What Happens When a Bank is Not Beholden to Shareholders?
When it comes to banking and financial services, there are a range of institutions eager to win your business, but interests aren’t always aligned. On one side of the spectrum are massive banking corporations owned by shareholders whose stake in the bank typically forms most of its equity capital. On the other hand, there are community banks that aren’t beholden to shareholders. The difference in how these entities operate, support their customers and communities, give back, and grow is stark. As it turns out, a bank’s ownership structure makes a profound impact on the people, families, organizations, and communities banks serve. Here’s why it matters and what it means for you.
A Different Approach to Decision Making
Decisions at a community bank are made through a markedly different lens when compared to a giant bank owned by shareholders. In the case of Home Federal Bank of Tennessee, community-driven decision making has been at the heart of how we operate since day one, when the bank’s founders united behind a mission to create more homeowners in Knoxville and its surrounding areas.
Rather than focusing primarily (and sometimes solely) on maximizing profits for a dispersed group of shareholders, decisions are made with the community’s best interests in mind. That means the bank’s leadership team is comprised of people raising their children and grandchildren in these communities, attending schools and churches, and are intimately connected to the outcomes of the decisions they make about access to financial services and resources. In the case of Home Federal Bank of Tennessee, we have a deep understanding of community needs as well as a profound sense of accountability to both decisions and outcomes.
Taking a Long-Term View
When it comes to the numbers behind how banks with differing ownership structures operate, there are important distinctions here, too. In the case of the big banks, issued shares comprise the vast majority of equity capital, which means the decision-making process is often influenced by short-term considerations that immediately impact the return on investment for shareholders.
When it comes to making decisions that impact soundness and overall stability in the long-term, privately held community banks have unique advantages. Less pressure to meet quarterly profit targets or appease distant shareholders allows decision-makers to take a longer-term view and consider the broader impact of their choices on the community. This stability also means that community banks can rely on a more diversified approach to capital, incorporating retained earnings and community investments alongside traditional equity capital.
For Home Federal Bank of Tennessee, the bigger picture is one of consistently responsible management that ensures security and soundness over time. From our 30-plus-year track record for achieving consistently high ratings from Bauer Financial to FDIC insurance structured to ensure coverage across personal and business accounts–it all comes back to prioritizing customers and community over shareholder interests.
More Opportunities to Adapt & Innovate
The difference in scale of operations between big banks and privately held community banks also matters. Community banks have an advantage in their size and scope, which is fundamentally smaller to allow for greater agility and responsiveness to the needs of the communities they serve. In the case of Home Federal Bank of Tennessee, close relationships with customers–both individual families and businesses–help the teams at our 23 branch locations identify evolving and emerging needs and provide creative solutions that meet them through a unique combination of expertise and proximity.
You don’t have to look far to find examples of how Home Federal has taken the responsibility of adapting to and serving its communities’ needs seriously since day one. After its founding in 1924, the bank made good on its promise to create and support homeownership, growing over its first three decades in operation to serve 70% of home loans in Knox County by 1965.
It’s one of many examples of how–from day one–the bank has been able to identify the financial needs of the communities we serve and act on them in meaningful ways that make an impact for generations.
Real Relationships Matter
It’s not uncommon for Home Federal Bank of Tennessee bankers to work with customers and their families for decades through relationships that span those generations in personal ways. While large banks often have complex hierarchies and decision-making structures, Home Federal Bank of Tennessee offers an approach tailored to the unique needs of every customer. Those needs can certainly differ over time and are based on the uniquely individual circumstances of each business, person, and family we work with, which is why we place a premium on real relationships and commit to serving our customers for the long haul.
The ownership structure comes into play here, too. Where big banks rely on an algorithm to make a decision about creditworthiness, loan structures, investments, and treasury management opportunities, Home Federal Bank of Tennessee centers on people with real expertise, real relationships, and real experience. Whether it’s working with a commercial client to creatively structure a lease agreement for a growing business that must keep cash on hand or the mortgage loan that facilitates a new home for a soon-to-be family of three–every situation is a little different, and we approach it as such.
Community Comes First
When it comes to giving back, we also do things a little differently compared to big banks. We focus our resources 100% locally, contributing to people in need through a combination of time, talent, and dollars. This includes a cohort of more than 200 employee volunteers contributing an annual total of 1,500-plus hours of volunteer service each year. It also includes more than $1,000,000 in financial donations to people in need.
The bottom line? Not all banks are created equal–and the differences between a bank that most values its bottom line and one that values its community simply cannot be understated. Home Federal Bank of Tennessee is and has always been a community bank driven by the needs, interests, and values of the Tennessee communities it serves.