Ramstad: Bremer Bank execs said for years they couldn’t sell it. Then they did.

The last of the banks from St. Paul’s 20th century heyday came to an inglorious end because of misguided executives, a collision of pride and anger, and a strange ownership structure that was unique in American banking.

The $1.4 billion sale of Bremer Financial to Old National Bank, announced Monday, dropped the curtain on a bank that started in the Depression, grew into a regional power and, despite federal law, maintained a charity as principal owner via a workaround that defied reason and efficiency.

Major what-ifs linger after five years of conflict between the bank’s top executives and the trustees of the nonprofit Otto Bremer Trust, the majority shareholder of the bank. The biggest: What if the bank had been sold for around $2 billion, as was on offer at least preliminarily when the dispute started? Would the trust have been able to grow even more, and give away more than it will be able to now?

It’s easy to see the conclusion of Bremer Bank’s strange saga simply through the dispute of the last five years. But I see it as something more: another sign of the end to an insular, clubby style of business that long dominated Minnesota.

Otto Bremer formed the bank by using a fortune he made as a co-owner in the Schmidt Brewing Co. in St. Paul to buy stakes in rural banks in the 1920s and 1930s. When he died in 1951, he left Bremer Bank in the hands of the Otto Bremer Trust and placed three colleagues as trustees. Those colleagues passed control of the trust to their children, and those children to their own.

After Congress in the 1960s halted corporate ownership by their charitable foundations, Minnesotans in Congress, backed by Bremer trustees and bankers, won an exemption for the Bremer entities that lasted into the late 1980s. Then they came up with a structure that preserved the financial connection but gave the trustees no control over the operations of the bank.

That set the conditions for the ultimate conflict. When by 2019 valuations for banks soared and deal volumes rose, the question was who could sell Bremer Financial. In 2020, Attorney General Keith Ellison, acting as the state’s overseer of charitable trusts, sued to rein in actions by the trustees he saw as harmful to its beneficiaries.

That suit put other litigation on hold and became the venue where the question of authority and control of Bremer Financial played out publicly.

“I’d always heard that Bremer can never be sold,” Jeanne Crain, Bremer Financial’s chief executive, testified when the state case went to court in October 2021. She and the bank relied heavily on a directive Otto Bremer wrote in the 1940s. The trust cited later documents and efforts by Bremer trustees and executives working to sell it at various times throughout its history.

The state lost on all matters but one. The judge ousted one of the three Bremer trustees, Brian Lipschultz, ruling he breached his duties to the trust, including through excessive compensation and spending. Appeals were finally settled by the Minnesota Supreme Court early this year, which agreed with lower courts and the state that Lipschultz failed to meet the standard “of a trustee of a well-respected charitable trust.”

Lipschultz, a grandson of one of the original trustees, took the most aggressive approach of the three Bremer trustees to sell its stake in the bank. His sometimes profane style angered the bank and others in Minnesota’s nonprofit and business circles. Neither he nor his attorney responded to requests for comment Monday.

Lipschultz was unkind and impolitic. However, he was right that the interests of the trust and bank were not aligned and that 2019 was a ripe moment to pursue deals.

The trust was being held back by relying on a single company’s profits for most of its resources. And the bank, because of its obligations to distribute profits to the trust, had less capital on hand to make acquisitions of its own and no ability to tap the stock market for capital the way that publicly held banks could.

Ellison, for his part, took no position on whether or when the bank should be sold. The AG’s role was merely to enforce rules guiding the legal operations of charities in Minnesota, a spokesman noted Monday. His office will review the bank sale’s terms for its effects on the trust.

In Monday’s deal announcement and a note to customers, Crain did an about-face. The bank and Bremer Trust, she said, “worked collaboratively to identify an acquirer with a commitment to customers and connection to community similar to our own.”

Indiana-rooted Old National first entered the Minnesota market in 2017 with the purchase of Anchor Banks, then bought Klein Financial the next year, a deal that for a time made the Twin Cities its largest market. It later gained a major foothold in Chicago with a purchase there. With Bremer, Old National picks up more than 70 branches that extend its reach well beyond the Twin Cities into dozens of small towns around Minnesota, Wisconsin and North Dakota.

Meanwhile, Bremer Trust will receive 86%, or about $1.2 billion, of the $1.4 billion Old National is paying for Bremer Financial. That will nearly double the size of the trust’s asset base.

Of those proceeds, 77% will be in shares of Old National and the trust will get a seat on the company’s board. The rest will be in cash, and that money will be used for other investments, a spokeswoman for the trust said.