Held to maturity (HTM): Held to maturity is the securities bucket a bank uses when it intends and is able to hold a bond until it matures, which lets the bank carry it at cost instead of at market value.
Where it comes from
Reported on Schedule RC-B. HTM securities are carried at amortized cost, so an unrealized loss on them never touches equity or AOCI. The fair value is disclosed in the same schedule, which is where the loss is actually visible.
How to read it
The classification is an election with a lock on it. Selling out of HTM, other than close to maturity, taints the whole portfolio and forces the rest into available for sale at market value. That is why a bank under liquidity pressure cannot simply sell its HTM bonds to raise cash.
The common mistake. Reading a clean AOCI line as no securities problem. The HTM unrealized loss is real and disclosed, it just does not run through equity, so it has to be read out of the fair value disclosure rather than off the face of the balance sheet.
Go deeper
- Unrealized losses and AOCI
- BankingLens pricing and what a subscription adds: percentile rank against the bank’s own FFIEC peer group, fourteen quarters of trend, and the flags an examiner reaches for first.
See also. Available for sale, AOCI, Equity to assets.
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