Regions Bank 2011 Annual Report Download - page 228

opposed to the price that would be paid to acquire the asset or received to assume the liability (an entry price). A
fair value measure should reflect the assumptions that market participants would use in pricing the asset or
liability, including the assumptions about the risk inherent in a particular valuation technique, the effect of a
restriction on the sale or use of an asset and the risk of nonperformance. Required disclosures include
stratification of balance sheet amounts measured at fair value based on inputs the Company uses to derive fair
value measurements. These strata include:
• Level 1 valuations, where the valuation is based on quoted market prices for identical assets or
liabilities traded in active markets (which include exchanges and over-the-counter markets with
sufficient volume),
• Level 2 valuations, where the valuation is based on quoted market prices for similar instruments traded
in active markets, quoted prices for identical or similar instruments in markets that are not active and
model-based valuation techniques for which all significant assumptions are observable in the market,
and
• Level 3 valuations, where the valuation is generated from model-based techniques that use significant
assumptions not observable in the market, but observable based on Company-specific data. These
unobservable assumptions reflect the Company’s own estimates for assumptions that market
participants would use in pricing the asset or liability. Valuation techniques typically include option
pricing models, discounted cash flow models and similar techniques, but may also include the use of
market prices of assets or liabilities that are not directly comparable to the subject asset or liability.
Regions rarely transfers assets and liabilities measured at fair value between Level 1 and Level 2
measurements. There were no such transfers during the years ended December 31, 2011, 2010 or 2009. Trading
account assets are periodically transferred to or from Level 3 valuation based on management’s conclusion
regarding the best method of pricing for an individual security. Such transfers are accounted for as if they occur
at the beginning of a reporting period.
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