Bremer Financial Corp.

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Bremer Financial Corp.

445 Minnesota Street, Suite 2000
St. Paul, Minnesota 55101
Telephone: (651) 227-7621
Toll Free: (800) 908-BANK; (800) 908-2265
Fax: (651) 312-3550
Web site:

Private Company
1943 as Otto Bremer Company
Employees: 1,700
Total Assets: $5 billion (2001 est.)
NAIC: 551111 Offices of Bank Holding Companies

Bremer Financial Corp., a bank holding company, operates under a unique ownership structure. Owned by its employees and a nonprofit foundation, it is the only entity of its type in the United States. Founder Otto Bremer, a German immigrant, was at one time the largest investor of bank stocks in the Midwest. By returning much of the holding companys profits to the communities it serves, the Otto Bremer Foundation perpetuates the vision established by its namesake. Bremer Financial offers banking, investment, trust, and insurance services to customers in a three-state area.

Building Business Relationships: 1880s-1940s

Otto Bremer and his younger brother Adolph immigrated to the United States from Germany in 1886. The Midwest, where the young men settled, had experienced a period of rapid growth: the population had exploded and business opportunities were abundant. Otto Bremers first job was as a stock clerk for a wholesale hardware business in St. Paul, Minnesota. In 1887, he took a bookkeeping position with the National German-American Bankhe had three years of elementary banking training in Germany, according to a Ramsey County History article by Thomas J. Kelley. Bremer eventually became chief clerk.

The boom days of the 1880s were followed by a bust in the early 1890s. Banks in St. Pauls sister city of Minneapolis went under. The National German-American Bank had to suspend operations for a time. By the end of the decade, the nation was in a deep economic depression.

Otto Bremer left the National German-American Bank at the turn of the century to make a run for the office of city treasurer. A well established and respected member of the community by this time, he won the election and served for five terms. (He had an unsuccessful but closely contested race for mayor in 1912.) Meanwhile, his brother Adolph was making his own headway in St. Pauls business community. One connection led to a romance as well. Adolph married Marie Schmidt, the daughter of North Star Brewery owner Jacob Schmidt, in 1896.

While serving as city treasurer, Otto Bremer became a charter member of the board of directors for the American National Bank. The bank was formed in 1903 through the merging of two St. Paul banks. Bremer held 50 of the 2,000 shares of capital stock. The charter members of the board of directors, well aware of potential pitfalls, operated a conservative banking business, unlike the days of wild growth when banks and customers were extended beyond their means.

Brother Adolphs responsibilities also continued to grow. When the brewery was reorganized as the Jacob Schmidt Brewing Company in 1899, he was named president. Adolph Bremer took over operating control when Schmidt died in 1910. He brought Otto in as secretary and treasurer shortly thereafter.

As Adolph gained ownership in the brewery, Otto Bremer increased his holdings in the bank, becoming a major shareholder by 1916. Adolph joined his brother on the American National Bank board of directors that year.

In 1921, Benjamin Baer, the banks second president and an original board member, died. Otto Bremer was named chairman. He also bought much of Baers stock and by 1924 gained controlling interest in the bank.

The brewery and its sales agencies in rural Minnesota, North Dakota, and Wisconsin provided a direct link to the Bremers and American National Bank in St. Paul. The brewery or the Bremers owned the land or buildings the sales agencies occupied, creating a starting point for further business relationships in the communities.

Otto Bremer became an advisor to local bankers, who often formed corresponding partnerships with American National. Dependent on the cyclical agricultural economy, country banks needed loans from city banks with a more diverse and therefore a more stable of base of business. Otto Bremer formed a deep commitment to the rural communities, and when economic disaster struck he was there to help.

Trouble began with a ramp-up of farm production in response to the needs created by the United States entry into World War I. Farmers began planting more acres and buying expensive machinery. Agricultural land increased in value. Farmers took out larger loans to drive the expansion. Demand collapsed following the war. Harsh weather conditions in the Midwest further hampered farmers. Loans went unpaid. A recession hit the nation in 1920, taxing city banks supporting the stressed country banks.

Bent on maintaining the public trust in the country banks, Otto Bremer loaned them his good name and his money. Throughout the 1920s banks came into the fold of the American National Bank or the Bremer group, wrote Kelley. Eventually, Bremer had to begin borrowing against his assets to keep country banks afloat.

By 1933, he held large or controlling interests in 55 banks in Minnesota, North Dakota, Wisconsin, and Montana, apart from his holdings in American National. However, he was $8 million in debt. The backing of Adolph Bremers shares in the Jacob Schmidt Brewing Company and a loan from the Federal Reconstruction Finance Corporation helped Otto Bremer keep his stock in American National and the country banks in the family.

Despite the one-two punch delivered by the farm recession and Great Depression, the Bremer brothers had kept control of both the brewery and the bank. When Adolph Bremer died in 1939, Otto Bremer succeed him as president of the Jacob Schmidt Brewing Company.

In 1943, he created the Otto Bremer Company. The bank holding company consolidated his holdings in the country banks and would protect them from being sold to settle his estate, according to the Kelley article.

The Otto Bremer Foundation was formed the next year to make charitable grants in the communities served by the country banks. The ownership of the Otto Bremer Company was transferred to the foundation in 1949. After Bremers death in 1951, the banking chain entered an extended period of consolidation. The brewery was sold in 1954, but descendants of Adolph Bremer held stock in American National until it was sold to Milwaukee-based Firstar Corp. in 1996.

Legacy and Tradition Threatened: 1960s-80s

Robert J. Reardon, who joined the holding company in 1961, was named president in 1967, and the next year became a trustee of the Otto Bremer Foundation. He was dedicated to upholding Otto Bremers tradition of commitment to the rural communities in which the banks were located. But, a year after Reardon took over leadership of the Foundation, a federal tax law was passed that threatened to dismantle the Bremer legacy.

The 1969 tax law required charitable foundations to cut their ownership in for-profit enterprises to 50 percent by May 26, 1989. The law had been enacted to weed out charitable trusts being used as tax shelters for corporate profits.

In its original form, the law presented something of a Catch-22 to the Bremer Foundation, a 1984 American Banker article posited. Local banks with enough capital to buy the bank holding company could not do so due to antitrust regulations. Interstate banking laws of the time blocked the sale of the company to banks outside Minnesota. Non-banking organizations were eliminated from the pool of potential buyers by federal bank holding company law. In addition, the Internal Revenue Services interpretation of the holding companys status further complicated matters: Reardon was able to circumvent that roadblock with the help of local congressmen. He had met with less success when he went to Congress to seek exemption from the tax law itself.

Bremer Financial Corp. began coordinating the activities among its banks beginning in 1983. A number of factors prompted the move. To begin with, the Bremer Foundation had been unable to find a solution to the 1969 tax law dilemma, and the deadline was looming. The banking industry itself was in a period of change, thanks to deregulation. Moreover, the agricultural economy, with which the companys rural and small town banks were still closely tied, was in deep trouble once again.

To strengthen the operation, the holding company reorganized into five regional groups. One bank president within each region was designated to lead the drive for more coordination and cooperation among the member banks.

To increase diversification, Bremer Financial Services Inc. added discount brokerage and trust services. Established in 1973, the enterprise at first performed audits and credit reviews of the banks. Later bond purchasing and other financial services were introduced. The company also upped its marketing activities and established a common name: First American.

By 1985, First American banks were writing off bad loans to the tune of $21.5 million, up from $4.6 million in 1983. The severe downturn in the rural economy had also made the prospects for selling off the banks in order to comply with the 1969 tax law more difficult. Banks located in agriculture-dependent regions were struggling across the nation: potential buyers would be looking for bargains.

Company Perspectives:

Our Mission: To deliver exceptional value by providing individualized solutions to our customers total financial service needs while ensuring a fair return to our shareholders.

Meanwhile, Bremer Financial Corp. continued to strengthen itself internally. Data processing was centralized and standardized lending procedures were developed. Loan managers were trained to spot potential problems and intervene early.

All in all, despite challenges, Bremer Financial Corp. stayed the course. David Shern, former state banking commissioner, said in a 1987 Star Tribune article by Joe Blade, That is one of the best-run bank holding companies in Minnesota. As it had been in Otto Bremers day, the corporation stepped in to strengthen its banks when they encountered trouble. That is a very clean operation. They are solid people. They run good banks, he said. Total assets were $1.6 billion, according to the Blade article.

In 1989, Bremer Foundation solved its tax law problem by selling 8 percent of the holding company to its employees and giving them majority voting rights. The foundation retained 92 percent of the economic value of the holding company.

Eye Toward Big City Growth: 1990s-2001

Beginning in the early 1990s, Bremer Financial set its sights on modernization. A big investment in technology improved efficiency and cut costs. The company also upgraded banking services and moved into new business areas. Although it was late in the game, Bremer Financial Corp. began offering proprietary mutual funds in 1997.

The entry of banks into the investment management business had peaked in 1992 and declined to a trickle since then. Bremer planned to target the retirement market. The bank holding company had been selling mutual funds since the mid-1980s through a partnership with Invest Financial Corp., but established its own equity growth fund and an intermediate bond fund using $60 million of corporate trust assets.

First American opened its first Twin Cities grocery store branches in mid-1997. The bank had operated in grocery stores in other areas since 1990. The move was part of an effort to expand its presence in the metropolitan area. The company had already increased its commercial business by adding international business services.

Also in 1997, the Otto Bremer Foundation, Bremer Financial Corp., and Bremer employees pitched in $1.5 million to help with disaster relief in the Red River Valley. The area bordering eastern North Dakota and northwestern Minnesota was devastated by flooding in the spring of that year. Tim Huber, reporting for CityBusiness in August, noted that the founder would have appreciated the relief effort. Catastrophic aid was one of the foundations original purposes.

Reminiscent of earlier days, Bremer Financial found when it entered the Fargo, North Dakota market that the foundations support of the regions nonprofit organizations had already prepared the ground for business relationships with many in the community.

The Bremer Foundation received the profits of the individual banks through dividends from the holding company and in turn distributed them back into the communities through charitable grants. According to the Huber article, the Foundation and Bremer employees received $12.5 million in dividends in 1996.

Even though Bremer Financial had no Wall Street investors to satisfy, the corporation needed to perform well to maintain its independence. The company strived to sustain annual earnings growth of 10 percent. In 1996, it exceeded the mark. Earnings were $31.8 million, up from $27.1 million the previous year.

The seven First American banks located in the Twin Cities underwent a name change in July 1998. The holding companys remaining banks and the trust and insurance operations would take on the Bremer name toward year-end. The move marked the first time the banks themselves would wear the founders name. The company also planned to open its first bank location in downtown St. Paul, longtime home of its corporate and foundation headquarters.

Bremer Financial projected the costs related to the name change would exceed $1 million. The company planned to emphasize Bremers historical commitment to community in its marketing. At the time, mergers were eliminating some well-known names in Twin Cities banking. Minneapolis-based Norwest would take the name of California-based Wells Fargo, and First Bank System opted for U.S. Bank, following its purchase of Portlands U.S. Bancorp.

Norwests assets were $96.1 billion. U.S. Bancorps were $71 billion. Another large Minnesota-based banking concern, TCF Financial, followed well behind with $9.7 billion. Acquisitions helped Bremer Financial grow from $1.4 million in assets in 1984 to $3.2 billion in 1997.

Bremer could put its name back on a building in downtown St. Paul following the purchase of Dean Financial (a building bearing the Bremer name had been razed in the late 1990s). In addition to gaining a significant physical presence, Bremer added $312 million in assets, 11 offices, and four bank charters to its holdings in the 1999 deal. Overall, Bremer would hold 50 banking offices in Minnesota, 31 in North Dakota, and 16 in Wisconsin.

Key Dates:

Bremer brothers arrive in the United States.
Otto Bremer holds interest in 55 banks in Minnesota, Wisconsin, North Dakota, and Montana.
Otto Bremer Company is created.
Otto Bremer Foundation is established.
Otto Bremer dies.
Tax law threatens Bremer legacy.
Holding company reorganizes, and the independent banks take a common name, First American.
Foundation sells part of holding company to employees.
Banks take on Bremer name for the first time.
Bremer Financial purchases 11 branches from Firstar Bank, its first significant purchase in Twin Cities metropolitan area.

The holding company finally attained a long-sought goal when it purchased 11 branches from Firstar Bank. In addition to boosting its visibility in the metro area, the deal also eased Bremer Financials reliance on the farm economy. The acquisition was made possible, according to a February 2001 American Banker article, when federal regulators told Firstar, which was about to buy U.S. Bancorp, to divest some of its Twin Cities branches in order to preserve competition. Gaining $769 million in deposits, Bremer Financial climbed a notch in the Twin Cities market, moving from sixth to fifth, and became the third largest holder of deposits in the state, up from fifth. The Firstar purchase was the companys ninth acquisition since 1993.

However, the deal took an unusual turn when the Department of Justice required some commercial accounts, the chairman of Firstar Bank Minnesota, and five commercial managers to be moved to Bremer. In general, deposits and branches were involved in divestitures, not specific accounts and personnel, according to a February 2001 Star Tribune article.

Keeping with the tradition of building community connections, Bremer Financial Corp. formed a partnership with the Minnesota Council of Nonprofits in 2001. The councils 1,110 members, both large and small organizations, would be offered a variety of special services, including favorable interest rates on deposit accounts and certificates of deposit. About 25 percent of the states financially active nonprofits were members of the council, according to a June 2001 Star Tribune article. Minnesotas nonprofit community held about $24 billion in total assets.

Principal Competitors

Wells Fargo & Company; U.S. Bank; TCF Financial Corp.

Further Reading

Blade, Joe, Bremer Foundation Caught in a Bind, Star Tribune (Minneapolis), April 5, 1987, p. ID.

Chin, Richard, R.J. Reardon, Social Services Booster, Dies, St. Paul Pioneer Press, January 24, 1995, p. 5C.

DePass, Dee, Bremer Agrees to Buy Banks of Dean Financial, Star Tribune (Minneapolis), January 27, 1999. p. 3D.

_____, Bremer, Nonprofit Council Form Banking Partnership, Star Tribune (Minneapolis), June 9, 2001, p. ID.

_____, Firstar Managers Joining Bremer, Star Tribune (Minneapolis), February 22, 2001, p. ID.

A Dilemma for Minnesotas Bremer, American Banker, June 8, 1984, pp. 16 + .

Hage, Dave, Another Union Battle Puts Willmar in Spotlight, Star Tribune (Minneapolis), May 3, 1987, ID.

Huber, Tim, First American Shops for Growth, City Business, June 6, 1997.

_____, Foundation Fosters Bremer Legacy, CityBusiness, August 8, 1997.

Hughlett, Mike, At Last: A Bremer Bank, St. Paul Pioneer Press, June 25, 1998, p. ID.

Jackson, Ben, Bremer Making Twin Kill in Twin Cities Branch Deal, American Banker, February 5, 2001, p. 6.

Kelly, Thomas J., The American National Bank and the Bremer Brothers, Ramsey County History, 1988, pp. 3-13.

Lutton, Laura Pavlenko, Small Banks Taking Name of Philanthropic Founder, American Banker, July 13, 1998, p. 7.

_____, U.S. Says Profit-Sharing Plan Short Changed Workers, American Banker, January 6, 1999.

Talley, Karen, Fewer Banks Trying Their Luck with Proprietary Mutual Funds, American Banker, April 28, 1997, p. 1 +.

Kathleen Peippo

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Bremer Financial Corp.

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