# SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-K

# [X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

# For the fiscal year ended December 31, 2003.

or

# [   ]       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

# For the transition period from __________________________ to _________________________

Commission file number:  0-18342

Bremer Financial Corporation (Exact name
 of registrant as specified in its charter)



|Minnesota(State or other jurisdiction of incorporation or organization) | 41-0715583(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------- | ----------------------------------------------

|445 Minnesota St., Suite 2000, St. Paul, MN (Address of principal executive offices) | 55101-2107    (Zip Code)
|------------------------------------------------------------------------------------ | ------------------------

(Registrants telephone number, including area code:
 (651) 227-7621)

Securities registered pursuant to Section 12(b)
 of the Act:None.

Securities registered pursuant to Section 12(g)
 of the Act:Class A Commoon Stock, no par value.

Indicate by check mark whether the registrant: (1)
 has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
 file such reports), and (2) has been subject to such filing requirements for the past 90 days.          
 Yes XNo

Indicate by check mark if disclosure of delinquent
 filers pursuant to Item 405 of REgulation S-K is not contained herein, and will not be contained, to
 the registrant's knowledge, in definitive proxy or information statements incorporated by reference
 in Part III of this Form 10-K or any amendment to this Form 10_K.    X

Indicate by check mark whether the registrant is an
 accelerated filer (as defined in Rule 12b-2).    Yes No
 X

Based upon the $36.68 per share price at which shares
 of class A common stock of the Company were last sold before June 30, 2003, the aggregate value of the
 Companys shares of class A common stock held by non-affiliates as of such date was approximately $27.7
 million. All of the Companys class B common stock is owned by the Otto Bremer Foundation, an affiliate
 of the Company.

As of March 18, 2004, there were 1,200,000 shares of
 class A common stock and 10,800,000 shares of class B common stock outstanding.

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# BREMER FINANCIAL CORPORATIONAnnual Report on Form 10-Kfor the year ended December 31, 2003

# INDEX

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Page                                                 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -----------------------------------------------------
|Documents Incorporated by Reference Cross Reference Sheet PART IItem 1.     Business Item 2.     Properties Item 3.     Legal Proceedings Item 4.      Submission of Matters to a Vote of Security Holders PART IIItem 5.     Market for Registrants Common Equity and Related Stockholder MattersItem 6.     Selected Financial Data Item 7.     Managements Discussion and Analysis of                  Financial Condition and Results of Operations Item 7A.  Quantitative and Qualitative Disclosure About Market Risk. Item 8.      Financial Statements and Supplementary Data
Item 9.      Changes in and Disagreements with Accountants                  on Accounting and Financial Disclosure Item 9A.   Controls and Procedures PART IIIItem 10 through Item 14. See Documents Incorporated by Reference (Page ii) PART IVItem 15.  Exhibits, Financial Statement Schedules, and                  Reports on Form 8-K Signatures | iiiii    1  9  9  9   10 13 14 33 34 60 60  60  60 63

i

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# DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference
 to the parts indicated of this Annual Report on Form 10-K:

|Parts of Annual Report on Form 10-K                                                                                                                     | Documents Incorporated by Reference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part IIItem 5.                         Part IIIItem 10.                                Item 11.        Item 12.                Item 13.        Item 14. | Market for Registrants Common Equity and Related Stockholder Matters                                                                                               Directors and Executive Officers of the Registrant
                                                                                                                                          Executive Compensation
                                              Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersCertain Relationships and Related Transactions Principal Accountant Fees and Services

ii

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# CROSS REFERENCE SHEET

# Between Items in Part IIIof Form 10-K andProxy StatementPursuant to Paragraph G-4 of General Instructions to Form 10-K

|Item Number and Caption                                                  | Subject HeadingsIn Proxy Statement                                                                                                                                                                                                                                                                                                                                                                                    
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 10.                Item 11.        Item 12.        Item 13.Item 14. | Directors and Executive Officers of the Registrant                                                                                                       Executive Compensation
                                                   Security Ownership of Certain Beneficial Ownersand Management and Related Stockholder Matters Certain Relationships and Related Transactions Principal Accountant Fees and Services

iii

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# PART I

Certain statements in this Annual Report on Form 10-K
 and in the documents incorporated by reference herein constitute forward-looking statements within
 the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities
 Exchange Act of 1934, as amended (Exchange Act). For this purpose, any statements contained herein
 or incorporated herein that are not statements of historical fact may be deemed to be forward-looking
 statements. Without limiting the foregoing, the words believes, anticipates, plans, intends,
 expects and similar expressions are intended to identify forward-looking statements. Because these
 forward-looking statements involve risk and uncertainties, there are important factors, including the
 factors discussed in Risk Factors filed with this Annual Report on Form 10-K as Exhibit 99.1, that
 could cause actual results to differ materially from those expressed or implied by these forward-looking
 statements.

# ITEM 1.   BUSINESS

# General

Bremer Financial Corporation is a regional financial
 services company with $5.7 billion in assets as of December 31, 2003, operating 11 subsidiary banks
 and 104 offices in Minnesota, Wisconsin and North Dakota. We offer a wide range of banking and related
 products and services, including transaction and savings deposits, commercial, consumer, agricultural
 and real estate loans, mortgage origination services, insurance, trust, and retail brokerage services.
 From December 31, 1999 to December 31, 2003, we increased our asset base from $3.9 billion to $5.7
 billion, resulting from a combination of internal growth and growth through bank and branch acquisitions
 within our three-state market area. During the same period, our loans and leases increased from $2.5
 billion to $4.0 billion, and our deposits increased from $2.8 billion to $4.1 billion.

# Business Developments

New Branches. As part of our ongoing Twin Cities
 expansion strategy, we opened a new office in White Bear Lake in October 2003 and two new offices located
 in Plymouth and in downtown Minneapolis in January 2003. Each of the offices provides a full range of
 banking services, with the downtown Minneapolis office focusing on Private Banking.

Sale of Branches.In May 2003, we sold two rural
 branches in Edgerton and Leota, Minnesota, to a local community bank headquartered in that area. The
 transaction included $15 million in deposits, $16 million in loans, and the bank facilities in those
 communities. We originally acquired these branches in 1999 as part of our larger purchase of a Twin
 Cities-based banking company.

# History

Otto Bremer incorporated Bremer Financial Corporation
 in December 1943 to consolidate his majority stock holdings in community banks located throughout Minnesota,
 Wisconsin and North Dakota. Mr. Bremer formed the Otto Bremer Foundation in 1944 to own Bremer Financial
 Corporations stock. Today we are owned by the foundation and the employees and directors of the company.
 The foundation is organized as a non-profit trust for charitable, educational and religious purposes
 for the benefit of individuals and entities who are residents of or are located in Minnesota, Wisconsin,
 North Dakota and Montana. The foundation is a key part of our community-based philosophy. Earnings from
 its investment in us and other investments are returned to the bank communities in the form of grants
 and program-related investments. In 2003, the Otto Bremer Foundation made over $23.0 million in grants
 to over 700 community organizations and programs.

From our incorporation in 1943 and through the late
 1980s, we relied on our existing community banks to generate loan and deposit growth in our market area.
 From 1990 through 2003, we augmented this growth through 11 bank and branch acquisitions totaling approximately
 $1 billion of assets and $1.4 billion of deposits. We use bank and branch acquisitions to fill in gaps
 in our geographic markets in order to provide better customer service and leverage existing operations.

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Beginning in 1999, our expansion focus has been primarily
 in higher growth metropolitan areas such as Minneapolis/St. Paul and Fargo/Moorhead.

# Our Strategy

We seek to be the preeminent community bank in the
 markets we serve. Our strategy for achieving this objective includes:

 Providing
 distinctive, community banking to our customers by:

»
  providing personalized service through a relationship management approach

| | We seek to identify the total financial services needs of our clients and provide them with individualized solutions to those needs. We emphasize a sales approach in which a relationship manager is responsible for selling the entire range of our services to our customer base, as opposed to assigning sales people from each product area to a specific client. In this role, our relationship managers work in tandem with representatives from our product areas to develop an effective client solution. As a result, our relationship managers gain a more thorough understanding of their clients needs, and clients gain more convenient access to our diverse product line. To implement this relationship management focus, we have instituted comprehensive training programs and modified our information systems to better measure the breadth of each customer relationship and the effectiveness of our relationship managers cross selling efforts.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

»  offering
 a wide variety of innovative financial products to our customers

| | Our clients use a wide variety of financial services beyond the traditional banking products, and we work with them to identify their particular needs and tailor our services to meet those needs. As our clients needs have evolved, we have established new competencies in e-commerce, cash management, international banking, specialized financing, private banking, estate and financial planning, and asset management.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

»  local
 decision-making

| | We believe customers in our markets seek banking relationships managed by a decision-maker who can deliver a prompt response to their requests. As smaller, independent banks have been acquired by national, multi-bank holding companies, we believe that the personal relationships that these customers maintained with the management of such banks have increasingly eroded, and the banks responsiveness and general service levels have declined. Consistent with our long history of community banking, we operate under a management philosophy of local market decision-making by each of our subsidiary banks. Each of our 11 subsidiary banks is separately chartered with its own officers and board of directors who usually are members of the local community. Management of each Bremer subsidiary bank has a high degree of flexibility in responding to local market demands.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

»  using
 our unique ownership structure to reinvest in the communities we serve

| | Over the last three years, the foundation has distributed more than $66.0 million in the states we serve in the form of grants and program-related investments. Directing most of its grants to non-profit organizations in the communities we serve not only contributes to the economic well being of those communities but also improves our brand recognition.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Investing
 in technology

| | We are committed to investing in technology to improve product offerings, improve security protection, reduce product costs and provide more convenient service to our customers. Here are a few significant highlights from 2003:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | » | Infrastructure improvements.We replaced all desktop computers throughout the company and most of our servers to keep our systems current with the capacity needed to make them effective and safe. We also moved to a more centralized server management environment, which will improve reliability and security.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Security.Among other business continuity efforts, we have built a hot site that houses redundant servers for our critical systems. We have also implemented better tools to address the frequent software upgrades required to maintain security protection.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Branch technology. We have released a new deposit origination and maintenance system which has streamlined operations and significantly reduced the time it takes to service a new deposit customer, thus allowing our branch personnel more time to focus on sales activities.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | Internal application development. We have developed customer centered applications around our relationship management process that will allow us to improve sales effectiveness.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Increasing
 penetration in our existing markets

| | To make us more accessible and convenient to our customers, we pursue a strategy of in-market expansion to fill in gaps in our market coverage through opening new branches, acquiring competing banks or branches, and investing in technology-based delivery channels. Examples of this strategy include:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | the October 2003 opening of a new branch in White Bear Lake;
| | - | ------------------------------------------------------------

| | » | the January 2003 opening of two new branches in Plymouth and downtown Minneapolis;
| | - | ----------------------------------------------------------------------------------

| | » | our May 2001 acquisition of 11 branches from Firstar Corporation (the "Branch Acquisition"), which substantially improved customer access in the Minneapolis/St. Paul area; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | the acquisition of Northwest Savings Bank in 2000, which brought our services to New Richmond, Wisconsin, a rapidly-growing community located between St. Paul and our banking offices in western Wisconsin.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    Leveraging
 our holding company structure

| | We have centralized many critical subsidiary bank administrative and support functions at the holding company level, including:
| | -------------------------------------------------------------------------------------------------------------------------------

| | » | policy development in areas such as loans, investments, asset liability management, compliance, data security, accounting, and personnel, and standardized procedures to support the policies;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | customer support services in areas such as loan servicing, deposit servicing, and call center operations;
| | - | ---------------------------------------------------------------------------------------------------------

| | » | investment portfolio management, interest rate risk management, purchasing, management of insurance coverage, employee benefits, credit examination, technology support, and accounting;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | » | specialized expertise in areas such as cash management, international banking, loan workout, taxation, and compliance; and
| | - | --------------------------------------------------------------------------------------------------------------------------

| | » | management of key vendor relationships, including those vendors supplying data processing, item processing, ATM services, audit services, computer software and hardware, and equipment and supplies.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We believe that standardizing certain policies, procedures and products and centralizing administrative functions allow subsidiary bank management and personnel to concentrate on individual customer service and community relations. Further, we reduce bank expenses and can consistently and efficiently implement system-wide banking policies and practices.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# Our Banks

Our 11 subsidiary banks are located in Minnesota, Wisconsin
 and North Dakota. At December 31, 2003, they ranged in size from $73.8 million to $1.9 billion in total
 assets and from $60.6 million to $1.4 billion in total deposits. Each of our banks is a community bank
 that provides a full range of commercial and consumer banking services, primarily to customers within
 its market area. All of our banks are nationally chartered, operate under the name of Bremer Bank, National
 Association, and are regulated by the Office of the Comptroller of the Currency. The locations, total
 assets and total deposits of our banks are as follows:

|Location of Subsidiary Bank Charter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Branch Locations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Assets                                                | Deposits                                         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | -------------------------------------------------
|
|Alexandria, MN
                                                                                                                                                      Brainerd, MN
                                                  Grand Forks, ND
                                                                                                                                                                     
                                                                                     International Falls, MN Marshall, MN                          Menomonie, WI | Alexandria, MN (2) Brandon, MNBreckenridge, MNFergus Falls, MNMorris, MNStarbuck, MNWahpeton, NDBrainerd, MN (2) Aitkin, MNBaxter, MN (2)Grand Forks, ND (2) Crookston, MNFisher, MNFordville, NDGilby, NDGrafton, NDHoople, NDLarimore, NDSt. Thomas,NDShelly, MNWarren, MNInternational Falls, MN Marshall, MN Redwood Falls, MNMenomonie, WI (3) Amery, WIBayfield, WIColfax, WIDanbury, WIDeer Park, WIEau Galle, WIElk Mound, WIFrederic, WIKnapp, WILa Pointe, WINew Richmond, WIRock Falls, WISiren, WIWashburn, WI | $446,492 $285,974 $580,839 $ 73,833 $194,030 $500,583 | $311,348$195,602$396,612 $ 60,649$148,918$381,189

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|Location of Subsidiary Bank Charter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | Branch Locations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Assets                                               | Deposits                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------- | ------------------------------------------------------
|
|Minot, ND                                                                                                                                             Moorhead, MN
                                                                                                                        St. Cloud, MN
                                                            South St. Paul, MN
                                                                                                                                                                    
                                                                                                                                                                    
                                                                                                                Willmar, MN | Minot, ND (3) Berthold, NDCarrington, NDDevils Lake, ND (2)Max, NDMinnewaukan, NDRichardton, NDRugby, NDMoorhead, MN Fargo, ND (2)Casselton, NDDetroit Lakes, MNLeonard, NDLisbon, NDPerham, MNSt. Cloud, MN (2) Rice, MNSartell, MNSauk Rapids, MNSouth St. Paul, MN St. Paul, MN (4)Minneapolis, MN (3)Arden Hills, MNBrooklyn Center, MNBrooklyn Park, MNEagan, MNEden Prairie, MNEdina, MNInver Grove Heights, MNMaplewood, MNMilaca, MNMinnetonka, MNOgilvie, MNPlymouth, MNPrinceton, MNRichfield, MNRoseville, MNSt. Anthony, MNSt. Louis Park, MNWatertown, MNWhite Bear Lake, MNZimmerman, MNWillmar, MN (2) Hutchinson, MN | $   419,312$   529,925$  545,190$1,932,166$  215,681 | $   331,057$   297,600$   369,210$1,446,729$   148,183

# Communities Served By Our Banks

We operate in 84 communities across Minnesota, Wisconsin
 and North Dakota. Beginning in 1999, we have been expanding significantly in more urban metropolitan
 areas, including Minneapolis/St. Paul, Fargo/Moorhead, and St. Cloud. Before that time, we had our strongest
 market presence in communities outside major metropolitan areas. In Minnesota, these non-metropolitan
 communities

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are a blend of agricultural-based areas in the southwestern
 portion of the state and more recreational and resort-based communities in west central Minnesota. Our
 North Dakota communities are in primarily agricultural-based areas located along the Red River Valley
 and in western North Dakota surrounding the Minot trade area. In Wisconsin, our locations are concentrated
 on the western side of the state. In our markets located outside the major metropolitan areas, we generally
 are first or second in deposit market share.

Beginning in 1999, most of our expansion has been in
 higher-growth metropolitan areas. The primary areas targeted for future expansion are expected to continue
 to be in the corridor from Minneapolis/St. Paul to St. Cloud and in the Fargo/Moorhead area. Although
 we have maintained charter banks in St. Cloud and South St. Paul for many years, our metropolitan area
 market share has not been substantial. The acquisition of Dean Financial Services, Inc. in 1999 added
 eight additional branch offices in the metropolitan Minneapolis/St. Paul area, and the 2001 Branch Acquisition
 added another 11 offices in that area. In 2003, we opened three additional offices in the Minneapolis/St.
 Paul area. We have also opened a number of offices in the rapidly growing Fargo/Moorhead area during
 the last few years.

# Lending Activities

We maintain a diversified loan portfolio consisting
 of commercial, commercial and residential real estate, agricultural, consumer and tax-exempt loans.

Commercial Loans.   Loans in this
 category include term loans and operating lines of credit primarily for manufacturing, wholesale, or
 retail businesses. While we rely on the borrowers business operations as the principal source of repayment,
 we also generally obtain personal guarantees and security interests in inventory, receivables, and equipment
 as collateral support for the loans. We utilize standard advance rates in determining amounts that can
 be advanced for each collateral type. Approximately 70% of our commercial loan portfolio consists of
 short-term floating rate advances that are normally secured by inventory and receivables. The remaining
 30% of the commercial loan portfolio consists of fixed rate loans typically amortizing over approximately
 five years and secured by equipment.

Commercial Real Estate Loans.  Our
 commercial real estate portfolio, which includes interim commercial real estate construction, consists
 primarily of loans to business customers who occupy the property or use the property for income production.
 Commercial real estate loans generally are made for up to 80% of appraised value or cost and typically
 have a term of five years with 15 to 20 year amortization. Approximately 47% of our commercial real
 estate loans are fixed rate loans and 53% are adjustable rate loans.

Agricultural Loans.   Our agricultural
 loans include term loans secured by farm property or equipment and operating loans used for commodity
 production. Our agricultural customers and agricultural-based communities are diversified across the
 three states we serve, and we extend credit to 12 different areas of commodity production, including
 crops, dairy, and livestock. Approximately 76% of our agricultural loans are short-term floating rate
 loans. The remainder of the agricultural loans are fixed rate loans with terms generally under five
 years.

Residential Real Estate Loans.   The
 residential real estate portfolio includes home equity loans, first mortgage residential real estate
 loans, and some construction loans. The construction loans are typically made to builders on homes under
 construction that have been pre-sold. Loan to value ratios for home equity loans typically range from
 80% to 100%. Approximately 27% of our home equity loans are fixed rate loans with terms of five to 12
 years. The remaining 73% of our home equity loans are floating rate lines of credit. First mortgage
 residential real estate lending is generally conducted in compliance with secondary market underwriting
 guidelines, and most newly originated fixed rate first mortgage loans are sold into the secondary market.
 The first mortgage residential real estate loans that we keep in our portfolio are generally adjustable
 rate loans and often involve vacation homes in our recreational and resort-based communities.

Consumer Loans.  Loans in this category
 include automobile loans, home improvement loans and personal lines of credit. In addition to our direct
 lending operations, our subsidiary banks also

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purchase indirect retail installment sales contracts
 primarily from automobile dealers, certain recreational vehicle dealers, and certain sport recreation
 dealers where the selling dealer is well known to us and located in our primary trade area. Approximately
 80% of our consumer loans are fixed rate loans with terms of three to five years.

Tax-Exempt Loans.  Tax-exempt loans
 and leases are made to qualifying organizations located within our primary trade area.

# Deposits

We emphasize developing relationships with individuals
 and business customers in order to increase our deposit base. We offer a broad range of competitively
 priced deposit products designed to meet the individual needs of our customers, including checking accounts,
 money market accounts, savings accounts and certificates of deposit. Deposits in our banks are insured
 by the Federal Deposit Insurance Corporation (FDIC) up to statutory limits (currently $100,000). Deposit
 product development is the primary responsibility of our holding company marketing and retail delivery
 departments, with input and feedback from the subsidiary banksmarket managers. Pricing of products
 is generally consistent among all of our banks, with bank market managers having some local authority
 to modify pricing on certain products to meet the market and/or the local competition.

# Other Products and Services

We operate various financial services subsidiaries,
 which provide insurance, trust and other fiduciary services. The subsidiaries allow us to offer a full
 range of products and services to our customers. On a consolidated basis, these other financial services
 subsidiaries historically have accounted for less than 10% of our annual earnings.

Bremer Trust, National Association.   Bremer
 Trust, National Association has trust powers and offers trust and other fiduciary services in the majority
 of our markets. Services that Bremer Trust provides to our customers include serving as trustee, investment
 agent, custodian, personal representative, and as a conservator for individuals, businesses, and public
 and tax-exempt organizations. Bremer Trust directly serves as an investment advisor for the proprietary
 stock and bond mutual funds we offer to our trust client accounts. It also operates on a limited basis
 as a registrar and transfer agent. As of December 31, 2003, Bremer Trust had 75 employees. Our total
 trust revenues for 2003 were $9.9 million.

Bremer Insurance Agencies, Inc.  
 Bremer Insurance Agencies, Inc. is an independent insurance agency with offices in Minnesota, Wisconsin
 and North Dakota, representing many different insurance companies. This gives agency personnel the ability
 to tailor coverage to meet the differing needs of our diverse customer base. The agencys book of business
 is generated by selling personal, life, health, commercial and agricultural insurance products. In 2003,
 Bremer Insurance generated insurance commissions of $9.5 million and, as of December 31, 2003, it had
 92 employees.

Brokerage Services.   In January 2004,
 we introduced our new name, Bremer Investments. Bremer Investments provides consumer investment products
 and services at our subsidiary bank offices through INVEST Financial Corporation of Tampa, Florida.
 We have an agreement with INVEST to deliver investment services to our customers through our
 branch network, and we receive a portion of the commissions earned by the investment representatives
 in those branches. We had $5.6 million in brokerage commissions in 2003.

Subsidiaries No Longer Conducting New Business Activities.
   Bremer Life Insurance Company was formed as a reinsurer of credit life and credit accident
 and health insurance sold by the Bremer banks. In 2003, we discontinued selling credit life and disability
 insurance products through Bremer Life Insurance Company and replaced them with a bank product. Bremer
 Business Finance Corporation is a subsidiary originally formed in 1996 that was engaged in secured lending
 activities. Bremer Business Finance Corporation discontinued accepting new loan applications in 2003,
 and its loan portfolio has declined to $20.0 million at December 31, 2003 from $45.9 million at December
 31, 2002.

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# Operations and Administration

We provide a broad range of services to the individual
 subsidiaries in order to augment the capacities of the subsidiary banks management and to achieve many
 of the synergies of a larger company.

Operations Center.  Back-office operations
 for all banks are housed in an operations center in Lake Elmo, Minnesota, into which we moved in December
 2002. We use a third-party provider for delivery of most data and item processing services for Bremer
 and its subsidiaries. We have entered into contracts for these services that extend through May 2008.
 Some of the operations of this third party provider are located in our operations center.

Credit.   We evaluate and approve
 credit at the individual subsidiary bank level through individual and senior lending officer credit
 authorities. In addition, each bank has a senior credit committee and a directors credit committee
 that review and approve larger credits. The directors credit committee can approve credit up to the
 individual bank limit.

We also support the credit process at the holding company
 level through the use of corporate credit committees and staff. Approval is required at the corporate
 level for loans that exceed the individual limits of the banks and for certain loans that have characteristics
 that warrant review at the corporate level as defined in our lending policy. We also provide centralized
 underwriting and internal syndication for credits that exceed the lending limits of individual banks.

Risk Management.  The risk management
 division is an independent unit that assists us in managing risk throughout the organization. This is
 done through consulting, monitoring, and performing independent audits and examinations of banks, other
 subsidiaries, and corporate support functions. The director of risk management has a direct reporting
 relationship to the holding companys board of directors and the boards of the operating entities. Risk
 management consists of credit examination, internal audit, and compliance administration and counsel.

| |  | Credit examination reviews our loan portfolio on a regular basis. The frequency of examination is based on a risk assessment and provides for more frequent examinations for units exhibiting higher risk factors.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Internal audit conducts periodic operational, compliance and internal control reviews of all of our subsidiary banks and system-wide operations and reports its findings to the boards of directors.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Compliance administration and legalcounsel provide assistance to the banks in meeting their consumer compliance responsibilities.
| | - | ---------------------------------------------------------------------------------------------------------------------------------

Asset Liability and Investment Portfolio Management.  We operate using a centralized treasury function. The asset liability committee
 of the holding company is responsible for developing appropriate risk management policies and for monitoring
 asset liability activities to assure that they are conducted within established risk parameters. The
 treasurer has day-to-day responsibility for our overall interest rate risk, liquidity, and investment
 portfolio management.

Finance.   We have established policies
 for capital expenditures, accounting policy, capital adequacy and dividends. In addition, we monitor
 the performance of our individual subsidiaries and coordinate the reporting process, the strategic planning
 process and annual profit planning.

Human Resources.   Our human resources
 division has established standard salary administration procedures, and our subsidiary banks administer
 these standards at their level. Employee benefits are standardized and administered by the holding company.

Marketing.Our marketing division
 manages our branding efforts to assure that consistent messages are communicated in all of our external
 communications.

# Competition

We conduct business in the highly competitive financial
 services industry. The financial services industry in which we compete is comprised of commercial banks,
 thrifts, credit unions, investment banks, brokerage houses, money managers, mortgage banks, insurance
 companies and other providers

8

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of financial products and services. These firms compete
 with us for loans, deposits, trust services, investment products and a host of other financial products
 and services.

We believe that our success in competing effectively
 with these alternative providers of financial services will be partly based on our ability to monitor
 the local economies, make decisions close to the marketplace, commit to and be involved in the communities
 we serve, and fully develop our relationship management concepts. We must preserve our ability to focus
 on providing personalized quality banking services to maintain or improve our competitive position in
 our markets. We believe that our size, combined with our support services in specialized areas, adds
 to the strength of the individual banks, enabling them to compete more effectively. Some of our competitors
 are not subject to the same degree of regulation as that imposed on bank holding companies and national
 banks. In addition, the larger banking organizations, investment banks and brokerage houses have significantly
 greater resources than we do. As a result, some of our competitors have advantages over us in name recognition
 and market penetration.

# Employees

As of February 29, 2004, we had 1,632 full-time equivalent
 employees. We provide our employees with a comprehensive program of benefits, some of which are on a
 contributory basis, including comprehensive medical and dental plans, life insurance plans, and 401(k)
 plans. In addition, all the employees have the opportunity to invest in our class A common stock. None
 of our employees is a member of a collective bargaining unit. We consider our relationship with our
 employees to be good.

# ITEM 2.   PROPERTIES

We lease our principal offices at 445 Minnesota Street,
 Suite 2000, St. Paul, Minnesota 55101, which consist of approximately 25,000 square feet. In addition,
 the centralized service operations of the holding company occupy approximately 83,900 square feet of
 owned property in Lake Elmo, Minnesota, a suburb of St. Paul. An additional 17,000 square feet of that
 property is occupied by one of our third party providers of data and item processing services. We believe
 that the principal offices at 445 Minnesota Street in St. Paul and our service operations facility will
 be sufficient for our needs in the foreseeable future.

Substantially all of the current offices and branches
 of the subsidiary banks are owned, with the primary exception of those located in leased space in downtown
 St. Paul and Minneapolis, Minnesota, and small leased spaces in supermarkets. Our bank facilities range
 in size from 391 square feet to 52,280 square feet.

# ITEM 3.   LEGAL PROCEEDINGS

There are no material legal proceedings pending other
 than ordinary routine litigation incidental to our business.

# ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted during the fourth quarter
 of the year ended December 31, 2003 to a vote of our security holders, through the solicitation of proxies
 or otherwise.

9

---



# PART II

# ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

# Market Information

There is no established trading market for the shares
 of our class A common stock. To the best of our knowledge, during the period from May 18, 1989 (the
 closing date of the registered initial public offering of Bremers class A common stock) through February
 29, 2004, a majority of the purchases and sales of shares of the class A common stock have consisted
 of transfers effected upon the exercise of the options described in the portions of Bremers Prospectus
 dated April 20, 1989 (Prospectus) entitled Description of Capital Stock  Description of Class A
 Common Stock  Restrictions on Transfer on page 62 of the Prospectus and Description of Capital Stock
  Description of Class A Common Stock First Call Option to Company on page 64 of the Prospectus (which
 portions are hereby incorporated by reference pursuant to Rule 12b-23 under the Securities Exchange
 Act of 1934). We are not obligated to purchase any shares of class A common stock from a holder upon
 the exercise of a put option if the purchase price paid for the shares subject to the put option, when
 added to the purchase price paid for all previous purchases of class A common stock during the preceding
 twelve-month period, would exceed 10% of our net worth as of the date of such purchase. As of December
 31, 2003, our net worth, including redeemable class A common stock, was $467.4 million, and 10% of our
 net worth and redeemable class A common stock was $46.7 million.

During the period from January 1, 2003 through February
 29, 2004, we did not directly purchase any shares of class A common stock but assigned to various parties
 our options to purchase a total of 109,236.9984 shares. These options were assigned to the Bremer Financial
 Corporation Employee Stock Ownership Plan (ESOP) (8,971.3837 shares), the Bremer Banks Profit Sharing
 Plus Plan (66,896.6147 shares), executives and directors under the Executive Stock Purchase Plan (33,269.0000
 shares), and certain directors of subsidiary banks (100.0000 shares). To the best of our knowledge,
 shares purchased by these parties upon exercise of these assigned options were the only transfers of
 shares of class A common stock effected during the period from January 1, 2003 through February 29,
 2004. The sales price of the shares of class A common stock in such transactions occurring during that
 period ranged from $36.17 to $46.50 per share. These prices were equal to either the per share book
 value of the class A common stock as shown in our consolidated balance sheet dated as of the last day
 of the immediately preceding fiscal quarter or, and only with respect to shares transferred that had
 been held for employees in the ESOP, the per share fair market value as determined by an independent
 appraiser. At December 31, 2003, the most recent date for which a per share book value for the class
 A common stock is available, such value was $38.95.

To the best of our knowledge, no brokers are used to
 sell the shares of class A common stock, and there are no market makers for the class A common stock.
 The Company has sold none of its equity securities during the three years ended December 31, 2003.

# Holders

As of February 29, 2004, there were 1,321 holders of
 record of the shares of class A common stock.

# Dividends

The subsidiary banks ability to pay dividends to the
 parent and the parents ability to pay dividends to holders of the class A common stock are restricted
 and limited. The restrictions on payments of dividends are described in Note R of the Notes to Consolidated
 Financial Statements set forth in Item 8 of this Annual Report on Form 10-K. Each of the subsidiary
 banks is subject to extensive regulation regarding the payment of dividends and other matters. All subsidiary
 banks are nationally chartered and are regulated by the Office of the Comptroller of the Currency. In
 addition, because the deposits of our subsidiary banks are insured up to the applicable limit (currently
 $100,000) by the

10

---



FDIC, all of the subsidiary banks are subject to regulation
 by the FDIC. The parent and the foundation, as bank holding companies, are regulated by the Board of
 Governors of the Federal Reserve System.

Dividends from Subsidiary Banks.  
 A substantial portion of our cash flow and income is derived from dividends paid to us by the subsidiary
 banks, and restrictions on the payment of such dividends could affect the payment of dividends by the
 parent. With regard to the subsidiary banks, and in addition to the statutory prohibition against the
 withdrawal of any portion of a national banks capital and certain statutory limitations on the payment
 of dividends, the approval of the Comptroller is required for the payment of any dividend by any national
 bank if the total of all dividends declared by the bank in any calendar year exceeds the total of its
 net profits (as defined) for that year combined with its retained net profits for the preceding two
 calendar years, less any required transfer to surplus. The Comptroller also has issued a banking circular
 emphasizing that the level of cash dividends should bear a direct correlation to the level of a national
 banks current and expected earnings stream, the banks need to maintain an adequate capital base, and
 other factors.

In addition to the foregoing limitations, the appropriate
 federal banking agency could take the position that it has the power to prohibit a national bank from
 paying dividends if, in its view, such payments would constitute unsafe or unsound banking practices.

The payment of dividends by any national bank also
 is affected by the requirements to maintain adequate capital pursuant to the capital adequacy guidelines
 issued by the Comptroller. The Comptroller has issued capital adequacy regulations for national banks
 subject to the Comptrollers primary supervision. These regulations provide for a minimum Tier 1 capital
 to total assets (leverage) ratio of 4.00% for the most highly-rated banks and a minimum total capital
 to risk-weighted assets (total capital) ratio of 8.00%. These guidelines and regulations further provide
 that capital adequacy is to be considered on a case-by-case basis in view of various qualitative factors
 that affect a banks overall financial condition. Most banking organizations are expected to maintain
 a leverage ratio of 100 to 200 basis points above this minimum, depending on their financial condition.
 The subsidiary banks are in compliance with the Comptrollers minimum capital guidelines. See the discussion
 of the capital adequacy guidelines set forth in the portion of Part II of this Form 10-K entitled Item
 7. Managements Discussion and Analysis of Financial Condition and Results of Operations  Capital Management.

The above regulations and restrictions on dividends
 paid by the subsidiary banks may limit our ability to obtain funds from such dividends for our cash
 needs, including funds for payment of operating expenses and for the payment of dividends on the class
 A and class B common stock, as well as funds necessary to facilitate acquisitions. However, because
 of the capital positions of the subsidiary banks, we have been able to obtain dividends sufficient to
 meet our cash flow needs.

As of December 31, 2003, the subsidiary banks had retained
 earnings of $31.7 million which were available for distribution to the parent as dividends in 2004 subject
 to regulatory and administrative restrictions. Of this amount, approximately $24.4 million was available
 for distribution without obtaining the prior approval of the appropriate bank regulator. In 2003 and
 2002, the subsidiary banks paid total dividends to the parent of $32.2 million and $59.8 million. The
 range of dividend payouts (dividends paid divided by net income) was 0.0% to 137.5% in 2003 and 24.3%
 to 116.5% in 2002.

Under the ESOP, and at the option of the ESOPs Administrator,
 cash dividends declared on the shares of class A common stock held by the ESOP will be allocated to
 the ESOP participants. To the extent that cash dividends declared on the class A common stock held by
 the ESOP are distributed to the participants (whether directly or indirectly), the dividends will be
 deductible to us for income tax purposes. Any dividends paid in the form of class A common stock with
 respect to shares allocated to the individual participants accounts will be allocated to such accounts.

Under the Profit Sharing Plan, all cash dividends paid
 on the class A common stock are allocated to the accounts of the participants holding shares of the
 class A common stock in their profit sharing accounts. All such proceeds are available to the participants
 for investment under the Profit Sharing

11

---



Plan in accordance with the terms and conditions of
 the Profit Sharing Plan. All dividends paid in the form of class A common stock will be allocated to
 the account of the participant in which the shares are held. In no event will dividends paid on the
 class A common stock held by the participants accounts within the Profit Sharing Plan be forfeited
 or otherwise allocated and held by the trustees of the Profit Sharing Plan.

Dividends from the Company.   Our
 payment of dividends is limited by, among other things, the requirement to maintain adequate capital
 pursuant to the capital adequacy guidelines issued by the Federal Reserve Board. These guidelines are
 substantially similar to those promulgated by the Comptroller with respect to national banks, which
 are discussed above. The payment of dividends by a bank holding company also is subject to the general
 limitation that the Federal Reserve Board could take the position that it has the power to prohibit
 the bank holding company from paying dividends if, in its view, such payments would constitute an unsafe
 or unsound practice.

We declared and paid dividends to the foundation and
 all other holders of our class A common stock of $21.6 million in 2003 and $19.8 million in 2002. We
 paid $5.4 million of dividends in each of the four quarters of 2003 and in the final quarter of 2002
 and $4.8 million of dividends in each of the first three quarters of 2002. The dividend yield, which
 consists of dividends paid during the year divided by shareholders equity as of the last day of the
 preceding year, was 5.0% and 5.1% for the years ended December 31, 2003 and 2002.

12

---



# ITEM 6.    SELECTED FINANCIAL DATA

# BREMER FINANCIAL CORPORATION AND SUBSIDIARIES

|                                            | At or for the year ended December 31,
|------------------------------------------- | -------------------------------------
|
|
|Operating results                           |                                      
|Total interest income                       |                                      
|Net interest income                         |                                      
|Net interest income (1)                     |                                      
|Provision for credit losses                 |                                      
|Noninterest income                          |                                      
|Noninterest expense                         |                                      
|Net income                                  |                                      
|Dividends                                   |                                      
|Average balances                            |                                      
|Total assets                                |                                      
|Securities (2)                              |                                      
|Loans and leases (3)                        |                                      
|Total deposits                              |                                      
|Short-term borrowings                       |                                      
|Long-term debt                              |                                      
|Mandatorily redeemable preferred securities |                                      
|Redeemable class A common stock             |                                      
|Shareholders' equity                        |                                      
|Period-end balances                         |                                      
|Total assets                                |                                      
|Securities (2)                              |                                      
|Loans and leases (3)                        |                                      
|Total deposits                              |                                      
|Short-term borrowings                       |                                      
|Long-term debt                              |                                      
|Mandatorily redeemable preferred securities |                                      
|Redeemable class A common stock             |                                      
|Shareholders' equity                        |                                      
|                                            |                                      
|Financial ratios                            |                                      
|Return on average assets (4)                |                                      
|Return on average equity (5)                |                                      
|Average equity to average assets (5)        |                                      
|Tangible equity to assets (5)               |                                      
|Dividend payout                             |                                      
|Net interest margin (1)                     |                                      
|Operating efficiency ratio (6)              |                                      
|Reserve to total loans and leases           |                                      
|Net charge-offs to average loans and leases |                                      
|Per share of common stock(5)                |                                      
|Net income-basic and diluted                |                                      
|Dividends paid per share                    |                                      
|Book value                                  |                                      

---

|                   |                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)(2)(3)(4)(5)(6) | Tax-equivalent basis (TEB).Includes securities held-to-maturity and securities available-for-sale.Net of unearned discount and includes nonaccrual loans and leases.Calculation is based on income before minority interests.Calculation includes shareholders' equity and redeemable class A common stock.Noninterest expense as a percentage of tax-equivalent net interest income and noninterest income.

13

---



# ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# Application of Critical Accounting Policies

In preparing the financial statements, we follow accounting
 principles generally accepted in the United States of America, which in many cases require us to make
 assumptions, estimates and judgments that affect the amounts reported. A summary of our significant
 accounting policies can be found in Note A to the consolidated financial statements, and many of these
 policies are relatively straightforward. However, management has identified the accounting policies
 described below as those that are critical to an understanding of our consolidated financial statements
 and managements discussion and analysis due to the judgments, estimates and assumptions inherent in
 those policies.

The difficulty in applying these policies arises from
 the assumptions, estimates and judgments that have to be made currently about matters that are inherently
 uncertain, such as future economic conditions, operating results and valuations as well as management
 intentions. As the difficulty increases, the level of precision decreases, meaning that actual results
 can and probably will be different from those currently estimated. We base our assumptions, estimates
 and judgments on a combination of historical experiences and other reasonable factors.

Reserves for Credit Losses.   In general,
 determining the amount of the reserve for credit losses requires the use of significant judgment and
 estimates by management. We maintain an allowance for credit losses to absorb probable losses in the
 loan and lease portfolio based on a quarterly analysis of the portfolio and expected future losses.
 Reserves for credit losses include charges to reduce the recorded balances of loans receivable and real
 estate to their estimated net realizable value or fair value, as applicable. The policy for accounting
 for the reserves for credit losses is described in the later section entitled - Financial Condition
  Reserve for Credit Losses and in Note A to the consolidated financial statements.

Investment and Mortgage-Backed Securities.  Investments
 in marketable equity and debt securities are classified into three categories  held to maturity, available
 for sale, or trading  pursuant to Statement of Financial Accounting Standards (SFAS) No. 115, Accounting
 for Certain Investments in Debt and Equity Securities. As of December 31, 2003, no investments were
 classified as trading securities. Held-to-maturity securities, which are valued at amortized historical
 cost, represent investments for which we have the ability and intent to hold to maturity and may be
 sold only under very limited circumstances. We currently classify our investments in certain municipal
 bond obligations and certain U.S. government agency obligations as held-to-maturity securities. Available-for-sale
 securities consist of debt and equity securities that will be held for indefinite periods of time, including
 securities that may be sold in response to changes in market interest or prepayment rates, needs for
 liquidity, or changes in the availability or yield of alternative investments. These securities are
 valued at current market value, with the resulting unrealized holding gains and losses excluded from
 earnings and reported, net of tax, and the resultant allocation to redeemable class A common stock reflected
 as a separate component of shareholders equity until realized. Gains or losses on these securities
 are computed based on the amortized cost of the specific securities when sold.

Management periodically evaluates investment and mortgage-backed
 securities for other than temporary declines in fair value. Declines in fair value of individual investment
 and mortgage-backed securities below their amortized cost that are deemed to be other than temporary
 are written down to current market value and included in earnings as realized losses in the period the
 securities are deemed to be impaired. The assessment of whether such impairment has occurred is based
 on managements case-by-case evaluation of the underlying reasons for the decline in fair value. Management
 considers a wide range of factors in making this assessment. Those factors include but are not limited
 to the length and severity of the decline in value and changes in the credit quality of the issuer or
 underlying assets. There were no investment and mortgage-backed securities which management identified
 to be other-than-temporarily impaired for the year ended December 31, 2003. If the financial markets
 experience deterioration and investments decline in fair value, charges to income could occur in future
 periods.

14

---



Interest Income Recognition.  We
 recognize interest income by methods that conform to generally accepted accounting practices within
 the banking industry. Interest income is accrued on loan and lease balances based on the principal amount
 outstanding. Loans and leases are reviewed regularly by management and placed on nonaccrual status when
 the collection of interest or principal is unlikely. The accrual of interest on loans and leases is
 suspended when the credit becomes 90 days or more past due, unless the loan or lease is fully secured
 and in the process of collection. Thereafter, no interest is recognized as income unless received in
 cash or until such time the borrower demonstrates the ability to pay interest and principal.

Goodwill and Other Intangible Assets.  SFAS
 No. 142, Accounting for Goodwill and Other Intangible Assets, establishes standards for the amortization
 of acquired intangible assets and the non-amortization and impairment assessment of goodwill. In addition,
 SFAS No. 147, Acquisitions of Certain Financial Institutions, establishes standards for unidentifiable
 intangible assets acquired specifically in branch purchases that qualify as business combinations. At
 December 31, 2003, we had $84.2 million of goodwill, which is not subject to periodic amortization,
 and $18.3 million in other intangible assets, which is subject to periodic amortization. The largest
 components of our other intangible assets at December 31, 2003 were core deposit premiums at $14.1 million,
 $13.5 million of which is the result of the Branch Acquisition in 2001, and mortgage servicing rights
 at $1.9 million. Other intangibles are being amortized on the basis of estimated remaining life. The
 core deposit premium related to the Branch Acquisition is being amortized over an estimated remaining
 deposit life of 10 years from the date of acquisition.

Goodwill arising from business combinations represents
 the value attributable to unidentifiable intangible elements in the business acquired. Our recorded
 goodwill relates to value inherent in the banking business, and the value is dependent upon our ability
 to provide quality, cost effective services in a competitive market place. As such, goodwill value is
 supported ultimately by revenue that is driven by the volume of business transacted. A decline in revenue
 as a result of a lack of growth or the inability to deliver cost effective services over sustained periods
 can lead to impairment of goodwill that could adversely impact earnings in future periods.

Under accounting principles generally accepted in the
 United States of America in effect through December 31, 2001, we amortized goodwill on a straight-line
 basis over periods ranging from 15 to 25 years. Effective January 1, 2002, we no longer were required
 to amortize previously recorded goodwill as a result of adopting SFAS No. 142 and SFAS No. 147.

We have performed the annual impairment tests on our
 goodwill assets and have concluded that the recorded value of goodwill was not impaired as of December
 31, 2003. There are many assumptions and estimates underlying the determination of impairment. Impairment
 testing is based on a determination of value of each reporting unit, using readily available market
 and earnings data for comparable publicly-traded organizations within the same time period, and comparing
 that calculation of value to the current book value of the unit. Another estimate using different, but
 still reasonable, assumptions could produce a significantly different result. Additionally, future events
 could cause management to conclude impairment indicators exist and our goodwill is impaired, which would
 result in us recording an impairment loss. Any resulting impairment loss could have a material adverse
 impact on our financial condition and results of operations.

Retirement Plan Accounting.   As discussed
 in Note M of the Notes to the Consolidated Financial Statements, we provide pension benefits to substantially
 all employees. As of year end 2003, the fair value of the qualified pension plan assets was $55.2 million,
 compared to an accumulated benefit obligation at that date of $47.0 million. We account for these plans
 in accordance with SFAS No. 87 Employers Accounting for Pensions, which requires us to make a number
 of economic and other assumptions that can have a significant impact on amounts recorded in our income
 statement and statement of financial position. Assumptions regarding long-term discount rates and the
 expected return on pension plan assets can have the most material impact on our financial results and
 funding requirements.

The SFAS No. 87 discount rate is used to calculate
 the present value of pension obligations and the service cost and interest components of net periodic
 pension cost. It is intended to represent the rate

15

---



at which pension benefit obligations could be settled
 by purchase of an annuity contract. Lower discount rate assumptions have the effect of increasing the
 service cost and interest cost components of pension expense, while higher discount rates have the opposite
 effect. The SFAS No. 87 discount rate used in calculating the 2003 pension expense was 6.75%, compared
 to 7.25% for 2002. The SFAS No. 87 discount rate which will be used in calculating 2004 pension expense
 is 6.00%. Each 25 basis point reduction in the 2004 discount rate assumption of 6.0% would increase
 our 2004 pension expense by approximately $350 thousand.

The SFAS No. 87 expected return on pension plan assets
 is our long-term expectation of the annual earnings rate on the pension fund and is determined by looking
 at historical trends, current expectations for certain asset categories based on broad equity and bond
 indices and the Companys actual and targeted asset allocation. Higher expected return assumptions have
 the effect of decreasing pension costs while lower assumptions have the opposite effect. As of December
 31, 2003, 70% of the Companys pension plan assets were invested in a diversified mix of domestic and
 foreign equity securities and 30% in debt and other investments. Our expected return on pension assets
 used to determine 2003 pension expense was 9.0% compared to 10.0% for 2002. Our expected return as of
 January 1, 2004 used to determine 2004 pension expense was 8.50%. Each 25 basis point reduction in the
 2004 expected rate of return would increase our 2004 pension expense by approximately $140 thousand.

# Recent Accounting Pronouncements and Developments

Note A to the consolidated financial statements discusses
 new accounting policies adopted by us during 2003 and the expected impact of accounting policies recently
 issued or proposed but not yet required to be adopted. To the extent the adoption of new accounting
 standards materially affects our financial condition, results of operations, or liquidity, the impacts
 are discussed in the applicable section(s) of the financial review and the Notes to the consolidated
 financial statements.

# Overview

Earnings.We reported net income
 of $61.1 million or $5.09 basic and diluted earnings per share for the year ended December 31, 2003.
 This compares to net income of $61.6 million or $5.14 basic and diluted earnings per share in 2002 and
 $51.6 million or $4.30 basic and diluted earnings per share in 2001. Return on average equity was 13.55%
 in 2003, as compared to 14.96% in 2002 and 13.88% in 2001. Return on average assets was 1.14% in 2003,
 1.23% in 2002 and 1.11% in 2001.

Assets.Total assets at December
 31, 2003 increased $411.7 million, or 7.8%, to $5.7 billion from $5.3 billion at December 31, 2002.
 During 2002, assets increased $165.5 million, or 3.2%, from $5.1 billion at December 31, 2001. Loans
 and leases net of unearned discount as a percentage of total assets were 69.9% at December 31, 2003,
 compared to 70.0% at December 31, 2002 and 68.7% at December 31, 2001.

Acquisitions.One acquisition impacted
 our operating results during the three year period ended December 31, 2003. In May 2001, we completed
 the Branch Acquisition. This added approximately $715 million in deposits and $320 million in loans
 to our subsidiary bank operating in Minneapolis/St. Paul. Of the $320 million of loans acquired, approximately
 $150 million were loans originated in the branch locations, primarily home equity and other consumer
 credit. The remaining loans were primarily middle-market commercial loans originated in the commercial
 banking group.

The following pro forma financial information was prepared
 assuming the Branch Acquisition had been completed at January 1, 2001:

|                     | Years Ended December 31,
|-------------------- | ------------------------
|
|
|Net Interest Income  |                         
|Net Income           |                         
|Net Income Per Share |                         

16

---

# Results of Operations

Net Interest Income.  We derive our
 net income primarily from net interest income. Net interest income is the difference between interest
 income, principally from loans and investment securities, and interest expense, principally on borrowings
 and customer deposits. Changes in net interest income result from changes in volume, net interest spread,
 and net interest margin. Volume refers to the average dollar levels of interest earning assets and interest
 bearing liabilities. Net interest spread refers to the difference between the average yield on interest
 earning assets and the average cost of interest bearing liabilities. Net interest margin refers to the
 net interest income divided by average interest earning assets and is influenced by the level and relative
 mix of interest earning assets and interest bearing liabilities.

17

---

The following table sets forth, for the periods indicated,
 information regarding average balances of assets and liabilities and the total dollar amounts of interest
 income from interest bearing assets and interest expense on interest bearing liabilities. In addition,
 the table shows resultant yields or costs, net interest income, net interest spread and net interest
 margin:

|                                         | Years ended December 31,
|---------------------------------------- | ------------------------
|
|
|
|Assets                                   |                         
|Loans and leases (2)                     |                         
|Commercial and other                     |                         
|Commercial real estate                   |                         
|Agricultural                             |                         
|Residential real estate                  |                         
|Consumer                                 |                         
|Tax-exempt                               |                         
|                                         |                         
|Total Loans and Leases                   |                         
|Reserve for credit losses                |                         
|                                         |                         
|Net Loans and Leases                     |                         
|Securities                               |                         
|Mortgage-backed                          |                         
|Other taxable                            |                         
|Tax-exempt                               |                         
|                                         |                         
|Total Securities                         |                         
|Federal funds sold                       |                         
|Other earning assets                     |                         
|                                         |                         
|Total Earning Assets (3)                 |                         
|Cash and due from banks                  |                         
|Other noninterest earning assets         |                         
|                                         |                         
|Total Assets                             |                         
|                                         |                         
|                                         |                         
|Liabilities and Shareholders' Equity     |                         
|Noninterest bearing deposits             |                         
|Interest bearing deposits                |                         
|Savings and NOW accounts                 |                         
|Other interest bearing checking          |                         
|Money market savings                     |                         
|Savings certificates                     |                         
|Certificates over $100,000               |                         
|                                         |                         
|Total Interest Bearing Deposits          |                         
|                                         |                         
|Total Deposits                           |                         
|Short-term borrowings                    |                         
|Long-term debt                           |                         
|Company obligated mandatorily redeemable |                         
|preferred securities                     |                         
|                                         |                         
|Total Interest Bearing Liabilities       |                         
|Noninterest bearing liabilities          |                         
|                                         |                         
|Total Liabilities                        |                         
|Minority interest                        |                         
|Redeemable class A common stock          |                         
|Shareholders' equity                     |                         
|                                         |                         
|Total Liabilities and Equity             |                         
|                                         |                         
|Net interest income                      |                         
|                                         |                         
|Net interest spread                      |                         
|Net Interest margin                      |                         

---

|(1) | Interest income includes $8,203, $8,315 and $8,140 in 2003,
       2002 and 2001 to adjust to a fully taxable basis using the federal statutory rate of 35%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Net of unearned discount and includes nonaccrual loans and leases.                                                                                          
|(3) | Before deducting the reserve for credit losses.                                                                                                             

18

---



The following table illustrates, on a tax-equivalent
 basis, for the periods indicated, the changes in our net interest income due to changes in volume and
 changes in interest rates. Changes in net interest income other than those due to volume have been included
 in changes due to rate:

|                                                 | Year Ended December 31,
|------------------------------------------------ | -----------------------
|
|
|
|
|Interest earning assets:                         |                        
|Loans and leases (1)                             |                        
|Taxable securities                               |                        
|Tax-exempt securities (1)                        |                        
|Federal funds sold                               |                        
|Other interest earning assets                    |                        
|                                                 |                        
|Total interest earning assets                    |                        
|                                                 |                        
|Interest bearing liabilities:                    |                        
|Savings and NOW accounts                         |                        
|Money market and other interest bearing checking |                        
|Savings certificates                             |                        
|Short-term borrowings                            |                        
|Long-term debt                                   |                        
|Mandatorily redeemable preferred securities      |                        
|                                                 |                        
|Total interest bearing liabilities               |                        
|                                                 |                        
|Change in net interest income                    |                        
|                                                 |                        

---

|(1) | Interest income includes $8,203, $8,315 and $8,140 in
 2003, 2002 and 2001 to adjust to a fully taxable basis using the federal statutory rate of 35%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

Tax-equivalent net interest income for 2003 was $194.0
 million, a decrease of 4.6% from the 2002 total of $203.4 million. Tax-equivalent net interest income
 in 2002 increased 13.1% from $179.8 million in 2001. The decrease in net interest income in 2003, as
 our net interest margin declined to 3.89% in 2003 from 4.38% in 2002, was primarily due to the effects
 of historically low interest rates. Net interest margin has declined for six consecutive quarters through
 the fourth quarter of 2003. The average yield on our earning assets declined 95 basis points when comparing
 2003 with 2002. Meanwhile, largely as a result of competitive pressure in deposit markets and already
 historically low deposit rates, we were able to reduce the average cost of our interest bearing liabilities
 by only 51 basis points when comparing the same two periods. Offsetting some of the decline in net interest
 margin when comparing 2003 to 2002 was an increase in average earning assets which increased by $337.1
 million or 7.3% in 2003 from 2002. Most of the increase in average earning assets was due to growth
 in loans. Average loans and leases increased by $262.3 million, or 7.4%, in 2003 from 2002.

The increase in net interest income in 2002 resulted
 primarily from our average earning assets, which increased by $313.1 million or 7.2% in 2002 from 2001.
 Most of this increase in average earning assets was also due to growth in loans, which increased by
 $329.8 million, or 10.3%, in 2002 from 2001. Also contributing to the increase in net interest income
 for 2002 was an increase in the net interest margin to 4.38% from 4.15% in 2001. As interest rates were
 declining in 2002, customer deposits were still migrating into lower yielding products which reduced
 the average annual cost of our interest bearing liabilities by 158 basis points when comparing 2002
 with 2001. Offsetting some of this positive impact to the net interest margin was a 117 basis point
 decline in the average yield of earning assets between the same two periods.

19

---



Provision for Credit Losses.   We
 establish the provision for credit losses based on a quarterly assessment of the adequacy of the reserve
 for credit losses. The provision for credit losses was $14.8 million in 2003, $18.2 million in 2002
 and $12.1 million in 2001. Net charge-offs were $14.7 million in 2003, $13.1 million in 2002 and $8.2
 million in 2001. For further information regarding the provision for credit losses, see the section
 entitled - Financial Condition  Reserve for Credit Losses.

Noninterest Income.  Noninterest
 income was $86.8 million in 2003 compared to $74.6 million in 2002 and $67.7 million in 2001. The following
 table summarizes the components of noninterest income:

|                             | Years Ended December 31,
|---------------------------- | ------------------------
|
|
|Service charges              |                         
|Insurance                    |                         
|Trust                        |                         
|Brokerage                    |                         
|Gain on sale of loans        |                         
|Gain on sale of other assets |                         
|Gain on sale of securities   |                         
|Other noninterest income     |                         
|                             |                         
|Total noninterest income     |                         
|                             |                         

Service charge income increased by 3.7% in 2003 from
 2002 and 7.7% in 2002 from 2001. The Branch Acquisition in 2001 contributed significantly to the growth
 in service charge income during 2002. Brokerage revenue increased by 7.9% in 2003 and 13.2% in 2002.
 Trust revenue increased by 5.5% in 2003 after a decrease of 0.3% in 2002, while insurance revenue decreased
 by 8.3% in 2003 and by 0.8% in 2002. The Company stopped selling most single premium credit life and
 disability insurance during 2002 and discontinued the product completely in 2003, which caused the declines
 in insurance revenue. Gains on sales of loans resulted primarily from the sale of fixed rate residential
 real estate first mortgages into the secondary market. The higher volume of loan sales and resulting
 income has been due in large part to customer refinancing activity caused by historically low interest
 rates. Income from loan sales increased by 52.7% in 2003 and 34.8% in 2002. Securities sales in early
 2003 resulted in securities gains of $5.9 million in 2003, compared to $2.2 million in 2002.

Noninterest Expense.   Noninterest
 expense increased $5.4 million, or 3.4%, in 2003 and $10.5 million, or 7.0%, in 2002. The following
 table summarizes the components of noninterest expense:

|                                   | Years ended December 31,
|---------------------------------- | ------------------------
|
|
|Salaries and wages                 |                         
|Employee benefits                  |                         
|Occupancy                          |                         
|Furniture and equipment            |                         
|Printing, postage and telephone    |                         
|Marketing                          |                         
|Data processing fees               |                         
|Professional fees                  |                         
|Other real estate owned            |                         
|FDIC premiums and examination fees |                         
|Amortization of intangibles        |                         
|Other noninterest expense          |                         
|                                   |                         
|Total noninterest expense          |                         
|                                   |                         

20

---



Personnel costs, which include salaries, wages and
 employee benefits, accounted for 59.5% of noninterest expense in 2003 and increased by $4.3 million,
 or 4.6%, from 2002 and $11.8 million, or 14.5%, from 2001 to 2002. Personnel expenses in 2003 increased
 due in part to the opening of three new branches during the year. During 2002, the ongoing operating
 costs related to our Branch Acquisition in May 2001 contributed significantly to our growth in personnel
 costs. In addition, employee benefit costs increased by $4.8 million, or 30.0%, from 2001 to 2002, primarily
 as a result of increased employee medical insurance and pension cost.

Excluding personnel costs, noninterest expense increased
 $1.1 million, or 1.7%, from 2002 to 2003. Other noninterest expense declined by $1.2 million when comparing
 these two periods. The higher level of other noninterest expense in 2002 was primarily related to transition
 costs associated with our move to a new operations center in 2002. Excluding personnel costs, noninterest
 expense decreased $1.4 million, or 2.1%, in 2002 from 2001. The adoption of new accounting rules in
 2002, which eliminated the requirement to amortize goodwill arising from business combinations, reduced
 the amortization of intangibles by $3.7 million in 2002 compared to 2001.

A common industry statistic used to measure the productivity
 of banking organizations is the operating efficiency ratio. The operating efficiency ratio measures
 the cost required to generate each dollar of revenue and is calculated by dividing noninterest expense
 by tax-equivalent net interest income and noninterest income. Our operating efficiency ratio was 58.6%
 in 2003, 57.2% in 2002 and 60.1% in 2001. Our strategic goal is to move the operating efficiency ratio
 to 55.0% or below.

Income Taxes.   Income tax expense,
 which consists of provisions for federal and state income taxes, was $32.1 million for 2003 compared
 to $30.8 million in 2002 and $27.1 million in 2001. Our effective tax rate was 34.5% in 2003, 33.3%
 in 2002 and 34.4% in 2001. Our effective tax rate increased in 2003 primarily as a result of the branch
 sale that occurred during the second quarter of 2003.

# Financial Condition

Loan and Lease Portfolio.   We maintain
 a diversified loan and lease portfolio consisting of commercial, commercial real estate, agricultural,
 residential real estate, consumer and tax-exempt loans and leases. The following table summarizes the
 components of our gross loan and lease portfolio:

|                        | At December 31,
|----------------------- | ---------------
|
|
|
|Commercial and other    |                
|Commercial real estate  |                
|Construction            |                
|Agricultural            |                
|Residential real estate |                
|Construction            |                
|Consumer                |                
|Tax-exempt              |                
|                        |                
|Total loans and leases  |                
|                        |                

At December 31, 2003, our loan and lease portfolio
 of $4.0 billion was comprised of 59.8% commercial credit, 28.8% consumer credit and 11.4% agricultural
 credit. The loan and lease portfolio increased $284.0 million, or 7.7%, in 2003 and $179.8 million,
 or 5.1%, in 2002.

Our commercial portfolio is primarily secured with
 collateral consisting of inventory, receivables and equipment. We utilize standard advance rates in
 determining amounts that can be advanced for each collateral type. Advances secured by inventory and
 receivables are normally short-term floating rate advances. Equipment loans typically amortize over
 five years. The commercial portfolio increased by $27.8 million, or 3.2%, to $900.4 million as of December
 31, 2003 following a decrease of $10.5 million in 2002 from 2001.

Our commercial real estate portfolio, which includes
 interim commercial real estate construction loans, consists primarily of loans to business customers
 who occupy the property or use the property

21

---



for income production. Commercial real estate loans
 are generally made for up to 80.0% of appraised value or cost and typically have a term of five years
 with a 15 to 20 year amortization. We have added additional experienced staff in this area, particularly
 in the Twin Cities market, and as a result the commercial real estate portfolio increased $201.3 million,
 or 17.8%, in 2003 and $87.9 million, or 8.5%, in 2002.

Our agricultural loans include term loans secured by
 farmland or equipment, and operating loans used for commodity production. Our agricultural customers
 and agricultural-based communities are diversified across the three states we serve, and we extend credit
 to 12 different types of commodity producers. Agricultural loans increased to $449.8 million, an increase
 of $13.4 million, or 3.1%, in 2003 compared to an increase of $19.3 million, or 4.6%, in 2002. For our
 agricultural customers, 2003 was a fairly average year with respect to crop conditions and prices. Government
 support programs continue to play an important role in the overall economics of farm production. At
 December 31, 2003, agricultural loans represented 11.4% of our total loans and leases, down from 11.9%
 at December 31, 2002.

Residential real estate loans increased $11.8 million,
 or 1.5%, in 2003 and $64.0 million, or 8.8%, in 2002. The residential real estate portfolio includes
 home equity loans, first mortgage residential real estate loans, and some construction loans. The construction
 loans are typically made to builders on homes under construction that have been pre-sold. Home equity
 loans comprise approximately 83% of our $803.4 million in residential real estate loans as of December
 31, 2003. Combined loan to value ratios for home equity loans typically range from 80.0% to 100.0%.
 The entire increase in residential real estate loans in 2003 and 2002 was in home equity loans, which
 increased $58.3 million, or 9.6%, in 2003 and $111.3 million, or 22.5%, in 2002. First mortgage residential
 real estate loans declined during each of the last two years, as most newly originated first mortgage
 residential real estate loans are sold into the secondary market.

Our consumer loan portfolio increased by $5.2 million,
 or 1.6%, in 2003 after a decrease of $2.0 million, or 0.6%, in 2002. As of December 31, 2003, approximately
 $152.3 million, or 45.1%, of the consumer portfolio consisted of indirect auto loans, generally to borrowers
 within our market area. The remainder of the portfolio consisted of direct consumer loans, with credit
 card loans making up only about 1.8% of the total consumer portfolio.

Tax-exempt loans and leases, which are made to qualifying
 organizations located within our primary trade area, increased by $24.6 million, or 20.8%, in 2003 and
 $21.2 million, or 21.7%, in 2002.

The following table summarizes the amount and maturity
 of the loan and lease portfolio as of December 31, 2003:

|                                         | At December 31, 2003, Maturing in
|---------------------------------------- | ---------------------------------
|
|
|Commercial and other                     |                                  
|Commercial real estate                   |                                  
|Construction                             |                                  
|Agricultural                             |                                  
|Residential real estate                  |                                  
|Construction                             |                                  
|Consumer                                 |                                  
|Tax-exempt                               |                                  
|                                         |                                  
|Total loans and leases                   |                                  
|                                         |                                  
|Loans and leases maturing after one year |                                  
|Fixed interest rate                      |                                  
|Variable interest rate                   |                                  
|                                         |                                  
|Total                                    |                                  
|                                         |                                  

22

---



Nonperforming Assets.   Nonperforming
 assets include nonaccrual loans, restructured loans, and other real estate acquired in loan settlements.
 The accrual of interest on loans and leases is suspended when the interest or principal payments are
 contractually past due 90 days or more, unless the loan is fully secured and in the process of collection.
 Payments received on nonaccrual loans are typically applied to principal and not recorded as income.
 Restructured loans generally continue to accrue interest but include concessions in terms as a result
 of the borrowers deteriorated financial condition.

The following table presents comparative data for nonperforming
 assets:

|                                                           | At December 31,
|---------------------------------------------------------- | ---------------
|
|
|Nonaccrual loans and leases                                |                
|Restructured loans and leases                              |                
|                                                           |                
|Total nonperforming loans and leases                       |                
|Other real estate owned (OREO)                             |                
|                                                           |                
|Total nonperforming assets                                 |                
|                                                           |                
|Accruing loans and leases 90 days or more past due         |                
|                                                           |                
|Nonperforming loans and leases to total loans and leases   |                
|Nonperforming assets to total loans, leases and OREO       |                
|Nonperforming assets and accruing loans and leases 90 days |                
|or more past due to total loans, leases and OREO           |                

Nonperforming assets were $23.9 million at December
 31, 2003, compared to $31.9 million at the end of 2002 and $22.4 million at the end of 2001. Correspondingly,
 nonperforming assets as a percentage of total loans, leases, and other real estate owned decreased to
 0.60% at December 31, 2003, compared to 0.87% in 2002 and 0.64% in 2001. Nonperforming loans and leases,
 including nonaccrual and restructured loans and leases, totaled $20.3 million, or 0.51% of total loans
 and leases, at December 31, 2003, versus $29.1 million, or 0.79% of total loans and leases, at December
 31, 2002, and $20.8 million, or 0.60% of total loans and leases, at December 31, 2001. The $8.0 million
 decrease in nonperforming loans and leases between December 31, 2002 and December 31, 2003 was due to
 an improving economy and a decline in the level of nonperforming commercial credits originated in our
 finance company subsidiary, which were largely responsible for the increase in nonperforming assets
 during 2002.

Other real estate owned (OREO) increased to $3.6
 million at December 31, 2003, compared to $2.8 million at December 31, 2002 and $1.6 million at December
 31, 2001. The increase in OREO in 2003 was primarily due to the addition of one commercial real estate
 property with a carrying value of $1.4 million. We sold approximately $350.0 thousand of OREO properties
 during January 2004.

Reserve for Credit Losses.   We maintain
 a reserve for credit losses to absorb losses inherent in the loan and lease portfolio. The reserve is
 based on ongoing, quarterly assessments of the probable estimated losses inherent in the loan and lease
 portfolio and, to a lesser extent, on unused commitments to provide financing. The reserve is increased
 by the provision for credit losses, which is charged against current period operating results, and decreased
 by the amount of charge-offs, net of recoveries. Our methodology for assessing the appropriateness of
 the reserve consists of several key elements, which include the formula reserve, specific reserves,
 and the unallocated reserve.

23

---



The formula reserve is calculated by applying loss
 factors to our outstanding loans and certain unused commitments. Loss factors for each loan type are
 based on our historical loss experience through the course of the business cycle and may be adjusted
 for significant factors that, in managements judgment, affect the collectibility of the portfolio as
 of the evaluation date. Specific reserves are established in cases where management has identified significant
 conditions or circumstances related to a credit that management believes indicate the probability that
 a loss has been incurred in excess of the amount determined by the application of the formula reserve.

The unallocated reserve is comprised of two elements.
 The first element recognizes the model and estimation risk associated with the formula and specific
 reserves. The second element is based upon managements evaluation of various conditions that are not
 directly measured in the determination of the formula and specific reserves. The conditions evaluated
 in connection with the unallocated reserve may include existing general economic and business conditions
 affecting our key lending areas, credit quality trends, collateral values, loan volumes and concentrations,
 seasoning of the loan portfolio, specific industry conditions within portfolio segments, recent duration
 of the current business cycle, and findings of our internal loan review examiners.

The reserve also incorporates the results of measuring
 impaired loans and leases as provided in SFAS No. 114, Accounting by Creditors for Impairment of a
 Loan, and SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures.
 These accounting standards prescribe the measurement methods, income recognition, and disclosures related
 to impaired loans and leases. A loan is considered impaired when management determines that it is probable
 that we will be unable to collect all amounts due according to the original contractual terms of the
 loan or lease agreement. Impairment is measured by the difference between the recorded investment in
 the loan or lease (including accrued interest, net deferred loan fees or costs, and unamortized premium
 or discount) and the estimated present value of total expected future cash flows, discounted at the
 loans effective rate, or the fair value of the collateral, if the loan is collateral dependent. Impairment
 is recognized by adjusting the reserve for credit losses.

24

---



The reserve for credit losses was $58.9 million, or
 1.49% of total loans and leases, at December 31, 2003, compared to $58.8 million, or 1.60% of loans
 and leases, at December 31, 2002, and $53.7 million, or 1.54% of loans and leases, at December 31, 2001.
 Activity in the reserve for credit losses for the past five years is shown in the following table:

|                                                       | For the Years Ended December 31,
|------------------------------------------------------ | --------------------------------
|
|
|Beginning of year                                      |                                 
|Charge-offs:                                           |                                 
|Commercial and other                                   |                                 
|Commercial real estate                                 |                                 
|Construction                                           |                                 
|Agricultural                                           |                                 
|Residential real estate                                |                                 
|Consumer                                               |                                 
|                                                       |                                 
|Total charge-offs                                      |                                 
|                                                       |                                 
|Recoveries:                                            |                                 
|Commercial and other                                   |                                 
|Commercial real estate                                 |                                 
|Construction                                           |                                 
|Agricultural                                           |                                 
|Residential real estate                                |                                 
|Consumer                                               |                                 
|                                                       |                                 
|Total recoveries                                       |                                 
|                                                       |                                 
|Net charge-offs                                        |                                 
|Provision for credit losses                            |                                 
|Reserve related to acquired assets                     |                                 
|                                                       |                                 
|End of year                                            |                                 
|                                                       |                                 
|Average loans and leases                               |                                 
|Annualized net charge-offs to average loans and leases |                                 
|Reserve as a percentage of:                            |                                 
|Period-end loans and leases                            |                                 
|Nonperforming loans and leases                         |                                 
|Nonperforming assets                                   |                                 

Net charge-offs were $14.7 million in 2003, $13.1 million
 in 2002, and $8.2 million in 2001. Expressed as a percentage of average loans and leases, net charge-offs
 increased slightly to 0.39% in 2003 from 0.37% in 2002. Charge-offs of commercial loans decreased to
 $4.6 million in 2003 from $9.4 million in 2002. Charge-offs in 2003 included a $2.5 million charge-off
 in the fourth quarter related to a leveraged lease to a U.S. airline currently in bankruptcy. Charge-offs
 of commercial real estate loans increased to $7.7 million in 2003 from $2.5 million in 2002. This was
 primarily the result of charge-offs of $7.2 million during the second half of 2003 on two credits originated
 in our finance company subsidiary. The provision for credit losses was $14.8 million in 2003, $18.2
 million in 2002, and $12.1 million in 2001.

The reserve to nonperforming loans and leases increased
 to 289.63% at December 31, 2003 from 202.02% at December 31, 2002 and 258.17% at December 31, 2001.
 The ratio of classified loans and leases, which include those loans and leases with an internal loan
 review rating of substandard, doubtful or loss, to total loans and leases was 2.9% at December 31, 2003
 compared to 3.6% at December 31, 2002 and 3.7% at December 31, 2001.

25

---



Management has allocated the reserve to sectors based
 on relative risk characteristics of the loan and lease portfolio. Commercial allocations are based on
 a quarterly review of individual loans outstanding and commitments to extend credit and standby letters
 of credit. Consumer allocations are based on an analysis of product mix, credit scoring and risk composition
 of the portfolio, fraud loss and bankruptcy experiences, historical and expected delinquency, and charge-off
 statistics for each homogenous category or group of loans.

The following table shows the allocation of the reserve
 for credit losses to sectors for each of the last five years:

|                        | At December 31,
|----------------------- | ---------------
|
|
|
|Commercial and other    |                
|Commercial real estate  |                
|Agricultural            |                
|Residential real estate |                
|Consumer                |                
|Tax-exempt              |                
|Unallocated             |                
|                        |                
|Total reserve           |                
|                        |                

At December 31, 2003, the commercial portfolio includes
 $14.3 million of exposure to major U.S. airlines in the form of airplane leases, and $2.8 million of
 the commercial and other reserve allocation at that date is related to these airline leases. Approximately
 $5.8 million, or 9.8%, of the reserve for loan and lease losses is not allocated to specific credits
 at December 31, 2003, compared to $5.4 million, or 9.2%, at December 31, 2002, and $5.8 million, or
 10.8%, at December 31, 2001.

Securities.   Our investment portfolio
 consists of investments and mortgage backed securities that we intend to hold to maturity which are
 valued at amortized cost. Our portfolio also includes debt and equity securities that are available-for-sale
 which are valued at current market value. The investment portfolio is maintained primarily for liquidity
 and collateral purposes and to generate interest income. Our investment portfolio consists primarily
 of low-risk government and government agency-backed securities and high-grade municipal bonds.

The securities portfolio increased by $187.9 million,
 or 16.7%, to $1.3 billion at December 31, 2003 from $1.1 billion at December 31, 2002 and $1.2 billion
 at December 31, 2001. We sold $217.7 million of securities during 2003, resulting in a $5.9 million
 gain on sale of securities. An additional $419.7 million of securities matured during 2003. We reinvested
 all of the proceeds from sales and maturities in other securities during 2003 combined with funds from
 deposit growth and additional short-term borrowings to purchase $845.2 million in securities in 2003.

26

---



The following table presents the amortized cost and
 fair value of securities held on December 31, 2003:

|                                    | At December 31, 2003
|----------------------------------- | --------------------
|
|
|Securities available-for-sale:      |                     
|U. S. Treasury securities           |                     
|U. S. government agency obligations |                     
|Obligations of state and political  |                     
|subdivisions                        |                     
|Mortgage-backed securities          |                     
|Equity securities                   |                     
|Other                               |                     
|                                    |                     
|Total securities available-for-sale |                     
|                                    |                     
|Securities held-to-maturity:        |                     
|U. S. government agency obligations |                     
|Obligations of state and political  |                     
|subdivisions                        |                     
|                                    |                     
|Total securities held-to-maturity   |                     
|                                    |                     

The following table presents the maturity of securities
 held at December 31, 2003 and the weighted average rates by range of maturity. The table includes projected
 payments on mortgage-backed securities. Certain equity securities, which include Federal Home Loan Bank
 stock and Federal Reserve Bank stock, do not have a stated face rate or maturity. Equity securities
 are presented in this table based on estimated rates at December 31, 2003:

|                             | At December 31, 2003
|---------------------------- | --------------------
|
|
|
|
|U.S. Treasury securities and |                     
|obligations of U.S.          |                     
|government agencies          |                     
|Obligations of states and    |                     
|political subdivisions (1)   |                     
|Mortgage-backed securities   |                     
|Equity securities            |                     
|Other securities             |                     
|                             |                     
|                             |                     
|Total Investment Securities  |                     
|                             |                     

---

|(1) | Yields are presented on a tax-equivalent basis to
     reflect the tax-exempt nature of these securities. The incremental federal statutory rate applied
     is 35%.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

The average maturity of the portfolio was 48 months
 at December 31, 2003, with an average tax-equivalent yield to maturity on the portfolio of 3.75%, unrealized
 gains of $15.0 million and unrealized losses of $4.7 million. This compares to an average maturity of
 38 months at December 31, 2002 and an average tax-equivalent yield to maturity of 4.98%, unrealized
 gains of $29.7 million, and unrealized losses of $88.0 thousand. At December 31, 2003, the market value
 of our securities was $1.3 billion, or $10.3 million over their amortized cost. This compares to a market
 value of $1.1 billion, or $29.7 million over amortized cost, at December 31, 2002.

27

---



Total Deposits.   Deposits increased
 by $300.6 million, or 8.0% in 2003, reversing a decrease of $57.7 million, or 1.5%, in 2002. Noninterest
 bearing deposits increased by $59.2 million, or 8.2%, in 2003, and $67.5 million, or 10.3%, in 2002.
 Savings, NOW, and money market accounts increased $491.0 million, or 29.3%, in 2003 and $36.7 million,
 or 2.2%, in 2002. The Company paid more aggressive rates for money market accounts compared to competitors
 in 2003 than it did in 2002, and this change in pricing approach was largely responsible for the improved
 deposit growth in 2003 compared to 2002.

Savings certificate balances decreased by $249.5 million,
 or 18.5%, in 2003, and $159.8 million, or 10.6%, in 2002. The continued decline in interest rates since
 2001 made savings certificates a less attractive product option for customers. At December 31, 2003,
 2002 and 2001, savings certificates included $10.0 million of deposits acquired through brokers.

The following table sets forth the distribution of
 our deposits by type:

|                                                 | At December 31,
|------------------------------------------------ | ---------------
|
|
|
|Noninterest bearing deposits                     |                
|Savings and NOW accounts                         |                
|Money market and other interest bearing checking |                
|Time certificates of deposit:                    |                
|Less than $100,000                               |                
|$100,000 or more                                 |                
|                                                 |                
|                                                 |                
|                                                 |                

Included in interest bearing deposits at December 31,
 2003 were $210.3 million of time deposits that had balances of $100,000 or more. Maturities of these
 time deposits are summarized as follows:

|                                 | At December 31, 2003
|-------------------------------- | --------------------
|
|Three months or less             |                     
|Over three months to six months  |                     
|Over six months to twelve months |                     
|Over twelve months               |                     
|                                 |                     
|Total                            |                     
|                                 |                     

Short-Term Borrowings.   Short-term
 borrowings include federal funds purchased, securities sold under agreements to repurchase, treasury
 tax and loan notes, Federal Home Loan Bank (FHLB) advances with original maturities of one year or
 less, and advances under an unsecured revolving credit facility. Short-term borrowings increased 25.0%
 to $639.4 million at December 31, 2003 from $511.5 million at December 31, 2002 and from $448.9 million
 at December 31, 2001. Repurchase agreements with customers, which constitute 69.9% of short-term borrowings
 at December 31, 2003, increased to $446.8 million at the end of 2003 from $404.0 million at the end
 of 2002 and $371.8 million at the end of 2001. At December 31, 2003, 85.6% of the customer repurchase
 agreements were related to daily checking account sweep mechanisms that are part of our cash management
 product line. FHLB advances with maturities of one year or less increased to $118.0 million at the end
 of 2003 from $60.0 million at the end of 2002 and $35.0 million at the end of 2001. The increased use
 of short-term borrowings as a funding source was the result of our use of short-term borrowings to fund
 growth in the investment portfolio and to reduce FHLB long term advances. The total amount that can
 be borrowed currently under the unsecured revolving credit facility is $15.0 million. The facility is
 maintained primarily for contingency purposes. There were no advances outstanding under this short-term
 revolving credit facility at December 31, 2003 or at December 31, 2002 compared to $33.0 million at
 December 31, 2001.

28

---



The following table presents a summary of our short-term
 borrowings for the periods ended on the dates indicated:

|                                               | Federal Funds
and Repurchase
Agreements | Federal Home
Loan Bank
Borrowings | Treasury
Tax and Loan
Notes | Revolving
Credit
Facility
|---------------------------------------------- | --------------------------------------- | --------------------------------- | --------------------------- | -------------------------
|
|Balance at December 31                         |                                         |                                   |                             |                          
|2003                                           |                                         |                                   | $                           | 519,759                  
|2002                                           |                                         |                                   |                             | 449,970                  
|Weighted average interest rate at December 31  |                                         |                                   |                             |                          
|2003                                           |                                         |                                   |                             | 1.16                     
|2002                                           |                                         |                                   |                             | 1.24                     
|Maximum amount outstanding at any month end    |                                         |                                   |                             |                          
|2003                                           |                                         |                                   | $                           | 519,759                  
|2002                                           |                                         |                                   |                             | 449,970                  
|Average amount outstanding during the year     |                                         |                                   |                             |                          
|2003                                           |                                         |                                   | $                           | 430,374                  
|2002                                           |                                         |                                   |                             | 385,065                  
|Weighted average interest rate during the year |                                         |                                   |                             |                          
|2003                                           |                                         |                                   |                             | 1.26                     
|2002                                           |                                         |                                   |                             | 1.45                     

Long-Term Debt.   Long-term debt,
 which includes senior notes, FHLB advances with original maturities of greater than one year, and installment
 promissory notes, decreased $36.4 million, or 8.7%, in 2003 following an increase of $101.8 million,
 or 32.2%, in 2002. The following table summarizes long-term debt for the last three years:

|                                  | At December 31,
|--------------------------------- | ---------------
|
|
|Senior notes                      |                
|Federal Home Loan Bank borrowings |                
|Installment promissory notes      |                
|                                  |                
|Total                             |                
|                                  |                

We issued the senior notes in November 1999. The proceeds
 were used in connection with acquisitions. The installment promissory note obligations were also incurred
 in connection with acquisitions.

Company Obligated Mandatorily Redeemable Preferred
 Securities.   We issued $76.5 million of mandatorily redeemable preferred securities in
 two separate transactions in 2001 in conjunction with the Branch Acquisition. On February 22, 2001,
 we issued $16.5 million of 10.2% Capital Securities through Bremer Statutory Trust I (BST), and on
 May 8, 2001, we issued $60 million of 9.0% Cumulative Capital Securities through Bremer Capital Trust
 I (BCT). The proceeds of both of these offerings, combined with the proceeds from the sale by BST
 and BCT to the parent of their common securities, were invested by BST and BCT in Junior Subordinated
 Deferrable Interest Debentures (debentures) of our parent company. The debentures mature not earlier
 than July 15, 2006 and not later than July 15, 2031. At December 31, 2003, $76.5 million in Capital
 Securities qualified as Tier I capital under guidelines of the Federal Reserve.

Equity of Shareholders and Redeemable Class A Common
 Stock.   Shareholders equity and redeemable class A common stock was $467.4 million at
 December 31, 2003 compared to $434.1 million at December 31, 2002 and $389.9 million at December 31,
 2001. Book value per share increased to $38.95 at December 31, 2003 from $36.17 at December 31, 2002
 and $32.49 at December 31, 2001. Dividends paid per share increased to $1.80 in 2003 from $1.65 in 2002
 and $1.60 in 2001. The dividends paid in 2003 of $21.6 million represented 5.0% of the equity of shareholders
 at December 31, 2002 and 35.4% of 2003 net income.

29

---



Capital Management.  The Federal
 Deposit Insurance Corporation Improvement Act ("FDICIA") required the establishment of a capital-based
 supervisory system of prompt corrective action for all depository institutions. The Federal Reserve
 Boards implementation of FDICIA defines well-capitalized institutions as those whose Tier I capital
 ratio equals or exceeds 6%, total risk-based capital ratio equals or exceeds 10%, and leverage ratio
 equals or exceeds 5%. We have maintained our capital at the well-capitalized level in each of these
 categories in the past and expect to do so in the future. The capital ratios of the Subsidiary Banks
 in each of these categories met or exceeded the well-capitalized ratios as of December 31, 2003.

The following table compares the consolidated capital
 ratios with the minimum requirements for well capitalized and adequately capitalized banks:

|                                          | At December 31, 2003
|----------------------------------------- | --------------------
|
|
|Tier I capital to risk-weighted assets    |                     
|Total capital to risk-weighted assets     |                     
|Tier I capital to average tangible assets |                     

Payment of dividends to us by the subsidiary banks
 is subject to various limitations by bank regulators, which includes maintenance of certain minimum
 capital ratios.

# Asset Liability Management

Liquidity Management.   The objective
 of liquidity management is to ensure the continuous availability of funds to meet our financial commitments.
 We use an asset liability management committee (ALCO) as part of our risk management process. ALCO
 is responsible for managing balance sheet and off-balance sheet commitments to meet the needs of customers
 while achieving our financial objectives. ALCO meets regularly to review funding capacity, current and
 forecasted loan demand, investment opportunities, and liquidity positions as outlined in our asset liability
 policy. With this information, ALCO guides changes in the balance sheet structure to provide for adequate
 ongoing liquidity.

Several factors provide for a favorable liquidity position.
 The first is the ability to acquire and retain funds in the local markets we serve. This in-market funding
 provides a historically stable source of funding and represented approximately 86% of total liabilities
 during 2003. Our available-for-sale securities portfolio is a secondary source of liquidity because
 of its readily marketable nature and predictable stream of maturities. While we prefer to fund the balance
 sheet with in-market funding sources, another source of liquidity is our ready access to regional and
 national wholesale funding markets, including federal funds purchased, Federal Home Loan Bank advances,
 and brokered deposits. As of December 31, 2003, we also had available $15.0 million of borrowing capacity
 under an unsecured credit facility. As of December 31, 2003, there were no advances outstanding under
 this facility. This credit facility is used primarily for contingency purposes.

Interest Rate Risk Management.  Interest
 rate risk is the risk that changing interest rates will adversely affect net income and balance sheet
 valuations. The objective of interest rate risk management is to control this risk exposure. The responsibility
 for this process rests with ALCO. ALCO establishes appropriate risk management policies and monitors
 asset liability activities to minimize our exposure to adverse interest rate trends. The tools used
 to measure interest rate risk include a valuation model which measures the sensitivity of balance sheet
 valuations to changes in interest rates, gap analysis, and simulation of future net income.

In the valuation model, the market value of each asset
 and liability as of the reporting date is calculated by computing the present value of all cash flows
 to be generated. In each case, the cash flows are discounted by a market interest rate chosen to reflect
 as closely as possible the characteristics of the given asset or liability as obtained from independent
 broker quotations and other public sources. The impact on valuations is then calculated for a 200 basis
 point rate shock. The

30

---



rate shock is an instantaneous change in market rates
 across the yield curve. Significant assumptions required in the use of the valuation model include estimates
 regarding prepayment activity and the behavior of non-maturity deposits in various interest rate environments.
 The model does not reflect actions that ALCO could initiate in response to a change in interest rates.
 The valuation model indicates that the value of assets would decline approximately 2.8% with a 200 basis
 point increase in interest rates. After considering the impact on liabilities and tax effects, the market
 value of equity impact from this 200 basis point increase in rates would be a decline of approximately
 4.2%, which is within our maximum risk limit of 20.0% for this risk measure.

The matching of assets and liabilities may be analyzed
 by examining the extent to which such assets and liabilities are interest rate sensitive and by monitoring
 an institutions interest rate sensitivity gap. An asset or liability is said to be interest rate
 sensitive within a specific time period if it matures or reprices within that time period. The interest
 rate sensitivity gap is defined as the difference between the amount of interest earning assets anticipated,
 based on certain assumptions, to mature or reprice within a specific time period and the amount of interest
 bearing liabilities anticipated, based on certain assumptions, to mature or reprice within that same
 time period. An interest rate sensitivity gap is considered positive when the amount of interest rate
 sensitive assets exceeds the amount of interest rate sensitive liabilities that mature or reprice within
 a specified time period. An interest rate gap is considered negative when the amount of interest rate
 sensitive liabilities exceeds the amount of interest rate sensitive assets that mature or reprice within
 a specified time period.

31

---



The following table sets forth the amounts of interest
 earning assets and interest bearing liabilities maturing or repricing within the time periods indicated,
 based on the information and assumptions set forth in the notes thereto:

|                                                | At December 31, 2003
|----------------------------------------------- | --------------------
|
|
|
|Interest earning assets(1)                      |                     
|Loans and leases                                |                     
|Securities                                      |                     
|Other earning assets                            |                     
|                                                |                     
|Total interest earning assets                   |                     
|                                                |                     
|Interest bearing liabilities                    |                     
|Interest bearing deposits (2)                   |                     
|Short-term borrowings (3)                       |                     
|Long-term debt                                  |                     
|Mandatorily redeemable preferred securities     |                     
|                                                |                     
|Total interest bearing liabilities              |                     
|                                                |                     
|Rate sensitive gap                              |                     
|                                                |                     
|Cumulative rate sensitive gap                   |                     
|                                                |                     
|Rate sensitive gap % to total assets            |                     
|Cumulative rate sensitive gap % to total assets |                     

---

|(1)
   
   
(2)
   
(3) | Adjustable and floating rate assets are included in the period in which interest rates are next scheduled to adjust rather than in the
period in which they are due.  Fixed rate assets are included in the periods in which they are scheduled to be repaid based on
scheduled amortization, except for mortgage backed securities, which are adjusted for prepayment assumptions.
Includes non-maturity savings and NOW accounts positioned to run off evenly over sixty months and money market savings
accounts, most of which are positioned to reprice within three months.
Adjustable and floating rate borrowings are included in the period in which their interest rates are next scheduled to adjust
rather than in the period in which they are due.
|----------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The repricing gaps are within our risk tolerances,
 which limit the maximum 90-day and one-year gaps to 15.0% of total assets.

We also use simulation modeling of future net interest
 income and net income as a risk management tool. Simulation modeling results indicate that net income
 would decrease by approximately 5.3% over the next year with a 300 basis point decline in the level
 of rates and increase approximately 4.7% with a 300 basis point increase in the level of rates. The
 projected changes in net income are within the current policy limit that requires that the change in
 net income over the next 12 months not exceed 8.0%.

Other Market Risk.  Other types of
 market risk, such as foreign currency exchange rate risk and commodity price risk, do not arise in the
 normal course of our business activities.

# Impact of Inflation and Changing Prices

The consolidated financial statements and related data
 presented herein have been prepared in accordance with accounting principles generally accepted in the
 United States of America, which require the measurement of financial position and operating results
 in terms of historical dollars without considering changes in the relative purchasing power of money
 over time due to inflation.

32

---



The assets and liabilities of a financial institution
 are primarily monetary in nature. As a result, interest rates have more impact on our performance than
 the effects of general levels of inflation. Interest rates do not necessarily move in the same direction
 or in the same magnitude as the prices of goods and services. The liquidity and the maturity structure
 of our assets and liabilities are important to the maintenance of acceptable performance levels. We
 disclose the estimated fair values of our financial instruments in accordance with SFAS No. 107, Disclosures
 about Fair Value of Financial Instruments.

# Effects of the Economic Environment

During the past year, the economy has improved, leading
 to a reduction in the level of classified and nonperforming assets. The economic recovery has been aided
 by historically low interest rates. While credit quality indicators have improved during this period,
 the low level of interest rates combined with competitive pressures in deposit markets has resulted
 in a decline in net interest margin. We expect net interest margins to stay compressed until we see
 increases in short term interest rates.

# Commitments and Contingencies

We utilize various off-balance sheet instruments to
 satisfy the financing needs of customers. These instruments represent our contractual obligations to
 provide funding, within a specified time period, to a customer. The following represents the outstanding
 obligations:

|                          | At December 31,
|------------------------- | ---------------
|
|
|Standby letters of credit |                
|Loan commitments          |                

Standby letters of credit represent a conditional commitment
 to satisfy an obligation to a third party, generally to support public and private borrowing arrangements,
 on behalf of the customer. Loan commitments represent contractual agreements to provide funding to customers
 over a specified time period as long as there is no violation of any condition of the contract. These
 loans generally will take the form of operating lines.

Our potential exposure to credit loss in the event
 of nonperformance by the other party is represented by the contractual amount of those instruments.
 The credit risk associated with letters of credit and loan commitments is substantially the same as
 extending credit in the form of a loan; therefore, the same credit policies apply in evaluating potential
 letters of credit or loan commitments. The amount of collateral obtained, if deemed necessary upon the
 extension of credit, is based on managements credit evaluation. The type of collateral held varies,
 but includes accounts receivable, inventory, and productive assets.

Under substantially noncancelable contracts, we are
 obligated to pay approximately $4.8 million in annual data processing and item processing fees to third
 party providers through May 2008. The costs under the item processing contract are calculated in accordance
 with a volume-based fee schedule, which is subject to change annually.

We are routinely involved in legal actions which are
 incidental to our business. Although it is difficult to predict the ultimate outcome of these cases,
 management believes, based on discussions with counsel, that any ultimate liability will not materially
 affect the consolidated financial position or operations.

# ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

See the information regarding disclosures about market
 risk under Managements Discussion and Analysis of Financial Condition and Results of Operations on
 pages 30 through 33 and in Risk Factors attached as Exhibit 99.1.

33

---



# ITEM 8.    FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

# BREMER FINANCIAL
CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
                                     December 31, 2003 and 2002
                                       (in thousands except share data)

|                                                        | 2003 | 2002
|------------------------------------------------------- | ---- | ----
|Assets                                                  |      |     
|Cash and due from banks                                 |      |     
|Interest bearing deposits                               |      |     
|Investment securities available-for-sale                |      |     
|Mortgage-backed securities available-for-sale           |      |     
|                                                        |      |     
|Total securities available-for-sale                     |      |     
|Investment securities held-to-maturity                  |      |     
|(fair value:  12/31/03 - $186,890, 12/31/02 - $171,233) |      |     
|Loans and leases                                        |      |     
|Reserve for credit losses                               |      |     
|Unearned discount                                       |      |     
|                                                        |      |     
|Net loans and leases                                    |      |     
|Interest receivable                                     |      |     
|Premises and equipment, net                             |      |     
|Goodwill                                                |      |     
|Other intangibles                                       |      |     
|Other assets                                            |      |     
|                                                        |      |     
|Total assets                                            |      |     
|                                                        |      |     
|Liabilities and Shareholders' Equity                    |      |     
|Noninterest bearing deposits                            |      |     
|Interest bearing deposits                               |      |     
|                                                        |      |     
|Total deposits                                          |      |     
|Federal funds purchased and repurchase agreements       |      |     
|Other short-term borrowings                             |      |     
|Long-term debt                                          |      |     
|Company obligated mandatorily redeemable                |      |     
|preferred securities of subsidiary trusts               |      |     
|holding junior subordinated debentures                  |      |     
|Accrued expenses and other liabilities                  |      |     
|                                                        |      |     
|Total liabilities                                       |      |     
|Minority interests                                      |      |     
|Redeemable class A common stock, 960,000 shares         |      |     
|issued and outstanding                                  |      |     
|Shareholders' equity                                    |      |     
|Common stock                                            |      |     
|Class A, no par, 12,000,000 shares authorized;          |      |     
|240,000 shares issued and outstanding                   |      |     
|Class B, no par, 10,800,000 shares authorized,          |      |     
|issued and outstanding                                  |      |     
|Retained earnings                                       |      |     
|Accumulated other comprehensive income                  |      |     
|                                                        |      |     
|Total shareholders' equity                              |      |     
|                                                        |      |     
|Total liabilities and shareholders' equity              |      |     
|                                                        |      |     

See notes to consolidated financial
statements.

34

---



# BREMER FINANCIAL
CORPORATION AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF INCOME
             Years Ended December 31, 2003, 2002 and 2001                (in thousands,
except per share amounts)

|                                                      | 2003 | 2002 | 2001
|----------------------------------------------------- | ---- | ---- | ----
|Interest income                                       |      |      |     
|Loans and leases, including fees                      |      |      | $   
|Securities                                            |      |     
|Taxable                                               |      |      |     
|Tax-exempt                                            |      |      |     
|Federal funds sold                                    |      |      |     
|Other                                                 |      |      |     
|                                                      |      |      |     
|Total interest income                                 |      |      |     
|Interest expense                                      |      |     
|Deposits                                              |      |      |     
|Federal funds purchased and repurchase agreements     |      |      |     
|Other short-term borrowings                           |      |      |     
|Long-term debt                                        |      |      |     
|Company obligated manditorily redeemable              |      |     
|preferred securities of subsidiary trusts             |      |     
|holding junior subordinated debentures                |      |      |     
|                                                      |      |      |     
|Total interest expense                                |      |      |     
|                                                      |      |      |     
|Net interest income                                   |      |      |     
|Provision for credit losses                           |      |      |     
|                                                      |      |      |     
|Net interest income after provision for credit losses |      |      |     
|Noninterest income                                    |      |     
|Service charges                                       |      |      |     
|Insurance                                             |      |      |     
|Trust                                                 |      |      |     
|Brokerage                                             |      |      |     
|Gain on sale of loans                                 |      |      |     
|Gain on sale of securities                            |      |      |     
|Other                                                 |      |      |     
|                                                      |      |      |     
|Total noninterest income                              |      |      |     
|Noninterest expense                                   |      |     
|Salaries and wages                                    |      |      |     
|Employee benefits                                     |      |      |     
|Occupancy                                             |      |      |     
|Furniture and equipment                               |      |      |     
|Data processing fees                                  |      |      |     
|FDIC premiums and examination fees                    |      |      |     
|Amortization of intangibles                           |      |      |     
|Other                                                 |      |      |     
|                                                      |      |      |     
|Total noninterest expense                             |      |      |     
|                                                      |      |      |     
|Income before income tax expense                      |      |      |     
|Income tax expense                                    |      |      |     
|                                                      |      |      |     
|Net income                                            |      |      | $   
|                                                      |      |      |     
|Per common share amounts:                             |      |     
|Net income-basic and diluted                          |      |      | $   
|Dividends paid                                        |      |      |     

See notes to consolidated financial
statements.

35

---



# BREMER FINANCIAL
CORPORATION AND SUBSIDIARIES                             CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY                  Years Ended December 31, 2003, 2002 and 2001
                   (in thousands, except per share amounts)

|                                                                        | Class ACommon Stock | Class BCommon Stock | Accumulated
Other
Comprehensive
Income (Loss) | Comprehensive
Income | Retained
Earnings | Total
|----------------------------------------------------------------------- | ------------------- | ------------------- | --------------------------------------------- | -------------------- | ----------------- | -----
|Balance, December 31, 2000                                              |                     |                     |                                               |                      |                   |      
|Comprehensive income                                                    |                     |                     | $                                             | 57                   |                   | $    
|Net income                                                              |                     |                     |                                               |                      |                   |      
|Other comprehensive income, net of tax:                                 |                     |                    
|Net unrealized gains on securities:                                     |                     |                    
|Unrealized holding gains arising during the period, net of tax          |                     |                     |                                               |                      |                   |      
|Less:  Reclassified adjustment for gains included in income, net of tax |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Other comprehensive income                                              |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Comprehensive income                                                    |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Dividends, $1.60 per share                                              |                     |                     |                                               |                      |                   |      
|Allocation of net income in excess of dividends and other               |                     |                    
|comprehensive income to redeemable class A common stock                 |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Balance, December 31, 2001                                              |                     |                     |                                               | 57                   |                   |      
|Comprehensive income                                                    |                     |                    
|Net income                                                              |                     |                     |                                               |                      |                   |      
|Other comprehensive income, net of tax:                                 |                     |                    
|Net unrealized gains on securities:                                     |                     |                    
|Unrealized holding gains arising during the period                      |                     |                     |                                               |                      |                   |      
|Less:  Reclassified adjustment for gains included in income, net of tax |                     |                     |                                               |                      |                   |      
|Minimum pension liability, net of tax                                   |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Other comprehensive income                                              |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Comprehensive income                                                    |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Dividends, $1.65 per share                                              |                     |                     |                                               |                      |                   |      
|Allocation of net income in excess of dividends and other               |                     |                    
|comprehensive income to redeemable class A common stock                 |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Balance, December 31, 2002                                              |                     |                     |                                               | 57                   |                   |      
|Comprehensive income                                                    |                     |                    
|Net income                                                              |                     |                     |                                               |                      |                   |      
|Other comprehensive income, net of tax:                                 |                     |                    
|Net unrealized losses on securities:                                    |                     |                    
|Unrealized holding losses arising during the period, net of tax         |                     |                     |                                               |                      |                   |      
|Less:  Reclassified adjustment for gains included in income, net of tax |                     |                     |                                               |                      |                   |      
|Minimum pension liability, net of tax                                   |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Other comprehensive income                                              |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Comprehensive income                                                    |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Dividends, $1.80 per share                                              |                     |                     |                                               |                      |                   |      
|Allocation of net income in excess of dividends and other               |                     |                    
|comprehensive income to redeemable class A common stock                 |                     |                     |                                               |                      |                   |      
|                                                                        |                     |                     |                                               |                      |                   |      
|Balance, December 31, 2003                                              |                     |                     | $                                             | 57                   |                   | $    
|                                                                        |                     |                     |                                               |                      |                   |      

See notes to consolidated financial
statements.

36

---



# BREMER FINANCIAL
CORPORATION AND SUBSIDIARIES                                CONSOLIDATED STATEMENTS OF
CASH FLOWS                 Years Ended December 31, 2003, 2002 and 2001
               (in thousands)

|                                                                     | 2003 | 2002 | 2001
|-------------------------------------------------------------------- | ---- | ---- | ----
|Cash flows from operating activities                                 |      |      |     
|Net income                                                           |      |      | $   
|Adjustments to reconcile net income to net cash                      |      |     
|provided by operating activities                                     |      |     
|Provision for credit losses                                          |      |      |     
|Depreciation and amortization                                        |      |      |     
|Deferred income taxes                                                |      |      |     
|Gain on sale of securities                                           |      |      |     
|Gain on sale of other real estate owned, net                         |      |      |     
|Other assets and liabilities, net                                    |      |      |     
|Gain on sale of loans                                                |      |      |     
|Proceeds from loans originated for sale                              |      |      |     
|Loans originated for sale                                            |      |      |     
|                                                                     |      |      |     
|Net cash provided by operating activities                            |      |      |     
|Cash flows from investing activities                                 |      |     
|Interest bearing deposits, net                                       |      |      |     
|Purchases of mortgage-backed securities                              |      |      |     
|Purchases of available-for-sale investment securities                |      |      |     
|Purchases of held-to-maturity securities                             |      |      |     
|Proceeds from maturities of mortgage-backed securities               |      |      |     
|Proceeds from maturities of available-for-sale investment securities |      |      |     
|Proceeds from maturities of held-to-maturity securities              |      |      |     
|Proceeds from sales of mortage-backed securities                     |      |      |     
|Proceeds from sales of available-for-sale investment securities      |      |      |     
|Proceeds from sales of other real estate owned                       |      |      |     
|Loans and leases, net                                                |      |      |     
|Acquisition of minority interests                                    |      |      |     
|Acquisitions, net of cash acquired                                   |      |      |     
|Purchase of premises and equipment                                   |      |      |     
|                                                                     |      |      |     
|Net cash used in investing activities                                |      |      |     
|Cash flows from financing activities                                 |      |     
|Noninterest bearing deposits, net                                    |      |      |     
|Savings, NOW and money market accounts, net                          |      |      |     
|Certificates of deposits, net                                        |      |      |     
|Federal funds purchased and repurchase agreements,net                |      |      |     
|Other short-term borrowings, net                                     |      |      |     
|Proceeds from issuance of long-term debt                             |      |      |     
|Repayments of long-term debt                                         |      |      |     
|Proceeds from issuance of trust preferred securities                 |      |      |     
|Common stock dividends paid                                          |      |      |     
|                                                                     |      |      |     
|Net cash provided by financing activities                            |      |      |     
|                                                                     |      |      |     
|Net (decrease) increase in cash and due from banks                   |      |      |     
|Cash and due from banks at beginning of period                       |      |      |     
|                                                                     |      |      |     
|Cash and due from banks at end of period                             |      |      | $   
|                                                                     |      |      |     
|Supplemental disclosures of cash flow information                    |      |     
|Cash paid during the year for interest                               |      |      | $   
|Cash paid during the year for income taxes                           |      |      |     

See notes to consolidated financial
statements.

37

---



# NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

# Note A:   Accounting Policies

Nature of business  Bremer Financial Corporation
 (the Company) is a regional financial services company headquartered in St. Paul, Minnesota. The Company
 is the sole shareholder of 11 subsidiary banks (Subsidiary Banks) which draw most of their deposits
 from and make substantially all of their loans within the states of Minnesota, North Dakota, and Wisconsin.
 The Company has identified each of the subsidiary banks as a separate operating segment. These operating
 segments have been combined for segment information reporting purposes as one reportable segment because
 the nature and distribution of the products and services, the type of customer, and the regulatory environment
 are similar. Additionally, the Company provides trust and insurance services to its customers through
 wholly-owned nonbanking subsidiaries and investment services through a third party relationship.

The accounting and reporting policies of the Company
 and its subsidiaries conform to accounting principles generally accepted in the United States of America
 and general practices within the financial services industry. The more significant accounting policies
 are summarized below:

Consolidation The consolidated financial statements
 include the accounts of the Company (a bank holding company majority owned by the Otto Bremer Foundation)
 and all Subsidiary Banks and other subsidiaries in which the Company has a majority interest. All significant
 intercompany accounts and transactions have been eliminated.

Cash flows  For purposes of this statement,
 the Company has defined cash equivalents as cash and due from banks. During the years ended December
 31, 2003, 2002, and 2001, the Company received real estate valued at $4,777,000, $2,645,000 and $1,166,000
 in satisfaction of outstanding loan balances.

Investment and mortgage-backed securities 
 Held-to-maturity securities consist of debt securities which the Company has the intent and ability
 to hold to maturity and are valued at amortized historical cost. Under certain circumstances (including
 the deterioration of the issuers creditworthiness or a change in tax law or statutory or regulatory
 requirements), securities held-to-maturity may be sold or transferred to another portfolio.

Available-for-sale securities consist of debt
 and equity securities that will be held for indefinite periods of time, including securities that may
 be sold in response to changes in market interest or prepayment rates, needs for liquidity, or changes
 in the availability or yield of alternative investments. These securities are valued at current market
 value, with the resulting unrealized holding gains and losses excluded from earnings and reported, net
 of tax, and the resultant allocation to redeemable class A common stock reflected as a separate component
 of shareholders equity until realized. Gains or losses on these securities are computed based on the
 amortized cost of the specific securities when sold.

All securities with gross unrealized losses on the
 consolidated balance sheet are subjected to the Companys process for identifying other-than-temporary
 impairments. The Company writes down to fair value securities that it deems to be other-than-temporarily
 impaired in the period the securities are deemed to be impaired. The assessment of whether such impairment
 has occurred is based on managements case-by-case evaluation of the underlying reasons for the decline
 in fair value. Management considers a wide range of factors in making this assessment. Those factors
 include but are not limited to the length and severity of the decline in value and changes in the credit
 quality of the issuer or underlying assets. The Company does not engage in trading activities.

Loans and leases Interest income is accrued
 on loan and lease balances based on the principal amount outstanding. Loans and leases are reviewed
 regularly by management and placed on nonaccrual status when the collection of interest or principal
 is unlikely. The accrual of interest on loans and leases is suspended when the credit becomes 90 days
 or more past due, unless the loan or lease is fully secured and in the process of collection. Thereafter,
 no interest is recognized as income unless received in cash or until such time the borrower demonstrates
 the ability to pay interest and principal. Certain net loan and commitment fees are deferred and amortized
 over the life of the

38

---



related loan or commitment as an adjustment of yield.
 Loans held-for-sale in the secondary market are recorded at lower of aggregate cost or market.

Reserve for credit losses Management determines
 the adequacy of the reserve based upon a number of factors, including credit loss experience and a continuous
 review of the loan and lease portfolio. Being an estimate, the reserve is subject to change through
 evaluation of the loan and lease composition, economic conditions, and the economic prospects of borrowers.

Under the Companys credit policies and practices,
 all nonaccrual and restructured commercial, agricultural, construction, and commercial real estate loans
 and leases, plus certain other loans and leases identified by the Company, meet the definition of impaired
 loans under Statements of Financial Accounting Standards (SFAS) No. 114, Accounting by Creditors
 for Impairment of a Loan, and SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income
 Recognition and Disclosures. Impaired loans as defined by SFAS No. 114 and SFAS No. 118 exclude certain
 large groups of smaller balance homogeneous loans, such as consumer loans and residential real estate
 loans. Under these statements, loan impairment is required to be measured based on the present value
 of expected future cash flows discounted at the loans effective interest rate or, as a practical expedient,
 at the observable market price of the loan or the fair value of the collateral if the loan is collateral
 dependent.

The reserve also incorporates the results of measuring
 impaired loans and leases as provided in SFAS No. 114 and SFAS No. 118. These accounting standards prescribe
 the measurement methods, income recognition, and disclosures related to impaired loans and leases. A
 loan is considered impaired when management determines that it is probable that the Company will be
 unable to collect all amounts due according to the original contractual terms of the loan or lease agreement.
 Impairment is measured by the difference between the recorded investment in the loan or lease (including
 accrued interest, net deferred loan fees or costs, and unamortized premium or discount) and the estimated
 present value of total expected future cash flows, discounted at the loans effective rate, or the fair
 value of the collateral, if the loan is collateral dependent. Impairment is recognized by adjusting
 the reserve for credit losses.

Premises and equipment  Premises and equipment
 are stated at cost less accumulated depreciation and amortization computed principally on accelerated
 methods based on estimated useful lives of the assets, which range from three to forty years. Maintenance
 and repair costs are charged to expense as incurred. Gains or losses on disposition of premises and
 equipment are reflected in income.

Other real estate  Other real estate owned,
 which is included in other assets, represents properties acquired through foreclosure and other proceedings
 recorded at the lower of the amount of the loan satisfied or fair value. Any write-down to fair value
 at the time of foreclosure is charged to the reserve for credit losses. Property is appraised periodically
 to ensure that the recorded amount is supported by the current fair value. Market write-downs, operating
 expenses and losses on sales are charged to other expenses. Income, including gains on sales, is credited
 to other income.

Retirement Plan Accounting  We provide pension
 benefits to substantially all employees based on years of service and employee compensation while employed
 with the Company and account for these plans in accordance with SFAS No. 87, Employers Accounting
 for Pensions. SFAS No. 87 requires us to make a number of economic and other assumptions that can have
 a significant impact on amounts recorded in our income statement and statement of financial position.
 Assumptions regarding long-term discount rates and the expected return on pension plan assets can have
 the most material impact on our financial results and funding requirements.

Income taxes  Bremer Financial Corporation
 and subsidiaries file a consolidated federal tax return. Deferred taxes are recorded to reflect the
 tax consequences in future years of differences between the tax bases of assets and liabilities and
 their financial reporting amounts at each year end.

Comprehensive income Comprehensive income is
 defined as the change in equity of a business enterprise during a period resulting from transactions
 and other events and circumstances from nonowner sources. It includes all changes in equity during a
 period except those resulting from

39

---



investments by owners and distributions to owners.
 For the Company, comprehensive income consists of net income, as reported in the financial statements,
 and other comprehensive income, which consists of the change in unrealized gains and losses on available-for-sale
 securities and the change in the minimum pension liability.

Goodwill and other intangible assets  Under
 the provisions of SFAS No. 142, intangible assets acquired in a business combination, which do not possess
 finite useful lives, are not amortized into net income over an estimated useful life. However, these
 intangible assets are tested for impairment at least annually. Intangible assets with finite lives continue
 to be amortized over the period the Corporation expects to benefit from such assets. See Note H.

Recent accounting pronouncements and issues
  In October 2003, the Financial Accounting Standards Board (FASB) added a project to its agenda to
 clarify SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, with
 respect to determining the fair value of interest rate lock commitments (IRLC). Specifically, the
 FASB project will address what information should be used to determine the fair value of an IRLC and
 whether the IRLC should ever be reported as an asset by the issuer. In December 2003, the SEC staff
 announced that it intends to release a Staff Accounting Bulletin that will require IRLCs issued after
 April 1, 2004, to be accounted for as written options and reported as liabilities until expiration or
 termination of the commitment. The Company does not anticipate that the proposed accounting standard
 will have a material effect on its financial position or results of operations.

In December 2003, the FASB issued SFAS No. 132 (Revised
 2003), Employers Disclosures about Pensions and Other Postretirement Benefits. Additional disclosure
 includes actual mix of plan assets by category, a description of investment strategies and policies
 used, a narrative description of the basis for determining the overall expected long-term rate of return
 on asset assumption and aggregate expected contributions. See Note M.

In January 2003, the FASB issued Interpretation No.
 46, Consolidation of Variable Interest Entities (FIN No. 46), an interpretation of Accounting Research
 Bulletin No. 51, Consolidated Financial Statements. FIN No. 46 prescribes how to identify variable
 interest entities and how an enterprise assesses its interests in a variable interest entity to decide
 whether to consolidate that entity. This interpretation requires existing unconsolidated variable interest
 entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse
 risks among parties involved. FIN 46 was scheduled to be effective for variable interest entities created
 after January 31, 2003. On December 24, 2003, the FASB published a revision to FIN No. 46 (FIN No.
 46( R )). FIN No. 46(R) clarifies certain provisions of FIN No. 46 and exempts certain entities from
 its requirements. For interests in variable interest entities acquired prior to January 31, 2003, the
 provisions of FIN No. 46(R) will be applied on March 31, 2004. The Company does not anticipate that
 the adoption of FIN No. 46 and FIN No. 46(R) will have a material effect on its financial position or
 results of operations.

Estimates The preparation of consolidated
 financial statements in conformity with accounting principles generally accepted in the United States
 of America requires management to make estimates and assumptions that affect the reported amounts of
 assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
 statements and the reported amounts of income and expenses during the reporting period. Actual results
 could differ from those estimates. Material estimates that are particularly susceptible to significant
 change relate to the determination of the allowance for credit losses and the valuation of real estate
 acquired in connection with foreclosures or in satisfaction of loans and leases.

Earnings per share calculations  Basic earnings
 per common share have been computed using 12,000,000 common shares for all periods. The Company does
 not have any dilutive securities. See Note R.

Reclassifications Certain amounts have been
 reclassified to provide consistent presentation among the various accounting periods shown.

40

---



# Note B:   Acquisitions

On May 11, 2001, the Company acquired from Firstar
 Corporation, Milwaukee, Wisconsin, (the Seller) 11 of its Minneapolis/St. Paul branch locations and
 a portfolio of commercial loans and related deposits (the Branch Acquisition). This transaction came
 as a result of the Sellers divestiture requirement related to its merger with U.S. Bancorp, Minneapolis,
 Minnesota. The 11 branch offices and the commercial loan portfolio that were acquired are now operated
 as part of the Companys subsidiary bank charter in South St. Paul, Minnesota. The acquisition was accounted
 for as an acquisition of assets and assumption of liabilities and resulted in the recognition of a core
 deposit premium of approximately $20.0 million and approximately $45.0 million of goodwill.

The following pro forma financial information was prepared
 assuming the Branch Acquisition had been completed at January 1, 2001:

|                     | Years Ended December 31,
|-------------------- | ------------------------
|
|
|Net Interest Income  |                         
|Net Income           |                         
|Net Income Per Share |                         

# Note C:   Restrictions on Cash and Due From Banks

The Subsidiary Banks are required to maintain average
 reserve balances in the form of vault cash or balances maintained either directly with a Reserve Bank
 or in a pass-through account, in accordance with the Federal Reserve Bank requirements. The amount of
 those cash reserve balances was approximately $11,065,000 and $10,092,000 as of December 31, 2003 and
 2002.

# Note D:   Investment and Mortgage-Backed Securities

At December 31, 2003 and 2002, investment and mortgage-backed
 securities with an amortized cost of $551,400,000 and $433,885,000 were pledged as collateral to secure
 public deposits and for other purposes. The amortized cost and estimated fair value by maturity are
 shown below (contractual maturity or, with mortgage-backed securities, projected principal payments
 are used):

|                            | At December 31, 2003
|--------------------------- | --------------------
|
|
|
|Within 1 year               |                     
|1 - 5 years                 |                     
|5 - 10 years                |                     
|After 10 years              |                     
|Equity securities           |                     
|                            |                     
|Total investment securities |                     
|                            |                     

41

---



The amortized cost and fair value of investment and
 mortgage-backed securities available-for-sale as of December 31 consisted of the following:

|                                        | 2003 | 2002
|--------------------------------------- | ---- | ----
|
|
|U.S. Treasury securities                |      |     
|Obligations of U.S. government agencies |      |     
|Obligations of state                    |      |     
|and political subdivisions              |      |     
|Mortgage-backed securities              |      |     
|Equity securities                       |      |     
|Other                                   |      |     
|                                        |      |     
|Total securities available-for-sale     |      |     
|                                        |      |     

Proceeds from sales of investments and mortgage-backed
 securities were $223,584,000, $211,877,000 and $146,616,000 for 2003, 2002 and 2001. Gross gains of
 $5,862,000, $2,244,000 and $2,134,000 and gross losses of $6,400, $0 and $6,000 were realized on those
 sales for 2003, 2002 and 2001.

A summary of amortized cost and fair value of investment
 securities held-to-maturity at December 31 consisted of the following:

|                                        | 2003 | 2002
|--------------------------------------- | ---- | ----
|
|
|Obligations of U.S. government agencies |      |     
|Obligations of state and political      |      |     
|subdivisions                            |      |     
|                                        |      |     
|Total securirties held-to-maturity      |      |     
|                                        |      |     

State and political subdivision investments largely
 involve governmental entities within the Companys market area.

# Note E:   Loans and Leases

The Company is engaged in lending activities with borrowers
 in a wide variety of industries. Lending is concentrated in the areas in which its Subsidiary Banks
 are located. A decline in the local economies in these areas could negatively impact the quality of
 these loans. Loans and leases at December 31 consisted of the following:

|                        | 2003 | 2002
|----------------------- | ---- | ----
|
|Commercial and other    |      |     
|Commercial real estate  |      |     
|Construction            |      |     
|Agricultural            |      |     
|Residential real estate |      |     
|Construction            |      |     
|Consumer                |      |     
|Tax-exempt              |      |     
|                        |      |     
|Total loans and leases  |      |     
|                        |      |     

Impaired loans and leases were $20,338,000 and $29,105,000
 at December 31, 2003 and 2002, respectively. Impaired loans and leases include nonaccrual and restructured
 loans and leases. Restructured loans and leases are those for which the terms (principal and/or interest)
 have been

42

---



modified as a result of the inability of the borrower
 to meet the original terms of the loan or lease. The reserve for credit losses included approximately
 $5,067,000 and $7,520,000 relating to impaired loans and leases at December 31, 2003 and 2002, respectively.

Following is a summary of information pertaining to
 impaired loans and leases. No significant amounts of interest income were recognized during each of
 the three years ending December 31:

|                                                      | 2003 | 2002 | 2001
|----------------------------------------------------- | ---- | ---- | ----
|
|Average investment in impaired loans, net of reserves |      |      | $   
|                                                      |      |      |     
|Interest income as originally contracted              |      |      | $   
|                                                      |      |      |     

Other nonperforming assets, consisting of other real
 estate owned, amounted to $3,598,000 and $2,805,000 at December 31, 2003 and 2002.

At December 31, 2003 and 2002, loans totaling $1,818,406,000
 and $1,627,865,000 had been pledged to secure Federal Home Loan Bank (FHLB) advances. Acceptable collateral
 is defined by the FHLB, and we currently pledge residential, agricultural, and commercial real estate
 mortgages and certain other eligible business and agricultural loans.

Certain executive officers, directors and their related
 interests are loan customers of the Corporation. These loans in the aggregate were less than 5% of stockholders
 equity at December 31, 2003, and 2002.

# Note F:   Reserve for Credit Losses

Changes in the reserve for credit losses are as follows:

|                                   | For the Year Ended December 31,
|---------------------------------- | -------------------------------
|
|
|Beginning of year                  |                                
|Charge-offs                        |                                
|Recoveries                         |                                
|                                   |                                
|Net charge-offs                    |                                
|Provision for credit losses        |                                
|Reserve related to acquired assets |                                
|                                   |                                
|End of year                        |                                
|                                   |                                

# Note G:   Premises and Equipment

Premises and equipment at December 31 consisted of
 the following:

|                                                 | 2003 | 2002
|------------------------------------------------ | ---- | ----
|
|Land                                             |      |     
|Buildings and improvements                       |      |     
|Furniture and equipment                          |      |     
|                                                 |      |     
|Total premises and equipment                     |      |     
|Less:  accumulated depreciation and amortization |      |     
|                                                 |      |     
|Premises and equipment, net                      |      |     
|                                                 |      |     

# Note H:   Intangible Assets

Intangible assets consist of goodwill, core deposit
 intangibles, and other intangibles. The remaining unamortized balances at December 31, 2003 and 2002
 were approximately $102,500,000 and $106,173,000. The core deposit and other intangibles have remaining
 amortization lives of 5 to

43

---



10 years. Goodwill is not amortized but is tested regularly
 for impairment. The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, which addresses
 the accounting and reporting for acquired goodwill and other intangible assets, on January 1, 2002.
 Under the provisions of SFAS No. 142, intangible assets acquired in a business combination, which do
 not possess finite useful lives, are not amortized into net income over an estimated useful life. However,
 these intangible assets are tested for impairment at least annually. Impairment testing is based on
 a determination of value of each reporting unit, using readily available market and earnings data for
 comparable publicly-traded organizations within the same time period, and comparing that calculation
 of value to the current book value of the unit. Management has performed its 2003 annual impairment
 test on its goodwill assets using this approach, and no impairment loss was recorded as a result.

In October 2002, the Financial Accounting Standards
 Board (FASB) issued SFAS No. 147, Acquisitions of Certain Financial Institutions. This Statement
 removes acquisitions of financial institutions from the scope of both SFAS 72, Accounting for Certain
 Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9, Applying Accounting
 Principles Board Opinion (APB) Opinions No. 16 and 17 When a Savings and Loan Association or a Similar
 Institution Is Acquired in a Business Combination Accounted for by the Purchase Method. SFAS No. 72
 included a requirement to recognize and subsequently amortize any excess of the fair value of the liabilities
 assumed in certain acquisitions over the fair value of tangible and identifiable intangible assets acquired
 as an unidentifiable intangible asset. Under the requirements of SFAS No. 147, for a transaction that
 is a business combination, the unidentifiable intangible asset that is required to be recognized under
 SFAS No. 72 represents goodwill that should be accounted for under SFAS No. 142.

Had the Company been accounting for its goodwill under
 SFAS No. 142 and SFAS No. 147 for all periods presented, the Companys net income and income per share
 would have been as follows:

|                                        | Year Ended December 31,
|--------------------------------------- | -----------------------
|
|
|Reported net income                     |                        
|Add:  Goodwill amortization, net of tax |                        
|                                        |                        
|Pro forma adjusted net income           |                        
|                                        |                        
|Net income per share                    |                        
|As reported                             |                        
|Add:  Goodwill amortization, net of tax |                        
|                                        |                        
|Pro forma adjusted net income per share |                        
|                                        |                        

The following table presents relevant information about
 the Companys amortized intangible assets:

|                              | As of December 31, 2003 | As of December 31, 2002
|----------------------------- | ----------------------- | -----------------------
|
|
|Core deposit premium          |                         |                        
|Mortgage servicing rights (1) |                         |                        
|Other                         |                         |                        
|                              |                         |                        
|Total                         |                         |                        
|                              |                         |                        

---

|(1) | Accumulated amortization of mortgage servicing rights includes the related valuation allowance of $1.9 million in 2003 and $379 thousand in 2002.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------

The Company recorded aggregate intangible amortization
 expense of $2.9 million for the year ended December 31, 2003. The estimated amortization expense for
 each of the next five years is approximately $2.4 million.

44

---



Goodwill was $84.2 million at December 31, 2003 and
 $85.1 million at December 31, 2002. The Company sold two branches that were part of its Marshall, Minnesota
 bank subsidiary in June 2003. The sale reduced goodwill by approximately $922 thousand, which was the
 amount of unamortized goodwill assigned to these two branches which were originally acquired by the
 Company in 1999. Changes in the carrying amount of the Companys goodwill were as follows:

|                                                  | Carrying Amount
|------------------------------------------------- | ---------------
|
|Balance as of December 31, 2001                   |                
|                                                  |                
|                                                  |                
|Balance as of December 31, 2002                   |                
|                                                  |                
|Reduction of goodwill related to sale of branches |                
|                                                  |                
|Balance as of December 31, 2003                   |                
|                                                  |                

# Note I:   Short-term Borrowings

Short-term borrowings consist of federal funds and
 repurchase agreements (which generally mature within one to 60 days of the transaction date), treasury
 tax and loan notes (which generally mature within one to 30 days), FHLB advances (which mature within
 one year), and advances under an unsecured revolving credit facility agreement. The available credit
 facility of $15.0 million was unused at December 31, 2003. The facility agreement contains covenants,
 including a requirement to maintain certain minimum levels of capitalization.

Information related to short-term borrowings for the
 two years ended December 31, 2003 is provided below:

|                                               | Federal Funds
and Repurchase
Agreements | Federal Home
Loan Bank
Borrowings | Treasury
Tax and Loan
Notes | Revolving
Credit
Facility
|---------------------------------------------- | --------------------------------------- | --------------------------------- | --------------------------- | -------------------------
|
|Balance at December 31                         |                                         |                                   |                             |                          
|2003                                           |                                         |                                   | $                           | 519,759                  
|2002                                           |                                         |                                   |                             | 449,970                  
|Weighted average interest rate at December 31  |                                         |                                   |                             |                          
|2003                                           |                                         |                                   |                             | 1.16                     
|2002                                           |                                         |                                   |                             | 1.24                     
|Maximum amount outstanding at any month end    |                                         |                                   |                             |                          
|2003                                           |                                         |                                   | $                           | 519,759                  
|2002                                           |                                         |                                   |                             | 449,970                  
|Average amount outstanding during the year     |                                         |                                   |                             |                          
|2003                                           |                                         |                                   | $                           | 430,374                  
|2002                                           |                                         |                                   |                             | 385,065                  
|Weighted average interest rate during the year |                                         |                                   |                             |                          
|2003                                           |                                         |                                   |                             | 1.26                     
|2002                                           |                                         |                                   |                             | 1.45                     

# Note J:   Long-term Debt

Long-term debt (debt with original maturities of more
 than one year) at December 31 consisted of the following:

|                                  | At December 31,
|--------------------------------- | ---------------
|
|
|Senior notes                      |                
|Federal Home Loan Bank borrowings |                
|Installment promissory notes      |                
|                                  |                
|Total                             |                
|                                  |                

45

---



The $65 million of senior notes are unsecured and are
 made up of two tranches. The $46 million first tranche bears an interest rate of 8.27% and matures on
 November 1, 2004, while the $19 million second tranche bears an interest rate of 8.47% and matures on
 November 1, 2006. These senior note agreements contain covenants, including a requirement to maintain
 certain minimum levels of capitalization.

The FHLB borrowings bear interest at rates ranging
 from 1.90% to 6.68%, with maturity dates from 2004 through 2012, and are secured by certain loans.

The installment promissory notes bear interest at 7.59%
 and are payable in semi-annual installments through 2007.

Maturities of outstanding long-term debt were as follows:

|            | At December 31, 2003
|----------- | --------------------
|
|2004        |                     
|2005        |                     
|2006        |                     
|2007        |                     
|2008        |                     
|Beyond 2008 |                     
|            |                     
|Total       |                     
|            |                     

At December 31, 2003, $71 million of the FHLB borrowings
 due in 2008 were subject to call on a quarterly basis prior to maturity at the option of the FHLB.

# Note K:   Company Obligated Mandatorily Redeemable Preferred Securities

The Company issued $76.5 million of mandatorily redeemable
 preferred securities in two separate transactions in 2001 in conjunction with the Branch Acquisition.
 On February 22, 2001, the Company issued $16.5 million of 10.2% Capital Securities through Bremer Statutory
 Trust I (BST), and on May 8, 2001, the Company issued $60 million of 9.0% Cumulative Capital Securities
 through Bremer Capital Trust I (BCT). The proceeds of both of these offerings, combined with the proceeds
 from the sale by BST and BCT to the parent of their common securities, were invested by BST and BCT
 in Junior Subordinated Deferrable Interest Debentures (debentures) of the parent company. The debentures
 mature not earlier than July 15, 2006 and not later than July 15, 2031. At December 31, 2003, $76.5
 million in Capital Securities qualified as Tier I capital under guidelines of the Federal Reserve.

# Note L:   Disclosure About Fair Value of Financial Instruments

Most of the Companys assets and liabilities are considered
 financial instruments as defined in SFAS No. 107. Many of the Companys financial instruments, however,
 lack an available trading market which is characterized by an exchange transaction of the instrument
 by a willing buyer and seller. It is also the Companys general practice and intent to hold most of
 its financial instruments to maturity and not engage in trading activities. Therefore, significant estimations
 and present value calculations were utilized by the Company for purposes of this disclosure. The use
 of different market assumptions and/or estimation methodologies may have a material effect on these
 estimated fair value amounts.

46

---



The fair value estimates presented herein are based
 on pertinent information available to the Company as of December 31, 2003 and 2002. Although the Company
 is not aware of any factors that would significantly affect the estimated fair value amounts, these
 amounts have not been comprehensively revalued for purposes of these financial statements since December
 31, 2003 and, therefore, current estimates of fair value may differ from the amounts presented. As of
 December 31, carrying amounts and estimated fair values were:

|                                            | 2003 | 2002
|------------------------------------------- | ---- | ----
|
|
|Financial assets:                           |      |     
|Cash and due from banks                     |      |     
|Interest bearing deposits                   |      |     
|Investment securities available-for-sale    |      |     
|Investment securities held-to-maturity      |      |     
|Loans and leases                            |      |     
|Financial liabilities:                      |      |     
|Demand deposits                             |      |     
|Time deposits                               |      |     
|Short-term borrowings                       |      |     
|Long-term debt                              |      |     
|Mandatorily redeemable preferred securities |      |     

Cash and due from banks and interest bearing deposits
  The carrying value for these financial instruments approximates fair value due to the relatively short
 period of time between the origination of the instruments and their expected realization.

Securities  Fair values of these financial
 instruments were estimated using quoted market prices, when available. If quoted market prices were
 not available, fair value was estimated using market prices for similar assets. As required by SFAS
 No. 115, securities available-for-sale are carried at fair market value.

Loans and leases  The loan and lease portfolio
 consists of both variable and fixed rate obligations. The carrying amounts of variable rate loans, a
 majority of which reprice within the next three months, and for which there has been no significant
 change in credit risk, are assumed to approximate fair value. The fair values for fixed rate loans and
 leases are estimated using discounted cash flow analysis. The discount rates applied are based on the
 current interest rates for loans with similar terms to borrowers of similar credit quality.

Deposits The estimated fair value of deposits
 with no stated maturity, such as non-interest bearing savings and money-market checking accounts, is
 the amount payable on demand. The fair value of time deposits is estimated using the rates currently
 offered for deposits of similar remaining maturities.

Short-term borrowings Due to the short term
 nature of repricing and maturities of these instruments, fair value approximates carrying value.

Long-term debt For fixed rate debt, the fair
 value is determined by discounting future cash flows at current rates for debt with similar remaining
 maturities and call features. For variable rate debt, fair value approximates carrying value.

Mandatorily redeemable preferred securities
 Fair values of these financial instruments were estimated using quoted market prices, when available.
 If quoted market prices were not available, fair value was estimated using market prices for similar
 assets.

Off-balance sheet financial instruments The
 estimated fair value of these instruments, such as loan commitments and standby letters of credit, approximates
 their off-balance sheet carrying value due to repricing ability and other terms of the contracts.

47

---



# Note M:   Employee Benefit Plans

Pension plans  The Company maintains the Bremer
 Retirement Plan (Pension Plan), which is a qualified defined benefit pension plan designed to provide
 retirement benefits to substantially all of the employees of the Company and its subsidiaries. In addition,
 the Company has a Supplemental Executive Retirement Plan (SERP), an unfunded plan designed to supplement
 the benefits determined under the Pension Plan for certain highly compensated employees of the Company
 to the extent the benefits under the Pension Plan are capped by compensation limits.

In recent years, the Companys funding policy on the
 qualified plan has been to contribute annually an amount approaching the maximum amount that can be
 deducted for federal income tax purposes. Contributions are intended to provide for benefits attributed
 to service to date and for those expected to be earned in the future.

Other postretirement benefits  The Company
 provides certain retiree health care benefits relating primarily to medical insurance co-payments to
 retired employees between the ages of 55 and 65. In accordance with SFAS No. 106 as amended by SFAS
 No. 132, Employers Accounting for Postretirement Benefits Other than Pensions, as revised in December
 2003, the Company accrues the cost of these benefits during the employees active service. Contributions
 to the pension plan are intended to provide for benefits attributed to service to date and for those
 expected to be earned in the future. Benefits under SFAS No. 106 are funded as incurred.

The following table sets forth the plans change in
 the actuarially determined benefit obligation and plan assets as of the September 30 measurement date,
 and information on the plans funded status at December 31:

|                                                      | Pension Benefits | Other Postretirement Benefits
|----------------------------------------------------- | ---------------- | -----------------------------
|
|
|Change in Benefit Obligation                          |                  |                              
|Benefit obligation at beginning of year (9/30)        |                  |                              
|Service cost                                          |                  |                              
|Interest cost                                         |                  |                              
|Plan particpants' contributions                       |                  |                              
|Actuarial loss                                        |                  |                              
|Benefits paid                                         |                  |                              
|Plan change                                           |                  |                              
|                                                      |                  |                              
|Benefit obligation at end of year (9/30)              |                  |                              
|                                                      |                  |                              
|Change in Plan Assets                                 |                  |                              
|Fair value of plan assets at beginning of year (9/30) |                  |                              
|Actual return on assets                               |                  |                              
|Employer contributions                                |                  |                              
|Plan participants' contributions                      |                  |                              
|Benefits paid                                         |                  |                              
|                                                      |                  |                              
|Fair value of plan assets at end of year (9/30)       |                  |                              
|                                                      |                  |                              
|Funded Status of Plans                                |                  |                              
|Funded status of plans                                |                  |                              
|Unrecognized net actuarial loss                       |                  |                              
|Unrecognized prior service cost/(benefit)             |                  |                              
|Contibutions between September 30 and December 31     |                  |                              
|                                                      |                  |                              
|Prepaid benefit asset/(accrued benefit liability)     |                  |                              
|                                                      |                  |                              

48

---



Amounts recognized in the statement of financial position
 consist of:

|                                       | Pension Benefits | Other Postretirement Benefits
|-------------------------------------- | ---------------- | -----------------------------
|
|
|Prepaid benefit cost                   |                  |                              
|Accrued benefit cost                   |                  |                              
|Intangible asset                       |                  |                              
|Accumulated other comprehensive income |                  |                              
|                                       |                  |                              
|Net amount recognized                  |                  |                              
|                                       |                  |                              

The accumulated benefit obligation for the defined
 benefit pension plans was $49.0 million and $40.1 million at December 31, 2003 and December 31, 2002,
 respectively. At December 31, 2002, the accumulated benefit obligation of the retirement plans exceeded
 the fair value of plan assets as indicated in the following table:

|                               | Pension Benefits
|------------------------------ | ----------------
|
|
|Accumulated benefit obligation |                 
|Projected benefit obligation   |                 
|Fair value of plan assets      |                 

Net pension expense for the actuarially developed plans
 included the following components:

|                                | Pension Benefits | Other
Postretirement Benefits
|------------------------------- | ---------------- | -----------------------------
|
|
|Service cost                    |                  |                              
|Interest cost                   |                  |                              
|Expected return on assets       |                  |                              
|Prior service cost amortization |                  |                              
|Net loss/(gain) amortization    |                  |                              
|                                |                  |                              
|Net periodic benefit cost       |                  |                              
|                                |                  |                              

The amounts, net of tax, included within other comprehensive
 income arising from a change in the additional minimum pension liability for the years ended December
 31, 2003 and December 31, 2002, were $5.8 million and $(5.8) million, respectively.

Weighted average assumptions used to determine benefit
 obligations at December 31 were as follows:

|                           | Pension Benefits | Other
Postretirement Benefits
|-------------------------- | ---------------- | -----------------------------
|
|Discount rate              |                  |                              
|Compensation increase rate |                  |                              

Weighted average assumptions used to determine net
 periodic benefit cost for the years ended December 31 were as follows:

|                                   | Pension Benefits | Other
Postretirement Benefits
|---------------------------------- | ---------------- | -----------------------------
|
|Discount rate                      |                  |                              
|Long-term rate of return on assets |                  |                              
|Compensation increase rate         |                  |                              
|                                   |                  |                              

49

---



The discount rate that we utilize for determining future
 pension obligations is based primarily on a review of current high quality fixed income securities rates.

The January 1, 2004 assumption for the long-term rate
 of return on plan assets is 8.5%. As defined in SFAS No. 87, this assumption represents the rate of
 return on plan assets reflecting the average rate of earnings expected on the funds invested or to be
 invested to provide for the benefits included in the benefit obligation. The assumption has been determined
 by reflecting expectations regarding future long-term rates of return for the investment portfolio,
 with consideration given to the distribution of investments by, and historical rates of return of, each
 individual asset class.

For purposes of postretirement benefits measurements,
 the Company has assumed the following health care trend rates as of December 31:

|                            | Other
Postretirement Benefits
|--------------------------- | -----------------------------
|
|Current year trend          |                              
|Ultimate year trend         |                              
|Year of ultimate trend rate |                              

The health-care trend rate assumption has a significant
 effect on the amounts reported. A one percentage point change in the health-care trend rate would have
 the following effects on 2003 service and interest cost on the accumulated postretirement benefit obligation
 at December 31, 2003:

|                                             | One (1) Percentage Point
|-------------------------------------------- | ------------------------
|
|
|Effect on total of service and interest cost |                         
|Effect on postretirement benefit obligation  |                         

In December 2003, the Medicare Prescription Drug, Improvement
 and Modernization Act of 2003 (the Act) was signed into law. The Act introduces a prescription drug
 benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans
 that provide a benefit that is at least actuarially equivalent to the prescription drug benefit under
 Medicare. Questions have arisen regarding whether an employer that provides postretirement prescription
 drug coverage should recognize the effects of the Act on its accumulated postretirement benefit obligation
 (APBO) and net postretirement benefit costs under SFAS No. 106, Employers Accounting for Postretirement
 Benefits Other Than Pensions. While the Company does offer postretirement benefits, including presciption
 drug coverage, subject to the accounting requirements of SFAS No. 106, those benefits are only available
 to retirees until age 65, at which time Medicare coverage becomes effective. As such, the Company does
 not believe that this specific provision of the Act will have any material effect on its financial position
 or results of operations.

The Companys pension plan weighted-average asset allocations
 at December 31, 2003 and 2002, by major asset category, were as follows:

|                  | Plan Assets
at December 31,
|----------------- | ---------------------------
|
|Equity securities |                            
|Debt securities   |                            
|Real Estate       |                            
|Other             |                            
|                  |                            
|Total             |                            
|                  |                            

In 2004, we expect our long-term asset allocation to
 be approximately 75% equities and 25% fixed income, as outlined in our current Pension Investment Policy.
 The current equity allocation is distributed over nine professionally managed mutual funds covering
 eight different equity styles. We regularly review our actual asset allocation and periodically rebalance
 our investments to our

50

---



targeted allocation when considered appropriate. We
 believe that 8.5% is a reasonable long-term rate of return on our Pension Plan assets for 2004, given
 our asset allocation strategy and investment time horizon. For the twelve months ended December 31,
 2003 our Pension Plan assets generated a total composite return in excess of 20%. We will continue to
 evaluate our actuarial assumptions, including our expected rate of return, at least annually, and will
 adjust as necessary.

In developing strategic asset allocation guidelines
 for the plan, an emphasis is placed on the long-term characteristics of individual asset classes, the
 benefits of diversification among multiple asset classes and the Companys long-term return expectations
 for the plan. Consideration is also given to the proper level of risk of the plan, particularly with
 respect to the long-term nature of the plans liabilities and long-term investment horizon of plan assets.

The Company expects to contribute an amount currently
 estimated at approximately $3.0 million to the retirement and post-retirement plans in 2004.

Profit sharing plan The profit sharing plan
 is a defined contribution plan with contributions made by the Company. The profit sharing plan is noncontributory
 at the employee level, except for the employees option to contribute under a 401(k) savings plan available
 as part of the profit sharing plan. The Company provides up to a 50% matching of employee contributions
 and may make additional contributions to the plan at the discretion of the Board, primarily on the basis
 of Company earnings. Total employer contributions made for 2003, 2002 and 2001 were approximately $2,462,000,
 $3,024,000 and $2,493,000, respectively.

Employee stock ownership plan  The ESOP is
 a defined contribution plan covering substantially all employees, with contributions made exclusively
 by the Company on a discretionary year-by-year basis. The contribution was $100,000 for 2003, $400,000
 for 2002 and $300,000 for 2001.

# Note N:   Other Noninterest Income

Other noninterest income at December 31 consisted of
 the following:

|              | 2003 | 2002 | 2001
|------------- | ---- | ---- | ----
|
|Fees on loans |      |      | $   
|Other         |      |      |     
|              |      |      |     
|Total         |      |      | $   
|              |      |      |     

# Note O:   Other Noninterest Expense

Other noninterest expense at December 31 consisted
 of the following:

|                                | 2003 | 2002 | 2001
|------------------------------- | ---- | ---- | ----
|
|Printing, postage and telephone |      |      | $   
|Marketing                       |      |      |     
|Professional fees               |      |      |     
|Other real estate owned         |      |      |     
|Other                           |      |      |     
|                                |      |      |     
|Total                           |      |      | $   
|                                |      |      |     

51

---



# Note P:   Income Taxes

The components of the provision for income taxes at
 December 31 were as follows:

|         | 2003 | 2002 | 2001
|-------- | ---- | ---- | ----
|
|Current  |      |      |     
|Federal  |      |      | $   
|State    |      |      |     
|Deferred |      |      |     
|         |      |      |     
|Total    |      |      | $   
|         |      |      |     

A reconciliation between income tax expense and the
 amount computed by applying the statutory federal income tax rate at December 31 was as follows:

|                                                       | 2003 | 2002 | 2001
|------------------------------------------------------ | ---- | ---- | ----
|
|Tax at statutory rate                                  |      |      | $   
|Plus state income tax, net of federal tax benefits     |      |      |     
|                                                       |      |      |     
|                                                       |      |      |     
|Less tax effect of:                                    |      |     
|Interest on state and political subdivision securities |      |      |     
|Other tax-exempt interest                              |      |      |     
|Amortization                                           |      |      |     
|Other                                                  |      |      |     
|                                                       |      |      |     
|                                                       |      |      |     
|                                                       |      |      |     
|Income tax expense                                     |      |      | $   
|                                                       |      |      |     

The following table sets forth the temporary differences
 comprising the net deferred taxes included with other assets on the consolidated balance sheet at December
 31:

|                                                 | 2003 | 2002
|------------------------------------------------ | ---- | ----
|
|Deferred tax assets                              |      |     
|Provision for credit losses                      |      |     
|Employee compensation and benefits accruals      |      |     
|Deferred income                                  |      |     
|Other                                            |      |     
|                                                 |      |     
|Total                                            |      |     
|                                                 |      |     
|Deferred tax liabilities                         |      |     
|Deferred expense                                 |      |     
|Employee compensation and benefits accruals      |      |     
|Depreciation                                     |      |     
|Unrealized gain on securities available-for-sale |      |     
|Other                                            |      |     
|                                                 |      |     
|Total                                            |      |     
|                                                 |      |     
|Net deferred tax liabilities                     |      |     
|                                                 |      |     

The Wisconsin Department of Revenue is currently conducting
 an income tax audit of our Wisconsin bank subsidiary, and another subsidiary company located in Nevada
 that holds and manages investments for the Wisconsin subsidiary bank. The audit has been initiated under
 an audit program targeted at Wisconsin financial institutions with non-Wisconsin subsidiaries, the income
 of which has not been subject to Wisconsin tax. The Wisconsin Department of Revenue may take the position
 that the income of the out-of-state investment subsidiary is taxable in Wisconsin. If such a claim is
 made,

52

---



the Company intends to challenge such a claim, and
 management does not believe the resolution of any such claim will have a material impact on the financial
 statements.

# Note Q:   Commitments and Contingencies

The Company utilizes various off-balance sheet instruments
 to satisfy the financing needs of customers. These instruments represent contractual obligations of
 the Company to provide funding, within a specified time period, to a customer. The following represents
 the outstanding obligations at December 31:

|                          | At December 31,
|------------------------- | ---------------
|
|
|Standby letters of credit |                
|Loan commitments          |                

Standby letters of credit represent a conditional commitment
 to satisfy an obligation to a third party, generally to support public and private borrowing arrangements,
 on behalf of the customer. Loan commitments represent contractual agreements to provide funding to customers
 over a specified time period as long as there is no violation of any condition of the contract. These
 loans most often take the form of operating lines.

The Companys potential exposure to credit loss in
 the event of nonperformance by the other party is represented by the contractual amount of those instruments.
 The credit risk associated with letters of credit and loan commitments is substantially the same as
 extending credit in the form of a loan; therefore, the same credit policies apply in evaluating potential
 letters of credit or loan commitments. The amount of collateral obtained, if deemed necessary upon the
 extension of credit, is based on managements credit evaluation. The type of collateral held varies,
 but includes real estate, accounts receivable, inventory, and productive assets.

Under substantially noncancelable contracts, the Company
 is obligated to pay approximately $4.8 million in annual data processing and item processing fees to
 third party providers through May 2008. The costs under the item processing contract are calculated
 in accordance with a volume-based fee schedule, which is subject to change annually.

The Company is routinely involved in legal actions
 which are incidental to the business of the Company. Although it is difficult to predict the ultimate
 outcome of these cases, management believes, based on discussions with counsel, that any ultimate liability
 will not materially affect the Companys consolidated financial position or operations.

# Note R:   Common Stock

The Company has authorized 12,000,000 shares of class
 A common stock and 10,800,000 shares of class B common stock. The shares of class A common stock have
 full rights to vote on all matters properly before the Companys shareholders, including the election
 of the Companys directors. The class B common stock, all of which is held by the Otto Bremer Foundation
 (the Foundation), is non-voting except with respect to certain extraordinary corporate transactions,
 upon which the holders would have the right to vote on an equivalent per share basis with the holders
 of class A common stock.

Each share of class B common stock is convertible into
 one share of class A common stock upon the occurrence of the following events: (i) at the affirmative
 election of a third party or entity, upon the transfer of class B common stock from the Foundation to
 any third party or entity, or (ii) at the affirmative election of the holder of class B common stock,
 if cash dividends have not been paid on class A and class B common stock with respect to any year in
 an amount equal to at least 5% of the Companys net book value as of the last day of the immediately
 preceding year. The Company has reserved 10,800,000 shares of class A common stock in the event of conversion
 of the class B common stock.

53

---



At December 31, 2003 and 2002, 960,000 shares of redeemable
 class A stock were issued and outstanding. At December 31, 2003, these shares were subject to redemption
 at a price of $38.95 per share, which approximated book value. These shares are owned by employees and
 directors of the Company and its subsidiaries and the employee benefit plans of the Company. These holders
 of class A common stock have the right to require the Company to purchase their shares under certain
 circumstances, while the Company has the option to purchase the shares from holders upon the occurrence
 of certain events, including the holders death or retirement from the Company. In addition, the Foundation
 has the option to purchase these redeemable class A shares from the holders upon the sale of all or
 substantially all of the shares of class B common stock held by the Foundation It is both the Companys
 and Foundations intent that these 960,000 shares will continue to be held by employees, directors and
 employee benefit plans of the Company and its subsidiaries and not be directly purchased by the Company
 or the Foundation.

Federal law prevents the Company and its non-bank subsidiaries
 from borrowing from the Subsidiary Banks unless the loans are secured by specified U.S. obligations.
 Further, the secured loans that may be made by Subsidiary Banks are generally limited in amount to 10%
 of the Subsidiary Banks equity if made to the Company or any individual affiliate and 20% of the Subsidiary
 Banks equity if made to all affiliates and the Company in the aggregate. At December 31, 2003, 2002
 and 2001, no Subsidiary Banks had extended credit to the Company.

Payment of dividends to the Company by its Subsidiary
 Banks is subject to various limitations by bank regulators, which includes maintenance of certain minimum
 capital ratios. As of December 31, 2003, $31,727,000 of retained earnings of the Subsidiary Banks was
 available for distribution to the Company as dividends subject to these limitations. Approximately $24,428,000
 was available for distribution without obtaining the prior approval of the appropriate bank regulator.

# Note S:   Regulatory Matters

The Company is subject to various regulatory capital
 requirements administered by the federal banking agencies. Failure to meet minimum capital requirements
 can initiate certain mandatory and possibly additional discretionary actions by regulators that, if
 undertaken, could have a direct material effect on the Companys financial statements. Under capital
 adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet
 specific capital guidelines that involve quantitative measures of the Companys assets, liabilities,
 and certain off-balance sheet items as calculated under regulatory accounting practices. The Companys
 capital amounts and classification are also subject to qualitative judgements by the regulators about
 components, risk weightings, and other factors.

Quantitative measures established by regulation to
 ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the
 table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as
 defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as
 of December 31, 2003, that the Company meets all capital adequacy requirements to which it is subject.

54

---



The Companys and Subsidiary Banks actual capital
 amounts and ratios as of December 31 are also presented below:

|                         | Actual | For Capital
Adequacy Purposes | To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
|------------------------ | ------ | ----------------------------- | ----------------------------------------------------------------
|
|
|As of December 31, 2003: |        |                               |                                                                 
|Total capital (to risk   |        |                              
|weighted assets)         |        |                              
|Consolidated             |        |                               | $                                                               
|Subsidiary Banks         |        |                               | $                                                               
|Tier I capital (to risk  |        |                              
|weighted assets)         |        |                              
|Consolidated             |        |                               | $                                                               
|Subsidiary Banks         |        |                               | $                                                               
|Tier I capital (to       |        |                              
|average assets)          |        |                              
|Consolidated             |        |                               | $                                                               
|Subsidiary Banks         |        |                               | $                                                               
|                         |        |                               |                                                                 
|As of December 31, 2002: |        |                              
|Total capital (to risk   |        |                              
|weighted assets)         |        |                              
|Consolidated             |        |                               | $                                                               
|Subsidiary Banks         |        |                               | $                                                               
|Tier I capital (to risk  |        |                              
|weighted assets)         |        |                              
|Consolidated             |        |                               | $                                                               
|Subsidiary Banks         |        |                               | $                                                               
|Tier I capital (to       |        |                              
|average assets)          |        |                              
|Consolidated             |        |                               | $                                                               
|Subsidiary Banks         |        |                               | $                                                               

The Federal Deposit Insurance Corporation Improvement
 Act (FDICIA) required the establishment of a capital-based supervisory system of prompt corrective
 action for all depository institutions. The Federal Reserve Boards implementation of FDICIA defines
 well-capitalized institutions as those whose Tier I capital ratio equals or exceeds 6%, total risk-based
 capital ratio equals or exceeds 10%, and leverage ratio equals or exceeds 5%. The Subsidiary Banks
 ratios in each of these categories met or exceeded the well-capitalized ratios as of December 31,
 2003.

55

---



# Note T:   Bremer Financial Corporation (Parent Company Only) Condensed Statements:

# Balance Sheets

|                                                           | December 31,
|---------------------------------------------------------- | ------------
|
|
|Assets                                                     |             
|Cash and cash equivalents                                  |             
|Investment securities available-for-sale                   |             
|Investment in and advances to:                             |             
|Bank subsidiaries                                          |             
|Non-bank subsidiaries                                      |             
|Other assets                                               |             
|                                                           |             
|Total assets                                               |             
|                                                           |             
|Liabilities and Shareholders' Equity                       |             
|Long-term debt                                             |             
|Junior subordinated debentures issued to subsidiary trusts |             
|Accrued expenses and other liabilities                     |             
|Redeemable class A common stock                            |             
|Shareholders' equity                                       |             
|                                                           |             
|Total liabilities and shareholders' equity                 |             
|                                                           |             

# Statements of Income

|                                                 | Years Ended December 31,
|------------------------------------------------ | ------------------------
|
|
|Income                                           |                         
|Dividends from:                                  |                         
|Bank subsidiaries                                |                         
|Non-bank subsidiaries                            |                         
|Interest from subsidiaries                       |                         
|Interest income on taxable securities            |                         
|Gain on sale of securities                       |                         
|Other income                                     |                         
|                                                 |                         
|Total income                                     |                         
|Expenses                                         |                         
|Interest expense:                                |                         
|Short-term borrowings                            |                         
|Long-term debt                                   |                         
|Junior subordinated debentures issued to         |                         
|subsidiary trusts                                |                         
|Salaries and benefits                            |                         
|Operating expense paid to subsidiaries           |                         
|Other operating expenses                         |                         
|                                                 |                         
|Total expenses                                   |                         
|                                                 |                         
|Income before income tax benefit                 |                         
|Income tax benefit                               |                         
|                                                 |                         
|Income of parent company only                    |                         
|Equity in undistributed earnings of subsidiaries |                         
|                                                 |                         
|Net income                                       |                         
|                                                 |                         

56

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# Note T:   Bremer Financial Corporation (Parent Company Only) Condensed Statements (continued):

# Statements of Cash Flows

|                                                         | Years Ended December 31,
|-------------------------------------------------------- | ------------------------
|
|
|Cash flows from operating activities                     |                         
|Net income                                               |                         
|Adjustments to reconcile net income to                   |                         
|net cash provided by operating activities                |                         
|Equity in undistributed (earnings) of subsidiaries       |                         
|Gain on sale of securities                               |                         
|Depreciation and amortization                            |                         
|Other, net                                               |                         
|                                                         |                         
|Net cash provided by operating activities                |                         
|                                                         |                         
|Cash flows from investing activities                     |                         
|Investment in and advances to subsidiaries, net          |                         
|Purchases of securities                                  |                         
|Proceeds from maturities of securities                   |                         
|Proceeds from sales of securities                        |                         
|                                                         |                         
|Net cash (used) provided by investing activities         |                         
|                                                         |                         
|Cash flows from financing activities                     |                         
|Short-term borrowings, net                               |                         
|Repayments of long-term debt                             |                         
|Proceeds from issuance of junior subordinated debentures |                         
|Dividends paid                                           |                         
|                                                         |                         
|Net cash (used) provided by financing activities         |                         
|                                                         |                         
|Increase (decrease) in cash and cash equivalents         |                         
|Cash and cash equivalents                                |                         
|Beginning of year                                        |                         
|                                                         |                         
|End of year                                              |                         
|                                                         |                         

57

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# Note U:   Quarterly Consolidated Financial Information (Unaudited):

# BREMER FINANCIAL
CORPORATION  SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

|                             | 2003 Quarter Ended
|---------------------------- | ------------------
|
|
|Interest income              |                   
|Interest expense             |                   
|Net interest income          |                   
|Net income                   |                   
|Per share of common stock    |                   
|Net income-basic and diluted |                   

|                             | 2002 Quarter Ended
|---------------------------- | ------------------
|
|
|Interest income              |                   
|Interest expense             |                   
|Net interest income          |                   
|Net income                   |                   
|Per share of common stock    |                   
|Net income-basic and diluted |                   

58

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# INDEPENDENT AUDITORS REPORT

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF BREMER
 FINANCIAL CORPORATION SAINT PAUL, MINNESOTA

We have audited the accompanying consolidated balance
 sheets of Bremer Financial Corporation and subsidiaries (the Company), a subsidiary of the Otto Bremer
 Foundation, as of December 31, 2003 and 2002 and the related consolidated statements of income, shareholders
 equity, and cash flows for each of the three years in the period ended December 31, 2003. These consolidated
 financial statements are the responsibility of the Companys management. Our responsibility is to express
 an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing
 standards generally accepted in the United States of America. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the financial statements are free of
 material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes assessing the accounting principles
 used and significant estimates made by management, as well as evaluating the overall financial statement
 presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements
 present fairly, in all material respects, the financial position of Bremer Financial Corporation and
 subsidiaries as of December 31, 2003 and 2002 and the results of their operations and their cash flows
 for the three years in the period ended December 31, 2003 in conformity with accounting principles
 generally accepted in the United States of America.

As discussed in Note A to the consolidated financial
 statements, the Company changed its method of accounting for goodwill in 2002.

/s/ Deloitte & Touche LLP

Minneapolis, MinnesotaFebruary 27, 2004

59

---



# ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURE

No event requiring disclosure pursuant to this Item
 9 has occurred during the two years ended December 31, 2003.

# ITEM 9A.   CONTROLS AND PROCEDURES

Our management, including the Chief Executive Officer
 and Chief Financial Officer, has evaluated the effectiveness, as of December 31, 2003, of the Companys
 internal control over financial reporting and, based on their evaluation, the Chief Executive Officer
 and Chief Financial Officer have concluded that the Companys internal control over financial reporting
 is effective. There was no change in our internal control over financial reporting that occurred during
 the year ended December 31, 2003 that has materially affected, or is reasonably likely to materially
 affect, the Companys internal control over financial reporting.

# PART III

Items 10 through 14 of the Form 10-K are omitted because
 the Company will file before April 30, 2004 a definitive Proxy Statement (the Proxy Statement) conforming
 to Schedule 14A involving the election of directors. The information required by Items 10, 11, 12, 13
 and 14 of Part III of the Form 10-K are hereby incorporated by reference to such Proxy Statement.

# PART IV

# ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

|(a) | The following documents are filed as part of this report:
|--- | ---------------------------------------------------------

| | (1) | The following financial statements of Bremer Financial Corporation are part of this document under Item 8. Financial Statements and Supplementary Data:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Consolidated Balance Sheets - December 31, 2003 and December 31, 2002Consolidated Statements of Income - Years ended December 31, 2003, 2002 and 2001Consolidated Statements of Shareholders Equity - Years ended December 31, 2003, 2002 and 2001Consolidated Statements of Cash Flows - Years ended December 31, 2003, 2002 and 2001Notes to Consolidated Financial StatementsIndependent Auditors Report
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Financial statement schedules are omitted as they are not applicable, not required, or the required information is included in the financial statements or notes thereto.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

60

---



| | (3) | The following exhibits are filed as a part of this report:
| | --- | ----------------------------------------------------------

| |  |  | 12.114 21 31.1    31.2    32.1    32.2    99.1 | Statement Regarding Computation of Ratio of Earnings to Fixed Charges.Code of Ethics.Subsidiaries of the Company.Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of2002.Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of2002.Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002.Risk Factors.
| |  |  | ---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following exhibit is incorporated by reference
 to Exhibit 10.2 to the Companys Annual Report on Form 10-K for the year ended December 31, 2002.

| |  |  | 10.1 | Bremer Financial Corporation Executive Stock Purchase Plan effective August 1, 2002.
| |  |  | ---- | ------------------------------------------------------------------------------------

The following exhibits are incorporated by reference
 to Exhibits 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7 and 4.8, respectively, to Amendment No. 1 to the Companys
 Registration Statement on Form S-2 filed with the Securities and Exchange Commission on April 30, 2001:

| |  |  | 4.14.24.34.44.54.64.7   4.8 | Form of Indenture between Wilmington Trust Company and Bremer Financial Corporation.Form of Junior Subordinated Debenture (included as an exhibit to Exhibit 4.1).Certificate of Trust for Bremer Capital Trust I.Declaration of Trust for Bremer Capital Trust I.Form of Amended and Restated Declaration of Trust for Bremer Capital Trust I.Form of Capital Securities Certificate (included as an exhibit to Exhibit 4.5).Form of Capital Securities Guarantee Agreement between Bremer Financial Corporation andWilmington Trust Company.Form of Supplemental Indenture.
| |  |  | --------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following exhibits are incorporated by reference
 to Exhibits 3.1, 28.7, and 28.8, respectively, to the Companys Annual Report on Form 10-K for the year
 ended December 31, 1989:

| |  |  | 3.199.2        99.3 | Bylaws of the Company in effect on the date hereof.The portion of the final Prospectus of the Company dated April 20, 1989 ("Prospectus"), whichwas filed with the SEC on April 20, 1989, entitled "Description of Capital Stock Description ofClass A Common Stock - Restrictions on Transfer."The portion of the Prospectus entitled "Description of Capital Stock - Description of Class ACommon Stock - First Call Option to Company" on page 64 of the Prospectus.
| |  |  | ------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following exhibit is incorporated by reference
 to Exhibit 3.1 to the Companys Registration Statement on Form S-1 filed with the SEC on February 10,
 1989:

| |  |  | 3.2 | Restated Articles of Incorporation of the Company in effect on the date hereof.
| |  |  | --- | -------------------------------------------------------------------------------

61

---



The following exhibits are incorporated by reference
 to Exhibits 4.1 and 4.2, respectively, to the Company's Amendment No. 1 to Registration Statement on
 Form S-1 filed with the SEC on March 29, 1989:

| |  |  | 4.9 4.10 | Specimen of Stock Certificate evidencing Class A Common Stock.Specimen of Stock Certificate evidencing Class B Common Stock.
| |  |  | -------- | ----------------------------------------------------------------------------------------------------------------------------

|(b) | During the quarter ended December 31, 2003, the Company filed or furnished the following Current Reports on Form 8-K:
|--- | ---------------------------------------------------------------------------------------------------------------------

| |  |  | A Current Report on Form 8-K dated October 08, 2003, which disclosed the issuance of a press release under Item 5, was filed by the Company with the Securities and Exchange Commission on October 9, 2003. The press release announced that the Company had named Pat Donovan as Executive Vice President and Chief Operating Officer of Bremer Financial Corporation.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | A Current Report on Form 8-K dated October 28, 2003, which disclosed the issuance of a press release under Item 12, was furnished by the Company to the Securities and Exchange Commission on October 28, 2003. The press release described the Companys financial results for the quarter ended September 30, 2003.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A copy of this Form 10-K and exhibits herein can be
 obtained by writing Robert B. Buck, Executive Vice President and Chief Financial Officer, Bremer Financial
 Corporation, 445 Minnesota Street, Suite 2000, St. Paul, MN 55101.

62

---

# SIGNATURES

Pursuant to the  requirements of
Section 13 or 15(d) of the Securities  Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

|March 18, 2004 | Bremer Financial Corporation
By: /s/Stan K. Dardis
              Stan K. Dardis
    Its President and Chief Executive Officer
|-------------- | -----------------------------------------------------------------------------------------------------------------------------

Pursuant to the  requirements of the
Securities  Exchange Act of 1934,  this report is signed below by the following  persons
on behalf of the registrant on March 18, 2004 in the capacities indicated.

|                                          |                                          
|----------------------------------------- | -----------------------------------------
|/s/Stan K. Dardis                         | /s/Patrick J. Donovan                    
|Stan K. Dardis                            | Patrick J. Donovan                       
|Its President and Chief Executive Officer | Executive Vice President and             
|and Director                              | Chief Operating Officer and Director     
|                                          |                                          
|/s/Terry M. Cummings                      | /s/Ronald James                          
|Terry M. Cummings                         | Ronald James                             
|Chairman of the Board and Director        | Director                                 
|/s/William H. Lipschultz                  | /s/Terrence W. Glarner                   
|William H. Lipschultz                     | Terrence W. Glarner                      
|Vice President and Director               | Director                                 
|/s/Charlotte S. Johnson                   | /s/Robert B. Buck                        
|Charlotte S. Johnson                      | Robert B. Buck                           
|Vice President and Director               | Executive Vice President and             
|                                          | Chief Financial Officer                  
|                                          | (Principal Financial Officer)            
|/s/Sherman Winthrop                       | /s/Stuart F. Bradt                       
|Sherman Winthrop                          | Stuart F. Bradt                          
|Director                                  | Controller (Principal Accounting Officer)
|/s/Daniel C. Reardon                      |                                          
|Daniel C. Reardon                         |                                          
|Vice President and Director               |                                          
|                                          |                                          

63

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# INDEX TO EXHIBITS

Description of Exhibits

| |                                        
| | ---------------------------------------
| | 12.1
14  
21  
31.1
31.2
32.1
32.2
99.1