Popular Inc. in San Juan, Puerto Rico, will take a $55 million hit to third-quarter earnings after its bank lost an arbitration battle with the Federal Deposit Insurance Corp.
The $37.2 billion-asset company said in a press release on Tuesday that an arbitration review board denied a request by Banco Popular de Puerto Rico for reimbursement of about $55 million in shared loss claims. Popular will also record a reduction to its FDIC indemnification asset for the same period.
"While we are very disappointed with this result, we will continue to actively assert our rights under the commercial loss share agreement for the benefit of our shareholders," Richard Carri-n, Popular's chairman and chief executive, said in the release.
The $29 billion-asset bank's dispute with the FDIC was tied to its 2010 purchase of the failed Westernbank. With FDIC assistance, Popular assumed $8.6 billion of Westernbank's deposits and agreed to buy about $9.3 billion of its assets.
Starting in 2012, the FDIC refused to pay a portion of the commercial loss-share agreement due to a difference over how the bank computed chargeoffs for certain real estate loans. The dispute is subject to arbitration before a review board.
A spokesman for Popular said the company was unable to comment further due to confidentiality clauses associated with the loss-share agreement.