As demand for water in the southwestern United States increases and climate change potentially decreases the natural flows in the Colorado River system, there will be increased need to optimize the water supply. Lake Powell is a large reservoir with potentially high loss rates to bank storage and evaporation. Bank storage is estimated as a residual in the reservoir water balance. Estimates of local inflow contribute uncertainty to estimates of bank storage. Regression analyses of local inflow with gaged tributaries have improved the estimate of local inflow. Using a stochastic estimate of local inflow based on the standard error of the regression estimator and of gross evaporation based on observed variability at Lake Mead, a reservoir water balance was used to estimate that more than 14.8 billion cubic meters (Gm3) has been stored in the banks, with a 90% probability that the value is actually between 11.8 and 18.5 Gm3. Groundwater models developed by others, observed groundwater levels, and simple transmissivity calculations confirm these bank storage estimates. Assuming a constant bank storage fraction for simulations of the future may cause managers to underestimate the actual losses from the reservoir. Updated management regimes which account more accurately for bank storage and evaporation could save water that will otherwise be lost to the banks or evaporation.