Banco Popular de Puerto Rico lost its appeal before a review board over a dispute with the Federal Deposit Insurance Corp. earlier this year that will result in a $115 million pre-tax charge for the quarter ended Dec. 31, the bank confirmed Wednesday.
The bank said the review board hearing one of the claims issued an arbitration award denying BPPR’s request for damages of approximately $88.5 million, plus interest in connection with the FDIC’s refusal to concur in certain of BPPR’s proposed portfolio sales under the commercial loss shared agreement entered into in connection with the Westernbank FDIC-assisted transaction in 2010.
The amount is higher than the bank originally projected in October, as this media outlet reported.
As previously disclosed, the commercial loss sharing agreement between BPPR and the FDIC provides that any disputes arising from such agreement are to be submitted to arbitration before a review board.
As a result of the adverse decision, for the quarter ended Dec. 31, 2016, Popular expects to recognize a pre-tax charge of approximately $115 million related to unreimbursed losses considered in the arbitration, the related adjustment to the true-up obligation owed to the FDIC at the end of the loss-share agreements in 2020 and recoveries previously incorporated in the net damages claimed in the arbitration.
“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,” said Popular Inc. CEO Richard L. Carrión.
“We’re obviously disappointed that a majority of the review board felt otherwise, but we will move on,” he said.