Regulatory Matters

12 Months Ended

Dec. 31, 2021

Banking and Thrift [Abstract]

Regulatory Matters

Note 15. Regulatory Matters

Regulatory Capital Requirements:

The final rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective January 1, 2015. In order to avoid restrictions on capital distributions and discretionary bonus payments to executives, under the new rules a covered banking organization is also required to maintain a “capital conservation buffer” in addition to its minimum risk-based capital requirements. This buffer is required to consist solely of common equity Tier 1, and the buffer applies to all three risk-based measurements (CET1, Tier 1 capital and total capital).  As of January 1, 2019, an additional amount of Tier 1 common equity equal to 2.5% of risk-weighted assets is required for compliance with the capital conservation buffer. The ratios for the Company and the Bank are currently sufficient to satisfy the fully phased-in conservation buffer. At December 31, 2021, the Company and the Bank exceeded the minimum regulatory requirements and exceeded the threshold for the "well capitalized" regulatory classification.

Regulatory Restrictions on Dividends:

Pursuant to Tennessee banking law, the Bank may not, without the prior consent of the Commissioner of the Tennessee Department of Financial Institutions (the “TDFI”), pay any dividends to the Company in a calendar year in excess of the total of the Bank’s retained net income for that year plus the retained net income for the preceding two years.  Because this test involves a measure of net income, any charge on the Bank’s income statement, such as an impairment of goodwill, could impair the Bank’s ability to pay dividends to the Company. Under Tennessee corporate law, the Company is not permitted to pay dividends if, after giving effect to such payment, it would not be able to pay its debts as they become due in the usual course of business or its total assets would be less than the sum of its total liabilities plus any amounts needed to satisfy any preferential rights if it were dissolving. In addition, in deciding whether or not to declare a dividend of any particular size, the Company’s board of directors must consider its and the Bank’s current and prospective capital, liquidity, and other needs. In addition to state law limitations on the Company’s ability to pay dividends, the Federal Reserve imposes limitations on the Company’s ability to pay dividends. Federal Reserve regulations limit dividends, stock repurchases and discretionary bonuses to executive officers if the Company’s regulatory capital is below the level of regulatory minimums plus the applicable capital conservation buffer.

During the years ended December 31, 2021, and 2020, the Bank paid $10.0 million and $13.9 million, respectively, in dividends to the Company.  Since the fourth quarter of 2019, the Company has paid a quarterly common stock dividend. During the years ended December 31, 2021, and 2020, the Company paid a quarterly common stock dividend of $0.06 and $0.05 per share, respectively. The amount and timing of all future dividend payments by the Company, if any, is subject to discretion of the Company’s board of directors and will depend on the Company’s earnings, capital position, financial condition and other factors, including new regulatory capital requirements, as they become known to the Company.

Regulatory Capital Levels:

Actual and required capital levels at December 31, 2021 and 2020 are presented below (dollars in thousands):

									Minimum to be
									well
									capitalized under
					Minimum for				prompt
					capital				corrective action
		Actual			adequacy purposes				provisions1
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2021
SmartFinancial:
Total Capital (to Risk Weighted Assets)	$	386,627	12.55	%	$	246,483	8.00	%		N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		325,345	10.56	%		184,862	6.00	%		N/A	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		325,345	10.56	%		138,647	4.50	%		N/A	N/A
Tier 1 Capital (to Average Assets)2		325,345	7.45	%		174,578	4.00	%		N/A	N/A
SmartBank:
Total Capital (to Risk Weighted Assets)	$	378,055	12.29	%	$	246,053	8.00	%	$	307,566	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		358,703	11.66	%		184,539	6.00	%		246,053	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		358,703	11.66	%		138,405	4.50	%		199,918	6.50	%
Tier 1 Capital (to Average Assets)2		358,703	8.23	%		174,384	4.00	%		217,980	5.00	%
December 31, 2020
SmartFinancial:
Total Capital (to Risk Weighted Assets)	$	329,431	14.07	%	$	187,303	8.00	%		N/A	N/A
Tier 1 Capital (to Risk Weighted Assets)		271,739	11.61	%		140,477	6.00	%		N/A	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)		271,739	11.61	%		105,358	4.50	%		N/A	N/A
Tier 1 Capital (to Average Assets)		271,739	8.70	%		125,002	4.00	%		N/A	N/A
SmartBank:
Total Capital (to Risk Weighted Assets)	$	317,660	13.57	%	$	187,294	8.00	%	$	234,117	10.00	%
Tier 1 Capital (to Risk Weighted Assets)		299,314	12.78	%		140,470	6.00	%		187,294	8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)		299,314	12.78	%		105,353	4.50	%		152,176	6.50	%
Tier 1 Capital (to Average Assets)		299,314	9.58	%		124,969	4.00	%		156,212	5.00	%

1 The prompt corrective action provisions are applicable at the Bank level only.

2 Average assets for the above calculations were based on the most recent quarter.