FAQs

Q. What is the relationship between Bremer Financial Corporation (BFC) and the Otto Bremer Trust (OBT)?

A. BFC and OBT share a common founder, Otto Bremer. Born in Germany, in 1886 Otto immigrated to St. Paul, Minnesota, where he spent most of his career building, supporting and investing in community banks throughout the Upper Midwest.

In 1943, Otto consolidated his community banking investments into BFC (then called the Otto Bremer Company). The following year, Otto created a charitable foundation — now called OBT— to hold the shares of his new company. In OBT’s governing “trust instrument,” Otto appointed trustees to oversee OBT’s philanthropic mission, and directed them to forever retain OBT’s stake in BFC, absent extraordinary circumstances. In this way, Otto sought to ensure that his hometown banks would endure long after his death and have a perpetually positive impact on local communities — with the banks’ earnings generating dividends for the foundation that could fuel charitable giving.

Consistent with Otto’s vision, BFC provides 92 percent of its dividends to OBT annually (with the rest going to BFC’s employee-shareholders). Since 1989, BFC has provided OBT with more than $1 billion in dividends.

Q. What is the ownership structure of BFC?

A. Otto Bremer was originally the sole shareholder of BFC. He transferred all of his stock to OBT in increments from 1949 until 1951, when he died. From 1951 through 1989, OBT was BFC’s sole shareholder.

BFC’s ownership structure changed in 1989 due to a change in federal tax law that would have subjected nonprofits like OBT to significant penalties if they exercised voting control over for-profit entities like BFC. The reorganization split BFC into two classes of common stock: Class A shares, which vote on all matters, and Class B shares, which vote only on extraordinary transactions. BFC’s employee-shareholders own 80 percent of the Class A shares and therefore control the election of BFC’s directors. OBT owns 20 percent of the Class A shares and all of the Class B shares, giving OBT a total economic ownership position of 92 percent.

The reorganization ensured that Otto Bremer’s legacy would continue. Voting control, and therefore the ability to elect the directors who determine BFC’s strategy and oversee its day-to-day operations, would rest with BFC’s employee-shareholders. At the same time, OBT would retain a significant economic interest in BFC, just as Otto intended. This symbiotic relationship has allowed BFC to continue to operate as a community bank while providing OBT with a steady dividend stream to fuel its philanthropic activity.

Q. Why did BFC file suit against OBT’s trustees?

A. BFC brought legal action in November 2019 to prevent an effort by OBT’s trustees to stage what they have called a “hostile takeover” of BFC’s board of directors designed to force an outright sale of the bank.

In October 2019, the trustees attempted to sell a portion of OBT’s non-voting shares of BFC to several out-of-state hedge funds. Those hedge funds planned to convert the non-voting shares to voting shares — giving OBT and the hedge funds control over the election of directors. OBT and the hedge funds would then vote to elect a new board that would pursue an immediate sale of BFC to the highest bidder, with no regard for employees, customers, the communities the bank serves or Otto Bremer’s legacy.

Importantly, because at the time two of the three trustees were paid an annual fee based on the value of OBT’s non-BFC assets, they stood to potentially earn a multimillion-dollar windfall if OBT’s stake in BFC were converted to a pool of cash or non-BFC securities.

The trustees’ attempted takeover violated OBT’s trust instrument and Minnesota law. If successful, the takeover would result in a large loss of jobs in Minnesota and the closure of bank branches in rural and other underserved areas. BFC is suing to block this takeover.

Q. Why is it important that BFC remain independent?

A. BFC maintains branches in underserved communities, employs local residents, and extends credit and offers financial products to small businesses and farmers that help grow the local economy and better the lives of the people who live here. The sale of this longstanding community banking institution to outside interests is exactly what Otto Bremer sought to avoid when he created the Trust.