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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
The St. Joe Company · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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We are exposed to market risks primarily from interest rate risk fluctuations. We have investments in short-term U.S. Treasury Bills classified as cash equivalents that have fixed interest rates for which changes in interest rates generally affect the fair value of the investment, but not the earnings or cash flows. A hypothetical 100 basis point increase in interest rates would result in a decrease of less than $0.1 million in the market value of these investments as of June 30, 2026. Any realized gain or loss resulting from such interest rate changes would only occur if we sold the investments prior to maturity or if a decline in their value is determined to be related to credit loss.
We have historically been exposed, and in the future may again be exposed, to credit risk associated with investments classified as available-for-sale securities (“Securities”) and these instruments are subject to price fluctuations as a result of changes in the financial market’s assessment of issuer credit quality, increases in delinquency and default rates, changes in prevailing interest rates and other economic factors. A downgrade of the U.S. government’s credit rating may also decrease the value of Securities.
Some of our cash and cash equivalents are invested in money market instruments. Changes in interest rates related to these investments would not significantly impact our results of operations.
We are subject to interest rate risk on our variable-rate debt and utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on certain loans. We have entered into interest rate swap agreements designated as cash flow hedges to manage the interest rate risk associated with some of our variable rate debt, with changes in the fair value recorded to accumulated other comprehensive income. As of June 30, 2026, we had variable-rate debt outstanding totaling $98.9 million, of which $39.4 million was swapped to a fixed interest rate. As of June 30, 2026, the weighted average interest rate on our variable rate loans, excluding the swapped portion, based on SOFR was 5.9%. Based on the outstanding balance of these loans as of June 30, 2026, a hypothetical 100 basis point increase in the applicable rate would result in an increase to our annual interest expense of $0.6 million. See Note 5. Financial Instruments and Fair Value Measurements and Note 8. Debt, Net for additional information.