Asset Quality
Nonaccrual Loans
Also known as Nonaccrual
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+ days past due or otherwise impaired. They are the core of nonperforming assets.
Formula
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 interpret
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 | Label | Interpretation |
|---|---|---|
| < 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
Frequently asked
When is a loan placed on nonaccrual?
Generally when it is 90 days or more past due, 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)
See Nonaccrual across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by Nonaccrual, refreshed quarterly within 48 hours of FFIEC release.