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FDIC loss share asset and true up payment obligation | 3 Months Ended
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Mar. 31, 2019
Disclosure Text Block |
FDIC loss share asset and true-up payment obligation | Note 10 – FDIC l oss-share asset and true-up payment obligation In connection with the Westernbank FDIC-assisted transaction, BPPR entered into loss-share arrangements with the FDIC with respect to the covered loans and other real estate owned. Pursuant to the terms of the loss-share arrangements, the FDIC’s obligation to reimburse BPPR for losses with respect to covered assets beg an with the first dollar of loss incurred. The FDIC reimburse d BPPR for 80% of losses with respect to covered assets, and BPPR reimburse d the FDIC for 80% of recoveries with respect to losses for which the FDIC paid reimbursem ent under loss-share arrangements. The loss-share component of the arrangements applicable to commercial (including construction) and consumer loans expired during the quarter ended June 30, 2015, but the arrangement provided for reimbursement of recoverie s to the FDIC to continue through the quarter ending June 30, 2018, and for the single family mortgage loss-share component of such agreement to expire i n the quarter ended June 30, 2020. As of March 31, 2018, the Corporation had an FDIC loss share asset o f $ 44.5 million related to the covered assets. As part of the loss-share agreements, BPPR had agreed to make a true-up payment to the FDIC 45 days following the last day (such day, the “true-up measurement date”) of the final shared-loss month, or upon the final disposition of all covered assets under the loss-share agreements, in the event losses on the loss-share agreements fail to reach expected levels. The estimated fair value of such true-up payment obligation at March 31, 2018 was approximately $ 171 million and was included as a contingen t consideration within the caption of other liabilities in the Consolidated Statements of Financial Condition. On May 22, 2018, the Corporation entered into a Termination Agreement (the “Termination Agreement”) with the FDIC to terminate all loss-share arr angements in connection with the Westernbank FDIC-assisted transaction. Under the terms of the Termination Agreement, B PPR made a payment of approximately $ 23.7 million (the “Termination Payment”) to the FDIC as consideration for the termination of the loss-share agreements. Popular recorded a gain of $ 102.8 million within the FDIC loss share income (expense) caption in the Consolidated Statements of Operations calculated based on the difference between the Termination Payment an d the net amount of the true-up payment obligation and the FDIC loss share asset. The following table sets forth the activity in the FDIC loss-share asset for the quarter ended March 31, 2018.
|  |  |  |  | Quarter ended
(In thousands) |  |  |  | March 31, 2018
Balance at beginning of period |  |  | $ | 46,316
Amortization of loss-share indemnification asset |  |  |  | (934)
Credit impairment losses to be covered under loss-sharing agreements |  |  |  | 104
Reimbursable expenses |  |  |  | 537
Net payments from FDIC under loss-sharing agreements |  |  |  | (364)
Balance at end of period |  |  | $ | 45,659
Balance due to the FDIC for recoveries on covered assets |  |  |  | (1,190)
Balance at end of period |  |  | $ | 44,469
As a result of the Termination Agreement, assets that were covered by the loss share agreement, including covered loans in the amount of approximately $ 514.6 million and covered real estate owned assets in the amount of approximately $ 15.3 million as of March 31, 2018, were reclassified as non-covered. The Corporation now recognizes entirely all future credit losses, expenses, gains, and recoveries related to the formerly covered assets with no offset due to or from the FDIC.

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- Definition The FDIC loss share indemnification asset represents the present value of losses on covered assets to be reimbursed by the FDIC under the loss share agreements. + References No definition available. + Details
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