Net worth measures. For purposes of this part, a new credit union must determine its net worth category classification quarterly according to its net worth ratio as defined in § 702.2(g).

Effective date of net worth classification of new credit union. For purposes of subpart C, the effective date of a new federally-insured credit union's classification within a net worth category in paragraph (c) of this section shall be determined as provided in § 702.101(b); and written notice to the NCUA Board of a decline in net worth category in paragraph (c) of this section shall be given as required by section 702.101(c).

Net worth categories. A federally-insured credit union defined as “new” under this section shall be classified (Table 6)—

Well capitalized if it has a net worth ratio of seven percent (7%) or greater;

Adequately capitalized if it has a net worth ratio of six percent (6%) or more but less than seven percent (7%);

Moderately capitalized if it has a net worth ratio of three and one-half percent (3.5%) or more but less than six percent (6%);

Marginally capitalized if it has a net worth ratio of two percent (2%) or more but less than three and one-half percent (3.5%);

Minimally capitalized if it has a net worth ratio of zero percent (0%) or greater but less than two percent (2%); and

Uncapitalized if it has a net worth ratio of less than zero percent (0%) (e.g., a deficit in retained earnings).

Reclassification based on supervisory criteria other than net worth. Subject to § 702.102(b) and (c), the NCUA Board may reclassify a “well capitalized,” “adequately capitalized” or “moderately capitalized” new credit union to the next lower net worth category (each of such actions is hereinafter referred to generally as “reclassification”) in either of the circumstances prescribed in § 702.102(b).

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 (d) of this section, and shall promptly notify the appropriate State official of its decision to reclassify.