What is the Texas Ratio?
The Texas Ratio is a bank-stress gauge equal to a bank's nonperforming (problem) assets divided by the capital and loan-loss reserves available to absorb them, expressed as a percentage. A low ratio means problem assets are small relative to the cushion; a ratio approaching 100% means problem assets roughly equal the capital and reserves behind them — historically a serious stress signal. It was named after the 1980s Texas banking crisis, where it reliably flagged failing banks. It is one signal among several, not a prediction of failure.
The formula
BankGrade computes the Texas Ratio from public FDIC call-report fields:
Texas Ratio = nonperforming assets ÷ (total equity + loan-loss allowance) × 100
In FDIC field terms that is NPERF ÷ (EQ + LNATRES). The numerator captures loans that
are 90+ days past due or in nonaccrual plus repossessed property; the denominator is the equity and
reserves that would absorb those losses. The full definition is on the
methodology page.
How to read the value
| Texas Ratio | Plain-language read |
|---|---|
| Under 10% | Very low problem-asset load relative to the cushion |
| 10% – 30% | Modest problem assets; common and usually unremarkable |
| 30% – 70% | Elevated — worth understanding why, alongside capital and earnings |
| 70% – 100%+ | Historically a stress zone; problem assets approach the cushion |
Banks with the lowest Texas Ratio right now
Among the largest US banks on the Q1 2026 (call report dated March 31, 2026) FDIC call report, the lowest computed Texas Ratios are Charles Schwab Premier Bank, SSB (0.00%), Charles Schwab Bank, SSB (0.18%) and The Bank of New York Mellon (0.19%). See the full lowest-Texas-Ratio ranking.
Limitations to keep in mind
The Texas Ratio is only as good as the asset classification behind it. Some past-due assets are government-guaranteed or fully collateralised, so a high ratio does not always mean high risk. It uses a single quarterly snapshot, ignores off-balance-sheet exposures, and treats all problem assets as equally risky. That is why BankGrade's overall grade blends the Texas Ratio with capital ratios, nonperforming-asset ratio and return on assets rather than relying on any one number.
Frequently asked questions
What is the Texas Ratio?
The Texas Ratio is a bank-stress gauge that divides a bank's nonperforming (problem) assets by the capital and loan-loss reserves available to absorb them. It was popularised by analysts during the 1980s Texas banking crisis. A low ratio means problem assets are small relative to the cushion; a ratio approaching 100% has historically signalled banks under serious stress.
What is a good Texas Ratio?
Lower is better. Healthy banks often sit in the low single digits to low double digits. Classic guidance treats figures near 100% as a danger zone, because at that point problem assets roughly equal the capital and reserves behind them. But the threshold is a rule of thumb, not a hard cutoff, and the ratio must be read alongside capital ratios and earnings.
How is the Texas Ratio calculated on BankGrade?
We compute Texas Ratio = nonperforming assets ÷ (total equity + loan-loss allowance), using the FDIC fields NPERF, EQ and LNATRES from each bank's latest call report, expressed as a percentage. This is a transparent calculation over public FDIC data; it is documented on our methodology page.
What are the limitations of the Texas Ratio?
The ratio depends on how 'nonperforming' assets are classified, and some past-due assets are government-guaranteed or well-collateralised, which can inflate the ratio without the same risk. It uses a single quarterly snapshot, ignores off-balance-sheet exposures, and treats all problem assets as equally risky. Large, well-capitalised banks can show elevated ratios for reporting reasons. Use it as one signal, not a verdict.
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Last updated: 2026-06-20