Financial Institutions, the parent of Five Star Bank, said it has completed its previously announced redemption of $16.7 million in debt and will take a $1.1 million pretax charge in the third quarter for expenses related to calling the debt.
The Warsaw-based company said it bought back the junior subordinated debt, with a 10.2 percent coupon, on Monday, using a portion of the proceeds from its $43 million common-stock offering earlier this year.
That offering, completed in March, was primarily used to repay the federal government's $37.5 million investment in the bank under the Troubled Assets Relief Program, or TARP. The bank also paid $2.1 million to buy back a related TARP warrant that would have allowed the government to buy additional shares of common stock.
Redeeming the junior debt two years early will lower the bank's interest expenses by about $600,000 before taxes for the rest of this year and by $1.7 million a year before taxes afterward.
The company also declared a 12-cent-per-share cash dividend on its common stock, as well as dividends of 75 cents per share and $2.12 per share on two classes of preferred stock. All dividends are to be paid Oct. 3 to shareholders of record on Sept. 16.