Capital categories. Except for credit unions defined as “new” under subpart B of this part, a credit union shall be deemed to be classified (Table 1 of this section)—

Well capitalized if:

Net worth ratio. The credit union has a net worth ratio of 7.0 percent or greater; and

Risk-based capital ratio. The credit union, if complex, has a risk-based capital ratio of 10 percent or greater.

Adequately capitalized if:

Net worth ratio. The credit union has a net worth ratio of 6.0 percent or greater; and

Risk-based capital ratio. The credit union, if complex, has a risk-based capital ratio of 8.0 percent or greater; and

Does not meet the definition of a well capitalized credit union.

Undercapitalized if:

Net worth ratio. The credit union has a net worth ratio of 4.0 percent or more but less than 6.0 percent; or

Risk-based capital ratio. The credit union, if complex, has a risk-based capital ratio of less than 8.0 percent.

Significantly undercapitalized if:

The credit union has a net worth ratio of 2.0 percent or more but less than 4.0 percent; or

The credit union has a net worth ratio of 4.0 percent or more but less than 5.0 percent, and either—

Fails to submit an acceptable net worth restoration plan within the time prescribed in § 702.110;

Materially fails to implement a net worth restoration plan approved by the NCUA Board; or

Receives notice that a submitted net worth restoration plan has not been approved.

Critically undercapitalized if it has a net worth ratio of less than 2.0 percent.

Reclassification based on supervisory criteria other than net worth. The NCUA Board may reclassify a well capitalized credit union as adequately capitalized and may require an adequately capitalized or undercapitalized credit union to comply with certain mandatory or discretionary supervisory actions as if it were classified in the next lower capital category (each of such actions hereinafter referred to generally as “reclassification”) in the following circumstances:

Unsafe or unsound condition. The NCUA Board has determined, after providing the credit union with notice and opportunity for hearing pursuant to § 747.2003 of this chapter, that the credit union is in an unsafe or unsound condition; or

Unsafe or unsound practice. The NCUA Board has determined, after providing the credit union with notice and opportunity for hearing pursuant to § 747.2003 of this chapter, that the credit union has not corrected a material unsafe or unsound practice of which it was, or should have been, aware.

Non-delegation. The NCUA Board may not delegate its authority to reclassify a credit union under paragraph (b) of this section.

Consultation with state officials. The NCUA Board shall consult and seek to work cooperatively with the appropriate state official before reclassifying a federally insured state-chartered credit union under paragraph (b) of this section, and shall promptly notify the appropriate state official of its decision to reclassify.