The CU serves 16,000 members, mostly federal government employees from various agencies. It is called Lafayette because it began its life serving federal government employees who worked in the Lafayette building, on the corner of Lafayette Park across from the White House in D.C.

The CU also applied for, and finally received, an expanded field of membership into the District of Columbia that covers most of the city with the exception of some of the city's wealthiest neighborhoods, and has a field of membership that covers the relatively wealthy D.C. suburb of Potomac, Maryland.

With the CU staying quiet about why it is seeking to change charters, sources from outside have questioned the CU's need to convert.

Bill Hampel, chief economist for CUNA, said the CU's 5300 reports show it as a strong credit union without any pressing capital crisis, a theme other CUs have sounded when they sought conversion. The one thing that is clear from the 5300 report is that the CU has been taking on member business loans quickly and would probably not be able to keep going at that rapid pace.

"Right now, the CU is at about 7% of assets in member business loans," Hampel said. "And two years ago the credit union didn't have any." As of March 2006, the CU had 67 member business loans outstanding, totaling just over $23 million. Federal law prohibits credit unions from having more than 12.25% of their assets in business loans.

On March 30, 2005, Hearne predicted that his CU would be one of those that would bump up against the 12.25% member business lending cap and said he found it completely arbitrary that his CU could only make half the member business loans a $600 million CU that served firefighters could make.

But although the member business lending cap would appear to provide a pressing reason for Lafayette to convert, Hampel and other sources pointed out that there are means of addressing the cap, including participations and selling the loans. "It's not as convenient as not having the cap, but it can be worked around," Hampel said.

Lafayette is also a founding member of Preferred Business XChange, a CUSO which is only now getting underway, according to Jonathan Guepe, vice president with Apple FCU headquartered in Fairfax, Virginia, another member of the new CUSO. Also participating in the founding of the CUSO are Northwest FCU, headquartered in Herndon, Virginia and NASA FCU, headquartered in Upper Marlboro, Maryland.

Guepe, Apple's liaison to the new CUSO, said it would be difficult to comment on whether the CUSO would help any of its members remain underneath the 12.25% cap since the CUSO was so new it had yet to become completely operational. He also would not comment on what might happen if Lafayette pulls out of the effort.

But other sources pointed out that some of Lafayette's trends, such as return on assets, have been sliding, moving from 1.45% in March 2005 to 0.69%, a little bit below the CU's peer group in March 2006.

Reactions to the news have been mostly mild and somewhat general.

"We've been in contact for a while and I expect we are going to stay in contact through this process as the members decide what sort of future they want their credit union to have," said Michael Beall, CEO of the Maryland and District of Columbia Credit Union Association.

Beall said Lafayette was a member of the association. He also said he had been aware of the pressure the CU had been feeling about its member business lending. Beall stressed that the association saw its role in this process to be one of education and of seeking to make sure everyone knew as much as possible about the conversion process and what is at stake in a charter change.

NAFCU said that it didn't feel any differently about Lafayette's potential conversion than it would about any other, even though the credit union's former CEO, Michael Brooks, had been a board member of NAFCU.

CUNA declined to comment on the possible conversion, as did Brooks.

But Hank Klein, former CEO of Arkansas FCU and a former NAFCU chairman, said he feared this situation was yet another instance of a healthy CU's leadership taking the CU in a direction which may not be in the best interest for the members.

"It seems to me that the credit union industry has not taken to heart the lessons from Columbia and DFCU," Klein said, "where small groups of well informed members were able to ask questions about what was going on and those questions put a stop to it," Klein said.

Klein also decried the policy of converting credit unions keeping so much of the process under wraps so that it appeared the leadership was trying to hoodwink the membership into making a key financial decision without due consideration and thought.

"If it's something that they can defend and feel is right for the CU, then let them talk about it. The unwillingness to expose their actions to the light of public scrutiny probably says more than anything else about what may be going on here," Klein noted. [email protected]