DEFINITION of State Bank

A state bank is a financial institution that a state has chartered primarily to provide commercial banking services. A state bank is not the same as a central or reserve bank. (These institutions are primarily concerned with influencing a government's monetary policy.)


In the United States, the Office of the Comptroller of the Currency (OCC) does not regulate state banks. The OCC is a federal agency that oversees banks that operate nationally. The Federal Reserve (the Fed) does regulate some state banks, along with those that are not under the jurisdiction of the Federal Deposit Insurance Corporation (FDIC).

State banks can still be large financial institutions; however, they are not permitted to expand nationwide since they do not have a federal charter. State banks may be able to provide more nationwide services, such as automated teller machines (ATMs), by partnering with banks with a broader presence around the country. In certain states, state banks have more authority than national banks in providing insurance solutions and private banking services.

State Bank Services: Commercial, Insurance, and Private Banking Offerings

Most state banks focus on personal banking services. These generally include accepting deposits, offering checking accounts, as well as business, personal and mortgage loans. In addition many state banks will provide basic financial products (e.g. certificates of deposit (CDs)) and savings accounts to individuals and small businesses.

The Jonesburg State Bank in Jonesburg, MO, for example, highlights these services above, along with mobile banking options for its retail and business customers.

Some state banks will also provide some insurance solutions. Common personal insurance policies include auto, health, homeowners, and life insurance contracts. Special business insurance policies may protect against specific damages or injuries to employees, medical malpractice, and professional liability insurance, among others.

State banks also expand into private banking and wealth management services. The Iowa State Bank, for example, offers individuals tailored financial plans, along with fee-based management services, business retirement plans, and IRAs and retirement planning, in addition to several insurance options. The team is headed by two financial advisors.

For wealthier individuals, private banking options can be extensive. In addition to more exclusive advice, services can cover protecting and growing assets, more specialized financing solutions, and passing wealth on to future generations. High levels of assets allow some individuals to participate in alternative investments, such as hedge funds and real estate. UBS, Merrill Lynch, Morgan Stanley and Credit Suisse are examples of private banks.