According to data from the Federal Deposit Insurance Corporation (FDIC), as of the end of the second quarter of 2026, the total unrealized losses on investment securities in the U.S. banking industry reached $326.7 billion, an increase of $1.6 billion from $325.1 billion in the first quarter, a quarter-on-quarter rise of 0.5%.

Barchart noted that this aligns with FDIC data, indicating a continuous increase over the previous two quarters: unrealized losses rose from approximately $321 billion in the fourth quarter of 2025 to $325.1 billion in the first quarter of 2026, and further to $326.7 billion in the second quarter.

However, $326.7 billion is not a historical peak for the banking industry, nor does it equate to realized losses or immediate insolvency. This amount is $68.6 billion lower than a year ago, representing a year-on-year decline of 17.4%, and is significantly below the peak of approximately $684 billion in the third quarter of 2023.

The unrealized losses primarily stem from fixed-income securities held by banks, such as government bonds and agency MBS: rising interest rates depress the market prices of older bonds, and paper losses only convert to cash losses if banks are forced to sell. If held to maturity and the issuer does not default, bonds can typically be redeemed at face value; however, during liquidity crunches or deposit outflows, banks may have to sell early and realize losses.

The unrealized losses on available-for-sale securities amount to $109.8 billion, a quarter-on-quarter decrease of $780 million; the unrealized losses on held-to-maturity securities are $216.9 billion, a quarter-on-quarter increase of $2.4 billion. Held-to-maturity portfolios are usually not marked to market in current profits, but their declining market value still affects banks' flexibility in emergency financing, asset sales, or capital market financing.

Unrealized losses account for 5.5% of the amortized cost of securities. During the same period, the net profit of the U.S. banking industry in the second quarter increased by 12% year-on-year, with loan balances rising by $154 billion, and the number of troubled banks increasing from 63 to 66; the capital ratio slightly decreased due to asset growth outpacing capital accumulation.

From a market mechanism perspective, maintaining high interest rates will continue to depress the prices of older securities, weakening some banks' flexibility to sell assets, absorb deposit outflows, or increase lending. Large banks, due to their deposit base, hedging, and broader financing channels, typically find it easier to manage interest rate risk; regional banks and institutions with longer-duration securities and relatively high unrealized losses face greater pressure. Beneficiaries include money market funds, short-term government bond funds, and platforms that can offer high-yield deposit alternatives.

Source: Public Information