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Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Bank of America reported a sharp rise in the market-value decline of its securities portfolio in the third quarter of 2023. Reuters, citing the bank’s disclosures, put the portfolio’s unrealized securities losses at $131.6 billion. About $603 billion of securities were classified as held to maturity, down from $614 billion in the second quarter.
Those are primarily paper losses, not $131.6 billion in cash that the bank had already paid out. They reflect how higher market yields reduced the prices of bonds purchased when rates were lower. The losses become realized if securities are sold below their carrying or purchase value; bonds held until maturity can repay principal at par, subject to credit and liquidity conditions.
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What Bank of America reported in Q3 2023
| Item | Q3 2023 figure | What it means |
|---|---|---|
| Unrealized losses on securities | $131.6 billion | Market-value decline reported by Reuters from Bank of America’s disclosures; it is not automatically a cash loss. |
| Held-to-maturity securities | About $603 billion | Down from about $614 billion in Q2; these securities are generally carried using amortized-cost accounting rather than being revalued through earnings each period. |
| Net income | $7.8 billion | Associated Press reported that the bank remained profitable in the quarter. |
| Net interest income | $14.4 billion | Higher loan yields helped produce substantial interest revenue even as older bonds lost market value. |
The figures refer to the third quarter of 2023. Bank of America’s Q3 Form 10-Q, filed with the Securities and Exchange Commission on October 31, 2023, provides the portfolio classifications, fair values, accumulated other comprehensive income and interest-rate-risk disclosures behind the headline number.
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1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsWhy rising rates push down bond prices
The fixed-rate bond trade-off
A fixed-rate bond pays a set coupon. When newly issued bonds begin offering higher yields, an older bond with a lower coupon is less attractive. Its price must fall in the market so that a buyer can earn a competitive yield from the remaining coupons and principal repayment. The SEC’s investor bulletin describes this inverse relationship: when interest rates rise, prices of existing fixed-rate bonds fall.
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Longer maturities move more
The effect is larger for securities with longer duration because more of their cash flows arrive far in the future. Bank of America accumulated substantial securities during the low-rate period. The Federal Reserve’s tightening cycle therefore reduced the current market value of those holdings as market yields moved higher.
The loss is a valuation result. It does not mean the bond issuer failed to make a payment, and it does not by itself indicate that the bank will lose the entire difference at maturity.
How a $131.6 billion loss can be “unrealized”
Unrealized versus realized
An unrealized loss is the difference between what a security is worth at current market prices and its accounting or purchase value while the bank still owns it. If rates later fall, the market value can recover. If the bond is held to maturity and the issuer pays as promised, the holder can receive the scheduled principal rather than selling at the interim market price.
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A realized loss occurs when the bank sells below its carrying or purchase value. The sale converts the paper decline into a cash shortfall relative to that earlier value and records the appropriate accounting loss.
Why liquidity is the key trigger
The danger is not simply seeing a low market quote. It is being forced to sell before maturity to meet deposit withdrawals, collateral calls or other funding needs. A bank with stable funding and enough liquid resources may be able to hold qualifying bonds until they mature. A bank that must raise cash quickly may have to crystallize losses at unfavorable prices.
Held-to-maturity and available-for-sale accounting
Held-to-maturity securities
Debt securities that the bank has both the intent and ability to hold to maturity can be classified as held to maturity. They are generally reported at amortized cost, so changes in market prices do not flow through earnings in the same way as they would for a security sold today. The classification does not erase economic risk: the bank still faces interest-rate, credit and liquidity risk, and selling before maturity can require a different accounting treatment.
Available-for-sale securities
Available-for-sale securities are carried at fair value. Changes in value are generally reflected in accumulated other comprehensive income rather than immediate net income, subject to the applicable accounting rules. Those changes can affect reported capital measures depending on the institution’s regulatory treatment and the specific portfolio.
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For that reason, comparing two banks solely by their headline unrealized-loss totals can mislead. The comparison should align the quarter, portfolio category, duration, average coupon, deposit stability, liquidity access and effects on tangible and regulatory capital.
Is this the same kind of risk that hurt Silicon Valley Bank?
The mechanism is similar in one important respect: both situations involve bonds bought when yields were lower and marked down after rates rose. The outcome depends on what happens next. If deposit outflows or another funding need force a sale, the market-value decline can become a realized loss and reduce available capital. If the bank can fund withdrawals without selling and can hold the securities to maturity, the interim mark can remain unrealized.
The $131.6 billion figure alone does not establish that Bank of America faced the same liquidity path or that depositors were at immediate risk. Assessing that question requires information about cash and borrowing capacity, deposit behavior, the mix of held-to-maturity and available-for-sale assets, and the capital impact—not just the size of an unrealized mark.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How the losses coexist with strong quarterly earnings
Bank of America still reported $7.8 billion in net income and $14.4 billion in net interest income for Q3 2023, according to the Associated Press. Higher interest rates can raise the interest collected on variable-rate loans and newly repriced assets. At the same time, those rates lower the market value of older fixed-rate securities. Net interest income measures revenue from earning assets and funding costs; it is not the same measurement as the fair value of the bond portfolio.
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That combination explains why a bank can remain profitable while carrying a very large unrealized securities loss. Profitability does not make the mark disappear, but the mark does not automatically eliminate quarterly earnings.
What to watch if rates remain high
- Deposit and funding trends: Persistent outflows can create the need to sell securities before maturity.
- Available-for-sale marks: Further rate increases can reduce fair values and accumulated other comprehensive income.
- Held-to-maturity balances: Changes in the size of this portfolio can indicate sales, maturities or repositioning; the Q3 balance was about $603 billion.
- Duration and credit quality: Longer-duration bonds are more rate-sensitive, while deterioration in an issuer’s credit can create a separate loss risk.
- Regulatory capital treatment: The effect of valuation changes depends on the accounting category and the capital rules applied to the institution.
- Ability to hold: The practical question is whether the bank can meet obligations without liquidating securities at depressed prices.
What Senator Warren’s estimate referred to
In a September 13, 2023 letter to the Financial Stability Oversight Council, Senator Elizabeth Warren wrote: “Bank of America, for example, has racked up over $100 billion of losses from money it poured into bonds three years ago.” That was a contemporaneous political characterization. The more specific Q3 figure reported by Reuters—$131.6 billion—comes from the bank’s securities disclosures and should be read as an unrealized market-value loss, not as a claim that the bank had already paid out that amount in cash.
Bottom line
Bank of America’s Q3 2023 securities portfolio carried an unusually large unrealized loss because interest rates rose sharply after the bank bought many bonds at lower yields. About $603 billion remained classified as held to maturity, and the bank was still profitable. The loss becomes a direct cash and capital problem if funding pressure forces sales before maturity; without that trigger, the headline mark is an economic warning about interest-rate and liquidity exposure rather than proof of insolvency.
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