--- title: "Nonaccrual Loans: definition, formula, and thresholds" description: "Nonaccrual loans are loans on which the bank has stopped recognizing interest income because full repayment is in doubt, generally once a loan is 90 or more days past due (unless it is well secured and in the process of collection) or sooner if full collection is doubtful. They are the core of nonperforming assets." canonical_url: https://www.bankregreports.com/glossary/nonaccrual-loans/ source: BankRegReports category: "Asset Quality" units: "$" schedule: "Schedule RC-N" --- # Nonaccrual Loans > Nonaccrual loans are loans on which the bank has stopped recognizing interest income because full repayment is in doubt, generally once a loan is 90 or more days past due (unless it is well secured and in the process of collection) or sooner if full collection is doubtful. They are the core of nonperforming assets. ## Formula ``` Nonaccrual Loans = Loans placed in nonaccrual status (Schedule RC-N) ``` Schedule RC-N reports loans by past-due bucket and nonaccrual status. Once a loan goes nonaccrual, accrued-but-unpaid interest is reversed and no further interest is booked, so nonaccruals directly drag earnings as well as signaling credit stress. ## Why it matters Nonaccrual is where credit problems become undeniable: the bank no longer expects to be paid in full. The level and trend of nonaccrual loans feed the nonperforming-loan and Texas ratios and are a primary input to the adequacy of the allowance. ## How to read it Track nonaccrual loans as a share of total loans and over time. A rising nonaccrual ratio is a leading sign of deteriorating credit; compare it to the allowance (coverage) to judge whether reserves are keeping pace with the problem book. ## Thresholds | Range | Reading | What it means | |---|---|---| | < 0.5% of loans | Strong | Minimal nonaccrual; clean loan book. | | 0.5-1.5% | Adequate | Normal level of problem credits. | | 1.5-3% | Watch | Elevated nonaccruals; credit quality slipping. | | > 3% of loans | Concern | High problem-loan burden straining earnings and capital. | ## Worked example A bank with $1.4 billion of loans and $21 million of nonaccrual loans has a 1.5% nonaccrual ratio. If its allowance is $21 million, coverage is about 100%, adequate, but leaving little margin if the problem book grows. ## Questions ### What is a non-accrual loan? A non-accrual loan is a loan on which the bank no longer records interest income because it doubts it will be repaid in full. The bank reverses interest it had accrued but not collected, and it books later payments against principal or as cash received. Banks report these loans on Schedule RC-N of the Call Report. ### What does nonaccrual mean? Nonaccrual means the bank has stopped accruing, or recording as earned, the interest a loan is supposed to pay. It is the accounting status for a loan the bank no longer expects to collect in full, and it is the most severe category of problem loan short of a charge-off. ### When is a loan placed on nonaccrual? Generally when it is 90 days or more past due, unless the loan is both well secured and in the process of collection, or sooner if full collection of principal and interest is in doubt. The bank stops accruing interest and reverses any previously accrued but uncollected interest. ### What is the difference between nonaccrual and past-due loans? Past-due loans are behind on payments but may still be accruing interest (e.g., 30-89 days late). Nonaccrual loans have had interest accrual stopped because repayment is doubtful. Nonaccruals are the more severe category. ## Sources - [FFIEC Call Report Schedule RC-N (Past Due and Nonaccrual)](https://www.ffiec.gov/sites/default/files/data/reporting-forms/FFIEC031_FFIEC041_202606_i.pdf) (PDF) ## Related metrics - [Non-Performing Loans Ratio](https://www.bankregreports.com/glossary/npl-ratio/): A non-performing loan (NPL) is a loan whose borrower has stopped paying as agreed: the bank has put it on nonaccrual because full collection is doubtful, or it is 90 or more days past due. The NPL ratio divides those loans by total loans. Regulators call them noncurrent loans. - [Non-Performing Assets Ratio](https://www.bankregreports.com/glossary/npa-ratio/): Non-performing assets (NPAs) are a bank's non-performing loans plus other real estate owned (OREO), the property it has taken through foreclosure. The NPA ratio divides them by total assets, so it measures the whole stock of troubled assets, not only troubled loans. - [Past-Due Loans](https://www.bankregreports.com/glossary/past-due-loans/): Past-due loans are loans behind on their contractual payments, reported in 30-89 day and 90+ day buckets. The early (30-89 day) bucket is a leading indicator of credit problems before loans slip into nonaccrual. - [Texas Ratio](https://www.bankregreports.com/glossary/texas-ratio/): The Texas ratio is a bank's problem assets divided by its tangible equity plus loan loss reserves. Problem assets are nonaccrual loans, loans 90 or more days past due and other real estate owned, net of government guarantees. A ratio above 100% means problem assets exceed the capacity to absorb them, a level long tied to bank failures. - [Loan Loss Coverage Ratio](https://www.bankregreports.com/glossary/coverage-ratio/): The coverage ratio measures the bank's loan loss reserve against its non-performing loans. It answers: how many times over could the bank's reserves absorb its current problem loans? ## About this document This is the markdown twin of the page named in `canonical_url` above. Source filings are public record; the cleaning, normalization, cross-source linkage, and derived metrics are BankRegReports' own. Attribute with a link to the canonical URL. Markdown twins are published for editorial content only. Institution data pages do not have them. For data at scale use the API, which is documented at https://www.bankregreports.com/api/ and specified at https://www.bankregreports.com/openapi.json. 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