Percentage of Non-Accrual Commercial Loans

Percentage of Non-Accrual Commercial Loans

KPI Details

Percentage of Non-Accrual Commercial Loans measures the dollar amount of outstanding commercial loans managed by the institution that are in non-accrual status in relation to the total dollar amount of outstanding commercial loans managed at the same point in time. Commercial loans in non-accrual status no longer accrue interest on behalf of the financial institution. High percentages of non-accrual commercial loans indicate that the financial institution has lent large amounts of money to borrowers that are no longer accruing interest, which negatively affects profitability and the ability of the financial institution to pay off its liabilities. Loans are typically assigned non-accrual status because of non-payment from borrowers, which can be indicative of high default risks.

KPI Definition

The dollar amount of outstanding commercial loans managed by the institution that are in non-accrual status (i.e., the loan is no longer accruing interest) divided by the total dollar amount of outstanding commercial loans managed at the same point in time, as a percentage.

KPI Best Practices

• Use historical data, stress tests and portfolio analytics to identify risky borrowers early in the loan process
• Review underwriting rules regularly to determine ways to minimize riskier loans
• Well-defined processes for the Collections function to receive payment from delinquent accounts

KPI Calculation Instructions Percentage of Non-Accrual Commercial Loans?

Two values are used to calculate this KPI: (1) the dollar amount of outstanding commercial loans managed by the institution that are in non-accrual status (i.e., the loan is no longer accruing interest), and (2) the total dollar amount of outstanding commercial loans managed at the same point in time. Loans in non-accrual status should include all loans which borrowers have stopped paying the principal and interest. Include all outstanding loans in the denominator.

KPI Formula :

(Dollar Amount of Outstanding Commercial Loans in Non-Accrual Status /Total Dollar Amount of Outstanding Commercial Loans Managed) * 100