A non-performing loan (NPL) is a bank loan that is 90 or more days past due or has been placed on non-accrual status — meaning the bank has stopped recognizing interest income on it due to doubt about collectibility. NPL ratio is a core bank safety-and-soundness metric.
A loan becomes non-performing when the borrower fails to make scheduled payments for 90+ days or when the bank determines it is unlikely to collect full principal and interest based on the borrower's financial condition — regardless of days past due. Once placed on non-accrual status, the bank reverses previously accrued but uncollected interest income and stops accruing new interest on the P&L. The FDIC defines NPLs in its Uniform Financial Institutions Rating System (CAMELS — https://www.fdic.gov/bank/historical/crisis/sec5.pdf). The 'A' in CAMELS (Asset Quality) is evaluated heavily on the NPL ratio: Total NPLs / Total Loans. Regulators use NPL ratios alongside charge-off rates and delinquency metrics to assess whether a bank's capital adequacy is adequate to absorb potential losses. Banks report NPLs on FFIEC call reports (https://www.ffiec.gov/npw/), which are public. The FDIC publishes aggregate NPL ratios in the Quarterly Banking Profile. For individual institution data, the FFIEC's BankFind Suite allows analysis of any FDIC-insured institution's asset quality metrics. For small business borrowers whose loans become NPLs, the consequences extend beyond credit scoring: the bank may engage a special assets or workout department, begin seeking additional collateral, pursue covenant violations, or initiate foreclosure proceedings. If the loan has a personal guarantee, the bank may proceed directly against the guarantor's personal assets. NPL status is a serious escalation that warrants immediate legal and financial counsel.
Non-accrual means the bank has classified your loan as doubtful of collection. They stop booking interest income. The bank's workout or special assets team typically takes over the relationship. You may receive formal default notices, requests for financial updates, demands for additional collateral, or notice of acceleration (full balance due immediately). This is a serious escalation — contact a business attorney immediately.
FFIEC BankFind Suite at ffiec.gov/npw/ allows free lookup of any FDIC-insured bank's call report data, including past-due and non-accrual loan schedules. The FDIC's Quarterly Banking Profile at fdic.gov/analysis/quarterly-banking-profile/ provides peer-group aggregate data. Banks also disclose NPL ratios in their quarterly earnings releases and 10-Q filings with the SEC.
Not precisely. Non-performing loan status (90+ days past due or non-accrual) is a bank regulatory classification. 'Default' is a legal concept defined in the loan agreement — often triggered at 30–60 days past due, covenant violation, or material adverse change. A loan can be in default (legally, under the contract) while still performing (less than 90 days past due). Conversely, NPL classification typically implies default has already occurred.