Even Sweeter Than Interest

C1 Bank knows how to get noticed. Though most banks looking to publicize a name change rarely attract much attention, the former Community Bank & Co. rolled out its new name May 1 with a promotion the press could not resist.

The Lakewood Ranch, Fla., bank is offering a new Mercedes-Benz to state residents who put $1 million in a five-year certificate of deposit.

They get the car up front as prepaid interest-"instant gratification," says Trevor Burgess, C1's CEO-instead of having to wait until the CD matures to collect. The value of the car equates to roughly a 1.2 percent annual percentage yield, which is a competitive rate.

"I'm always looking for ways to set us apart from our competition and show excitement," says Burgess, who came up the idea for the promotion himself. He hoped to create buzz for the name change and attract some new customers, and says he succeeded on both counts.

The bank received coverage from local and national media, including the Wall Street Journal. Though the general consensus was that other types of investments offer a better return, several industry observers had high praise for the concept.

Jeffry Pilcher, publisher of the TheFinancialBrand.com, says other banks should think about using the "instant gratification" tactic.

Whatever amount a particular CD would normally earn, a bank could find a desirable item of equivalent value to offer up front instead of paying interest, Pilcher suggests.

"You don't have to make it a big, jumbo, super giveaway," he says. "The concept is scalable. The same principle applies at the $10,000 level as at the $1 million level."

With rates so low and unexciting these days, Burgess thought a car might be a stronger incentive to some CD shoppers than the interest they could earn. "What fun it is to be able to drive off in a Mercedes."

Burgess says he expects someone will take the bank up on the offer, especially since 20 people already were considering it just one week after the promotion launched.

Customers can choose from four models: a sports car, sedan, SUV or cabriolet. C1 worked out a discount with a local Mercedes dealership so the purchase price, with tax, title and tags included, works out to about $61,000, which is the same as a 1.2 percent APY.

Anyone who withdraws the cash early would have that amount deducted from their principal, plus a $3,000 penalty.

Burgess says that while C1 has plenty of liquidity, it is adding loans fast and is eager for more customers. He says the bank had a loan pipeline of $50 million last June, compared with $250 million today.

So besides offering the unique CD, it also is reviving another creative promotion, paying new customers $5 a month for a year to open a checking account with direct deposit. That was an offer C1 first ran last fall, in response to Bank of America's attempt to charge a $5 monthly fee for debit cards.

Since the Mercedes CD is only for people with $1 million, Burgess brought back the popular $5-a-month offer, so that C1 has a deal available for every new customer to coincide with the name change.

Both promotions will run for at least a few months. Burgess says he believes they send a message about C1-even to people who don't take advantage of either. "It's a way of showing how we can think about things, in not just a cookie-cutter way," he says. "When people think of C1 Bank, I want them to think of innovation."