What's the greater problem for a rural credit union? Too little cash on hand or too much?
Franklin First Federal Credit Union needed to improve its liquidity after making a large amount of loans and to make payments for its own loan schedule. FFFCU Board Treasurer Lee Irish said the credit union was also nearing a self-imposed limit on its margin percentages and was also facing steady competition from area banks, led by the ever-present branches of Bank of America.
"We were having a cash flow crunch. We were struggling to find some balance," Irish said. "Everyone wanted a bigger piece of a small pie."
Franklin First needed a new idea to bring in cash. When approached about holding another, traditional CD drive, the FFFCU board told CU staff to offer the membership the same rate on all CDs and allow members to choose how much to limit and how long the term would last. Members had a $500 minimum and could earn a 5.48% rate on CDs from six months to as long as four years, Irish said. The new rate was paired with a private detective-themed ad campaign placed in newspapers and the newsletter, plus radio spots asking "What's your alibi?" for not seeking a high rate of return. Irish said it was a simple plan: one rate; you pick the term; you decide the amount.
"It just suddenly exploded," he said. "It was a lot more successful than we anticipated, and hoped."
In the first six weeks, the CD drive netted $1.5 million. Extended to run for a total of 12 weeks, Franklin First brought in a total of $4.2 million with 82% of the total consisting of new money for the credit union. The CD drive accounted for 8.5% of Franklin First's total deposits, all for a cost of $2,734.
Only 17 Employees
Located in rural Franklin County less than 10 miles from the Vermont border, FFFCU has only 17 employees. Irish said many homes are up to a mile from their nearest neighbor and said raising such a large amount of money so quickly with the area's low population, was a source of pride for Franklin First staffers. Irish said that with everyone working as a team, the CD drive "took maybe a week" to plan.
"We're only a $35-million credit union," he said.
Due to the "astronomical" result, Irish said Franklin First paid off its own loans, has the liquidity it needs, member cash is staying put in their credit union, and it turned around to offer more loans to the membership. Irish said the majority of CDs were brought in by members from other financial institutions or rolled over into Franklin First. Irish said FFFCU would do the same rate CD promotion again if needed and recommended the idea to other CUs, advising to keep a daily tab on the amount needed by the loan department to accomplish the goals, whether paying off a CU loan or increasing liquidity.
Franklin First FCU Marketing Director Valerie Hetzel said the ad campaign was so inexpensive as it was designed and created in house with a high-end Epson computer. The total run was: six newspaper ads costing $854; 20 buttons for CU staff costing $10, two large outdoor banners for $60 and newsletter ads for 7,800 members. Franklin First employees Sara Hunkler and Emily Forgey performed the voiceovers for 104 radio spots that cost $1,350, and Forgey also posed as the private detective. Hetzel said the rural area surrounding the CU made for an easier buy for radio and newspaper ads.
"We have one radio station that commands 80% of the market share so we went with them," she said.
What's Your Alibi?
Hetzel said everyone from the CEO to the teller line wore their "What's your alibi?" buttons for the October membership drive. Hetzel said a normal CD drive at Franklin First nets an additional $100,000, with no drive ever bringing in more than $720,000 during an entire fiscal quarter.
Hetzel said Franklin First FCU hoped to add members, but the sheer influx of deposits pushed the membership drive aside.
"We didn't bring in as many members as we hoped, but we did bring in a lot of money," Hetzel said with a laugh. "It doesn't really even compare."
Hetzel said during her three years with the CU, no drive had ever reached a million, much less the $4.2 million drive of Fall 2006.
Hetzel said she is presently assembling the advertising campaign material to submit it for award consideration.
