Baxter Credit Union does it best not to let a potential loan slip away.

At a time when the industry's average loan-to-deposits ratio is 60%, with a 1.1% delinquency rate, the Deerfield, Ill.-based institution is 88% loaned out and has a 0.2% delinquency rate.

And Baxter does it while singing.

That is, every Monday morning employees join together to sing a pep song.

"We sing it every Monday morning. when it's hard for people to be in a good mood," said A. Rex Johnson, president of the $290 million insitution.

Lending Culture

But the chief ingredient in Baxter's recipe for success since it was founded 12 years ago is aggressively taking advantage of every loan possibility for which a customer qualifies, said vice president of business development Michael Valentine.

"The whole organization has a culture that loans are the most important business a credit union does," he said.

Cross-selling is an example of this aggressiveness. When a customer asks for a car loan, or even inquires about rates, the sales representative calls up the customer's credit report.

If a qualified customer has a credit card with a different institution, the salesperson will ask if he would like to buy out that account with a Baxter credit card.

Full-court Press

And if the customer qualifies for a larger loan, the salesperson informs him of that. "When someone qualifies for a loan we give as much as we can," Mr. Johnson said.

Mr. Johnson, who does consulting work for credit unions, said other institutions frequently miss this opportunity.

"Our environment has become one of order filling, like McDonald's."

And if cross-selling doesn't work the first time, employees of Baxter's marketing department make follow-up calls pushing the credit union's products. And come noon, the "Lunch Bunch" call people who have closed accounts with the credit union.

|Assault Team'

All loan decisions are made by top management, who take turns working the floor. Around the credit union they're called "The Assault Team," a moniker coined by Mr. Johnson, who "sees himself as a mini-Rambo," Mr. Valentine said.

Despite the playfulness, the mission behind management's hands-on approach is serious.

"We're the biggest cheerleaders for our staff," Mr. Johnson said. "When the president and vice presidents are involved in lending, the rest of the staff thinks, |That [making loans] must be important.' It's a visible commitment, not an oral commitment, which is a world of difference."

Commissions Paid

Baxter also makes the kind of commitment that shows up in the employees' wallets by paying commissions for sales.

"Sales representatives - strictly working on phones - average $900 a month plus salary," Mr. Valentine said. "We're not afraid to pay for performance."

When making loan decisions, the Assault Team doesn't adhere to the orthodoxy of debt-to-income ratios. worksheets, and credit scoring guides.

"We basically look at the three C's: the credit application, the credit bureau report, and character. We ask, Can this person carry a loan?" Mr. Valentine said. "We try not to focus on one or two things, but look at the whole picture. It's really a judgment call."

"A debt ratio is a good tool, but that's all it is: a tool. It shouldn't be set in stone."

The state regulator said this approach is fine. Baxter, which serves employees of Baxter Health Care and CareMart in California, Florida, Illinois, North Carolina, and Puerto Rico, is state chartered and is insured by the Dublin, Ohio-based American Share Insurance Corp., a private insurer.

"Baxter's philosophy is to evaluate [whether to make a loan] according to intent to pay," said Bruce Garrett, assistant supervisor of the Credit Union Division of the Department of Financial Institutions. "Their history, of loan loss is minimal and their record over the years has been excellent."

Baxter's collection department is as vigilant as its salespeople. Phone calls are made "almost immediately" after a missed payment, and employees are paid an incentive for trimming delinquency rates.

Emphasis on Auto Loans

Baxter's current loan portfolio totals $232.4 million. Auto loans represent $112.7 million, or 48.4%. The remainder is made up of consumer loans, $19.6 million; home equity loans, $57.9 million; and credit cards, $42.2 million.

Auto loans are preferred over other types because they offer higher returns than signature loans and are more fully secured, Mr. Valentine said. And besides being less risky than home equity loans, they are easier to approve and service.

The average turnaround time on a car loan is eight minutes, and for a home equity it's two to three weeks, Mr. Valentine said.

Risk of default is the main reason why Baxter hasn't gone into first mortgages. Instead, it processes applications and collects fees from three mortgage companies that fund them.

Deals with Dealers

Baxter customers can get preapprovals for car loans that are good for 90 days, and they are referred to "preferred dealers." In exchange for the business, the dealers forfeit financing the car and offer a price only slightly higher than invoice.

Despite recent controversy over point of purchase lending. Mr. Garrett said he has received no complaints about Baxter's practices from either banks or credit unions.

Mr. Johnson, who calls himself a "credit union president and salesman," makes no apologies for running his credit union differently than most.

"People have to work according to what works for them," he said. "And we try to have fun."

John Bailey, vice president of finance, agreed. He admitted that the pep song is true, but he added. "It beats complaining about coming into work on a Monday."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.