OLR Research Report

May 26, 2010




By: James Orlando, Legislative Analyst

You asked for information about the Bank of North Dakota.

The Bank of North Dakota (BND), the only state-owned bank in the United States, was established by legislative action in 1919. Its statutory purpose is to “encourag[e] and promot[e] agriculture, commerce, and industry” (N.D. Cent. Code, 6-09-01). In a 2009 interview with Mother Jones magazine, bank president Eric Hardmeyer stated that the bank was created:

as a populist movement swept the northern plains. Basically it was a very angry movement by a large group of the agrarian sector that was upset by decisions that were being made in the eastern markets . . . deciding who got credit and how to market their goods. . . . [the movement] actually took control of the legislature and created what was called an industrial program, which created both the Bank of North Dakota as a financing arm and a state-owned mill and elevator to market and buy the grain from the farmer (Harkinson, Josh, “How the Nation's Only State-Owned Bank Became the Envy of Wall Street,” Mother Jones, Mar. 27, 2009, available at http://motherjones.com/mojo/


According to the bank's website, “[i]t was never intended for BND to compete with or replace existing banks. Instead, Bank of North Dakota was created to partner with other financial institutions and assist them in meeting the needs of the citizens of North Dakota” (http://www.banknd.nd.gov/about_BND/history_of_BND.html).

North Dakota law requires all state funds to be deposited in the bank (N.D. Cent. Code, 6-09-07). All deposits are guaranteed by the state and are exempt from all state, county, and municipal taxes (id. 6-09-10). Most of the bank's deposits are from tax collection and state fees. Approximately 1.5% of its deposits are from its limited retail banking services, such as checking, savings, and certificates of deposit (Bank of North Dakota Frequently Asked Questions at p. 2 (hereinafter BND FAQs), attached to this report and available at http://www.banknd.nd.gov/about_BND/pdfs/faqs.pdf).

BND has the statutory authority to engage in several banking activities. Its main focus is financing for economic development. The bank is involved in both direct lending and participation loans (lending by the bank through participation with another financial institution), with an emphasis on the latter. The bank offers commercial financing programs for farming, ranching, small business, start-up enterprises, community development, and other areas. The bank also administers a state student loan program and other educational financing programs, including a 529 college savings program (BND FAQs at p. 3-10).

In 1945, the bank began depositing its profits into the state's general fund. BND has contributed over $340 million in profit to the state since 1996. In 2009, due to the state's budget surplus of over $1 billion, the state legislature eliminated the transfer of profits to the state for the 2009-2011 biennium, instead allowing the bank to retain its profits and increase its capital. In 2009, the bank generated annual income of $58.1 million, up from $57.0 million in 2008 and $51.1 million in 2007 BND 2009 Annual Report at p. 1, 6, available at http://www.banknd.nd.gov/financials_and_compliance/pdfs/annualreport09.pdf).

In 2009, the bank had a loan portfolio of over $2.7 billion and its loan portfolio was comprised of approximately 38% commercial/business loans, 34% student loans, 18% residential loans and 10% agriculture loans (id. at p. 3, 46).