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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →To evaluate a bank’s credit quality, follow net charge-offs and noncurrent loans across several quarters, compare them with banks that have similar businesses and loan portfolios, and check the underlying loan categories and allowance data. Neither metric alone is a pass-or-fail test: one records losses recognized during a period, while the other measures seriously delinquent or nonaccrual loans at a point in time.
What charge-offs and noncurrent loans measure
In U.S. bank reporting, these measures describe different stages and aspects of credit trouble:
- Net charge-offs (NCOs) are loans and leases removed from the balance sheet as uncollectible, minus recoveries on loans and leases charged off previously. The FDIC defines the measure in its Quarterly Banking Profile glossary.
- Noncurrent loans are loans 90 days or more past due plus loans in nonaccrual status, under the FDIC’s industry reporting definition. See the FDIC Quarterly Banking Profile.
Charge-offs capture recognized losses over a reporting period; noncurrent balances capture loans meeting serious delinquency or nonaccrual criteria at a reporting date. Their timing can differ, so a rise in one before the other does not necessarily mean the figures conflict.
Where to find the figures
For U.S. banks, quarterly Call Reports provide the relevant underlying data. FFIEC instructions identify Schedule RI-B for charge-offs, recoveries, and allowance changes, and Schedule RC-N for past-due and nonaccrual loans, leases, and other assets. Check the instructions for the specific reporting period and use consistent categories when comparing filings: FFIEC Call Report forms and instructions.
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The Call Report data are used by regulators to monitor an institution’s condition, performance, and risk profile. See the FFIEC Central Data Repository.
A practical way to assess credit quality
- Line up reporting dates and definitions. Compare matching quarter ends, the same kinds of loans, and consistent ratio definitions. A period mismatch can make an apparent change misleading.
- Review several quarters. Note whether charge-offs and noncurrent loans are rising, falling, accelerating, or reversing. Distinguish a single-quarter movement from a sustained trend.
- Choose genuinely similar peers. Consider bank size, location, charter, business specialty, and loan mix. The FDIC’s guide to bank data describes comparison characteristics. A consumer-credit-heavy bank, for example, is not directly comparable to a bank concentrated in commercial real estate without accounting for that difference.
- Look below the portfolio total. Aggregate ratios can conceal weakness in a particular loan class. Review category-level past-due, nonaccrual, charge-off, and recovery data where available.
- Check how recoveries affect net charge-offs. Recoveries are collections on amounts charged off previously. The FDIC has warned that crediting recoveries beyond amounts previously charged off can understate net charge-off experience. See the FDIC guidance on recoveries.
- Use allowance information as context. RI-B also reports allowance changes. The allowance is an estimate of expected credit losses, not a record of losses already charged off or a count of loans currently noncurrent. The FDIC explains the CECL methodology, used to estimate allowances for credit losses.
Why loan mix changes the interpretation
Different portfolios can have very different delinquency and loss patterns. In its Q2 2024 industry release, the FDIC reported noncurrent loans at 0.91% of total loans and a credit-card net charge-off rate of 4.82%. These historical figures describe different measures and portfolio scopes; they are an illustration of variation, not a direct comparison or a threshold for judging an individual bank. See the FDIC Q2 2024 release.
For a bank-level assessment, identify which loan classes account for its balances and losses. A portfolio-wide rate can look steady even while one category is deteriorating and another is improving.
How to use industry figures without treating them as cutoffs
In its Q4 2025 Quarterly Banking Profile, the FDIC reported an industry past-due and nonaccrual rate of 1.56% and a quarterly net charge-off rate of 0.63%. It also reported a 1.94% pre-pandemic average past-due and nonaccrual rate. The FDIC noted that some portfolios remained weaker than their pre-pandemic averages. These figures are period-specific context, not universal safety limits or a substitute for comparing a bank with suitable peers. See the FDIC Q4 2025 release.
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What these metrics cannot establish by themselves
- A low current ratio does not by itself prove that a bank is sound; trends, categories, and reporting quality matter.
- A rising measure does not alone prove distress. It is a signal to inspect persistence, portfolio composition, peers, and related information.
- These measures do not provide a complete bank rating or investment recommendation. An individual conclusion requires the bank’s actual filings and broader risk information.
This framework reflects U.S. FDIC and FFIEC Call Report practices. The sources cited here do not establish equivalent definitions or filing schedules for other jurisdictions.
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