UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-09439
INTERNATIONAL BANCSHARES CORPORATION
(Exact name of registrant as specified in its charter)
Texas
74-2157138
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
1200 San Bernardo Avenue, Laredo, Texas 78042-1359
(Address of principal executive offices)
(Zip Code)
(956) 722-7611
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading Symbol
Name of each exchange on which registered:
Common Stock, $1.00 par value
IBOC
NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company, in Rule 12b-2 of the Exchange Act.
Large accelerated filer ⌧
Accelerated filer ◻
Non-accelerated filer ◻
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
Shares Issued and Outstanding
62,156,398 shares outstanding at August 4, 2025
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Condition (Unaudited)
(Dollars in Thousands)
June 30,
December 31,
2025
2024
Assets
Cash and cash equivalents
$
731,918
352,652
Investment securities:
Held to maturity debt securities (Market value of $4,400 on June 30, 2025 and $4,400 on December 31, 2024)
4,400
Available for sale debt securities (Amortized cost of $5,397,669 on June 30, 2025 and $5,472,310 on December 31, 2024)
5,009,843
4,987,916
Equity securities with readily determinable fair values
5,483
5,394
Total investment securities
5,019,726
4,997,710
Loans
9,138,620
8,809,826
Less allowance for credit losses
(154,983)
(156,537)
Net loans
8,983,637
8,653,289
Bank premises and equipment, net
428,364
428,221
Accrued interest receivable
74,842
72,175
Other investments
375,686
356,735
Cash surrender value of life insurance policies
307,148
303,042
Goodwill
282,532
Other assets
258,461
292,496
Total assets
16,462,314
15,738,852
1
Consolidated Statements of Condition, continued (Unaudited)
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand—non-interest bearing
4,719,972
4,612,344
Savings and interest bearing demand
4,739,099
4,599,957
Time
3,015,589
2,899,543
Total deposits
12,474,660
12,111,844
Securities sold under repurchase agreements
616,154
535,322
Other borrowed funds
60,437
10,541
Junior subordinated deferrable interest debentures
108,868
Other liabilities
180,126
175,570
Total liabilities
13,440,245
12,942,145
Shareholders’ equity:
Common shares of $1.00 par value. Authorized 275,000,000 shares; issued 96,639,895 shares on June 30, 2025 and 96,616,673 shares on December 31, 2024
96,640
96,617
Surplus
160,169
159,333
Retained earnings
3,509,661
3,356,177
Accumulated other comprehensive loss
(303,489)
(379,054)
3,462,981
3,233,073
Less cost of shares in treasury, 34,489,206 shares on June 30, 2025 and 34,407,674 on December 31, 2024
(440,912)
(436,366)
Total shareholders’ equity
3,022,069
2,796,707
Total liabilities and shareholders’ equity
See accompanying notes to consolidated financial statements.
2
Consolidated Statements of Income (Unaudited)
(Dollars in Thousands, except per share data)
Three Months Ended
Six Months Ended
Interest income:
Loans, including fees
173,979
168,365
344,139
336,693
Taxable
41,401
37,137
82,333
73,400
Tax-exempt
1,514
1,539
3,041
3,085
Other interest income
4,073
8,631
6,093
14,583
Total interest income
220,967
215,672
435,606
427,761
Interest expense:
Savings deposits
21,318
20,631
41,768
40,547
Time deposits
25,150
23,450
50,650
44,726
4,640
5,319
8,944
10,559
Other borrowings
669
69
2,145
139
1,693
1,972
3,383
3,951
Total interest expense
53,470
51,441
106,890
99,922
Net interest income
167,497
164,231
328,716
327,839
Credit loss expense
4,398
8,771
7,727
21,749
Net interest income after provision for credit losses
163,099
155,460
320,989
306,090
Non-interest income:
Service charges on deposit accounts
17,988
18,091
35,655
36,358
Other service charges, commissions and fees
Banking
14,939
14,643
29,004
29,118
Non-banking
2,650
2,893
4,985
5,167
Other investments income (loss), net
348
3,049
(910)
4,672
Other income
4,739
4,844
8,933
10,447
Total non-interest income
40,664
43,520
77,667
85,762
3
Consolidated Statements of Income, continued (Unaudited)
Non-interest expense:
Employee compensation and benefits
38,251
35,629
76,862
71,496
Occupancy
7,270
6,686
13,676
12,363
Depreciation of bank premises and equipment
5,486
5,715
11,099
11,344
Professional fees
4,074
4,212
7,645
7,903
Deposit insurance assessments
1,763
1,696
3,533
3,395
Net operations, other real estate owned
990
297
1,366
327
Advertising
1,732
1,462
3,453
3,282
Software and software maintenance
5,721
5,651
11,131
10,963
Other
12,514
12,760
22,811
22,678
Total non-interest expense
77,801
74,108
151,576
143,751
Income before income taxes
125,962
124,872
247,080
248,101
Provision for income taxes
25,820
27,892
50,046
53,790
Net income
100,142
96,980
197,034
194,311
Basic earnings per common share:
Weighted average number of shares outstanding
62,150,969
62,177,215
62,182,293
62,163,797
Net income per common share
1.61
1.56
3.17
3.13
Fully diluted earnings per common share:
62,232,768
62,292,058
62,268,705
62,279,676
3.16
3.12
4
Consolidated Statements of Comprehensive Income (Unaudited)
Other comprehensive income (loss), net of tax:
Net change in unrealized holding gains (losses) on securities available for sale arising during period (net of tax effects of $8,220, $(1,041), $20,087 and $(6,904))
30,923
(3,915)
75,565
(25,971)
Total other comprehensive income (loss), net of tax
Comprehensive income
131,065
93,065
272,599
168,340
5
Consolidated Statements of Shareholders’ Equity
Three and Six Months ended June 30, 2025 and 2024
(in Thousands, except per share amounts)
Number
of
Common
Retained
Comprehensive
Treasury
Shares
Stock
Earnings
Income (Loss)
Total
Balance at March 31, 2025
96,626
159,712
3,409,519
(334,412)
2,895,079
—
Purchase of treasury stock (81,532 shares)
(4,546)
Exercise of stock options
14
436
450
Stock compensation expense recognized in earnings
21
Other comprehensive income, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments
Balance at June 30, 2025
Balance at March 31, 2024
96,570
157,775
3,085,388
(419,945)
(435,898)
2,483,890
10
358
48
Other comprehensive loss, net of tax:
Balance at June 30, 2024
96,580
158,171
3,182,368
(423,860)
2,577,361
6
Balance at December 31, 2024
Dividends:
Cash ($.70 per share)
(43,550)
23
770
793
66
Balance at December 31, 2023
96,467
155,511
3,029,088
(397,889)
(435,403)
2,447,774
Cash ($.66 per share)
(41,031)
Purchase of treasury stock (9,284 shares)
(495)
113
2,538
2,651
122
7
Consolidated Statements of Cash Flows (Unaudited)
Operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Specific reserve, other real estate owned
20
16
Gain on sale of bank premises and equipment
(13)
(344)
Loss (gain) on sale of other real estate owned
479
(281)
Accretion of investment securities discounts
(2,181)
(957)
Amortization of investment securities premiums
2,276
2,778
Unrealized (gain) loss on equity securities with readily determinable fair values
(89)
80
Stock based compensation expense
Loss (earnings) from affiliates and other investments
1,272
(1,781)
Deferred tax expense
2,191
8,664
Increase in accrued interest receivable
(2,667)
(6,424)
Decrease (increase) in other assets
21,627
(3,546)
(Decrease) increase in other liabilities
(2,882)
16,858
Net cash provided by operating activities
235,959
242,589
Investing activities:
Proceeds from maturities of securities
1,200
2,075
Proceeds from sales and calls of available for sale securities
4,235
1,720
Purchases of available for sale securities
(376,800)
(429,932)
Principal collected on mortgage backed securities
445,909
343,558
Net increase in loans
(339,775)
(242,275)
Purchases of other investments
(30,450)
(25,062)
Distributions from other investments
478
6,393
Purchases of bank premises and equipment
(11,242)
(8,882)
Proceeds from sales of bank premises and equipment
13
574
Proceeds from sales of other real estate owned
3,498
1,088
Net cash used in investing activities
(302,934)
(350,743)
8
Consolidated Statements of Cash Flows, continued (Unaudited)
Financing activities:
Net increase (decrease) in non-interest bearing demand deposits
107,628
(178,453)
Net increase in savings and interest bearing demand deposits
139,142
165,783
Net increase in time deposits
116,046
219,736
Net increase in securities sold under repurchase agreements
80,832
81,172
Net increase (decrease) in other borrowed funds
49,896
(101)
Purchase of treasury stock
Proceeds from stock transactions
Payments of cash dividends
Net cash provided by financing activities
446,241
249,262
Increase in cash and cash equivalents
379,266
141,108
Cash and cash equivalents at beginning of period
651,058
Cash and cash equivalents at end of period
792,166
Supplemental cash flow information:
Interest paid
109,258
96,325
Income taxes paid
42,976
30,176
Non-cash investing and financing activities:
Net transfers from loans to other real estate owned
1,700
3,200
9
Notes to Consolidated Financial Statements
(Unaudited)
As used in this report, the words “Company,” “we,” “us” and “our” refer to International Bancshares Corporation, a Texas corporation, its five wholly owned subsidiary banks, and other subsidiaries. The information that follows may contain forward-looking statements, which are qualified as indicated under “Special Cautionary Notice Regarding Forward-Looking Information” in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of this report. Our website address is www.ibc.com.
Note 1 — Basis of Presentation
Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“US GAAP”) and to general practices within the banking industry. Our consolidated financial statements include the accounts of International Bancshares Corporation, and our five wholly-owned bank subsidiaries, International Bank of Commerce, Laredo (“IBC”), Commerce Bank, International Bank of Commerce, Zapata, International Bank of Commerce, Brownsville, International Bank of Commerce, Oklahoma (the “Subsidiary Banks”) and our five wholly-owned non-bank subsidiaries, IBC Trading Company, Premier Tierra Holdings, Inc., IBC Charitable and Community Development Corporation, IBC Capital Corporation, and Diamond Beach Holdings, LLC. Our consolidated financial statements are unaudited but include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the periods presented. All such adjustments were of a normal and recurring nature. These financial statements should be read in conjunction with the financial statements and the notes thereto in our latest Annual Report to Shareholders on Form ARS for the fiscal year ended December 31, 2024, furnished to the U.S. Securities and Exchange Commission (“SEC”) on April 21, 2025 (our “2024 Annual Report”). Our consolidated statement of condition at December 31, 2024 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements.
We operate as one segment, banking. The chief operating decision maker (“CODM”) is our chief executive officer. The operating information used by our CODM for purposes of assessing performance and making operating decisions is the consolidated statements presented in this report. We have five active operating subsidiaries, the Subsidiary Banks. Our Subsidiary Banks offer all products and services on the same basis and on the same terms and operate in the same regulatory environment. We apply the provisions of ASC Topic 280, “Segment Reporting,” in determining our reportable segments and related disclosures.
On July 4, 2025, the “One Big Beautiful Bill Act,” was enacted into law in the United States. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation of business interest expense. The effects of the new law are not reflected in the consolidated financial statements as of and for the period ended June 30, 2025, because the legislation was enacted in July. Although we are currently evaluating the effect of the legislation on our financial statements, we do not expect the legislation to have a material impact to our consolidated financial statements and results of operations.
We have evaluated all events or transactions that occurred through the date we issued these financial statements. During this period, we did not have any material recognizable or non-recognizable subsequent events.
Note 2 — Fair Value Measurements
FASB ASC Topic 820, “Fair Value Measurements” (“ASC 820”), defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 applies to all financial instruments that are being measured and reported on a fair value basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date; it also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into the following three levels:
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy is set forth below.
The following table represents assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of June 30, 2025 by level within the fair value measurement hierarchy:
Fair Value Measurements at
Reporting Date Using
(in Thousands)
Quoted
Prices in
Active
Significant
Assets/Liabilities
Markets for
Measured at
Identical
Observable
Unobservable
Fair Value
Inputs
June 30, 2025
(Level 1)
(Level 2)
(Level 3)
Measured on a recurring basis:
Assets:
Available for sale debt securities
Residential mortgage-backed securities
4,869,078
States and political subdivisions
140,765
Equity Securities
5,015,326
The following table represents assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of December 31, 2024 by level within the fair value measurement hierarchy:
December 31, 2024
Available for sale securities
4,835,176
152,740
4,993,310
11
Available-for-sale securities are classified within Level 1 or 2 of the valuation hierarchy. Equity securities with readily determinable fair values are classified within Level 1. For debt investments classified as Level 2 in the fair value hierarchy, we obtain fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.
Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis. The instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Our policy is to recognize transfers between levels at the end of each reporting period, if applicable. There were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2025.
The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended June 30, 2025 by level within the fair value measurement hierarchy:
Fair Value Measurements at Reporting
Date Using
(in thousands)
Net
Period ended
Provision
During
Period
Measured on a non-recurring basis:
Watch List—Doubtful loans
25,064
2,378
Other real estate owned
225
The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended December 31, 2024 by level within the fair value measurement hierarchy:
Markets
Year ended
for Identical
169,246
14,662
11,537
632
Our assets measured at fair value on a non-recurring basis are limited to loans classified as Watch List—Doubtful and other real estate owned. The tabular disclosures above include only those loans or other real estate owned that had a change in the provision for credit loss during the reporting period or for which a new specific provision for credit loss was established during the reporting period. The fair value of Watch List—Doubtful loans is derived in accordance with FASB ASC Subtopic 326-10, “Financial Instruments – Credit Losses - Overall”. They are primarily comprised of collateral-dependent commercial loans. As the primary sources of loan repayments decline, the secondary repayment source, the collateral, takes on greater significance. Correctly evaluating the fair value becomes even more important. Re-measurement of the loan to fair value is done through a specific valuation allowance included in the allowance for credit losses (“ACL”). The fair value of the loan is based on the fair value of the collateral, as determined through either an appraisal or internal evaluation process. The basis for our appraisal and appraisal review process are
12
applicable regulatory guidelines, including regulatory appraisal laws and the Uniform Standards of Professional Appraisal Practice, which are incorporated into our lending policy. All collateral dependent loans are evaluated in accordance with our lending policy to assess if a third-party appraisal is required to be obtained as part of our credit underwriting and monitoring process. Collateral dependent loans that do not meet the requirements for a third-party appraisal are required to undergo an internal evaluation by our in-house independent appraisal staff.
Our determination to either seek an appraisal or to perform an internal evaluation is performed by our credit quality committee, which analyzes the existing collateral values of the doubtful loans and identifies obsolete appraisals or internal evaluations. The credit quality committee reviews the existing appraisal to determine if the collateral value is reasonable in view of the current use of the collateral and the economic environment related to the collateral. The ultimate decision on the appropriate action is made by our independent credit administration team. A new appraisal is not required if an internal evaluation, as performed by our in-house independent appraisal staff, is able to appropriately update the original appraisal assumptions to reflect current market conditions and provide an estimate of the collateral’s market value for analysis of the doubtful loan. The internal evaluations must be in writing and contain sufficient information detailing the analysis, assumptions and conclusions, and they must support performing an evaluation in lieu of ordering a new appraisal.
As of June 30, 2025, we had $158,263,000 of doubtful commercial collateral-dependent loans, of which $110,508,000 had an appraisal performed within the immediately preceding rolling twelve-month period, and of which $0 had an internal evaluation performed within the immediately preceding rolling twelve-month period. As of December 31, 2024, we had approximately $168,621,000 of doubtful commercial collateral-dependent loans, of which $110,583,000 had an appraisal performed within the immediately preceding rolling twelve-month period and of which $0 had an internal evaluation performed within the immediately preceding rolling twelve-month period.
Other real estate owned is comprised of real estate acquired by foreclosure and deeds in lieu of foreclosure. Other real estate owned is carried at the lower of the recorded investment in the property or its fair value less estimated costs to sell such property (as determined by independent appraisal) within Level 3 of the fair value hierarchy. Prior to foreclosure, the value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the ACL, if necessary. The fair value is reviewed periodically, and subsequent write-downs are made through a charge to operations, accordingly. Other real estate owned is included in other assets on the consolidated financial statements. For the three and six months ended June 30, 2025 and the twelve months ended December 31, 2024, we recorded $0, $46,000 and $2,228,000, respectively, in charges to the ACL in connection with loans transferred to other real estate owned. For the three and six months ended June 30, 2025 and the twelve months ended December 31, 2024, we recorded $20,000, $20,000 and $632,000, respectively, in adjustments to fair value in connection with other real estate owned.
The fair value estimates, methods, and assumptions for our financial instruments at June 30, 2025 and December 31, 2024 are outlined below.
Cash and Cash Equivalents
For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Time Deposits with Banks
The carrying amounts of time deposits with banks approximate fair value.
Investment Securities Held-to-Maturity
The carrying amounts of investments held-to-maturity approximate fair value.
Investment Securities
For investment securities, which include U.S. Treasury securities, obligations of other U.S. government agencies, obligations of states and political subdivisions and mortgage pass-through and related securities, fair values are established by an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market
consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. See disclosures of fair value of investment securities in Note 6.
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, such as commercial, real estate or consumer loans, as outlined by regulatory reporting guidelines. Each category is segmented into fixed and variable interest rate terms and by performing and non-performing categories.
For variable rate performing loans, the carrying amount approximates fair value. For fixed-rate performing loans, except residential mortgage loans, the fair value is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources or the primary origination market. Fixed-rate performing loans are within Level 3 of the fair value hierarchy. At June 30, 2025 and December 31, 2024, the carrying amount of fixed rate performing loans was $1,258,953,000 and $1,216,156,000, respectively, and the estimated fair value was $1,183,192,000 and $1,154,862,000, respectively.
Accrued Interest
The carrying amounts of accrued interest approximate fair value.
Deposits
The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposit accounts, savings accounts and interest-bearing demand deposit accounts, was equal to the amount payable on demand as of June 30, 2025 and December 31, 2024. The fair value of time deposits is based on the discounted value of contractual cashflows. The discount rate is based on currently offered rates. Time deposits are within Level 3 of the fair value hierarchy. At June 30, 2025 and December 31, 2024, the carrying amount of time deposits was $3,015,589,000 and $2,899,543,000, respectively, and the estimated fair value was $3,014,207,000 and $2,895,245,000, respectively.
Securities Sold Under Repurchase Agreements
Securities sold under repurchase agreements are short-term maturities. Due to the contractual terms of the instruments, the carrying amounts approximated fair value at June 30, 2025 and December 31, 2024.
Junior Subordinated Deferrable Interest Debentures
We currently have floating-rate junior subordinated deferrable interest debentures outstanding. Due to the contractual terms of the floating-rate junior subordinated deferrable interest debentures, the carrying amounts approximated fair value at June 30, 2025 and December 31, 2024.
Other Borrowed Funds
We currently have short- and long-term borrowings issued from the Federal Home Loan Bank (“FHLB”). Due to the contractual terms of the short-term borrowings, the carrying amounts approximated fair value at June 30, 2025. The long-term borrowings outstanding at June 30, 2025 and December 31, 2024 are fixed-rate borrowings and the fair value is based on established market spreads for similar types of borrowings. The fixed rate long-term borrowings are included in Level 2 of the fair value hierarchy. At June 30, 2025 and December 31, 2024, the carrying amount of the fixed rate long-term FHLB borrowings was $10,437,000 and $10,541,000, respectively, and the estimated fair value was $10,437,000 and $10,541,000, respectively.
Commitments to Extend Credit and Letters of Credit
Commitments to extend credit and fund letters of credit are principally at current interest rates, and, therefore, the carrying amount approximates fair value.
Limitations
Fair value estimates are made at a point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument. Because no market exists for a significant portion of our financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-statement of condition financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Other significant assets and liabilities that are not considered financial assets or liabilities include the bank premises and equipment and core deposit value. In addition, the tax ramifications related to the effect of fair value estimates have not been considered in the above estimates.
Note 3 — Loans
A summary of loans, by loan type, at June 30, 2025 and December 31, 2024 is as follows:
Commercial, financial and agricultural
5,288,360
5,089,721
Real estate - mortgage
1,050,280
999,313
Real estate - construction
2,563,794
2,484,454
Consumer
52,211
49,777
Foreign
183,975
186,561
Total loans
Note 4 — Allowance for Credit Losses
The ACL is based on a loss-rate methodology that measures lifetime losses on loan pools that have similar risk characteristics. Loans that do not have similar risk characteristics are evaluated on an individual basis. The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk characteristics and containing sufficient loss history to provide meaningful results. Our segmentation starts at the general loan category with further sub-segmentation based on collateral types that may be of meaningful size and/or may contain sufficient differences in risk characteristics based on management’s judgement that would warrant further segmentation. Risk management begins with a strong and conservative lending policy that specifies lending limits that are well below allowable regulatory limits, provides highly restrictive lending authority to lending officers, and promotes judicious lending terms and diversification. The general loan categories along with primary risk characteristics used in our calculation are as follows:
Commercial and industrial loans. This category includes loans extended to a diverse array of businesses for working capital or equipment purchases. These loans are mostly secured by the collateral pledged by a borrower that is directly related to the business activities of the borrower’s company such as equipment, accounts receivable and inventory. The borrower’s abilities to generate revenues from equipment purchases, collect accounts receivable, and turn inventory into sales are risk factors in the repayment of the loan. A small portion of this loan category is related to loans secured by oil and gas production and loans secured by aircraft.
Construction and land development loans. This category includes loans for the development of unimproved land to lot development for both residential and commercial use and vertical construction across residential and commercial real estate classes. These loans carry the risk of repayment when projects incur cost overruns, have an increase in the price of construction materials, encounter zoning, entitlement or environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively
15
impacted when the market experiences a deterioration in the value of real estate. Risks specifically related to 1-4 family development loans also include mortgage rate risk and the practice by the mortgage industry of imposing more restrictive underwriting standards, which inhibits the buyer from obtaining long term financing, creating excessive housing and lot inventory in the market.
Commercial real estate loans. This category includes loans secured by farmland, multifamily properties, owner-occupied commercial properties, and non-owner-occupied commercial properties. Owner-occupied commercial properties include warehouses often along the U.S. border for import/export operations, office space where the borrower is the primary tenant, restaurants and other single-tenant retail spaces. Non-owner-occupied commercial properties include hotels, retail centers, office and professional buildings, and leased warehouses. These loans carry the risk of repayment when market values deteriorate, the business experiences turnover in key management, the business is unable to attract or maintain stable occupancy levels, or the market experiences an exit of a specific business type that is significant to the local economy, such as a manufacturing plant. Our primary risk management tool is internal monitoring measured against internal concentration limits that are significantly lower than regulatory thresholds and are segmented by low-risk and high-risk characteristics, such as the borrower’s equity, cash flow coverage, and non-amortizing versus amortizing status, further disaggregated by the length of time to pay in full. This monitoring is regularly reported to senior management and the board of directors. Risk management practices also extend to managing the borrower’s relationship with us and are designed to recognize degradation in the borrower’s ability to repay under established terms well before the borrower may default. Loan and deposit activity by the borrower is monitored on a frequent basis, which may prompt a change in risk classification. Once a loan is moved to a more severe risk classification, the loan performance, and when applicable, a plan by the borrower to rectify issues are monitored and reviewed at least quarterly. Additionally, our credit administration team, who is independent from the lending team, reviews a substantial portion of the commercial lending portfolio annually, which includes a significant portion of the commercial real estate loan portfolio given the current mix of loans in our portfolio. The table below summarizes the commercial real estate loan portfolio disaggregated by the type of real estate securing the credit as of June 30, 2025 and December 31, 2024:
Amount
Percent of Total
Commercial real estate:
Commercial real estate construction development
1,232,306
20.4
%
1,313,984
23.0
Hotel
1,087,224
17.9
1,080,706
18.9
Retail multi-tenant
737,880
12.2
738,874
12.9
Lot development: residential and commercial lots
583,601
9.6
513,760
9.0
Warehouse
439,255
7.2
435,783
7.6
Office/Professional buildings
457,096
7.5
416,014
7.3
1 - 4 family construction
374,356
6.2
338,832
5.9
Multi-family
376,628
310,115
5.4
Owner occupied real estate
354,928
270,584
4.7
Commercial leased properties
291,943
4.8
194,023
3.4
Farmland
128,146
2.1
109,697
1.9
Total commercial real estate
6,063,363
100.0
5,722,372
1-4 family mortgages. This category includes both first and second lien mortgages for the purposes of home purchases or refinancing existing mortgage loans. A small portion of this loan category is related to home equity lines of credits, lots purchases, and home construction. Loan repayments may be affected by unemployment or underemployment and deteriorating market values of real estate.
Consumer loans. This category includes deposit secured, vehicle secured, and unsecured loans, including overdrafts, made to individuals. Repayment is primarily affected by unemployment or underemployment.
The loan pools are further broken down using a risk-based segmentation based on internal classifications for commercial loans and past due status for consumer mortgage loans. Non-mortgage consumer loans are evaluated as one segment. On a weekly basis, commercial loan past due reports are reviewed by our credit quality committee to determine if a loan has any potential problems and should be placed on our internal Watch List report. Additionally, our credit department reviews the majority of our loans for proper internal classification purposes regardless of whether they are past due and segregates any loans with potential problems for further review. The credit department will discuss the potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the evaluation. Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the review process. After the above analysis is completed, we determine if a loan should be placed on our internal Watch List report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.
Our internal Watch List report is segregated into the following categories: (i) Pass, (ii) Economic Monitoring, (iii) Special Review, (iv) Watch List—Pass, (v) Watch List—Substandard, and (vi) Watch List—Doubtful. Loans placed in the Economic Monitoring or Special Review categories reflect our opinion that the loans have potential weaknesses that require monitoring on a more frequent basis. Credits in those categories are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted. Loans placed in the Watch List—Pass category reflect our opinion that the credit contains weaknesses that represent a greater degree of risk, which warrants “extra attention.” Credits placed in this category are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted. Loans placed in the Watch List—Substandard category are considered to be potentially inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. Those credit obligations, even if apparently protected by collateral value, have shown defined weaknesses related to adverse financial, managerial, economic, market, or political conditions, which may jeopardize repayment of principal and interest under contractual terms. Furthermore, there is a possibility that we may sustain some future loss if such weaknesses are not corrected. Loans placed in the Watch List—Doubtful category have shown defined weaknesses and reflect our belief that it is likely, based on current information and events, that we will be unable to collect all principal and/or interest amounts contractually due. Loans placed in the Watch List—Doubtful category are placed on non-accrual when they are moved to that category.
For the purposes of the ACL, in order to maintain segments with sufficient history for meaningful results, the credits in the Pass and Economic Monitoring categories are aggregated, the credits in the Special Review and Watch List—Pass category are aggregated, and the credits in the Watch List—Substandard category remain in their own segment. For loans classified as Watch List—Doubtful, management evaluates these credits in accordance with FASB ASC Subtopic 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Cost,” and, if deemed necessary, a specific reserve is allocated to the loan. The analysis of the specific reserve is based on a variety of factors, including the borrower’s ability to pay, the economic conditions impacting the borrower’s industry and any collateral deficiency. If it is a collateral-dependent loan, the net realizable fair value of collateral will be evaluated for any deficiencies. Substantially all of our loans evaluated as Watch List – Doubtful are measured using the fair value of collateral method. In rare cases, we may use other methods to determine the specific reserve of a loan if such loan is not collateral dependent.
Within each collectively evaluated pool, the robustness of the lifetime historical loss-rate is evaluated and, if needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative loss factors are then evaluated to incorporate management’s two-year reasonable and supportable forecast period followed by a reversion to the pool’s average lifetime loss-rate. Those qualitative loss factors are: (i) trends in portfolio volume and composition, (ii) volume and trends in classified loans, delinquencies and non-accruals, (iii) concentration risk, (iv) trends in underlying collateral value, (v) changes in policies, procedures, and strategies, and (vi) economic conditions. Qualitative factors also include potential losses stemming from operational risk factors arising from fraud, natural disasters, pandemics, geopolitical events and large loans. The large loan operational risk factor was added to our ACL calculation beginning in the second quarter of 2023. Because of the magnitude of large loans, they pose a higher risk of default. Recognizing this risk and establishing an operational risk factor to capture that risk, is prudent action in the current economic environment. Large loans are usually part of a larger relationship with collateral that is pledged across the relationship. Defaulting on a larger loan may therefore jeopardize an entire collateral relationship. The current
17
economic environment has created challenges for borrowers to service their debt. Increasing capitalization rates, elevated office vacancies, an upward trend in apartment vacancies and significant increases in interest rates are all contributing to the elevated risk in large loans. Should any of the factors considered by management in evaluating the adequacy of the ACL change, our estimate could also change, which could affect the level of future credit loss expense.
We have elected to not measure an ACL for accrued interest receivable given our timely approach in identifying and writing off uncollectible accrued interest. An ACL for off-balance sheet exposure is derived from a projected usage rate of any unfunded commitment multiplied by the historical loss-rate, plus model risk adjustment, if any, of the on-balance sheet loan pools.
Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate for current expected credit losses change, our estimate of current expected credit losses could also change, which could affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control, including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in interest rates, and the view of regulatory authorities towards loan classifications.
A summary of the transactions in the allowance for credit loan losses by loan class is as follows:
Three Months Ended June 30, 2025
Domestic
Commercial
Real Estate:
Construction &
Land
Farmland &
Residential:
Development
Multifamily
First Lien
Junior Lien
28,946
61,865
45,667
4,857
5,669
10,077
262
1,364
158,707
Losses charged to allowance
(1,749)
(8,121)
(3)
(82)
(23)
(9,978)
Recoveries credited to allowance
1,626
106
109
1,856
Net (losses) recoveries charged to allowance
(123)
27
(21)
(8,122)
(409)
321
887
3,143
563
(106)
32
(33)
28,414
54,065
46,660
8,000
6,242
9,998
273
1,331
154,983
Three Months Ended June 30, 2024
26,676
55,097
39,402
3,768
5,757
10,648
313
1,137
142,798
(1,979)
(2,228)
(1)
(52)
(4,260)
1,234
34
26
1,300
(745)
33
(2,960)
1,324
1,971
5,480
(240)
(35)
53
202
27,255
54,840
44,888
3,528
5,806
10,639
314
1,339
148,609
18
Six Months Ended June 30, 2025
29,853
60,639
43,990
4,869
5,528
10,031
281
1,346
156,537
(3,537)
(49)
(202)
(68)
(11,977)
2,447
112
116
2,696
(1,090)
(34)
(86)
(62)
(9,281)
(349)
1,547
2,558
3,131
748
54
(15)
Six Months Ended June 30, 2024
35,550
55,291
42,703
5,088
5,812
11,024
318
1,283
157,069
(29,720)
(46)
(90)
(32,084)
1,789
36
35
1,875
(27,931)
(10)
(85)
(30,209)
19,636
1,777
2,175
(1,560)
(420)
81
56
19
The decrease in losses charged to the ACL in the Commercial category for the six months ended June 30, 2025 can be attributed to a charge-down in the first quarter of 2024 on one loan secured primarily by equipment and pipeline infrastructure used in the oil and gas industry. The credit has been classified as Watch List—Doubtful since the end of 2022 at which time, and going forward, we have evaluated our loss exposure and adjusted reserves accordingly. We also continued to attempt to work with our customer during that period; however, those negotiations came to a halt late in the third quarter of 2023 when the customer declared bankruptcy. In March 2024, the bankruptcy court awarded the winning bid at foreclosure for the assets collateralizing the loan to a principal owner of the business. The bid was not for the full carrying value of the loan and resulted in a charge-down of approximately $25.6 million. We expect to recover a portion of the charge-down by pursuing repayment from the guarantor of the credit through a binding arbitration process. No changes to the qualitative loss factors were made for the June 30, 2025 ACL.
The tables below provide additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class, as of June 30, 2025 and December 31, 2024:
Loans Individually
Loans Collectively
Evaluated For
Impairment
Recorded
Investment
Allowance
52,268
400
1,754,590
28,014
Commercial real estate: other construction & land development
Commercial real estate: farmland & commercial
63,347
8,228
3,041,955
38,432
Commercial real estate: multifamily
43,038
4,260
333,162
3,740
Residential: first lien
38
588,227
Residential: junior lien
141
461,874
158,832
12,888
8,979,788
142,095
52,110
1,799,693
29,453
8,195
8,122
2,476,259
52,517
65,733
2,862,070
35,762
42,964
1,882
267,151
2,987
45
530,039
469,088
169,188
18,632
8,640,638
137,905
The table below provides additional information on loans accounted for on a non-accrual basis by loan class at June 30, 2025 and December 31, 2024:
Total Non-Accrual Loans
Non-Accrual Loans with No Credit Allowance
51,583
51,276
73
23,978
24,757
5,067
93
134
Total non-accrual loans
158,746
80,721
169,136
76,313
We occasionally provide modifications to borrowers experiencing financial difficulties. Modifications may include certain concessions that we must evaluate under current accounting standards to determine the need for disclosure. Concessions to borrowers experiencing financial difficulties that would require disclosure include principal forgiveness, a term extension, an other-than-insignificant payment delay, an interest rate reduction or a combination of these concessions. For the six months ended June 30, 2025, we did not provide any modifications under these circumstances to any borrower experiencing financial difficulty.
The Subsidiary Banks charge-off that portion of any loan that management considers to represent a loss or that is classified as a “loss” by bank examiners. Management generally considers commercial and industrial or real estate loans to represent a loss, in whole or part, when an exposure beyond any collateral coverage is apparent and when no further collection of the loss portion is anticipated based on the borrower’s financial condition and general economic conditions in the borrower’s industry. Generally, unsecured consumer loans are charged-off when 90 days past due.
While our management believes that it is generally able to identify borrowers with financial problems reasonably early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses. The determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an exercise of judgment. Similarly, the determination of the adequacy of the ACL can be made only on a subjective basis. It is the judgment of our management that the ACL at June 30, 2025 was adequate to absorb probable losses from loans in the portfolio at that date.
The following tables present information regarding the aging of past due loans by loan class at June 30, 2025 and December 31, 2024:
90 Days or
30 - 59
60 - 89
greater &
Past
Days
Greater
still accruing
Due
Current
Portfolio
7,022
589
48,119
999
55,730
1,751,128
1,806,858
1,719
1,724
2,562,070
1,276
26,339
1,091
27,615
3,077,687
3,105,302
12,907
12,973
363,227
376,200
5,796
3,184
2,812
2,736
11,792
576,473
588,265
2,603
1,027
2,243
5,873
456,142
462,015
271
41
315
51,896
2,621
900
336
3,857
180,118
Total past due loans
34,215
5,703
79,961
7,451
119,879
9,018,741
4,070
51,577
579
534
56,226
1,795,577
1,851,803
2,421
10,558
2,473,896
1,221
26,416
27,637
2,900,166
2,927,803
270
25,334
284,781
4,763
1,337
3,631
3,542
9,731
520,353
530,084
2,599
1,544
2,000
6,143
463,086
469,229
170
49,607
816
1,992
339
3,147
183,414
16,012
56,767
66,167
6,693
138,946
8,670,880
The increase in Commercial real estate: multifamily loans past due 30 – 59 days can be attributed to a loan secured by a multifamily affordable housing community. The increase in Commercial loans past due 90 days or more can be attributed to two loans secured by commercial properties that were placed on non-accrual in the fourth quarter of 2024 and are more than 90 days past due. The two loans were past due less than 90 days at December 31, 2024 as reflected in the table above. The decrease in commercial real estate: multifamily loans past due 90 days or greater can be primarily attributed to two loans secured by apartments that are on non-accrual that were brought current during the non-accrual period.
22
A summary of the loan portfolio by credit quality indicator by loan class and by year of origination at June 30, 2025 and December 31, 2024 is presented below:
2023
2022
2021
Prior
Pass
606,234
451,967
294,786
109,643
182,551
96,997
1,742,178
Watch List - Pass
10,855
61
10,916
Watch List - Substandard
1,010
267
71
1,496
Watch List - Doubtful
4,439
864
46,874
72
Total Commercial
621,545
453,902
341,927
109,732
182,716
97,036
Current-period gross writeoffs
3,022
515
3,537
598,585
792,337
879,835
227,451
34,959
12,535
2,545,702
Special Review
17,814
278
Total Commercial real estate: other construction & land development
616,399
792,615
8,121
417,160
725,235
579,807
500,224
306,286
406,368
2,935,080
18,046
463
66,946
85,455
16,036
199
2,076
18,311
2,073
240
445
351
3,109
38,100
12,702
12,545
Total Commercial real estate: farmland & commercial
489,342
740,672
646,993
515,290
406,719
100,592
43,234
20,837
117,619
18,253
32,627
30,131
Total Commercial real estate: multifamily
113,499
73,365
177,047
96,279
107,988
75,158
48,162
83,206
587,840
91
295
386
39
Total Residential: first lien
96,392
75,175
48,457
49
29,766
86,397
66,502
61,011
64,754
153,444
Watch List- Doubtful
Total Residential: junior lien
29,907
120
82
27,093
19,416
3,345
591
316
1,450
Total Consumer
30
68
59,552
74,100
23,136
13,972
6,485
6,730
Total Foreign
Total Loans
2,134,384
2,336,859
2,090,563
1,120,841
662,226
793,747
2020
993,045
343,212
135,057
214,702
37,670
63,030
1,786,716
11,113
1,341
74
1,864
881
51,184
995,267
405,836
135,176
214,824
5,711
2,689
25,686
44
34,149
1,029,399
921,180
322,348
144,221
39,908
2,925
2,459,981
16,000
1,029,750
937,180
330,470
1,146
1,082
2,228
814,273
631,806
531,035
312,757
220,510
245,334
2,755,715
643
67,567
68,210
16,490
18,934
242
2,122
357
21,655
52,973
115
12,645
903,313
699,730
545,802
220,867
90,092
11,538
108,830
18,621
8,198
29,871
267,150
17,901
42,965
107,993
36,602
180,743
107,100
81,618
57,503
29,316
73,390
529,670
95
274
369
180,861
81,640
57,777
46
91,202
73,740
65,144
70,969
65,799
102,234
91,343
38,778
8,137
904
422
43
185
124,716
30,648
16,877
6,962
2,879
4,479
3,472,021
2,298,973
1,284,843
826,553
404,659
522,777
The decrease in Watch List – Substandard Commercial real estate: farmland & commercial loans at June 30, 2025 can be primarily attributed to a change in classification on two loans in one relationship secured by hotels. The loans were upgraded to Special Review during the first quarter of 2025.
24
Note 5 — Stock Options
On April 5, 2012, our Board of Directors (the “Board”) adopted the 2012 International Bancshares Corporation Stock Option Plan (the “2012 Plan”). There were 800,000 shares of common stock available for stock option grants under the 2012 Plan, which were qualified incentive stock options (“ISOs”) or non-qualified stock options. Options granted may be exercisable for a period of up to 10 years from the date of grant, excluding ISOs granted to 10% shareholders, which may be exercisable for a period of up to only five years. On April 4, 2022, the 2012 Plan expired and was not renewed.
A summary of option activity under the 2012 Plan for the six months ended June 30, 2025 is as follows:
Weighted
average
remaining
Aggregate
Number of
exercise
contractual
intrinsic
options
price
term (years)
value ($)
Options outstanding at December 31, 2024
212,155
35.27
Plus: Options granted
Less:
Options exercised
(23,222)
34.19
Options expired
Options forfeited
(4,650)
33.57
Options outstanding at June 30, 2025
184,283
35.44
3.75
5,734
Options fully vested and exercisable at June 30, 2025
138,392
36.21
3.01
4,201
Stock-based compensation expense included in the consolidated statements of income for the three and six months ended June 30, 2025 was $21,000 and $66,000, respectively. Stock-based compensation expense included in the consolidated statements of income for the three and six months ended June 30, 2024 was $48,000 and $122,000, respectively. As of June 30, 2025, there was approximately $152,000 of total unrecognized stock-based compensation cost related to non-vested options granted under our plans that will be recognized over a weighted average period of 1.4 years.
On April 18, 2022, the Board adopted the 2022 International Bancshares Corporation Stock Appreciation Rights Plan (the “SAR Plan”). There are 750,000 shares of underlying common stock that may be used for stock appreciation right (“SAR”) grants under the SAR Plan; however, no actual shares will be granted. Upon exercise, the SAR will be settled in cash. SARs granted may be exercisable for a period of up to 10 years from the date of grant and may vest over an eight-year period. As of June 30, 2025, a total of 446,740 SARs had been issued under the SAR Plan.
A summary of activity under the SAR Plan for the six months ended June 30, 2025 is as follows:
stock appreciation
rights
SARs outstanding at December 31, 2024
456,702
39.61
Plus: SARs granted
SARs exercised
(762)
39.33
SARs expired
SARs forfeited
(9,200)
SARs outstanding at June 30, 2025
446,740
7.04
12,038
SARs fully vested and exercisable at June 30, 2025
22,337
597
25
The fair value of the liability for payments due to SAR holders at June 30, 2025 and December 31, 2024 is approximately $5,787,000 and $4,540,000, respectively, as calculated using a Black-Scholes-Merton pricing model, and is included in other liabilities on the consolidated statements of condition. The expense recorded in connection with all grants under the SAR Plan totaled $874,000 and $1,262,000 for the three and six months ended June 30, 2025, respectively. The expense recorded in connection with all grants under the SAR Plan totaled $344,000 and $1,424,000 for the three and six months ended June 30, 2024, respectively. As of June 30, 2025, there was approximately $7,365,000 in unrecognized liability related to non-vested SARs granted under the SAR Plan that will be recognized over a weighted average period of 7.0 years.
Note 6 — Investment Securities, Equity Securities with Readily Determinable Fair Values and Other Investments
We classify debt securities into one of three categories: held-to-maturity, available-for-sale, or trading. Such debt securities are reassessed for appropriate classification at each reporting date. Securities classified as “held-to-maturity” are carried at amortized cost for financial statement reporting, while securities classified as “available-for-sale” and “trading” are carried at their fair value. Unrealized holding gains and losses are included in net income for those securities classified as “trading,” while unrealized holding gains and losses related to those securities classified as “available-for-sale” are excluded from net income and reported net of tax as other comprehensive income (loss) and accumulated other comprehensive income (loss) until realized, or in the case of losses, when deemed other than temporary. Available-for-sale and held-to-maturity debt securities in an unrealized loss position are evaluated for the underlying cause of the loss. In the event that the deterioration in value is attributable to credit related reasons, then the amount of credit-related impairment will be recorded as a charge to our ACL with subsequent changes in the amount of impairment, up or down, also recorded through our ACL. We have evaluated the debt securities classified as available-for-sale and held-to-maturity at June 30, 2025 and have determined that no debt securities in an unrealized loss position are arising from credit related reasons and have therefore not recorded any allowances for debt securities in our ACL for the period. Unrealized gains and losses related to equity securities with readily determinable fair values are included in net income.
The amortized cost and estimated fair value by type of investment security at June 30, 2025 are as follows:
Held to Maturity
Gross
Amortized
unrealized
Estimated
Carrying
cost
gains
losses
fair value
value
Other securities
Available for Sale Debt Securities
value(1)
5,245,239
25,192
(401,353)
Obligations of states and political subdivisions
152,430
(11,670)
5,397,669
25,197
(413,023)
The amortized cost and estimated fair value by type of investment security at December 31, 2024 are as follows:
Available for Sale
fair
5,315,488
8,858
(489,170)
156,822
331
(4,413)
5,472,310
9,189
(493,583)
The amortized cost and estimated fair value of investment securities at June 30, 2025, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.
Cost
Due in one year or less
Due after one year through five years
Due after five years through ten years
2,240
2,238
Due after ten years
150,190
138,527
Residential mortgage-backed securities are securities primarily issued by the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”), or the Government National Mortgage Association (“Ginnie Mae”). Investments in residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. Government. Investments in residential mortgage-backed securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government, however, we believe that the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008 and because securities issued by others that are collateralized by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated securities.
The amortized cost and fair value of available-for-sale debt investment securities pledged to qualify for fiduciary powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was $1,720,908,000 and $1,532,931,000, respectively, at June 30, 2025.
Proceeds from the sales and calls of available-for-sale debt securities were $730,000 and $4,235,000 for the three and six months ended June 30, 2025, respectively, which included $0 and $0 of mortgage-backed securities, respectively. Gross gains of $0 and $0 and gross losses of $0 and $0 were realized on the sales and calls for the three and six months ended June 30, 2025, respectively. Proceeds from the sales and calls of available-for-sale debt securities
were $0 and $1,720,000 for the three and six months ended June 30, 2024, respectively, which included $0 and $0 of mortgage-backed securities, respectively. Gross gains of $0 and $0 and gross losses of $0 and $0 were realized on the sales and calls for the three and six months ended June 30, 2024, respectively.
Gross unrealized losses on debt investment securities and the fair value of those related securities, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at June 30, 2025, were as follows:
Less than 12 months
12 months or more
Unrealized
Losses
Available for sale:
30,149
(73)
3,177,133
(401,280)
3,207,282
39,297
(2,154)
89,462
(9,516)
128,759
69,446
(2,227)
3,266,595
(410,796)
3,336,041
Gross unrealized losses on debt investment securities and the fair value of those related securities, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at December 31, 2024, were as follows:
544,375
(4,126)
3,358,586
(485,044)
3,902,961
66,450
(2,389)
57,551
(2,024)
124,001
610,825
(6,515)
3,416,137
(487,068)
4,026,962
Equity securities with readily determinable fair values consist primarily of Community Reinvestment Act funds. At June 30, 2025 and December 31, 2024, the balance in equity securities with readily determinable fair values recorded at fair value were $5,483,000 and $5,394,000, respectively. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and six months ended June 30, 2025 and the three and six months ended June 30, 2024:
Net gains recognized during the period on equity securities
Less: Net gains and (losses) recognized during the period on equity securities sold during the period
Unrealized gains recognized during the reporting period on equity securities still held at the reporting date
28
June 30, 2024
Net losses recognized during the period on equity securities
Unrealized losses recognized during the reporting period on equity securities still held at the reporting date
89
(80)
Other investments include equity and merchant banking investments held by our Subsidiary Banks and non-banking subsidiary entities. We hold ownership interests in limited partnerships for the purpose of investing in low-income housing tax credit (“LIHTC”) projects. The partnerships may acquire, construct or rehabilitate housing for low- and moderate-income individuals. We realize a return primarily from federal tax credits and other federal tax deductions associated with the underlying LIHTC projects. We are a limited partner in the partnerships and are not required to consolidate the entities in our consolidated financial statements. Investments in LIHTC projects totaled $192,616,000 and $186,369,000 at June 30, 2025 and December 31, 2024, respectively, and are included in other investments on the consolidated financial statements. Unfunded commitments to LIHTC projects totaled $32,504,000 at June 30, 2025 and $25,064,000 at December 31, 2024 and are included in other liabilities on the consolidated financial statements. Tax credits and other tax benefits, as well as amortization expense associated with investments in qualified low-income housing partnerships are accounted for using the proportional amortization method of accounting. There was a total of $16,282,000 in estimated tax credits related to these investments for the six months ended June 30, 2025 and $13,084,000 in estimated amortization related to these investments for the six months ended June 30, 2025. There was a total of $11,266,000 in estimated tax credits and $12,437,000 in estimated amortization related to these investments for the six months ended June 30, 2024. There were no impairment losses recorded on tax equity investments during the six months ended June 30, 2025 or June 30, 2024, respectively.
Note 7 — Other Borrowed Funds
Other borrowed funds include FHLB borrowings, which are short-term and long-term borrowings issued by the FHLB of Dallas at the market price offered at the time of funding. These borrowings are secured by residential
29
mortgage-backed investment securities and a portion of our loan portfolio. At June 30, 2025, other borrowed funds totaled $60,437,000 compared to $10,541,000 at December 31, 2024.
Note 8 — Junior Subordinated Interest Deferrable Debentures
As of June 30, 2025, we had four statutory business trusts under the laws of the State of Delaware (the “Trusts”), for the purpose of issuing trust preferred securities. The four Trusts each issued capital and common securities (“Capital and Common Securities”) and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (“Debentures”) that we issued. As of June 30, 2025 and December 31, 2024, the principal amount of Debentures outstanding totaled $108,868,000, respectively.
The Debentures are subordinated and junior in right of payment to all present and future senior indebtedness (as defined in the respective Indentures) and are pari passu with one another. The interest rate payable on, and the payment terms of the Debentures are the same as the distribution rate and payment terms of the respective issues of Capital and Common Securities issued by the Trusts. We have fully and unconditionally guaranteed the obligations of each of the Trusts with respect to the Capital and Common Securities. We have the right, unless an Event of Default (as defined in the Indentures) has occurred and is continuing, to defer payment of interest on the Debentures for up to 20 consecutive quarterly periods on each of the Trusts. If interest payments on any Debenture is deferred, distributions on both the Capital and Common Securities related to that Debenture would also be deferred. The redemption prior to maturity of any of the Debentures may require the prior approval of the Federal Reserve and/or other regulatory bodies.
For financial reporting purposes, the Trusts are treated as our investments and not consolidated in our consolidated financial statements. Although the Capital and Common Securities issued by each of the Trusts are not included as a component of shareholders’ equity on the consolidated statement of condition, the Capital and Common Securities are treated as capital for regulatory purposes. Specifically, under applicable regulatory guidelines, the Capital and Common Securities issued by the Trusts qualify as Tier 1 capital up to a maximum of 25% of Tier 1 capital on an aggregate basis. Any amount that exceeds the 25% threshold would qualify as Tier 2 capital. At June 30, 2025 and December 31, 2024, the total $108,868,000, respectively, of the Capital and Common Securities outstanding qualified as Tier 1 capital.
The following table illustrates key information about each of the Capital and Common Securities and their interest rate at June 30, 2025:
Junior
Subordinated
Deferrable
Interest
Repricing
Optional
Debentures
Frequency
Rate
Rate Index(1)
Maturity Date
Redemption Date(2)
Trust IX
41,238
Quarterly
6.18
SOFR
+
1.62
October 2036
October 2011
Trust X
21,021
6.19
1.65
February 2037
February 2012
Trust XI
25,990
July 2037
July 2012
Trust XII
20,619
6.04
1.45
September 2037
September 2012
(1) On July 1, 2023, the interest rate index on the Capital and Common Securities transitioned from U.S.-dollar London Interbank Offered Rate (“LIBOR”) to the Three-Month CME Term Secured Overnight Financing Rate (“SOFR”) with a 26-basis point spread adjustment.
(2)
The Capital and Common Securities may be redeemed in whole or in part on any interest payment date after the Optional Redemption Date (as defined in the respective Indenture).
Note 9 — Common Stock and Dividends
We paid cash dividends of $0.70 per share on February 28, 2025 to record holders of our common stock on February 14, 2025. We paid cash dividends of $0.66 per share on February 28, 2024 to record holders of our common stock on February 15, 2024.
In April 2009, the Board re-established a formal stock repurchase program that authorized the repurchase of up to $40 million of common stock within the following 12 months. Annually since then, including on March 12, 2025, the Board extended and increased the repurchase program to purchase up to $150 million of common stock during the 12-month period commencing on March 15, 2025. Shares of common stock may be purchased from time to time on the open market or through privately negotiated transactions. Shares purchased in this program will be held in treasury for reissue for various corporate purposes, including employee compensation plans. During the second quarter of 2025, the Board adopted a Rule 10b-18 trading plan and a Rule 10b5-1 trading plan and intends to adopt additional Rule 10b-18 and Rule 10b5-1 trading plans, which will allow us to purchase shares of our common stock during certain open and blackout periods when we ordinarily would not be in the market due to trading restrictions in our insider trading policy. During the terms of both a Rule 10b-18 and Rule 10b5-1 trading plan, purchases of common stock are automatic to the extent the conditions of the plan’s trading instructions are met. Shares purchased under these trading plans will be held in treasury for reissue for various corporate purposes, including employee stock compensation plans. As of August 4, 2025, a total of 13,795,319 shares had been repurchased under all programs at a cost of $419,939,000. We are not obligated to purchase shares under our stock repurchase program outside of the Rule 10b-18 and Rule 10b5-1trading plans.
Note 10 — Commitments and Contingent Liabilities
We are involved in various legal proceedings that are in various stages of litigation. We have determined, based on discussions with our counsel, that any material loss in such actions, individually or in the aggregate, is remote or the damages sought, even if fully recovered, would not be considered material to our consolidated financial position or results of operations. However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.
Note 11 — Capital Ratios
Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amount and classifications are also subject to qualitative judgements by regulators about components, risk-weighting and other factors.
In July 2013, the FDIC and other regulatory bodies established a new, comprehensive capital framework for U.S. banking organizations, consisting of minimum requirements that increase both the quantity and quality of capital held by banking organizations. The final rules are a result of the implementation of the Basel III capital reforms and various related capital provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”). Consistent with the Basel international framework, the rules include a new minimum ratio of Common Equity Tier 1 (“CET1”) capital to risk-weighted assets of 4.5% and a CET1 capital conservation buffer of 2.5% of risk-weighted assets, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 capital to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and include a minimum leverage ratio of 4% for all banking organizations. Regarding the quality of capital, the rules emphasize CET1 capital and implements strict eligibility criteria for regulatory capital instruments. We believe that as of June 30, 2025, we meet all fully phased-in capital adequacy requirements.
In November 2017, the OCC, the Federal Reserve Board (“FRB”) and the FDIC finalized a proposed rule that extends the current treatment under the regulatory capital rules for certain regulatory capital deductions and risk weights and certain minority interest requirements, as they apply to banking organizations that are not subject to the advanced approaches capital rules. Effective January 1, 2018, the rule also paused the full transition to the Basel III treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority interests. The agencies are also considering whether to make adjustments to the capital rules in response to the FASB’s Current Expected Credit Loss (“CECL”) Standard and its potential impact on regulatory capital. Pursuant to rules issued by the federal bank regulatory agencies in February 2019 and March 2020, banking organizations were given options to phase in the adoption of CECL over a three-year transition period through December 31, 2022 or over a
31
five-year transition period through December 31, 2024. Rather than electing to make one of the phase-in options, we immediately recognized the capital impact upon adopting CECL accounting standards on January 1, 2020, which resulted in an increase in our allowance for probable loan losses and a one-time cumulative-effect adjustment to retained earnings upon adoption.
In December 2017, the Basel Committee on Banking Supervision unveiled its final set of standards and reforms to its Basel III regulatory capital framework, commonly called “Basel III Endgame” or “Basel IV.” The Basel IV framework makes changes to the capital framework first introduced as “Basel III” in 2010 and aim to reduce excessive variability in banks’ calculations of risk-weighted capital ratios. Implementation of Basel IV began on January 1, 2023 and will continue over a five-year transition period by regulators in individual countries, including the U.S. federal bank regulatory agencies. The U.S. targeted implementation of Basel IV to begin on July 1, 2025, subject to a three-year transition period with full compliance expected by July 1, 2028. However, the future implementation of Basel IV remains unclear, as the Federal Reserve continues to review the Basel IV rules and has indicated that it may craft a new risk-based capital rule that would be less onerous for banks and require less stringent capital requirements.
As of June 30, 2025, our capital levels continue to exceed all capital adequacy requirements under the Basel III capital rules as currently applicable to us.
On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“EGRRCPA”) was enacted, and among other things, it includes a simplified capital rule change that effectively exempts banks with assets of less than $10 billion that exceed the “community bank leverage ratio,” from all risk-based capital requirements, including Basel III and its predecessors. The federal banking agencies must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8% and 10% before community banks can begin to take advantage of this regulatory relief provision. Some of the Subsidiary Banks, with assets of less than $10 billion, may qualify for this exemption. Additionally, under the EGRRCPA, qualified bank holding companies with assets of up to $3 billion (currently $1 billion) will be eligible for the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, which eases limitations on the issuance of debt by holding companies. On August 28, 2018, the FRB issued an interim final rule expanding the applicability of its Small Bank Holding Company Policy Statement. While holding companies that meet the conditions of the policy statement are excluded from consolidated capital requirements, their depository institutions continue to be subject to minimum capital requirements. Finally, for banks that continue to be subject to the Basel III’s risk-based capital rules (e.g., assignment of a 150% risk weight to certain exposures), certain commercial real estate loans that were formally classified as high volatility commercial real estate (“HVCRE”) will not be subject to heightened risk weights if they meet certain criteria. Also, while acquisition, development, and construction loans will generally be subject to heightened risk weights, certain exceptions will apply. On September 18, 2018, the federal banking agencies issued a proposed rule modifying the agencies’ capital rules for HVCRE.
We had a CET1 to risk-weighted assets ratio of 23.23% on June 30, 2025 and 22.42% on December 31, 2024. We had a Tier 1 capital-to-average-total-asset (leverage) ratio of 19.51% and 18.84%, risk-weighted Tier 1 capital ratio of 23.84% and 23.06%, and risk-weighted total capital ratio of 25.06% and 24.31% at June 30, 2025 and December 31, 2024, respectively. Our CET1 capital consists of common stock and related surplus, net of treasury stock, and retained earnings. We and our Subsidiary Banks elected to opt-out of the requirement to include most components of accumulated other comprehensive income (loss) in the calculation of CET1 capital. CET1 is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions. Tier 1 capital includes CET1 capital and additional Tier 1 capital. Additional Tier 1 capital includes the Capital and Common Securities issued by the Trusts (see Note 8 above) up to a maximum of 25% of Tier 1 capital on an aggregate basis. Any amount that exceeds the 25% threshold qualifies as Tier 2 capital. As of June 30, 2025 and December 31, 2024, the total of $108,868,000 of the Capital and Common Securities outstanding qualified as Tier 1 capital. We actively monitor the regulatory capital ratios to ensure that our Subsidiary Banks are well-capitalized under the regulatory framework.
The CET1, Tier 1 and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, excluding goodwill and other intangible assets, allocated by risk-weight category, and certain off-balance-sheet items, among other things. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things.
We and our Subsidiary Banks are subject to the regulatory capital requirements administered by the Federal Reserve, and, for our Subsidiary Banks, the FDIC. Regulatory authorities can initiate certain mandatory actions if we or any of our Subsidiary Banks fail to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of June 30, 2025, that we and each of our Subsidiary Banks meet all capital adequacy requirements to which we are subject.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2024, which are included in our 2024 Annual Report. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results for the year ending December 31, 2025, or any future period.
Special Cautionary Notice Regarding Forward Looking Information
Certain matters discussed in this report, excluding historical information, include forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by these sections. Although we believe such forward-looking statements are based on reasonable assumptions, no assurance can be given that every objective will be reached. The words “estimate,” “expect,” “intend,” “believe” and “project,” as well as other words or expressions of a similar meaning are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. Such statements are based on current expectations, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors.
Risk factors that could cause actual results to differ materially from any results that we project, forecast, estimate or budget in forward-looking statements include those disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 27, 2024, and among others, the following:
Forward-looking statements speak only as of the date on which such statements are made. It is not possible to foresee or identify all such factors. We make no commitment to update any forward-looking statement, or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement, unless required by law.
Overview
We are headquartered in Laredo, Texas with 166 facilities and 255 ATMs, and we provide banking services for commercial, consumer and international customers of North, South, Central and Southeast Texas and the State of Oklahoma. We are one of the largest independent commercial bank holding companies headquartered in Texas. We, through our Subsidiary Banks, are in the business of gathering funds from various sources and investing those funds in order to earn a return. We, either directly or through a Subsidiary Bank, own an insurance agency, a liquidating subsidiary, a fifty percent interest in an investment banking unit that owns a broker/dealer, a controlling interest in four merchant banking entities, and a majority ownership in a real-estate development partnership. Our primary earnings come from the spread between the interest earned on interest-bearing assets and the interest paid on interest-bearing liabilities. In addition, we generate income from fees on products offered to commercial, consumer and international customers. The sales team of each of our Subsidiary Banks aims to match the right mix of products and services to each customer to best serve the customer’s needs. That process entails spending time with customers to assess those needs and servicing the sales arising from those discussions on a long-term basis. The Subsidiary Banks have various compensation plans, including incentive-based compensation, for fairly compensating employees. The Subsidiary Banks also have a robust process in place to review sales that support the incentive-based compensation plan to monitor the quality of the sales and identify any significant irregularities, a process that has been in place for many years.
We are very active in facilitating trade along the United States border with Mexico. We do a large amount of business with customers domiciled in Mexico. Deposits from persons and entities domiciled in Mexico comprise a large and stable portion of the deposit base of our Subsidiary Banks. We also serve the growing Hispanic population through our facilities located throughout South, Central and Southeast Texas and the State of Oklahoma.
Future economic conditions remain uncertain and the impact of those conditions on our business also remains uncertain. Our business depends on the willingness and ability of our customers to conduct banking and other financial transactions. Our revenue streams, including service charges on deposits and banking and non-banking service charges and fees (ATM and interchange income), may be impacted in the future if economic conditions deteriorate. Expense control is an essential element of our long-term profitability. It has been a constant focus of ours for many years and is especially
critical during periods of economic uncertainty. We have kept that focus in mind as we continue to look at operations, create efficiencies, and institute cost-control protocols at all levels. We will continue to closely monitor our efficiency ratio, a measure of non-interest expense to net interest income plus non-interest income and our overhead burden ratio, a ratio of our operating expenses against total assets. We use these measures in determining if we are accomplishing our long-term goals of controlling our costs in order to provide superior returns to our shareholders.
Results of Operations
Summary
Consolidated Statements of Condition Information
Percent Increase (Decrease)
4.6
3.8
3.0
15.1
473.4
Shareholders’ equity
8.1
Consolidated Statements of Income Information
Percent
Increase
(Decrease)
Interest income
2.5
1.8
Interest expense
3.9
7.0
2.0
0.3
Provision for probable loan losses
(49.9)
(64.5)
Non-interest income
(6.6)
(9.4)
Non-interest expense
5.0
3.3
1.4
Per common share:
Basic
3.2
1.3
Diluted
Net Income
Net income for the three and six months ended June 30, 2025 increased by 3.3% and 1.4%, respectively, compared to the same periods of 2024. Net income continues to be positively impacted by an increase in interest income earned on our investment and loan portfolios driven primarily by both an increase in the size of the portfolios and the rate environment, which remains elevated as a result of FRB actions to raise interest rates in recent years. Net interest income for the same periods has been negatively impacted by an increase in interest expense, primarily driven by increases in rates paid on deposits. We closely monitor rates paid on deposits to remain competitive in the current economic environment and retain deposits. Net income for the three and six months ended June 30, 2025 was also positively impacted by a decrease in our provision for credit loss expense. The provision for credit loss expense recorded for the six months ended June 30, 2024 was primarily impacted by a charge-down of an impaired credit after the results of a bankruptcy related foreclosure. Net income for the three and six months ended June 30, 2025 was negatively impacted by an increase in our non-interest expenses driven by inflation and increased salary and compensation costs in order to attract and retain staff.
Net Interest Income
Interest Income:
2.2
11.5
(1.6)
(1.4)
(52.8)
(58.2)
13.2
Securities sold under Repurchase agreements
(12.8)
(15.3)
869.6
1,443.2
Junior subordinated interest deferrable debentures
(14.1)
(14.4)
The change in net interest income for the three and six months ended June 30, 2025 can be attributed to an increase in interest expense as a result of changes in rates we are paying on deposits to remain competitive with rates offered by our competitors. Interest income continues to be positively impacted by interest income earned on our investment and loan portfolios, driven by both an increase in the size of such portfolios and the current rate environment, which remains elevated due to the FRB raising interest rates recent years. Net interest income is the spread between income on interest earning assets, such as loans and securities, and the interest expense on liabilities used to fund those assets, such as deposits, repurchase agreements and funds borrowed. As part of our strategy to manage interest rate risk, we strive to manage both assets and liabilities so that interest sensitivities match. One method of calculating interest rate sensitivity is through gap analysis. A gap is the difference between the amount of interest rate sensitive assets and interest rate sensitive liabilities that re-price or mature in a given time period. Positive gaps occur when interest rate sensitive assets exceed interest rate sensitive liabilities, and negative gaps occur when interest rate sensitive liabilities exceed interest rate sensitive assets. A positive gap position in a period of rising interest rates should have a positive effect on net interest income as assets will re-price faster than liabilities. Conversely, net interest income should contract somewhat in a period of falling interest rates. Our management can quickly change our interest rate position at any given point in time as market conditions dictate. Additionally, interest rate changes do not affect all categories of assets and liabilities equally or at the same time. Analytical techniques we employ to supplement gap analysis include simulation analysis to quantify interest rate risk exposure. The gap analysis prepared by management is reviewed by our Investment Committee twice a year (see table on page 46 for the June 30, 2025 gap analysis). Our management currently believes that we are properly positioned for interest rate changes; however, if our management determines at any time that we are not properly positioned, we will strive to adjust the interest rate sensitive assets and liabilities in order to manage the effect of interest rate changes.
37
Non-Interest Income
(0.6)
(1.9)
(0.4)
(8.4)
(3.5)
Other investment income (loss), net
(88.6)
(119.5)
(2.2)
(14.5)
Total non-interest income for the three and six months ended June 30, 2025 decreased by 6.6% and 9.4%, respectively, compared to the same periods of 2024. Non-interest income was negatively impacted due to losses recorded on merchant banking investments and is reflected in other investments, net in the table.
Non-Interest Expense
7.4
8.7
10.6
(4.0)
(3.3)
4.0
4.1
233.3
317.7
18.5
5.2
1.2
1.5
0.6
Non-interest expense increased by 5.0% and 5.4% for the three and six months ended June 30, 2025, respectively, compared to the same periods of 2024. Non-interest expense continues to be primarily impacted by an increase in our employee compensation and benefits as we continue to adjust our compensation programs to retain our workforce and remain competitive in the current employment market. We also continue to monitor and manage our controllable non-interest expenses through a variety of measures with the ultimate goal of ensuring we align non-interest expenses with our operations and revenue streams.
Financial Condition
Allowance for Credit Losses
The ACL decreased 1.0 % to $154,983,000 at June 30, 2025 from $156,537,000 at December 31, 2024 primarily due to the charge-off of a loan that had been fully reserved for in prior periods. The provision for credit losses charged to expense decreased 49.9% to $4,398,000 for the three months ended June 30, 2025 compared to $8,771,000 for the same period of 2024. The provision for credit losses charged to expense decreased 64.5% to $7,727,000 for the six months ended June 30, 2025 compared to $21,749,000 for the same period of 2024. The credit loss charged to expense for the six months ended June 30, 2024 increased in order to absorb the impact of the charge-down. The ACL was 1.70% of total loans at June 30, 2025 and 1.78% of total loans at December 31, 2024.
Residential mortgage-backed debt securities are securities primarily issued by Freddie Mac, Fannie Mae, or Ginnie Mae. Investments in debt residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. government. Investments in debt residential mortgage-backed securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government, however, we believe that the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008 and because securities issued by others that are collateralized by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated securities.
Total loans increased by 3.7% to $9,138,620,000 at June 30, 2025, from $8,809,826,000 at December 31, 2024. Commercial real estate loans have historically been the largest category in our loan portfolio and comprise approximately 66% and 65% of total loans at June 30, 2025 and December 31, 2024, respectively. The loans in this category primarily include owner- and non-owner-occupied commercial buildings such as shopping centers, warehouses, hotels and office buildings and are primarily geographically concentrated in central and south Texas and throughout Oklahoma. Commercial real estate loans generally carry a lower risk of loss; however, they may also be significantly more affected by changes in real estate markets or the general economy. We regularly monitor commercial real estate loan concentrations and also have processes and procedures in place to monitor economic conditions that may adversely affect our commercial real estate portfolio.
Deposits increased by 3.0% to $12,474,660,000 at June 30, 2025, compared to $12,111,844,000 at December 31, 2024. Deposits have continued to fluctuate as a result of increased general activities by customers, increased competition for deposits by the federal government, and aggressive competitors’ pricing. We have closely monitored the rates paid on deposits by competitors and have made changes to our pricing accordingly in order to remain competitive in an effort to retain deposits. The five separately charted banks within our holding company structure also allows us to work with customers to maximize their FDIC insurance levels and provide additional levels of insured deposits.
Foreign Operations
On June 30, 2025, we had $16,462,314,000 of consolidated assets, of which approximately $183,975,000, or 1.1%, was related to loans outstanding to borrowers domiciled in foreign countries, compared to $186,561,000, or 1.2%, at December 31, 2024. Of the $183,975,000, 79.1% is directly or indirectly secured by U.S. assets, certificates of deposits and real estate; 5.9% is secured by foreign real estate or other assets; and 15.0% is unsecured.
Critical Accounting Policies
We have established various accounting policies that govern the application of accounting principles in the preparation of our Consolidated Financial Statements. The significant accounting policies are described in the Notes to the Consolidated Financial Statements. Certain accounting policies involve significant subjective judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies.
We consider our estimated ACL as a policy critical to the sound operations of our Subsidiary Banks. The ACL is deducted from the amortized cost of an instrument to present the net amount expected to be collected on the financial asset. Our ACL primarily consists of the aggregate ACL estimates of our Subsidiary Banks. The estimates are established through charges to operations in the form of charges to provisions for credit loss expense. Loan losses or recoveries are charged or credited directly to the ACL. The ACL of each Subsidiary Bank is maintained at a level considered appropriate by management, based on estimated current expected credit losses in the current loan portfolio, including information about past events, current conditions, and reasonable and supportable forecasts.
The estimation of the ACL is based on a loss-rate methodology that measures lifetime losses on loan pools that have similar risk characteristics. Loans that do not have similar risk characteristics are evaluated on an individual basis. The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk characteristics and containing sufficient loss history to provide meaningful results. Our segmentation starts at the general loan category with further sub-segmentation based on collateral types that may be of meaningful size and/or may contain sufficient differences in risk characteristics based on management’s judgement that would warrant further segmentation. Risk management begins with a strong and conservative lending policy that specifies lending limits that are well below allowable regulatory limits, provides highly restrictive lending authority to lending officers, and promotes judicious lending terms and diversification. The general loan categories along with primary risk characteristics used in our calculation are as follows:
Commercial and industrial loans. This category includes loans extended to a diverse array of businesses for working capital or equipment purchases. These loans are mostly secured by the collateral pledged by a borrower that is directly related to the business activities of the borrower’s company such as equipment, accounts receivable and inventory. The borrower’s abilities to generate revenues from equipment purchases, collect accounts receivable, and to turn inventory into sales are risk factors in the repayment of the loan. A small portion of this loan category is related to loans secured by oil and gas production and loans secured by aircraft.
Construction and land development loans. This category includes loans for the development of unimproved land to lot development for both residential and commercial use and vertical construction across residential and commercial real estate classes. These loans carry risk of repayment when projects incur cost overruns, have an increase in the price of construction materials, encounter zoning, entitlement, or environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. Risks specifically related to 1-4 family development loans also include mortgage rate risk and the practice by the mortgage industry of imposing more restrictive underwriting standards, which inhibits the buyer from obtaining long term financing creating excessive housing and lot inventory in the market.
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Commercial real estate loans. This category includes loans secured by farmland, multifamily properties, owner-occupied commercial properties, and non-owner-occupied commercial properties. Owner-occupied commercial properties include warehouses often along the U.S./Mexico border for import/export operations, office space where the borrower is the primary tenant, restaurants and other single-tenant retail spaces. Non-owner-occupied commercial properties include hotels, retail centers, office and professional buildings, and leased warehouses. These loans carry the risk of repayment when market values deteriorate, the business experiences turnover in key management, the business is unable to attract or maintain stable occupancy levels, or the market experiences an exit of a specific business type that is significant to the local economy, such as a manufacturing plant. Our primary risk management tool is internal monitoring measured against internal concentration limits that are significantly lower than regulatory thresholds and are segmented by low-risk and high-risk characteristics, such as the borrower’s equity, cash flow coverage, and non-amortizing versus amortizing status, further disaggregated by the length of time to pay in full. This monitoring is regularly reported to senior management and the board of directors. Risk management practices also extend to managing the borrower’s relationship with us and are designed to recognize degradation in the borrower’s ability to repay under established terms well before the borrower may default. Loan and deposit activity by the borrower is monitored on a frequent basis, which may prompt a change in risk classification. Once a loan is moved to a more severe risk classification, the loan performance, and when applicable, a plan by the borrower to rectify issues are monitored and reviewed at least quarterly. Additionally, our credit administration team, who is independent from the lending team, reviews a substantial portion of the commercial lending portfolio annually, which includes a significant portion of the commercial real estate loan portfolio given the current mix of loans in our portfolio. The table below summarizes the commercial real estate loan portfolio disaggregated by the type of real estate securing the credit as of June 30, 2025 and December 31, 2024:
The loan pools are further broken down using a risk-based segmentation based on internal classifications for commercial loans and past due status for consumer mortgage loans. Non-mortgage consumer loans are evaluated as one segment. On a weekly basis, commercial loan past due reports are reviewed by our credit quality committee to determine if a loan has any potential problems and if a loan should be placed on our internal Watch List report. Additionally, our
credit department reviews the majority of our loans for proper internal classification purposes regardless of whether they are past due and segregates any loans with potential problems for further review. The credit department will discuss the potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the evaluation. Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the review process. After the above analysis is completed, we will determine if a loan should be placed on an internal Watch List report because of issues related to the analysis of the credit, credit documents, collateral, and/or payment history.
Within each collectively evaluated pool, the robustness of the lifetime historical loss-rate is evaluated and, if needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative loss factors are then evaluated to incorporate management’s two-year reasonable and supportable forecast period followed by a reversion to the pool’s average lifetime loss-rate. Those qualitative loss factors are: (i) trends in portfolio volume and composition, (ii) volume and trends in classified loans, delinquencies and non-accruals, (iii) concentration risk, (iv) trends in underlying collateral value, (v) changes in policies, procedures, and strategies, and (vi) economic conditions. Qualitative factors also include potential losses stemming from operational risk factors arising from fraud, natural disasters, pandemics, geopolitical events, and large loans. The large loan operational risk factor was added to our ACL calculation beginning in the second quarter of 2023. Because of the magnitude of large loans, they pose a higher risk of default. Recognizing this risk and establishing an operational risk factor to capture that risk, is prudent action in the current economic environment. Large loans are usually part of a larger relationship with collateral that is pledged across the relationship. Defaulting on a larger loan may therefore jeopardize an entire collateral relationship. The current economic environment has created challenges for borrowers to service their debt. Increasing capitalization rates, elevated office vacancies, an upward trend in apartment vacancies and significant increases in interest rates are all contributing to the elevated risk in large loans. Should any of the factors considered by management in evaluating the adequacy of the ACL change, our estimate could also change, which could affect the level of future credit loss expense.
We have elected to not measure an ACL for accrued interest receivable given our timely approach in identifying and writing off uncollectible accrued interest. An ACL for off-balance sheet exposure is derived from a projected usage
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rate of any unfunded commitment multiplied by the historical loss-rate, plus model risk adjustment, if any, of the on-balance sheet loan pools.
Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate for current expected credit losses change, our estimate of current expected credit losses could also change, which could affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control, including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in interest rates and the view of regulatory authorities towards loan classifications.
Liquidity and Capital Resources
The maintenance of adequate liquidity provides our Subsidiary Banks with the ability to meet potential depositor withdrawals, provide for customer credit needs, maintain adequate statutory reserve levels and take full advantage of high-yield investment opportunities as they arise. Liquidity is afforded by access to financial markets and by holding appropriate amounts of liquid assets. Our Subsidiary Banks derive their liquidity largely from deposits of individuals and business entities. Deposits from persons and entities domiciled in Mexico comprise a stable portion of the deposit base of our Subsidiary Banks. Other important funding sources for our Subsidiary Banks during 2025 and 2024 were securities sold under repurchase agreements and large certificates of deposit, requiring management to closely monitor our asset/liability mix in terms of both rate sensitivity and maturity distribution. Our Subsidiary Banks have had a long-standing relationship with the FHLB and keep open significant unused lines of credit in order to fund liquidity needs. We also maintain a sizable, high quality investment portfolio to provide significant liquidity. These securities can be pledged to the FHLB, sold, or sold under agreements to repurchase to provide immediate liquidity. The following table summarizes our short-term balancing capacities net of balances outstanding:
Unsecured fed funds lines available from commercial banks
50,000
Unused borrowings capacity from FHLB (1)
3,361,493
Unused borrowings capacity under Federal Reserve discount window
500,423
Unpledged investment securities (2)
3,681,653
7,593,569
(1) FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans and mortgage finance assets
(2) Market value
We maintain an adequate level of capital as a margin of safety for our depositors and shareholders. At June 30, 2025, shareholders’ equity was $3,022,069,000 compared to $2,796,707,000 at December 31, 2024. The increase in shareholders’ equity can be primarily attributed to the retention of earnings offset by shareholder dividends paid.
In July 2013, the FDIC and other regulatory bodies established a new, comprehensive capital framework for U.S. banking organizations, consisting of minimum requirements that increase both the quantity and quality of capital held by banking organizations. The final rules are a result of the implementation of the Basel III capital reforms and
various related capital provisions of the Dodd-Frank Act. Consistent with the Basel international framework, the rules include a new minimum ratio of Common Equity Tier 1 (“CET1”) capital to risk-weighted assets of 4.5% and a CET1 capital conservation buffer of 2.5% of risk-weighted assets, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 capital to risk-weighted assets above the minimum requirement but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and include a minimum leverage ratio of 4% for all banking organizations. Regarding the quality of capital, the rules emphasize CET1 capital and implements strict eligibility criteria for regulatory capital instruments. We believe that as of June 30, 2025, we meet all fully phased-in capital adequacy requirements.
In November 2017, the OCC, the FRB and the FDIC finalized a proposed rule that extends the current treatment under the regulatory capital rules for certain regulatory capital deductions and risk weights and certain minority interest requirements, as they apply to banking organizations that are not subject to the advanced approaches capital rules. Effective January 1, 2018, the rule also paused the full transition to the Basel III treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority interests. The agencies are also considering whether to make adjustments to the capital rules in response to CECL (the FASB Standard relating to current expected credit loss) and its potential impact on regulatory capital. Pursuant to rules issued by the federal bank regulatory agencies in February 2019 and March 2020, banking organizations were given options to phase in the adoption of CECL over a three-year transition period through December 31, 2022 or over a five-year transition period through December 31, 2024. Rather than electing to make one of the phase-in options, we immediately recognized the capital impact upon adopting CECL accounting standards on January 1, 2020, which resulted in an increase in our allowance for probable loan losses and a one-time cumulative-effect adjustment to retained earnings upon adoption.
On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“EGRRCPA”) was enacted, and, among other things, it includes a simplified capital rule change that effectively exempts banks with assets of less than $10 billion that exceed the “community bank leverage ratio,” from all risk-based capital requirements, including Basel III and its predecessors. The federal banking agencies must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8% and 10% before community banks can begin to take advantage of this regulatory relief provision. Some of the Subsidiary Banks, with assets of less than $10 billion, may qualify for this exemption. Additionally, under the EGRRCPA, qualified bank holding companies with assets of up to $3 billion (currently $1 billion) will be eligible for the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, which eases limitations on the issuance of debt by holding companies. On August 28, 2018, the FRB issued an interim final rule expanding the applicability of its Small Bank Holding Company Policy Statement. While holding companies that meet the conditions of the policy statement are excluded from consolidated capital requirements, their depository institutions continue to be subject to minimum capital requirements. Finally, for banks that continue to be subject to the Basel III’s risk-based capital rules (e.g., assignment of 150% risk weight to certain exposures), certain commercial real estate loans that were formally classified as high volatility commercial real estate (“HVCRE”) will not be subject to heightened risk weights if they meet certain criteria. Also, while acquisition, development, and construction loans will generally be subject to heightened risk
weights, certain exceptions will apply. On September 18, 2018, the federal banking agencies issued a proposed rule modifying the agencies’ capital rules for HVCRE.
We and our Subsidiary Banks are subject to the regulatory capital requirements administered by the Federal Reserve, and, for our Subsidiary Banks, the FDIC. Regulatory authorities can initiate certain mandatory actions if we or any of our Subsidiary Banks fail to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of June 30, 2025, that we and each of our Subsidiary Banks continue to meet all capital adequacy requirements to which we are subject.
We will continue to monitor the volatility and cost of funds in an attempt to match maturities of rate-sensitive assets and liabilities and respond accordingly to anticipate fluctuations in interest rates by adjusting the balance between sources and uses of funds as deemed appropriate. The net-interest rate sensitivity as of June 30, 2025 is illustrated in the table entitled “Interest Rate Sensitivity,” below. This information reflects the balances of assets and liabilities for which rates are subject to change. A mix of assets and liabilities that are roughly equal in volume and re-pricing characteristics represents a matched interest rate sensitivity position. Any excess of assets or liabilities results in an interest rate sensitivity gap.
We undertake an interest rate sensitivity analysis to monitor the potential risk on future earnings resulting from the impact of possible future changes in interest rates on currently existing net asset or net liability positions. However, this type of analysis is as of a point-in-time position, when in fact that position can quickly change as market conditions, customer needs, and management strategies change. Thus, interest rate changes do not affect all categories of assets and liabilities equally or at the same time. As indicated in the table, we are asset sensitive in both the short- and long-term scenarios. Our Asset and Liability Committee semi-annually reviews the consolidated position along with simulation and duration models, and makes adjustments as needed to control our interest rate risk position. We use modeling of future events as a primary tool for monitoring interest rate risk.
Interest Rate Sensitivity
Rate/Maturity
Over 3
Over 1
3 Months
Months to
Year to 5
Over 5
or Less
1 Year
Years
Rate sensitive assets
Investment securities
250,020
757,116
3,871,825
Loans, net of non-accruals
7,550,290
183,001
481,702
764,881
8,979,874
Total earning assets
7,800,310
940,117
4,353,527
905,646
13,999,600
Cumulative earning assets
8,740,427
13,093,954
Rate sensitive liabilities
1,346,018
1,525,676
143,895
Other interest bearing deposits
615,084
1,070
10,437
Total interest bearing liabilities
6,859,069
1,526,746
8,540,147
Cumulative sensitive liabilities
8,385,815
8,529,710
Repricing gap
941,241
(586,629)
4,209,632
895,209
5,459,453
Cumulative repricing gap
354,612
4,564,244
Ratio of interest-sensitive assets to liabilities
1.14
0.62
30.25
86.77
1.64
Ratio of cumulative, interest-sensitive assets to liabilities
1.04
1.54
Item 3. Quantitative and Qualitative Disclosures about Market Risk
During the six months ended June 30, 2025, there were no material changes in market risk exposures that affected the quantitative and qualitative disclosures regarding market risk presented under the caption “Liquidity and Capital Resources” located on pages 15 through 20 of our 2024 Annual Report.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within specified time periods. As of the end of the period covered by this Quarterly Report on Form 10-Q, our principal executive officer and principal financial officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)). Based on the evaluation, which disclosed no material weaknesses, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in various legal proceedings that are in various stages of litigation. We have determined, based on discussions with our counsel that any material loss in any current legal proceedings, individually or in the aggregate, is remote or the damages sought, even if fully recovered, would not be considered material to our consolidated financial position or results of operations. However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.
1A. Risk Factors
There were no material changes in the risk factors as previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 27, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
During the six months ended June 30, 2025, there were no sales of equity securities that were not registered under the Securities Act of 1933, as amended, or which were not previously disclosed or reported in our Annual Report on Form 10-K for the year ended December 31, 2024 or a subsequent Current Report on Form 8-K.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In April 2009, the Board re-established a formal stock repurchase program that authorized the repurchase of up to $40 million of common stock within the following 12 months. Annually since then, including on March 12, 2025, the Board extended and increased the repurchase program to purchase up to $150 million of common stock during the 12-month period commencing on March 15, 2025. Shares of common stock may be purchased from time to time on the open market or through privately negotiated transactions. Shares purchased in this program will be held in treasury for reissue for various corporate purposes, including employee compensation plans. During the second quarter of 2025, the Board adopted a Rule 10b-18 trading plan and a Rule 10b5-1 trading plan and intends to adopt additional Rule 10b-18 and Rule 10b5-1 trading plans, which will allow us to purchase shares of our common stock during certain open and blackout periods when we ordinarily would not be in the market due to trading restrictions in our insider trading policy. During the terms of both a Rule 10b-18 and Rule 10b5-1 trading plan, purchases of common stock are automatic to the extent the conditions of the plan’s trading instructions are met. Shares purchased under these trading plans will be held in treasury for reissue for various corporate purposes, including employee stock compensation plans. As of August 4, 2025, a total of 13,795,319 shares had been repurchased under all programs at a cost of $419,939,000. We are not obligated to purchase shares under our stock repurchase program outside of the Rule 10b-18 and Rule 10b5-1 trading plans.
Except for repurchases in connection with the administration of an employee benefit plan in the ordinary course of business and consistent with past practices, common stock repurchases are only conducted under publicly announced
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repurchase programs approved by the Board. The following table includes information about common stock share repurchases for the quarter ended June 30, 2025.
Total Number of
Purchased as
Approximate
Average
Part of a
Dollar Value of
Total Number
Price Paid
Publicly-
Shares Available
of Shares
Per
Announced
for
Purchased
Share
Program
Repurchase(1)
April 1 – April 30, 2025
79,609
55.60
145,574,000
May 1 – May 31, 2025
June 1 – June 30, 2025
1,923
62.63
145,453,000
81,532
55.77
Item 5. Other Information
During the quarter ended June 30, 2025, there was no information required to be disclosed in a Current Report on Form 8-K which was not disclosed in a Current Report on Form 8-K.
During the quarter ended June 30, 2025, there were no material changes to the procedures by which shareholders may recommend nominees to our Board.
During the quarter ended June 30, 2025, none of the Company’s directors or officers adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.
Item 6. Exhibits
The following exhibits are filed as a part of this Report:
(3a)* — Articles of Incorporation of International Bancshares Corporation.
(3b)* — Articles of Amendment to the Articles of Incorporation of International Bancshares Corporation dated May 22, 1998.
(3c)* — Articles of Amendment to the Articles of Incorporation of International Bancshares Corporation dated May 21, 2002.
(3d)* — Articles of Amendment to the Articles of Incorporation of International Bancshares Corporation filed with the Texas Secretary of State on May 17, 2005.
(3e)* — Articles of Amendment to the Articles of Incorporation of International Bancshares Corporation filed with the Texas Secretary of State on December 22, 2008.
(3f)* — Amended and Restated By-Laws of International Bancshares Corporation.
(3g)* — Certificate of Amendment to Articles of Incorporation of International Bancshares Corporation filed with the Texas Secretary of State on May 21, 2013.
13 —Annual report to Shareholders on Form ARS for the fiscal year ended December 31, 2024, furnished to the SEC on April 21, 2025
31(a) —Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31(b) —Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32(a)** —Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32(b)** —Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101++ — Interactive Data File
104++ — Cover Page Interactive Data File (included in Exhibit 101)
*Previously Filed
**This certification is furnished herewith and will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
++ Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Cover Page to this Form 10-Q; (ii) the Condensed Consolidated Statement of Earnings for the three and six months ended June 30, 2025 and June 30, 2024; (iii) the Condensed Consolidated Balance Sheet as of June 30, 2025 and December 31, 2024; and (iv) the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2025 and June 30, 2024.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date:
August 7, 2025
/s/ Dennis E. Nixon
Dennis E. Nixon
President
/s/ Judith I. Wawroski
Judith I. Wawroski
Treasurer
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