Capital
Net Worth Ratio (Credit Unions)
Also known as Net Worth Ratio
The net worth ratio is the credit-union analog of a bank's leverage ratio — net worth divided by total assets. It is the headline capital measure on the NCUA 5300 Call Report and the basis for credit-union prompt corrective action.
Formula
Net worth for a credit union is principally its retained earnings (undivided earnings and regular reserves), since cooperatives have no common stock. The NCUA 5300 reports it against total assets; 7% or above is 'well capitalized.'
Why it matters
Because credit unions cannot issue stock, the net worth ratio is their core solvency cushion and the trigger for NCUA prompt corrective action. It is the single most important capital number for a credit union, mirroring the role of the leverage ratio at banks.
How to interpret
Read the net worth ratio against the NCUA PCA thresholds. Above 7% is well capitalized; the ratio builds only through retained earnings, so a credit union growing assets faster than earnings will see it drift down — a common source of capital pressure in fast-growing cooperatives.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| ≥ 7% | Well capitalized | Meets the NCUA well-capitalized threshold. |
| 6-7% | Adequately capitalized | Above minimums but below the well-capitalized line. |
| 4-6% | Undercapitalized | Below adequacy; restoration measures required. |
| < 4% | Concern | Significantly or critically undercapitalized. |
Worked example
Frequently asked
How is a credit union's net worth ratio different from a bank's capital ratio?
Credit unions cannot raise equity by issuing stock, so net worth is built almost entirely from retained earnings. The net worth ratio (net worth ÷ total assets) is unweighted, making it most comparable to a bank's leverage ratio rather than a risk-based ratio.
What net worth ratio must a credit union maintain?
Under NCUA prompt corrective action, 7% or higher is well capitalized, 6-7% is adequately capitalized, and below 6% triggers escalating restrictions and a required net-worth-restoration plan.
Sources
- NCUA 5300 Call Report
- 12 CFR Part 702 (NCUA Prompt Corrective Action)
See Net Worth Ratio across 4,335 US banks
BankRegReports ranks every FDIC-insured institution by Net Worth Ratio, refreshed quarterly within 48 hours of FFIEC release.