How Much of Nonperforming Loans Are Covered by Allowances? Provision Coverage Versus NPL Ratios at 3,455 US Banks, June 2026, and an Exact Aggregate Identity

Provision coverage is allowances divided by nonperforming loans, and the allowance-to-loan ratio equals coverage times the NPL ratio exactly at every bank and in the aggregate. In FDIC Call Reports for June 2026, among 3,455 banks with usable data, the median coverage ratio is 1.96 and the mean is 3.48, but the asset-weighted aggregate coverage is only 1.77 because large banks have lower coverage. Aggregate NPL is 0.979% and aggregate allowance/loans is 1.730%, matching the product identity. The elasticity of log coverage on log NPL is -0.890 (HC1 standard error 0.008, R-squared 0.844): banks with more bad loans have much thinner coverage. Among banks with NPL above 3%, mean coverage is 0.47 and 95.5% have coverage below one. Just over one in four banks overall has coverage below one.