The equity ratio is the overall capitalization of the insurance fund to protect against unexpected losses from the failure of credit unions. When the equity ratio falls below, or is projected within six months to fall below, 1.20 percent, the NCUA Board must assess a premium or develop a restoration plan. When the equity ratio exceeds the normal operating level and available assets ratio at year-end, the Share Insurance Fund pays a distribution.
The equity ratio is calculated as the ratio of the contributed 1 percent deposit, plus the cumulative results of operations, excluding net cumulative unrealized gains and losses on investments, to the aggregate amount of the insured shares in all insured credit unions.
The normal operating level is the desired equity level for the Share Insurance Fund. In accordance with the Federal Credit Union Act, the NCUA Board sets the normal operating level between 1.20 percent and 1.50 percent.