Short answer: The Texas ratio divides a bank's problem assets (nonaccrual loans, loans 90 days or more past due and still accruing, and foreclosed real estate) by its equity less intangibles plus its loan loss allowance. At June 30, 2026 the median across 4,237 FDIC-insured banks was 3.15% and the 90th percentile 14.85%. Seven banks were above 100%, 26 above 50%, 157 above 25% and 797 above 10%, while 472 were at zero. The dollar-weighted industry figure was 5.64%. The ratio measures credit trouble against capital on one date. It doesn't predict failure.
Where the ratio comes from
The ratio is credited to bank analyst Gerard Cassidy. The St. Louis Fed says he developed it while analyzing the Texas banking crisis of the 1980s; American Banker dates the work to the 1990s, built on Texas banks that failed in the 1980s. Either way, it began as a study of banks that had already failed, which is easy to forget once the number gets quoted as a forecast.
The standard formula adds nonaccrual loans, loans 90 or more days past due and still accruing, and other real estate owned, then divides by equity capital less goodwill and other intangibles plus the allowance for loan losses. Above 100%, problem assets exceed the capital and reserves behind them, and analysts treat that as a warning (St. Louis Fed).
How we build it from the call report
Our version takes every input from each bank's own call report:
Texas ratio = (nonaccrual loans + loans 90 days or more past due and still accruing + other real estate owned) ÷ (total equity capital less intangible assets + allowance for credit losses) × 100
The two loan figures come from Schedule RC-N, Past Due and Nonaccrual Loans, Leases, and Other Assets. Other real estate owned, intangible assets, the allowance for credit losses and total equity capital are on Schedule RC, the balance sheet (titles per the FFIEC call report instructions).
Under the Schedule RC-N instructions, a loan goes on nonaccrual when it's kept on a cash basis because the borrower's condition has deteriorated, when full payment of principal or interest isn't expected, or when principal or interest has been in default for 90 days or more, unless the loan is both well secured and in the process of collection. That exception is what keeps some very late loans accruing. Older write-ups call the allowance for credit losses the allowance for loan losses.
Where US banks stood at June 30, 2026
Across the 4,237 banks with a ratio, the median was 3.15% and the lower quartile 0.78%. The right tail is long: a quarter of banks were above 7.72%, a tenth above 14.85%, one in twenty above 21.42% and 1% above 43.85%.
| Texas ratio | Banks | Share of banks |
|---|---|---|
| Zero | 472 | 11.1% |
| Above 10% | 797 | 18.8% |
| Above 25% | 157 | 3.7% |
| Above 50% | 26 | 0.6% |
| Above 100% | 7 | 0.2% |
Source: BankingLens, computed from FFIEC call reports for the quarter ending June 30, 2026. Shares are of 4,237 banks; a bank above 50% is also counted above 25% and above 10%.
For the far end of the table we give counts and nothing more. One large credit, or a foreclosed property already under contract, can produce the same reading as a loan book going bad across the board.
Pooling every bank's dollars gives an industry figure of 5.64%, above the median because the dollars sit mostly at the largest banks, where ratios run higher (5.23% at the median bank over $100B). Foreclosed real estate is a small slice, $4.91 billion across all 4,238 banks, so today's numerator is mostly loans; the dollar amounts are in our nonperforming loan benchmarks.
Size moves both ends of the distribution
| Bank size (total assets) | Banks | Lower quartile | Median | Upper quartile | 90th percentile |
|---|---|---|---|---|---|
| All banks | 4,237 | 0.78% | 3.15% | 7.72% | 14.85% |
| Under $100M | 543 | 0.00% | 1.94% | 7.58% | 16.78% |
| $100M to $300M | 1,214 | 0.40% | 2.57% | 7.35% | 14.92% |
| $300M to $1B | 1,433 | 0.86% | 2.97% | 7.95% | 15.96% |
| $1B to $3B | 625 | 1.44% | 3.59% | 7.76% | 13.81% |
| $3B to $10B | 264 | 2.28% | 4.33% | 8.04% | 13.73% |
| $10B to $100B | 126 | 3.13% | 4.57% | 7.31% | 11.67% |
| Over $100B | 32 | 3.66% | 5.23% | 7.32% | 8.51% |
Source: BankingLens, computed from FFIEC call reports for the quarter ending June 30, 2026. Lower is better.
The upper quartile stays between 7.31% and 8.04% in every band. The median climbs from 1.94% under $100M to 5.23% over $100B because the bottom of the distribution fills in: at least a quarter of banks under $100M were at zero, while over $100B even the 10th percentile was 1.21%. The 90th percentile runs the other way, from 16.78% under $100M and 15.96% at $300M to $1B down to 8.51% over $100B.
Small books are lumpy. A bank under $100M holds few enough loans that trouble arrives one relationship at a time, so it can sit at zero and then pass its band's 90th percentile on a single farm credit. Large books always carry some past due loans, and no one credit moves the total much. When you show this ratio to a small bank's board, name the credit behind any jump, or a director may read it as a trend.
What the ratio can't see
Use the Texas ratio to measure, not to forecast. A reading above 100% doesn't say the bank will fail, and the count above that line, seven banks at June 30, 2026, forecasts nothing. Banks work problem loans out or absorb them through reserves and earnings. A bank can also get into serious trouble through liquidity or interest rate risk with a ratio near zero, because neither shows up in it.
The numerator counts balances at face value. A nonaccrual loan on farmland worth far more than the debt weighs the same as an unsecured line to a closed business, and a late loan with a government guarantee weighs the same as one without.
It can't judge the allowance, which sits in the denominator beside equity. A provision moves money from equity into the allowance and leaves the cushion about where it was, so a bank that has reserved for its problem loans and one that hasn't can post nearly the same ratio. Writing off a reserved loan takes the same dollars out of both halves of the fraction, which lowers the ratio for any bank under 100% and hides the loss already taken.
It ignores earnings. Pre-provision income absorbs losses before capital does, so a bank with strong core earnings carries a high ratio more easily than one that barely breaks even. Rebuild pre-tax, pre-provision income from Schedule RI before reading much into a high number.
It's one date, so it can't tell a rising ratio from a falling one, and it sees trouble late. Loans 30 days or more past due but not yet at 90 are left out, while the FDIC's headline credit measure in its Quarterly Banking Profile now counts them with nonaccrual loans. Track the nonperforming loan ratio and reserve coverage (the allowance against nonperforming loans) by quarter beside it; the median NPL ratio has risen in nearly every quarter since early 2023.
Bond marks move it too. Total equity includes accumulated other comprehensive income, so unrealized losses on available-for-sale securities raise the ratio with no change in credit (see how much bank capital is still underwater). For capital, the tier 1 leverage ratio is the steadier measure at banks that made the one-time election to keep most AOCI out of regulatory capital (FDIC).
Variants that won't match ours
Published Texas ratios aren't always built this way, and each common variation moves the number:
- Leaving out loans 90 days or more past due and still accruing lowers it. The case for that is the nonaccrual exception for loans that are well secured and in collection.
- Using tangible common equity drops preferred stock from the denominator and raises the ratio at banks with preferred shares.
- Adding restructured loans to the numerator raises it.
- Holding company statements bring in the parent's own capital and nonbank subsidiaries, so they won't match the bank's call report.
Compare Texas ratios only when they're computed the same way from the same kind of statement, and rebuild any outside figure from call report lines before setting yours beside it. Every input is public on the FFIEC's Central Data Repository.
Frost Bank's reading
Frost Bank, the San Antonio bank on our public sample scorecard, had a Texas ratio of 3.00% at June 30, 2026. With $53.95 billion in assets it sits in the $10B to $100B band, below that band's lower quartile of 3.13% and well under its 4.57% median. Next to the all-bank median of 3.15%, the same number looks ordinary.
At a reading that low, the ratio has said most of what it can. The next questions are direction and reserve coverage. For direction, the sample scorecard shows Frost's nonperforming loan ratio with its change from a year earlier, along with its capital ratios, each against its FFIEC peer group.
Frequently asked questions
What is the Texas ratio?
The Texas ratio compares a bank's problem assets with the capital and reserves available to absorb them: nonaccrual loans, loans 90 days or more past due and still accruing, and other real estate owned, divided by equity capital less intangible assets plus the loan loss allowance. The median FDIC-insured bank was at 3.15% on June 30, 2026.
What is a good Texas ratio?
No regulator sets a target, and lower is better. On June 30, 2026 half of all banks were between 0.78% and 7.72%, and 18.8% were above 10%. Compare within a size band: the median ran from 1.94% for banks under $100M to 5.23% for banks over $100B.
What does a Texas ratio over 100% mean?
Problem assets, counted at full balance, exceed the bank's equity capital less intangibles plus its allowance, and analysts treat that as a warning sign. It doesn't mean the bank is insolvent or will fail, because the numerator counts balances rather than the losses the bank will take. Seven of 4,237 banks were above 100% on June 30, 2026.
How do you calculate the Texas ratio from a call report?
Add nonaccrual loans and loans 90 days or more past due and still accruing, both from Schedule RC-N, to other real estate owned from Schedule RC. Divide by total equity capital minus intangible assets plus the allowance for credit losses, all from Schedule RC, and multiply by 100.
Who created the Texas ratio?
It is credited to bank analyst Gerard Cassidy. The St. Louis Fed says he developed it while analyzing the Texas banking crisis of the 1980s; American Banker dates the work to the 1990s.
Where these numbers come from
Every figure on this page is computed from the call reports of the 4,238 FDIC-insured banks and savings institutions that filed for the quarter ending June 30, 2026, the same count the FDIC Quarterly Banking Profile reports. We leave out the 58 non-deposit trust companies that also file call reports, since they take no deposits and make almost no loans. The distributions cover the 4,237 of them for which the ratio can be computed. You can see a real bank's credit quality and capital ratios, ranked against its FFIEC peer group, on the sample scorecard for Frost Bank. Plans that cover your state or every bank start at $29 a month (pricing).