Bremer Financial Corp. executives and directors, learning about a potential merger with a South Dakota bank in early 2019, never discussed that such a deal might be impossible because of the charitable trust that owned it, testimony and documents showed in court Tuesday.

Appearing for a second day in Ramsey County District Court, the bank's top executive faced a barrage of questions about why the trust's operating constraints never came up until the leaders of the trust pondered an outright sale rather than a merger.

"It was always understood," Jeanne Crain, the bank's chief executive, said in response questions about what has become a key issue in an effort by the state Attorney General's Office to remove the three people who lead the trust.

In combative exchanges with Crain all day, the trustees' attorney Mike Ciresi attempted to paint a picture of relative harmony between the bank and trust when a prospective merger of equals with Great Western Bancorp Inc. arose in March 2019. The relationship turned acrimonious when trustees in June rejected that deal structure and said they wanted the bank to be sold outright.

Ciresi put in front of Crain a number of documents — e-mails, memos, board meeting minutes — about the prospective deal, none of which raised the prospect that the trust might not be allowed to sell its 92% stake in the bank, Minnesota's fourth-largest.

Crain and the bank raised questions about the trustees' ability to sell their stake and end a relationship that stretches back to the 1940s, when bank founder Otto Bremer created the charity to own banks after his death and distribute their profits to communities where they were located.

In the document establishing the relationship, Otto Bremer allowed the trust to sell its bank stake in an "unforeseen circumstance."

To bank executives and directors in 2019 and throughout the current hearing, trustees argued that the unforeseen circumstance was a federal law in 1969 that prescribed behaviors for private foundations, including a minimum distribution of funds each year.

When deal discussions unfolded in 2019, there seemed to be little question that trustees had the ability to sell their stake, the documents showed.

The attorney asked Crain whether in April 2019 the Bremer Financial board had discussed potential concerns, including any from the Attorney General's Office, which has oversight of charities in Minnesota.

"No," Crain replied.

"No reference to court approval?" Ciresi asked.

"That was not ours to discuss," Crain replied.

"Wouldn't that [court approval] be a major issue when talking about a merger if you were on the other side? If you were on the other side, you'd want to know that, wouldn't you?" Ciresi asked.

"Yes, it would be very important for Company A to know," Crain said, referring to Great Western by an acronym the parties in the case created.

Documents and testimony in the case have since made Great Western's identity clear, however. The merger discussion fell apart in June 2019 after the trustees pressed for the outright sale and hired their own investment bankers to solicit deals.

Terms of the merger deal under consideration with Great Western would have kept the Bremer name, with Crain remaining as CEO.

Ciresi and Crain sparred over the meaning and impact of a document prepared by investment bankers at JPMorgan, who had a long-time relationship with Bremer Financial, that assessed four strategic alternatives: doing nothing, listing stock in an initial public offering, undertaking a merger of equals and or selling the company to a buyer.

The sale option on the document prepared for the Bremer Financial board in spring 2019, was noted as "for illustrative purposes only." Crain said that the bank executives at Bremer Financial never contemplated a sale.

And when Ciresi asked her about another scenario, which showed that the potential merger of equals (known as an MOE in business circles) with Great Western could lead to job cuts at Bremer, Crain said, "That is the reason we very likely may never have done an MOE."

The split between the trustees and the bank became publicly known in late October 2019, when the trustees — Charlotte Johnson, Brian Lipschultz and Dan Reardon — announced the trust was seeking buyers for its stake.

The bank sued a short time later, and other suits followed. Last year, the Attorney General's Office stepped in, leading to the current hearing.

In testimony Monday, Crain called the trustees' decision to publicly put their stake on sale "the most destructive way" to sell the bank.