Nonperforming Asset

Loan that is not paying principal and interest according to the original terms of the borrower's loan agreement, plus loans and leases with renegotiated terms and real estate acquired through foreclosure. The total of nonperforming assets usually is expressed as a percentage of the lender's total loan portfolio.

There are various definitions of this term, depending on the loan involved, and the lender's policy. When the principal and interest payments on a loan are past due by 90 days or more, the loan is said to be nonperforming, and the borrower is in a state of Default. Before a loan gets to that stage, however, a lender usually takes action to protect his security interest, by asking for more collateral or even demanding payment in full. See also Delinquency; Nonaccrual Asset; Workout Agreement.