SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K/A

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                                       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                              41-0715583
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)               Identification No.)

          445 MINNESOTA STREET                            55101
        SUITE 2000, ST. PAUL, MN                        (Zip Code)
(Address of principal executive offices)

       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 Common
                                                             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 __X__ No _____

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
best of 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]

Based upon the $29.50 per share book value of the shares of class A common stock
of the Company as of December 31, 2000, the aggregate value of the Company's
shares of class A common stock held by employees and directors as of such date
was approximately $28.3 million.

As of March 30, 2001, there were 1,200,000 shares of class A common stock and
10,800,000 shares of class B common stock outstanding.

<PAGE>


                          BREMER FINANCIAL CORPORATION

                           ANNUAL REPORT ON FORM 10-K

                      FOR THE YEAR ENDED DECEMBER 31, 2000

                                      INDEX

                                                                            Page

Documents Incorporated by Reference........................................   ii
Cross Reference Sheet......................................................  iii

PART I

Item 1.     Business.......................................................   1

Item 2.     Properties.....................................................  10

Item 3.     Legal Proceedings..............................................  10

Item 4.     Submission of Matters to a Vote of Security Holders............  11

PART II

Item 5.     Market for Registrant's Common Equity and
            Related Stockholder Matters....................................  11

Item 6.     Selected Financial Data........................................  13

Item 7.     Management's Discussion and Analysis of
            Financial Condition and Results of Operations..................  14

Item 8.     Financial Statements and Supplementary Data....................  31

Item 9.     Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure.........................  54

PART III

Item 10 through Item 13.
See "Documents Incorporated by Reference" (Page ii)........................  54

PART IV

Item 14.     Exhibits, Financial Statement Schedules, and
             Reports on Form 8-K...........................................  54

Signatures   ..............................................................  57


                                       i
<PAGE>


                       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 II

Item 5. Market for Registrant's Common     Reference is made to the portions
        Equity and Related Stockholder     described herein of the final
        Matters                            Prospectus of the Company dated
                                           April 20, 1989 filed with the
                                           Securities and Exchange Commission
                                           on April 20, 1989.

PART III

Item 10. Directors and Executive           Reference is made to the Registrant's
         Officers of the Registrant        definitive proxy statement ("Proxy
                                           Statement"), which will be filed with
                                           the Securities and Exchange
                                           Commission ("Commission") within 120
                                           days after December 31, 2000.

Item 11. Executive Compensation            Reference is made to the Registrant's
                                           Proxy Statement.

Item 12. Security Ownership of Certain     Reference is made to the Registrant's
         Beneficial Owners and             Proxy Statement.
         Management

Item 13. Certain Relationships and         Reference is made to the Registrant's
         Related Transactions              Proxy Statement.


           (The remainder of this page was intentionally left blank.)


                                       ii
<PAGE>


                              CROSS REFERENCE SHEET

                            BETWEEN ITEMS IN PART III
                                OF FORM 10-K AND
                                 PROXY STATEMENT
         PURSUANT TO PARAGRAPH G-4 OF GENERAL INSTRUCTIONS TO FORM 10-K

                                                             SUBJECT HEADINGS
ITEM NUMBER AND CAPTION                                     IN PROXY STATEMENT
-----------------------                                     ------------------

Item 10. Directors and Executive Officers of the          Election of Directors
         Registrant

Item 11. Executive Compensation                           Election of Directors

Item 12. Security Ownership of Certain Beneficial
         Owners and Management                            Principal Stockholders

Item 13. Certain Relationships and Related Transactions   Election of Directors


           (The remainder of this page was intentionally left blank.)


                                      iii
<PAGE>


                                     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," "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 99.4, 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 $4.2
billion in assets as of December 31, 2000, operating 11 subsidiary banks and 101
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, 1996 to December 31, 2000, we increased our asset base from $2.9
billion to $4.2 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 $1.8 billion to $2.9
billion, and our deposits increased from $2.3 billion to $3.1 billion. Giving
pro forma effect to the pending Branch Acquisition (described below), we would
have had assets of nearly $4.8 billion, loans and leases of $3.2 billion, and
deposits of $3.9 billion as of year-end 2000.

BUSINESS DEVELOPMENTS IN 2000

     In March 2000 we acquired, for cash in a purchase transaction, the stock of
Northwest Equity Corp. of Amery, Wisconsin, and its wholly-owned subsidiary,
Northwest Savings Bank, with offices in Amery, New Richmond, and Siren,
Wisconsin. In May 2000, Northwest Savings Bank was merged with and into our
subsidiary bank in Wisconsin, which added about $91.8 million in assets and
$61.6 million in deposits to that bank and resulted in the closing of duplicate
facilities in Siren and Amery, Wisconsin.

     In 2000, a number of affiliated business combinations involving our
wholly-owned subsidiaries were consummated for the purposes of improving
operational efficiencies and streamlining administrative oversight. On June 1,
2000, Bremer Bank, National Association, Breckenridge, Minnesota, merged with
and into Bremer Bank, National Association, Alexandria, Minnesota. On June 23,
2000, Bremer Bank, National Association, Moorhead, Minnesota consummated an
interim bank merger pursuant to 12 U.S.C. paragraph 215a. As a result of this
interim merger, the common stock owned by the minority shareholders of the
Moorhead Bank was cancelled and converted into the right to receive cash.

     Effective August 1, 2000, Bremer Bank, National Association, Crookston,
Minnesota, merged with and into Bremer Bank, National Association, Grand Forks,
North Dakota. On September 1, 2000, Bremer Services, Inc., the Company's
centralized operations subsidiary in West St. Paul, Minnesota, merged with and
into Bremer Financial Services, Inc., of St. Paul, Minnesota, its affiliated
management and bank services company. And on November 1, 2000, Bremer Bank,
National Association, Detroit Lakes, Minnesota merged with and into our
subsidiary bank in Moorhead, Minnesota.

PENDING BRANCH ACQUISITION

FIRSTAR BRANCHES. On January 30, 2001, we entered into a definitive Branch
Purchase and Assumption Agreement (the "Branch Agreement") with Firstar
Corporation, Milwaukee, Wisconsin, (the "Seller") to acquire 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 recently completed merger
with U.S. Bancorp, Minneapolis, Minnesota. As of December 31, 2000, the Seller
reported that the operations to be acquired under the Branch Agreement had total
deposits of approximately $750 million and loans of approximately $300 million.
The levels of deposits and loans of the Seller's branches can be expected to
vary prior to closing. Consummation of the Branch Acquisition is subject to
regulatory approvals and other customary conditions


                                       1
<PAGE>


and is expected to occur in May 2001. The 11 branch offices and the commercial
loan portfolio will be acquired by and operated as part of our subsidiary bank
charter in South St. Paul, Minnesota. The acquisition will be accounted for as
an acquisition of assets and assumption of liabilities and will result in the
recognition by us of deposit-based intangibles, including goodwill, in an amount
equal to the purchase price premium.

In the Branch Agreement, the Seller made certain representations and warranties
to us as to matters including the operations and financial condition of the
branches. These representations and warranties generally survive until the first
anniversary of the closing date. We also made representations and warranties to
the Seller as to certain matters, including lack of any conflicts of the Branch
Agreement with certain agreements or documents relating to us. The Seller has
agreed that until closing, and for an additional 12 months following closing, it
will not solicit deposits or loans from customers included in the Branch
Acquisition.

The Branch Agreement is subject to termination by each party upon a material
breach of the agreement by the other party, in the event that the closing has
not occurred within 180 calendar days from February 27, 2001, or at any time
after the denial of any regulatory approval. In the event of termination,
neither party shall have any liability or obligation to the other party, except
as it relates to liabilities arising from breach of the agreement.

In order to meet the regulatory capital requirements for completion of the
Branch Acquisition, we intend to increase our level of Tier I capital by at
least $55.0 million through the completion of a trust preferred capital
securities offering. In addition to the proposed $55.0 million offering, we
issued $16.5 million of Trust Preferred Capital Securities in an institutional
private placement on February 22, 2001. We believe that we will be able to
consummate the Branch Acquisition in May 2001; however, no assurances can be
given that we will be able to meet this timetable.

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 2000, the Otto Bremer
Foundation made over $18.2 million in grants to over 650 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 2000, we augmented this growth through six acquisitions of
banks and bank holding companies totaling approximately $708 million of assets
and $585 million of deposits. During that time, we also acquired four branch
offices and their related $100 million of deposits. The pending Branch
Acquisition will be our fifth branch purchase and eleventh acquisition
transaction in the last ten years. 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. In recent years, and including the Branch
Acquisition, our expansion focus has been primarily in more urban, metropolitan
areas, most noticeably in Minneapolis/St. Paul and surrounding communities.

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 a comprehensive
               training program that must be attended by every customer contact
               employee.


                                       2
<PAGE>


               We have also 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, estate and financial planning,
               and asset management. In 2000, new product development resulted
               in ten new business products and six new consumer products to
               serve current and new market segments.

          >>   GRANTING SUBSTANTIAL LOCAL AUTONOMY TO OUR SUBSIDIARY BANKS

               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 generally 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 $48 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, it
               also improves our brand recognition.

     *    INVESTING IN TECHNOLOGY

          We are committed to investing in technology to improve product
          offerings, reduce product costs and provide more convenient service to
          our customers. Over the last three years, we have invested over $5
          million to upgrade our technology infrastructure. This included
          upgrading most of our 1,500 personal computers, effectively connecting
          them through improvements in the company-wide intranet, enhancing our
          Internet capabilities, and making improvements in the customer contact
          information system. In 2000, we

          >>   launched Bremer eBank and Bremer ePay, our retail Internet
               banking and bill payment services; and

          >>   increased the functionality of www.bremer.com by adding tools
               such as online loan and account applications, calculators, check
               reordering, retirement planning, and local Bremer community
               websites.

          In August 2001, we plan to launch Bremer eBiz and Bremer eACH, a
          package of Internet-based cash management services for businesses. In
          the future, we will continue to invest in technologies that allow
          customers to communicate with us at the time and in the manner that
          best meets their needs and preference.

     *    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:

          >>   our pending Branch Acquisition, which will substantially improve
               customer access in the Minneapolis/St. Paul area; and


                                       3
<PAGE>


          >>   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 at the holding company level many critical
          subsidiary bank administrative and support functions. Functions that
          have been centralized at the holding company include:

          >>   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,
               internal and external audit services, computer software and
               hardware, equipment and supplies.

          We believe that by standardizing certain policies, procedures and
          products, and by centralizing administrative functions, subsidiary
          bank management and personnel can 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.


                                       4
<PAGE>


OUR BANKS

Our 11 subsidiary banks are located in Minnesota, Wisconsin and North Dakota. At
December 31, 2000, they ranged in size from $71.3 million to $799.0 million in
total assets and from $62.4 million to $558.4 million 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 as of
December 31, 2000, are as follows:

<TABLE>
<CAPTION>
Location of Subsidiary Bank Charter     Branch Locations              Assets       Deposits
-----------------------------------     ----------------              ------       --------
<S>                                     <C>                          <C>           <C>
                                                                         (in thousands)

Alexandria, MN                          Alexandria, MN (2)           $400,592      $292,706
                                        Brandon, MN
                                        Breckenridge, MN
                                        Fergus Falls, MN
                                        Morris, MN
                                        Starbuck, MN
                                        Wahpeton, ND

Brainerd, MN                            Brainerd, MN (2)             $255,953      $194,103
                                        Aitkin, MN
                                        Baxter, MN (2)

Grand Forks, ND                         Grand Forks, ND (2)          $558,234      $438,031
                                        Crookston, MN
                                        Fisher, MN
                                        Fordville, ND
                                        Forest River, ND
                                        Gilby, ND
                                        Grafton, ND
                                        Hillsboro, ND
                                        Hoople, ND
                                        Larimore, ND
                                        Saint Thomas, ND
                                        Shelly, MN
                                        Warren, MN

International Falls, MN                 International Falls, MN       $71,322       $62,448

Marshall, MN                            Marshall, MN                 $210,170      $183,648
                                        Redwood Falls, MN
                                        Edgerton, MN
                                        Leota, MN
</TABLE>


                                        5
<PAGE>


<TABLE>
<CAPTION>
Location of Subsidiary Bank Charter     Branch Locations              Assets       Deposits
-----------------------------------     ----------------              ------       --------
<S>                                     <C>                          <C>           <C>
                                                                         (in thousands)

Menomonie, WI                           Menomonie, WI (3)            $474,262      $374,040
                                        Amery, WI
                                        Bayfield, WI
                                        Colfax, WI
                                        Danbury, WI
                                        Deer Park, WI
                                        Eau Galle, WI
                                        Elk Mound, WI
                                        Frederic, WI
                                        Knapp, WI
                                        La Pointe, WI
                                        New Richmond, WI
                                        Rock Falls, WI
                                        Siren, WI
                                        Washburn, WI

Minot, ND                               Minot, ND (4)                $425,776      $352,413
                                        Berthold, ND
                                        Carrington, ND
                                        Devils Lake, ND
                                        Glenfield, ND
                                        Kensal, ND
                                        Lansford, ND
                                        Max, ND
                                        Minnewaukan, ND
                                        Richardton, ND
                                        Rugby, ND
                                        Woodworth, ND

Moorhead, MN                            Moorhead, MN                 $376,905      $248,292
                                        Fargo, ND (2)
                                        Casselton, ND
                                        Detroit Lakes, MN
                                        Leonard, ND
                                        Lisbon, ND
                                        Perham, MN

St. Cloud, MN                           St. Cloud, MN (2)            $409,775      $277,307
                                        Rice, MN
                                        Sartell, MN
                                        Sauk Rapids, MN

South St. Paul, MN                      South St. Paul, MN           $798,951      $558,358
                                        St. Paul, MN (3)
                                        Minneapolis, MN
                                        Brooklyn Park, MN
                                        Eagan, MN
                                        Eden Prairie, MN
                                        Inver Grove Heights, MN
                                        Milaca, MN
                                        Ogilvie, MN
                                        Princeton, MN
                                        Roseville, MN
                                        Watertown, MN
                                        White Bear Lake, MN
                                        Zimmerman, MN
</TABLE>


                                       6
<PAGE>


<TABLE>
<CAPTION>
Location of Subsidiary Bank Charter     Branch Locations              Assets       Deposits
-----------------------------------     ----------------              ------       --------
<S>                                     <C>                          <C>           <C>
                                                                         (in thousands)

Willmar, MN                             Willmar, MN (2)              $182,796      $140,002
                                        Hutchinson, MN
</TABLE>


When consummated, the Branch Acquisition will expand our Minneapolis/St. Paul
area presence to eight additional suburban communities, including Arden Hills,
Richfield, St. Anthony, Brooklyn Park, Maplewood, Edina, Minnetonka and St.
Louis Park.

COMMUNITIES SERVED BY OUR BANKS

We operate in 82 communities across Minnesota, Wisconsin and North Dakota. Over
the past few years, we have begun to expand significantly in more urban
metropolitan areas, including Minneapolis/St. Paul, Fargo/Moorhead, and St.
Cloud. Prior to that time, we had our strongest market presence in communities
outside the major metropolitan areas. In Minnesota, these non-metropolitan
communities are a blend of agricultural-based areas in the southwestern portion
of the state to more recreational and resort-based communities in west central
Minnesota. Our North Dakota communities are in primarily agricultural-based
areas along the Red River Valley as well as 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.

Over the past few years, 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 Minneapolis/St. Paul to St. Cloud corridor and the
Fargo/Moorhead area. While 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 pending Branch Acquisition will add another 11 offices in this area. We
have also opened a number of offices in the rapidly growing Fargo/Moorhead area
during the last few years. Approximately 35% of our deposits and 40% of our
loans are in the metropolitan hubs of Minneapolis/St. Paul/St. Cloud and
Fargo/Moorhead.

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 for primarily manufacturing, wholesale, or retail businesses. While we
look to 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. Advances secured by inventory and receivables are normally
short term floating rate advances and constitute about 50% of this portfolio.
Equipment loans typically amortize over five years and constitute the remainder
of this portfolio.

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 70% of our commercial real estate loans are
fixed rate loans and 30% 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 50% 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 75% of our home
equity loans are fixed rate loans with terms of five to twelve years. The
remaining 25% of our home equity loans are floating rate lines of credit. First
mortgage residential real estate


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<PAGE>


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 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. Most
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 municipalities and
qualifying non-profit 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, including checking accounts, money market accounts,
savings accounts and certificates of deposit, designed to meet the individual
needs of our customers. 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
across 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 trust and
other fiduciary services, insurance, and asset-based lending and leasing
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 BUSINESS FINANCE CORPORATION. We formed Bremer Business Finance
Corporation in late 1996 to expand the services available to customers that may
not qualify for traditional bank financing. Bremer Business Finance Corporation
engages in secured lending activities and works closely with the Bremer banks in
offering services to customers in the areas of asset-based finance, real estate
finance, real estate equity finance, corporate finance, project finance,
equipment financing and leasing. As of December 31, 2000, Bremer Business
Finance Corporation had a loan portfolio of $74.8 million, with the majority of
loans being variable rate credits generally priced between 200 and 350 basis
points over the prime rate. In 2000, our finance company generated $1.3 million
in net income and employed a staff of five.

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.
Bremer Trust also operates on a limited basis as a registrar and transfer agent.
As of December 31, 2000, Bremer Trust had 85 employees. Our total trust revenues
for 2000 were $9.1 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 coverages 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 2000,
Bremer Insurance generated insurance premium sales of $8.2 million and, as of
December 31, 2000, it had 94 employees.

BROKERAGE SERVICES. Consumer investment products and services are available 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 $5.5 million
in brokerage commissions in 2000.


                                       8
<PAGE>


BREMER LIFE INSURANCE COMPANY. Bremer Life Insurance Company was formed as a
reinsurer of credit life and credit accident and health insurance sold by the
Bremer banks, in partnership with American General, which owns a preferred stock
interest in the life company.

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 West St. Paul, Minnesota. 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 into
the next three to five years. Certain of the operations of these third party
providers 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. These bank limits range from $700
thousand to $7.0 million, depending on the size of the individual bank.

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.

Most loan workouts are handled by the special assets group of the holding
company. To improve distressed credit management practices, we have established
a policy that requires the prompt transfer of certain problem loan situations
from the subsidiary banks to the special assets group.

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 is comprised
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.

          *    We have outsourced much of our internal audit function, which
               conducts periodic operational, compliance and internal control
               reviews of all of our subsidiary banks and system-wide
               operations. The director of risk management directs the work of
               internal audit and coordinates all reporting to the boards of
               directors.

          *    Compliance administration and legal counsel 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 the monitoring of asset liability activities to insure 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 at their
level. Employee benefits are standardized and administered by the holding
company.

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


                                       9
<PAGE>


COMPETITION

We do 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 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
us. As a result, some of our competitors have advantages over us in name
recognition and market penetration.

EMPLOYEES

As of February 28, 2001, we had 1,487 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. 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 consists of approximately 25,000 square feet. In
addition, the centralized service operations of the holding company occupy
approximately 30,000 square feet of owned property in West St. Paul, Minnesota.
As a result of the Branch Acquisition, we anticipate expanded space needs for
our service operations and expect to secure additional leased space in the
Minneapolis/St. Paul area within the next 12 months. We believe that the
principal offices at 445 Minnesota Street in St. Paul will be sufficient for the
holding company's 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, Minnesota and leased space in supermarkets. Our bank
facilities range in size from 391 square feet to 5,280 square feet. The pending
Branch Acquisition will add four new owned properties and seven leased
properties, ranging in size from 3,000 square feet to 31,888 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, 2000 to a vote of the Company's security holders, through the
solicitation of proxies or otherwise.

                                     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 March 19, 2001, 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


                                       10
<PAGE>


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, 2000, our net worth, including redeemable class A common stock, was
$354.0 million and 10% of our net worth and redeemable class A common stock was
$35.4 million.

     During the period from January 1, 2000 through March 19, 2001, we did not
directly purchase any shares of class A common stock but assigned to our
Employee Stock Ownership Plan and the Bremer Banks Profit Sharing Plus Plan our
options to purchase a total of 166,879.6765 shares. The ESOP and the Profit
Sharing Plan purchased these shares and then transferred them to our employees
and employees of our subsidiaries through the ESOP and the Profit Sharing Plan.
In addition, 4,295 shares of class A common stock were transferred directly
between individuals at various times during the same period. To the best of our
knowledge, these were the only transfers of shares of class A common stock
effected during the period from January 1, 2000 through March 19, 2001. The
sales price of the shares of class A common stock in such transactions ranged
from $26.07 to $35.25 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, 2000, the most recent date for which a per share book
value for the class A common stock is available, such value was $29.50.

     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.

HOLDERS

     As of March 19, 2001, there were approximately 1,300 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 also
described in Note O of the Notes to Consolidated Financial Statements set forth
in Item 8 of this 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 the our
subsidiary banks are insured up to the applicable limit (currently $100,000) by
the 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


                                       11
<PAGE>


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 its 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, 2000, the subsidiary banks had retained earnings of
$24.2 million which were available for distribution to the parent as dividends
in 2001 subject to regulatory and administrative restrictions. Of this amount,
approximately $15.7 million was available for distribution without obtaining the
prior approval of the appropriate bank regulator. In 2000 and 1999, the
subsidiary banks paid total dividends to the parent of $46.5 million and $29.1
million. The range of dividend payouts (dividends paid divided by net income)
was 27.8% to 220.8% in 2000 and 22.7% to 114.0% in 1999.

     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. 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 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
its class A common stock of $16.7 million in 2000 and $15.8 million in 1999.
$4.8 million of dividends were paid in the final quarter of 2000, while $4.0
million of dividends were paid in the first three quarters of 2000 and in each
of the four quarters of 1999. 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 5.3% and 5.2% for the years ended December 31, 2000 and
1999.


                                       12

<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

                  BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
                              FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
                                                                         AT OR FOR THE YEAR ENDED DECEMBER 31,
                                                           2000           1999           1998           1997           1996
                                                        ----------     ----------     ----------     ----------     ----------
                                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                     <C>            <C>            <C>            <C>            <C>
OPERATING RESULTS
    Total interest income ..........................    $  314,171     $  263,967     $  245,525     $  226,550     $  210,703
    Net interest income ............................       150,989        139,053        124,101        116,581        108,193
    Net interest income (1) ........................       159,051        146,370        131,678        124,169        115,862
    Provision for credit losses ....................         8,338          8,321          5,570          4,746          2,756
    Noninterest income .............................        54,217         52,465         51,270         38,681         33,842
    Noninterest expense ............................       126,630        121,944        107,013         98,255         92,325
    Net income .....................................        45,781         40,111         41,511         35,060         31,817
    Dividends ......................................        16,680         15,840         15,840         14,400         12,600

AVERAGE BALANCES
    Assets .........................................    $4,010,098     $3,584,460     $3,248,180     $2,986,600     $2,817,062
    Loans and leases (2) ...........................     2,749,662      2,315,105      2,084,462      1,838,218      1,687,900
    Securities .....................................     1,001,031      1,043,771        954,994        963,806        959,278
    Deposits .......................................     2,982,970      2,679,984      2,456,827      2,300,311      2,211,280
    Short-term borrowings ..........................       422,508        390,650        367,580        304,384        282,813
    Long-term debt .................................       215,009        156,706         73,047         53,486         22,178
    Redeemable class A common stock ................        26,677         24,650         23,205         21,322         19,686
    Shareholders' equity ...........................       306,781        283,467        266,862        245,206        226,388

PERIOD-END BALANCES
    Assets .........................................    $4,192,596     $3,851,485     $3,398,079     $3,173,701     $2,925,651
    Loans and leases (2) ...........................     2,915,601      2,542,897      2,172,631      1,964,127      1,756,146
    Securities .....................................       951,627      1,038,372        996,673        992,249        935,774
    Deposits .......................................     3,106,828      2,850,692      2,570,650      2,442,498      2,283,446
    Short-term borrowings ..........................       441,000        426,685        353,213        365,264        275,021
    Long-term debt .................................       232,660        215,832        116,286         30,238         62,389
    Redeemable class A common stock ................        28,324         25,029         24,270         22,308         20,337
    Shareholders' equity ...........................       325,715        287,847        279,108        256,541        233,870

FINANCIAL RATIOS
    Return on average assets (3) ...................          1.14%          1.12%          1.30%          1.22%          1.18%
    Return on average realized equity (4)(5) .......         13.54          12.88          14.55          13.32          13.08
    Average realized equity to average assets (4)(5)          8.43           8.69           8.79           8.81           8.64
    Tangible realized equity to assets (4)(5) ......          7.34           7.40           8.41           8.50           8.58
    Dividend payout ................................         36.43          39.49          38.16          41.07          39.60
    Net interest margin (1) ........................          4.22           4.34           4.31           4.43           4.37
    Efficiency ratio ...............................         57.58          60.54          59.09          58.43          59.87
    Net charge-offs to average loans and leases ....          0.17           0.24           0.13           0.09           0.03
    Reserve for credit losses to loans and leases ..          1.57           1.65           1.70           1.74           1.74

PER SHARE OF COMMON STOCK (4)
    Net income-basic and diluted ...................    $     3.82     $     3.34     $     3.46     $     2.92     $     2.65
    Dividends paid .................................          1.39           1.32           1.32           1.20           1.05
    Book value .....................................         29.50          26.07          25.28          23.24          21.18
    Realized book value (5) ........................         29.37          26.95          24.93          22.79          21.07
</TABLE>

---------------------
(1) Tax-equivalent basis (TEB).
(2) Net of unearned discount and includes nonaccrual loans and leases.
(3) Calculation is based on income before minority interests.
(4) Calculation includes shareholders' equity and redeemable class A common
    stock.
(5) Excluding net unrealized gain (loss) on securities available-for-sale.



                                       13
<PAGE>


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

OVERVIEW

     EARNINGS. We reported net income of $45.8 million or $3.82 basic and
diluted earnings per share for the year ended December 31, 2000. This compares
to net income of $40.1 million or $3.34 basic and diluted earnings per share in
1999 and $41.5 million or $3.46 basic and diluted earnings per share in 1998.
Return on average realized equity was 13.54% in 2000, as compared to 12.88% in
1999 and 14.55% in 1998. Realized equity excludes the impact on equity of
unrealized gains and losses associated with available-for-sale securities.
Return on average assets was 1.14% in 2000, versus 1.12% in 1999 and 1.30% in
1998.

     ASSETS. Total assets at December 31, 2000 increased $341.1 million, or
8.9%, to $4.2 billion from $3.9 billion at December 31, 1999. During 1999,
assets increased $453.4 million, or 13.3%, from $3.4 billion at December 31,
1998. During this period we continued to move our asset mix more towards loans
and away from lower yielding securities. Loans and leases net of unearned
discount as a percentage of total assets increased to 69.5% at December 31,
2000, from 66.0% at December 31, 1999, and 63.9% at December 31, 1998.

     ACQUISITIONS. Two acquisitions impacted our operating results during the
three year period ended December 31, 2000. In July 1999, we acquired, for cash
in a purchase transaction, the stock of Dean Financial Services, Inc. Dean was a
privately-held bank holding company with approximately $296.9 million in assets
and $260.6 million in deposits with four charter banks serving eleven locations
in Minnesota. During the latter half of 1999, we merged Dean into Bremer and
Dean's four separate charter banks into our previously existing charter banks.

     In March 2000, we acquired, for cash in a purchase transaction, the stock
of Northwest Equity Corp. of Amery, Wisconsin, and its wholly-owned subsidiary,
Northwest Savings Bank, with offices in Amery, New Richmond, and Siren,
Wisconsin. In May 2000, we merged Northwest Savings Bank with and into our
subsidiary bank in Wisconsin, which added about $91.8 million in assets and
$61.6 million in deposits to that bank and resulted in the closing of duplicate
facilities in Siren and Amery, Wisconsin.

     In May 2001, we expect to complete the Branch Acquisition. This will add
approximately $750 million in deposits and $300 million in loans to our
subsidiary bank operating in Minneapolis/St. Paul. Of the $300 million of loans
to be acquired, approximately $150 million are loans originated in the branch
locations, primarily home equity and other consumer credit. The remaining loans
are primarily middle-market commercial loans originated in the commercial
banking group.

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.

     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 earning 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:



                                       14
<PAGE>


<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31,
                                               ------------------------------------------------------------------------------
                                                               2000                                     1999
                                               ------------------------------------    --------------------------------------
                                                                           AVERAGE                                   AVERAGE
                                                 AVERAGE                    RATE/        AVERAGE                      RATE/
                                                 BALANCE    INTEREST (1)    YIELD        BALANCE     INTEREST (1)     YIELD
                                               ----------   ------------  ----------    ----------   ------------  ----------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                            <C>          <C>           <C>           <C>          <C>           <C>
ASSETS
Loans and leases (net of unearned discount)(2)
     Commercial and other ..................   $  663,494    $   62,507         9.42%   $  534,954    $   47,208         8.82%
     Commercial real estate ................      753,402        67,881         9.01       609,345        52,648         8.64
     Agricultural ..........................      421,539        39,384         9.34       447,715        39,295         8.78
     Residential real estate ...............      548,876        48,545         8.84       414,510        35,737         8.62
     Consumer ..............................      289,779        26,351         9.09       251,499        22,584         8.98
     Tax-exempt ............................       72,572         6,855         9.45        57,082         5,394         9.45
                                               ----------    ----------                 ----------    ----------
         TOTAL LOANS AND LEASES ............    2,749,662       251,523         9.15     2,315,105       202,866         8.76
     Reserve for credit losses .............      (44,647)                                 (39,471)
                                               ----------                               ----------
         NET LOANS AND LEASES ..............    2,705,015                                2,275,634
Securities
     Mortgage-backed .......................      639,065        42,510         6.65       742,299        45,618         6.15
     Other taxable .........................      151,890        10,530         6.93       100,633         6,043         6.00
     Tax-exempt ............................      210,076        16,799         8.00       200,839        16,050         7.99
                                               ----------    ----------                 ----------    ----------
          TOTAL SECURITIES .................    1,001,031        69,839         6.98     1,043,771        67,711         6.49
Federal funds sold .........................        9,466           612         6.47        11,853           575         4.85
Other earning assets .......................        5,763           259         4.48         2,712           132         4.87
                                               ----------    ----------                 ----------    ----------
          TOTAL EARNING ASSETS (3) .........    3,765,922    $  322,233         8.56%   $3,373,441    $  271,284         8.04%
Cash and due from banks ....................      122,611                                  119,695
Other non interest earning assets ..........      166,212                                  130,795
                                               ----------                               ----------
          TOTAL ASSETS .....................   $4,010,098                               $3,584,460
                                               ==========                               ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits ...............   $  386,511                               $  347,900
Interest bearing deposits
     Savings and NOW accounts ..............      312,038    $    3,965         1.27%      304,182    $    3,640         1.20%
     Money market checking .................      164,080         1,557         0.95       163,636         1,493         0.91
     Money market savings ..................      584,676        28,853         4.93       471,531        17,811         3.78
     Savings certificates ..................    1,168,334        66,745         5.71     1,109,724        58,110         5.24
     Certificates over $100,000 ............      367,331        22,678         6.17       283,011        15,374         5.43
                                               ----------    ----------                 ----------    ----------
         TOTAL INTEREST BEARING DEPOSITS ...    2,596,459       123,798         4.77     2,332,084        96,428         4.13
                                               ----------                               ----------
         TOTAL DEPOSITS ....................    2,982,970                                2,679,984
Short-term borrowings ......................      422,508        25,276         5.98       390,650        19,421         4.97
Long-term debt .............................      215,009        14,108         6.56       156,708         9,065         5.78
                                               ----------    ----------                 ----------    ----------
          TOTAL INTEREST BEARING LIABILITIES    3,233,976    $  163,182         5.05%    2,879,442    $  124,914         4.34%
Non interest bearing liabilities ...........       56,003                                   46,321
                                               ----------                                ---------
          TOTAL LIABILITIES ................    3,676,490                                3,273,663
Minority interest ..........................          150                                      909
Redeemable preferred stock .................           --                                    1,771
Redeemable class A common stock ............       26,677                                   24,650
Shareholders' equity .......................      306,781                                  283,467
                                               ----------                               ----------
          TOTAL LIABILITIES AND EQUITY .....   $4,010,098                               $3,584,460
                                               ==========                               ==========
Net interest income ........................                 $  159,051                               $  146,370
                                                             ==========                               ==========
Net interest spread ........................                                    3.51%                                    3.70%
Net Interest margin ........................                                    4.22%                                    4.34%
</TABLE>

[WIDE TABLE CONTINUED FROM ABOVE]

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                               --------------------------------------
                                                                1998
                                               --------------------------------------
                                                                            AVERAGE
                                                 AVERAGE                     RATE/
                                                 BALANCE     INTEREST (1)    YIELD
                                               ----------    ------------  ----------
<S>                                            <C>           <C>           <C>
ASSETS
Loans and leases (net of unearned discount) (2)
     Commercial and other ..................   $  431,459     $   39,417         9.14%
     Commercial real estate ................      501,802         45,277         9.02
     Agricultural ..........................      446,859         40,610         9.09
     Residential real estate ...............      394,944         34,758         8.80
     Consumer ..............................      254,685         23,285         9.14
     Tax-exempt ............................       54,713          5,497        10.05
                                               ----------     ----------
         TOTAL LOANS AND LEASES ............    2,084,462        188,844         9.06
     Reserve for credit losses .............      (35,870)
                                               ----------
         NET LOANS AND LEASES ..............    2,048,592
Securities
     Mortgage-backed .......................      670,505         41,935         6.25
     Other taxable .........................       77,582          4,763         6.14
     Tax-exempt ............................      206,907         16,733         8.09
                                               ----------     ----------
          TOTAL SECURITIES .................      954,994         63,431         6.64
Federal funds sold .........................       12,312            701         5.69
Other earning assets .......................        2,341            126         5.38
                                               ----------     ----------
          TOTAL EARNING ASSETS (3) .........   $3,054,109     $  253,102         8.29%
Cash and due from banks ....................      107,585
Other non interest earning assets ..........      122,356
                                               ----------
          TOTAL ASSETS .....................   $3,248,180
                                               ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Noninterest bearing deposits ...............   $  304,990
Interest bearing deposits
     Savings and NOW accounts ..............      290,260     $    4,424        1.52%
     Money market checking .................      156,421          2,079         1.33
     Money market savings ..................      349,190         13,953         4.00
     Savings certificates ..................    1,115,862         63,519         5.69
     Certificates over $100,000 ............      240,104         13,685         5.70
                                               ----------     ----------
         TOTAL INTEREST BEARING DEPOSITS ...    2,151,837         97,660         4.54
                                               ----------
         TOTAL DEPOSITS ....................    2,456,827
Short-term borrowings ......................      367,580         19,488         5.30
Long-term debt .............................       73,047          4,276         5.85
                                               ----------     ----------
          TOTAL INTEREST BEARING LIABILITIES    2,592,464     $  121,424         4.68%
Non interest bearing liabilities ...........       53,105
                                               ----------
          TOTAL LIABILITIES ................    2,950,559
Minority interest ..........................        5,458
Redeemable preferred stock .................        2,096
Redeemable class A common stock ............       23,205
Shareholders' equity .......................      266,862
                                               ----------
          TOTAL LIABILITIES AND EQUITY .....   $3,248,180
                                               ==========
Net interest income ........................                  $  131,678
                                                              ==========
Net interest spread ........................                                     3.60%
Net Interest margin ........................                                     4.31%
</TABLE>

------------------------------------
(1)  Interest income includes $8,062, $7,317, and $7,577, in 2000, 1999, and
     1998, to adjust to a fully taxable basis using the federal statutory rate
     of 35%.
(2)  Loan and lease amounts include nonaccrual loans and leases.
(3)  Before deducting the reserve for credit losses.



                                       15
<PAGE>



     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:


<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                 ------------------------------------------------------------------------
                                                           2000 VS. 1999                         1999 VS. 1998
                                                 ----------------------------------    ----------------------------------
                                                         INCREASE (DECREASE)                  INCREASE (DECREASE)
                                                          DUE TO CHANGE IN                      DUE TO CHANGE IN
                                                 ----------------------------------    ----------------------------------
                                                  VOLUME        RATE        TOTAL       VOLUME        RATE         TOTAL
                                                 --------     --------     --------    --------     --------     --------
                                                                              (IN THOUSANDS)
<S>                                              <C>          <C>          <C>         <C>          <C>          <C>
INTEREST EARNINGS ASSETS:
    Loans and leases (1) ....................    $ 38,078     $ 10,579     $ 48,657    $ 20,894     $ (6,872)    $ 14,022
    Taxable securities ......................      (3,186)       4,565        1,379       5,920         (957)       4,963
    Tax-exempt securities (1) ...............         738           11          749        (491)        (192)        (683)
    Federal funds sold ......................        (116)         153           37         (26)        (100)        (126)
    Other interest earning assets ...........         149          (22)         127          20          (14)           6
                                                 --------     --------     --------    --------     --------     --------
       Total interest earning assets             $ 35,663     $ 15,286     $ 50,949    $ 26,317     $ (8,135)    $ 18,182
                                                 ========     ========     ========    ========     ========     ========
INTEREST BEARING LIABILITIES:
    Savings and NOW accounts ................    $    471     $   (146)    $    325    $    798     $ (1,582)    $   (784)
    Money market accounts ...................       2,496        8,610       11,106       2,890          382        3,272
    Savings certificates ....................       7,541        8,398       15,939       2,093       (5,813)      (3,720)
    Short-term borrowings ...................       1,584        4,271        5,855       1,223       (1,290)         (67)
    Long-term debt ..........................       3,373        1,670        5,043       4,897         (108)       4,789
                                                 --------     --------     --------    --------     --------     --------
       Total interest bearing liabilities          15,465       22,803       38,268      11,901       (8,411)       3,490
                                                 --------     --------     --------    --------     --------     --------
CHANGE IN NET INTEREST INCOME ...............    $ 20,198     $ (7,517)    $ 12,681    $ 14,416     $    276     $ 14,692
                                                 ========     ========     ========    ========     ========     ========
</TABLE>

------------------------------------
(1)    Interest income includes $8,062, $7,317, and $7,577, in 2000, 1999, and
       1998, respectiviely, to adjust to a fully taxable basis using the federal
       statutory rate of 35%.

     Tax-equivalent net interest income for 2000 was $159.1 million, an increase
of 8.7% from the 1999 total of $146.4 million. Tax-equivalent net interest
income in 1999 increased 11.2% from $131.7 million in 1998. The increase in net
interest income resulted primarily from our average earning assets, which
increased by $392.5 million or 11.6% in 2000 from 1999 and by $319.3 million or
10.5% in 1999 from 1998. Most of the increase in average earning assets was due
to growth in loans. Average loans and leases increased by $434.6 million, or
18.8%, in 2000 from 1999 and by $230.6 million, or 11.1%, in 1999 from 1998. The
acquisitions of Northwest in 2000 and Dean in 1999 contributed significantly to
the growth in loans.

     The positive impact on net interest income due to growth in average loans
and leases in 2000 was partially offset by a decline in the net interest margin
to 4.22% in 2000 from 4.34% in 1999 and 4.31% in 1998. While the average yield
on earning assets increased by 52 basis points in 2000 from 1999, the cost of
interest bearing liabilities increased by 71 basis points. In response to strong
competitive pressure in attracting deposits, we emphasized our money market
savings product and structured that product to be competitive with other
short-term investment alternatives available to customers. Average money market
savings grew by 24.0% in 2000 from 1999 and as a result, the increased cost of a
more competitively positioned product contributed to the decline in net interest
margin. The increase in net interest margin in 1999 from 1998 was primarily due
to an increased spread between the average yield on earning assets and the
average cost of interest bearing liabilities during 1999. While the average
yield on earning assets decreased 25 basis points in 1999 from 1998, the average
cost of interest bearing liabilities decreased by 34 basis points. The Branch
Acquisition is anticipated to add approximately $750 million in deposits to our
balance sheet, reducing the need for us to compete as aggressively for deposits
after the Branch Acquisition is completed. Our net interest margin is expected
to decline following completion of the Branch Acquisition primarily as a result
of debt incurred in connection with the transaction and the initial investment
of assumed deposits in excess of acquired loans in lower earning investment
securities.

     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 $8.3 million in both 2000 and 1999,
and $5.6 million in 1998. Net charge-offs were $4.6 million in 2000, $5.6
million in 1999, and in $2.8 million in 1998. For further information regarding
the provision for credit losses, see the section entitled Financial Condition -
Reserve for Credit Losses.



                                       16
<PAGE>

     NONINTEREST INCOME. Noninterest income was $54.2 million in 2000 compared
to $52.5 million in 1999 and $51.3 million in 1998. Recurring noninterest
income, which excludes gains from asset and security sales and a $4.5 million
state tax refund in 1998, was $53.8 million in 2000 compared to $49.5 million in
1999 and $44.5 million in 1998. Recurring noninterest income increased by 8.7%
in 2000 and 11.1% in 1999. The following table summarizes the components of
noninterest income:




<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                                           --------------------------------
                                             2000        1999        1998
                                           --------    --------    --------
                                                    (IN THOUSANDS)
<S>                                        <C>         <C>         <C>
Service charges .......................    $ 22,284    $ 19,434    $ 17,037
Insurance .............................      10,045       9,703       7,804
Trust .................................       9,139       7,984       6,990
Brokerage .............................       5,481       4,533       3,752
Gain on sale of loans .................       2,758       3,380       4,977
Other recurring noninterest income ....       4,063       4,436       3,972
                                           --------    --------    --------
     Recurring noninterest income .....      53,770      49,470      44,532
Gain on sale of other assets ..........         177       1,142         966
Gain on sale of securities ............         270       1,853       1,296
State tax refund ......................          --          --       4,476
                                           --------    --------    --------
     Total noninterest income .........    $ 54,217    $ 52,465    $ 51,270
                                           ========    ========    ========
</TABLE>


     Service charge income increased by 14.7% in 2000 from 1999 and 14.1% in
1999 from 1998. The acquisitions of Northwest in 2000 and Dean in 1999
contributed significantly to the growth in service charge income. Our continued
focus on relationship management led to increases in brokerage, trust, and
insurance income. Brokerage revenue grew by 20.9% in 2000 and 20.8% in 1999.
Trust revenue increased by 14.5% in 2000 and 14.2% in 1999 while insurance
revenue increased by 3.5% in 2000 and 24.3% in 1999. The insurance revenue
growth rate in 1999 was positively impacted by unusually high levels of crop
insurance revenues and contingent commissions which declined to more normal
levels in 2000. Gains on sales of loans result primarily from the sale of fixed
rate residential real estate first mortgages into the secondary market. Income
from loan sales is heavily influenced by the general level of market interest
rates and the specific level of customer refinancing activity. Income from loan
sales decreased by 18.4% in 2000 and 32.1% in 1999 from a peak of $5.0 million
recorded in 1998 when the level of loan refinancing activity was higher than in
recent years due to lower mortgage interest rates.

      NONINTEREST EXPENSE. Noninterest expense increased $4.7 million, or 3.8%
in 2000 and $14.9 million, or 14.0%, in 1999. The following table summarizes the
components of noninterest expense:



<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                       --------------------------------
                                                         2000        1999        1998
                                                       --------    --------    --------
                                                                (IN THOUSANDS)
<S>                                                    <C>         <C>         <C>
Salaries and wages ................................    $ 58,331    $ 54,164    $ 49,287
Employee benefits .................................      14,018      14,901      12,572
Occupancy .........................................       7,651       6,921       6,128
Furniture and equipment ...........................       9,432       9,170       7,621
Printing, postage and office supplies .............       5,850       5,916       5,487
Marketing .........................................       4,862       4,760       4,756
Data processing fees ..............................       7,244       7,465       6,046
Professional fees .................................       2,878       3,031       1,786
Other real estate owned ...........................         106         104          91
Minority interest in earnings .....................          21          41         747
FDIC premiums and examination fees ................       1,652       1,297       1,157
Amortization of goodwill and other intangibles ....       3,713       2,831       1,711
Other noninterest expense .........................      10,872      11,343       9,624
                                                       --------    --------    --------
   Total noninterest expense ......................    $126,630    $121,944    $107,013
                                                       ========    ========    ========
</TABLE>


                                       17
<PAGE>


     Personnel costs, which include salaries, wages and employee benefits,
accounted for 57.1% of noninterest expense in 2000, and increased by $3.3
million, or 4.8%, from 1999 and $7.2 million, or 11.6%, from 1998 to 1999. The
acquisitions of Northwest in 2000 and Dean in 1999 contributed significantly to
the growth in personnel costs. The 7.7% increase in salaries and wages in 2000
was partially offset by a reduction in employee benefit costs. Employee benefit
costs declined by 5.9% to $14.0 million in 2000 from $14.9 million in 1999. A
reduction in net pension costs, primarily as a result of increased plan assets
augmented by higher market returns, was the most significant contributor to the
decline in employee benefit costs. Net pension costs declined to $300 thousand
in 2000, from $1.7 million in 1999 and $1.0 million in 1998.

     Excluding personnel costs, noninterest expense increased $1.4 million, or
2.7%, in 2000. Contributing to the increase in noninterest expense in 2000 was a
$1.0 million increase in occupancy and furniture and fixture expense, due in
part to the Northwest and Dean acquisitions. The expense associated with
goodwill and other intangibles also increased by $882 thousand or 31.2% as a
result of those two acquisitions. It is expected that completion of the Branch
Acquisition will result in a significant increase in our amortization of
goodwill and other intangibles during future periods.

     Excluding personnel costs, noninterest expense increased $7.7 million or
17.1% in 1999. Approximately $2.8 million of this increase was due to the Dean
acquisition in 1999. Furniture and equipment expenses increased by $1.5 million
in 1999 as we completed a significant upgrade to our technology infrastructure.
Also contributing to the increase in noninterest expense in 1999 was a $1.4
million increase in data processing fees as we changed item processing vendors
during the year and integrated the data processing of acquired offices.
Professional fees increased by $1.2 million in 1999, primarily due to the
outsourcing of the internal audit function. The expense associated with goodwill
and other intangibles increased by $1.1 million in 1999 due to the Dean
acquisition.

     A common industry statistic used to measure the productivity of banking
organizations is the efficiency ratio. The efficiency ratio measures the cost
required to generate each dollar of revenue and is calculated by dividing
recurring noninterest expense by tax-equivalent net interest income and
recurring noninterest income. Our efficiency ratio was 57.6% in 2000, 60.5% in
1999, and 59.1% in 1998. The decrease in 2000 from 1999 was due to growth in
recurring noninterest income and tax-equivalent net interest income of 8.7%
each, which was partially offset by an increase of 3.8% in noninterest expense.
Our strategic goal is to move the efficiency ratio to 55.0% or below.

     INCOME TAXES. Income tax expense, which consists of provisions for federal
and state income taxes, was $24.5 million for 2000 compared to $21.1 million in
1999 and $21.3 million in 1998. Our effective tax rate was 34.8% in 2000, a
slight increase from the effective rates of 34.5% in 1999 and 33.9% in 1998. The
effective rate has been increasing slightly as the rate of growth in tax exempt
income has been lower than the rate of growth in net income.



                                       18
<PAGE>


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:

<TABLE>
<CAPTION>
                                                                        AT DECEMBER 31,
                             -----------------------------------------------------------------------------------------------------
                                    2000                1999                 1998                 1997                 1996
                             -----------------   ------------------   ------------------   ------------------   ------------------
                               AMOUNT      %       AMOUNT       %       AMOUNT       %       AMOUNT       %      AMOUNT        %
                             ----------  -----   ----------  ------   ----------  ------   ----------  ------   ----------  ------
                                                                    (DOLLARS IN THOUSANDS)
<S>                          <C>          <C>    <C>           <C>    <C>           <C>    <C>           <C>    <C>           <C>
Commercial and other ......  $  717,936   24.6%  $  596,680    23.4%  $  475,556    21.8%  $  387,048    19.7%  $  346,602    19.7%

Commercial real estate ....     733,746   25.1      648,029    25.4      501,205    23.0      419,063    21.3      340,621    19.3

  Construction ............      68,296    2.3       70,869     2.8       59,913     2.8       36,518     1.8       30,039     1.7

Agriculture ...............     416,660   14.3      433,357    17.0      444,784    20.4      409,875    20.8      378,399    21.5

Residential real estate ...     578,876   19.8      450,812    17.7      376,652    17.3      387,549    19.7      351,946    20.0

  Construction ............      18,051    0.6       15,274     0.6       13,397     0.6       12,609     0.6       11,904     0.7

Consumer ..................     302,824   10.4      275,320    10.8      250,803    11.5      263,469    13.4      247,511    14.1

Tax-exempt ................      83,082    2.9       59,815     2.3       55,477     2.6       52,954     2.7       53,078     3.0
                             ----------  -----   ----------  ------   ----------  ------   ----------  ------   ----------  ------
  Total loans and leases ..  $2,919,471  100.0%  $2,550,156   100.0%  $2,177,787   100.0%  $1,969,085   100.0%  $1,760,100   100.0%
                             ==========  =====   ==========  ======   ==========  ======   ==========  ======   ==========  ======
</TABLE>

      At December 31, 2000, our loan and lease portfolio was comprised of 54.9%
commercial credit, 30.8% consumer credit and 14.3% agricultural credit. The loan
and lease portfolio increased $369.3 million, or 14.5%, in 2000 and $372.4
million, or 17.1%, in 1999. Approximately 20.0% of the loan growth during 2000
was related to the acquisition of Northwest and approximately 45.0% of the loan
growth during 1999 was related to the acquisition of Dean.

      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 grew by $121.3 million, or 20.3%, to $717.9 million as of December 31,
2000 and has grown in excess of 20.0% for each of the last three years.

     Our commercial real estate portfolio, which includes interim commercial
real estate construction loans, consists primarily of loans and leases to
business customers who occupy the property or use the property 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 15 to 20
year amortization. The commercial real estate portfolio increased $83.1 million,
or 11.6%, in 2000 and $157.8 million, or 28.1%, in 1999. The Dean acquisition
was a significant contributor to the growth of the commercial real estate
portfolio in 1999.

     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 twelve different areas of commodity production.
Agricultural loans decreased $16.7 million, or 3.9%, in 2000 and $11.4 million,
or 2.6%, in 1999. For our agricultural customers, the year 2000 was generally an
average to above average production year. Improved crop conditions and increased
governmental support helped mitigate the impact of continuing low commodity
prices and higher fuel prices. During 2000, we continued the tightening of our
agricultural loan underwriting standards that began in 1999. At December 31,
2000, agricultural loans represented 14.3% of our total loans and leases, down
from 17.0% in 1999 and 20.4% in 1998. This decrease reflects our continuing
strategy of placing a reduced emphasis on agricultural lending relative to the
portfolio as a whole.

      Residential real estate loans increased $130.8 million, or 28.1%, in 2000
and $76.0 million, or 19.5%, in 1999. 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 52.0% of our $596.9 million in residential real estate loans as of
December 31, 2000. Loan to value ratios for home equity loans typically range
from 80.0% to 100.0%. Most of the increase in residential real estate loans in
2000 and 1999 was in home equity loans, which increased $82.3 million, or 36.0%,
in 2000 and $61.8 million, or 37.1%, in 1999. 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. First mortgage residential real estate
loans, which had not changed significantly during 1998 and 1999, did increase by
$45.8 million during 2000 due primarily to the acquisition of Northwest.


                                       19
<PAGE>

     Our consumer loan portfolio increased by $27.5 million, or 10.0%, in 2000
and $24.5 million, or 9.8%, in 1999. As of December 31, 2000 approximately
$110.6 million, or 36.5%, of the consumer portfolio consists of indirect auto
loans, generally to borrowers within our market area. The remainder of the
portfolio consists of direct consumer loans, with credit card loans making up
only about 1.9% of the total consumer portfolio.

     Tax-exempt loans and leases, which are made to municipalities and
qualifying non-profit organizations, increased by $23.3 million, or 38.9%, in
2000 and $4.3 million, or 7.8%, in 1999.

     We expect that the Branch Acquisition will add approximately $300 million
to our loan portfolio, including $118 million in commercial real estate loans,
$100 million in home equity loans, $70 million in commercial loans, and $12
million in consumer loans.

     The following table summarizes the amount and maturity of the loan and
lease portfolio as of December 31, 2000:

<TABLE>
<CAPTION>
                                                              AT DECEMBER 31, 2000, MATURING IN
                                                   ----------------------------------------------------
                                                    ONE YEAR       ONE TO        OVER
                                                     OR LESS     FIVE YEARS    FIVE YEARS      TOTAL
                                                   ----------    ----------    ----------    ----------
                                                                      (IN THOUSANDS)
<S>                                                <C>           <C>           <C>           <C>
Commercial and other ..........................    $  355,320    $  329,771    $   32,845    $  717,936
Commercial real estate ........................       141,139       447,543       145,064       733,746
     Construction .............................        18,351        31,835        18,110        68,296
Agricultural ..................................       180,322       167,035        69,303       416,660
Residential real estate .......................        59,178       267,234       252,464       578,876
     Construction .............................        17,109           344           598        18,051
Consumer ......................................       103,943       192,538         6,343       302,824
Tax-exempt ....................................        21,688        33,181        28,213        83,082
                                                   ----------    ----------    ----------    ----------
     Total loans and leases ...................    $  897,050    $1,469,481    $  552,940    $2,919,471
                                                   ==========    ==========    ==========    ==========

Loans and leases maturing after one year
     Fixed interest rate ......................                  $1,076,912    $  244,062    $1,320,974
     Variable interest rate ...................                     392,569       308,878       701,447
                                                                 ----------    ----------    ----------
     Total ....................................                  $1,469,481    $  552,940    $2,022,421
                                                                 ==========    ==========    ==========
</TABLE>



                                       20
<PAGE>



     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:

<TABLE>
<CAPTION>
                                                                                        AT DECEMBER 31,
                                                                 ------------------------------------------------------------
                                                                   2000         1999         1998         1997         1996
                                                                 --------     --------     --------     --------     --------
                                                                                    (DOLLARS IN THOUSANDS)
<S>                                                              <C>          <C>          <C>          <C>          <C>
Nonaccrual loans and leases .................................    $ 13,941     $ 16,608     $ 13,077     $  8,958     $ 10,830
Restructured loans and leases ...............................          50           48          178          910          414
                                                                 --------     --------     --------     --------     --------
    Total nonperforming loans and leases ....................      13,991       16,656       13,255        9,868       11,244
Other real estate owned (OREO) ..............................       3,658          527          620          691          240
                                                                 --------     --------     --------     --------     --------
    Total nonperforming assets ..............................    $ 17,649     $ 17,183     $ 13,875     $ 10,559     $ 11,484
                                                                 ========     ========     ========     ========     ========

Past due loans and leases * .................................    $  3,590     $  4,753     $  1,142     $  3,573     $  2,205
                                                                 ========     ========     ========     ========     ========

Nonperforming loans and leases to total loans and leases ....        0.48%        0.65%        0.61%        0.50%        0.64%
Nonperforming assets to total loans, leases and OREO ........        0.60         0.68         0.64         0.54         0.65
Nonperforming assets and past due loans and leases* to
    total loans, leases and OREO ............................        0.73         0.86         0.69         0.72         0.78
</TABLE>

--------------------------
* Past due loans and leases include accruing loans and leases 90 days or more
  past due.

     Nonperforming assets were $17.6 million at December 31, 2000, compared to
$17.2 million at the end of 1999, and $13.9 million at the end of 1998.
Correspondingly, nonperforming assets as a percentage of total loans, leases,
and other real estate owned decreased to 0.60% at December 31, 2000, compared to
0.68% in 1999 and 0.64% in 1998. Nonperforming loans and leases, including
nonaccrual and restructured loans and leases, totaled $14.0 million, or 0.48% of
total loans and leases, at December 31, 2000, versus $16.7 million, or 0.65% of
total loans and leases at December 31, 1999, and $13.3 million, or 0.61% of
total loans and leases at December 31, 1998. The $2.7 million decline in
nonperforming loans and leases in 2000 from 1999 was primarily in the
agricultural loan portfolio. Nonperforming agricultural loans declined to $4.1
million at the end of 2000 from $8.5 million at the end of 1999. This decrease
was partially offset by a $2.7 million increase in nonperforming commercial and
commercial real estate loans, primarily the result of one $2.0 million credit.
Furthermore, low commodity prices and poor crop conditions contributed to the
increase in nonperforming agricultural loans in 1999, but improved crop
conditions and increased governmental support helped reduce the negative impact
of low commodity prices and higher fuel prices during 2000.

     Other real estate owned ("OREO") increased to $3.7 million at December 31,
2000, compared to $527 thousand at December 31, 1999, and $620 thousand at
December 31, 1998. The increase in OREO in 2000 is primarily due to a single
hotel property with a carrying value of $3.1 million that was acquired through
foreclosure in the fourth quarter of 2000. Redemption rights on this property
expire on May 8, 2001 and efforts to sell it will begin shortly after that date
if it is not redeemed by the borrower.

     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, 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.

     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




                                       21
<PAGE>

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 Statement 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". 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 an allocation of
the existing reserve for credit losses.



                                       22
<PAGE>




      The reserve for credit losses was $45.9 million, or 1.57% of total loans
and leases, at December 31, 2000, compared to $41.9 million, or 1.65% of loans
at December 31, 1999, and $37.0 million, or 1.70% of loans at December 31, 1998.
Activity in the reserve for credit losses for the past five years is shown in
the following table:

<TABLE>
<CAPTION>
                                                                         FOR THE YEARS ENDED DECEMBER 31,
                                                        ------------------------------------------------------------------
                                                           2000          1999          1998          1997          1996
                                                        ----------    ----------    ----------    ----------    ----------
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                     <C>           <C>           <C>           <C>           <C>
Beginning of year ...................................   $   41,895    $   37,019    $   34,253    $   30,482    $   28,253
Charge-offs:
    Commercial and other ............................        3,273         1,270           820           604           480
    Commercial real estate ..........................          287         1,445           152           427           117
       Construction .................................           24            --            25             2            --
    Agricultural ....................................          518         2,138           835           288           489
    Residential real estate .........................          320           351           328           100            47
    Consumer ........................................        1,481         1,860         1,808         1,338         1,097
                                                        ----------    ----------    ----------    ----------    ----------
       Total charge-offs ............................        5,903         7,064         3,968         2,759         2,230
                                                        ----------    ----------    ----------    ----------    ----------
Recoveries:
    Commercial and other ............................          320           351           218           379           911
    Commercial real estate ..........................          226           152           322           173           194
       Construction .................................            5            --            --            10            --
    Agricultural ....................................          165           355           102            65           159
    Residential real estate .........................           64            36            30           104            58
    Consumer ........................................          491           545           492           295           381
                                                        ----------    ----------    ----------    ----------    ----------
       Total recoveries .............................        1,271         1,439         1,164         1,026         1,703
                                                        ----------    ----------    ----------    ----------    ----------
Net charge-offs .....................................        4,632         5,625         2,804         1,733           527
Provision for credit losses .........................        8,338         8,321         5,570         4,746         2,756
Reserve related to acquired assets ..................          294         2,180            --           758            --
                                                        ----------    ----------    ----------    ----------    ----------
End of year .........................................   $   45,895    $   41,895    $   37,019    $   34,253    $   30,482
                                                        ==========    ==========    ==========    ==========    ==========
Average loans and leases ............................   $2,749,662    $2,315,105    $2,084,462    $1,838,218    $1,687,900
Net charge-offs to average loans and leases .........         0.17%         0.24%         0.13%         0.09%         0.03%
Reserve to total nonperforming loans and leases .....       328.03        251.53        279.28        347.11        271.10
Reserve to total loans and leases ...................         1.57          1.65          1.70          1.74          1.74
</TABLE>

     Net charge-offs were $4.6 million in 2000, $5.6 million in 1999, and $2.8
million in 1998. Expressed as a percentage of average loans and leases, net
charge-offs declined to 0.17% in 2000 from 0.24% in 1999. Charge-offs of
commercial loans increased to $3.3 million in 2000 from $1.3 million in 1999. A
single loan with a total charge-off of $1.9 million accounted for most of this
increase. Charge-offs in the agricultural loan portfolio declined to $518
thousand in 2000 from $2.1 million in 1999. Agricultural loan charge-offs
increased from $835 thousand in 1998 to $2.1 million in 1999, due primarily to a
generally poor agricultural economy in the Red River Valley of eastern North
Dakota and western Minnesota. The provision for credit losses was $8.3 million
in both 2000 and 1999, and $5.6 million in 1998.

     The reserve to nonperforming loans increased to 328.0% at December 31,
2000, from 251.5% at December 31, 1999, and 279.3% at December 31, 1998. The
ratio of classified loans, which include those loans with an internal loan
review rating of substandard, doubtful or loss, to total loans was 3.1% at
December 31, 2000 compared to 4.5% at December 31, 1999 and 5.1% at December 31,
1998. The improvement in 2000 was primarily the result of a significant
reduction of classified agricultural loans, which were down 43.0% in a
comparison of 2000 to 1999, and loan growth within the other loan categories.



                                       23
<PAGE>



      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:

<TABLE>
<CAPTION>
                                                                       AT DECEMBER 31,
                        ------------------------------------------------------------------------------------------------------------
                                2000                  1999                  1998                  1997                  1996
                        --------------------  --------------------  --------------------  --------------------  --------------------
                                  PERCENT OF            PERCENT OF            PERCENT OF            PERCENT OF            PERCENT OF
                                  LOANS AND             LOANS AND             LOANS AND             LOANS AND             LOANS AND
                                  LEASES TO             LEASES TO             LEASES TO             LEASES TO             LEASES TO
                                 TOTAL LOANS           TOTAL LOANS           TOTAL LOANS           TOTAL LOANS           TOTAL LOANS
                         AMOUNT   AND LEASES   AMOUNT   AND LEASES   AMOUNT   AND LEASES   AMOUNT   AND LEASES   AMOUNT   AND LEASES
                        --------  ----------  --------  ----------  --------  ----------  --------  ----------  --------  ----------
                                                                   (DOLLARS IN THOUSANDS)
<S>                     <C>       <C>         <C>       <C>         <C>       <C>         <C>       <C>         <C>       <C>
Commercial and other .. $ 12,800       24.6%  $ 10,200       23.4%  $  8,300       21.8%  $  7,700       19.7%  $  6,800       19.7%
Commercial real
  estate ..............    9,900       27.4      9,200       28.2     10,100       25.8      9,300       23.1      7,500       21.0
Agricultural ..........    9,300       14.3     11,900       17.0      8,200       20.4      7,000       20.8      6,400       21.5
Residential real
  estate ..............    1,900       20.4      1,900       18.3      2,700       17.9      2,400       20.3      2,200       20.7
Consumer ..............    2,500       10.4      2,300       10.8      1,500       11.5      1,700       13.4      1,500       14.1
Tax-exempt ............      100        2.9        600        2.3        300        2.6        300        2.7        300        3.0
Unallocated ...........    9,395         --      5,795         --      5,919         --      5,853         --      5,782         --
                        --------   --------   --------   --------   --------   --------   --------   --------   --------   --------

    Total reserve ..... $ 45,895      100.0%  $ 41,895      100.0%  $ 37,019      100.0%  $ 34,253      100.0%  $ 30,482      100.0%
                        ========   ========   ========   ========   ========   ========   ========   ========   ========   ========
</TABLE>

     Approximately $9.4 million, or 20.5%, of the reserve for loan and lease
losses is not allocated to specific credits at December 31, 2000, compared to
$5.8 million, or 13.8%, of the reserve which was not allocated to specific
credits at December 31, 1999. Management noted some weakening of general
economic conditions during the fourth quarter of 2000 which had not yet been
factored into the analysis of specific credits, but which was taken into
consideration in the analysis of the overall reserve position.

     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.

     As a result of the Branch Acquisition, we expect to receive cash from the
seller of approximately $390.0 million. A significant portion of this cash will
be invested in securities.

     The securities portfolio declined by $86.7 million, or 8.4%, to $951.6
million at December 31, 2000 from $1.0 billion at December 31, 1999 and $996.7
million at December 31, 1998. The majority of the proceeds from maturing
securities during 2000 were reinvested in loans rather than securities.



                                       24
<PAGE>



      The following table presents the amortized cost and fair value of
securities held on December 31, 2000:

<TABLE>
<CAPTION>
                                                                     AT DECEMBER 31, 2000
                                                     ----------------------------------------------------
                                                                     GROSS         GROSS
                                                      AMORTIZED    UNREALIZED    UNREALIZED       FAIR
                                                        COST          GAIN          LOSS          VALUE
                                                     ----------    ----------    ----------    ----------
                                                                       (IN THOUSANDS)
<S>                                                  <C>           <C>           <C>           <C>
Securities available-for-sale:
     U. S. Treasury securities ..................    $    1,915    $        1    $        3    $    1,913
     U. S. government agency obligations ........       110,543           672            40       111,175
     Obligations of state and political
      subdivisions ..............................        23,047           562             4        23,605
     Mortgage-backed securities .................       574,236         3,339         2,691       574,884
     Equity securities ..........................        55,945           905           114        56,736
     Other ......................................        15,234            --            33        15,201
                                                     ----------    ----------    ----------    ----------
        Total securities available-for-sale .....    $  780,920    $    5,479    $    2,885    $  783,514
                                                     ==========    ==========    ==========    ==========

Securities held-to-maturity:
     U. S. government agency obligations ........    $    5,491    $       22    $       56    $    5,457
     Obligations of state and political
      subdivisions ..............................       162,622         3,354           170       165,806
                                                     ----------    ----------    ----------    ----------
        Total securities held-to-maturity .......    $  168,113    $    3,376    $      226    $  171,263
                                                     ==========    ==========    ==========    ==========
</TABLE>



      The following table presents the maturity of securities held at December
31, 2000 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, Federal Reserve Bank stock, Federal
Home Loan Mortgage Corporation preferred stock, and Federal National Mortgage
Association preferred stock, do not have a stated face rate or maturity. Equity
securities are presented in this table based on estimated rates at December 31,
2000:


<TABLE>
<CAPTION>
                                                                           AMORTIZED COST
                                 -------------------------------------------------------------------------------------------------
                                   WITHIN 1 YEAR         1-5 YEARS           5-10 YEARS        AFTER 10 YEARS         TOTALS
                                 -----------------   -----------------   -----------------   -----------------   -----------------
                                  AMOUNT    YIELD     AMOUNT    YIELD     AMOUNT    YIELD     AMOUNT    YIELD     AMOUNT    YIELD
                                 --------  -------   --------  -------   --------  -------   --------  -------   --------  -------
                                                                       (DOLLARS IN THOUSANDS)
<S>                              <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
U.S. Treasury securities and
  obligations of U.S.
  government agencies .......... $ 38,836     6.80%  $ 66,269     6.87%  $ 12,748     6.71%  $     96     6.90%  $117,949     6.83%
Obligations of states and
  political subdivisions (1) ...   36,808     7.83     98,772     7.75     49,330     7.44        759     7.98    185,669     7.67
Mortgage-backed securities .....  118,697     7.08    236,642     6.77    127,492     6.65     91,405     6.70    574,236     6.79
Equity securities ..............       --       --         --       --         --       --         --       --     55,945     7.31
Other securities ...............   13,199     6.32         --       --      2,035     6.81         --       --     15,234     6.32
                                 --------  -------   --------  -------   --------  -------   --------  -------   --------  -------

     Total Investment
       Securities .............. $207,540     7.19%  $401,683     7.05%  $191,605     7.04%  $ 92,260     6.71%  $949,033     7.00%
                                 ========  =======   ========  =======   ========  =======   ========  =======   ========  =======
</TABLE>

------------------------------
(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 66 months at December 31, 2000,
with an average tax-equivalent yield to maturity on the portfolio of 7.00%,
unrealized gains of $8.9 million and unrealized losses of $3.1 million. This
compares to an average maturity of 76 months at December 31, 1999, and an
average tax-equivalent yield to maturity of 6.82%, unrealized gains of $3.3
million, and unrealized losses of $21.7 million. At December 31, 2000, the
market value of our securities was $954.8 million, or $5.7 million over its
amortized cost. This compares to a market value of $1.0 billion, or $18.5
million under amortized cost, at December 31, 1999.



                                       25
<PAGE>



     TOTAL DEPOSITS. Deposits increased by $256.1 million, or 9.0% in 2000, and
$280.0 million or 10.9% in 1999. The Northwest acquisition in 2000 and the Dean
acquisition in 1999 were significant contributors to overall deposit growth.
Noninterest bearing deposits increased by $50.1 million, or 12.3%, in 2000, and
$37.3 million, or 10.1%, in 1999. Savings, NOW, and money market accounts
increased $115.1 million, or 11.3%, in 2000, and $153.6 million, or 17.7%, in
1999. As part of our strategy to grow deposits, we have placed a strong emphasis
on the money market savings product and have structured that product to be
competitive with other short-term investment alternatives available to
customers. Money market savings balances increased by $147.9 million, or 29.4%,
in 2000, and $98.5 million, or 24.3%, in 1999.

     Savings certificate balances increased by $91.0 million, or 6.4%, in 2000,
and $89.1 million, or 6.7%, in 1999. The lower growth rate for certificate
balances compared to other transaction accounts is consistent with our goal to
place less emphasis on savings certificates in our deposit funding. The Branch
Acquisition will add approximately $750 million in deposits to Bremer and help
us to further the goal of placing less emphasis on certificates in our deposit
funding. Only 39.0% of the deposits that we expect to acquire in the Branch
Acquisition are in savings certificates as compared to our deposit base at
December 31, 2000 which included 48.8% in savings certificates. At December 31,
2000, savings certificates included $76.7 million of deposits acquired through
brokers. This compares with $58.7 million of brokered deposits at December 31,
1999 and $40.9 million at December 31, 1998. All of these brokered deposits
mature during the first half of 2001. As a result of the deposits being added
through the Branch Acquisition, we do not expect to replace these maturing
brokered deposits during 2001.

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

<TABLE>
<CAPTION>
                                                                        AT DECEMBER 31,
                                      -------------------------------------------------------------------------------------
                                                 2000                         1999                           1998
                                      -------------------------     -------------------------     -------------------------
                                        AMOUNT         PERCENT        AMOUNT         PERCENT        AMOUNT         PERCENT
                                      ----------     ----------     ----------     ----------     ----------     ----------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                   <C>            <C>            <C>            <C>            <C>            <C>
Noninterest bearing deposits .....    $  456,571           14.7%    $  406,478           14.3%    $  369,215           14.4%
Savings and NOW accounts .........       318,481           10.2        342,752           12.0        294,385           11.4
Money market accounts ............       816,112           26.3        676,775           23.7        571,495           22.2

Time certificates of deposit:
  Less than $100,000 .............     1,186,472           38.2      1,132,158           39.7      1,081,795           42.1
  $100,000 or more ...............       329,192           10.6        292,529           10.3        253,760            9.9
                                      ----------     ----------     ----------     ----------     ----------     ----------
                                      $3,106,828          100.0%    $2,850,692          100.0%    $2,570,650          100.0%
                                      ==========     ==========     ==========     ==========     ==========     ==========
</TABLE>


     Included in interest bearing deposits at December 31, 2000 were $329.2
million of time deposits that had balances of $100,000 or more at December 31,
2000. Maturities of these time deposits are summarized as follows:


<TABLE>
<CAPTION>
                                                          AT DECEMBER 31,2000
                                                          -------------------
                                                            (IN THOUSANDS)
<S>                                                       <C>
Three months or less ..................................   $           122,306
Over three months to six months .......................                46,383
Over six months to twelve months ......................                74,560
Over twelve months ....................................                85,943
                                                          -------------------
      Total ...........................................   $           329,192
                                                          ===================
</TABLE>


     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 3.4% to $441.0 million at December 31, 2000 from
$426.7 million at December 31, 1999 and from $353.2 million at December 31,
1998. Repurchase agreements with customers, which constitute 64.5% of short-term
borrowings at December 31, 2000, increased to $284.3 million at the end of 2000
from $260.4 million at the end of 1999 and $217.7 million at the end of 1998. At
December 31, 2000, 83.2% 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 declined to
$95.0 million at the end of 2000 from $107.0 million at the end of 1999 and
$89.5 million at the end of 1998. We expect that the level of these short-term
FHLB advances will decline significantly after we complete the Branch
Acquisition. The total amount that can be




                                       26
<PAGE>

borrowed under the unsecured revolving credit facility is $60.0 million. The
facility is used primarily to provide funding to the Bremer Business Finance
Corporation. Advances under this short-term revolving credit facility were $15.0
million at December 31, 2000 compared to $16.0 million at December 31, 1999, and
$33.0 million at December 31, 1998. The amount borrowed under this facility is
expected to increase by approximately $30 million when the Branch Acquisition
is completed. The proceeds from this additional borrowing will be used to
provide capital to the South St. Paul bank subsidiary to support the Branch
Acquisition. The following table presents a summary of our short-term borrowings
for the periods ended on the dates indicated:

<TABLE>
<CAPTION>
                                                        FEDERAL FUNDS  FEDERAL HOME     TREASURY      REVOLVING
                                                       AND REPURCHASE   LOAN BANK     TAX AND LOAN      CREDIT
                                                         AGREEMENTS     BORROWINGS        NOTES        FACILITY
                                                       --------------  ------------   ------------    ----------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                                      <C>            <C>            <C>            <C>
Balance at December 31
     2000 ...........................................    $  328,315     $   95,000     $    2,685     $   15,000
     1999 ...........................................       300,737        107,000          2,948         16,000
     1998 ...........................................       221,419         89,500          9,294         33,000

Weighted average interest rate at December 31
     2000 ...........................................          6.49%          6.55%          6.25%          7.16%
     1999 ...........................................          5.41           5.67           5.25           6.74
     1998 ...........................................          4.96           5.22           4.62           6.52

Maximum amount outstanding at any month end
     2000 ...........................................    $  328,536     $  165,419     $    3,899     $   40,000
     1999 ...........................................       300,737        156,755         12,461         99,000
     1998 ...........................................       288,312        178,658         15,167         35,000

Average amount outstanding during the year
     2000 ...........................................    $  286,813     $  105,428     $    2,412     $   27,855
     1999 ...........................................       246,666         84,556          3,553         55,875
     1998 ...........................................       196,731        139,520          8,587         22,742

Weighted average interest cost during the year
     2000 ...........................................          5.72%          6.28%          6.18%          7.58%
     1999 ...........................................          4.53           5.47           4.65           6.23
     1998 ...........................................          5.00           5.55           4.76           6.55
</TABLE>


     LONG-TERM DEBT. Long-term debt, which includes senior notes, FHLB advances
with original maturities of greater than one year, and installment promissory
notes, increased $16.8 million, or 7.8%, in 2000, and $99.5 million, or 85.6%,
in 1999. The following table summarizes long-term debt for the last three years:


<TABLE>
<CAPTION>
                                                         AT DECEMBER 31,
                                                2000          1999          1998
                                             ----------    ----------    ----------
                                                         (IN THOUSANDS)
<S>                                          <C>            <C>          <C>
Senior notes ............................    $   65,000     $  65,000    $       --
Federal Home Loan Bank borrowings .......       164,908       147,587       111,318
Installment promissory notes ............         2,752         3,245         4,968
                                             ----------    ----------    ----------
   Total ................................    $  232,660    $  215,832    $  116,286
                                             ==========    ==========    ==========
</TABLE>


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

      TRUST PREFERRED CAPITAL SECURITIES. On February 22, 2001, we issued $16.5
million of trust preferred capital securities. This issuance will increase our
Tier 1 capital in anticipation of the Branch Acquisition.



                                       27
<PAGE>

      EQUITY OF SHAREHOLDERS AND REDEEMABLE CLASS A COMMON STOCK. Shareholders'
equity and redeemable class A common stock was $354.0 million at December 31,
2000 compared to $312.9 million at December 31, 1999 and $303.4 million at
December 31, 1998. Book value per share increased to $29.50 at December 31, 2000
from $26.07 at December 31, 1999 and $25.28 at December 31, 1998. Dividends paid
per share increased to $1.39 in 2000 from $1.32 in both 1999 and 1998. The
dividends paid in 2000 of $16.7 million represented 5.3% of the equity of
shareholders at December 31, 1999 and 36.5% of 2000 net income. Realized book
value per share, which excludes the impact of the net unrealized gain or loss on
securities available-for-sale, increased to $29.37 at December 31, 2000 from
$26.95 at December 31, 1999, and $24.93 at December 31, 1998.

      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, 2000. The following table compares
the consolidated capital ratios with the minimum requirements for well
capitalized and adequately capitalized banks as of December 31, 2000:


<TABLE>
<CAPTION>
                                                             MINIMUM REQUIREMENTS
                                                      ---------------------------------
                                                           WELL           ADEQUATELY
CAPITAL CATEGORY                          ACTUAL        CAPITALIZED       CAPITALIZED
-------------------------------------  ------------   ---------------   ---------------
<S>                                       <C>               <C>               <C>
Tier I risk-based capital ...........     10.03%            6.00%             4.00%
Total risk-based capital ............     11.28            10.00              8.00
Leverage ratio ......................      7.51             5.00              4.00
</TABLE>

     The completion of the Branch Acquisition and the issuance of additional
trust preferred capital securities will significantly impact our capital ratios.
After completion of these transactions, the capital ratios are expected to be
lower in all cases than the ratios as of December 31, 2000, but remain above the
well-capitalized level.

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 an historically stable source of funding and
represented approximately 86% of total liabilities during 2000. Our
available-for-sale securities portfolio is a secondary source of liquidity
because of its readily marketable nature and predictable stream of maturities.
Approximately 22.0% of the securities portfolio matures in 2001. 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, 2000, we also had available $45.0 million
of borrowing capacity under a $60.0 million unsecured credit facility. As of
December 31, 2000, $15.0 million was advanced and outstanding under this
facility. This credit facility is used primarily to provide funding availability
for non-bank activities. We intend to use approximately $30 million under this
facility to finance capital increases in connection with the Branch Acquisition.

     The Branch Acquisition, which includes approximately $750 million of
deposits but only about $300 million of loans, is expected, when consummated, to
significantly enhance our liquidity position.

     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 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 3.4% with a 200

                                       28
<PAGE>

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 decrease of approximately 11.9%. This
is within our maximum risk limit of 20.0% for this risk measure.

     The matching of assets and liabilities may be analyzed by examining to 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.

     The following table sets forth at December 31, 2000 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:

<TABLE>
<CAPTION>
                                                                              AMOUNT REPRICING OR MATURING
                                                        -------------------------------------------------------------------------
                                                          WITHIN          3 - 12           1 - 5         OVER 5
                                                         3 MONTHS         MONTHS           YEARS          YEARS          TOTAL
                                                        -----------     -----------     -----------    -----------    -----------
                                                                                  (DOLLARS IN THOUSANDS)
<S>                                                     <C>             <C>             <C>            <C>            <C>
INTEREST EARNING ASSETS (1)
    Loans and leases ................................   $ 1,002,645     $   506,229     $ 1,216,527    $   194,070    $ 2,919,471
    Securities ......................................       304,653         114,425         260,297        272,252        951,627
    Other earning assets ............................        11,828              --              --             --         11,828
                                                        -----------     -----------     -----------    -----------    -----------
       Total interest earning assets ................   $ 1,319,126     $   620,654     $ 1,476,824    $   466,322    $ 3,882,926
                                                        ===========     ===========     ===========    ===========    ===========
INTEREST BEARING LIABILITIES

    Interest bearing deposits (2) ...................   $   963,460     $   781,851     $   904,633    $       313    $ 2,650,257
    Short-term borrowings ...........................       407,474          28,116           5,410             --        441,000
    Long-term debt (3) ..............................            56          15,598         181,094         35,912        232,660
                                                        -----------     -----------     -----------    -----------    -----------
       Total interest bearing liabilities ...........   $ 1,370,990     $   825,565     $ 1,091,137    $    36,225    $ 3,323,917
                                                        -----------     -----------     -----------    -----------    -----------
Rate sensitive gap ..................................   $   (51,864)    $  (204,911)    $   385,687    $   430,097    $   559,009
                                                        ===========     ===========     ===========    ===========    ===========
Cumulative rate sensitive gap .......................   $   (51,864)    $  (256,775)    $   128,912    $   559,009
                                                        ===========     ===========     ===========    ===========
Rate sensitive gap % to total assets ................          (1.2)%          (4.9)%           9.2%          10.2%          13.3%
Cumulative rate sensitive gap % to total assets .....          (1.2)           (6.1)            3.1           13.3
</TABLE>

---------------------------
(1)  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.
(2)  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.
(3)  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 well 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 not change by more than 2.5% over the next year with a 300 basis
point change in the level of rates. The projected change in net income is well
within the current policy limit that requires that the change in net income over
the next 12 months not exceed 10.0%.

     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.



                                       29
<PAGE>



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.

     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 FASB Statement No. 107.

IMPACT OF NEW ACCOUNTING STANDARDS

      ACCOUNTING FOR DERIVATIVES. On January 1, 2001, we adopted Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 137, "Deferral of
the Effective Date of FASB Statement No. 133", as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities".
SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that all derivatives,
including those embedded in other contracts, be recognized as either assets or
liabilities and that those financial instruments be measured at fair value.
Management has reviewed the requirements of SFAS No. 133 and has determined that
we have a minimal amount of derivatives and that there is no material impact to
the financial statements due to the adoption of SFAS No. 133.

     ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES. In September 2000, the FASB issued SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," which replaces SFAS No. 125. The Statement revises the
standards for accounting for the securitization and other transfers of financial
assets and collateral, and requires certain disclosures, but carries over most
of SFAS No. 125's provisions without reconsideration. SFAS No. 140 is effective
for transfers and servicing of financial assets and extinguishments of
liabilities occuring after March 31, 2001. Management believes that adopting
SFAS No. 140 will not have a material impact on the Company's financial position
or results of operations.



                                       30
<PAGE>




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                  BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2000 AND 1999

                        (IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                  2000             1999
                                                                              ------------     ------------
<S>                                                                           <C>              <C>
ASSETS
    Cash and due from banks ..............................................    $    200,547     $    145,407
    Interest bearing deposits ............................................           5,731            4,886
    Investment securities available-for-sale (amortized cost of
       $206,684 and $188,683, respectively) ..............................         208,630          187,857
    Mortgage-backed securities available-for-sale (amortized cost of
       $574,236 and $688,649, respectively) ..............................         574,884          671,985
                                                                              ------------     ------------
       TOTAL SECURITIES AVAILABLE-FOR-SALE ...............................         783,514          859,842
    Investment securities held-to-maturity (fair value of
       $171,263 and $170,788, respectively) ..............................         168,113          171,720
    Mortgage-backed securities held-to-maturity (fair value of
       $0 and $6,769, respectively) ......................................              --            6,810
                                                                              ------------     ------------
       TOTAL SECURITIES HELD-TO-MATURITY .................................         168,113          178,530
    Loans and leases .....................................................       2,919,471        2,550,156
       Reserve for credit losses .........................................         (45,895)         (41,895)
       Unearned discount .................................................          (3,870)          (7,259)
                                                                              ------------     ------------
       NET LOANS AND LEASES ..............................................       2,869,706        2,501,002
    Interest receivable ..................................................          40,822           34,148
    Premises and equipment, net ..........................................          57,742           59,821
    Other assets .........................................................          66,421           67,849
                                                                              ------------     ------------
       TOTAL ASSETS ......................................................    $  4,192,596     $  3,851,485
                                                                              ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
    Noninterest bearing deposits .........................................    $    456,571     $    406,478
    Interest bearing deposits ............................................       2,650,257        2,444,214
                                                                              ------------     ------------
       TOTAL DEPOSITS ....................................................       3,106,828        2,850,692
    Federal funds purchased and repurchase agreements ....................         328,315          300,737
    Other short-term borrowings ..........................................         112,685          125,948
    Long-term debt .......................................................         232,660          215,832
    Accrued expenses and other liabilities ...............................          57,919           44,486
                                                                              ------------     ------------
       TOTAL LIABILITIES .................................................       3,838,407        3,537,695
    Minority interests ...................................................             150              914
    Redeemable class A common stock, 960,000 shares
       issued and outstanding ............................................          28,324           25,029
    Shareholders' equity
       Common stock
          Class A, no par, 12,000,000 shares authorized;
            240,000 shares issued and outstanding ........................              57               57
          Class B, no par, 10,800,000 shares authorized,
            issued and outstanding .......................................           2,562            2,562
       Retained earnings .................................................         321,665          294,892
       Accumulated other comprehensive income (loss) .....................           1,431           (9,664)
                                                                              ------------     ------------
       TOTAL SHAREHOLDERS' EQUITY ........................................         325,715          287,847
                                                                              ------------     ------------
       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........................    $  4,192,596     $  3,851,485
                                                                              ============     ============
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       31
<PAGE>


                  BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

                  YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                        2000          1999          1998
                                                                     ----------    ----------    ----------
<S>                                                                  <C>              <C>           <C>
INTEREST INCOME
    Loans and leases, including fees ............................    $  249,178    $  201,022    $  186,963
    Securities
      Taxable ...................................................        53,040        51,661        46,698
      Tax-exempt ................................................        11,082        10,577        11,036
    Federal funds sold ..........................................           612           575           701
    Other .......................................................           259           132           127
                                                                     ----------    ----------    ----------
          Total interest income .................................       314,171       263,967       245,525

INTEREST EXPENSE
    Deposits ....................................................       123,798        96,428        97,660
    Federal funds purchased and repurchase agreements ...........        16,392        11,175         9,836
    Other short-term borrowings .................................         8,884         8,246         9,652
    Long-term debt ..............................................        14,108         9,065         4,276
                                                                     ----------    ----------    ----------
          Total interest expense ................................       163,182       124,914       121,424
                                                                     ----------    ----------    ----------
      Net interest income .......................................       150,989       139,053       124,101
    Provision for credit losses .................................         8,338         8,321         5,570
                                                                     ----------    ----------    ----------
      Net interest income after provision for credit losses .....       142,651       130,732       118,531

NONINTEREST INCOME
    Service charges .............................................        22,284        19,434        17,037
    Insurance ...................................................        10,045         9,703         7,804
    Trust .......................................................         9,139         7,984         6,990
    Brokerage ...................................................         5,481         4,533         3,752
    Gain on sale of loans .......................................         2,758         3,380         4,977
    Gain on sale of securities ..................................           270         1,853         1,296
    State tax refund ............................................            --            --         4,476
    Other .......................................................         4,240         5,578         4,938
                                                                     ----------    ----------    ----------
          Total noninterest income ..............................        54,217        52,465        51,270

NONINTEREST EXPENSE
    Salaries and wages ..........................................        58,331        54,164        49,287
    Employee benefits ...........................................        14,018        14,901        12,572
    Occupancy ...................................................         7,651         6,921         6,128
    Furniture and equipment .....................................         9,432         9,170         7,621
    Data processing fees ........................................         7,244         7,465         6,046
    FDIC premiums and examination fees ..........................         1,652         1,297         1,157
    Amortization of goodwill and other intangibles ..............         3,713         2,831         1,711
    Other .......................................................        24,589        25,195        22,491
                                                                     ----------    ----------    ----------
          Total noninterest expense .............................       126,630       121,944       107,013
                                                                     ----------    ----------    ----------
INCOME BEFORE INCOME TAX EXPENSE ................................        70,238        61,253        62,788
    Income tax expense ..........................................        24,457        21,142        21,277
                                                                     ----------    ----------    ----------
NET INCOME ......................................................    $   45,781    $   40,111    $   41,511
                                                                     ==========    ==========    ==========
    Per common share amounts:
      Net income-basic and diluted ..............................    $     3.82    $     3.34    $     3.46
      Dividends paid ............................................    $     1.39          1.32          1.32
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       32
<PAGE>

                  BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                            ACCUMULATED
                                                           COMMON STOCK        OTHER
                                                         ----------------  COMPREHENSIVE COMPREHENSIVE  RETAINED
                                                         CLASS A  CLASS B   INCOME(LOSS)    INCOME      EARNINGS       TOTAL
                                                         -------  -------   ------------    ------      --------       -----
<S>                                                        <C>      <C>          <C>     <C>             <C>          <C>
BALANCE, DECEMBER 31, 1997                                 $ 57   $ 2,562   $    4,977                 $ 248,945    $ 256,541
Comprehensive income
    Net income                                                                           $   41,511       41,511       41,511
    Other comprehensive income
      Change in net unrealized gain (loss)
        on securities available-for-sale, net of tax
        and reclassification adjustment                                         (1,141)      (1,141)                   (1,141)
                                                                                         -----------
    Comprehensive income                                                                     40,370
                                                                                         ===========
Dividends, $1.32 per share                                                                               (15,840)     (15,840)
Allocation of net income in excess of dividends and change
    in net unrealized gain (loss) on securities available
    for sale to redeemable class A common stock                                     91                    (2,054)      (1,963)
                                                         -------  --------  -----------               -----------  -----------

BALANCE, DECEMBER 31, 1998                                   57     2,562        3,927                   272,562      279,108
Comprehensive income
    Net income                                                                               40,111       40,111       40,111
    Other comprehensive income
      Change in net unrealized gain (loss)
        on securities available-for-sale, net of tax
        and reclassification adjustment                                        (14,774)     (14,774)                  (14,774)
                                                                                         -----------
    Comprehensive income                                                                     25,337
                                                                                         ===========
Dividends, $1.32 per share                                                                               (15,840)     (15,840)
Allocation of net income in excess of dividends and change
    in net unrealized gain (loss) on securities available
    for sale to redeemable class A common stock                                  1,183                    (1,941)        (758)
                                                         -------  --------  -----------               -----------  -----------

BALANCE, DECEMBER 31, 1999                                   57     2,562       (9,664)                  294,892      287,847
Comprehensive income
    Net income                                                                               45,781       45,781       45,781
    Other comprehensive income
      Change in net unrealized gain (loss)
        on securities available-for-sale, net of tax
        and reclassification adjustment                                         12,060       12,060                    12,060
                                                                                         -----------
    Comprehensive income                                                                 $   57,841
                                                                                         ===========
Dividends, $1.39 per share                                                                               (16,680)     (16,680)
Allocation of net income in excess of dividends and change
    in net unrealized gain (loss) on securities available
    for sale to redeemable class A common stock                                   (965)                   (2,328)      (3,293)
                                                         -------  --------  -----------               -----------  -----------

BALANCE, DECEMBER 31, 2000                                 $ 57   $ 2,562   $    1,431                $  321,665   $  325,715
                                                         =======  ========  ===========               ===========  ===========
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       33
<PAGE>


                  BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  2000           1999           1998
                                                                               ----------     ----------     ----------
<S>                                                                            <C>                <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income ...........................................................    $   45,781     $   40,111     $   41,511
     Adjustments to reconcile net income to net cash
      provided by operating activities
       Provision for credit losses ........................................         8,338          8,321          5,570
       Depreciation and amortization ......................................        11,521         11,001          9,081
       Deferred income taxes ..............................................         3,825          5,091          2,283
       Minority interests in earnings of subsidiaries .....................            21             41            747
       Gain on sale of securities .........................................          (270)        (1,853)        (1,296)
       Gain on sale of other real estate owned, net .......................           (72)          (405)          (242)
       Other assets and liabilities, net ..................................         9,683          6,005          1,656
       Proceeds from loans originated for sale ............................       135,936        185,448        289,472
       Loans originated for sale ..........................................      (133,404)      (186,259)      (290,493)
                                                                               ----------     ----------     ----------
          Net cash provided by operating activities .......................        81,359         67,501         58,289

CASH FLOWS FROM INVESTING ACTIVITIES
     Interest bearing deposits, net .......................................          (845)        (3,174)           174
     Purchases of securities available for sale ...........................       (54,247)      (394,091)      (359,454)
     Purchases of securities held to maturity .............................       (12,180)       (41,168)       (34,381)
     Proceeds from maturities of securities available for sale ............       105,386        215,050        221,601
     Proceeds from maturities of securities held to maturity ..............        22,621         62,793         99,379
     Proceeds from sales of securities available for sale .................        45,520         92,302         67,179
     Proceeds from sales of other real estate owned .......................         1,092            919            862
     Loans and leases, net ................................................      (379,574)      (372,897)      (210,289)
     Acquisition of minority interests ....................................          (458)            --        (12,149)
     Acquisitions, net of cash acquired ...................................       (18,416)       (47,789)            --
     Purchase of premises and equipment ...................................        (5,717)       (12,979)        (9,264)
                                                                               ----------     ----------     ----------
       Net cash used in investing activities ..............................      (296,818)      (501,034)      (236,342)

CASH FLOWS FROM FINANCING ACTIVITIES
     Noninterest bearing deposits, net ....................................        50,093         37,263         24,694
     Interest bearing deposits (excluding certificates of deposit), net....       132,980        171,488        125,907
     Certificates of deposits, net ........................................        73,063         71,291        (22,449)
     Federal funds purchased and repurchase agreements, net ...............        27,578         79,318         54,245
     Other short-term borrowings, net .....................................       (13,263)        (5,846)       (66,296)
     Proceeds from issuance of long-term debt .............................        33,099        142,432         97,298
     Repayments of long-term debt .........................................       (16,271)       (42,886)       (11,250)
     Dividends paid to minority interests .................................            --            (32)          (326)
     Redeemable preferred stock ...........................................            --         (2,079)           (65)
     Dividends paid .......................................................       (16,680)       (15,840)       (15,840)
                                                                               ----------     ----------     ----------
       Net cash provided by financing activities ..........................       270,599        435,109        185,918
                                                                               ----------     ----------     ----------
       Net increase in cash and due from banks ............................        55,140          1,576          7,865
     Cash and due from banks
      Beginning of year ...................................................       145,407        143,831        135,966
                                                                               ----------     ----------     ----------
      End of year .........................................................    $  200,547     $  145,407     $  143,831
                                                                               ==========     ==========     ==========

Supplemental disclosures of cash flow information
     Cash paid during the year for interest ...............................    $  153,534     $  125,658     $  121,198
     Cash paid during the year for income taxes ...........................        17,274         17,534         19,079
</TABLE>

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       34
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A:   ACCOUNTING POLICIES

     NATURE OF BUSINESS - Bremer Financial Corporation (the "Company") is a
privately-held 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 and is operated as a single segment. Additionally, the Company
provides asset-based lending and leasing, 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 generally accepted accounting principles 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,
2000, 1999, and 1998, the Company received real estate valued at $3,154,000,
$725,000, and $776,000, respectively, 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. 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 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") Nos. 114 and 118. Impaired loans as defined by SFAS 114 and
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, "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 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




                                       35
<PAGE>

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 an allocation of the existing 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.

     INTANGIBLE ASSETS - Intangible assets consist primarily of goodwill. The
remaining unamortized balances at December 31, 2000 and 1999 were approximately
$49,373,000 and $43,606,000, respectively, which are amortized over either a 15
year or 25 year period.

     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.

     STATE INCOME TAX REFUND - In 1998, the Company recorded a non-recurring
state tax refund of nearly $4.5 million, including interest, as a component of
noninterest income. The state tax refund reflects a refund of state income taxes
paid to the state of Minnesota from 1980 through 1983.

     COMPREHENSIVE INCOME - In 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." Comprehensive income is defined as the change
in equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from 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.

     NEW ACCOUNTING PRONOUNCEMENTS - On January 1, 2001, the Company adopted
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No.
133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities". SFAS No. 133 establishes accounting and reporting
standards for derivative instruments and for hedging activities. It requires
that all derivatives, including those embedded in other contracts, be recognized
as either assets or liabilities and that those financial instruments be measured
at fair value. Management has reviewed the requirements of SFAS No. 133 and has
determined that the Company has a minimal amount of derivatives and that there
is no material impact to the financial statements due to the adoption of SFAS
No. 133.

     In September 2000, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," which replaces SFAS No. 125. The Statement
revises the standards for accounting for the securitization and other transfers
of financial assets and collateral, and requires certain disclosures, but
carries over most of SFAS No. 125's provisions without reconsideration. SFAS No.
140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occuring after March 31, 2001. Management
believes that adopting SFAS No. 140 will not have a material impact on the
Company's 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 O.

     RECLASSIFICATIONS - Certain amounts have been reclassified to provide
consistent presentation among the various accounting periods shown. The
reclassifications have no effect on previously reported net income or total
shareholders' equity.



                                       36
<PAGE>

NOTE B:   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
$31,170,000 and $28,363,000 as of December 31, 2000 and 1999, respectively.

NOTE C:   INVESTMENT AND MORTGAGE-BACKED SECURITIES

     At December 31, 2000 and 1999, investment and mortgage-backed securities
with an amortized cost of $661,455,000 and $818,305,000, respectively, were
pledged as collateral to secure public deposits and for other purposes. The
amortized cost and estimated fair value by maturity at December 31, 2000, are
shown below (contractual maturity or, with mortgage-backed securities, projected
principal payments are used):


<TABLE>
<CAPTION>
                                               HELD TO MATURITY           AVAILABLE FOR SALE
                                           ------------------------    ------------------------
                                            AMORTIZED       FAIR        AMORTIZED       FAIR
                                              COST         VALUE          COST         VALUE
                                           ----------    ----------    ----------    ----------
                                                             (IN THOUSANDS)
<S>                                        <C>           <C>           <C>           <C>
Within 1 year .........................    $   35,552    $   35,956    $  171,988    $  172,600
1 - 5 years ...........................        90,013        91,957       311,670       312,852
5 - 10 years ..........................        41,964        42,765       149,641       150,289
After 10 years ........................           584           585        91,676        91,037
Equity securities .....................            --            --        55,945        56,736
                                           ----------    ----------    ----------    ----------
    Total investment securities .......    $  168,113    $  171,263    $  780,920    $  783,514
                                           ==========    ==========    ==========    ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                                             2000                                         1999
                                       ---------------------------------------------  ---------------------------------------------
                                                     GROSS       GROSS                              GROSS       GROSS
                                        AMORTIZED  UNREALIZED  UNREALIZED    FAIR     AMORTIZED   UNREALIZED  UNREALIZED    FAIR
                                          COST       GAINS       LOSSES      VALUE       COST        GAINS      LOSSES      VALUE
                                       ----------  ----------  ----------  ---------  ----------  ----------  ----------  ---------
                                                                               (IN THOUSANDS)
<S>                                    <C>         <C>         <C>         <C>        <C>         <C>         <C>         <C>
U.S. Treasury securities ............  $    1,915  $        1  $        3  $   1,913  $    9,679  $       20  $       25  $   9,674
Obligations of U.S.
  government agencies ...............     110,543         672          40    111,175     100,500         384         282    100,602
Obligations of state
  and political subdivisions ........      23,047         562           4     23,605      27,264         108         593     26,779
Mortgage-backed
  securities ........................     574,236       3,339       2,691    574,884     688,649       1,320      17,983    671,986
Equity securities ...................      55,945         905         114     56,736      48,190           8         295     47,903
Other ...............................      15,234          --          33     15,201       3,050          19         171      2,898
                                       ----------  ----------  ----------  ---------  ----------  ----------  ----------  ---------
    Total securities available-
      for-sale ......................  $  780,920  $    5,479  $    2,885  $ 783,514  $  877,332  $    1,859  $   19,349  $ 859,842
                                       ==========  ==========  ==========  =========  ==========  ==========  ==========  =========
</TABLE>


     Proceeds from sales of investments and mortgage-backed securities were
$45,520,000, $83,444,000, and $67,179,000 for 2000, 1999, and 1998,
respectively. Gross gains of $429,630, $1,866,000, and $1,563,000 and gross
losses of $164,000, $21,000, and $267,000 were realized on those sales for 2000,
1999, and 1998, respectively.



                                       37
<PAGE>



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

<TABLE>
<CAPTION>
                                                              2000                                         1999
                                       ---------------------------------------------  ---------------------------------------------
                                                      GROSS      GROSS                              GROSS       GROSS
                                        AMORTIZED  UNREALIZED  UNREALIZED    FAIR      AMORTIZED  UNREALIZED  UNREALIZED    FAIR
                                          COST        GAINS      LOSSES      VALUE       COST        GAINS      LOSSES      VALUE
                                       ----------  ----------  ----------  ---------  ----------  ----------  ----------  ---------
                                                                              (IN THOUSANDS)
<S>                                    <C>         <C>         <C>         <C>        <C>         <C>         <C>         <C>
U.S. Treasury securities ............  $    5,491  $       22  $       56  $   5,457  $   10,486  $       --  $      313  $  10,173
Obligations of state
  and political subdivisions ........     162,622       3,354         170    165,806     161,234       1,421       2,040    160,615
Mortgage-backed
  securities ........................          --          --          --         --       6,810          --          41      6,769
                                       ----------  ----------  ----------  ---------  ----------  ----------  ----------  ---------
     Total securities held-
       to-maturity ..................  $  168,113  $    3,376  $      266  $ 171,263  $  178,530  $    1,421  $    2,394  $ 177,557
                                       ==========  ==========  ==========  =========  ==========  ==========  ==========  =========
</TABLE>

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

NOTE D:   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:



<TABLE>
<CAPTION>
                                                          2000            1999
                                                      ------------    ------------
                                                             (IN THOUSANDS)
<S>                                                   <C>             <C>
Commercial and other .............................    $    717,936    $    596,680
Commercial real estate ...........................         733,746         648,029
     Construction ................................          68,296          70,869
Agricultural .....................................         416,660         433,357
Residential real estate ..........................         578,876         450,812
     Construction ................................          18,051          15,274
Consumer .........................................         302,824         275,320
Tax-exempt .......................................          83,082          59,815
                                                      ------------    ------------
        Total loans and leases ...................    $  2,919,471    $  2,550,156
                                                      ============    ============
</TABLE>


     Impaired loans and leases were $13,991,000 and $16,656,000 at December 31,
2000 and 1999, 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 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 $2,724,000 and $2,692,000
relating to impaired loans and leases at December 31, 2000 and 1999,
respectively.

                                       38
<PAGE>



     The effect of nonaccrual and restructured loans and leases on interest
income for each of the three years ended December 31 was as follows:


<TABLE>
<CAPTION>
                                                         2000           1999           1998
                                                      ----------     ----------     ----------
                                                                   (IN THOUSANDS)
<S>                                                   <C>            <C>            <C>
Average investment in impaired loans .............    $   14,896     $   15,004     $   10,831
                                                      ==========     ==========     ==========
Interest income as originally contracted .........         1,626          2,254          1,708
                                                      ==========     ==========     ==========
Interest income as recognized ....................          (778)          (770)          (324)
                                                      ==========     ==========     ==========
</TABLE>


     Other nonperforming assets, consisting of other real estate owned, amounted
to $3,658,000 and $527,000 at December 31, 2000 and 1999, respectively.

     Loans totaling $935,270,000 and $283,140,000 had been pledged to secure
Federal Home Loan Bank ("FHLB") as such advances at December 31, 2000 and 1999,
respectively. Acceptable collateral is defined by the FHLB and consists
primarily of residential real estate mortgages.

     The Company and its subsidiaries have granted loans to the officers and
directors (the "Group") of significant subsidiaries. The aggregate dollar amount
of loans to the Group was $38,630,000 and $17,605,000 at December 31, 2000 and
1999, respectively. During 2000, $100,166,000 of new loans were made, repayments
totaled $86,200,000, and changes in the composition of the Group or their
associations increased loans outstanding by $7,059,000. These loans were made at
the prevailing market interest rates.

NOTE E:   RESERVE FOR CREDIT LOSSES

     Changes in the reserve for credit losses are as follows:

<TABLE>
<CAPTION>
                                                         2000           1999           1998
                                                      ----------     ----------     ----------
                                                                   (IN THOUSANDS)
<S>                                                   <C>            <C>            <C>
Beginning of year ................................    $   41,895     $   37,019     $   34,253
      Charge-offs ................................        (5,903)        (7,064)        (3,968)
      Recoveries .................................         1,271          1,439          1,164
                                                      ----------     ----------     ----------
           Net charge-offs .......................        (4,632)        (5,625)        (2,804)
      Provision for credit losses ................         8,338          8,321          5,570
      Reserve related to acquired assets .........           294          2,180             --
                                                      ----------     ----------     ----------

End of year ......................................    $   45,895     $   41,895     $   37,019
                                                      ==========     ==========     ==========
</TABLE>



                                       39
<PAGE>


NOTE F:   PREMISES AND EQUIPMENT

     Premises and equipment at December 31 consisted of the following:

<TABLE>
<CAPTION>
                                                                 2000          1999
                                                              ----------    ----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>           <C>
Land .....................................................    $    7,969    $    7,787
Buildings and improvements ...............................        66,240        65,583
Furniture and equipment ..................................        51,871        48,372
                                                              ----------    ----------
           Total premises and equipment ..................       126,080       121,742
Less: accumulated depreciation and amortization ..........        68,338        61,921
                                                              ----------    ----------
Premises and equipment, net ..............................    $   57,742    $   59,821
                                                              ==========    ==========
</TABLE>

NOTE G:   SHORT-TERM BORROWINGS

     Short-term borrowings consist of federal funds and repurchase agreements
(which generally mature within one to sixty days of the transaction date),
treasury tax and loan notes (which generally mature within one to thirty days),
FHLB advances (which mature within one year), and advances under an unsecured
revolving credit facility agreement. The size of the credit facility available
at December 31, 2000, is $60 million, of which $45 million was unused. The
facility contains covenants which require the Company to maintain certain levels
of capitalization.

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

<TABLE>
<CAPTION>
                                                   FEDERAL FUNDS     FEDERAL HOME        TREASURY         REVOLVING
                                                  AND REPURCHASE       LOAN BANK       TAX AND LOAN         CREDIT
                                                    AGREEMENTS        BORROWINGS           NOTES           FACILITY
                                                   ------------      ------------      ------------      ------------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                                <C>               <C>               <C>               <C>
Balance at December 31
     2000 ....................................     $    328,315      $     95,000      $      2,685      $     15,000
     1999 ....................................          300,737           107,000             2,948            16,000
     1998 ....................................          221,419            89,500             9,294            33,000

Weighted average interest rate at December 31
     2000 ....................................             6.49%             6.55%             6.25%             7.16%
     1999 ....................................             5.41              5.67              5.25              6.74
     1998 ....................................             4.96              5.22              4.62              6.52

Maximum amount outstanding at any month end
     2000 ....................................     $    328,536      $    165,419      $      3,899      $     40,000
     1999 ....................................          300,737           156,755            12,461            99,000
     1998 ....................................          288,312           178,658            15,167            35,000

Average amount outstanding during the year
     2000 ....................................     $    286,813      $    105,428      $      2,412      $     27,855
     1999 ....................................          246,666            84,556             3,553            55,875
     1998 ....................................          196,731           139,520             8,587            22,742

Weighted average interest cost during the year
     2000 ....................................             5.72%             6.28%             6.18%             7.58%
     1999 ....................................             4.53              5.47              4.65              6.23
     1998 ....................................             5.00              5.55              4.76              6.55
</TABLE>



                                       40
<PAGE>



NOTE H:   LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                AT DECEMBER 31,
                                                       2000          1999          1998
                                                    ----------    ----------    ----------
                                                                (IN THOUSANDS)
<S>                                                 <C>            <C>          <C>
Senior notes ...................................    $   65,000    $   65,000    $       --
Federal Home Loan Bank borrowings ..............       164,908       147,587       111,318
Installment promissory notes ...................         2,752         3,245         4,968
                                                    ----------    ----------    ----------
   Total .......................................    $  232,660    $  215,832    $  116,286
                                                    ==========    ==========    ==========
</TABLE>

     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 remaining $19 million second tranche
bears an interest rate of 8.47% and matures on November 1, 2006. These senior
notes include covenants which require the Company to maintain certain levels of
capitalization.

     The FHLB borrowings bear interest at rates ranging from 4.99% to 7.83%,
with maturity dates from 2001 through 2013, and are secured by certain loans.

     The installment promissory notes bear interest at rates ranging from 7.59%
to 7.83%, paid predominantly in annual installments through 2007.

     Maturities of long-term debt outstanding at December 31, 2000, were as
follows:

<TABLE>
<CAPTION>
                                                          (IN THOUSANDS)
<S>                                                           <C>
2001 .....................................................    $  1,654
2002 .....................................................      18,768
2003 .....................................................      18,684
2004 .....................................................      70,700
2005 .....................................................      15,942
Beyond 2005 ..............................................     106,912
                                                              --------
   Total .................................................    $232,660
                                                              ========
</TABLE>

         At December 31, 2000, $71 million of the FHLB borrowings due in years
     beyond 2005 were subject to call prior to maturity at the option of the
     FHLB. Of this amount, $14 million is callable in 2001 and $57 million is
     callable in 2003.



                                       41
<PAGE>


NOTE I:   DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     Most of the Company's assets and liabilities are considered financial
instruments as defined in SFAS 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.

     The fair value estimates presented herein are based on pertinent
information available to the Company as of December 31, 2000 and 1999. 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, 2000 and,
therefore, current estimates of fair value may differ from the amounts
presented. As of December 31, carrying amounts and estimated fair values were:

<TABLE>
<CAPTION>
                                                                   2000                       1999
                                                        ------------------------    ------------------------
                                                                       ESTIMATED                   ESTIMATED
                                                         CARRYING        FAIR        CARRYING        FAIR
                                                          AMOUNT         VALUE        AMOUNT         VALUE
                                                        ----------    ----------    ----------    ----------
                                                                           (IN THOUSANDS)
<S>                                                     <C>           <C>           <C>           <C>
FINANCIAL ASSETS:
    Cash and due from banks ........................    $  200,547    $  200,547    $  145,407    $  145,407
    Interest bearing deposits ......................         5,731         5,731         4,886         4,886
    Investment securities held-to-maturity .........       168,113       171,263       178,530       177,557
    Investment securities available-for-sale .......       783,514       783,514       859,842       859,842
    Loans and leases ...............................     2,869,706     2,890,338     2,501,002     2,481,897

FINANCIAL LIABILITIES:
    Demand deposits ................................    $1,591,164    $1,591,164    $1,426,005    $1,426,005
    Time deposits ..................................     1,515,664     1,532,697     1,424,687     1,418,486
    Short-term borrowings ..........................       441,000       441,334       426,685       426,698
    Long-term debt .................................       232,660       236,410       215,832       208,365
</TABLE>

     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 FAS 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.

                                       42
<PAGE>

     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.

NOTE J:   EMPLOYEE BENEFIT PLANS

     PENSION PLAN - The Company has a defined benefit pension plan covering
substantially all of its employees. The benefits are based on age, years of
service and the monthly average of the 60 consecutive months' compensation out
of the last 120 months that gives the highest average. In recent years, the
Company's funding policy is 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," 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 on a
pay-as-you-go-basis.

     The cost of these programs are as follows:

<TABLE>
<CAPTION>
                                                                                                    OTHER
                                                           PENSION BENEFITS                POSTRETIREMENT BENEFITS
                                                  --------------------------------    --------------------------------
                                                     2000       1999        1998        2000        1999        1998
                                                  --------    --------    --------    --------    --------    --------
                                                                             (IN THOUSANDS)
<S>                                               <C>         <C>         <C>         <C>         <C>         <C>
NET PENSION COST
Service cost ..................................   $  1,757    $  1,674    $  1,408    $    151    $    152    $    157
Interest cost .................................      2,271       2,178       1,937         167         146         171
Expected return on plan assets ................     (3,704)     (2,629)     (2,439)         --          --          --
Net (gain) recognition ........................       (197)         --          --         (78)        (72)        (47)
Prior service cost amortization ...............        173         173         130          (6)         (6)         (6)
Loss due to special termination benefits ......         --         352          --          --          --          --
                                                  --------    --------    --------    --------    --------    --------
   Net pension cost ...........................   $    300    $  1,748    $  1,036    $    234    $    220    $    275
                                                  ========    ========    ========    ========    ========    ========
</TABLE>






                                       43
<PAGE>


     The following tables set forth the plans' funded status (based on a
valuation date of September 30), along with a description of how the status
changed during the past two years and the amount recognized on the Company's
balance sheet at December 31. The funded status of the plans is equal to the
fair value of plan assets less the benefit obligation at end of year.


<TABLE>
<CAPTION>
                                                                                                        OTHER POST-
                                                                        PENSION BENEFITS            RETIREMENT BENEFITS
                                                                   -------------------------     -------------------------
                                                                      2000           1999           2000           1999
                                                                   ----------     ----------     ----------     ----------
                                                                                       (IN THOUSANDS)
<S>                                                                <C>            <C>            <C>            <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at end of prior year .......................    $   29,712     $   30,134     $    2,063     $    2,072
Service cost ..................................................         1,757          1,674            151            152
Interest cost .................................................         2,271          2,179            167            146
Amendments ....................................................            --            817             --             --
Actuarial (gain)/loss .........................................           199         (4,172)           638           (113)
Benefits paid .................................................        (1,127)          (920)          (194)          (194)
                                                                   ----------     ----------     ----------     ----------
Benefit obligation at end of year .............................    $   32,812     $   29,712     $    2,825     $    2,063
                                                                   ==========     ==========     ==========     ==========

CHANGE IN PLAN ASSETS
Fair value of plan assets at September 30,  prior year ........    $   34,800     $   28,173     $       --     $       --
Actual return on plan assets ..................................         4,209          5,400             --             --
Employer contribution .........................................         2,337          2,147            194            194
Benefits paid .................................................        (1,127)          (920)          (194)          (194)
                                                                   ----------     ----------     ----------     ----------
Fair value of plan assets at September 30, current year .......    $   40,219     $   34,800     $       --     $       --
                                                                   ==========     ==========     ==========     ==========

FUNDED STATUS OF PLANS
Funded status of plans ........................................    $    7,407     $    5,088     $   (2,825)    $   (2,063)
Unrecognized net (gain)/loss ..................................        (6,014)        (5,905)          (662)        (1,341)
Unrecognized prior service costs ..............................           587            760            (79)          (122)
Contributions between September 30 and December 31 ............         1,049          3,500             --             --
                                                                   ----------     ----------     ----------     ----------
    Prepaid benefit asset/(accrued benefit liability) .........    $    3,029     $    3,443     $   (3,566)    $   (3,526)
                                                                   ==========     ==========     ==========     ==========
</TABLE>



                                       44
<PAGE>



     The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation and the expected long-term rates of return on
assets are as follows:

<TABLE>
<CAPTION>
                                                                                               OTHER
                                                         PENSION BENEFITS             POSTRETIREMENT BENEFITS
                                                  ------------------------------   ------------------------------
WEIGHTED AVERAGE ASSUMPTIONS                        2000       1999       1998       2000       1999       1998
                                                  --------   --------   --------   --------   --------   --------
<S>                                                 <C>        <C>        <C>        <C>        <C>        <C>
    Discount rate ............................      7.75%      7.75%      6.75%      7.75%      7.75%      6.75%
    Expected return on plan assets ...........     10.00%     10.00%      9.00%       N/A        N/A        N/A
    Rate of compensation increase ............      4.25%      4.25%      4.25%       N/A        N/A        N/A
</TABLE>


     For purposes of the 2000 postretirement benefits measurements, the Company
has assumed a health-care cost trend rate of 7.375%. The health-care trend rate
assumption has a significant effect on the amounts reported. A one (1)
percentage point change in the health-care trend rate would have the following
effects on 2000 service and interest cost on the accumulated postretirement
benefit obligation at December 31, 2000:

<TABLE>
<CAPTION>
                                                                             ONE (1) PERCENTAGE POINT
                                                                             ------------------------
                                                                              INCREASE      DECREASE
                                                                             ----------    ----------
                                                                                  (IN THOUSANDS)
<S>                                                                           <C>          <C>
Effect on service and interest cost components of net periodic cost ......    $     44     $    (38)
Effect on accumulated postretirement benefit obligation ..................         322         (279)
</TABLE>


     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.

     Contributions are calculated using a formula based primarily upon the
Company's earnings. Total contribution expense for 2000, 1999, and 1998 was
approximately $3,291,000, $2,795,000 and $2,465,000, 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 expense was $100,000 for both
2000 and 1999 and was $250,000 in 1998.

NOTE K:   OTHER NONINTEREST INCOME

     Other noninterest income at December 31 consisted of the following:

<TABLE>
<CAPTION>
                                              2000        1999        1998
                                            --------    --------    --------
                                                    (IN THOUSANDS)
<S>                                         <C>         <C>         <C>
Fees on loans ..........................    $  3,024    $  2,841    $  2,944
Other ..................................       1,216       2,737       1,994
                                            --------    --------    --------
     Total .............................    $  4,240    $  5,578    $  4,938
                                            ========    ========    ========
</TABLE>






                                       45
<PAGE>




NOTE L:   OTHER NONINTEREST EXPENSE

     Other noninterest expense at December 31 consisted of the following:

<TABLE>
<CAPTION>
                                                       2000        1999        1998
                                                     --------    --------    --------
                                                              (IN THOUSANDS)
<S>                                                  <C>         <C>         <C>
Printing, postage and office supplies ...........    $  5,850    $  5,916    $  5,487
Marketing .......................................       4,862       4,760       4,756
Other real estate owned .........................         106         104          91
Other ...........................................      13,771      14,415      12,157
                                                     --------    --------    --------
     Total ......................................    $ 24,589    $ 25,195    $ 22,491
                                                     ========    ========    ========
</TABLE>


NOTE M:   INCOME TAXES

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

<TABLE>
<CAPTION>
                                                       2000        1999        1998
                                                     --------    --------    --------
                                                              (IN THOUSANDS)
<S>                                                  <C>         <C>         <C>
Current
    Federal .....................................    $ 16,538    $ 12,305    $ 14,713
    State .......................................       4,094       3,746       4,281
Deferred ........................................       3,825       5,091       2,283
                                                     --------    --------    --------
          Total .................................    $ 24,457    $ 21,142    $ 21,277
                                                     ========    ========    ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                      2000           1999           1998
                                                                   ----------     ----------     ----------
                                                                                (IN THOUSANDS)
<S>                                                                <C>            <C>            <C>
Tax at statutory rate .........................................    $   24,583     $   21,440     $   21,976
Plus state income tax, net of federal tax benefits ............         3,110          3,153          3,083
                                                                   ----------     ----------     ----------
                                                                       27,693         24,593         25,059
Less tax effect of:
    Interest on state and political subdivision securities ....         2,890          2,939          2,972
    Other tax-exempt interest .................................         1,714          1,259          1,483
    Goodwill Amortization .....................................        (1,176)          (753)          (330)
    Minority interest in earnings .............................            (7)           (14)          (262)
    Other .....................................................          (185)            20            (81)
                                                                   ----------     ----------     ----------
                                                                        3,236          3,451          3,782
                                                                   ----------     ----------     ----------
Income tax expense ............................................    $   24,457     $   21,142     $   21,277
                                                                   ==========     ==========     ==========
</TABLE>




                                       46
<PAGE>



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

<TABLE>
<CAPTION>
                                                                       2000           1999
                                                                    ----------     ----------
                                                                          (IN THOUSANDS)
<S>                                                                 <C>            <C>
Deferred tax assets

      Provision for credit losses ..............................    $   18,160     $   16,490
      Employee compensation and benefits accruals ..............           771          1,293
      Deferred income ..........................................           950            960
      Unrealized loss on securities available for sale .........            --          6,994
      Other ....................................................             9             40
                                                                    ----------     ----------
          Total ................................................    $   19,890     $   25,777
                                                                    ==========     ==========
Deferred tax liabilities

      Deferred expense .........................................    $    1,567     $    1,577
      Depreciation .............................................        17,355         12,017
      Unrealized gain on securities available for sale .........         1,046             --
      Other ....................................................           556             39
                                                                    ----------     ----------
          Total ................................................        20,524         13,633
                                                                    ----------     ----------
Net deferred tax (liabilities) assets ..........................    $     (634)    $   12,144
                                                                    ==========     ==========
</TABLE>

NOTE N:   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:

<TABLE>
<CAPTION>
                                                           2000          1999
                                                        ----------    ----------
                                                             (IN THOUSANDS)
<S>                                                     <C>           <C>
Standby letters of credit ..........................    $   26,567    $   25,939
Loan commitments ...................................       586,873       589,860
</TABLE>

     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.



                                       47
<PAGE>



     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 accounts
receivable, inventory, and productive assets.

      Under substantially noncancelable contracts, the Company is obligated to
pay approximately $4.5 million in annual data processing and item processing
fees to third party providers through February 2004 and March 2006,
respectively. 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 consolidated
financial position or operations.

NOTE O:   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, 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 Otto Bremer 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.

     At December 31, 2000 and 1999, 960,000 shares of redeemable class A stock
were issued and outstanding. At December 31, 2000, these shares were subject to
redemption at a price of $29.50 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. It is the Company'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
Otto Bremer 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, 2000, 1999 and 1998, no Subsidiary Banks had extended credit to the Company.



                                       48
<PAGE>



     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, 2000, $24,205,000 of retained
earnings of the Subsidiary Banks was available for distribution to the Company
as dividends subject to these limitations. Approximately $15,679,000 was
available for distribution without obtaining the prior approval of the
appropriate bank regulator.

NOTE P:   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, 2000, that the
Company meets all capital adequacy requirements to which it is subject.











                                       49
<PAGE>



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

<TABLE>
<CAPTION>
                                                                                                     TO BE WELL
                                                                                                 CAPITALIZED UNDER
                                                                           FOR CAPITAL           PROMPT CORRECTIVE
                                                      ACTUAL            ADEQUACY PURPOSES        ACTION PROVISIONS
                                             ---------------------    ---------------------    ----------------------
                                               AMOUNT       RATIO       AMOUNT       RATIO       AMOUNT        RATIO
                                             ----------    -------    ----------    -------    ----------     -------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                          <C>            <C>       <C>            <C>       <C>             <C>
As of December 31, 2000:
    Total capital (to risk
       weighted assets)
         Consolidated ....................   $ 341,979      11.28%    $ 242,502 >    8.00%         N/A
                                                                                -
         Subsidiary Banks ................   $ 330,283      11.41%    $ 231,516 >    8.00%      $ 289,395 >    10.00%
                                                                                -                         -
    Tier I capital (to risk
       weighted assets)
         Consolidated ....................   $ 303,988      10.03%    $ 121,251 >    4.00%         N/A
                                                                                -
         Subsidiary Banks ................   $ 293,700      10.15%    $ 115,758 >    4.00%      $ 173,637 >     6.00%
                                                                                -                         -
    Tier I capital (to
       average assets)
         Consolidated ....................   $ 303,988       7.51%    $ 161,851 >    4.00%         N/A
                                                                                -
         Subsidiary Banks ................   $ 293,700       7.29%    $ 161,225 >    4.00%      $ 201,531 >     5.00%
                                                                                -                         -

As of December 31, 1999:
    Total capital (to risk
       weighted assets)
         Consolidated ....................   $ 315,100      11.67%    $ 216,029 >    8.00%         N/A
                                                                                -
         Subsidiary Banks ................   $ 313,166      12.10%    $ 207,056 >    8.00%      $ 258,820 >    10.00%
                                                                                -                         -
    Tier I capital (to risk
       weighted assets)
         Consolidated ....................   $ 281,244      10.42%    $ 108,015 >    4.00%         N/A
                                                                                -
         Subsidiary Banks ................   $ 280,717      10.85%    $ 103,528 >    4.00%      $ 155,292 >     6.00%
                                                                                -                         -
    Tier I capital (to
       average assets)
         Consolidated ....................   $ 281,244       7.48%    $ 150,379 >    4.00%         N/A
                                                                                -
         Subsidiary Banks ................   $ 280,717       7.47%    $ 150,354 >    4.00%      $ 187,943 >     5.00%
                                                                                -                         -
</TABLE>

     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 Company's
Subsidiary Banks ratios in each of these categories met or exceeded the
"well-capitalized" ratios as of December 31, 2000.






                                       50
<PAGE>


NOTE Q:   BREMER FINANCIAL CORPORATION (PARENT COMPANY ONLY)
          CONDENSED STATEMENTS:

BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                   DECEMBER 31
                                                             ------------------------
                                                                2000          1999
                                                             ----------    ----------
                                                                  (IN THOUSANDS)
<S>                                                          <C>           <C>
ASSETS

    Cash and cash equivalents ...........................    $      221    $       49
    Investment securities available for sale ............         3,987            --
    Investment in and advances to:
       Bank subsidiaries ................................       342,477       320,468
       Non-bank subsidiaries ............................        89,086        74,923
    Other assets ........................................         3,960         4,576
                                                             ----------    ----------
          Total assets ..................................    $  439,731    $  400,016
                                                             ==========    ==========


LIABILITIES AND SHAREHOLDERS' EQUITY

    Short-term borrowings ...............................    $   15,000    $   16,000
    Long-term debt ......................................        67,752        68,176
    Accrued expenses and other liabilities ..............         2,940         2,964
    Redeemable class A common stock .....................        28,324        25,029
    Shareholders' equity ................................       325,715       287,847
                                                             ----------    ----------
          Total liabilities and shareholders' equity ....    $  439,731    $  400,016
                                                             ==========    ==========
</TABLE>



STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31
                                                                 --------------------------------
                                                                   2000        1999        1998
                                                                 --------    --------    --------
                                                                         (IN THOUSANDS)
<S>                                                              <C>         <C>         <C>
INCOME
    Dividends from:
       Bank subsidiaries ....................................    $ 46,475    $ 29,049    $ 31,873
       Non-bank subsidiaries ................................       1,300       1,230         600
    Interest from subsidiaries ..............................       5,107       4,288       3,060
    Interest income on taxable securities ...................         222          --          --
    Other income ............................................          --         354         353
                                                                 --------    --------    --------
       Total income .........................................      53,104      34,921      35,886

EXPENSES
    Interest expense:
       Short-term borrowings ................................       2,112       3,479       1,489
       Long-term debt .......................................       5,736       1,149         305
    Salaries and benefits ...................................         792       1,505         685
    Operating expense paid to subsidiaries ..................         998       1,008       1,083
    Other operating expenses ................................       1,239       1,184         538
                                                                 --------    --------    --------
       Total expenses .......................................      10,877       8,325       4,100
                                                                 --------    --------    --------
       Income before income tax benefit .....................      42,227      26,596      31,786
    Income tax benefit ......................................       2,432       1,341         208
                                                                 --------    --------    --------
       Income of parent company only ........................      44,659      27,937      31,994
    Equity in undistributed earnings of subsidiaries ........       1,122      12,174       9,517
                                                                 --------    --------    --------
NET INCOME ..................................................    $ 45,781    $ 40,111    $ 41,511
                                                                 ========    ========    ========
</TABLE>




                                       51
<PAGE>



NOTE Q:   BREMER FINANCIAL CORPORATION (PARENT COMPANY ONLY) CONDENSED
          STATEMENTS (CONTINUED):

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31
                                                                        ----------------------------------------
                                                                           2000           1999           1998
                                                                        ----------     ----------     ----------
                                                                                     (IN THOUSANDS)
<S>                                                                     <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income .....................................................    $   45,781     $   40,111     $   41,511
    Adjustments to reconcile net income to
       net cash provided by operating activities
          Equity in undistributed (earnings) of subsidiaries .......        (1,122)       (12,174)        (9,517)
          Depreciation and amortization ............................           662            858            490
          Other, net ...............................................           232         (1,357)          (303)
                                                                        ----------     ----------     ----------
             Net cash provided by operating activities .............        45,553         27,438         32,181
                                                                        ----------     ----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Investment in and advances to subsidiaries, net ................       (23,290)       (59,226)       (42,887)
    Purchases of securities, net ...................................        (4,626)            --             --
    Proceeds from sales of securities ..............................           639             --             --
                                                                        ----------     ----------     ----------
             Net cash used by investing activities .................       (27,277)       (59,226)       (42,887)
                                                                        ----------     ----------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES
    Short-term borrowings, net .....................................        (1,000)       (17,000)        27,000
    Proceeds of long-term debt .....................................            --         65,000             --
    Repayments of long-term debt ...................................          (424)          (423)          (424)
    Dividends paid .................................................       (16,680)       (15,840)       (15,840)
                                                                        ----------     ----------     ----------
             Net cash (used) provided by financing activities ......       (18,104)        31,737         10,736
                                                                        ----------     ----------     ----------
Increase (decrease) in cash and cash equivalents ...................           172            (51)            30
Cash and cash equivalents
    Beginning of year ..............................................            49            100             70
                                                                        ----------     ----------     ----------
    End of year ....................................................    $      221     $       49     $      100
                                                                        ==========     ==========     ==========
</TABLE>

NOTE R:   SUBSEQUENT EVENTS

     On January 30, 2001, the Company entered into a definitive agreement to
purchase eleven branch locations and a related commercial banking group from
Firstar Corporation, Milwaukee, Wisconsin ("Firstar"), including deposits of
approximately $750 million and loans of approximately $300 million. Structured
as a purchase of assets and assumption of liabilities, the purchase of the
Minneapolis and St. Paul, Minnesota branches came as a result of Firstar's
divestiture requirement related to its recently announced merger with U.S.
Bancorp, Minneapolis, Minnesota. Subject to the necessary regulatory approvals,
the transaction is expected to close in May 2001. In conjunction with this
transaction, and in order to maintain its well-capitalized position, the Company
issued $16.5 million in trust preferred capital securities on February 22, 2001,
and expects to issue an additional $55 million of similar securities during the
second quarter of 2001.




                                       52
<PAGE>


                          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, 2000 and 1999 and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 2000. 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 financial statements present fairly, in all material
respects, the financial position of Bremer Financial Corporation and
subsidiaries as of December 31, 2000 and 1999 and the results of their
operations and their cash flows for the three years in the period ended December
31, 2000 in conformity with accounting principles generally accepted in the
United States of America.

  /s/  Deloitte & Touche

Minneapolis, Minnesota
January 25, 2001

(February 22, 2001 as to Note R)





                                       53
<PAGE>



ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     No event requiring disclosure pursuant to this Item 9 has occurred during
the two years ended December 31, 2000.

                                    PART III

     Items 10 through 13 of the Form 10-K are omitted because the Company will
file before April 30, 2001 a definitive Proxy Statement (the "Proxy Statement")
conforming to Schedule 14A involving the election of directors. The information
required by Items 10, 11, 12 and 13 of Part III of the Form 10-K are hereby
incorporated by reference to such Proxy Statement.

                                     PART IV

14.  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, 2000 and December
                    31, 1999

                    Consolidated Statements of Income - Years ended December 31,
                    2000, 1999 and 1998

                    Consolidated Statements of Shareholder's Equity - Years
                    ended December 31, 2000, 1999 and 1998

                    Consolidated Statements of Cash Flows - Years ended December
                    31, 2000, 1999 and 1998

                    Notes to Consolidated Financial Statements

                    Independent 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.

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


               10.1 Bremer Financial Corporation 2000 Executive Annual Incentive
                    Compensation Plan for President and CEO of Bremer Financial
                    Corporation.*

               10.2 Bremer Financial Corporation 2000 Executive Annual Incentive
                    Compensation Plan for Community Banking Director.*

               10.3 Bremer Financial Corporation 2000 Executive Annual Incentive
                    Compensation Plan for Financial Services Director.*

               10.4 Bremer Financial Corporation 2000 Executive Annual Incentive
                    Compensation Plan for Chief Financial Officer, Chief Credit
                    Officer, Chief Information Officer, and Retail Director.*

               10.5 Bremer Financial Corporation 2000 Executive Annual Incentive
                    Compensation Plan for Human Resources Director, Marketing
                    Director, Assistant Community Banking Director, and Risk
                    Management Director.*

               10.6 Bremer Financial Corporation Note Purchase Agreement dated
                    November 1, 1999 - Series A Senior Notes, Tranche 1 and
                    Series A Senior Notes, Tranche 2.*

               10.7 Bremer Financial Corporation Credit Agreement dated October
                    21, 1997, as amended - unsecured revolving credit facility.*

               10.8 Purchase and Assumption Agreement dated as of January 30,
                    2001.*

               21   Subsidiaries of the Company.*

               99.4 Risk Factors*

* Incorporated by reference to Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6,
  10.7, 10.8, 21 and 99.4, respectively to the Company's Annual Report on Form
  10-K for the year ended December 31, 2000.


                                       54
<PAGE>



               The following exhibits are incorporated by reference to Exhibits
          10.1, 10.2, 10.3, 10.4, 10.5, and 10.6, respectively, to the Company's
          Annual Report on Form 10-K for the year ended December 31, 1999:

               10.9  Bremer Financial Corporation 1999 Executive Annual
                     Incentive Compensation Plan for Chairman of the Board of
                     Bremer Financial Corporation.

               10.10  Bremer Financial Corporation 1999 Executive Annual
                      Incentive Compensation Plan for President and CEO of
                      Bremer Financial Corporation.

               10.11  Bremer Financial Corporation 1999 Executive Annual
                      Incentive Compensation Plan for Community Banking
                      Director.

               10.12  Bremer Financial Corporation 1999 Executive Annual
                      Incentive Compensation Plan for Financial Services
                      Director.

               10.13  Bremer Financial Corporation 1999 Executive Annual
                      Incentive Compensation Plan for Chief Credit Officer,
                      Chief Financial Officer, and Chief Information Officer.

               10.14  Bremer Financial Corporation 1999 Executive Annual
                      Incentive Compensation Plan for other Senior Management
                      Positions.

               The following exhibits are incorporated by reference to Exhibits
          10.1, 10.2, 10.3, and 10.4, respectively, to the Company's Annual
          Report on Form 10-K for the year ended December 31, 1998:

               10.15  Bremer Financial Corporation 1998 Executive Annual
                      Incentive Compensation Plan for Chief Credit Officer,
                      Chief Financial Officer, Chief Information Officer, Human
                      Resources Director, and Operations Director.

               10.16  Bremer Financial Corporation 1998 Executive Annual
                      Incentive Compensation Plan for Group Presidents.

               10.17  Bremer Financial Corporation 1998 Executive Annual
                      Incentive Compensation Plan for Chairman of the Board of
                      Bremer Financial Corporation.

               10.18  Bremer Financial Corporation 1998 Executive Annual
                      Incentive Compensation Plan for President and CEO of
                      Bremer Financial Corporation.

               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:

               3.1    Bylaws of the Company in effect on the date hereof.

               99.1   The portion of the final Prospectus of the Company dated
                      April 20, 1989 ("Prospectus"), which was filed with the
                      SEC on April 20, 1989, entitled "Description of Capital
                      Stock Description of Class A Common Stock - Restrictions
                      on Transfer."

               99.2   The portion of the Prospectus entitled "Description of
                      Capital Stock - Description of Class A Common Stock -
                      First Call Option to Company" on page 64 of the
                      Prospectus.



                                       55
<PAGE>



               The following exhibits are incorporated by reference to Exhibits
          3.1, 10.12, 10.13, 10.14, 10.15, and 10.16, respectively, 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.

               10.19  Bremer Financial Corporation Employee Stock Ownership Plan
                      and Trust Agreement.

               10.20  Bremer Banks Profit Sharing Plus Plan, as amended and
                      restated effective January 1, 1986, and Amendment No. 1
                      thereto.

               10.21  Bremer Banks Profit Sharing Plus Trust Agreement dated
                      October 1, 1986 and Amendment No. 1 thereto.

               10.22  Bremer Banks Retirement Plan as effective April 1, 1985.

               10.23  Bremer Banks Retirement Plan Trust Agreement (as revised
                      and restated effective January 1, 1976).

                    The following exhibits are incorporated by reference to
                Exhibits 4.1, 4.2, and 28.1, respectively, to the Company's
                Amendment No. 1 to Registration Statement on Form S-1 filed with
                the SEC on March 29, 1989:

               4.1    Specimen of Stock Certificate evidencing Class A Common
                      Stock.

               4.2    Specimen of Stock Certificate evidencing Class B Common
                      Stock.

               99.3   Otto Bremer Foundation Trust Instrument dated May 22,
                      1944.

     (b) The Company filed no Current Reports on Form 8-K during the fourth
quarter of 2000, which ended December 31, 2000.

       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.



                                       56
<PAGE>



                                   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.

April 10, 2001.              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
April 10, 2001 in the capacities indicated.

                             /s/Stan K. Dardis
                             -------------------------------------------------
                             Stan K. Dardis
                             ITS PRESIDENT AND CHIEF EXECUTIVE OFFICER AND
                             DIRECTOR

                             /s/Terry M. Cummings
                             -------------------------------------------
                             Terry M. Cummings
                             CHAIRMAN OF THE BOARD AND DIRECTOR

                             /s/William H. Lipschultz
                             ------------------------------------------
                             William H. Lipschultz
                             VICE PRESIDENT AND DIRECTOR

                             /s/Charlotte S. Johnson
                             -----------------------------------------
                             Charlotte S. Johnson
                             VICE PRESIDENT AND DIRECTOR

                             /s/Sherman Winthrop
                             -------------------------------------------
                             Sherman Winthrop
                             DIRECTOR

                             /s/Daniel C. Reardon
                             --------------------------------------------
                             Daniel C. Reardon
                             VICE PRESIDENT AND DIRECTOR

                             /s/Robert B. Buck
                             --------------------------------------------
                             Robert B. Buck
                             EXECUTIVE VICE PRESIDENT AND CHIEF
                             FINANCIAL OFFICER (PRINCIPAL FINANCIAL OFFICER)

                             /s/Stuart F. Bradt
                             -------------------------------------------------
                             Stuart F. Bradt
                             CONTROLLER (PRINCIPAL ACCOUNTING OFFICER)



                                       57

<PAGE>

                                INDEX TO EXHIBITS

Description of Exhibits                                                     Page

     10.1 Bremer Financial Corporation 2000 Executive Annual Incentive
          Compensation Plan for President and CEO of Bremer Financial
          Corporation.

     10.2 Bremer Financial Corporation 2000 Executive Annual Incentive
          Compensation Plan for Community Banking Director.

     10.3 Bremer Financial Corporation 2000 Executive Annual Incentive
          Compensation Plan for Financial Services Director.

     10.4 Bremer Financial Corporation 2000 Executive Annual Incentive
          Compensation Plan for Chief Financial Officer, Chief Credit Officer,
          Chief Information Officer, and Retail Director.

     10.5 Bremer Financial Corporation 2000 Executive Annual Incentive
          Compensation Plan for Human Resources Director, Marketing Director,
          Assistant Community Banking Director, and Risk Management Director.

     10.6 Bremer Financial Corporation Note Purchase Agreement dated November 1,
          1999 -- Series A Senior Notes, Tranche 1 and Series A Senior Notes,
          Tranche 2.

     10.7 Bremer Financial Corporation Credit Agreement dated October 21, 1997,
          as amended -- unsecured revolving credit facility.

     10.8 Purchase and Assumption Agreement dated as of January 30, 2001.

     21   Subsidiaries of the Company.