In connection with the FDIC assisted acquisition, the Bank and the FDIC entered into shared-loss agreements pursuant to which the FDIC covers a substantial portion of any losses on loans (and related unfunded loan commitments), foreclosed real estate and other repossessed properties covered by the agreements.

The acquired loans, foreclosed real estate, and other repossessed properties subject to the shared-loss agreements are collectively referred to as “covered assets.” Under the terms of the shared-loss agreements, the FDIC absorbs 80% of losses and shares in 80% of loss recoveries on covered assets. The term of the shared-loss agreement covering single family residential mortgage loans is ten years with respect to losses and loss recoveries, while the term of the shared-loss agreement covering commercial loans is five years with respect to losses and eight years with respect to loss recoveries, from the April 30, 2010 acquisition date. The shared-loss agreements also provide for certain costs directly related to the collection and preservation of covered assets to be reimbursed at an 80% level. The FDIC indemnification asset represents the portion of estimated losses covered by the shared-loss agreements between the Bank and the FDIC.

The following table presents the activity in the FDIC indemnification asset and true-up payment obligation for the years ended December 31, 2014 and 2013:

	Year Ended December 31,
	2014		2013		2012
	(In thousands)
FDIC indemnification asset:
Balance at beginning of year	$	189,240	$	302,295	$	405,646
Shared-loss agreements reimbursements from the FDIC		(47,666)		(47,100)		(96,664)
Increase (decrease) in expected credit losses to be covered under shared-loss agreements, net		5,836		(6,730)		7,041
FDIC indemnification asset expense		(62,285)		(66,253)		(25,805)
Incurred expenses to be reimbursed under shared-loss agreements		12,253		7,028		12,077
Balance at end of year	$	97,378	$	189,240	$	302,295

True-up payment obligation:
Balance at beginning of year	$	18,510	$	15,496	$	13,279
Change in true-up payment obligation		3,471		3,014		2,217
Balance at end of year	$	21,981	$	18,510	$	15,496

The FDIC shared-loss expense bears an inverse relationship with a change in the yield of covered pools in accordance with ASC 310-30. ASC 310-30 dictates that such pools should be subject to increases in their yield when the present value of the expected cash flows is higher than the pool's carrying balance. When the increases in cash flow expectations are driven by reductions in the expected credit losses, the Bank recognizes that such losses are no longer expected to be collected from the FDIC. Accordingly, the Bank reduces the FDIC indemnification asset by amortizing the reduction in expected collections throughout the remaining life of the underlying pools. This amortization is recognized in the FDIC shared-loss expense. During the fourth quarter of 2014, the FDIC and the Company agreed to a methodology for the determination of the fair value of covered assets. This change resulted in higher claims to the FDIC from previously expected. As a result, lower amortization of the indemnification asset was required during that quarter.

The underlying factors that caused an increase in the expected cash flows and resulting reduction in projected losses are derived from the pool-level cash flow forecasts. Credit loss assumptions used to develop each pool-level cash flow forecast are based on the behavior of defaults, recoveries and losses of the corresponding pool of covered loans.

Shared-loss agreements reimbursements from the FDIC for the year ended December 31, 2014, include $15.0 million corresponding to the third quarter loss-share certification that was received during January 2015. This was also recorded as an account receivable from the FDIC and included in other assets in the consolidated financial statements.

The FDIC indemnification asset expense of $62.3 million for 2014 decreased when compared to $ 66.3 million for 2013 and $25.8 million for 2012. The reduction in 2014 when compared to 2013 is driven by a lower level of stepped up cost recoveries on certain construction, commercial, and leasing loan pools, which amounted to $12.2 million and $16.6 million in 2014 and 2013, respectively. The increase in 2014 and 2013 when compared to 2012 was caused by the ongoing evaluation of expected cash flows of the covered loan portfolio, which resulted in reduced projected losses expected to be collected from the FDIC and the improved accretable yield on the covered loans. Forecasted losses showed a decreasing trend during in 2014 and 2013 as compared to the projections in 2012. The reduction in claimable losses amortizes the FDIC indemnification asset through the shorter of the remaining life of the shared loss agreement or the loan holding period. This amortization is net of the accretion of the discount recorded to reflect the expected claimable loss at its net present value. Additional amortization of the FDIC indemnification asset may be recorded, should the Company continue to experience reduced expected losses. The majority of the FDIC indemnification asset, $67.9 million, is recorded for projected claimable losses on non-single family residential loans whose loss share period ends in the second quarter of 2015, although the period during which recoveries are shared extends for additional three-years.

Also in connection with the FDIC assisted acquisition, the Bank agreed to make a true-up payment, also known as clawback liability or clawback provision, to the FDIC on the date that is 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 shared-loss agreements in the event losses thereunder fail to reach expected levels. Under the shared-loss agreements, the Bank will pay to the FDIC 50% of the excess, if any, of: (i) 20% of the Intrinsic Loss Estimate of $906.0 million (or $181.2 million) (as determined by the FDIC) less (ii) the sum of: (A) 25% of the asset discount (per bid) (or $227.5 million); plus (B) 25% of the cumulative shared-loss payments (defined as the aggregate of all of the payments made or payable to the Bank minus the aggregate of all of the payments made or payable to the FDIC); plus (C) the sum of the period servicing amounts for every consecutive twelve-month period prior to and ending on the True-Up Measurement Date in respect of each of the shared-loss agreements during which the shared-loss provisions of the applicable shared-loss agreement is in effect (defined as the product of the simple average of the principal amount of shared-loss loans and shared-loss assets at the beginning and end of such period times 1%). The true-up payment represents an estimated liability of $22.0 million and $18.5 million, net of discount, as of December 31, 2014 and 2013, respectively. The estimated liability is included within accrued expenses and other liabilities in the consolidated statements of financial condition.

The true-up payment obligation, also known as clawback liability, may increase if actual and expected losses decline. The Company measures the true-up payment obligation at fair value. During 2014, the fair value of the true-up payment obligation increased by $3.5 million, compared to increases of $3.0 million and $2.2 million for 2013 and 2012, respectively. These changes in fair value are included as change in true-up payment obligation within FDIC shared-loss expense, net in the consolidated statements of operations.

The following table provides the fair value and the undiscounted amount of the true-up payment obligation at December 31, 2014 and 2013: