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Bremer, a bank built for charity, creates new fund to help individuals hitting hard times

The St. Paul-based Otto Bremer Foundation is spreading $4.2 million to various nonprofits in Minnesota, North Dakota and western Wisconsin to provide direct grants to families and individuals in crisis.

Teresa Morrow, spokesperson for Bremer Financial Corp., said the money is meant to help people who can't keep the heat on, who have a sudden medical bill or face other financial emergencies. Bremer identified grass-roots organizations it believed were in touch with individual needs, and charged them with getting the money to the people who need it.

Nonprofits in the Twin Cities metro area received $1.7 million from the Bremer Emergency Fund. They included: St. Louis Park Emergency Program ($100,000); St. Stephens Human Services ($80,000); and Community Action of Suburban Hennepin County ($71,300). For the complete three-state list of grantees, go here.

Annette Bauer, public-relations director for the Salvation Army's Northern Division, said the Bremer grant would provide $613,000 to Salvation Armies throughout Minnesota and North Dakota. In the 10-county metro area, a $100,000 grant would cover the Salvation Army's existing emergency assistance program for one month — gas vouchers, bus tokens, eyeglasses, mortgage assistance and more. The grant would be a particular help in rural areas. The Salvation Army in St. Cloud had no emergency services budget but now has $25,000. In Stevens County, the budget of $300 a month got a $35,000 boost.

Bremer announced the grants last week. Organizations have not yet received the money, which should arrive in a couple of weeks.

Richard Zierdt, executive director of Community Action of Suburban Hennepin County, said this kind of grant is very unusual. Unfortunately, the money won't last long, he said. "Times are tough."

The back story
The Bremer Foundation ranked ninth among all Minnesota grantmakers in 2007, according to the Minnesota Council on Foundations. It gave away $31.1 million, with $21.7 million in Minnesota.

While banks typically have foundations, Bremer is unique. It doesn't own the foundation; the foundation owns the bank. It's the only one like it the country, Morrow said. And there won't be another one. After Congress approved the Bremer model, "a law was passed that there won't be any more models like this," she said.

I've meant to write about Bremer for a while. Maybe it's old news to nonprofit and foundation insiders, but Bremer's charitable structure was news to me. I first learned about it when I met a few Bremer employees this summer at a nonprofit confab.

The foundation makes charitable gifts based on the value of its assets — primarily the banks, now worth approximately $650 million. According to the bio provided by Bremer, Otto Bremer was a German immigrant who began his career as a bookkeeper at the National German American Bank and eventually rose to chairman. Over the years, he invested in independent rural banks, helping them through the Depression. He believed in giving back. He created a bank holding company in 1943 and the foundation in 1944.

Steve Meads, president and CEO of Bremer Bank Twin Cities, explained how the funding works. The bank is a for-profit business. Approximately 40 percent of its after-tax profits go to the foundation to fund charitable giving. The other 60 percent is reinvested for growth, such as opening a new branch.

There's one more wrinkle, a good one if you work for Bremer. The foundation actually only owns 92 percent of Bremer Bank; employees own the other 8 percent. The employees' share goes into a stock ownership plan. (The stock's not publicly traded. When employees leave the bank, the corporation buys back the stock at a predetermined rate.)

A good year, considering
As goes the bank's value, so goes the charity. According to a news release issued Tuesday, Bremer Financial's fourth-quarter earnings were down, but income remained up for the year. Bremer had $72 million net income in 2008, a 5.7 percent increase from 2007. Not bad, considering the recent financial news.

Meads and other bank officials attributed the bank's good returns to a conservative approach — knowing its customers, doing its own underwriting and local decision-making on loans. Bremer, which has more than 100 locations in the three-state area, also was diversified and did well with agricultural loans. (A good growing season and the run-up in corn, wheat and beet prices during much of 2008 helped.)

While the media has focused on the failures in the big investment banks, Meads said, there are a number of community banks, much like Bremer, that are strong. "They have money to lend and they want to lend it out to good customers," he said.

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