BankProspector - Non-Performing Loans to Loans Ratio - NPLs

Non-Performing Loans to Loans Ratio (NPL Ratio)

The Non-Performing Loans (NPL) to Loans Ratio is used to measure the level of stress in a loan portfolio. In general, the higher the ratio, the more distressed the portfolio.

How the NPL Ratio is Calculated

The NPL ratio is calculated by adding:

  • Loans 90+ days past due (and still accruing)
  • Nonaccrual loans

Then dividing that total by the overall loan portfolio.

Example:
($1M nonaccrual + $1M 90+ days late) ÷ $10MM total loans = 20%

This ratio is not reported directly in FFIEC call reports—it is derived from underlying data.

In BankProspector, the NPL ratio is calculated automatically for each portfolio.

What Counts as a Non-Performing Loan?

For this calculation, a non-performing loan is defined as any loan that is 90+ days past due or in nonaccrual status.

While loans may default for other reasons (e.g., technical or covenant defaults), those are not included in the NPL ratio.

How to Use the NPL Ratio in Your Prospecting

As a general guideline:

  • Under 6% – Considered a healthy portfolio
  • Above 6% – May indicate elevated stress

There is no strict rule for how a lender will respond to higher NPL levels, but portfolios with higher ratios are typically under more pressure and may be more open to workouts, restructuring, or asset sales.

Use Bank Search to filter for institutions with elevated NPL ratios and identify potential opportunities.

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