Wow! I did not know about this at all. Bank of North Dakota in the state of North Dakota is the only state-owned bank in US. It was opened in 1919 as North Dakota farmers were having difficulty securing adequate credit at a reasonable cost.
Unlike India where we have banks owned by Central government and are called state-owned/public sector banks, here state-owned bank means owned by state. US Federal govt is not in any business of owning banks. BND is the only state govt owned bank in US.
It has come across as a nice professionally run bank with low NPAs and high profitability and returns. It also just has one branch in Bismarck and has not really expanded throughout the state. Its deposits are not insured by FDIC but are guaranteed by the full faith and credit of the State of North Dakota.
The deposit base of BND is unique. Its primary deposit base is the State of North Dakota. All state funds and funds of state institutions are deposited with Bank of North Dakota, as required by law. Other deposits are accepted from any source, private citizens to the U.S. government.
There were talks post crisis that State governments in US should also have their own government-owned banks. They thought this might have helped them ward off crisis. Their own bank could have infused more liquidity/credit and also provided some dividend to help in fiscal crisis.
Boston Fed did a superb study looking at whether State of Massachusetts should have a bank modelled like Bank of Dakota. Their analysis shows the experience have been mixed. Overall research shows Bank of North Dakota has played some role in development of North Dakota State but not really an exclusive role.
There are 4 reasons for setting a state-owned bank: