Can HTM Securities Be Sold Before Maturity?

The appeal of held-to-maturity (HTM) securities depends on several factors, including whether the purchaser can afford to hold the investment until it matures or if there might be an anticipated need to sell before that time.

Can HTM Securities Be Sold Before Maturity?

While HTM securities are intended to be held until maturity, there are some circumstances where they can be sold prior to reaching that point. The accounting standards generally presume that if a significant portion (e.g., 10%) of a company’s HTM portfolio is sold in a given year, the entire HTM classification should be reconsidered.
Some valid reasons for selling HTM securities before maturity include:

The sale occurs close enough to the maturity date that interest rate risk is substantially eliminated as a pricing factor (e.g., within 3 months of maturity).
The enterprise has already collected at least 85% of the principal outstanding at acquisition.
There are isolated, non-recurring, and unusual events that could not have been reasonably anticipated, such as a significant increase in the risk weights of the debt securities for regulatory capital purposes.

However, if a company sells HTM securities for reasons outside of these limited exceptions, it may call into question the enterprise’s stated intent and ability to hold other debt securities to maturity, leading to a reclassification of the entire HTM portfolio.

In summary, while the core premise of HTM securities is to hold them until maturity, there are some specific circumstances where they can be sold prior to that point without jeopardizing the HTM classification for the rest of the portfolio.