Equity Asset Ratio

Equity acts as a cushion to protect senior debt investors from losses, helps reduce a CDFI’s cost of funds, and enhances a CDFI’s lending flexibility. The ratio demonstrates what percentage of the CDFI’s total assets comes from equity (as opposed to liabilities and debt). For credit unions, the numerator is net worth (and not equity) which includes the portion of secondary capital that for regulatory purposes can be treated as equity.