Popular Inc. in San Juan, Puerto Rico, will absorb another hit to its earnings tied to a dispute with the Federal Deposit Insurance Corp.
The $30.2 billion-asset company said in a press release Wednesday that it will recognize a fourth-quarter $115 million pretax charge after losing an arbitration battle with the FDIC over a request for reimbursement for certain shared-loss claims.
Popular said the quarterly charge is related to adjustments to the true-up obligation owed to the FDIC when a loss-share agreement expires in 2020, as well as recoveries previously incorporated in the net damages claimed in arbitration.
The dispute stems from Popular's FDIC-assisted purchase of the failed Westerbank in 2010. Popular assumed $8.6 billion of that bank's deposits and bought $9.3 billion of its assets.
Starting in 2012, the FDIC refused to pay part of the loss-share agreement due to differences over how Popular computed chargeoffs for certain real estate loans.
The dispute went before an arbitration review board that ultimately denied Popular's request for about $88.5 million in damages.
"We believe today, as we did when we first decided to pursue this claim, that it was in the best interest of our shareholders to assert our rights under our loss-sharing arrangement with the FDIC by going forward with these bulk sales and seeking reimbursement for the resulting losses," Richard Carri-n, Popular's chairman and CEO, said in the release. "We are obviously disappointed that a majority of the review board felt otherwise, but we will move on."
Popular reported in October that its third-quarter profit fell 45% from a year earlier to $46.8 million due to the arbitration ruling.