CLEVELAND (

TheStreet

) --

KeyCorp

(KEY) - Get Report

announced Wednesday it had redeemed $2.5 billion in preferred shares held by the U.S. Treasury Department for bailout funds received through the Troubled Assets Relief Program, or TARP.

The company's shares were 2% in early afternoon trading, to $8.91.

The TARP repayment followed the recent completion of a $625 million common stock offering and a $1 billion debt offering, in the wake of the

Federal Reserve's

stress tests on 19 large U.S. financial holding companies, completed earlier this month.

KeyCorp said it had paid the Treasury roughly $297 million in dividends and accrued interest since the government's initial investment in 2008.

The company also said it would "notify the U.S. Treasury shortly of its intent to repurchase" the outstanding warrant held by the government to purchase up to 35.2 million shares of the company's common stock," and that if the company decides not to repurchase the warrant or is unable to repurchase it in the secondary market, "it may choose instead to repurchase common stock in an amount expected to be sufficient to offset any estimated dilution to Key's equity that would occur if the warrant were exercised."

KeyCorp's announcement leaves only

SunTrust

(STI) - Get Report

and

Regions Financial

(RF) - Get Report

owing TARP money, among the publicly traded financial holding companies that were subject to the Federal Reserve's

stress tests

.

SunTrust completed a $1 billion common stock offering on March 18, followed by a $1 billion senior notes offering, completed on March 24. The company is expected to announce its TARP repayment soon.

Regions Financial said after the stress tests were completed that it would continue to hold off on repaying TARP, as its "position of repaying the government's TARP investment in a prudent manner, on shareholder-friendly terms,

remained unchanged."

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--

Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.