PITTSBURGH (

TheStreet

) --

PNC Financial Services

(PNC) - Get Report

priced 55.6 million shares of common stock at $54 a share on Wednesday in a public offering meant to bolster the financial institution's capital coffers as it seeks to repay bailout funds under the Troubled Asset Relief Program.

PNC expects to raise $3 billion through the stock sale. The proceeds will be used as part of its initiative to pay back $7.6 billion in bailout funds received under TARP in late 2008. The Pittsburgh-based bank said late Tuesday that it has reached an agreement with regulators to repurchase the funds.

The pricing reflects a 1.2% discount to the $54.65 closing price of PNC shares on Tuesday. The stock was down 35 cents, or 0.6%, to $54.30 in recent morning action.

In a statement released before the opening bell, the company said underwriters will have a 30-day option to purchase an additional 8.3 million common shares to cover over-allotments. It expects the deal to be completed by Monday.

PNC also plans to use the proceeds from the sale of its PNC Global Investment Servicing business, which

Bank of New York Mellon

(BK) - Get Report

is purchasing for $2.3 billion in cash, to repay TARP. In addition, it expects to issue between $1.5 billion and $2 billion worth of senior notes this month to provide additional liquidity in connection with the TARP redemption. The PNC-Bank of New York Mellon deal is expected to close in the third quarter.

PNC anticipates an after-tax gain of $500 million from the sale of the investment servicing business, formerly called PFPC. It will also increase its Tier-1 capital by approximately $1.6 billion after the release of $1.1 billion in capital related to goodwill and other intangible assets, it said.

The combination of the offering, TARP redemption and business sale is expected to boost PNC's Tier-1 common capital by approximately $4.3 billion and, based on Dec. 31 levels, bring the Tier-1 common capital ratio to 8% and Tier-1 risk-based capital ratio to 10.3%.

"With signs of an improving economic environment and stabilizing financial system, we believe now is the appropriate time for us to redeem the preferred shares held by the U.S. Treasury. As a result, we are pleased to have reached an agreement with our regulators to return the taxpayers' investment in PNC," Chairman and CEO James E. Rohr said in a statement on Tuesday. "These strategic actions are expected to improve the quality of our capital and position us for further growth."

PNC received the bailout funds in relation to its acquisition of troubled lender National City in 2008. CEO Rohr seemed to be in no rush to pay back the TARP funds as the economic downturn persisted last year. But in the company's latest earnings call last month, he acknowledged that the TARP funds would be repaid this year.

The U.S. Treasury will continue to hold warrants associated with the preferred shares. The warrants enable the U.S. Treasury to purchase up to approximately 16.9 million shares of PNC common stock at an exercise price of $67.33 a share until its expiration on December 31, 2018.

Separately,

Umpqua Holdings

(UMPQ) - Get Report

, the parent company of Umpqua Bank and Umpqua Investments, said late Tuesday that it too was initiating a $215 million public offering for both shares of its common stock and preferred stock.

Umpqua

, which is already a well-capitalized institution, said that the proceeds would be used to repay TARP funds, once it got regulatory clearance, and also to fund FDIC-assisted acquisition opportunities.

Shares of Umpqua were down 2.2% to $11.43 in recent trades.

--Written by Laurie Kulikowski in New York.