Popular Inc. in San Juan, Puerto Rico, said its quarterly profit fell after losing an arbitration dispute with the Federal Deposit Insurance Corp.

The $39 billion-asset company disclosed in a regulatory filing Tuesday that its third-quarter earnings fell 45% from a year earlier to $46.8 million, or $51.85 a common share.

Popular had warned earlier this month that it would take a $55 million hit after it lost an arbitration dispute with the FDIC over a request for reimbursement for certain shared loss claims. As a result, Popular recognized a pretax charge and a related reduction to its FDIC indemnification asset for the quarter. FDIC loss-share expense totaled $62 million.

Net interest income increased by 2% to $354 million. Net loans fell 0.4% to $22.6 billion, and loans covered under the FDIC-related loss-share agreement dipped 12% to $588.2 million. The net interest margin compressed by 27 basis points to 4.12%.

The loan-loss provision fell 35% to $43.3 million.

Noninterest income fell 42% to $76 million, largely reflecting the arbitration setback. The company reported higher fees, including life insurance commission revenue, and increased net gains from loan sales.


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