Webster announces TARP exit

WATERBURY, Conn. – Webster Financial Corp., the holding company for Webster Bank, has exited the federal government’s Troubled Asset Relief Program, after it repurchased the remaining $200 million of preferred stock held by the U.S. Treasury.
Webster enrolled in TARP’s Capital Purchase Program in December 2008. The program allowed the federal government to buy shares of healthy banks in hopes it would help thaw credit markets.
Many of the banks that initially signed on have since exited the program, citing restrictive government requirements on matters including executive compensation.
For instance, Bancorp Rhode Island, the parent of Providence-based Bank Rhode Island, received a $30 million cash infusion from the same program in December 2008. The bank repurchased the Treasury’s shares in the 2009 third quarter.
Webster, the No. 10 bank in Rhode Island by deposits, received $400 million in new capital and, in return, issued 400,000 shares of preferred stock. The bank bought back $200 million worth, in March and October 2010.
“We are pleased to have completed this orderly, responsible repurchase of CPP stock in a shareholder considerate manner,” James C. Smith, Webster’s chairman and CEO, said in a statement. “Webster’s participation in the CPP strengthened our already well-capitalized position during uncertain economic times, and the U.S. Treasury has earned an excellent return on its investment.”
The $200 million repurchase will result in the acceleration of $2.7 million in discount accretion related to the underlying preferred shares, the bank said.
This will be in addition to the previously announced $1.4 million of accelerated accretion in connection with the $100 million repurchase that occurred in October. The combined amount of $4.1 million will be recognized as a reduction to net income available to common shareholders in its results for the fourth quarter of 2010.
The transaction will eliminate $10 million of annual dividend expense, and $1.9 million of additional annual income tax expense related to CPP participation, the bank said.