---
title: "Available-for-Sale Securities: definition, formula, and thresholds"
description: "Available-for-sale (AFS) securities are bonds a bank may sell before maturity for liquidity or balance-sheet management. They are carried at fair value, and their unrealized gains and losses flow through accumulated other comprehensive income (AOCI) into equity."
canonical_url: https://www.bankregreports.com/glossary/afs-securities/
source: BankRegReports
category: "Securities & Investments"
units: "$"
schedule: "Schedule RC-B"
---

# Available-for-Sale Securities

> Available-for-sale (AFS) securities are bonds a bank may sell before maturity for liquidity or balance-sheet management. They are carried at fair value, and their unrealized gains and losses flow through accumulated other comprehensive income (AOCI) into equity.

## Formula

```
AFS Securities (carrying value) = Fair Value of bonds classified as available-for-sale
```

Unlike HTM, AFS securities are marked to market each period. The difference between amortized cost and fair value is the unrealized gain or loss, which is recorded in AOCI rather than net income (Schedule RC-B and the equity section of Schedule RC).

## Why it matters

AFS securities are a bank's liquidity reserve, but because they are marked to market through AOCI, rising rates push their value down and drag reported equity with it. The largest banks must also flow AFS losses into regulatory capital, making AFS the channel through which rate moves hit the capital base.

## How to read it

Read the AFS balance with its unrealized loss and the bank's AOCI election. A bank holding a big AFS book in a high-rate environment is carrying a live mark-to-market drag on equity that an HTM-heavy peer can hide.

## Thresholds

| Range | Reading | What it means |
|---|---|---|
| Liquid, modest mark | Strong | Healthy liquidity buffer with limited unrealized loss. |
| Normal | Adequate | Typical AFS holdings; manageable AOCI impact. |
| Large unrealized loss | Watch | Mark-to-market losses meaningfully denting equity. |
| Loss straining capital | Concern | AFS losses materially eroding tangible equity or regulatory capital. |


## Worked example

A bank holding $400 million of available-for-sale securities that have fallen 8% in value as rates rose carries a roughly $32 million unrealized loss in AOCI, directly reducing total equity capital even though no security has been sold and net income is untouched.

## Questions

### Why do AFS losses matter if the bonds aren't sold?

AFS securities are marked to fair value through AOCI, so an unrealized loss reduces book equity immediately. If the bank later needs liquidity and sells, the loss becomes realized and hits net income.

### What is the AOCI opt-out?

Every bank except Category I and II banking organizations (the US G-SIBs and firms with $700 billion or more in assets or $75 billion or more in cross-jurisdictional activity) may make a one-time election to exclude most AOCI from regulatory capital, insulating its capital ratios from AFS mark-to-market swings. Category I and II firms cannot opt out.

## Sources

- [FFIEC Call Report Schedule RC-B (Securities)](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF)
- [FFIEC Call Report Schedule RC (Equity, AOCI)](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF)

## Related metrics

- [Held-to-Maturity Securities](https://www.bankregreports.com/glossary/htm-securities/): Held-to-maturity (HTM) securities are bonds a bank intends and is able to hold until they mature. They are carried at amortized cost (not fair value) so unrealized price changes do not flow through earnings or capital while the bank holds them.
- [AFS Unrealized Losses](https://www.bankregreports.com/glossary/afs-unrealized-losses/): AFS unrealized losses are the mark-to-market losses on a bank's available-for-sale securities. Unlike HTM losses, they are recognized. They flow through accumulated other comprehensive income (AOCI) and reduce book equity each period the securities are underwater.
- [AOCI Burden](https://www.bankregreports.com/glossary/aoci-burden/): AOCI Burden measures unrealized losses on available-for-sale and held-to-maturity securities relative to a bank's total equity capital. It quantifies the gap between book equity and 'mark-to-market' economic equity, the issue that brought down Silicon Valley Bank in 2023.
- [Total Securities](https://www.bankregreports.com/glossary/total-securities/): Total securities is a bank's entire investment portfolio, held-to-maturity bonds at amortized cost plus available-for-sale bonds at fair value. It is typically the second-largest asset after loans and the bank's main liquidity reserve and interest-rate-risk position.

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