FDIC Indemnification Asset and True-up Payment Obligation

6 Months Ended

Jun. 30, 2017

FDIC Indemnification Asset and True-up Payment Obligation [Text Block]

NOTE 6- FDIC INDEMNIFICATION ASSET, TRUE-UP PAYMENT OBLIGATION, AND FDIC SHARED-LOSS EXPENSE

On February 6, 2017, the Bank and the FDIC agreed to terminate the single family and commercial shared-loss agreements related to the FDIC assisted acquisition of Eurobank on April 30, 2010. As part of the loss share termination transaction, the Bank made a payment of $10.1 million to the FDIC and recorded a net benefit of $1.4 million. Such termination payment took into account the anticipated reimbursements over the life of the shared-loss agreements and the true-up payment liability of the Bank anticipated at the end of the ten year term of the single family shared-loss agreement. All rights and obligations of the parties under the shared-loss agreements terminated as of the closing date of the agreement.

Pursuant to the terms of the shared-loss agreements, the FDIC would reimburse the Bank for 80% of all qualifying losses with respect to assets covered by such agreements, and the Bank would reimburse the FDIC for 80% of qualifying recoveries with respect to losses for which the FDIC reimbursed the Bank. The single family shared-loss agreement provided for FDIC loss sharing and the Bank’s reimbursement to the FDIC to last for ten years, and the commercial shared-loss agreement provided for FDIC loss sharing and the Bank’s reimbursement to the FDIC to last for five years, with additional recovery sharing for three years thereafter.

The following table presents the activity in the FDIC indemnification asset and true-up payment obligation for the quarters and six-month periods ended June 30, 2017 and 2016:

	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2017		2016		2017		2016
	(In thousands)
FDIC indemnification asset:
Balance at beginning of period	$	-	$	20,923	$	14,411	$	22,599
Shared-loss agreements reimbursements from the FDIC		-		(332)		-		(737)
Increase in expected credit losses to be covered under shared-loss agreements, net		-		951		-		2,395
FDIC indemnification asset benefit (expense)		-		(1,405)		1,403		(4,269)
Net expenses incurred under shared-loss agreements		-		(1,711)		-		(1,562)
Shared-loss termination settlement		-		-		(15,814)		-
Balance at end of period	$	-	$	18,426	$	-	$	18,426

True-up payment obligation:
Balance at beginning of period	$	-	$	25,235	$	26,786	$	24,658
Change in true-up payment obligation		-		537		-		1,114
Shared-loss termination settlement		-		-		(26,786)		-
Balance at end of period	$	-	$	25,772	$	-	$	25,772

The Company recognized an FDIC shared-loss (benefit) expense, net in the consolidated statements of operations, which consists of the following, for the quarters and six-month periods ended June 30, 2017 and 2016:

	Quarter Ended June 30,				Six-Month Period Ended June 30,
	2017		2016		2017		2016
	(In thousands)
FDIC indemnification asset expense (benefit)	$	-	$	1,405	$	(1,403)	$	4,269
Change in true-up payment obligation		-		537		-		1,114
Reimbursement to FDIC for recoveries		-		1,478		-		2,066
Total FDIC shared-loss expense (benefit), net	$	-	$	3,420	$	(1,403)	$	7,449