US banks are now saddled with $413.2 billion in unrealized losses on their balance sheets.
In its new Quarterly Banking Profile for the first quarter of 2025, the Federal Deposit Insurance Corporation (FDIC) says US banks reported a $67.5 billion decrease in unrealized losses on securities, primarily Treasuries and other bonds.
Although it looks like progress, the FDIC warns the decrease has likely already reversed amid extreme bond market volatility and a surging Treasury yield curve.
“Longer-term interest rates such as the 30-year mortgage rate and the 10-year Treasury rate decreased in the first quarter, increasing the value of securities reported by banks and lowering unrealized losses.
However, increases in longer-term interest rates since the end of the first quarter would likely reverse most of these improvements in unrealized losses if measured today.”
Rebel Cole, who worked in the Federal Reserve System for ten years, tells Fortune that today’s levels of unrealized losses represent a serious ongoing danger for lenders.
“All it takes is one bad news story about any of these banks, and we could have another banking crisis like we had in March of [2023].
I’m amazed we haven’t had one since then.”
Unrealized losses represent the difference between the price banks paid for securities and the current market value of those assets.
Concern over such paper losses played a major role in the collapse of Silicon Valley Bank in 2023, as depositors panicked and withdrew funds after learning the bank sold securities at a steep loss to cover liquidity needs.
The FDIC says banks recorded a $180.9 billion rise in domestic deposits, which is about 1%, and a $3.8 billion increase in net income to $70.6 billion, with a reserve coverage ratio declining from 179.9% to 168.8%.
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