediate family!” 29 27 – –
Interbank deposits 5.403 14.588 (144) (510)
Pine Investimentos 5.403 14.588 (144) (510)
e deposits 174.955 124.303 (8.513) (2.732)
Pine Investimentos 28.426 16.762 (464) (368)
Pine Comercializadora de Energia Elétrica 81.171 81.287 (1.413) (2.142)
Pine Corretora 224 713 M) (19)
Pine Assessoria 35.499 10.305 (601) (91)
Pine Planejamento Ltda 13.355 – (90) –
Pine Asesoria em Comercializacáo de Energía 40 – – –
Directors and immediate family!” 16.240 15.236 (941) (112)
(% The amounts relating to directors and immediate family are not consolidated.
Cc) Capital ownership
The following table presents the direct investment in common and preferred shares, at March 31,2013 and December 31, 2012, of stockholders with more than
five percent of the total shares and of members of the Board of Directors and Executive Board.
ETT Common Preferred TT TY
En shares(%) En EE) En shares(%)
Individuals 58.444.889 100,00 15.395.863 30,68 73.840.752 67,97
Board of Directors – – 3.218.179 6,41 3.218.179 2,96
Executives – – 2.856.314 5,69 2.856.314 2,63
Total 58.444.889 100,00 21.470.356 42,78 79.915.245 73,56
e e Preferred A] Total Total
En shares(%) En EE) En shares(%)
Individuals 58.444.889 100,00 15.595.863 31,08 74.040.752 68,16
Board of Directors – – 3.281.010 6,54 3.281.010 3,02
Executives – – 2.635.774 5,25 2.635.774 2,39
Total 58.444.889 100 21.512.647 42,87 79.957.536 73,57
45. OTHER INFORMATION
a) Insurance
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 Type of Cover
MOMENT
Directors and Officers Liability (D8O) Management Civil Liability 20.000
Vehicles Fire, robbery and collision for 11 vehicles 1.930
Buildings, machines, furniture 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
36
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, 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.
li. 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.
37
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(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
3/31/2013 ETA
Cash equivalents 356.974 304.288
Debt instruments 2.604.345 3.438.752
Derivatives 293.804 337.333
Loans and receivables 5.409.357 5.112.895
Guarantees provided 2.620.905 2.123.110
Quality of credit
We present below the segregation of loans, considering the following: loans falling due and loans past due with or without impairment:
Unexpired
IA AS SS
2682) CN CN OTTO
AA-C (Collective) 9.443 4.801.394 4.810.837 16.469
D-H (Individual analysis) 83.827 161.462 245.289 100.162
Retail 2.609 17.211 19.820 2.367
Securities with credit risk – 679.989 679.989 –
Total 95.879 5.660.056 5.755.935 118.998
7
IA SS SS
2682) CN CN OTTO
AA-C (Collective) 50.618 4.985.933 5.036.551 –
D-H (Individual analysis) 111.730 67.675 179.405 118.570
Retail 4.516 13.810 18.326 2.164
Total 166.864 5.067.418 5.234.282 120.734
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 Composi
n
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.
38
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, 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.
39
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, 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.
li. 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 definition 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 guarantees and other types of guarantee held against financial assets.
aaa
3131/2013 ETA
Operations with impairment
Receivables 2.448 622
Pledge / sale of products, inventories and equipment 27.544 107.751
Mortgage / sale of real estate 93.263 3.230
Subtotal 123.255 111.603
Operation without impairment
Receivables 997.123 933.952
Pledge / sale of products, inventories and equipment 1.369.559 1.421.962
Financial investments 87.080 39.939
Mortgage / sale of real estate 990.079 755.850
Guarantees 68.057 57.316
Subtotal 3.511.898 3.209.019
Total 3.635.153 3.320.622
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reaís, except share data)
Uniden
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
amounts, 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.
€) 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:
+ 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 P8L Risk Oversight Board, which reports to the Risk Control Oversight Board.
Balance Sheet by maturity
We present below the Balance Sheet by contractual maturity:
AE CA
360 days 360 days
ASSETS
Financial Assets 4.840.501 2.282.620 2.270.758 9.393.879
Cash and cash equivalents 5 568.586 – – 568.586
Financial assets held for trading 2.651.727 61.137 186.510 2.899.374
Debt instruments 7 2.588.878 – 15.467 2.604.345
Equity instruments 1.225 – – 1.225
Derivatives 8 61.624 61.137 171.043 293.804
Available-for-sale financial assets 190.341 208.639 236.580 635.560
Debt instruments 7 190.341 208.639 236.580 635.560
Loans and receivables 1.429.847 2.012.844 1.847.668 5.290.359
Loans and advances to credit institutions 6 260.099 73.312 – 333.411
Loans and advances to customers 9 1.169.748 1.939.532 1.847.668 4.956.948
Other assets 216.568 91.959 363.198 671.725
Non-current assets held for sale 10 149.530 30.683 – 180.213
Other 67.038 61.276 363.198 491.512
Deposits in guarantee 11 – – 201.901 201.901
Recoverable income tax 331 322 73.760 74.413
Other assets 12 65.612 22.133 59.249 146.994
Deferred income tax and social contribution 39 1.095 38.821 28.288 68.204
TOTAL ASSETS ‘” 10.065.604.
LIABILITIES
Financial liabilities 3.729.426 1.728.567 3.193.968 8.651.961
Derivatives 8 36.458 54.797 18.450 109.705
Deposits from financial institutions 15 31.649 73.300 4.837 109.786
Deposits from customers 16 1.082.397 975.008 1.353.737 3.411.142
Funds obtained in the open market 17 1.954.411 – – 1.954.411
Securities issued abroad 18 26.974 18.386 791.144 836.504
Borrowings and onlendings 19 533.146 607.076 728.396 1.868.618
Sale or transfer of financial assets 20 209 – – 209
Other financial liabilities 22 58.380 – – 58.380
Subordinated debt 21 5.802 – 297.404 303.206
Provisions 2 7.971 5.500 61.949 75.420
Reserves for contingent liabilities, commitments and other provisions 7.971 5.500 18.006 31.477
Provision for tax risks – – 43.943 43.943
Tax liabilities 24 – 38.120 – 38.120
Other liabilities 37.805 – 9.257 47.062
Other liabilities 25 37.790 – 9.257 47.047
Correspondent banks 15 – – 15
TOTAL LIABILITIES 8.812.563
“T Does not include the total Property and equipment or intangible assets.
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
TEE More than
360 days ESTO
ASSETS
Financial Assets 5.300.398 2.110.531 2.289.206 9.700.135
Cash and cash equivalents 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-for-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 1“ – – 199.189 199.189
Recoverable income tax 855 – 35.623 36.478
Olher 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 Y 10.278.958
LIABILITIES
Financial liabilities 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 líabilties 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 provision 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.
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 controllable 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 contr
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.
ii) 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 MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of regis, 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.
i) 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, BMéFBovespa, 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 (DVO1) 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 BM8FBOVESPA 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:
y inimum!
March 31, 2013 978 456
December 31, 2012 1.076 245
43
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
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
March 31, 2013:
Sensitivity analysis
Er
ETA EA) ETA A)
Fixed interest rate (PRE) Fixed interest rate variations (1.680) (5.054) (10.108)
General Market Price index (IGPM) IGPM coupon variations (86) (181) (362)
Price index (IPCA) IPCA coupon variations (973) (4.757) (9.515)
Long-term interest rate (TJLP) TJLP variations (1) 1.039 2.078
US dollar coupon rate Exchange coupon variation (4.715) (1.479) (2.959)
Other currency coupon rate Exchange coupon variation 36 (47) (94)
Offshore rates (Libor + other Offshore) Offshore rates variation 676 (6.748) (13.495)
Currencies Change in exchange variation 1 (18) (36)
Total (uncorrelated sum)” (9.295) (19.515) (39.029)
Total (correlated sum)** (6.742) (17.246) (34.492)
*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 March 28, 2013 and April 12, 2013 (variation in the fixed rate from
Scenario 1 – Probable 7.92% to 8.32% in a 1-year curve and from 9.44% to 9.29% in a 4-year curve, variation in the US dollar from 2.014 to 1.976, and
variation in the IPCA coupon from 1.36% to 1.72% 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 II – Possible dollar and equity), as in the following example:
Market rate New market rate
Curve (L year) Shock (L year)
Fixed interest rate (PRE) 7,92% 25%, 9,91%
Price index (IGPM) 2,48% 25% 3,10%
Price index (IPCA) 2,67% 25% 3,34%
TJLP rate 2,66% -25% 2,00%
US dollar coupon rate 1,36% -25% 1,02%
Other currency coupon rate 1,33% 25% 1,67%
LIBOR – USD 0,73% 25% 0,91%
Currencies 2,0138 25% 2,5173
Scenario comprising a 50% shock to the market interest rate curve values (disclosed by BMBF), and in the closing prices (US
Scenario II! – Remote (*) dollar and equity), as in the following example:
Market rate New market rate
Curve (L year) Shock (L year)
Fixed interest rate (PRE) 7,92% 50%, 11,89%
Price index (IGPM) 2,48% 50% 3,72%
Price index (IPCA) 2,67% 50% 4,00%
TJLP rate 2,66% -50% 1,33%
US dollar coupon rate 1,36% -50% 0,68%
Other currency coupon rate 1,33% 50% 2,00%
LIBOR – USD 0,73% 50% 1,10%
Currencies 2,0138 50% 3,0207
ENANA
ETA AAA) Possible (11) Remote (1)
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 (TJLP) TJLP variations 671 913 1.826
Reference rate (TR) TR variations (553) 234 469
US dollar coupon rate Exchange coupon variation 1 (8) (19)
Other currency coupon rate Exchange coupon variation (265) (2.419) (4.837)
Currencies Change in exchange variation 8 (833) (667)
Total (uncorrelated sum)* (8.159) (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.
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
TS
Scenario comprising the variation in market factors between December 31, 2012 and January 7, 2013 (variation in the fixed rate
Scenario 1 – 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 BM8F), and to the closing prices (US
Scenario Il – Possible dollar and equity), as in the following example:
Market rate New market rate
Risk Factor (L 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 BM8F), and in the closing prices (US
11! – Remote dollar and equity), as in the following example:
Market rate New market rate
Risk Factor (L year) Shock (L 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 204,35% 50% 306,53%
viii) Balance Sheet by currency
Ea
Sr 2
ASSETS
Cash and cash equivalents 184.639 88.284 10 130.143 3.034 13
Loans and advances to customers 944.923 – – 1.025.834 – –
Other assets 25.167 16.316 – 2.122 – –
Total 1.154.729 104.600 10 1.158.099 3.034 13
LIABILITIES
Deposits from customers 760 100.300 – 1.348 86 –
Securities issued abroad 104.468 – 149.575 179.368 – 147.014
Borrowings and onlendings 845.832 – – 958.944 – –
Correspondent banks 6.266 – – 22.431 – –
Subordinated debt 257.528 – – 267.641 – –
Other liabilities 56.565 – – – – –
Total 1.271.419 100.300 149.575 1.429.732 86 147.014
Derivatives 114.872 (3.819) 147.769 274.957 (3.006) 142.402
GAP (1.818) 481 (1.796) 3.324 (58) (4.599)
45
PIN
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
1x) Balance Sheet by interest rate
ESTE
Fixed rate(PRE) 13 LIBOR – Exchange coupon uo Other]
ASSETS
Debt instruments 2.318.461 630.368 – – – 48.928
Loans and advances to credit institutions 542.810 – – – – –
Loans and advances to customers 3.238.495 256.671 801.992 187.979 826.397 649
Other assets 209.263 – – – – –
Total 6.309.029 887.039 801.992 187.979 826.397 49.577
LIABILITIES
Deposits from customers 2.838.904 501.126 216 – – 15.890
Deposits from financial institutions 115.496 – – – – –
Funds obtained in the open market 1.904.680 48.436 – – – –
Securities issued abroad 647.812 25.922 255.677 – – –
Borrowings and onlendings 102.389 – 855.468 – 858.886 –
Sale or transfer of financial assets 209 – – – – –
Subordinated debt – – 346.261 – – –
Total 5.609.490 575.484 1.457.622 – 858.886 15.890
Derivatives (1.005.760) (818.402) – 142.218 (30.585) (8.075)
GAP (306.221) (6.847) (655.630) 330.197 (63.074) 25.612
ETA
ETE) 3 LIBOR – Exchange coupon uu El
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
Deposits 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)
€) Operating
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:
M3 3/31/2013 Ea
Consolidated equity under BRGAAP 1.260.469 1.219.946
Impairment loss on loans and receivables – Impairment a 66.911 66.433
Deferral of bank fees and commissions under the effective interest rate method b (29.841) (17.407)
Income tax and social contribution on IFRS adjustments e (14.828) (19.610)
Equity under IFRS 1.282.711 1.249.362
46
PINE
BANCO PINE S.A. AND SUBSIDIARIES
NOTES TO THE IFRS CONSOLIDATED FINANCIAL STATEMENTS AT MARCH 31, 2013 AND AT DECEMBER 31, 2012
(In thousands of reais, except share data)
3 3/31/2013 ETA
Consolidated net income under BRGAAP 45.555 46.560
Impairment loss on loans and receivables – Impairment a 478 18.171
Deferral of bank fees and commissions under the effective interest rate method b (12.435) (885)
Transactions for the sale or transfer of financial assets e – 1.903
Write-off of investment stated at cost d – 209
Hedge Accounting f 303 –
Transfer of category in securities 9 7.517 –
Income tax and social contribution on IFRS adjustments e 4.783 (7.719)
Net income under IFRS 46.201 58.139
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.
47
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