Is Seacoast Banking Corporation of Florida (NASDAQ:SBCF) Over-Exposed To Risk?

Post-GFC recovery has led to improving credit quality and a strong growth environment for the banking sector. Economic growth impacts the stability of salaries and interest rate level which in turn affects borrowers’ demand for, and ability to repay, their loans. As a small-cap bank with a market capitalisation of US$1.4b, Seacoast Banking Corporation of Florida’s (NASDAQ:SBCF) profit and value are directly affected by economic activity. Risk associate with repayment is measured by the level of bad debt which is an expense written off Seacoast Banking of Florida’s bottom line. Today we will analyse Seacoast Banking of Florida’s level of bad debt and liabilities in order to understand the risk involved with investing in the bank.

See our latest analysis for Seacoast Banking of Florida

NasdaqGS:SBCF Historical Debt December 3rd 18
NasdaqGS:SBCF Historical Debt December 3rd 18

How Good Is Seacoast Banking of Florida At Forecasting Its Risks?

The ability for Seacoast Banking of Florida to accurately forecast and provision for its bad loans shows it has a strong understanding of the level of risk it is taking on. If the bank provisions for more than 100% of the bad debt it actually writes off, then it is considered to be relatively prudent and accurate in its bad debt provisioning. With a bad loan to bad debt ratio of 129.55%, the bank has cautiously over-provisioned by 29.55%, which illustrates a safe and prudent forecasting methodology, and its ability to anticipate the factors contributing to its bad loan levels.

What Is An Appropriate Level Of Risk?

Seacoast Banking of Florida’s operations expose it to risky assets by lending to borrowers who may not be able to repay their loans. Total loans should generally be made up of less than 3% of loans that are considered unrecoverable, also known as bad debt. Loans are written off as expenses when they are not repaid, which comes directly out of Seacoast Banking of Florida’s profit. Since bad loans make up a relatively small 0.64% of total assets, the bank exhibits strict bad debt management and faces low risk of default.

How Big Is Seacoast Banking of Florida’s Safety Net?

Handing Money Transparent Seacoast Banking of Florida operates by lending out its various forms of borrowings. Customers’ deposits tend to carry the smallest risk given the relatively stable interest rate and amount available. The general rule is the higher level of deposits a bank holds, the less risky it is considered to be. Since Seacoast Banking of Florida’s total deposit to total liabilities is very high at 89% which is well-above the prudent level of 50% for banks, Seacoast Banking of Florida may be too cautious with its level of deposits and has plenty of headroom to take on risker forms of liability.

Next Steps:

How will SBCF’s recent acquisition impact the business going forward? Should you be concerned about the future of SBCF and the sustainability of its financial health? The list below is my go-to checks for SBCF. I use Simply Wall St’s platform to keep informed about any changes in the company and market sentiment, and also use their data as the basis for my articles.

  1. Future Outlook: What are well-informed industry analysts predicting for SBCF’s future growth? Take a look at our free research report of analyst consensus for SBCF’s outlook.
  2. Valuation: What is SBCF worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether SBCF is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at