UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 10-Q



[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended September 30, 2004.



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 Identification No.)



incorporation or organization)



445 Minnesota St., Suite 2000, St. Paul, MN  55101-2107

(Address of principal executive offices)  (Zip Code)



(651) 227-7621

(Registrants telephone number, including area code)



Not applicable.

(Former name, former address and former fiscal year, if changed since last report)



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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
 the Exchange Act). Yes _____ No __X_



APPLICABLE ONLY TO CORPORATE ISSUERS:



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the
 latest practicable date.



As of September 30, 2004, there were 1,200,000 shares of class A common stock and 10,800,000 shares of class B common stock outstanding.



---

|BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share amounts)
|-------------------------------------------------------------------------------------------------------------------

|                                                      | Three months ended September 30, |  | Nine months ended September 30,
|----------------------------------------------------- | -------------------------------- |  | -------------------------------
|                                                      |                                  |  |                                
|
|                                                      |                                  |  |                                
|Operating Results:                                    |                                  |  |                                
|Total interest income                                 |                                  |  | $                              
|Total interest expense                                |                                  |  |                                
|                                                      |                                  |  |                                
|Net interest income                                   |                                  |  |                                
|Provision for credit losses                           |                                  |  |                                
|                                                      |                                  |  |                                
|Net interest income after provision for credit losses |                                  |  |                                
|Noninterest income                                    |                                  |  |                                
|Noninterest expense                                   |                                  |  |                                
|                                                      |                                  |  |                                
|Income before income tax expense                      |                                  |  |                                
|Income tax expense                                    |                                  |  |                                
|                                                      |                                  |  |                                
|Net income                                            |                                  |  | $                              
|                                                      |                                  |  |                                
|Net income per share                                  |                                  |  | $                              
|Dividends paid per share                              |                                  |  |                                
|Tax equivalent net interest income                    |                                  |  | $                              
|Net charge-offs                                       |                                  |  |                                
|Selected Financial Ratios:                            |                                  | 
|Return on average assets                              |                                  |  |                                
|Return on average equity (1)                          |                                  |  |                                
|Average equity to average assets (1)                  |                                  |  |                                
|Net interest margin (2)                               |                                  |  |                                
|Operating efficiency ratio (3)                        |                                  |  |                                
|Net charge-offs to average loans and leases           |                                  |  |                                
|                                                     
|
|Balance Sheet Data:                                   |                                  | 
|Total assets                                          |                                  |  | $                              
|Securities (4)                                        |                                  |  |                                
|Loans and leases (5)                                  |                                  |  |                                
|Total deposits                                        |                                  |  |                                
|Short-term borrowings                                 |                                  |  |                                
|Long-term debt                                        |                                  |  |                                
|Total shareholders' equity and redeemable Class A     |                                  | 
|common stock                                          |                                  |  |                                
|Per share book value of common stock                  |                                  |  |                                
|Asset Quality:                                        |                                  | 
|Reserve for credit losses                             |                                  |  | $                              
|Nonperforming assets                                  |                                  |  |                                
|Nonperforming assets to total loans, leases           |                                  | 
|and OREO                                              |                                  |  |                                
|Reserve to nonperforming loans and leases             |                                  |  |                                
|Reserve to total loans and leases                     |                                  |  |                                

|_________________
|-----------------

|(1) |  | Calculation
includes shareholders' equity and redeemable class A common stock.
|--- |  | ------------------------------------------------------------------------------

|(2) |  | Tax-equivalent
basis (TEB).
|--- |  | ---------------------------

|(3) |  | Noninterest
expense as a percentage of tax-equivalent net interest income and noninterest income.
|--- |  | -------------------------------------------------------------------------------------------------

|(4) |  | Includes
securities held-to-maturity and securities available-for-sale.
|--- |  | -----------------------------------------------------------------------

|(5) |  | Net
of unearned discount and includes nonaccrual loans and leases.
|--- |  | ------------------------------------------------------------------



---

|BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
SUMMARY BALANCE SHEET AND INCOME STATEMENT
(dollars in thousands)
|---------------------------------------------------------------------------------------------------------------

|                                                      | Three months ended September 30, |  | Nine months ended September 30,
|----------------------------------------------------- | -------------------------------- |  | -------------------------------
|
|
|Summary Average Balance Sheet:                        |                                  |  |                                
|Total loans and leases (2)                            |                                  |  | $                              
|Total securities (3)                                  |                                  |  |                                
|Total other earning assets                            |                                  |  |                                
|                                                      |                                  |  |                                
|Total interest earning assets (4)                     |                                  |  | $                              
|Total noninterest earning assets                      |                                  |  |                                
|                                                      |                                  |  |                                
|Total assets                                          |                                  |  | $                              
|                                                      |                                  |  |                                
|Noninterest bearing deposits                          |                                  |  | $                              
|Interest bearing deposits                             |                                  |  |                                
|Short-term borrowings                                 |                                  |  |                                
|Long-term debt                                        |                                  |  |                                
|                                                      |                                  |  |                                
|Total interest bearing liabilities                    |                                  |  | $                              
|Other noninterest bearing liabilities                 |                                  |  |                                
|Minority interest                                     |                                  |  |                                
|Total shareholders' equity and redeemable             |                                  | 
|Class A common stock                                  |                                  |  |                                
|                                                      |                                  |  |                                
|Total liabilities and equity                          |                                  |  | $                              
|                                                      |                                  |  |                                
|                                                     
|
|
|Summary Income Statement:                             |                                  | 
|Total interest income                                 |                                  |  | $                              
|Total interest expense                                |                                  |  |                                
|                                                      |                                  |  |                                
|Net interest income                                   |                                  |  |                                
|Provision for credit losses                           |                                  |  |                                
|                                                      |                                  |  |                                
|Net interest income after provision for credit losses |                                  |  |                                
|Service charges                                       |                                  |  |                                
|Insurance                                             |                                  |  |                                
|Investment management and trust fees                  |                                  |  |                                
|Brokerage                                             |                                  |  |                                
|Gain on sale of loans                                 |                                  |  |                                
|Gain on sale of securities                            |                                  |  |                                
|Other                                                 |                                  |  |                                
|                                                      |                                  |  |                                
|Total noninterest income                              |                                  |  |                                
|Salaries and wages                                    |                                  |  |                                
|Employee benefits                                     |                                  |  |                                
|Occupancy                                             |                                  |  |                                
|Furniture and equipment                               |                                  |  |                                
|Data processing fees                                  |                                  |  |                                
|FDIC premiums and examination fees                    |                                  |  |                                
|Amortization of intangibles                           |                                  |  |                                
|Other                                                 |                                  |  |                                
|                                                      |                                  |  |                                
|Total noninterest expense                             |                                  |  |                                
|                                                      |                                  |  |                                
|Income before income tax expense                      |                                  |  |                                
|Income tax expense                                    |                                  |  |                                
|                                                      |                                  |  |                                
|Net income                                            |                                  |  | $                              
|                                                      |                                  |  |                                

|_________________
|-----------------

|(1) |  | Calculation is
based on interest income including $2,188 and $2,061 for the three months ended
September 30, 2004 and September 30, 2003 and $6,328 and $6,053 for the nine
months ended September 30, 2004 and September 30, 2003 to adjust to a fully
taxable basis using the federal statutory rate of 35%.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Net of unearned
discount and includes nonaccrual loans and leases.
|--- |  | ------------------------------------------------------------------

|(3) |  | Excluding net
unrealized gain (loss) on securities available-for-sale.
|--- |  | ----------------------------------------------------------------------

|(4) |  | Before deducting
the reserve for credit losses.
|--- |  | -----------------------------------------------



---

BREMER FINANCIAL CORPORATION  FORM 10-Q QUARTER ENDED SEPTEMBER 30, 2004  INDEX  Page  PART I    FINANCIAL INFORMATION   Item 1. Financial Statements 3  Item 2. Managements Discussion and Analysis of Financial 13 Condition and Results of Operations  Item 3. Quantitative and Qualitative Disclosure About Market Risk 25  Item 4. Disclosure Controls and Procedures 26  PART II    OTHER INFORMATION   Item 6. Exhibits and Reports on Form 8-K 27  Signatures 28  Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  Exhibit 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     1


---

Forward-Looking Statements Certain statements in this Form 10-Q constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21B of the Securities
Exchange Act of 1934, as amended (Exchange Act). For this purpose, any statements contained herein or incorporated
herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing,
the words believes, anticipates, plans, intends, expects and similar
expressions are intended to identify forward-looking statements. Because these forward-looking statements involve risk and
uncertainties, there are important factors, including the factors discussed in Risk Factors included as Exhibit 99.1
to the Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 23, 2004, that could cause actual results to
differ materially from those expressed or implied by these forward-looking statements.  2


---

PART I  FINANCIAL INFORMATION Item 1.   Financial Statements BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data) September 30,
2004
     
     December 31,
2003(unaudited)AssetsCash and due from banks
     $146,069
        
     $195,165Investment securities available-for-sale(cost:  9/30/04 - $993,683; 12/31/03 - $1,133,958)
     992,111
        
     1,135,928Investment securities held-to-maturity(fair value:  9/30/04 - $203,430; 12/31/03 - $186,890)
     194,315
        
     178,512Loans and leases
     4,430,092
        
     3,964,015Reserve for credit losses
     (62,345
        )
     (58,906
        )Net loans and leases
     4,367,747
        
     3,905,109Interest receivable
     36,981
        
     33,540Premises and equipment, net
     84,255
        
     85,970Other intangibles
     16,042
        
     18,274Other assets
     41,954
        
     36,985Goodwill
     84,226
        
     84,226Total assets
     $5,963,700
        
     $5,673,709Liabilities and Shareholders' EquityNoninterest bearing deposits
     $770,261
        
     $783,260Interest bearing deposits
     3,327,863
        
     3,267,716Total deposits
     4,098,124
        
     4,050,976Federal funds purchased and repurchase agreements
     475,953
        
     519,759Other short-term borrowings
     417,947
        
     119,599Long-term debt
     426,921
        
     460,158Accrued expenses and other liabilities
     50,359
        
     55,640Total liabilities
     5,469,304
        
     5,206,132Minority interests
     150
        
     150Redeemable class A common stock, 960,000 sharesissued and outstanding
     39,540
        
     37,394Shareholders' equityCommon stockClass A, no par, 12,000,000 shares authorized;240,000 shares issued and outstanding
     57
        
     57Class B, no par, 10,800,000 shares authorized,issued and outstanding
     2,562
        
     2,562Retained earnings
     452,960
        
     426,331Accumulated other comprehensive (loss) income
     (873
        )
     1,083Total shareholders' equity
     454,706
        
     430,033Total liabilities and shareholders' equity
     $5,963,700
        
     $5,673,709  See notes to consolidated financial
statements.  3


---

BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts) For the Three Months Ended
September 30,
     
     For the Nine Months Ended
September 30,2004
     
     2003
     
     2004
     
     2003Interest incomeLoans and leases, including fees
     $62,363
        
     $57,780
        
     $175,989
        
     $173,087Securities
     10,609
        
     10,179
        
     32,712
        
     32,758Federal funds sold
     43
        
     39
        
     91
        
     97Other
     23
        
     24
        
     72
        
     94Total interest income
     73,038
        
     68,022
        
     208,864
        
     206,036Interest expenseDeposits
     12,815
        
     12,196
        
     37,383
        
     39,056Federal funds purchased and repurchase agreements
     1,506
        
     1,365
        
     4,260
        
     4,022Other short-term borrowings
     1,523
        
     548
        
     2,999
        
     1,262Long-term debt
     6,697
        
     7,434
        
     20,533
        
     22,723Total interest expense
     22,541
        
     21,543
        
     65,175
        
     67,063Net interest income
     50,497
        
     46,479
        
     143,689
        
     138,973Provision for credit losses
     1,713
        
     4,220
        
     5,599
        
     10,376Net interest income after provision for credit losses
     48,784
        
     42,259
        
     138,090
        
     128,597Noninterest incomeService charges
     8,301
        
     7,605
        
     23,396
        
     22,337Insurance
     2,401
        
     2,366
        
     7,316
        
     6,390Investment management and trust fees
     2,684
        
     2,515
        
     8,048
        
     7,299Brokerage
     1,458
        
     1,303
        
     4,774
        
     3,885Gain on sale of loans
     2,352
        
     6,259
        
     7,779
        
     16,779Gain on sale of securities
     4
        
     16
        
     2,072
        
     5,855Other
     2,062
        
     2,416
        
     5,605
        
     5,200Total noninterest income
     19,262
        
     22,480
        
     58,990
        
     67,745Noninterest expenseSalaries and wages
     20,110
        
     19,757
        
     60,105
        
     57,644Employee benefits
     5,466
        
     5,236
        
     16,610
        
     17,507Occupancy
     2,902
        
     2,820
        
     8,963
        
     8,410Furniture and equipment
     2,606
        
     2,764
        
     7,760
        
     7,836Data processing fees
     2,830
        
     2,668
        
     8,173
        
     7,651FDIC premiums and examination fees
     516
        
     443
        
     1,436
        
     1,319Amortization of intangibles
     685
        
     717
        
     2,054
        
     2,150Other
     7,694
        
     7,246
        
     22,292
        
     22,313Total noninterest expense
     42,809
        
     41,651
        
     127,393
        
     124,830Income before income tax expense
     25,237
        
     23,088
        
     69,687
        
     71,512Income tax expense
     8,836
        
     7,777
        
     23,942
        
     24,626Net income
     $16,401
        
     $15,311
        
     $45,745
        
     $46,886Per common share amounts:Net income-basic and diluted
     $1.36
        
     $1.28
        
     $3.81
        
     $3.91Dividends paid
     0.50
        
     0.45
        
     1.40
        
     1.35  See notes to consolidated financial
statements.  4


---

BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(unaudited)
(in thousands, except per share amounts) Common Stock
     AccumulatedOtherComprehensiveIncome (Loss)
     ComprehensiveIncome
     RetainedEarnings
     TotalClass A
     Class BFor the Nine Months ended September 30, 2003Balance, December 31, 2002
     $57
        
     $2,562
        
     $6,751
        
     
        
     $389,998
        
     $399,368Comprehensive incomeNet income
     
        
     
        
     
        
     $46,886
        
     46,886
        
     46,886Other comprehensive income, net of tax:Net unrealized gains on securities:Unrealized holding losses arising during the period, net of tax
     
        
     
        
     (7,253
        )
     (7,253
        )Less:  Reclassified adjustment for gains included in income, net of tax
     
        
     
        
     (3,513
        )
     (3,513
        )Other comprehensive income (loss)
     
        
     
        
     (10,766
        )
     (10,766
        )
     
        
     (10,766
        )Comprehensive income
     
        
     
        
     
        
     $36,120Dividends, $1.35 per share
     
        
     
        
     
        
     
        
     (16,200
        )
     (16,200
        )Allocation of net income in excess of dividends and othercomprehensive income to redeemable class A common stock
     
        
     
        
     861
        
     
        
     (2,455
        )
     (1,594
        )Balance, September 30, 2003
     $57
        
     $2,562
        
     $(3,154
        )
     
        
     $418,229
        
     $417,694For the Nine Months Ended September 30, 2004Balance, December 31, 2003
     $57
        
     $2,562
        
     $1,083
        
     
        
     $426,331
        
     $430,033Comprehensive incomeNet income
     
        
     
        
     
        
     $45,745
        
     45,745
        
     45,745Other comprehensive income, net of tax:Net unrealized gains on securities:Unrealized holding losses arising during the period, net of tax
     
        
     
        
     (883
        )
     (883
        )Less:  Reclassified adjustment for gains included in income, net of tax
     
        
     
        
     (1,243
        )
     (1,243
        )Other comprehensive income (loss)
     
        
     
        
     (2,126
        )
     (2,126
        )
     
        
     (2,126
        )Comprehensive income
     
        
     
        
     
        
     $43,619Dividends, $1.40 per share
     
        
     
        
     
        
     
        
     (16,800
        )
     (16,800
        )Allocation of net income in excess of dividends and othercomprehensive income to redeemable class A common stock
     
        
     
        
     170
        
     
        
     (2,316
        )
     (2,146
        )Balance, September 30, 2004
     $57
        
     $2,562
        
     $(873
        )
     
        
     $452,960
        
     $454,706  See notes to consolidated financial
statements.  5


---

BREMER FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands) For the Nine Months
Ended September 30,2004
     
     2003Cash flows from operating activitiesNet income
     $45,745
        
     $46,886Adjustments to reconcile net income to net cashprovided by operating activities:Provision for credit losses
     5,599
        
     10,376Depreciation and amortization
     13,195
        
     13,462Gain on sale of securities
     (2,072
        )
     (5,855
        )Other assets and liabilities, net
     (19,825
        )
     (19,696
        )Gain on sale of loans
     (7,779
        )
     (16,779
        )Proceeds from loans originated for sale
     296,286
        
     656,033Loans originated for sale
     (288,825
        )
     (650,395
        )Net cash provided by operating activities
     42,324
        
     34,032Cash flows from investing activitiesPurchases of available-for-sale investment securities
     (212,136
        )
     (616,762
        )Purchases of held-to-maturity securities
     (28,571
        )
     (18,847
        )Proceeds from maturities of available-for-sale investment securities
     239,733
        
     325,733Proceeds from maturities of held-to-maturity securities
     12,768
        
     13,064Proceeds from sales of available-for-sale investment securities
     114,746
        
     207,731Proceeds from sales of other real estate owned
     3,107
        
     2,039Loans and leases, net
     (467,919
        )
     (255,742
        )Purchase of premises and equipment
     (4,801
        )
     (10,441
        )Net cash used in investing activities
     (343,073
        )
     (353,225
        )Cash flows from financing activitiesNoninterest bearing deposits, net
     (12,999
        )
     (6,437
        )Savings, NOW and money market accounts, net
     19,735
        
     384,007Certificates of deposits, net
     40,412
        
     (218,914
        )Federal funds purchased and repurchase agreements,net
     (43,806
        )
     13,820Other short-term borrowings, net
     298,348
        
     129,299Proceeds from issuance of long-term debt
     --
        
     14,820Repayments of long-term debt
     (33,237
        )
     (50,988
        )Common stock dividends paid
     (16,800
        )
     (16,200
        )Net cash provided by financing activities
     251,653
        
     249,407Net decrease in cash and due from banks
     (49,096
        )
     (69,786
        )Cash and due from banks at beginning of period
     195,165
        
     256,900Cash and due from banks at end of period
     $146,069
        
     $187,114Supplemental disclosures of cash flow informationCash paid for interest
     $63,689
        
     $68,918Cash paid for income taxes
     19,587
        
     21,868  See notes to consolidated financial
statements.  6


---

BREMER FINANCIAL
CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS For the Nine Months
ended September 30, 2004 and 2003 (unaudited) Note A: Financial
Statements The condensed financial
statements included herein have been prepared by Bremer Financial Corporation (the
Company) pursuant to the rules and regulations of the Securities and Exchange
Commission and have not been audited by independent auditors. Certain information and
footnote disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not misleading. Note B: General The consolidated
financial statements include the accounts of Bremer Financial Corporation and
subsidiaries. All material intercompany transactions and balances are eliminated in
consolidation. The Company has not changed its accounting policies from those stated for
the year ended December 31, 2003 included in its Annual Report on Form 10-K for that year
filed on March 23, 2004. Note C: Interim Period
Adjustments The consolidated
financial statements contained herein reflect all adjustments which are, in the opinion of
management, of a normal recurring nature and which are necessary for a fair statement of
the financial position, results of operations, and cash flows for the unaudited interim
periods. The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the entire year. Note D: Earnings Per
Share Calculations Basic and diluted
earnings per common share have been computed using 12,000,000 common shares outstanding
for all periods. The Company does not have any dilutive securities. Note E: Securities Investment securities
classified as held-to-maturity are valued at amortized historical cost. Investment
securities classified as available-for-sale are valued at fair value. Unrealized holding
gains and losses are excluded from earnings and reported, net of tax, as a separate
component of shareholders equity until realized, except for the portion allocated to
redeemable class A stock. Gains or losses on these securities are computed based on the
amortized cost of the specific securities when sold. Management periodically evaluates
investment securities for other than temporary declines in fair value. There were no
investment securities which management identified to be other-than-temporarily impaired
for the period ended September 30, 2004.  7


---

Note F: Redeemable Class
A Common Stock At September 30, 2004,
960,000 shares of redeemable class A stock were issued and outstanding. At September 30,
2004, these shares were subject to redemption at a price of $41.19 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. The employee holders
of class A common stock have the right to require the Company to purchase their shares
under certain circumstances, including death, permanent disability or retirement. The
Company has the option to purchase the shares from holders upon the occurrence of certain
events, which include death, retirement or termination of employment. 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. During the period from
January 1, 2004 through September 30, 2004, the Company did not directly purchase any
shares of class A common stock but assigned to various parties our options that arose
during that period to purchase a total of 60,935.1717 shares. These options were assigned
to the Bremer Financial Corporation Employee Stock Ownership Plan (ESOP)
(6,460.4400 shares), the Bremer Banks Profit Sharing Plus Plan (44,564.7317 shares), and
executives and directors under the Executive Stock Purchase Plan (9,910.0000 shares). To
the Companys knowledge, shares purchased by these parties upon exercise of these
assigned options were the only transfers of shares of class A common stock effected during
the period from January 1, 2004 through September 30, 2004. Note G: Goodwill and
Intangible Assets Intangible assets
consist of goodwill, core deposit intangibles, and other intangibles. The remaining
unamortized balances at September 30, 2004 and 2003 were $100.3 million and $103.6
million. The core deposit and other intangibles amortization lives are five to 10 years.
Goodwill is not amortized but is tested regularly for impairment. On January 1, 2002, the
Company adopted Statements of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, which addresses the accounting and
reporting for acquired goodwill and other intangible assets. Under the provisions of SFAS
No. 142, intangible assets acquired in a business combination, which do not possess finite
useful lives, will no longer be amortized into net income over an estimated useful life.
However, these intangible assets are tested for impairment at least annually and more
frequently if events or changes in circumstances indicate that assets might be impaired.
Management performed its annual impairment test on its goodwill assets in December 2003,
no impairment loss was recorded as a result of that test, and no events or changes in
circumstances have occurred since that test that would indicate that assets might be
impaired.  8


---

The following table
presents relevant information about the Companys amortized intangible assets: As of September 30, 2004
     As of September 30, 2003(in thousands)Gross CarryingAmount
     AccumulatedAmortization
     Net CarryingValue
     Gross CarryingAmount
     AccumulatedAmortization
     Net CarryingValueCore deposit premium
     
     

     $
        21,313
        

     $
        9,002
        

     $
        12,311
        

     $
        21,313
        

     $
        6,605
        

     $
        14,708Mortgage servicing rights (1)
     4,459
        
     2,777
        
     1,682
        
     4,524
        
     2,373
        
     2,151Other
     4,400
        
     2,351
        
     2,049
        
     4,525
        
     1,978
        
     2,547Total
     $30,172
        
     $14,130
        
     $16,042
        
     $30,362
        
     $10,956
        
     $19,406   (1)

Accumulated
amortization of mortgage servicing rights includes the related valuation allowance of
$665 thousand in 2004 and $1.1 million in 2003.  The Company recorded
aggregate intangible amortization expense of $2.1 million for the nine-month period ended
September 30, 2004 and $2.2 million for the period ended September 30, 2003. The estimated
amortization expense for each of the next five years is approximately $2.4 million. Goodwill was $84.2
million at September 30, 2004 and September 30, 2003. Note H: Employee Benefit
Plans Pension benefit
plans  The Company maintains the Bremer Retirement Plan (Pension
Plan), which is a qualified defined benefit pension plan designed to provide
retirement benefits to substantially all of the employees of the Company and its
subsidiaries. In addition, the Company has a Supplemental Executive Retirement Plan
(SERP). The Pension Plan and the SERP constitute the Companys
Pension Benefit Plans. 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. The Company accrues the cost of these benefits during the employees active
service.  9


---

Net benefit plan expense
for the above plans as actuarially determined for the three months and nine months ended
September 30, 2004 and 2003 included the following components: For the Three Months EndedSeptember 30,
     For the Nine Months EndedSeptember 30,Pension Benefits
     OtherPostretirement Benefits
     Pension Benefits
     OtherPostretirement Benefits2004
     2003
     2004
     2003
     2004
     2003
     2004
     2003(in thousands)Service cost
     
     
     $941
        
     $733
        
     $140
        
     $113
        
     $2,825
        
     $2,199
        
     $422
        
     $339Interest cost
     918
        
     825
        
     88
        
     79
        
     2,753
        
     2,474
        
     263
        
     238Expected return on assets
     (1,183
        )
     (904
        )
     
        
     
        
     (3,553
        )
     (2,712
        )
     
        
     Prior service cost amortization
     14
        
     21
        
     (3
        )
     (3
        )
     44
        
     63
        
     (9
        )
     (9
        )Net loss/(gain) amortization
     273
        
     290
        
     14
        
     13
        
     820
        
     871
        
     40
        
     39Net periodic benefit cost
     $963
        
     $965
        
     $239
        
     $202
        
     $2,889
        
     $2,895
        
     $716
        
     $607 The Company made a cash
contribution of $7.2 million to these plans in September 2004. The Company does not
anticipate making any additional contributions to these plans in 2004. In December 2003, the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the
Act) was signed into law. The Act introduces a prescription drug benefit under
Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans
that provide a benefit that is at least actuarially equivalent to the prescription drug
benefit under Medicare. Financial Accounting Standards Board Staff Position 106-1
(FSP FAS106-1), Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug Improvement and Modernization Act of 2003, and Financial
Accounting Standards Board Staff Position 106-2 (FSP FAS106-2), provide
guidance on the accounting for the effects of the Act for employers that sponsor
postretirement health care plans that provide prescription drug benefits. The guidance was
effective for the Company on July 1, 2004. While the Company does offer postretirement
benefits, including presciption drug coverage, subject to the accounting requirements of
SFAS No. 106, those benefits are only available to retirees until age 65, at which time
Medicare coverage becomes effective. As such, the Company believes that these specific
provisions of the Act, FSP FAS 106-1 or FSP FAS 106-2 will have no material effect on its
financial position or results of operations. Note I: Recent Accounting Pronouncements In January 2003, the
Financial Accounting Standards Board (FASB) issued Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN No. 46), an
interpretation of Accounting Research Bulletin No. 51, Consolidated Financial
Statements. FIN No. 46 prescribes how to identify variable interest entities and how
an enterprise assesses its interests in a variable interest entity to decide whether to
consolidate that entity. This interpretation requires existing unconsolidated variable
interest entities to be consolidated by their primary beneficiaries if the entities do not
effectively disperse risks among parties involved. On December 24, 2003, the FASB
published a revision to FIN No. 46 (FIN No. 46(R)). FIN No. 46(R) clarifies
certain provisions of FIN No. 46 and exempts certain entities from its requirements. For
interests in variable interest entities acquired prior to January 31, 2003, the provisions
of FIN No. 46(R)  10


---

were applied on March 31, 2004. The Company applied the provisions by
de-consolidating its subsidiary trusts, which issued Company obligated mandatorily
redeemable preferred securities (Trust Preferred Securities). The junior
subordinated debentures of the Company owned by these trusts are reflected in the
Statements of Financial Condition as long-term debt. As provided by FIN No. 46(R), the
Company has restated its financial statements to reflect the adoption for all periods
presented. The Trust Preferred Securities currently qualify as Tier I capital of the
Company for regulatory capital purposes. The banking regulatory agencies have issued
proposed guidance that would not significantly change the capital treatment for Trust
Preferred Securities after the adoption of FIN No. 46(R). On March 9, 2004, the
Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No.
105, Application of Accounting Principles to Loan Commitments, which provides
guidance regarding loan commitments that are accounted for as derivative instruments. The
Company, which makes such interest rate lock commitments primarily in connection with
residential real estate lending activities, currently accounts for such commitments in a
manner consistent with the provisions of Staff Accounting Bulletin No. 105, and the
application of this accounting guidance will not have a material impact on the financial
statements of the Company. On March 31, 2004, the
FASB ratified Emerging Issues Task Force Issue No. 03-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments
(EITF No. 03-1), which provides guidance on recognizing other-than-temporary
impairments on certain investments. The Issue is effective for other-than-temporary
impairment evaluations for investments accounted for under SFAS No. 115, Accounting
for Certain Investments in Debt and Equity Securities, as well as non-marketable
equity securities accounted for under the cost method for reporting periods beginning
after June 15, 2004. The guidance requires that investments which have declined in value
must be recorded as other-than-temporarily impaired unless the Company can assert and
demonstrate its intention to hold the security for a period of time sufficient to allow
for a recovery of fair value up to or beyond the cost of the investment, which might mean
maturity. This issue also requires disclosures assessing the ability and intent to hold
investments in instances in which an investor determines that an investment with a fair
value less than cost is not other-than-temporarily impaired. EITF No. 03-1 does not
suspend the current requirements for other-than-temporary impairments under Staff
Accounting Bulletin No. 59. In September 2004, FASB issued Proposed FSP EITF Issue 03-1-a,
Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, which
provides further guidance regarding this issue. In September, FASB also issued Proposed
FSP EITF Issue 03-1-1, Effective Date of Paragraphs 10-20 of EITF No. 03-1, which defers
the effective date of certain paragraphs of EITF Issue 03-1. The Company is in the process
of evaluating the impact of adopting EITF No. 03-1 and will complete that analysis when
final guidance is issued.  11


---

Note J: 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
table represents the outstanding obligations: September 30,2004
     December 31,2003(in thousands)Standby letters of credit
     
     
     $53,734
        
     $54,795Loan commitments
     1,315,191
        
     1,093,759 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. 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 $4.8 million in
annual data processing and item processing fees to a third party provider through May
2008. The costs under the item processing contract are calculated in accordance with a
volume-based fee schedule, which is subject to change annually. The Wisconsin Department
of Revenue (the State) is currently conducting an income tax audit of our Wisconsin
bank subsidiary and of another subsidiary company located in Nevada that holds and manages
investments for the Wisconsin subsidiary bank. The audit has been initiated under an audit
program targeted at Wisconsin financial institutions with non-Wisconsin subsidiaries, the
income of which has not been subject to Wisconsin tax. The State may take the position
that the income of the out-of-state subsidiary is taxable in Wisconsin. The Company has
initiated settlement discussions with the State. Management believes that the resolution
of any claims will not have a material impact on the financial statements. The Company is routinely
involved in legal actions which are incidental to the business of the Company. Although it
is difficult to predict the ultimate outcome of these cases, management believes, based on
discussions with counsel, that any ultimate liability will not materially affect the
Companys consolidated financial position or operations.  12


---

Item 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations Application of Critical Accounting Policies In preparing the
financial statements, we follow accounting principles generally accepted in the United
States of America, which in many cases require us to make assumptions, estimates and
judgments that affect the amounts reported. Many of these policies are relatively
straightforward; however, management has identified the accounting policies described
below as those that are critical to an understanding of our consolidated financial
statements and managements discussion and analysis due to the judgments, estimates
and assumptions inherent in those policies. The difficulty in
applying these policies arises from the assumptions, estimates and judgments that have to
be made currently about matters that are inherently uncertain, such as future economic
conditions, operating results and valuations as well as management intentions. As the
difficulty increases, the level of precision decreases, meaning that actual results can
and probably will be different from those currently estimated. We base our assumptions,
estimates and judgments on a combination of historical experiences and other relevant
factors. Reserves for Credit
Losses. In general, determining the amount of the reserve for credit losses requires
the use of significant judgment and estimates by management. We maintain an allowance for
credit losses to absorb probable losses in the loan and lease portfolio based on a
quarterly analysis of the portfolio and expected future losses. Reserves for credit losses
include charges to reduce the recorded balances of loans receivable and real estate to
their estimated net realizable value or fair value, as applicable. Investment
Securities. Investments in marketable equity and debt securities are classified into
three categories  held-to-maturity, available-for-sale, or trading  pursuant
to SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities. As of September 30, 2004, no investments were classified as trading
securities. Held-to-maturity securities, which are valued at amortized historical cost,
represent investments for which we have the ability and intent to hold to maturity and may
be sold only under very limited circumstances. We currently classify our investments in
certain municipal bond obligations and certain U.S. government agency obligations as
held-to-maturity securities. Available-for-sale securities consist of debt and equity
securities that will be held for indefinite periods of time, including securities that may
be sold in response to changes in market interest or prepayment rates, needs for
liquidity, or changes in the availability or yield of alternative investments. These
securities are valued at current market value, with the resulting unrealized holding gains
and losses excluded from earnings and reported, net of tax, and the resultant allocation
to redeemable class A common stock reflected as a separate component of shareholders
equity until realized. Gains or losses on these securities are computed based on the
amortized cost of the specific securities when sold. Management periodically
evaluates investment securities for other than temporary declines in fair value. Declines
in fair value of individual investment securities below their amortized cost that are
deemed to be other than temporary are written down to current market value and  13


---

included in
earnings as realized losses during the period in which the securities are deemed to be
impaired. The assessment of whether such impairment has occurred is based on
managements case-by-case evaluation of the underlying reasons for the decline in
fair value. Management considers a wide range of factors in making this assessment. Those
factors include, but are not limited to, the length and severity of the decline in value
and changes in the credit quality of the issuer or underlying assets. EITF No. 03-1, which
provides additional guidance regarding the meaning of other than temporary impairment,
became effective for reporting periods after June 15, 2004. In September 2004, FASB issued
two Proposed FASB Staff Positions which provide additional guidance regarding this matter
and delay the effective date of certain paragraphs of EITF No. 03-1. We are in the process
of evaluating the impact of adopting EITF No. 03-1 and will complete that analysis when
final guidance is issued. There were no investment securities which management identified
to be other-than-temporarily impaired for the nine months ended September 30, 2004. If the
financial markets experience deterioration and investments decline in fair value, charges
to income could occur in future periods. Goodwill and Other
Intangible Assets. SFAS No. 142, Accounting for Goodwill and Other Intangible
Assets, establishes standards for the amortization of acquired intangible assets and
the non-amortization and impairment assessment of goodwill. In addition, SFAS No. 147,
Acquisitions of Certain Financial Institutions, establishes standards for
unidentifiable intangible assets acquired specifically in branch purchases that qualify as
business combinations. At September 30, 2004, we had $84.2 million of goodwill, which
is not subject to periodic amortization, and $16.0 million in other intangible assets,
which is subject to periodic amortization. We performed the annual
impairment tests on our goodwill assets in December 2003. No events or changes in
circumstances have occurred since that test that would indicate that such assets might be
impaired, and we have concluded that the recorded value of goodwill was not impaired as of
September 30, 2004. There are many assumptions and estimates underlying the determination
of impairment. Impairment testing is based on a determination of the value of each
reporting unit, using readily available market and earnings data for comparable
publicly-traded organizations within the same time period, and comparing that calculation
of value to the current book value of the unit. Another estimate using different, but
still reasonable, assumptions could produce a significantly different result.
Additionally, future events could cause management to conclude impairment indicators exist
and our goodwill is impaired, which would result in us recording an impairment loss. Any
resulting impairment loss could have a material adverse impact on our financial condition
and results of operations. Retirement Plan
Accounting. We provide pension benefits to substantially all employees. We account for
these plans in accordance with SFAS No. 87, Employers Accounting for
Pensions, which requires us to make a number of economic and other assumptions that
can have a significant impact on amounts recorded in our income statement and statement of
financial position. Assumptions regarding long-term discount rates and the expected return
on pension plan assets can have the most material impact on our financial results and
funding requirements. Income Taxes.The
determination of our current and deferred income taxes is a critical accounting estimate
requiring significant management judgment. We make these estimates based  14


---

on complex
analysis of many factors, including our interpretation of existing federal and state
income tax laws as they relate to our activities, the differences between the tax and
financial reporting bases of assets and liabilities (temporary differences), the expected
timing of the reversal of these temporary differences, and current financial accounting
standards. Such interpretations could differ from those of the various federal and state
tax authorities that examine us periodically. If managements estimates and
assumptions vary from the views of the taxing authorities, adjustments to the periodic tax
accruals may be necessary. Our accounting policies
for the reserve for credit losses, investment securities, goodwill and other intangible
assets, retirement plans, and income taxes are outlined in the Companys Annual
Report on Form 10-K for the year ended December 31, 2003. We believe that there have been
no significant changes to the methods described in that Annual Report for making the
estimates and judgments necessary to apply these policies. Overview Earnings. We
reported net income of $16.4 million or $1.36 in basic and diluted earnings per
share for the third quarter of 2004. This compares to $15.3 million or $1.28 in
basic and diluted earnings per share in the third quarter of 2003. On a
year-to-date basis through September 30, 2004, net income was $45.7 million
compared to $46.9 million earned in the first nine months of 2003. Return on
average equity was 13.45% for the third quarter of 2004 compared to 13.40% for
the same quarter of 2003. On a year-to-date basis, we reported a return on
average equity of 12.71% compared to 14.12% in the first nine months of 2003.
Return on average assets decreased to 1.11% in the third quarter of 2004 from
1.12% in the third quarter of 2003. On a year-to-date basis, we reported a
return on average assets of 1.06% compared to 1.19% in the first nine months of
2003. Results of Operations Net Interest
Income. Net interest income for the third quarter of 2004 was $50.5 million,
an increase of $4.0 million from the $46.5 million reported for the same period
a year ago. Meanwhile, our net interest margin decreased to 3.76% in the third
quarter of 2004 from 3.81% in the third quarter of 2003. On a year-to-date
basis, net interest income increased $4.7 million or 3.4% from the first nine
months of 2003, while our net interest margin decreased to 3.70% from 3.94%.
Offsetting some of the decline in net interest margin when comparing the two
nine-month periods was an increase in 2004 in our average loans and leases of
$369.0 million or 9.8%. The decline in our net interest margin is primarily the
result of the prolonged low interest rate environment. The average yield on our
earning assets declined 47 basis points when comparing the first nine months of
2004 with the first nine months of 2003. Meanwhile, and largely as a result of
competitive pressure in deposit markets and already historically low deposit
rates, we were able to reduce the average cost of our interest bearing
liabilities by only 24 basis points when comparing the same two periods. With
the recent increase in market interest rates, the net interest margin increased
in the third quarter, and we anticipate continued improvement during the final
quarter of 2004.  15


---

The following tables set forth, for
the periods indicated, information regarding average balances of assets and liabilities
and the total dollar amounts of interest income from interest bearing assets and interest
expense on interest bearing liabilities. In addition, the tables show resultant yields or
costs, net interest income, net interest spread, and net interest margin: For the Three Months Ended September 30,(unaudited)2004
     2003AverageBalance
     Interest (1)
     AverageRate/Yield
     AverageBalance
     Interest (1)
     AverageRate/Yield(dollars in thousands)AssetsLoans and Leases (2)Commercial and other
     $951,892
        
     $12,845
        
     5.37
        %
     $900,172
        
     $12,628
        
     5.57
        %Commercial real estate
     1,476,611
        
     22,089
        
     5.95
        
     1,249,046
        
     19,375
        
     6.15Agricultural
     508,859
        
     7,271
        
     5.68
        
     470,728
        
     6,733
        
     5.67Residential real estate
     866,767
        
     12,537
        
     5.75
        
     776,089
        
     11,459
        
     5.86Consumer
     361,427
        
     5,675
        
     6.25
        
     338,048
        
     5,881
        
     6.90Tax-exempt
     158,523
        
     2,959
        
     7.43
        
     128,745
        
     2,590
        
     7.98Total Loans and Leases
     4,324,079
        
     63,376
        
     5.83
        
     3,862,828
        
     58,666
        
     6.03Reserve for Credit Losses
     (62,402
        )
     
        
     
        
     (63,618
        )Net Loans and Leases
     4,261,677
        
     
        
     
        
     3,799,210Securities (3)Taxable
     1,031,124
        
     8,347
        
     3.22
        
     985,749
        
     7,921
        
     3.19Tax-exempt
     190,476
        
     3,437
        
     7.18
        
     183,704
        
     3,433
        
     7.41Total Securities
     1,221,600
        
     11,784
        
     3.84
        
     1,169,453
        
     11,354
        
     3.85Federal funds sold
     17,417
        
     43
        
     0.98
        
     16,487
        
     39
        
     0.94Other earning assets
     4,361
        
     23
        
     2.10
        
     4,269
        
     24
        
     2.23Total Earning Assets (4)
     $5,567,457
        
     $75,226
        
     5.38
        %
     $5,053,037
        
     $70,083
        
     5.50
        %Cash and due from banks
     148,025
        
     
        
     
        
     158,925Other non interest earning assets
     250,577
        
     
        
     
        
     273,029Total Assets
     $5,903,657
        
     
        
     
        
     $5,421,373Liabilities and Shareholders' EquityNoninterest bearing deposits
     $762,582
        
     
        
     
        
     $691,714Interest bearing depositsSavings and NOW accounts
     482,036
        
     $367
        
     0.30
        %
     471,210
        
     $310
        
     0.26
        %Other interest bearing checking
     260,683
        
     76
        
     0.12
        
     245,334
        
     64
        
     0.10Money market savings
     1,447,895
        
     4,812
        
     1.32
        
     1,248,249
        
     4,025
        
     1.28Savings certificates
     866,356
        
     5,768
        
     2.65
        
     940,916
        
     6,432
        
     2.71Certificates over $100,000
     267,278
        
     1,792
        
     2.67
        
     207,107
        
     1,365
        
     2.61Total Interest Bearing Deposits
     3,324,248
        
     12,815
        
     1.53
        
     3,112,816
        
     12,196
        
     1.55Total Deposits
     4,086,830
        
     
        
     
        
     3,804,530Short-term borrowings
     860,356
        
     3,029
        
     1.40
        
     626,764
        
     1,913
        
     1.21Long-term debt
     426,262
        
     6,697
        
     6.25
        
     478,241
        
     7,434
        
     6.17Total Interest Bearing Liabilities
     $4,610,866
        
     $22,541
        
     1.94
        %
     $4,217,821
        
     21,543
        
     2.03
        %Other noninterest bearing liabilities
     45,115
        
     
        
     
        
     58,423Total Liabilities
     5,418,563
        
     
        
     
        
     4,967,958Minority Interest
     150
        
     
        
     
        
     150Redeemable Class A Common Stock
     38,795
        
     
        
     
        
     36,261Shareholders' equity
     446,149
        
     
        
     
        
     417,004Total Liabilities and Equity
     $5,903,657
        
     
        
     
        
     $5,421,373Net interest income
     
        
     $52,685
        
     
        
     
        
     $48,540Net interest spread
     
        
     
        
     3.43
        %
     
        
     
        
     3.48
        %Net interest margin
     
        
     
        
     3.76
        %
     
        
     
        
     3.81
        % _________________(1)

Interest
income includes $2,188 in 2004 and $2,061 in 2003 to adjust to a fully taxable basis
using the federal statutory rate of 35%.(2)

Net
of unearned discount and includes nonaccrual loans and leases.(3)

Excluding
net unrealized gain (loss) on available-for-sale securities.(4)

Before
deducting the reserve for credit losses.   16


---

For the Nine Months Ended September 30,(unaudited)2004
     2003AverageBalance
     Interest (1)
     AverageRate/Yield
     AverageBalance
     Interest (1)
     AverageRate/Yield(dollars in thousands)AssetsLoans and Leases (2)Commercial and other
     $928,155
        
     $36,569
        
     5.26
        %
     $895,587
        
     $37,998
        
     5.67
        %Commercial real estate
     1,411,607
        
     62,706
        
     5.93
        
     1,196,298
        
     57,390
        
     6.41Agricultural
     463,947
        
     19,646
        
     5.66
        
     440,936
        
     19,576
        
     5.94Residential real estate
     827,832
        
     34,857
        
     5.62
        
     774,341
        
     35,352
        
     6.10Consumer
     350,896
        
     16,599
        
     6.32
        
     335,158
        
     17,870
        
     7.13Tax-exempt
     151,782
        
     8,526
        
     7.50
        
     122,852
        
     7,449
        
     8.11Total Loans and Leases
     4,134,219
        
     178,903
        
     5.78
        
     3,765,172
        
     175,635
        
     6.24Reserve for Credit Losses
     (61,367
        )
     
        
     
        
     (61,859
        )Net Loans and Leases
     4,072,852
        
     
        
     
        
     3,703,313Securities (3)Taxable
     1,085,402
        
     26,146
        
     3.22
        
     952,298
        
     26,013
        
     3.65Tax-exempt
     184,297
        
     9,980
        
     7.23
        
     181,859
        
     10,250
        
     7.54Total Securities
     1,269,699
        
     36,126
        
     3.80
        
     1,134,157
        
     36,263
        
     4.27Federal funds sold
     12,713
        
     91
        
     0.96
        
     12,213
        
     97
        
     1.06Other earning assets
     4,335
        
     72
        
     2.22
        
     4,234
        
     94
        
     2.97Total Earning Assets (4)
     $5,420,966
        
     $215,192
        
     5.30
        %
     $4,915,776
        
     $212,089
        
     5.77
        %Cash and due from banks
     151,667
        
     
        
     
        
     151,647Other non interest earning assets
     256,338
        
     
        
     
        
     283,958Total Assets
     $5,767,604
        
     
        
     
        
     $5,289,522Liabilities and Shareholders' EquityNoninterest bearing deposits
     $725,259
        
     
        
     
        
     $651,875Interest bearing depositsSavings and NOW accounts
     484,514
        
     $954
        
     0.26
        %
     464,736
        
     $1,095
        
     0.32
        %Other interest bearing checking
     262,953
        
     226
        
     0.11
        
     247,976
        
     261
        
     0.14Money market savings
     1,459,303
        
     14,622
        
     1.34
        
     1,138,716
        
     11,155
        
     1.31Savings certificates
     869,803
        
     17,116
        
     2.63
        
     1,004,322
        
     21,864
        
     2.91Certificates over $100,000
     230,612
        
     4,465
        
     2.59
        
     223,015
        
     4,681
        
     2.81Total Interest Bearing Deposits
     3,307,185
        
     37,383
        
     1.51
        
     3,078,765
        
     39,056
        
     1.70Total Deposits
     4,032,444
        
     
        
     
        
     3,730,640Short-term borrowings
     769,625
        
     7,259
        
     1.26
        
     556,297
        
     5,284
        
     1.27Long-term debt
     440,326
        
     20,533
        
     6.23
        
     489,489
        
     22,723
        
     6.21Total Interest Bearing Liabilities
     $4,517,136
        
     $65,175
        
     1.93
        %
     $4,124,551
        
     $67,063
        
     2.17
        %Other noninterest bearing liabilities
     44,223
        
     
        
     
        
     68,891Total Liabilities
     5,286,618
        
     
        
     
        
     4,845,317Minority Interest
     150
        
     
        
     
        
     150Redeemable Class A Common Stock
     38,467
        
     
        
     
        
     35,524Shareholders' equity
     442,369
        
     
        
     
        
     408,531Total Liabilities and Equity
     $5,767,604
        
     
        
     
        
     $5,289,522Net interest income
     
        
     $150,017
        
     
        
     
        
     $145,026Net interest spread
     
        
     
        
     3.38
        %
     
        
     
        
     3.59
        %Net interest margin
     
        
     
        
     3.70
        %
     
        
     
        
     3.94
        % _________________(1)

Interest
income includes $6,328 in 2004 and $6,053 in 2003 to adjust to a fully taxable basis
using the federal statutory rate of 35%.(2)

Net
of unearned discount and includes nonaccrual loans and leases.(3)

Excluding
net unrealized gain (loss) on available-for-sale securities.(4)

Before
deducting the reserve for credit losses.   17


---

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: Nine Months Ended September 30,2004 vs. 2003Increase (Decrease)
Due to Change inVolume
     
     Rate
     
     Total(in thousands)Interest earning assets:Loans and leases (1)
     $17,215
        
     $(13,947
        )
     $3,268Taxable securities
     3,636
        
     (3,503
        )
     133Tax-exempt securities (1)
     137
        
     (407
        )
     (270
        )Federal funds sold
     4
        
     (10
        )
     (6
        )Other interest earning assets
     2
        
     (24
        )
     (22
        )Total interest earning assets
     $20,994
        
     $(17,891
        )
     $3,103Interest bearing liabilities:Savings and NOW accounts
     $210
        
     $(351
        )
     $(141
        )Money market and other interest bearing checking
     2,191
        
     1,241
        
     3,432Savings certificates
     (2,745
        )
     (2,219
        )
     (4,964
        )Short-term borrowings
     2,026
        
     (51
        )
     1,975Long-term debt
     (2,057
        )
     (133
        )
     (2,190
        )Total interest bearing liabilities
     (375
        )
     (1,513
        )
     (1,888
        )Change in net interest income
     $21,369
        
     $(16,378
        )
     $4,991 _________________(1)

Interest income includes $6,328 in 2004 and $6,053 in 2003 to adjust to a fully
         taxable basis using the federal statutory rate of 35%.  Provision for Credit
Losses. The provision for credit losses is charged against earnings to cover both
current period net charge-offs and to maintain the allowance for credit losses at an
acceptable level to cover losses inherent in the portfolio as of the reporting date. We
recorded net charge-offs of $656.4 thousand during the third quarter of 2004 compared to
net charge-offs of $4.8 million for the same period in 2003. We recorded a provision for
credit losses of $1.7 million for the third quarter of 2004 compared to $4.2 million for
the same quarter in 2003. On a year-to-date basis, the provision for credit losses
decreased to $5.6 million in the first nine months of 2004 from $10.4 million for the
first nine months of 2003. Our ratio of reserve to total loans and leases decreased to
1.41% at September 30, 2004 from 1.57% at September 30, 2003. Our reserve coverage on
nonperforming loans and leases increased to 429% at September 30, 2004 from 269% at
September 30, 2003. For further discussion related to the allowance for credit losses, see
the later section entitled  Financial Condition  Reserve for Credit
Losses.  18


---

Noninterest
Income. Noninterest income reflected a $3.2 million or 14.3% decrease to $19.3 million
for the third quarter of 2004 from the $22.5 million recorded in the third quarter of
2003. On a year-to-date basis, noninterest income was $59.0 million, an $8.8 million or
12.9% decrease from the $67.7 million recorded in the first nine months of 2003. Increases
of 22.9%, 14.5%, 10.3% and 4.7% in brokerage, insurance, investment management and trust
and service charge revenues, respectively, were more than offset by lower gains on the
sale of loans and securities when comparing the two nine-month periods. When comparing the
first nine months of 2004 with the same period in 2003, brokerage, insurance, investment
management and trust and service charge revenues increased a combined $3.6 million or
9.1%, while gains on the sale of loans and securities declined a combined $12.8 million.
The decline in gains on sale of loans in the first nine months of 2004 can be attributed
to a reduced level of residential mortgage loan refinancing activity. The following table
summarizes the components of noninterest income: Three Months Ended September 30,
     Nine Months Ended September 30,2004
     
     2003
     
     2004
     
     2003(in thousands)Service charges
     
     
     $8,301
        
     $7,605
        
     $23,396
        
     $22,337Insurance
     2,401
        
     2,366
        
     7,316
        
     6,390Investment management and trust fees
     2,684
        
     2,515
        
     8,048
        
     7,299Brokerage
     1,458
        
     1,303
        
     4,774
        
     3,885Gain on sale of loans
     2,352
        
     6,259
        
     7,779
        
     16,779Gain on sale of securities
     4
        
     16
        
     2,072
        
     5,855Other  noninterest income
     2,062
        
     2,416
        
     5,605
        
     5,200Total noninterest income
     $19,262
        
     $22,480
        
     $58,990
        
     $67,745 Noninterest
Expense. Noninterest expense increased $1.2 million or 2.8% to $42.8 million in the
third quarter of 2004 from $41.7 million in the third quarter of 2003. On a year-to-date
basis, total noninterest expense increased $2.6 million or 2.1% to $127.4 million in 2004
from $124.8 million in 2003. On a year-to-date basis, employee benefit expense declined by
$897.0 thousand, or 5.1%, and printing, postage, and telephone expense declined by $534.0
thousand, or 10.6%. The decline in employee benefit expense is due to lower profit sharing
contributions and a continuation of favorable experience in our medical claims activity.
The decline in printing, postage, and telephone expense is due to efficiencies gained
through the outsourcing of certain office functions and increased use of technology.  19


---

The following table
summarizes the components of noninterest expense: Three Months Ended September 30,
     Nine Months Ended September 30,2004
     
     2003
     
     2004
     
     2003(in thousands)Salaries and wages
     
     
     $20,110
        
     $19,757
        
     $60,105
        
     $57,644Employee benefits
     5,466
        
     5,236
        
     16,610
        
     17,507Occupancy
     2,902
        
     2,820
        
     8,963
        
     8,410Furniture and equipment
     2,606
        
     2,764
        
     7,760
        
     7,836Printing, postage and telephone
     1,492
        
     1,641
        
     4,526
        
     5,060Marketing
     1,702
        
     1,553
        
     4,698
        
     4,672Data processing fees
     2,830
        
     2,668
        
     8,173
        
     7,651Professional fees
     1,058
        
     1,040
        
     3,050
        
     2,490Other real estate owned
     17
        
     66
        
     103
        
     226FDIC premiums and examination fees
     516
        
     443
        
     1,436
        
     1,319Amortization of intangibles
     685
        
     717
        
     2,054
        
     2,150Other noninterest expense
     3,425
        
     2,946
        
     9,915
        
     9,865Total noninterest expense
     $42,809
        
     $41,651
        
     $127,393
        
     $124,830 A common industry
statistic used to measure the productivity of banking organizations is the operating
efficiency ratio. The operating efficiency ratio measures the cost required to generate
each dollar of revenue and is calculated by dividing noninterest expense by tax-equivalent
net interest income and noninterest income. Our operating efficiency ratio was 59.5% for
the third quarter of 2004 compared to 58.7% for the third quarter of 2003. On a
year-to-date basis, the ratio was 61.0% for the nine months ended September 30, 2004
compared to 58.7% for the same period in 2003. Income Taxes. The
provision for income taxes was $8.8 million for the quarter ended September 30, 2004
compared to $7.8 million for the same period in 2003. On a year-to-date basis, the
provision for income taxes decreased to $23.9 million in 2004 from $24.6 million in 2003.
Comparing the third quarter of 2004 to the same period in 2003, our effective tax rate
increased to 35.0% from 33.7%. Our effective tax rate increased in the third quarter of
2004 primarily as a result of a provision for expense associated with the expected
settlement of open audit issues with the Wisconsin Department of Revenue. Our effective
tax rate was 34.4% for the first nine months of 2004 and 2003.  20


---

Financial Condition Loan and Lease Portfolio.  The
following table presents the components of our gross loans and lease portfolio: At September 30, 2004
     At December 31, 2003Amount
     
     Percent of
Total Loans
     
     Amount
     
     Percent of
Total Loans(dollars in thousands)Commercial and other
     
     
     $966,504
        
     21.8
        %
     $900,395
        
     22.7
        %Commercial real estate
     1,401,501
        
     31.6
        
     1,230,752
        
     31.0- Construction
     115,656
        
     2.6
        
     99,213
        
     2.5Agricultural
     521,187
        
     11.8
        
     449,765
        
     11.4Residential real estate
     871,693
        
     19.7
        
     780,351
        
     19.7- Construction
     24,443
        
     0.6
        
     23,041
        
     0.6Consumer
     366,565
        
     8.3
        
     337,449
        
     8.5Tax-exempt
     162,543
        
     3.7
        
     143,049
        
     3.6Total
     $4,430,092
        
     100.0
        %
     $3,964,015
        
     100.0
        % Our total loan and lease
portfolio increased to $4.4 billion at September 30, 2004 from $4.0 billion at December
31, 2003. Commercial loans increased by $66.1 million or 7.3% during the first nine months
of 2004, and commercial real estate loans increased by $187.2 million or 14.1% during the
same period. Agricultural loans increased by $71.4 million or 15.9% during the first nine
months of 2004, while residential real estate loans increased by $92.7 million or 11.5%.
Consumer loans increased $29.1 million or 8.6%, and tax-exempt loans increased $19.5
million or 13.6% during the first nine months of 2004. Nonperforming
Assets. Nonperforming assets include nonaccrual loans, restructured loans and other
real estate owned (OREO). Nonperforming assets were $16.4 million at September
30, 2004, a decrease of $7.5 million or 31.3% from the $23.9 million level at December 31,
2003. Nonperforming assets as a percentage of total loans, leases and OREO decreased to
..37% at September 30, 2004 from .60% at December 31, 2003. Approximately $3.2 million or
19.4% of our nonperforming assets are commercial and commercial real estate credits
originated in our finance company subsidiary. This finance company subsidiary, which had a
total loan and lease portfolio of $10.1 million at September 30, 2004 compared to $20.0
million at December 31, 2003, is in the process of winding down operations and is no
longer accepting new loan applications. Accruing loans and leases 90 days or more past due
totaled $4.5 million at September 30, 2004 compared to $3.3 million at December 31, 2003.  21


---

Our nonperforming assets
are summarized in the following table: September 30,
2004
     
     December 31,
2003(dollars in thousands)Nonaccrual loans and leases
     
     
     $14,324
        
     $20,058Restructured loans and leases
     215
        
     280Total nonperforming loans and leases
     14,539
        
     20,338Other real estate owned (OREO)
     1,906
        
     3,598Total nonperforming assets
     $16,445
        
     $23,936Accruing loans and leases 90 days or more past due
     $4,493
        
     $3,284Nonperforming loans and leases to total loans and leases
     0.33
        %
     0.51
        %Nonperforming assets to total loans, leases and OREO
     0.37
        
     0.60Nonperforming assets and accruing loans and leases 90days or more past due to total loans, leases and OREO
     0.47
        
     0.69 Reserve for Credit
Losses. At September 30, 2004, the reserve for credit losses was $62.3 million, an
increase of $3.4 million or 5.8% from the balance of $58.9 million at December 31, 2003.
The reserve for credit losses as a percentage of total loans and leases was 1.41% at
September 30, 2004 compared to 1.49% at December 31, 2003. Reserve coverage on
nonperforming loans and leases increased to 429% at September 30, 2004 from 290% at
December 31, 2003. The improvements in these ratios in 2004 are the result of the
significant decrease in our nonperforming assets to $16.4 million at September 30, 2004
from $23.9 million at December 31, 2003.  22


---

Activity in the reserve for credit
losses for the following periods is shown in the following table: Three Months Ended September 30,
     Nine Months Ended September 30,2004
     
     2003
     
     2004
     
     2003(dollars in thousands)Balance at beginning of period
     
     
     $61,288
        
     $62,315
        
     $58,906
        
     $58,799Charge-offs:Commercial and other
     296
        
     207
        
     2,037
        
     1,672Commercial real estate
     10
        
     4,406
        
     49
        
     4,584Agricultural
     --
        
     --
        
     20
        
     103Residential real estate
     158
        
     23
        
     560
        
     171Consumer
     490
        
     479
        
     1,485
        
     1,662Total charge-offs
     954
        
     5,115
        
     4,151
        
     8,192Recoveries:Commercial and other
     114
        
     72
        
     256
        
     169Commercial real estate
     --
        
     --
        
     1,161
        
     16Agricultural
     65
        
     48
        
     99
        
     63Residential real estate
     22
        
     39
        
     96
        
     54Consumer
     97
        
     146
        
     379
        
     440Total recoveries
     298
        
     305
        
     1,991
        
     742Net charge-offs
     656
        
     4,810
        
     2,160
        
     7,450Provision for credit losses
     1,713
        
     4,220
        
     5,599
        
     10,376Balance at end of period
     $62,345
        
     $61,725
        
     $62,345
        
     $61,725Average loans and leases
     $4,324,079
        
     $3,862,828
        
     $4,134,219
        
     $3,765,172Annualized net charge-offs to average loans and leases
     0.06
        %
     0.49
        %
     0.07
        %
     0.26
        %Reserve as a percentage of:Period-end loans and leases
     1.41
        %
     0.49
        %Nonperforming loans and leases
     428.81
        
     269.22Nonperforming assets
     379.12
        
     222.71
        %        23


---

Securities. Our
investment portfolio, including available-for-sale securities and
held-to-maturity securities, decreased by $128.0 million to $1.2 billion at
September 30, 2004 from $1.3 billion at December 31, 2003. The decline in the
portfolio occurred because a significant portion of the proceeds from sales and
maturities during the second and third quarters of 2004 have been used to fund
loan portfolio growth. We sold $114.7 million in securities during the first
nine months of 2004, resulting in securities gains of $2.1 million for this
period compared to securities gains of $5.9 million in the first nine months of
2003. Most of these gains were in connection with the first quarter 2004 sale of
callable obligations of state and political subdivisions that had unfavorable
call features and mortgage-backed securities pools that had been paid down
significantly to balance levels that were not economical to maintain. We
replaced these securities with obligations of state and political subdivisions
that had more favorable call characteristics and adjustable rate mortgage-backed
securities in larger and easier to manage pools. Deposits. Total
deposits were $4.1 billion at September 30, 2004 and at December 31, 2003.
Noninterest bearing deposits decreased $13.0 million or 1.7% to $770.3 million
at September 30, 2004 from $783.3 million at December 31, 2003. Interest bearing
deposits maintained a $3.3 billion balance at September 30, 2004 and December
31, 2003. Borrowings.
Short-term borrowings, which include federal funds purchased, securities sold
under agreements to repurchase, treasury tax and loan notes, and Federal Home
Loan Bank (FHLB) advances, increased $254.5 million or 39.8% to
$893.9 million at September 30, 2004 from $639.4 million at December 31, 2003.
The increased use of short-term borrowings as a funding source was the result of
our loan growth outpacing our deposit growth in the first nine months of 2004. Long-term
debt. At September 30, 2004, long-term debt consisted primarily of FHLB
advances, junior subordinated debentures, and $65.0 million of privately-placed
senior debt. Of the privately-placed senior debt, $46.0 million matured on
November 1, 2004. FHLB advances decreased to $281.8 million at September 30,
2004 from $314.8 at December 31, 2003. The junior subordinated debentures
include $61.9 million of 9.0% debentures payable to Bremer Capital Trust I, an
unconsolidated affiliate of the Company, bearing quarterly interest payments,
and $17.0 million of 10.2% junior subordinated debentures payable to Bremer
Statutory Trust I, also an unconsolidated affiliate of the Company, bearing
semi-annual interest payments. The debentures mature not earlier than July 15,
2006 and not later than July 15, 2031. At September 30, 2004, $76.5 million
qualified as Tier I capital under guidelines of the Federal Reserve. 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 September 30, 2004.  24


---

The following table
compares our consolidated capital ratios with the minimum requirements for
well-capitalized and adequately capitalized banks as of September 30, 2004: Minimum RequirementsSeptember 30,
2004
     
     December 31,
2003
     
     Well
Capitalized
     
     Adequately
CapitalizedTier I capital to risk-weighted assets
     
     
     10.13%
        
     10.51%
        
     6.00%
        
     4.00%Total capital to risk-weighted assets
     11.38
        
     11.76
        
     10.00
        
     8.00Tier I capital to average tangible assets
     8.13
        
     8.10
        
     5.00
        
     4.00  Payment of dividends to
us by the subsidiary banks is subject to various limitations by bank regulators, which
includes maintenance of certain minimum capital ratios. Liquidity
Management. The objective of liquidity management is to assure the continuous
availability of funds to meet our financial commitments. We use an asset liability
management committee (ALCO) as part of our risk management process. ALCO is
responsible for managing balance sheet and off-balance sheet commitments to meet the needs
of customers while achieving our financial objectives. ALCO meets regularly to review
funding capacity, current and forecasted loan demand, investment opportunities, and
liquidity positions as outlined in our asset liability policy. With this information, ALCO
guides changes in the balance sheet structure to provide for adequate ongoing liquidity. Several factors provide
for a favorable liquidity position. The first is the ability to acquire and retain funds
in the local markets we serve. This in-market funding provides a historically stable
source of funding and represented approximately 83% of total liabilities at September 30,
2004. Our available-for-sale securities portfolio is a secondary source of liquidity
because of its readily marketable nature and predictable stream of maturities. While we
prefer to fund the balance sheet with in-market funding sources, another source of
liquidity is our ready access to regional and national wholesale funding markets,
including federal funds purchased, FHLB advances, and brokered deposits. As of September
30, 2004, we also had $15.0 million of borrowing capacity available under an unsecured
credit facility. As of September 30, 2004, there were no advances outstanding under this
facility. This credit facility is used primarily for contingency purposes. Commitments and
Contingencies. There have been no material changes in our outstanding commitments and
contingencies since those reported at December 31, 2003 in our Annual Report on Form 10-K
for 2003. Item 3. Quantitative and
Qualitative Disclosure About Market Risk There have been no
material changes in market risk exposures that affect the quantitative and qualitative
disclosures presented as of December 31, 2003 in the Annual Report on Form 10-K for 2003.  25


---

Item 4. Disclosure
Controls and Procedures The Company carried out
an evaluation, under the supervision and with the participation of the Companys
management, including the Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness, as of September 30, 2004, of the design and operation of
the Companys disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that the Companys
disclosure controls and procedures are effective in timely alerting them to material
information relating to the Company required to be included in the Companys periodic
filings with the Securities Exchange Commission. There was no change in our internal
control over financial reporting that occurred during the quarter ended September 30, 2004
that has materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.  26


---

PART II - OTHER INFORMATION Item 6.   Exhibits and Reports on Form 8-K (a)

The Company is filing the following exhibits with this Quarterly
Report on Form 10-Q:  31.1

Certification
of Chief Executive Officer Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.  31.2

Certification
of Chief Financial Officer Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.  32.1

Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.  32.2

Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.  (b)

During the quarter ended September 30, 2004, the Company filed or furnished the following Current Report
         on Form 8-K:  A Current Report on Form 8-K dated July 27, 2004, which disclosed the issuance of a
         press release under Item 12, was furnished by the Company to the Securities and         Exchange
Commission on July 29, 2004. The press release described the Company's
         financial results for the quarter ended June 30, 2004.              27


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SIGNATURES Pursuant to the requirements 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. Dated:   November 12, 2004
     
     BREMER FINANCIAL CORPORATIONBy:
     
     /s/   Stan K. DardisStan K. DardisPresident andChief Executive Officer(Principal Executive Officer)By:
     
     /s/   Stuart F. BradtStuart F. BradtController(Chief Accounting Officer)                28


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INDEX TO EXHIBITS Description of Exhibits 31.1

Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  31.2

Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  32.1

Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002  32.2

Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002


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