Securities & Investments
Held-to-Maturity Securities
Also known as 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.
How is Held-to-Maturity Securities calculated?
Schedule RC-B reports securities by classification. HTM securities sit at amortized cost regardless of current market value; the gap between that book value and fair value is disclosed but not recognized on the balance sheet.
Why does Held-to-Maturity Securities matter?
The HTM classification shields reported capital from interest-rate-driven price swings. But the economic loss is still real. Silicon Valley Bank's 2023 failure made HTM accounting front-page news: large unrecognized HTM losses meant book capital overstated the bank's true loss-absorbing capacity.
How do you interpret Held-to-Maturity Securities?
A large HTM book is not a problem by itself; the question is the size of the unrecognized loss inside it relative to capital, and whether the bank could be forced to sell (which would crystallize the loss). Read HTM securities alongside HTM unrealized losses and the bank's liquidity position.
What do Held-to-Maturity Securities levels indicate?
| Range | Label | Interpretation |
|---|---|---|
| Small / short-duration | Benign | Limited rate exposure; little hidden loss. |
| Moderate | Normal | Typical HTM holdings with manageable unrecognized loss. |
| Large vs. capital | Watch | Sizable HTM book; check the embedded unrealized loss. |
| Loss > capital cushion | Concern | Unrecognized HTM loss could overwhelm capital if realized. |
Worked example
Frequently asked
What is the difference between HTM and AFS securities?
Available-for-sale (AFS) securities are carried at fair value, with unrealized gains and losses flowing through AOCI and affecting equity. Held-to-maturity (HTM) securities are carried at amortized cost, so their unrealized losses are disclosed but not recognized on the balance sheet.
Can a bank freely move securities into HTM?
Reclassifying to HTM is allowed but consequential: selling HTM securities before maturity (outside narrow exceptions) can 'taint' the whole HTM portfolio and force fair-value accounting on all of it.
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