--- title: "AFS Unrealized Losses: definition, formula, and thresholds" description: "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." canonical_url: https://www.bankregreports.com/glossary/afs-unrealized-losses/ source: BankRegReports category: "Securities & Investments" units: "$" schedule: "Schedule RC-B" --- # 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. ## Formula ``` AFS Unrealized Loss = Amortized Cost - Fair Value (for available-for-sale securities) ``` AFS securities are marked to fair value on Schedule RC-B. The unrealized gain or loss is carried in AOCI within total equity capital on Schedule RC, so it directly moves reported equity even before any security is sold. ## Why it matters AFS unrealized losses are the recognized cousin of HTM losses: they already sit in equity. For Category I and II banking organizations, which cannot opt out of AOCI, they also reduce regulatory capital, making AFS the conduit through which interest-rate moves hit the capital ratios directly. ## How to read it Measure the AFS loss against equity and against the bank's AOCI election. Smaller banks that opted out of including AOCI in capital keep their capital ratios insulated, but their tangible book value still falls. A deep AFS loss plus heavy uninsured deposits is the combination that signals run risk. ## Thresholds | Range | Reading | What it means | |---|---|---| | Small mark | Benign | Limited AOCI drag on equity. | | Moderate | Normal | Recognized loss within a comfortable capital cushion. | | Large vs. equity | Watch | AOCI losses materially reducing tangible equity. | | Capital-threatening | Concern | Mark-to-market losses straining regulatory or tangible capital. | ## Worked example A bank with $800 million of available-for-sale securities marked down 6% carries a $48 million unrealized loss in AOCI. Against $250 million of equity, that is nearly a fifth of book capital already absorbed, visible in equity today, unlike an equivalent loss buried in an HTM book. ## Questions ### Do AFS unrealized losses reduce regulatory capital? For 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), yes. They cannot opt out of including AOCI in CET1. Other banks, including Category III and IV firms, may elect to exclude AOCI, shielding their capital ratios even though book equity still falls. ### How are AFS and HTM unrealized losses different? AFS losses are recognized in AOCI and reduce equity now. HTM losses are disclosed but not recognized, so they stay off the balance sheet. The economic loss is the same; only the accounting treatment differs. ## 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 - [Available-for-Sale Securities](https://www.bankregreports.com/glossary/afs-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. - [HTM Unrealized Losses](https://www.bankregreports.com/glossary/htm-unrealized-losses/): HTM unrealized losses are the gap between the amortized-cost carrying value of a bank's held-to-maturity securities and their lower current market value. The loss is disclosed but not recognized on the balance sheet, a hidden hit to economic capital. - [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. - [Tangible Common Equity / Tangible Assets](https://www.bankregreports.com/glossary/tce-ta/): TCE/TA measures common shareholders' equity excluding goodwill and intangibles, divided by total assets excluding the same. It is the purest measure of a bank's capital cushion to common shareholders and is not subject to risk-weighting choices. - [Total Equity Capital](https://www.bankregreports.com/glossary/total-equity/): Total equity capital is the bank's net worth on a book basis: common stock, surplus, retained earnings, and accumulated other comprehensive income (AOCI). It is the first cushion that absorbs losses before depositors or the FDIC are exposed. ## About this document This is the markdown twin of the page named in `canonical_url` above. Source filings are public record; the cleaning, normalization, cross-source linkage, and derived metrics are BankRegReports' own. Attribute with a link to the canonical URL. Markdown twins are published for editorial content only. Institution data pages do not have them. For data at scale use the API, which is documented at https://www.bankregreports.com/api/ and specified at https://www.bankregreports.com/openapi.json. It returns typed JSON with explicit units and periods, and one call replaces hundreds of page fetches. ## Sitemap - [Glossary](https://www.bankregreports.com/glossary/): every metric, with formula and thresholds - [Blog](https://www.bankregreports.com/blog/): analysis and explainers - [API documentation](https://www.bankregreports.com/api/): the programmatic way to get this data - [XML sitemap](https://www.bankregreports.com/sitemap.xml): the complete crawlable index