May 28, 2009 / 1:13 PM / 10 years ago

UPDATE 1-First Niagara repays TARP proceeds, shares up

* Repays $184 mln TARP proceeds

* Sees Q2 charge of $0.07/shr * Stock up 6 pct before the bell

May 28 (Reuters) - First Niagara Financial Group Inc FNFG.O said it redeemed all of its $184 million non-voting senior preferred stock that was sold to the U.S. Treasury under the Capital Purchase Program.

The company said it will record an accelerated discount accretion of $7.7 million related to the difference between the amount at which the preferred stock sale was initially recorded and its redemption price.

The accretion, together with the final preferred stock dividend, will hurt its second-quarter earnings by 7 cents a share, it added.

First Niagara also said it intends to negotiate with the Treasury to buy back a warrant for 953,000 common shares issued under the program, which is not expected to have an impact on its earnings.

The company said in April it will sell $300 million of common stock to repay the government funding, and to close its acquisition of 57 branches, $4.2 billion of deposits and $839 million in loans from City National Bank, a unit of PNC Financial Services Group Inc (PNC.N).

The government created TARP last fall to unlock the flow of credit after credit markets were brought to a near halt by shocks such as Lehman Brothers Holdings Inc’s LEHMQ.PK bankruptcy.

At first, banks viewed TARP money as a positive, signaling government confidence. But TARP also allows the government to unilaterally impose restrictions, including on pay, and many investors now believe holding bailout money signals weakness.

First Niagara shares were trading up 6 percent at $12.34 before the bell. They closed at $11.68 Wednesday on Nasdaq. (Reporting by Anurag Kotoky in Bangalore; Editing by Anil D’Silva)

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