FDIC Indemnification Asset and True-up Payment Obligation

12 Months Ended

Dec. 31, 2017

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

NOTE 8- 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 years ended December 31, 2017, 2016 and 2015:

	Year Ended December 31,
	2017		2016		2015
	(In thousands)
FDIC indemnification asset:
Balance at beginning of year	$	14,411	$	22,599	$	97,378
Shared-loss agreements reimbursements from the FDIC		-		(1,573)		(55,723)
Increase in expected credit losses to be covered under shared-loss agreements, net		-		3,391		2,503
FDIC indemnification asset benefit (expense)		1,403		(8,040)		(36,398)
Final settlement with the FDIC on commercial loans		-		-		(1,589)
Net expenses incurred under shared-loss agreements		-		(1,966)		16,428
Shared-loss termination settlement		(15,814)		-		-
Balance at end of year	$	-	$	14,411	$	22,599

True-up payment obligation:
Balance at beginning of year	$	26,786	$	24,658	$	21,981
Change in true-up payment obligation		-		2,128		2,677
Shared-loss termination settlement		(26,786)		-		-
Balance at end of year	$	-	$	26,786	$	24,658

The following table provides the fair value and the undiscounted amount of the true-up payment obligation at December 31, 2016:

	December 31,
	2017		2016
	(In thousands)
Carrying amount (fair value)	$	-	$	26,786
Undiscounted amount	$	-	$	33,635

Oriental recognized an FDIC shared-loss (benefit) expense, net in the consolidated statements of operations, which consists of the following, for the years ended December 31, 2017, 2016, and 2015:

	Year Ended December 31,
	2017		2016		2015
	(In thousands)
FDIC indemnification asset expense (benefit)	$	(1,403)	$	8,040	$	36,398
Change in true-up payment obligation		-		2,128		2,677
Reimbursement to FDIC for recoveries		-		3,413		2,144
Final settlement with the FDIC on commercial loans		-		-		1,589
Total FDIC shared-loss expense (benefit), net	$	(1,403)	$	13,581	$	42,808