The Securities Book Rates PunishedThin moat

Bank of America (BAC) — moat facet

Bank of America invested the pandemic deposit flood at the bottom of rates, and the $82 billion paper loss is also why its income is now rising.

Bank of America's balance sheet carries the scar of one decision. In 2020 and 2021 deposits flooded in, and the bank invested a large part of them in long-dated securities held to maturity: that book grew from $438,279 million at the end of 2020 to $674,591 million a year later12. When rates rose, the securities lost value, and the unrealised loss reached $108,596 million at the end of 20223.

Net interest yield, FTE (%)2.0820231.9520242.012025Bank of America Form 10-K FY2025, average balance table
The yield bottomed in 2024.

The loss was about 44% of common equity at the time4. It remained above $100 billion at the end of 2024 and was $82,094 million in June 202656. Because the securities are held to maturity, the loss does not reduce regulatory capital and will not become real unless the bank has to sell.

What it did cost was income. For three years the bank was paid 2021 yields on hundreds of billions of assets while paying its depositors far more than in 2021. Net interest income was $56,931 million in 2023 and $56,060 million in 202478, lower than it would otherwise have been.

The book is now working the other way. It is running off with no new purchases, and the proceeds are reinvested at higher rates; net interest income rose to $60,096 million in 2025 and grew 9% in the second quarter of 2026910. The bank is now asset sensitive, gaining about $1.0 billion of income from a 100 basis point rise in rates11.

This facet is thin as a moat, because nothing here protects Bank of America from competitors. It belongs in the analysis because it shows how a strong deposit franchise can be undermined by what is done with the money.

The funding side of the balance sheet has also grown more expensive in another way. Long-term debt rose from $283.3 billion at the end of 2024 to $317.8 billion at the end of 2025 and $339.9 billion in June 20261213. Long-term debt is funding the bank pays market rates for, unlike a checking account.

The held-to-maturity loss is the figure that tracks the healing. Its fall from $108 billion toward zero is the repair being made; a return above $100 billion would mean the bank's balance sheet had again become a bet on rates.

Moat trajectory: Widening

Loss narrowing, book running off, NII up 9% in Q2 2026.

The number that tests this moat
Reported
Net interest yield
2.01% (2025) vs 1.95% in 2024

The spread earned on the whole balance sheet; a fall back below 2% would mean repricing had stalled.

Source: Bank of America Form 10-K, FY2025 ↗
Aspects of the moat
DIG DEEPER 01
$108.6 Billion Under Water
Bank of America's held-to-maturity securities were $108.6 billion under water in 2022, and $82 billion of that loss is still there.
DIG DEEPER 02
Running Off $152 Billion
Bank of America built a $236 billion bond position in one pandemic year and is unwinding it at about $35 billion a year.
DIG DEEPER 03
Fixed-Rate Asset Repricing
The bonds that cost Bank of America $108 billion on paper now give it a scheduled pay rise as they mature.
DIG DEEPER 04
A Bank That Now Wants a Rate Hike
The bank that lost $108 billion on paper when rates rose now earns an extra billion dollars for every point they go up.
⚠ Threats to the moat
⚠ THREAT 01
The Decision Made in 2021
One year of investing the pandemic deposit flood at very low rates set Bank of America's earnings path for the next five.
⚠ THREAT 02
Mortgages Are Most of the Loss
Five-sixths of Bank of America's bond loss sits in mortgage securities that repay slowest when rates are high.
References
  1. ReportedIn 2020 and 2021 deposits flooded in, and the bank invested a large part of them in long-dated securities held to maturity: that book grew from $438,279 million at the end of 2020 to $674,591 million a year later.
    Bank of America Form 10-K for fiscal 2021 - held-to-maturity securities at end-2020 and segment figures for 2019. — FY2021 · publ. February 2022 · source ↗
  2. ReportedIn 2020 and 2021 deposits flooded in, and the bank invested a large part of them in long-dated securities held to maturity: that book grew from $438,279 million at the end of 2020 to $674,591 million a year later.
    Bank of America Form 10-K for fiscal 2022 - held-to-maturity securities at end-2021 and segment figures for 2020, including the 2020 provision for credit losses. — FY2022 · publ. February 2023 · source ↗
  3. ReportedWhen rates rose, the securities lost value, and the unrealised loss reached $108,596 million at the end of 2022.
    Bank of America Form 10-K for fiscal 2023 - held-to-maturity securities at end-2022 and end-2023, average deposit balances for 2021-2023 and segment figures for 2021. — FY2023 · publ. February 2024 · source ↗
  4. Moat Explorer calcThe loss was about 44% of common equity at the time.
    Moat Explorer calculation from Bank of America's reported figures ($ millions unless stated). Deposits: cost of total deposits = interest on interest-bearing deposits / (average interest-bearing + average noninterest-bearing deposits): 2019 7,188 / 1,380,326 = 0.52%; 2021 537 / 1,914,286 = 0.03%; 2022 4,718 / 1,986,158 = 0.24%; 2023 26,163 / 1,887,541 = 1.39%; 2024 38,442 / 1,924,106 = 2.00%; 2025 34,513 / 1,984,182 = 1.74% (1,469,705 + 514,477 = 1,984,182, about $1.98 trillion). Average total deposits 2015 1,155,860; 2021 1,914,286; 2022 1,986,158 (about $1.99 trillion); 2015 to 2025 1,984,182 / 1,155,860 - 1 = 72%. Noninterest-bearing share 744,035 / 1,914,286 = 38.9% (2021); 514,477 / 1,984,182 = 25.9% (2025). Noninterest-bearing decline 751,470 - 514,477 = 236,993 (about $237 billion). JPMorgan comparison: deposit cost gap 1.80% - 1.74% = 0.06 points; 0.0006 x 1,984,182 = about 1,190 (about $1.2 billion). JPMorgan revenue per dollar of average deposits 182,447 / 2,506,565 = 7.3 cents; Bank of America 113,097 / 1,984,182 = 5.7 cents. JPMorgan year-end deposits 2,559,320 / 2,018,729 - 1 = 27%; revenue 182,447 / 113,097 - 1 = 61%; market value 935.79 / 391.80 = 2.4 times. Net income margin JPMorgan 57,048 / 182,447 = 31.3%; Bank of America 30,509 / 113,097 = 27.0%. Efficiency gap 61.65% - 52% = 9.65 points x 113,097 = about 10,914 (about $10.9 billion). Loans to deposits 1,185,700 / 2,018,729 = 58.7%. Uninsured deposits 723.0 + 134.9 = 857.9 billion; 857.9 / 2,018.7 = 42.5%; insured and other 2,018.7 - 857.9 = 1,160.8 billion. Consumer deposits per checking account 957.0 billion / 38.7 million = about $24,700. Securities: held-to-maturity unrealised loss as a share of common equity 108,596 / 244,800 = 44% (2022); 82,094 / 276,100 = 30% (June 2026). Held-to-maturity amortised cost 2021 674,591 - 2025 522,685 = 151,906 (about $152 billion); 2020 438,279 to 2021 674,591 = +236,312 (about $236 billion); 2021 fair value 665,890 - cost 674,591 = -8,701. Runoff time 505,828 / 34,794 = 14.5 years. Agency MBS share of loss 67,309 / 80,257 = 84%. Net interest income H1 31,742 / 29,113 - 1 = 9.0%. Capital: CET1 headroom (11.2% - 10.0%) x 1,792 billion = about 21.5 billion; 2027 minimum 4.5% + 3.5% + 2.5% = 10.5%. Capital returned 2025 (8.1 + 21.433) / 29.055 = 101% of net income to common. Average diluted shares 7,680.9 / 11,236.2 - 1 = -31.6%. EPS growth (3.81 / 1.31)^(1/10) - 1 = 11.3% a year. Price to tangible book 56.03 / 29.37 = 1.91. Revenue 2023 102,769 to 2025 113,097 = +10%. Compensation 42,346 / 69,727 = 61% of noninterest expense. Financial centers 3,530 / 3,664 - 1 = -3.7%. Noninterest expense Q2 2026 18,627 / 17,183 - 1 = 8.4%. Berkshire holding 483,394,015 / 1,032,852,006 - 1 = -53%. Investment banking fees Q2 2025 implied 2.1 / 1.5 = 1.4 billion. Segments (FTE, 2025): segment revenue 43,673 + 24,883 + 24,108 + 24,096 = 116,760; less All Other 3,054 = 113,706; less FTE adjustment 609 = 113,097. Shares of total FTE revenue: Consumer 43,673 / 113,706 = 38.4%; GWIM 24,883 / 113,706 = 21.9%. Shares of net income 30,509: Consumer 12,245 = 40.1%; Global Banking 7,793 = 25.5%; Global Markets 6,111 = 20.0%; GWIM 4,670 = 15.3%. Net income margins: Consumer 12,245 / 43,673 = 28.0%; GWIM 4,670 / 24,883 = 18.8% (2024 4,263 / 22,929 = 18.6%; 2023 3,947 / 21,105 = 18.7%); Global Banking 7,793 / 24,108 = 32.3%; Global Markets 6,111 / 24,096 = 25.4%. Consumer net interest income 35,309 / 43,673 = 81%; Consumer provision 4,649 / 5,675 = 82%. Growth 2023-2025: Consumer 43,673 / 42,031 - 1 = 3.9%; GWIM 24,883 / 21,105 - 1 = 17.9%; Global Markets 24,096 / 19,533 - 1 = 23.4%; Global Banking net income 7,793 / 10,072 - 1 = -23%. Consumer H1 2026 revenue 11,336 + 11,049 = 22,385. GWIM net interest income 7,197 / 24,883 = 29%. Revenue per dollar of year-end assets: Global Markets 24,096 / 1,032,858 = 2.3 cents; Consumer 43,673 / 1,039,346 = 4.2 cents. GWIM client balances 4,751,394 / 4,252,106 - 1 = 11.7%, increase 499,288; net flows 81,997 / 4,252,106 = 1.9%; consumer investment assets 639.5 / 599.1 - 1 = 6.7%. Revenue per dollar of balances: Private Bank 4,167 / 759,082 = 0.55%; Merrill 20,716 / 3,992,312 = 0.52%; Private Bank share of GWIM balances 759,082 / 4,751,394 = 16% and revenue 4,167 / 24,883 = 17%. Investment and brokerage services 19,956 / 17,766 - 1 = 12.3%. Common equity 277,251 / total assets 3,411,738 = 8.1%. AUM net flows 81,997 / 2,177,708 = 3.8%. Held-to-maturity loss 2023 97,994 / 263,249 = 37%. Share price 56.03 / 52-week high 65.23 - 1 = -14%. First half 2026 (Q1 + Q2): Consumer Banking revenue 11,049 + 11,336 = 22,385 and net income 3,060 + 3,281 = 6,341; Global Banking net income 2,087 + 2,046 = 4,133; Global Markets revenue 7,109 + 8,022 = 15,131 - deposits, deposit cost and the securities book. — 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in Bank of America's Forms 10-K and 10-Q, earnings releases, JPMorgan's 10-K, Berkshire 13F tables and market data; operands shown in the source line.
  5. ReportedIt remained above $100 billion at the end of 2024 and was $82,094 million in June 2026.
    Bank of America Form 10-K for fiscal 2025 - financial highlights, income statement, capital and shareholders' equity. — FY2025 · publ. 25 February 2026 · source ↗
  6. ReportedIt remained above $100 billion at the end of 2024 and was $82,094 million in June 2026.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
  7. ReportedNet interest income was $56,931 million in 2023 and $56,060 million in 2024, lower than it would otherwise have been.
    Bank of America Form 8-K exhibit 99.1, revised supplemental information for the change in accounting for tax-related equity investments - restated 2023 and 2024 results. — FY2023-FY2024 · publ. 6 January 2026 · source ↗
  8. ReportedNet interest income was $56,931 million in 2023 and $56,060 million in 2024, lower than it would otherwise have been.
    Bank of America Form 10-K for fiscal 2025 - financial highlights, income statement, capital and shareholders' equity. — FY2025 · publ. 25 February 2026 · source ↗
  9. ReportedIt is running off with no new purchases, and the proceeds are reinvested at higher rates; net interest income rose to $60,096 million in 2025 and grew 9% in the second quarter of 2026.
    Bank of America Form 10-K for fiscal 2025 - securities note: held-to-maturity debt securities, fair value and paydowns. — FY2025 · publ. 25 February 2026 · source ↗
  10. ReportedIt is running off with no new purchases, and the proceeds are reinvested at higher rates; net interest income rose to $60,096 million in 2025 and grew 9% in the second quarter of 2026.
    Bank of America second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - consolidated results, credit quality, capital and forward-looking risks. — Q2 2026 · publ. 14 July 2026 · source ↗
  11. ReportedThe bank is now asset sensitive, gaining about $1.0 billion of income from a 100 basis point rise in rates.
    Bank of America Form 10-Q for the quarter ended 30 June 2026 - held-to-maturity securities, interest-rate sensitivity, capital requirements and the OCC consent order. — Q2 2026 · publ. 31 July 2026 · source ↗
  12. ReportedLong-term debt rose from $283.3 billion at the end of 2024 to $317.8 billion at the end of 2025 and $339.9 billion in June 2026.
    Bank of America Form 10-K for fiscal 2025 - financial highlights, income statement, capital and shareholders' equity. — FY2025 · publ. 25 February 2026 · source ↗
  13. ReportedLong-term debt rose from $283.3 billion at the end of 2024 to $317.8 billion at the end of 2025 and $339.9 billion in June 2026.
    Bank of America second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - consolidated results, credit quality, capital and forward-looking risks. — Q2 2026 · publ. 14 July 2026 · source ↗
Sources
Generated September 25, 2026