What a CAMELS Rating Really Means, and Why HFCU’s Downgrade Matters

When credit unions are examined by regulators, they receive something called a CAMELS rating. It’s a confidential score used by the National Credit Union Administration (NCUA) to assess an institution’s safety and soundness.

While these ratings aren’t public, members can often spot when things have changed through shifts in performance, public financial reports, or statements in official documents. Hanscom Federal Credit Union’s (HFCU) long-standing “1” rating, the highest possible, was recently downgraded to a “2.”

At first glance, this may not sound dramatic. But in the world of credit unions, it’s a meaningful signal that something has changed under the surface.

So, what is a CAMELS rating?

CAMELS is an acronym for the six areas regulators evaluate:

C – Capital Adequacy: Does the credit union have enough capital to absorb losses and protect members’ deposits?
A – Asset Quality: How well are loans performing? Are delinquencies and charge-offs under control?
M – Management: Is leadership effectively identifying and managing risk?
E – Earnings: Is the institution profitable enough to sustain itself and reinvest in members?
L – Liquidity: Does the credit union have enough readily available funds to meet member withdrawals and lending needs?
S – Sensitivity to Market Risk: How vulnerable is the credit union to changes in interest rates and economic conditions?

Each area receives a rating from 1 (strongest) to 5 (critically weak). The overall CAMELS composite is the average, but not a simple one; a weakness in just one category can pull down the entire score.

What does moving from a “1” to a “2” mean?

A “2” rating means the credit union is still considered fundamentally sound, but with areas of concern that require management attention and oversight.
In plain terms: it’s no crisis, but it’s a warning.

For more than two decades, Hanscom FCU held the highest “1” rating. That reflected strong capital, low delinquencies, and conservative management. The downgrade to “2” breaks that streak and signals regulators now see heightened risk or weakened controls.

Why this should matter to members:

It reflects deeper stress.
A downgrade doesn’t happen because of a bad quarter; it follows a sustained decline. In HFCU’s case, profitability fell sharply in 2024, and loan losses (charge-offs) spiked by more than 600% in early 2025.
It affects trust and growth.
Credit unions with a “2” must show improvement before regulators will approve new ventures or acquisitions. That can limit flexibility and focus leadership attention on remediation rather than innovation.
It’s a call for transparency.
Members are the owners. Understanding why performance slipped, and how leadership plans to restore stability, is essential for accountability.

What members can do:

Stay informed: You can review Hanscom FCU’s quarterly call reports anytime on the NCUA’s Credit Union Online Portal. Search for Hanscom Federal Credit Union (Charter #9095) to view trends in assets, income, and delinquencies.
Ask questions: Attend annual meetings, read disclosures carefully, and request updates on asset quality and capital plans.
Remember your ownership: A credit union exists to serve its members, not investors or executives. Speaking up and staying engaged keeps that mission alive.

The bottom line:

A “2” rating isn’t a disaster, but it’s a shift worth understanding. It means regulators see real issues that need fixing before they become bigger problems.
For members, it’s a reminder that vigilance matters as much as vision. The cooperative model depends on informed owners who care enough to pay attention when warning lights start to flash.

Hanscom Loyal