Focus on real estate, flexibility propels Bridgewater Bank’s growth

Bridgewater Bank's new branch in downtown Minneapolis.

Bridgewater Bank’s new branch in downtown Minneapolis.

by Dan Rafter

Minnesota’s Bridgewater Bank follows a simple formula: Hire the right people, don’t micromanage them and focus on lending to real estate entrepreneurs.

This formula has worked. The bank, which opened in November of 2005, now boasts three Minnesota locations, one in Bloomington, a second in Greenwood and its newest, a downtown Minneapolis office in the Northstar Center.

Even more important, Bridgewater Bank is profitable, with the institution now enjoying its 32nd straight quarter of profitability. The bank’s current asset size is $565 million, and its pre-tax earnings stand at a healthy $10.2 million.

Jerry Baack, chief executive officer and president of the bank, said that Bridgewater has reached this success so early because of several factors.

First, the bank benefits from a diverse shareholder base. The bank’s shareholders are a mixed bunch, which means that they don’t all provide the same advice or input.

“When we raised capital we went to a larger shareholder base than most other banks will,” Baack said. “A lot of banks that have started in the last 20 years will find 10 rich guys with $1 million each and move on from there. We wanted a larger network, a larger shareholder base.”

Secondly, the bank has put together a strong management team and hired the best employees it can find. And Baack doesn’t micromanage his staff. He lets them use their talents to make the best decisions. And he doesn’t second-guess these decisions.

Not surprisingly, Bridgewater Bank’s management team has been together from the bank’s beginnings in 2005.

Finally, the bank has always focused on real estate, the area that Baack knows better than any other.

Jerry Baack

Jerry Baack

“Real estate is where most of my customer base was anyway before we started the bank,” Baack said. “I was a real estate lender previously. That was my network, my expertise. When you want to start something new, you want to tap into your network and previous experience. I wouldn’t start a credit-card bank when I know nothing about credit cards.”

Bridgewater’s timing — and its focus on real estate — wasn’t great in hindsight, Baack admits. The real estate market crashed beginning in late 2006 and early 2007. That could have meant trouble for any new financial institution. But Bridgewater stayed true to its focus. Baack credits the bank’s cohesive management team with helping guide the company through the slowest times of the recession.

The bank also didn’t shut down its lending activity during the slow times. It worked on developing relationships with customers that it still maintains today.

Of course, hard work helped, too.

“There were a lot of late nights,” Baack said. “We worked through the details and put in long, long hours. But we survived.”

Mary Jayne Crocker, senior vice president of Bridgewater, said that the bank avoided the mistake so many companies make when facing tough times: It didn’t go into a shell. Instead it continued to grow even when the national economy was faltering.

“We continued to add shareholders and we continued to focus on the real estate entrepreneur,” Crocker said. “More than anything, we stayed true to what we wanted to be. We stayed true to each other and worked our way out of the recession. We were proactive. We didn’t shut down and stop lending. We looked forward.”

This proved to be a key reason for Bridgewater’s success. As Baack says, because the bank was still willing to lend when so many others weren’t, it developed particularly strong relationships during the economic downturn.

Bridgewater was able, too, to diversify its loan portfolio during this time and drive up its earnings because it remained in the marketplace.

“Other banks weren’t interested in picking up any additional debt. We were,” Baack said. “We never lost money during that time. We took charge-offs and losses on foreclosures. But we never suffered an operating loss. We haven’t taken an operating loss since our second month of business. We’ve been profitable since our third month in business.”

The economy is stronger today, and so is Bridgewater. In September, the bank reached a goal by opening its first branch office in downtown Minneapolis.

“It’s exciting to see our presence in downtown Minneapolis,” Crocker said. “That wouldn’t have been possible if not for our strong shareholder base. We raised $8 million of capital and added new shareholders before opening the branch. Most of our new shareholders were customers.”

Both Crocker and Baack expect even better times for Bridgewater in the future. With the economy getting stronger, and the real estate market improving along with it, there are plenty of opportunities for new loans and relationships.

Bridgewater has already thrived in the multi-family segment, with about 30 percent of its loan based tied into apartments. Baack, though, sees other real estate segments picking up, providing an opportunity for Bridgewater to further diversify its loan portfolio. He pointed to the single-family residential market, industrial and retail strip-center markets as gaining momentum.

“One of the reasons we’ve been successful is because we are so flexible,” Crocker said. “That’s because people here are able to make decisions quickly. Part of what got us through the tougher times is that we didn’t sit around in committees to make our decisions. We made decisions quickly. And Jerry backs those decisions. We have a young and talented staff that is allowed to grow and take on things that they typically might not have been able to take on at a bank with a more traditional structure.”

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