By Neal St. Anthony

Star Tribune

ROCHESTER — Bremer Financial Corp. said it has agreed to acquire privately held Eastwood Bank in Rochester, significantly furthering Bremer’s recent push into Austin and southeastern Minnesota.

St. Paul-based Bremer, with $8.7 billion in loans and other investments, is buying Eastwood, which has $675 million in assets. That includes two Austin locations, which a company spokesperson said would switch over to Bremer Bank with all the other Eastwood locations after the acquisition is formally approved on Jan. 23, 2015.

Bremer CEO Pat Donovan said the acquisition of 13-office Eastwood fits Bremer’s “southeastern corridor” strategy which has added about $400 million in assets over the last several years through new offices from Mankato to La Crosse, Wis.

Bremer doesn’t have a Rochester flagship, and Donovan said there is no overlap between the two -organizations.

Eastwood, a century-old bank owned by employees and the Talen family of Rochester, is a profitable, well-run institution, Donovan said.

“This is our first acquisition since 2001,” Donovan said in an interview. “This is really in our wheelhouse by geography, -talent, culture and business fit.”

Terms were not disclosed. However, good community banks are selling for up to two times their equity capital in an improving economy. Eastwood has a book value of about $50 million.

“I have a number of deals in the works right now,” said Karen Grandstrand, a banking attorney at Fredrikson & Byron in Minneapolis and former federal regulator who was not involved in the deal. “Most of the deals are confidential but the pricing is moving up in the 1.5 times to two times book value.”

Bank deals, which once priced at three-or-more times book value in the go-go days before the Great Recession, often were priced at little more than book value for the first couple years after the recession. Only in the last year or two have they started to get marked up as consumer and business loan demand started to grow again.

“Bremer is a good bank. And it’s good for community banks in Minnesota that there’s another [large] player in the market. There are a lot of small banks in Minnesota. And the larger players are not coming in like we saw 10 years ago, before the recession,” Grandstrand said.

Bremer has become the 11th largest farm banker in the country, according to the Federal Deposit Insurance Corp.

Eastwood Chairman James Talen said in a statement: “We have carefully considered what is best for our shareholders, customers, communities and employees, and we believe the decision to become part of the Bremer organization is the right choice for meeting the best interests of all of these groups.”

—Distributed by MCT Information Services. The Austin Daily Herald contributed to this report.