Bank of North Dakota
| File:Bank of North Dakota logo.png | |
| Company type | Public bank |
|---|---|
| Industry | Banking Financial services |
| Founded | 1919 in Bismarck, North Dakota |
| Headquarters | , |
Area served | North Dakota |
Key people | Todd Steinwand (President and CEO) |
| Increase Template:USD (2018) | |
| Total assets | Template:USD (2018) |
| Owner | State of North Dakota |
Number of employees | 173 |
| Website | {{URL|example.com|optional display text}}Lua error in Module:EditAtWikidata at line 29: attempt to index field 'wikibase' (a nil value). |
The Bank of North Dakota (BND) is a government-owned financial institution based in Bismarck, North Dakota, uniquely positioned as the only publicly operated general-service bank in the United States. Serving as the official repository for all state funds, BND utilizes these deposits to fuel economic growth, support agriculture, and assist small businesses throughout North Dakota.
Established in 1919 with the mission to bolster agriculture, commerce, and industrial sectors within the state, the bank has maintained consistent profitability every year since its founding. It attracted considerable recognition for its strong financial stability during the 2008 economic downturn and played an active role in aiding local enterprises amid the COVID-19 crisis.
With its distinctive operational approach and visionary leadership, BND has earned a reputation as a powerful financial entity within North Dakota’s marketplace. Although other states have shown interest in adopting this model, political hurdles and the structure of the banking industry have hindered widespread replication.
Organization
According to state legislation, the institution functions as the State of North Dakota doing business as the Bank of North Dakota. It holds exclusive status as the legal depository for all public funds, requiring state agencies to deposit their monies with BND. This arrangement allows the bank to retain approximately 15% of all deposits within the state. Earnings generated by BND contribute to North Dakota’s general fund or economic development initiatives, totaling $585 million since its establishment.
Governance is provided by the North Dakota Industrial Commission, which includes the Governor, Attorney General, and Agriculture Commissioner. Additionally, a seven-member advisory board appointed by the Governor supports oversight; this board features executives from primarily North Dakota-owned banks along with representatives from state- or federally-chartered financial institutions.
Services
BND’s operational strategy centers on three primary areas: funding local and statewide infrastructure through short-term lending and bond issuance; providing direct loans to private borrowers; and delivering banking services that support regional banks.
Public sector
Occasionally, profits from BND assist in offsetting budgetary shortfalls for the state government.
Private sector
Via its Student Loans of North Dakota program, BND guarantees educational loans and extends business development financing aimed at agricultural startups.
Bank-to-bank services
Functioning as a wholesale banking institution, BND aids community banks and credit unions by increasing available loan amounts, offering loan guarantees, and lowering interest costs. It acquires loans from bank portfolios and purchases shares from community banks, while also providing clearinghouse services, reserve account options, and access to federal funds. Although entities beyond banks may open accounts with BND, its single-branch operation and limited consumer-facing offerings restrict its ability to compete in retail banking. Deposits at BND are backed by the state’s general fund instead of traditional FDIC insurance.
Additionally, BND plays a critical role in disaster recovery financing, notably following major flooding events such as the 1997 Red River flood and the 2011 Missouri River flood. It also extends agricultural relief loans during weather-related emergencies.
History
Founded in 1919 with an initial capital of $2 million, the Bank of North Dakota (BND) was created to enhance credit availability and stimulate agriculture, commerce, and industry within the state. At that time, North Dakota’s economy heavily depended on wheat farming but faced challenges including drought conditions, suppressed grain prices due to dealer monopolies, and high commercial bank interest rates reaching up to 12% in urban centers.
The institution was conceived by populist members of the Non-Partisan League aiming to decrease farmers’ reliance on out-of-state corporations through public ownership of financial services. This initiative met resistance from powerful grain, railroad, and banking interests who financed opposition parties, initiated legal disputes over bond sales, and boycotted bond purchases—delaying the bank’s capitalization until 1921.
Originally intended to function similarly to a credit union to protect farmers from exploitative lenders, BND encountered political opposition from the Independent Voters Association seeking its closure. The recall of NPL Governor Lynn Frazier halted these efforts, leading BND to adopt a more conservative role as a central financial institution for the state.
During the Great Depression, BND supported educators by paying full face value for their payment warrants, unlike other institutions that discounted them. In the 1940s, it facilitated the return of foreclosed farmland to families at prices below market value. By mid-century, the bank shifted its emphasis from agricultural lending toward managing state funds and servicing local banks, commencing transfers to the state’s general fund in 1945.
Under Governor William L. Guy’s administration, BND broadened its service offerings and deepened collaboration with financial institutions. It issued its first Small Business Administration loan and began participation lending in 1965. In 1967, it became the first U.S. institution to provide federally insured student loans. These initiatives diversified BND’s portfolio and strengthened its role in fostering North Dakota’s economic growth.
COVID-19 pandemic
During the COVID-19 crisis, BND’s backing of small commercial banks proved essential in enabling North Dakota to achieve the highest per capita approval rate for paycheck protection program loans nationwide. Larger banks experienced slower processing due to complex internal procedures, whereas smaller local banks capitalized on close customer relationships and communication channels to expedite approvals.
Assessment
A 2011 analysis by the Boston Federal Reserve emphasized that BND "strengthens the sustainability of small banks" within North Dakota through cooperative arrangements; half of its loan portfolio consists of participations or purchases from community banks. Since approximately 50% of deposits statewide are held by banks with assets under $500 million, BND’s risk-sharing mechanism is crucial—it empowers these smaller banks to offer larger loans and remain competitive against national and global institutions.
Unlike other states where small banks depend on larger counterparts—often risking client loss—BND’s approach fosters growth among local banks without such competitive pressures. This has contributed to North Dakota maintaining a robust number of small banks and a decentralized banking landscape featuring more branch offices per capita than comparable states, with reduced market concentration since 1995.
BND also demonstrates greater responsiveness than federal agencies during economic downturns by supplying liquidity promptly and mitigating financial strain. While other states rely on multiple agencies for similar functions, BND’s unified structure enhances transparency, accelerates lending processes, and optimizes resource allocation.
However, BND is not the primary source of liquidity; during the 2008 financial crisis, federal programs were pivotal. The state’s relative financial stability at that time was attributed more to steady sectors like agriculture and energy rather than BND’s presence. North Dakota’s economy remains comparatively more volatile than neighboring states’.
Occasionally, state budgets are supplemented using profits generated by BND—though this practice carries risk if the bank experiences losses. Since inception, BND has been consistently profitable annually. Transfers have generally been modest (below 1% of total budget) but have provided crucial support during deficits—for instance, $25 million was transferred from BND during fiscal shortfalls between 2001 and 2003.
Other states have explored similar concepts; for example, New York proposed establishing a state-owned bank in 1975 aimed at supporting municipal bonds and underserved communities after private banks withdrew their backing.
Assets and liabilities
By December 31, 2012, the Bank of North Dakota's total assets amounted to $6.1 billion, which included $3.3 billion in outstanding loans. The institution reported capital of $463 million and earned a net profit of $81 million. Fast forward to 2019, the bank demonstrated robust financial growth with profits rising to $169 million alongside $7 billion in assets and $4.5 billion in loans, underscoring the effectiveness of its business strategy.
Presidents
| No. | Name | Term |
|---|---|---|
| 1 | J. R. Waters | 1919 |
| 2 | F. W. Cathro | 1920–1921 |
| 3 | C. R. Green | 1922–1929 |
| 4 | C. F. Mudgett | 1930–1932 |
| 5 | R. M. Stangler | 1933–1936 |
| 6 | F. A. Vogel | 1937–1944 |
| 7 | H. C. Bowers | 1945–1956 |
| 8 | T. W. Sette | 1957–1961 |
| 9 | G. M. Thompson | 1962–1968 |
| 10 | H. L. Thorndal | 1969–1986 |
| 11 | Joseph Lamb | 1986–1992 |
| 12 | John Hoeven | 1993–2000 |
| 13 | Eric Hardmeyer | 2001–2021 |
| 14 | Todd Steinwand[1] | 2021–2024 |
| 15 | Don Morgan[2] | 2024– |