Bremer Financial Corp. says its deal to buy 11 branches from Firstar Bank will accomplish two things: end its frustration in trying to expand in its backyard and help it become less reliant on the volatile farm economy.

Though it is headquartered in St. Paul, $4.2 billion-asset Bremer has had little success growing in the coveted Minneapolis/St. Paul market and has had to focus on small towns in Minnesota, North Dakota, and Wisconsin.

But opportunity finally knocked when Firstar Corp. of Milwaukee announced Oct. 4 that it had agreed to buy rival U.S. Bancorp of Minneapolis for $21 billion in a stock deal set to close this quarter. Buying the 11 Firstar branches in the Twin Cities area would give Bremer 21 branches in the market. The combined Firstar/U.S. Bancorp, which is to take the U.S. Bancorp name, would still have 90 branches in Minneapolis/St. Paul and the biggest deposit share there after the 11 are sold to Bremer.

“There has been a lot of speculation about what it would take to acquire a deposit base that’s this large in a market as vibrant as the Twin Cities,” said Stan Dardis, president and chief executive officer of Bremer Financial.

What it took was an order from regulators that Firstar and U.S. Bancorp divest branches in the Twin Cities to preserve competition. In buying the 11 Firstar Bank branches, Bremer would gain $769 million of deposits and become the fifth-largest bank in the Twin Cities and third-largest in Minnesota in deposit share. It is now No. 6 in Minneapolis/St. Paul and No. 5 in the state.

“We now have the critical mass that allows us … to address the Twin Cities in the way that we address the outlying areas,” Mr. Dardis said.

Though he said that, “with the challenges in agriculture, we realized we needed to diversify into the growth markets of the Twin Cities and Fargo,” Mr. Dardis was quick to add that this does not mean Bremer — whose 100-plus branches in Minnesota, North Dakota, and Wisconsin are mostly in small towns — is getting out of agricultural lending.

This would be Bremer’s ninth acquisition since 1993, when it had assets of $2 billion. The Firstar branch deal, which was announced last week and is scheduled to close next quarter, would bring Bremer’s asset size to $4.8 billion. The deal’s price was not disclosed.

Analysts say they were not surprised that Firstar chose a local buyer. Mr. Dardis said it also helped that the Justice Department was advocating a sale to one buyer and that Bremer has a relationship with both Firstar and U.S. Bancorp: Bremer is Firstar’s largest credit card partner in Minnesota, and U.S. Bancorp provides logistical support on Bremer’s network of automated teller machines.

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