7. Short-Term Borrowings and Long-Term Debt

The following table represents outstanding short-term borrowings and long-term debt at June 30, 2011 and December 31, 2010:


				Carrying Value
(Dollars in thousands)	Maturity	Principal value		June 30, 2011		December 31, 2010
Short-term borrowings:
Other short-term borrowings	(1)	$	—	$	—	$	37,245

Total short-term borrowings				$	—	$	37,245


Long-term debt:
5.375% Senior Notes	September 15, 2020		350,000	$	347,696	$	347,601
5.70% Senior Notes (2)	June 1, 2012		141,429		147,446		265,613
6.05% Subordinated Notes (3)	June 1, 2017		45,964		53,150		285,937
3.875% Convertible Notes	April 15, 2011		—		—		249,304
7.0% Junior Subordinated Debentures	October 15, 2033		50,000		55,461		55,548
4.99% long-term notes payable	(4)		5,843		5,843		5,257

Total long-term debt				$	609,596	$	1,209,260

(1)

At December 31, 2010, represented cash collateral received from counterparties for our interest rate swap agreements related to our 5.70% Senior Notes and 6.05% Subordinated Notes. Due to the repurchase of $312.6 million of these notes and termination of associated portions of interest rate swaps (see discussion below) in May 2011, the notional value of our swaps fell below the $10 million threshold specified in the agreement, and therefore, the full collateral was returned to the counterparties.

(2)	At June 30, 2011 and December 31, 2010, included in the carrying value of our 5.70% Senior Notes are $6.1 million and $15.7 million, respectively, related to the fair value of the interest rate swap associated with the notes.

(3)	At June 30, 2011 and December 31, 2010, included in the carrying value of our 6.05% Subordinated Notes are $7.2 million and $36.3 million, respectively, related to the fair value of the interest rate swap associated with the notes.

(4)	Represents long-term notes payable related to one of our debt fund investments, and was payable beginning April 30, 2009 with the last payment due in April 2012.

Interest expense related to short-term borrowings and long-term debt was $7.1 million and $17.8 million for the three and six months ended June 30, 2011, respectively, and $5.9 million and $11.5 million for the three and six months ended June 30, 2010, respectively. Interest expense is net of the cash flow impact from our interest rate swap agreements related to our 5.70% Senior Notes and 6.05% Subordinated Notes. The weighted average interest rate associated with our short-term borrowings as of December 31, 2010 was 0.13 percent.

Senior Notes and Subordinated Notes

We repurchased $108.6 million of our 5.70% Senior Notes and $204.0 million of our 6.05% Subordinated Notes through a tender offer transaction on May 2, 2011. These repurchases resulted in a gross loss from extinguishment of debt of $33.9 million, which included the payment of the repurchase premiums, transaction fees, and discount and origination fee accretion related to the notes. In connection with these repurchases, we terminated corresponding amounts of the interest rate swaps associated with these notes (see Note 8—“Derivative Financial Instruments”), resulting in a gross gain on swap termination of $37.0 million. The net gain from the note repurchases and the termination of corresponding portions of the interest rate swaps was $3.1 million (on a pre-tax basis), and was recognized during the second quarter of 2011 as a reduction in noninterest expense which is included in the line item “Other”.

3.875% Convertible Notes

Our $250 million 3.875% Convertible Notes matured on April 15, 2011. All of the notes were converted prior to maturity and we made an aggregate $260.4 million conversion settlement payment. We paid $250.0 million in cash (representing total principal) and $10.4 million through the issuance of 187,760 shares of our common stock (representing total conversion premium value). In addition, in connection with the conversion settlement, we received 186,736 shares of our common stock, valued at $10.3 million, from the associated convertible note hedge. Accordingly, there was no significant net impact on our total stockholders’ equity with respect to settling the conversion premium value.

Concurrent with the issuance of our 3.875% Convertible Notes, we entered into a convertible note hedge and warrant agreement (see Note 8—“Derivative Financial Instruments”), which effectively increased the economic conversion price of our 3.875% Convertible Notes to $64.43 per share of common stock. The terms of the hedge and warrant agreement were not part of the terms of the notes and did not affect the rights of the holders of the notes. The warrants expire ratably over 60 business days beginning on July 15, 2011.

The effective interest rate for our 3.875% Convertible Notes for the three and six months ended June 30, 2011 was 6.84 percent and 5.92 percent, respectively, and interest expense was $0.7 million and $4.2 million, respectively. For the three and six months ended June 30, 2010, the effective interest rate was 5.72 percent and 5.75 percent, respectively, and interest expense was $3.5 million and $7.1 million, respectively.

Available Lines of Credit

We have certain facilities in place providing us access to short-term borrowings on a secured basis (using available-for-sale securities as collateral) and on an unsecured basis. These include repurchase agreements and uncommitted federal funds lines with various financial institutions. As of June 30, 2011, we had not borrowed against any of our repurchase lines or any of our uncommitted federal funds lines. We also pledge securities to the Federal Home Loan Bank of San Francisco and the discount window at the Federal Reserve Bank. The market value of collateral pledged to the Federal Home Loan Bank of San Francisco (comprised entirely of U.S. agency debentures) at June 30, 2011 totaled $1.6 billion, all of which was unused and available to support additional borrowings. The market value of collateral pledged at the discount window of the Federal Reserve Bank at June 30, 2011 totaled $96.6 million, all of which was unused and available to support additional borrowings.