Bridgewater Bank is one of several new entrants on the Canadian Banking scene. It was born out of a desire to satisfy Alberta Motor Association (AMA) member requests for more services. "Our board is comprised of members. In the association, we have regional boards comprised of members at large," O'Neill says. "They were asking about chequing accounts and credit cards. They started with credit cards and an alliance with MBNA out of the States. Next they bought a mortgage company. They quickly realized they wanted to offer more services and that is why the decision to start a bank came about," Peter O'Neill, Bridgewater Bank's COO, recounts. "So we bought a mortgage company."

Bridgewater Bank's employees are primarily based in Calgary. They have over 100 employees including eight Business Development Managers (BDMs) located across Canada in larger cities including Vancouver, Edmonton, Calgary, Toronto, Ottawa, and Halifax. The sequence of events that lead to the creation of Bridgewater Bank began in March 1997 when PAFCO Mortgage Company began a brief flirtation with mortgages in Calgary, Alberta. In June 2000, in response to their member's request for additional services, the Alberta Motor Association purchased PAFCO and changed the name to Bridgewater Financial Services Ltd.

Following a two year bank charter application process, the western based financial institution received approval to operate as a chartered bank and the legal name change to Bridgewater Bank from the Canadian federal banking regulator; Office of the Superintendent of Financial Institutions (OSFI) in January 2006. The application process was underway when O'Neill arrived.

Reasons for the long lead-time were twofold: "Because we are member driven and represent an ethical brand we operate with an abundance of caution," O'Neill explains. "Second, because we were one of the first companies with an existing mortgage operation to approach OSFI, it was probably felt they had to proceed with caution. I remember a lot of conversations we had around needing to inform the regulators about our unique situation. It worked itself out in the end though. When OSFI finally issued our 'letters patent' document it was given simultaneously with our order to commence business. They are not typically issued together, but we received both at the same time."

The new "bank" status allowed Bridgewater Bank to evolve into a deposit taking institution as a member of the Canada Deposit Insurance Corp (CDIC). In May 2006 the bank sold it's first Guaranteed Investment Certificate (GIC) through the AMA membership stream. In November 2006 the first GIC was sold to a national consumer audience through their select Deposit Broker network.

Bridgewater Bank has two distinct customer bases: Mortgages and GICs are sold nationally across Canada (with the exception of Quebec) via a select broker network and exclusively to the Alberta Motor Association members through 'the AMA Financial sales network.'

According to O'Neill, Bridgewater Bank had an installed base looking to expand revenue. It is all based on the concept of ‘Internal Organics.’ "Organic growth used to be the big buzzword about 15 years ago," O'Neill explains. "It was all about taking core competency and trying to find other industries to bring those to. Banks have known about 'Internal Organics' for a long time; I spent a lot of time in a major bank. There was a machine that said we want you to do much more business with your existing clients. Look at Royal Bank. They have millions of clients. Technically they have a bottomless well of opportunities. So what if they have thousands of employees, it would take forever to mine their own database. In reality, if they turned all of their sights inward why would they want to expand outward?"

Big banks are not geared effectively for intimate banking situations. "That is why we exist," says O'Neill. I have been on both sides-in a microbank managing $2 billion in assets versus a major bank with hundreds of billions in assets with access to international markets and sophisticated machinery on the treasury management side. One would imagine they'd have the ability to shave pennies out of the cost base and put a nice "no-dicker-sticker" out on the streets. Something the average Canadian would just say 'wow, thanks!' But the reality is that there is so much imbedded cost and infrastructure; its not unlike GMAC, or Chevrolet, or Ford, in that every car they put into the production line already has $1,800 to $2,000 worth of legacy costs attached to it before you even put a bolt on it. The big banks are like that. You've got all these big branches, people, and equipment that they have to keep paying for. Those costs don't go away. We have very little of that. We are a manufacturer with around 100 staff and we still manage to have a national footprint. It's a very tight machine."

Bridgewater employees seem to be motivated by more than just profits. "Bridgewater Bank wakes up every day because we want to add value for our customers," says O'Neill. "This is one of our main goals."

O'Neill is a realist when it comes toBridgewater Bank. Technology innovations and near commodity pricing for software to run the bank are other areas where O'Neill feels his bank has an advantage over the big banks. "In going to 'bankland' one of the things we asked ourselves is, 'Do we have the technology to meet regulatory, reporting, operational, and administration requirements?' O'Neill explains.
Bridgewater Bank selected Fincentric's Wealthview banking platform to run its banking services and Filogix Express for its underwriting software. "Without these technologies, the bank simply would not exist," O'Neill states. He points out in reference to technology that while the first thing he put in place was people, technology is an important enabler that allows employees to focus on superior service delivery.

What he likes about Wealthview is that it is basically a 'bank in a box.' "While there are many companies that offer banking software," he says. "Not many suppliers offer what I consider the 'bank in the box' concept. We wanted a product to support our GIC products and scale up without any development. Two suppliers fit the bill. We preferred Fincentric. We understood them, I had known of them previously and their solution actually works."

"The big banks are running on legacy systems that require huge maintenance. Just to add a new service can take 6-9 months. I ran product management for a bank and can assure you that every time we had a good idea-in fact we had market-leading ideas-we found that some small, nimble operation would have it on the street within 30 days. This is pretty frustrating when you are trying to be leading edge and just about anybody can get in the game before you. Now I'm on the other side of the equation. Bridgewater Bank was first to the market with 40 year amortizations and first in the market with AIG (United Guarantee Corp) as a third mortgage insurer."

Looking back, O'Neil is satisfied that Bridgewater Bank achieved a lot in getting their bank charter. His first piece of advice for anyone thinking about following a similar path would be that there is a lot to do to get a bank ready. "The first thing that should be done is to draw the map of what ought to be," he advises. "Figure out all the elements that will have to come into play. Determine the kind of portfolio leaders that add value to the bank and bring credibility to the table. We had to come up with the right leaders. And most important, set yourself up from a people perspective first." /