DEBT AND SHAREHOLDERS’ EQUITY

TARP Redemption

On September 26, 2012, we redeemed the remaining $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 first redemption was made on March 28, 2012. The entire redemption was executed following notification from the Federal Reserve Board (“FRB”) on March 13, 2012 that it did 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 redemption meeting 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) maintaining for 2012 the current common stock dividend of $0.01 per share per quarter. See also preferred stock issuance and redemption following.

The TARP redemption accelerated the amortization to preferred stock dividends of approximately $33.5 million of unamortized discount during the nine months ended September 30, 2012. This discount was based on the fair value originally estimated for the common stock warrant associated with the TARP preferred stock issuance.

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%. On August 28, 2012, we issued an additional $20 million of these notes at a price of 100.5%, bringing the total to $178.45 million. Net of commissions, fees and discounts, the proceeds to the Company for these debt issuances were $553.4 million.

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

During the three and nine months ended September 30, 2012, we issued long-term senior medium-term notes of $29 million and $91 million, respectively, and a short-term medium-term note of $5 million during the first quarter of 2012. The short-term note matures March 2013 and has an interest rate of 2.0%. The long-term notes mature February 2014 through September 2015 and have interest rates of 3.4% and 3.5%. During these same periods, we redeemed at maturity $7 million and $74 million of senior medium-term notes.

Subordinated Debt Conversions

During the three and nine months ended September 30, 2012, $5.4 million and $85.4 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 84,982 shares of Series C and 370 shares of Series A to the Company’s preferred stock.

For the nine months ended September 30, 2012 in connection with these conversions, the $99.9 million added to preferred stock included the transfer from common stock of $14.5 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 $77.3 million at September 30, 2012. Accelerated discount amortization on the converted debt increased interest expense for the three and nine months ended September 30, 2012 by $2.0 million and $30.4 million, respectively. At September 30, 2012, the balance at par of the convertible subordinated debt was $462.0 million. The five largest investor holdings totaled approximately 40% of this amount. The remaining balance of the convertible debt discount was $161.4 million at September 30, 2012.

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
Nine Months Ended September 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 $44,684		72,529										72,529
Reclassification for net losses included in earnings, net of income tax benefit of $4,199		6,428										6,428
Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $9,915		(16,006		)								(16,006		)
Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $472		724										724
Net unrealized losses, net of reclassification to earnings of $10,871 and income tax benefit of $4,153						(6,329		)				(6,329		)
Other comprehensive income (loss)		63,675				(6,329		)	—			57,346
Balance at September 30, 2012		$	(483,088	)		$	3,075		$	(54,725	)	$	(534,738	)

Nine Months Ended September 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 $55,668		(90,109		)								(90,109		)
Reclassification for net losses included in earnings, net of income tax benefit of $4,063		6,185										6,185
Noncredit-related impairment losses on securities not expected to be sold, net of income tax benefit of $17,058		(26,318		)								(26,318		)
Accretion of securities with noncredit-related impairment losses not expected to be sold, net of income tax expense of $77		131										131
Net unrealized losses, net of reclassification to earnings of $30,840 and income tax benefit of $11,115						(17,427		)				(17,427		)
Other comprehensive loss		(110,111		)		(17,427		)	—			(127,538		)
Balance at September 30, 2011		$	(566,375	)		$	13,275		$	(35,734	)	$	(588,834	)