First Niagara Financial Group said it has completed the final step in its plan to return the funds invested by the U.S. Treasury Department under the Troubled Asset Relief Program.
The company said Monday it has repurchased the warrant for the remaining 953,000 shares of common stock issued to the Treasury on Nov. 21, 2008, for $2.7 million. The repurchase will not have an impact on earnings.
During their six-month investment in First Niagara, the government earned more than $7.4 million for an annualized return of nearly 8 percent.
On May 27, First Niagara returned all $184 million it received from the government in the preferred stock sale under the TARP program. That was after conducting a follow-on stock offering that raised $380.4 million in private-sector equity capital. The number of shares available to the Treasury under the warrant was reduced by one-half due to First Niagara’s ability to raise capital through an underwritten public offering on April 14. Since October 2008, First Niagara has raised more than $495 million in private sector capital.
“We leveraged the federal investment to make commercial and consumer credit readily available in the communities where we do business, just as the program intended, and replaced it with private investors’ capital when stock market conditions improved,” said First Niagara President and CEO John R. Koelmel. “Unlike most others, we raised more than twice the amount originally received from the government and provided a solid return to taxpayers on their investment while continuing to execute our long-term strategy for the benefit of our shareholders.”
First seen as a vote of government confidence, TARP was a federal program that gave stronger banks financial backing from the government. The idea was to put more capital in the market and improve credit flow. But the program also allows the government to impose restrictions on banking activity.
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