Regions Bank 2012 Annual Report Download - page 153

statement carrying amounts and the corresponding tax bases of assets and liabilities. Deferred tax assets are also
recorded for any tax attributes, such as tax credit and net operating loss carryforwards. The net balance of
deferred tax assets and liabilities is reported in other assets in the consolidated balance sheets. Any effect of a
change in federal and state tax rates on deferred tax assets and liabilities is recognized in income tax expense in
the period that includes the enactment date. The Company reflects the expected amount of income tax to be paid
or refunded during the year as current income tax expense or benefit, as applicable.
The Company evaluates the realization of deferred tax assets based on all positive and negative evidence
available at the balance sheet date. Realization of deferred tax assets is based on the Company’s judgments,
including taxable income within any applicable carryback periods, future projected taxable income, reversal of
taxable temporary differences and other tax-planning strategies to maximize realization of the deferred tax assets.
A valuation allowance is recorded for any deferred tax assets that are not more-likely-than-not to be realized.
Income tax benefits generated from uncertain tax positions are accounted for using the recognition and
cumulative-probability measurement thresholds. Based on the technical merits, if a tax benefit is not more-likely-
than-not of being sustained upon examination, the Company records a liability for the recognized income tax
benefit. If a tax benefit is more-likely-than-not of being sustained based on the technical merits, the Company
utilizes the cumulative probability measurement and records an income tax benefit equivalent to the largest
amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with a taxing
authority. The Company recognizes interest expense, interest income and penalties related to unrecognized tax
benefits within current income tax expense.
Refer to Note 19 for further discussion regarding income taxes.
TREASURY STOCK
The purchase of the Company’s common stock is recorded at cost. At the date of retirement or subsequent
reissuance, treasury stock is reduced by the cost of such stock with differences recorded in additional paid-in
capital or retained earnings, as applicable.
SHARE-BASED PAYMENTS
Compensation cost for share-based payments is measured based on the fair value of the award, which most
commonly includes restricted stock (i.e., unvested common stock) and stock options, at the grant date and is
recognized in the consolidated financial statements on a straight-line basis over the requisite service period for
service-based awards. The fair value of restricted stock, restricted stock units or performance stock units is
determined based on the closing price of Regions’ common stock on the date of grant. The fair value of stock
options where vesting is based on service is estimated at the date of grant using a Black-Scholes option pricing
model and related assumptions. Expected volatility considers implied volatility from traded options on the
Company’s stock and, primarily, historical volatility of the Company’s stock. Regions considers historical data to
estimate future option exercise behavior, which is used to derive an option’s expected term. The expected term
represents the period of time that options are expected to be outstanding from the grant date. Historical data is
also used to estimate future employee attrition, which is used to calculate an expected forfeiture rate. Groups of
employees that have similar historical exercise behavior are reviewed and considered for valuation purposes. The
risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and the weighted-average
expected life of the grant. Regions issues new common shares to settle stock options.
Beginning in 2009, Regions issued restricted stock units payable solely in cash (“cash-settled RSUs”),
which are accounted for as other liabilities in the consolidated balance sheets. The cash-settled RSUs are subject
to a vesting period ranging from two weeks to one year and, following the vesting period, are subject to transfer
restrictions and a delayed payment, which can range from six months to two years. The grant date fair value of
the award is determined in the same manner as other restricted stock awards and is charged to the statements of
operations over the vesting period. Changes in Regions’ stock price over the delayed payment period are charged
to the statements of operations. See Note 16 for further discussion and details of share-based payments.
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