⚠ Mortgages Are Most of the LossModerate threat

Bank of America (BAC) — threat to the moat

Five-sixths of Bank of America's bond loss sits in mortgage securities that repay slowest when rates are high.

The held-to-maturity loss is concentrated in one asset type. At the end of 2025 agency mortgage-backed securities had an amortised cost of $395,415 million and an unrealised loss of $67,309 million; United States Treasury and agency securities $121,242 million and $12,225 million1. Mortgages were about 84% of the loss2.

HTM unrealised loss by type, end 2025 ($bn)-67.3Agency MBS-12.2US Treasury and agencies-0.7Other taxableBank of America Form 10-K FY2025, securities note
The loss is in the mortgages.

That matters for how long the loss lasts. A Treasury security matures on a fixed date; a mortgage security repays as homeowners move or refinance, and homeowners with low fixed-rate mortgages have little reason to refinance when rates are higher.

So the mortgage part of the book is likely to run off slowest, and it is also the part carrying the largest loss.

The bank has stopped adding to the problem. It made no purchases of held-to-maturity securities in 2024 or 20253, so every dollar of mortgage and Treasury runoff is reinvested elsewhere at current yields rather than rolled into new long-dated bonds.

The mortgage-backed loss is disclosed in the annual securities note. If it shrinks more slowly than the Treasury loss over the next two years, the repricing tailwind will be slower than the headline runoff suggests.

References
  1. ReportedAt the end of 2025 agency mortgage-backed securities had an amortised cost of $395,415 million and an unrealised loss of $67,309 million; United States Treasury and agency securities $121,242 million and $12,225 million.
    Bank of America Form 10-K for fiscal 2025 - securities note: held-to-maturity debt securities, fair value and paydowns. — FY2025 · publ. 25 February 2026 · source ↗
  2. Moat Explorer calcMortgages were about 84% of the loss.
    Moat Explorer calculation from Bank of America's reported figures ($ 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.
  3. ReportedIt made no purchases of held-to-maturity securities in 2024 or 2025, so every dollar of mortgage and Treasury runoff is reinvested elsewhere at current yields rather than rolled into new long-dated bonds.
    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 ↗
Sources
Generated September 25, 2026