Bank Isn’t Happy With Its Owner

Here is a magical corporate ownership structure. Bremer Financial Corp. is a bank holding company in Minnesota; it owns a bank, Bremer Bank, with about $13 billion of assets.1 Bremer Bank was founded by Otto Bremer, “an American success story, a German immigrant who moved to Minnesota in 1886 and built a thriving regional banking business.”2 He was the only shareholder of the bank until 1944, when he started the Otto Bremer Trust, a charitable foundation, and gave it some of his shares. Otto Bremer died in 1951, leaving the trust as the bank’s sole shareholder. The trust “has contributed over $700 million to charitable causes in the Upper Midwest” over the years, funded basically by dividends from the bank.3

It’s a little weird, and disfavored by modern tax law, to have a for-profit company controlled by a charitable trust, and so in 1989 the bank was reorganized to end the trust’s voting control. There are now two classes of shares: Class A shares, which vote, and Class B shares, which mostly don’t. The trust kept 92% of the economic ownership of the bank in the form of 10.8 million Class B shares (90% of the total capital) and 240,000 out of 1.2 million Class A shares (2% of the capital and 20% of the votes); it sold the other “80 percent of the Class A shares to Bremer employees and directors and the Company’s employee stock-ownership plan and profit-sharing plan.” (It is still not publicly listed.) The bank’s board of directors consists of the three trustees of the trust, plus seven other directors elected by the employee-shareholders.