Hold to maturity
· Debt securities with the intent to be held to maturity at amortized cost
· Amortized cost equals to par value less any unamotized discount or plus any unamortized premium
· recognized annual dividend & interest income on income statement;
· capital gains recognized at maturity
· can reclassify & sell under certain circumstances
Available for sale
· Debt or equity securities with an intent to be sold prior to maturity
· Report at fair market value
· unrealized gain/ loss recorded annually as adjustment to equity
· Income reported in income statement
As change in value affect bank’s capital -> need to be very liquid -> shorter duration
Trading Securities
· Debt and equity purchased for short term gains, change value reported in income statement
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