After four consecutive quarters of shrinking losses, the US banking sector just hit rewind. Unrealized losses on securities held by American banks climbed back to $325.1 billion in Q1 2026, snapping a recovery streak that had brought the figure down to its lowest level in years.
The reversal is particularly frustrating because things were genuinely improving. In Q4 2025, unrealized losses had fallen to $306.1 billion, the lowest mark since Q1 2022. That represented a $31 billion reduction, or 9.2%, from the prior quarter alone.
Now, a $19 billion jump in a single quarter has put that progress in question.
How the banking sector got here
US banks held enormous portfolios of Treasury securities and mortgage-backed securities, classified as either available-for-sale (AFS) or held-to-maturity (HTM). AFS securities get marked to market each quarter, meaning losses show up on financial statements. HTM securities don’t get marked to market, but the unrealized losses still exist.
