The credit union has told its members that it plans to keep its branches in the headquarters of the U.S. Agency for International Development and Small Business Administrations, although it will almost certainly have to pay close to market rent for them, and thus will keep up its presence with its former field of membership. But even if it maintains the branches, it will have to do so as a bank and not as a credit union. Both agencies have workers who may actively choose a credit union over a bank, John speculated.

The situation could get even more competitive if another credit union in the Washington area that also serves federal employees decided it wanted to take Lafayette's place in the Small Business Administration or USAID, adopting the former credit union's field of membership.

"I would expect that any well-managed credit union in the D.C. area that already serves federal employees would have started thinking in that direction," John said.

One CU that may have a strong claim for that field of membership is the $866 million State Department Federal Credit Union, a credit union that already claims a number of USAID employees as members.

Because of the close ties and history between USAID and the State Department, there have always been questions about when and under what circumstances a USAID employee could become a member of SDFCU, according to Deborah Clark, a vice president with SDFCU. There even had to be an exception that specified that USAID employees could not join State, but the exception was eliminated three years ago, Clark said.

Since the exception was removed, Clark explained, State has made a point of talking to USAID employees about becoming State members, but has essentially kept the marketing effort low key since there was another credit union also serving the agency. But if Lafayette succeeds in becoming a bank, Clark admitted that State could step up the effort to reach USAID employees.

The CU already has a message specifically to USAID employees that runs as part of its telephone hold tape and has launched a Web site specifically for USAID employees who may be thinking of joining.

That pre-existing relationship should give SDFCU a head start if it decided to make a run at becoming the credit union officially designated to serve USAID members, something that Clark said the CU had not yet decided to do.

"We will be watching what happens with Lafayette," she said, "it will definitely be interesting to see what will happen."

The situation with employees of the Small Business Administration is a bit more open. Since there are currently no other CUs that have as strong a claim on SBA employees as potential members, the field is more open for other credit unions which serve federal employees and employees of companies that contract with the federal government to move in.

John stressed that even with additional money that Lafayette might raise in a stock offering, there was no guarantee that the new bank would necessarily have the experience or be situated to make the transition.

"Remember, it's a balancing act between being able to keep profitable customers and finding new ones," John noted.

As a bank Lafayette may see a decline in its customer base as former members leave, either because they want to remain with a credit union or because the bank prices them out, he explained. Without an established foothold in its old field of membership and facing competition from a credit union that takes its old position, it may be difficult to find new ones.

"Just because an institution gets a for-profit charter, there is not a guarantee they are necessarily going to succeed," he added. –[email protected]