Blog · Finance metrics and formulas · Retail banking
Compare credit union earnings, capital, lending and asset quality with consistent formulas. Work through two years of financial inputs, check the balances and distinguish management indicators from regulatory capital calculations.
Credit union ratios measure how earnings, capital, lending and loan quality change relative to the balances that support them. Calculate them from consistent financial reports, using period income with average balances and reporting-date measures with closing balances. A useful review explains why the ratios moved together, rather than assigning each percentage a separate pass or fail.
The NCUA's Financial Performance Reports summarize assets, liabilities, capital, income and expenses and provide peer comparisons. Use that reporting structure to organize an internal workbook, while retaining your own source references and definition choices.
Return on average assets, or ROAA, shows net income relative to the asset base used during the year. Operating expenses to average assets shows the cost of running that base. Together they help the CFO distinguish earnings pressure from changes in business size.
Loans to shares compares lending with member shares and deposits. It describes funding use, but it does not show when cash is available or when obligations come due. Keep the detailed funding review in the separate credit union liquidity ratio workflow.
Delinquency shows the share of loans past a defined payment threshold. Net charge-offs show losses recognized during the period after recoveries. Both belong in the credit review because a loan can move out of delinquency when it is charged off without improving the underlying credit outcome.
Capital needs its own definition. An internal net-worth-to-closing-assets indicator can explain balance-sheet trends. It must be reconciled to the credit union's approved regulatory calculation before anyone uses it to assess a regulatory category.
Start with the financial statement export, loan balances and delinquency report, charge-off and recovery report, and approved capital schedule. Keep reporting date, period start, period end, currency, account description and source reference on each row.
The NCUA ratio and formula guide defines average assets and average loans using current-period and prior-year-end balances. It also defines the reported delinquency measure using loans at least 60 days delinquent. Use the current guide when mapping source fields; do not silently replace those definitions with a different internal convention.
For this worked example, Harbor Community Credit Union is an illustrative US credit union. Each income and expense input covers a complete calendar year. Beginning balances are the preceding December 31 balances, and ending balances are the current December 31 balances. No annualization is required.
| Source input | 2024 (USD) | 2025 (USD) |
|---|---|---|
| Beginning total assets | 140,000,000 | 150,000,000 |
| Ending total assets | 150,000,000 | 160,000,000 |
| Beginning total loans | 90,000,000 | 100,000,000 |
| Ending total loans | 100,000,000 | 110,000,000 |
| Ending shares and deposits | 125,000,000 | 132,000,000 |
| Ending net worth supplied by finance | 16,500,000 | 17,600,000 |
| Full-year net income | 1,160,000 | 1,085,000 |
| Full-year operating expenses | 4,350,000 | 4,960,000 |
| Ending loans at least 60 days delinquent | 800,000 | 1,100,000 |
| Full-year loan charge-offs | 570,000 | 840,000 |
| Full-year recoveries | 95,000 | 105,000 |
Here operating expenses mean non-interest expenses, excluding credit loss expense. Loan totals and delinquency use the same loan population. The net worth row is a supplied finance balance, not a reconstruction from several loosely matched equity accounts.
Average assets = (Beginning assets + Ending assets) / 2
Average loans = (Beginning loans + Ending loans) / 2
Net charge-offs = Loan charge-offs − Recoveries
| Derived input | 2024 calculation (USD) | 2025 calculation (USD) |
|---|---|---|
| Average assets | (140,000,000 + 150,000,000) / 2 = 145,000,000 | (150,000,000 + 160,000,000) / 2 = 155,000,000 |
| Average loans | (90,000,000 + 100,000,000) / 2 = 95,000,000 | (100,000,000 + 110,000,000) / 2 = 105,000,000 |
| Net charge-offs | 570,000 − 95,000 = 475,000 | 840,000 − 105,000 = 735,000 |
A workbook using monthly average balances can provide additional internal detail. Label it clearly and keep the official reporting comparison on its prescribed averaging basis; changing the denominator convention can change the ratio without changing the underlying income.
Percentages below are rounded to two decimal places. Calculate from the full dollar amounts rather than rounded balances.
| Measure | Formula | 2024 calculation and result | 2025 calculation and result |
|---|---|---|---|
| ROAA | Net income / Average assets | 1,160,000 / 145,000,000 = 0.80% | 1,085,000 / 155,000,000 = 0.70% |
| Operating expense ratio | Operating expenses / Average assets | 4,350,000 / 145,000,000 = 3.00% | 4,960,000 / 155,000,000 = 3.20% |
| Internal capital indicator | Supplied net worth / Closing assets | 16,500,000 / 150,000,000 = 11.00% | 17,600,000 / 160,000,000 = 11.00% |
| Loans to shares | Closing loans / Closing shares and deposits | 100,000,000 / 125,000,000 = 80.00% | 110,000,000 / 132,000,000 = 83.33% |
| Delinquency ratio | Loans at least 60 days delinquent / Closing loans | 800,000 / 100,000,000 = 0.80% | 1,100,000 / 110,000,000 = 1.00% |
| Net charge-off ratio | Full-year net charge-offs / Average loans | 475,000 / 95,000,000 = 0.50% | 735,000 / 105,000,000 = 0.70% |
The credit union generated less net income from a larger average asset base, while its operating expense ratio increased. Lending also used a larger share of member funding. Delinquency and net charge-offs both rose, so the lending review should investigate portfolio segments and vintages before attributing the movement to any single cause.
The capital indicator stayed at 11.00% because the net worth and closing-asset inputs increased proportionally. The table does not establish the regulatory capital result: the NCUA guide specifies asset elections and applicable transition adjustments for that calculation.
The broader return on assets guide explains the income-to-assets relationship. For combining several institutions, the count-weighted and value-weighted guide explains why the combined ratio must use combined numerators and denominators rather than an unweighted average.
Reverse the calculations. For 2025, 155,000,000 × 0.70% = $1,085,000 of net income. Average loans of $105,000,000 × 0.70% = $735,000 of net charge-offs, and 735,000 + 105,000 recoveries = $840,000 of gross charge-offs. These checks reproduce the source rows.
Tie opening balances to the prior report's closing balances, reconcile ending assets and shares to the general ledger, and tie the loan population to the loan report. Preserve unrounded ratios for reverse checks, especially loans to shares, whose displayed percentage is rounded.
Finance owns the financial reconciliation and expense definitions. Lending and credit teams own delinquency and charge-off explanations. Treasury owns the funding follow-up, while the designated finance or compliance owner confirms regulatory capital treatment. Each team should explain the source movement before management changes targets.
Bring a workbook with period income, opening and closing balances, loan-quality inputs and the definitions approved by your team. Covirage maps the columns; its tools compute and check the supplied ratios, while the external AI model explains changes with every figure traced to its rows. Create a free Covirage account and bring a sample of your own export.
See financial planning and reporting for the supporting finance workflow.
A practical review combines profitability, capital, lending and asset quality. Return on average assets and operating expenses describe earnings performance; loans to shares describes funding use; delinquency and net charge-offs describe different aspects of loan quality. Review capital using the approved definition.
There is no single target suitable for every credit union. Compare the same earnings definition with your budget, prior periods and relevant peers. Loan mix, member pricing, operating costs and unusual gains can explain differences that the headline return alone does not resolve.
Delinquency measures outstanding loans past a stated due-date threshold at a reporting date. Net charge-offs measure loans charged off less recoveries over a period. Their timing differs, so a low delinquency balance does not by itself establish that realized credit losses are low.
An internal calculation using net worth and closing assets can show a trend, but regulatory calculations may include specific asset elections and transition adjustments. Reconcile to the credit union's reported regulatory ratio and have the responsible finance or compliance owner resolve the differences.