DEBT AND SHAREHOLDERS’ EQUITY

TARP Redemption

On March 28, 2012, we redeemed $700 million of the $1.4 billion Series D Fixed-Rate Cumulative Perpetual Preferred Stock issued to the U.S. Department of the Treasury under its Troubled Asset Relief Program (“TARP”) Capital Purchase Program. The redemption was made following notification from the Federal Reserve Board (“FRB”) on March 13, 2012 that it does not object to the capital actions proposed in our Capital Plan submitted under the FRB’s 2012 Capital Plan Review.

Among other things, our Capital Plan includes the following provisions: (1) completing the entire redemption in 2012 of our TARP preferred stock with the second $700 million installment contingent upon specified conditions requiring regulatory approval, including Parent liquidity and other requirements; (2) issuing a total of $600 million in senior debt (see debt issuances and redemption following); (3) redeeming on a timely basis the Company’s $254.9 million variable rate senior medium-term notes (see debt issuances and redemption following); and (4) not changing in 2012 the current common stock dividend of $0.01 per share per quarter. There is no requirement to issue common or preferred equity. See also preferred stock issuance and redemption following.

The TARP redemption accelerated the amortization of approximately $19.6 million of unamortized discount in the first quarter of 2012. This discount was based on the fair value originally estimated for the common stock warrant associated with the TARP preferred stock issuance. The discount was being accreted to preferred stock over five years using the interest method with a corresponding increase to preferred stock dividends.

Debt Issuances and Redemption

On March 27, 2012, we issued $300 million of 4.5% senior unsecured medium-term notes at a price of 94.25%. On May 1, 2012, we issued an additional $100 million at a price of 100.249%, bringing the total to $400 million of the 4.5% notes that are due March 27, 2017. On June 20, 2012, we issued $158.45 million of 4.0% senior notes due June 20, 2016 at a price of 97.5%. Net of commissions, fees and discounts, the proceeds to the Company for these debt issuances were $533.3 million.

We redeemed all $254.9 million of variable rate senior medium-term notes on their maturity date of June 21, 2012 that were guaranteed under the FDIC's Temporary Liquidity Guarantee Program. We have no other notes outstanding under this program.

During the three and six months ended June 30, 2012, we issued long-term senior medium-term notes of $11.9 million and $61.9 million, respectively, and a short-term medium-term note of $5.0 million during the first quarter of 2012. The short-term note matures March 2013 at an interest rate of 2.0%. The long-term notes mature February 2014 and June 2014 at interest rates of 3.5% and 3.4%, respectively. During these same periods, we redeemed at maturity $12.0 million and $66.9 million of short-term senior medium-term notes.

Subordinated Debt Conversions

During the three and six months ended June 30, 2012, $50.2 million and $80.0 million of convertible subordinated debt was converted into depositary shares each representing a 1/40^th interest in a share of the Company’s preferred stock. These conversions added 79,596 shares of Series C and 370 shares of Series A to the Company’s preferred stock.

For the six months ended June 30, 2012 in connection with these conversions, the $93.6 million added to preferred stock included the transfer from common stock of $13.6 million of the intrinsic value of the beneficial conversion feature. The amount of this conversion feature was included with common stock at the time of the debt modification. The remaining balance in common stock of this conversion feature was approximately $78.2 million at June 30, 2012. Accelerated discount amortization on the converted debt increased interest expense for the three and six months ended June 30, 2012 by approximately $16.2 million and $28.4 million, respectively. At June 30, 2012, the balance at par of the convertible subordinated debt was $467.4 million and the remaining balance of the convertible debt discount was $174.0 million.

Preferred Stock Issuance and Redemption

On May 7, 2012, we sold $143.75 million of Series F 7.9% Fixed-Rate Non-Cumulative Perpetual Preferred Stock. The issuance was in the form of depositary shares with each depositary share representing a 1/40^th ownership interest in a share of the preferred stock. The shares are registered with the SEC and qualify as Tier 1 capital. We redeemed on the June 15, 2012 call date all $142.5 million of Series E 11% preferred stock.

Changes in Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income (loss) are summarized as follows:

(In thousands)	Net unrealized gains (losses) on investments and retained interests				Net unrealized gains (losses) on derivative instruments				Pension and post- retirement			Total
Six Months Ended June 30, 2012:
Balance at December 31, 2011		$	(546,763	)		$	9,404		$	(54,725	)	$	(592,084	)
Other comprehensive income (loss), net of tax:
Net realized and unrealized holding gains, net of income tax expense of $17,775		29,045										29,045
Reclassification for net losses included in earnings, net of income tax benefit of $4,318		6,619										6,619
Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $9,479		(15,303		)								(15,303		)
Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $349		532										532
Net unrealized losses, net of reclassification to earnings of $8,493 and income tax benefit of $3,231						(4,956		)				(4,956		)
Other comprehensive income (loss)		20,893				(4,956		)	—			15,937
Balance at June 30, 2012		$	(525,870	)		$	4,448		$	(54,725	)	$	(576,147	)

Six Months Ended June 30, 2011:
Balance at December 31, 2010		$	(456,264	)		$	30,702		$	(35,734	)	$	(461,296	)
Other comprehensive income (loss), net of tax:
Net realized and unrealized holding losses, net of income tax benefit of $22,217		(36,060		)								(36,060		)
Reclassification for net losses included in earnings, net of income tax benefit of $4,128		6,590										6,590
Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $452		(729		)								(729		)
Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $61		99										99
Net unrealized losses, net of reclassification to earnings of $23,105 and income tax benefit of $8,335						(13,095		)				(13,095		)
Other comprehensive loss		(30,100		)		(13,095		)	—			(43,195		)
Balance at June 30, 2011		$	(486,364	)		$	17,607		$	(35,734	)	$	(504,491	)