U.S. banks earn $80.5B as unrealized losses total $325.1B

The Federal Deposit Insurance Corporation’s quarterly banking profile showed U.S. banks earned $80.5 billion in net income in the first quarter of 2026 while holding $325.1 billion in unrealized losses on investment securities.

Unrealized losses rose $19.0 billion, or 6.2%, from the fourth quarter of 2025. The FDIC attributed much of the increase to a rise in the 30‑year mortgage rate in March, which lowered the market value of mortgage‑backed securities.

The losses were split between held‑to‑maturity portfolios, which accounted for $214.5 billion, and available‑for‑sale portfolios, which carried $110.6 billion. Unrealized losses occur when current market prices fall below the purchase price; they become realized only if a bank sells the securities before maturity.

Despite the rise in paper losses, the industry reported higher profits. Net income rose 3.6% from the prior quarter and return on assets reached 1.26%.

Domestic deposits increased by $389.7 billion in the quarter, marking a seventh consecutive quarter of deposit growth.

Paper losses turn into actual losses when banks sell securities at prices below their purchase cost. Rapid deposit outflows that force such sales can therefore convert unrealized losses into realized ones.

The Federal Reserve earlier reported hundreds of banks with large unrealized losses relative to capital, and some estimates this year placed total unrealized securities losses across the system at roughly half a trillion dollars.

In 2023 several regional lenders sold bonds at losses to meet withdrawals, converting paper losses into realized losses. The FDIC noted similar balance‑sheet pressure can persist while interest rates remain elevated.

The FDIC’s second‑quarter profile will provide the next comprehensive reading on whether unrealized losses are stabilizing or continuing to grow and how the gap between industry profits and securities losses develops.