Ameriprise 2008 Annual Report Download - page 141

Distributors, Inc. (‘‘RSFD’’), RiverSource Services, Inc. (‘‘RSSI’’), Ameriprise Advisor Services, Inc. (‘‘AASI’’) and Brecek &
Young Advisors, Inc. The broker-dealers are subject to the net capital requirements of the Financial Industry Regulatory
Authority (‘‘FINRA’’) and the Uniform Net Capital requirements of the SEC under Rule 15c3-1 of the Securities Exchange Act of
1934. AASI is also subject to regulatory reporting requirements established by the U.S. Commodity Futures Trading
Commission.
Ameriprise Trust Company is subject to capital adequacy requirements under the laws of the State of Minnesota as enforced
by the Minnesota Department of Commerce.
The initial capital of Ameriprise Bank, per Federal Deposit Insurance Corporation policy, should be sufficient to provide a Tier 1
capital to assets leverage ratio of not less than 8% throughout its first three years of operation. For purposes of completing the
bank’s regulatory reporting, the Office of Thrift Supervision (‘‘OTS’’) requires Ameriprise Bank to maintain a Tier 1 (core)
capital requirement based upon 4% of total assets adjusted per the OTS, and total risk-based capital based upon 8% of total
risk-weighted assets. The OTS also requires Ameriprise Bank to maintain minimum ratios of Tier 1 and total capital to
risk-weighted assets, as well as Tier 1 capital to adjusted total assets and tangible capital to adjusted total assets. Under OTS
regulations, Ameriprise Bank is required to have a leverage ratio of core capital to adjusted total assets of at least 4%, a Tier 1
risk-based capital ratio of at least 4%, a total risk-based ratio of at least 8% and a tangible capital ratio of at least 1.5%. As of
December 31, 2008, Ameriprise Bank’s Tier 1 core capital dropped to 7.36%. Ameriprise Financial promptly provided
additional capital to Ameriprise Bank in January 2009 to bring the Tier 1 core capital back above the 8% FDIC requirement.
Government debt securities of $6 million and $7 million at December 31, 2008 and 2007, respectively, held by the
Company’s life insurance subsidiaries were on deposit with various states as required by law and satisfied legal requirements.
18. Fair Values of Assets and Liabilities
Effective January 1, 2008, the Company adopted SFAS 157, which defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date; that is, an exit price. The exit price assumes the asset or liability is not exchanged subject to a forced
liquidation or distressed sale.
Valuation Hierarchy
Under SFAS 157, the Company categorizes its fair value measurements according to a three-level hierarchy. The hierarchy
prioritizes the inputs used by the Company’s valuation techniques. A level is assigned to each fair value measurement based
on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value
hierarchy are defined as follows:
Level 1 Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at
the measurement date.
Level 2 Prices or valuations based on observable inputs other than quoted prices in active markets for
identical assets and liabilities.
Level 3 Prices or valuations that require inputs that are both significant to the fair value measurement and
unobservable.
Determination of Fair Value
The Company uses valuation techniques consistent with the market and income approaches to measure the fair value of its
assets and liabilities. The Company’s market approach uses prices and other relevant information generated by market
transactions involving identical or comparable assets or liabilities. The Company’s income approach uses valuation
techniques to convert future projected cash flows to a single discounted present value amount. When applying either
approach, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs.
The following is a description of the valuation techniques used to measure fair value and the general classification of these
instruments pursuant to the fair value hierarchy.
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