Definition
The net worth ratio (NWR) is the percentage of a credit union's total assets that is funded by net worth — essentially, the institution's own capital rather than borrowed money (deposits and other liabilities). It is calculated as:
Net Worth Ratio = (Net Worth / Total Assets) × 100
For example, a credit union with $10 million in net worth and $100 million in total assets has a 10% net worth ratio.
Why It Matters
The net worth ratio is the single most important indicator of a credit union's financial resilience. A higher ratio means the credit union has a larger cushion to absorb unexpected losses — from loan defaults, investment losses, or economic downturns — without threatening member deposits. It is the credit union equivalent of a capital adequacy ratio at a bank.
NCUA Capital Categories
The NCUA's Prompt Corrective Action (PCA) framework classifies credit unions by net worth ratio:
- Well Capitalized: 7% or higher (the goal for all credit unions)
- Adequately Capitalized: 6% to less than 7%
- Undercapitalized: 4% to less than 6% (triggers NCUA corrective action)
- Significantly Undercapitalized: 3% to less than 4%
- Critically Undercapitalized: Less than 2% (risk of insolvency)
What Is a Good Net Worth Ratio?
The national average net worth ratio for US credit unions is approximately 10–11%. A ratio above 10% is generally considered excellent. Below 7%, a credit union must develop a net worth restoration plan. Below 6%, the NCUA may impose operational restrictions. A ratio above 15% may indicate the credit union is retaining too much capital and could be passing more value back to members.
How Our Health Score Uses Net Worth Ratio
Our A+ to F Financial Health Score weighs the net worth ratio alongside delinquency rate. A credit union with a 10%+ net worth ratio and a sub-1% delinquency rate earns an A+. A credit union below the 6% threshold automatically scores D or F regardless of other metrics. See the individual credit union pages for detailed score breakdowns.
Limitations
The net worth ratio is a lagging indicator — it reflects past performance and may not capture rapidly deteriorating loan quality or sudden asset losses. Always review the delinquency rate and loan-to-share ratio alongside the net worth ratio for a complete picture of financial health.
Frequently Asked Questions
Generally yes, up to a point. A very high net worth ratio (above 15-20%) may suggest the credit union is retaining too much capital instead of passing value back to members through better rates and lower fees. Most well-run credit unions target the 10-13% range.
Yes. Every credit union page on CUScore displays the current net worth ratio, sourced from the NCUA's quarterly call report data. You can also see how a credit union's ratio compares to the national and state averages.
Net worth at a credit union is the accumulated retained earnings — also called 'undivided earnings' — plus any other equity components. Because credit unions are not-for-profit, they cannot issue stock to raise capital. They build net worth organically through retained earnings over time.
Not directly, because deposits are NCUA-insured up to $250,000 per account category regardless of the credit union's financial condition. However, a low ratio increases the risk of NCUA intervention, merger, or liquidation, which may disrupt services.
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