Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Sensitivity
Fluctuations in interest rates may result in changes in the fair value of the Company’s financial instruments, cash flows and net interest income. This risk is managed using simulation modeling to calculate the most likely interest rate risk utilizing estimated loan and deposit growth. The objective is to optimize the Company’s financial position, liquidity, and net interest income while limiting volatility.
Senior management regularly reviews the overall interest rate risk position and evaluates strategies to manage the risk. The Company's ALCO uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to assess the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve- month period is subjected to instantaneous changes in market rates and is monitored at least quarterly.
The following table presents the ALCO simulation model's projected impact of a change in interest rates on the projected baseline net interest income for the 12 and 24 month periods beginning on January 1, 2025, holding all balances on the balance sheet static. It is important to note that the results in the table below assume parallel shifts in the yield curve and do not take into account changes in the slope of the yield curve nor changes in balance sheet size or mix.
% Change in Projected Baseline Net Interest Income
December 31, 2024
Change in Interest Rates 1-12 months 13-24 months
+3.00% (16.6) (12.8)
+2.00% (10.8) (8.0)
+1.00% (5.1) (3.6)
Current — —
-1.00% 3.6 1.6
-2.00% 6.9 2.0
-3.00% 10.3 2.8
The computations of interest rate risk do not necessarily include certain actions management may undertake to manage this risk in response to changes in interest rates. Management may adjust asset or liability pricing or structure in order to manage interest rate risk through an interest rate cycle. This may include the use of investment portfolio purchases or sales or the use of derivative financial instruments, such as interest rate swaps, options, caps, floors, futures or forward contracts.
The Company's calculation of interest rate sensitivity for the year ended December 31, 2024 is presented below. The balances of interest rate sensitive assets and liabilities are presented in the periods in which they reprice to market rates or mature. The amounts are aggregated to reflect the interest rate sensitivity gap. This analysis includes assumptions for prepayments of loans and securities and assumptions for core deposit re-pricing.
The computations of interest rate sensitivity are based on the static balance sheet and do not necessarily include certain actions management may undertake to manage this risk in response to changes in interest rates in the future. This may include specific efforts to change the size of the balance sheet or the relative composition of fixed versus variable rate assets and liabilities as well as qualitative changes that could impact quantitative performance.
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Interest Rate Sensitivity Analysis 1
December 31, 2024
(In thousands) 0-3
Months 4-12
Months 1-5
Years Over
5 Years Total
Federal funds sold and interest-bearing deposits $ 313,617 $ — $ — $ — $ 313,617
Debt securities 2
514,492 197,741 912,776 1,236,720 2,861,729
Loans 3
3,178,747 1,204,440 4,275,760 1,658,280 10,317,227
Other Assets — — — 93,045 93,045
Earning assets $ 4,006,856 $ 1,402,181 $ 5,188,536 $ 2,988,045 $ 13,585,618
Non-maturity deposits 5,018,117 329,910 270,478 1,655,677 7,274,182
Time deposits 771,897 782,670 60,647 659 1,615,873
Borrowings 327,331 12,515 225,000 19,191 584,037
Interest-bearing liabilities $ 6,117,345 $ 1,125,095 $ 556,125 $ 1,675,527 $ 9,474,092
Interest rate swaps 800,000 (750,000) (50,000) — —
Interest sensitivity gap $ (1,310,489) $ (472,914) $ 4,582,411 $ 1,312,518 $ 4,111,526
Cumulative gap $ (1,310,489) $ (1,783,403) $ 2,799,008 $ 4,111,526
Cumulative gap to total earning assets (10 %) (13 %) 21 % 30 %
Earning assets to interest-bearing liabilities 65 % 125 % 933 % 178 %
1 The repricing dates may differ from contractual maturity dates for certain assets due to prepayment assumptions.
2 Securities are stated at carrying value.
3 Includes loans held for sale.
Market Risk
Market risk refers to potential losses arising from changes in interest rates, and other relevant market rates or prices.
Interest rate risk, defined as the exposure of net interest income and EVE to adverse movements in interest rates, is the Company’s primary market risk, and mainly arises from the structure of the balance sheet (non-trading activities). The Company is also exposed to market risk in its investing activities. The ALCO meets regularly and is responsible for reviewing the interest rate sensitivity position of the Company and establishing policies to monitor and limit exposure to interest rate risk. The policies established by the ALCO are reviewed and approved by the Company’s Board of Directors. The primary goal of interest rate risk management is to control exposure to interest rate risk, within policy limits approved by the Board of Directors. These limits reflect the Company’s tolerance for interest rate risk over short-term and long-term horizons.
The Company also performs valuation analyses, which are used for evaluating levels of risk present in the balance sheet that might not be taken into account in the net interest income simulation analyses. Whereas net interest income simulation highlights exposures over a relatively short time horizon, valuation analysis incorporates all cash flows over the estimated remaining life of all balance sheet positions. The valuation of the balance sheet, at a point in time, is defined as the discounted present value of asset cash flows minus the discounted value of liability cash flows, the net result of which is the EVE. The sensitivity of EVE to changes in the level of interest rates is a measure of the longer-term re-pricing risks and options risks embedded in the balance sheet. In contrast to the net interest income simulation, which assumes interest rates will change over a period of time, EVE uses instantaneous changes in rates.
EVE values only the current balance sheet, and does not incorporate the growth assumptions that are used in the net interest income simulation model. As with the net interest income simulation model, assumptions about the timing and variability of balance sheet cash flows are critical in the EVE analysis. Particularly important are the assumptions driving prepayments and the expected changes in balances and pricing of the indeterminate life deposit portfolios. Core deposits are a more significant funding source for the Company, making the lives attached to core deposits more important to the accuracy of our modeling of EVE. The Company periodically reassesses its assumptions regarding the indeterminate lives of core deposits utilizing an independent third-party resource to assist.
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The following table presents the projected impact of a change in interest rates on the balance sheet. This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve.
% Change in Economic Value of Equity
Changes in Interest Rates December 31, 2024
+3.00% (26.1%)
+2.00% (17.0)
+1.00% (8.2)
Current —
-1.00% 6.8
-2.00% 12.4
-3.00% 16.1
While an instantaneous and severe shift in interest rates is used in this analysis, a gradual shift in interest rates would have a much more modest impact. Since EVE measures the discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon, i.e., the next fiscal year. Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, change in yield curve relationships, and changing product spreads that could mitigate the adverse impact of changes in interest rates.
Effects of Inflation and Changing Prices
The consolidated financial statements and related financial data presented herein have been prepared in accordance with U.S. GAAP, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money, over time, due to inflation.
Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates have a more significant impact on a financial institution’s performance than the general level of inflation. However, inflation affects financial institutions by increasing their cost of goods and services purchased, as well as the cost of salaries and benefits, occupancy expense, and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings, and shareholders’ equity. Mortgage origination and refinancing tends to slow as interest rates increase, and higher interest rates will likely reduce the Company’s earnings from such activities and the income from the sale of residential mortgage loans in the secondary market.
Stock Performance Graph
The line graph below compares the cumulative total stockholder return on Seacoast common stock with the cumulative total return of the NASDAQ Composite Index and the S&P U.S. BMI Banks - Southeast Region Index for the same period. The graph and table assume that $100 was invested on December 31, 2019 (the last day of trading for the year ended December 31, 2019) in each of Seacoast common stock, the NASDAQ Composite Index and the S&P U.S. BMI Banks - Southeast Region Index. The cumulative total return represents the change in stock price and the amount of dividends received over the period, assuming all dividends were reinvested.
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Index December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024
Seacoast Banking Corporation of Florida 100.00 96.34 117.13 105.30 99.02 98.54
NASDAQ Composite Index 100.00 144.92 177.06 119.45 172.77 223.87
S&P U.S. BMI Banks - Southeast Region Index 100.00 89.66 128.06 104.16 107.45 139.40
Source: S&P Global Market Intelligence © 2025
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SELECTED QUARTERLY INFORMATION
QUARTERLY CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
2024 Quarters 2023 Quarters
(In thousands, except per share data) Fourth Third Second First Fourth Third Second First
Net interest income:
Interest income $ 185,930 $ 184,115 $ 179,808 $ 175,706 $ 176,855 $ 179,846 $ 174,283 $ 157,991
Interest expense 70,126 77,450 75,384 70,628 66,036 60,540 47,320 26,839
Net interest income 115,804 106,665 104,424 105,078 110,819 119,306 126,963 131,152
Provision for credit losses 3,699 6,273 4,918 1,368 3,990 2,694 (764) 31,598
Net interest income after provision for credit losses on loans 112,105 100,392 99,506 103,710 106,829 116,612 127,727 99,554
Noninterest income:
Service charges on deposit accounts 5,138 5,412 5,342 4,960 4,828 4,648 4,560 4,242
Interchange income 1,860 1,911 1,940 1,888 2,433 1,684 5,066 4,694
Wealth management income 4,019 3,843 3,766 3,540 3,261 3,138 3,318 3,063
Mortgage banking fees 326 485 582 381 378 410 576 426
Insurance agency income 1,151 1,399 1,355 1,291 1,066 1,183 1,160 1,101
BOLI income 2,627 2,578 2,596 2,264 2,220 2,197 2,068 1,916
Other income 10,335 7,864 6,647 5,944 5,589 4,920 5,004 6,896
Securities (losses) gains, net
(8,388) 187 (44) 229 (2,437) (387) (176) 107
Total noninterest income 17,068 23,679 22,184 20,497 17,338 17,793 21,576 22,445
Noninterest expenses:
Salaries and wages 42,378 40,697 38,937 40,304 38,435 46,431 45,155 47,616
Employee benefits 6,548 6,955 6,861 7,889 6,678 7,206 7,472 8,562
Outsourced data processing costs 8,307 8,003 8,210 12,118 8,609 8,714 20,222 14,553
Occupancy 7,234 7,096 7,180 8,037 7,512 7,758 8,583 8,019
Furniture and equipment 2,004 2,060 1,956 2,011 2,028 2,052 2,345 2,267
Marketing 2,126 2,729 3,266 2,655 2,995 1,876 2,047 2,238
Legal and professional fees 2,807 2,708 1,982 2,151 3,294 2,679 4,062 7,479
FDIC assessments 2,274 1,882 2,131 2,158 2,813 2,258 2,116 1,443
Amortization of intangibles 5,587 6,002 6,003 6,292 6,888 7,457 7,654 6,727
Other real estate owned expense and net loss (gain) on sale
84 491 (109) (26) 573 274 (57) 195
Provision for credit losses on unfunded commitments 250 250 251 250 — — — 1,239
Other 5,976 5,945 5,869 6,532 6,542 7,210 8,266 7,137
Total noninterest expenses 85,575 84,818 82,537 90,371 86,367 93,915 107,865 107,475
Income before income taxes 43,598 39,253 39,153 33,836 37,800 40,490 41,438 14,524
Provision for income taxes 9,513 8,602 8,909 7,830 8,257 9,076 10,189 2,697
Net income $ 34,085 $ 30,651 $ 30,244 $ 26,006 $ 29,543 $ 31,414 $ 31,249 $ 11,827
Per Common Share Data
Net income diluted $ 0.40 $ 0.36 $ 0.36 $ 0.31 $ 0.35 $ 0.37 $ 0.37 $ 0.15
Net income basic 0.40 0.36 0.36 0.31 0.35 0.37 0.37 0.15
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2024 Quarters 2023 Quarters
(In thousands, except per share data) Fourth Third Second First Fourth Third Second First
Cash dividends declared:
Common stock $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.17
Market price common stock:
Low close 25.42 22.70 21.59 22.93 19.59 21.51 18.83 21.31
High close 30.71 28.33 24.25 27.28 29.28 27.01 23.85 33.50
Bid price at end of period 27.53 26.49 23.33 24.86 28.46 21.82 21.78 23.18
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