Bremer Financial Corp. executives in early 2019 held preliminary merger talks with South Dakota-based Great Western Bank on a deal that would have kept the Bremer name and put its CEO in charge of the combined firm, documents and testimony in a court hearing revealed Tuesday.

But trustees of Otto Bremer Trust, which held a 92% stake in the bank at the time, objected to the deal structure, one trustee, Brian Lipschultz, said at the hearing.

"It was an existential question of the trustees," Lipschultz said. He added, "We had an absolute crisis on our hands."

The trustees feared that the trust's stake in the ongoing company, at around 45%, might constrain its annual dividend so much that it wouldn't be able to meet federal distribution requirements for a charitable trust.

The Minnesota Attorney General's office wants a Ramsey County judge to remove Lipschultz and the two other trustees of St. Paul-based Otto Bremer Trust, alleging mismanagement.

The state's pursuit of the trustees began after they continued seeking a buyer for Bremer Financial in 2019 when no deal came together with Great Western and the bank's executives and board resisted looking for another.

Appearing for a second day in St. Paul at a hearing on the state's dismissal request, Lipschultz provided more details about the disintegration of the relationship between the trustees and Bremer Financial executives and board members through 2019.

Under questioning from Assistant Attorney General Carol Washington, Lipschultz acknowledged the relationship turned so acrimonious that, by early 2020, he and trustee Dan Reardon were texting allegations of criminal suspicions about Bremer Financial executives.

"Everything will come out," Lipschultz wrote in one text in January 2020. "They are involved in truly criminal activities. Not just bad or conflicted governance."

"Amazing, sad and unfortunate," Reardon replied. "Assets being squandered recklessly by them."

Under questions later in the day from the trust's outside counsel, Jan Conlin, Lipschultz portrayed Bremer Financial executives and board members as initially open to discussions with Great Western.

He did not name the other bank by name. The parties agreed at the start of the hearing not to publiclyidentify counterparties, with the one in early 2019 referred to simply as "Company A." But documents entered into testimony, including its 2018 asset size and branch locations, made clear that Company A was Great Western.

Other documents last week revealed that trustees held deal discussions later in 2019 with BMO Harris's U.S. banking unit and Huntington Bancshares, the Ohio banking firm that recently paired up with TCF Financial.

A representative of Great Western did not respond to a e-mail inquiry for comment Tuesday. The Sioux Falls-based firm last month agreed to a stock merger with Montana-based First Interstate BankSystem Inc. that will conclude next year, under which it will take the First Interstate name.

But in early 2019, its top executive met Bremer Financial CEO Jeanne Crain in person and madeprogress on a deal that would have united two of the largest regional banks in the Upper Midwest. There would have been little overlap in branch locations, with Great Western operating chiefly in South Dakota, Iowa, Nebraska and Kansas and Bremer in Minnesota, Wisconsin, North Dakota and Montana.

Bremer Financial is not a party to the current court hearing and, in separate litigation, has disputed some details put forth by the trustees. Crain, the top executive, is scheduled to appear in the current legal hearing later this week.

The bank and trust have fought over whether the trust can sell its stake in the bank since the summer 2019, when Bremer Financial's board decided not to pursue any further deals.

The document establishing the trust in the 1940s, written by the bank's founder Otto Bremer, said the trust could only sell the bank under "unforeseen circumstances."

On Tuesday, Lipschultz described several conditions of the modern banking industry — such as the digital banking revolution and consolidation of bank companies — as conditions that met that criteria.

He also testified about documents created by Bremer Financial's top executives in the late 1980s — the last time the legal relationship between the two entities changed — that warned other Bremer Financial shareholders that the charitable trust could sell its stake anytime.

"An offer to buy or merge could be received next year, five years from now, next week or never," Bremer Financial told its shareholders then. The foundation, it noted, had a responsibility to maintain its "charitability by protecting and enhancing the foundation's assets."

"Is there anything in these documents that say Bremer Bank can block a sale?" Conlin asked Lipschultz.

"Not one," he replied.