A polarity thresholding algorithm that has recently been developed for split-spectrum processing for ultrasonic coherent noise reduction is theoretically analyzed to evaluate its performance. The probability density function (PDF) of the output of the algorithm is derived and used to calculate the theoretical signal-to-noise ratio (SNR) enhancement and the receiver operating characteristics. The performance limits of the algorithm are also established. Some experimental results of SNR enhancement obtained with the polarity thresholding algorithm are presented.