Bank of North Dakota
Bank of North
Dakota (BND) is the only state-owned bank in the United States. It
was formed in 1919 as part of the populist political movement in the state
at that time, led by the Nonpartisan League. All state funds are
deposited with BND. The bank’s mission has remained the same since
its beginning: to encourage and promote agriculture, commerce, and industry
in North Dakota. The bank was never intended to compete with or replace
other banks; instead, BND cooperates with other banks in achieving its
goals. In this regard, BND acts in partnership with over 100 other
financial institutions in the state. With a few exceptions, such
as student loans and farm real estate acquisition and refinancing, the
bank is restricted by state law from lending directly to a borrower.
Instead, the bank lends through participation with a lead financial institution.
The bank acts as the state’s development bank. Over the past five
years, BND, in partnership with private financial institutions, has helped
over 1,000 businesses and industrial projects, putting over $800 million
into North Dakota’s economy (Bank of North Dakota web site).
As its web site
indicates, “financing economic development is the thrust of Bank of North
Dakota efforts.”
BND has been recognized
for its support of value-added processing ventures. Some of the bank’s
programs that have played a role in this area are the following:
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Partnership in Assisting Community Expansion
(PACE). Through this program, BND participates with a local lender
in a community-based loan to a primary sector business, such as value-added
processing, and buys down the interest rate on the loan. The rate
to the borrower cannot fall below 1 percent. In 1996, it was reported
that the PACE program had resulted in loans of $80.9 million to 209 businesses
since the program began in 1990 (Vogel). The PACE program has helped
provide attractive interest rates to value-added processing ventures.
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Agriculture Partnership in Assisting Community
Expansion (AgPACE). This is an interest rate buy-down program
that is intended to help diversify farming operations. The AgPACE
program was implemented as part of the 1991 Growing North Dakota legislative
package. The program is available to North Dakota residents whose principal
occupation is farming. Proceeds can be used for the purchase of equity
shares in a value-added processing facility. According to BND, the
AgPACE program is “available to any business except traditional production
agriculture, which is integrated into the farm operation and will supplement
farm income” (BND Farm Loan Programs). For instance, bison ranchers
used the AgPACE program to help with their purchase of bison herds that
would eventually be delivered to North American Bison Cooperative.
The program was so popular with bison producers, however, that bison was
removed from BND’s category of nontraditional agriculture (Patrie).
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Co-op Equity Loan Program. This
program was started in 1994 and provides funding to assist in the purchase
of shares in agricultural processing plants. The borrower must be
a North Dakota resident whose principal occupation is farming or ranching.
The interest rate on BND’s portion of the loan floats at its base rate
less 1 percent. The term of the loan is five to ten years, and the
principal payments may be deferred up to three years.
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Value-Added Agriculture Equity Loan Program
(ENVEST). This program began in 1996 and also provides funding
to assist in the purchase of shares in agricultural processing plants.
Unlike the Co-op Equity Loan Program, however, the Envest program is not
limited to a state resident whose principal occupation is farming or ranching.
As well, the project’s ownership does not necessarily have to be structured
as a cooperative.
In August
1999, the ENVEST and Co-op Equity Loan Programs were combined into one
and the AgPACE program was expanded (Humann).
References
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