MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations represents an explanation of significant changes in our financial position and results of our operations on a consolidated basis for the three-year period ended December 31, 2025. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025, and the Selected Financial Data and Consolidated Financial Statements included elsewhere herein.
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 those 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, among others, the following possibilities:
Local, regional, national, and international economic business conditions and the impact they may have on us, our customers, and such customers’ ability to transact profitable business with us, including the ability of our borrowers to repay their loans according to their terms or a change in the value of the related collateral.
Volatility and disruption in national and international financial markets.
The imposition of new or increased international tariffs and the impact of potential retaliatory tariffs, which may impact our subsidiary banks’ business and operations with Mexico.
Government intervention in the U.S. financial system.
The unavailability of funding from the FHLB, the Federal Reserve Bank (“FRB”) or other sources in the future could adversely impact our growth strategy, prospects, and performance.
Changes in consumer spending, borrowing, and saving habits.
Changes in interest rates and market prices, including changes in federal regulations on the payment of interest on demand deposits.
Changes in our ability to retain or access deposits due to changes in public confidence in the banking system and the potential threat of bank-run contagion fueled by, among other factors, economic instability, inflationary pressures, the public’s increased exposure to social media, and the rapid speed at which communication and coordination via social media can occur.
Changes in the capital markets we utilize, including changes in the interest rate environment that may reduce margins.
Changes in state and/or federal laws and regulations, including, the impact of the Consumer Financial Protection Bureau (“CFPB”) as a regulator of financial institutions, changes in the accounting, tax, and regulatory treatment of trust-preferred securities, as well as changes in banking, tax, securities, insurance, employment, environmental, and immigration laws and regulations and the risk of litigation that may follow.
Changes in U.S.—Mexico trade, including reductions in border crossings and commerce, integration, and implementation of the United States-Mexico-Canada Agreement, the possible imposition of tariffs on
imported goods from Mexico, and the potential retaliatory tariffs that Mexico may impose on the United States.
Political instability in, and strained geopolitical relations between, the United States and Mexico.
General instability of economic and political conditions in the United States, including inflationary pressures, prolonged elevated interest rates and slower than expected rate reductions, economic slowdown or recession, low productivity growth, declining business investment, concerns regarding the level of U.S. debt, and escalating geopolitical tensions.
The reduction of deposits from nonresident alien individuals due to the Internal Revenue Service rules requiring U.S. financial institutions to report deposit interest payments made to such individuals.
The loss of senior management or operating personnel.
The timing, impact, and other uncertainties of the potential future acquisitions, as well as our ability to maintain our current branch network and enter new markets to capitalize on growth opportunities.
Additions to our allowance for credit loss (“ACL”) as a result of changes in local, national, or international conditions which adversely affect our customers.
Greater than expected costs or difficulties related to the development and integration of new products and lines of business.
Increased labor costs and effects related to health care reform and other laws, regulations, and legal developments impacting labor costs.
Impairment of carrying value of goodwill could negatively impact our earnings and capital.
Changes in the soundness of other financial institutions with which we interact.
Technological changes or system failures or breaches of our network security, as well as other cybersecurity risks, could subject us to increased operating costs, litigation, and other liabilities.
Potential loss of revenue streams and reduction of lower cost deposits as a source of funds resulting from the rise in bank-like products and services from financial technology companies and other alternative financial providers, including blockchain-based financial products and banking-as-a-service platforms.
Changes in the regulatory landscape for cryptocurrencies, decentralized finance, and fintech services that favor alternative financial products, which may subject us to additional competitive pressures and reduce the demand for traditional banking services.
Increased compliance and operational costs associated with investing in, adapting to, integrating, and competing with technological developments that incorporate artificial intelligence (“AI”) into banking services and products.
Flaws in our introduction and use of AI technologies, which could result in increased exposure to security vulnerabilities, data inconsistencies, operational disruptions, and technological inefficiencies that could hamper customer experience, negatively impact transaction processing, and undermine our risk-management processes.
Increased cybersecurity and fraud risks resulting from threat actors’ use of AI and other advanced technologies to conduct more sophisticated phishing schemes, social engineering, deepfake impersonation, and other cyberattacks, which could lead to unauthorized access to customer accounts, financial losses, and operational disruptions.
Acts of war or terrorism.
Natural disasters or other adverse external events such as pandemics or epidemics.
Reduced earnings resulting from the write-down of the carrying value of securities held in our securities available-for-sale portfolios.
The effect of changes in accounting policies and practices by the Public Company Accounting Oversight Board (“PCAOB”), the Financial Accounting Standards Board (“FASB”) and other accounting standards setters.
The costs and effects of regulatory developments or regulatory or other governmental inquiries and the results of regulatory examinations or reviews and obtaining regulatory approvals.
The effect of any supervisory and enforcement efforts by the CFPB related to its unfair, deceptive, or abusive acts or practices authority concerning fees charged by financial institutions including late, non-sufficient funds, and overdraft fees, as well as the effect of any other regulatory or legal developments that limit fees and/or overdraft services.
Monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the FRB.
The reduction of income and possible increase in required capital levels related to the adoption of legislation and the implementing rules and regulations, including those that establish debit card interchange fee standards and prohibit network exclusivity arrangements and routing restrictions.
The increase in required capital levels related to the implementation of capital and liquidity rules of the federal banking agencies that address or are impacted by the Basel III capital and liquidity standards.
The enhanced due diligence burden imposed on banks related to the banks’ inability to rely on credit ratings under the Dodd-Frank Act.
The failure or circumvention of our internal controls and risk management, policies, and procedures.
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 247 ATMs, providing 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 one insurance agency, a liquidating subsidiary; a fifty-percent interest in an investment banking unit that owns a broker/dealer; a controlling interest in five merchant banking entities; and a majority ownership interest 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 their needs and servicing the sales arising from those discussions on a long-term basis. Our Subsidiary Banks have various compensation plans, including incentive-based compensation, for fairly compensating employees. Our 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.
One of our primary goals is to grow net interest income and non-interest income while adequately managing credit risk, interest rate risk and expenses. Effective management of capital is one of our critical objectives. A key measure of the performance of a banking institution is the return on average common equity (“ROE”). Our ROE for the year ended December 31, 2025 was 12.40% as compared to 13.66% for the year ended December 31, 2024.
We are highly active in facilitating trade along the United States border with Mexico. We do a significant amount of business with customers domiciled in Mexico and 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 north, 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
December 31, 2025
December 31, 2024
Percent Increase (Decrease)
(Dollars in Thousands)
Assets
Net loans
Deposits
Securities sold under repurchase agreements
Other borrowed funds
Junior subordinated deferrable interest debentures
Shareholders’ equity
Consolidated Statements of Income Information
Percent
Percent
Year Ended
Year Ended
Increase
Year Ended
Increase
December 31,
December 31,
(Decrease)
December 31,
(Decrease)
(Dollars in Thousands, Except Per Share Data)
Interest income
Interest expense
Net interest income
Provision for probable credit losses
Non-interest income
Non-interest expense
Net income
Per common share:
Basic
Diluted
Net Income
Net income for the year ended December 31, 2025 increased by approximately .8% compared to the same period of 2024 and net income for the year ended December 31, 2024 decreased by approximately 0.6% compared to the same period of 2023. Net income for the year ended December 31, 2025 and the year ended December 31, 2024 was 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. Net interest income for the same periods has been negatively impacted by an increase in interest expense, primarily driven by increases on 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 year ended December 31, 2025 was also positively
impacted by a decrease in our provision for credit loss expense. The provision for credit loss expense recorded for the year ended December 31, 2024 was primarily impacted by a charge-down of an impaired credit after the results of a bankruptcy related foreclosure.
Net Interest Income
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. Net interest income is our largest source of revenue. Net interest income is affected by both changes in the level of interest rates and changes in the amount and composition of interest-earning assets and interest-bearing liabilities. Tax-exempt yields have not been adjusted to a tax-equivalent basis.
For the years ended December 31,
Average
Average
Average
Rate/Cost
Rate/Cost
Rate/Cost
Assets
Interest earning assets:
Loan, net of unearned discounts:
Domestic
Foreign
Investment securities:
Taxable
Tax-exempt
Other
Total interest-earning assets
Liabilities
Interest bearing liabilities:
Savings and interest bearing demand deposits
Time deposits:
Domestic
Foreign
Securities sold under repurchase agreements
Other borrowings
Junior subordinated deferrable interest debentures
Total interest bearing liabilities
The level of interest rates and the volume and mix of earning assets and interest-bearing liabilities impact net income and net interest margin. The yield on average interest-earning assets decreased 2.6% from 6.07% in 2024 to 5.91% in 2025, and the rates paid on average interest-bearing liabilities decreased 4.9% from 2.65% in 2024 to 2.52% in 2025. The yield on average interest-earning assets increased 5.2% from 5.77% in 2023 to 6.07% in 2024, and the rates paid on average interest-bearing liabilities increased 42.5% from 1.86% in 2023 to 2.65% in 2024.
The following table analyzes the changes in net interest income during 2025, 2024, and 2023 and the relative effect of changes in interest rates and volumes for each major classification of interest-earning assets and interest-bearing liabilities. Non-accrual loans have been included in assets for the purpose of this analysis, which reduces the resulting yields:
2025 compared to 2024
2024 compared to 2023
Net increase (decrease) due to
Net increase (decrease) due to
Volume(1)
Rate(1)
Total
Volume(1)
Rate(1)
Total
(Dollars in Thousands)
(Dollars in Thousands)
Interest earned on:
Loans, net of unearned discounts:
Domestic
Foreign
Investment securities:
Taxable
Tax-exempt
Other
Total interest income
Interest incurred on:
Savings and interest bearing demand deposits
Time deposits:
Domestic
Foreign
Securities sold under repurchase agreements
Other borrowings
Junior subordinated deferrable interest debentures
Total interest expense
Net interest income
(1) The change in interest due to both rate and volume has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.
The increase in net interest income for the years ended December 31, 2025 and December 31, 2024 is primarily attributable to an increase in 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 FRB actions on rates in recent years. The increase in interest income is being offset by an increase in interest expense due to changes in rates we pay on deposits to remain competitive with our competitors. Net interest income is the spread between income on interest earning assets (e.g. loans and securities) and the interest expense on liabilities used to fund those assets (e.g. 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 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 at least twice a year. The Investment Committee is comprised of certain members of the board of directors and senior managers of the various Subsidiary Banks. Management currently believes that we are properly positioned for interest rate changes; however, management may adjust the interest rate sensitive assets and liabilities in order to manage the effect of interest rate changes, as needed.
Allowance for Credit Losses
The ACL increased 1.7% to $159,174,000 at December 31, 2025 from $156,537,000 at December 31, 2024. The provision for credit losses charged to expense decreased $16,710,000 to $15,092,000 for the year ended December 31, 2025 from $31,802,000 for the same period in 2024.
The following table summarizes loan balances at the end of each year and average loans outstanding during the year and the following ratios: nonaccrual loans to total loans, nonaccrual loans to the ACL, charge-offs to average loans, by loan type, and total charge-off to average total loans:
(Dollars in Thousands)
Allowance for credit losses to total loans outstanding
Allowance for credit losses
Loans, net of unearned discounts
Nonaccrual loans to total loans outstanding
Nonaccrual loans
Loans, net of unearned discounts
Allowance for credit losses to nonaccrual loans
Allowance for credit losses
Nonaccrual loans
Net charge-offs during the period to average loans outstanding:
Commercial
Net charge-offs during the period
Average amount outstanding
Commercial real estate: other construction and land development
Net charge-offs during the period
Average amount outstanding
Commercial real estate: farmland and commercial
Net charge-offs during the period
Average amount outstanding
Commercial real estate: multifamily
Net charge-offs during the period
Average amount outstanding
Residential: first lien
Net charge-offs during the period
Average amount outstanding
Residential: junior lien
Net charge-offs during the period
Average amount outstanding
Consumer
Net charge-offs during the period
Average amount outstanding
Foreign
Net charge-offs during the period
Average amount outstanding
Total loans
Net charge-offs during the period
Average amount outstanding
(1) The average balances for purposes of the above table are calculated on the basis of daily balances.
The ACL has been allocated based on the amount management has deemed to be reasonably necessary to provide for the credit losses incurred within the following categories of loans at the dates indicated and the percentage of loans to total loans in each category:
At December 31,
Percent
Percent
Percent
Allowance
of total
Allowance
of total
Allowance
of total
(Dollars in Thousands)
Commercial
Commercial real estate: other construction and land development
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Residential : first lien
Residential: junior lien
Consumer
Foreign
The ACL primarily consists of the aggregate ACLs of the Subsidiary Banks. The ACLs are established through charges to operations in the form of provisions for credit losses.
The Subsidiary Banks charge-off that portion of any loan which management considers to represent a loss as well as that portion of any other loan which is classified as a “loss” by bank examiners. Commercial, financial, and agricultural or real estate loans are generally considered by management to represent a loss, in whole or part, (i) when an exposure beyond any collateral coverage is apparent, (ii) when no further collection of the portion of the loan so exposed is anticipated based on actual results, (iii) when the credit enhancements, if any, are not adequate, and (iv) when the borrower’s financial condition would so indicate. Generally, unsecured consumer loans are charged-off when 90 days past due.
The ACL is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of credit losses within the existing portfolio of loans based on our internal ACL calculation. While our management considers 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 credit 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. Our management believes that the ACL at December 31, 2025 was adequate to absorb expected losses from loans and other financial instruments in the portfolio at that date. See Critical Accounting Policies on page 20.
Non-Interest Income
Percent
Percent
Year Ended
Year Ended
Increase
Year Ended
Increase
December 31,
December 31,
(Decrease)
December 31,
(Decrease)
(Dollars in Thousands)
Service charges on deposit accounts
Other service charges, commissions and fees
Banking
Non-banking
Investment securities transactions, net
Other investments, net
Other income
Total non-interest income
Total non-interest income for the year ended December 31, 2025 decreased by 4.1% compared to the same period of 2024. The decrease can primarily be attributed to losses recorded on merchant banking investments and reflected in other investments, net in the table above. Non-interest income for the year ended December 31, 2024 increased by 4.1% compared to the same period of 2023. The increase can be primarily attributed to an increase in other investment income when compared to the same period of 2023. The decrease in 2023 was primarily attributed to losses recorded on certain merchant banking investments.
Non-Interest Expense
Percent
Percent
Year Ended
Year Ended
Increase
Year Ended
Increase
December 31,
December 31,
(Decrease)
December 31,
(Decrease)
(Dollars in Thousands)
Employee compensation and benefits
Occupancy
Depreciation of bank premises and equipment
Professional fees
Deposit insurance assessments
Net expense, other real estate owned
Advertising
Software and software maintenance
Other
Total non-interest expense
Non-interest expense for the year ended December 31, 2025 increased by 4.6% compared to 2024 and increased by 6.5% for the year ended December 31, 2024 compared to 2023. The increase in both years can primarily be attributed to continued increases in our employee compensation and benefit costs as we continue to review and adjust our compensation and benefits programs to recognize performance and retain our workforce. We 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.
Effects of Inflation
The principal component of earnings is net interest income, which is affected by changes in the level of interest rates. Changes in rates of inflation affect interest rates. It is difficult to precisely measure the impact of inflation on net interest income because it is not possible to accurately differentiate between increases in net interest income resulting from inflation and increases resulting from increased business activity. Inflation also raises costs of operations, primarily those of employment and services.
Financial Condition
Investment Securities
The following tables set forth the average yield, by contractual maturities of debt investment securities, at December 31, 2025, except for the totals, which reflect the weighted average yields. Actual maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.
Available for Sale Maturing
Within one
After one but
After five but
year
within five years
within ten years
After ten years
Adjusted
Adjusted
Adjusted
Adjusted
Yield
Yield
Yield
Yield
(Dollars in Thousands)
Residential mortgage-backed securities
Obligations of states and political subdivisions
Total
Held to Maturity Maturing
Within one
After one but
After five but
year
within five years
within ten years
After ten years
Adjusted
Adjusted
Adjusted
Adjusted
Yield
Yield
Yield
Yield
(Dollars in Thousands)
Other securities
Total
Residential mortgage-backed securities are securities issued by Freddie Mac, Fannie Mae, Ginnie Mae or non-government entities. Investments in residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. government. Investments in 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 and Freddie Mac are rated consistently as AAA rated securities. Obligations of states and political subdivisions are securities issued by public school districts and are guaranteed by the Permanent School Fund (PSF) of the State of Texas under the Texas Education Code. The PSF guarantee provides an unconditional and irrevocable guarantee of principal and interest payments.
Loans
The following table shows the amounts of loans outstanding as of December 31, 2025, which based on remaining scheduled repayments of principal are due in the years indicated. Also, the amounts due after one year are classified according to the sensitivity to changes in interest rates:
Maturing
After one but
After five but
Within one
within five
within fifteen
After fifteen
year
years
years
years
Total
(Dollars in Thousands)
Commercial
Commercial real estate: other construction & land development
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Residential: first lien
Residential: junior lien
Consumer
Foreign
Total
Interest sensitivity
Fixed Rate
Variable Rate
(Dollars in Thousands)
Amount due after one year:
Commercial
Commercial real estate: other construction & land development
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Residential: first lien
Residential: junior lien
Consumer
Foreign
Total
International Operations
On December 31, 2025, we had $392,811,000 (2.4% of total assets) in loans outstanding to borrowers domiciled in foreign countries, which included primarily borrowers domiciled in Mexico. The loan policies of our Subsidiary Banks generally require that loans to borrowers domiciled in foreign countries be primarily secured by assets located in the United
States or have credit enhancements in the form of guarantees from significant United States corporations. The composition of such loans as of December 31, 2025 and 2024 is presented below.
For the year ended December 31,
Amount of
Amount of
Loans
Loans
(Dollars in Thousands)
Secured by certificates of deposit in United States banks
Secured by United States real estate
Secured by other United States collateral (securities, gold, silver, etc.)
Unsecured
Other (principally Mexico real estate)
Deposits
The following table illustrates the average amounts of deposits for the twelve months ended December 31, 2025 and December 31, 2024. Included in the table is our estimate of the amount of total uninsured deposits as of December 31, 2025 and December 31, 2024.
Average Balance
Average Balance
(Dollars in Thousands)
Deposits:
Demand—non-interest bearing
Domestic
Foreign
Total demand non-interest bearing
Savings and interest bearing demand
Domestic
Foreign
Total savings and interest bearing demand
Time certificates of deposit
Domestic
Foreign
Total time, certificates of deposit
Total deposits
Uninsured Deposits:
Scheduled maturities of time deposits in amounts of $250,000 or more at December 31, 2025 and an estimate of uninsured time deposits, were as follows:
Due within 3 months or less
Due after 3 months and within 6 months
Due after 6 months and within 12 months
Due after 12 months
Portion of time deposits that are uninsured
We offer a variety of deposit accounts having a wide range of interest rates and terms. We rely primarily on our high-quality customer service, sales programs, customer referrals, and advertising to attract and retain these deposits. Deposits provide the primary source of funding for our lending and investment activities, and the interest paid for deposits must be managed carefully to control the level of interest expense. Deposits at December 31, 2025 were $12,436,506,000, an increase of 2.7% from $12,111,844,000 at December 31, 2024. Deposit balances increased for the twelve months ended December 31, 2025 compared to the same period of 2024, however, they have continued to fluctuate as a result of increased general activities by customers and increased competition for deposits as a result of aggressive pricing by competitors. 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 chartered Subsidiary Banks within our holding company structure also allows us to work with customers to maximize their FDIC deposit insurance levels and provide additional levels of insured deposits.
Other Borrowed Funds
Other borrowed funds include FHLB borrowings, which are 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 mortgage-backed investment securities and a portion of our loan portfolio. At December 31, 2025, other borrowed funds totaled $10,332,000, a decrease of 2.0% from $10,541,000 at December 31, 2024.
Return on Equity and Assets
Certain key ratios for the years ended December 31, 2025, 2024, and 2023 follow (1) :
Years ended
December 31,
Percentage of net income to:
Average shareholders’ equity
Average total assets
Percentage of average shareholders’ equity to average total assets
Percentage of cash dividends per share to net income per share
(1) The average balances for purposes of the above table are calculated on the basis of daily balances.
Liquidity and Capital Resources
Liquidity
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 its 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, unused, lines of credit in order to fund liquidity needs. We maintain a sizable, high quality investment portfolio to provide significant liquidity. These securities can be sold or sold under agreements to repurchase, to provide immediate liquidity. The following table summarizes our short-term borrowing capacities, net of balances outstanding:
December 31,
(in Thousands)
Unsecured fed funds lines available from commercial banks
Unused borrowings capacity from FHLB (1)
Unused borrowings capacity under Federal Reserve discount window
Unpledged investment securities (2)
(1) FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans and mortgage finance assets
(2) Market value
Asset/Liability Management
Our funds management policy has as its primary focus the measurement and management of the Subsidiary Banks’ earnings at risk in the face of rising or falling interest rate forecasts. The earliest and most simplistic concept of earnings at risk measurement is the gap report, which is used to generate a rough estimate of the vulnerability of net interest income to changes in market rates as implied by the relative re-pricings of assets and liabilities. The gap report calculates the difference between the amounts of assets and liabilities re-pricing across a series of intervals in time, with emphasis typically placed on the one-year period. This difference, or gap, is usually expressed as a percentage of total assets.
If an excess of liabilities over assets matures or re-prices within the one-year period, the statement of condition is said to be negatively gapped. This condition is sometimes interpreted to suggest that an institution is liability-sensitive, indicating that earnings would suffer from rising rates and benefit from falling rates. If a surplus of assets over liabilities occurs in the one-year time frame, the statement of condition is said to be positively gapped, suggesting a condition of asset sensitivity in which earnings would benefit from rising rates and suffer from falling rates.
The gap report thus consists of an inventory of dollar amounts of assets and liabilities that have the potential to mature or re-price within a particular period. The flaw in drawing conclusions about interest rate risk from the gap report is that it takes no account of the probability that potential maturities or re-pricings of interest-rate-sensitive accounts will occur, or at what relative magnitudes. Because simplicity, rather than utility, is the only virtue of gap analysis, financial institutions increasingly have either abandoned gap analysis or accorded it a distinctly secondary role in managing their interest-rate risk exposure.
The net interest rate sensitivity at December 31, 2025, is illustrated in the following table. This information reflects the balances of assets and liabilities whose rates are subject to change. As indicated in the table below, we are asset sensitive through all of the time periods illustrated. The table shows the sensitivity of the statement of condition at one point in time and is not necessarily indicative of the position at future dates.
INTEREST RATE SENSITIVITY
(Dollars in Thousands)
Rate/Maturity
Over 3
Over 1
3 Months
Months to
Year to 5
Over 5
December 31, 2025
or Less
1 Year
Years
Years
Total
(Dollars in Thousands)
Rate sensitive assets
Investment securities
Loans, net of non-accruals
Total earning assets
Cumulative earning assets
Rate sensitive liabilities
Time deposits
Other interest bearing deposits
Securities sold under repurchase agreements
Other borrowed funds
Junior subordinated deferrable interest debentures
Total interest bearing liabilities
Cumulative sensitive liabilities
Repricing gap
Cumulative repricing gap
Ratio of interest-sensitive assets to liabilities
Ratio of cumulative, interest-sensitive assets to liabilities
The detailed inventory of statement of condition items contained in gap reports is the starting point of income simulation analysis. Income simulation analysis also focuses on the variability of net interest income and net income, but without the limitations of gap analysis. In particular, the fundamental, but often unstated, assumption of the gap approach that every statement of condition item that can re-price will do so to the full extent of any movement in market interest rates is taken into consideration in income simulation analysis.
Accordingly, income simulation analysis captures not only the potential of assets and liabilities to mature or re-price, but also the probability that they will do so. Moreover, income simulation analysis focuses on the relative sensitivities of these balance sheet items and projects their behavior over an extended period of time in a motion picture rather than snapshot fashion. Finally, income simulation analysis permits management to assess the probable effects on balance sheet items not only of changes in market interest rates, but also of proposed strategies for responding to such
changes. We and many other institutions rely primarily upon income simulation analysis in measuring and managing exposure to interest rate risk.
We have established guidelines for acceptable volatility of projected net interest income on the income simulation analysis and the guidelines are reviewed at least annually. As of December 31, 2025, in decreasing rate scenarios of -100, -200, -300 and -400 basis points and in rising rate scenarios of +100, +200, +300 and +400 basis points, the guidelines established by management require that the net interest income not vary by more than minus 15%, 15%, 15%, and 20%, respectively, for the first 12-month period projected. At December 31, 2025, the most recent income simulations show that a rate shift of -100, -200, -300, -400, +100, +200, +300 and +400 basis points in interest rates up will vary projected net interest income for the coming 12-month period by -2.71%, -4.88%, -6.55%, -7.75% +3.56%, +7.31%, +11.01% and +14.67%, respectively. The basis point shift in interest rates is a hypothetical rate scenario used to calibrate risk and does not necessarily represent management’s current view of future market developments. We believe that we are properly positioned for a potential interest rate increase or decrease.
All the measurements of risk described above are made based upon our business mix and interest rate exposures at the particular point in time. The exposure changes continuously as a result of our ongoing business and our risk management initiatives. While management believes these measures provide a meaningful representation of our interest rate sensitivity, they do not necessarily take into account all business developments that have an effect on net income, such as changes in credit quality or the size and composition of the statement of condition.
Our principal sources of liquidity and funding dividends from subsidiaries and borrowed funds, with such funds being used to finance our cash flow requirements. We closely monitor the dividend restrictions and availability from our Subsidiary Banks as disclosed in Note 18 of the Notes to Consolidated Financial Statements. At December 31, 2025, the aggregate amount legally available to be distributed to us from our Subsidiary Banks as dividends was approximately $1,644,000,000, assuming that each Subsidiary Bank continues to be classified as “well capitalized” under the applicable regulations in effect at December 31, 2024. The restricted capital (capital and surplus) of our Subsidiary Banks was approximately $1,506,627,000 as of December 31, 2025. The undivided profits of our Subsidiary Banks were approximately $2,254,243,000 as of December 31, 2025.
At December 31, 2025, we had outstanding $10,332,000 in other borrowed funds and $108,868,000 in junior subordinated deferrable interest debentures. In addition to borrowed funds and dividends, we have a number of other available alternatives to finance the growth of our Subsidiary Banks as well as future growth and expansion.
Capital
We maintain an adequate level of capital as a margin of safety for our depositors and shareholders. At December 31, 2025, shareholders’ equity was $3,251,638,000 compared to $2,796,707,000 at December 31, 2024, an increase of $454,931,000, or 16.3%. Shareholders’ equity increased primarily due to an increase in retained earnings. The accumulated other comprehensive loss is not included in the calculation of regulatory 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.
The FRB has adopted risk-based capital guidelines which assign risk weightings to assets and off-balance sheet items. The guidelines also define and set minimum capital requirements (risk-based capital ratios). All banks are required to have Tier 1 capital of at least 4 % of risk-weighted assets and total capital of 8% of risk-weighted assets. Tier 1 capital consists principally of shareholders’ equity plus trust preferred securities issued and outstanding less goodwill and certain other intangibles, while total capital consists of Tier 1 capital, certain debt instruments and a portion of the reserve for loan losses. In order to be deemed well capitalized pursuant to the regulations, an institution must have a total risk-weighted capital ratio of 10%, a Tier 1 risk-weighted ratio of 8% and a Tier 1 leverage ratio of 5%. We had risk-weighted Tier 1 capital ratios of 23.91% and 23.06% and risk-weighted total capital ratios of 25.09% and 24.31% as of December 31, 2025
and 2024, respectively, which are well above the minimum regulatory requirements and exceed the well-capitalized ratios (see Note 18 of our Notes to Consolidated Financial Statements).
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 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. The rules also improve the methodology for calculating risk-weighted assets to enhance risk sensitivity. We believe that as of December 31, 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 pauses 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 Current Expected Credit Losses (“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 the 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 the Basel III regulatory capital framework, commonly called “Basel III Endgame” or “Basel IV.” The Basel IV standards make changes to the capital framework first introduced as “Basel III” in 2010 and aim to reduce excessive variability in banks’ calculations of risk-weighted assets and risk-weighted capital ratios. Implementation of Basel IV across the Basel Committee’s member jurisdictions 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. Although the U.S. regulators originally 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, the federal banking agencies indicated in September 2025 that they intend to unveil a re-proposal of the Basel IV capital rules by early 2026. Accordingly, the previously established implementation dates for Basel IV are no longer definitive, and the timing, scope and final form of the re-proposed Basel IV framework remains uncertain.
Junior Subordinated Deferrable Interest Debentures
We currently have four statutory business trusts, Trusts IX, X, XI and XII (the “Trusts”) under the laws of the State of Delaware for the purpose of issuing trust preferred securities. The Trusts each issued capital and common securities (“Capital and Common Securities”) and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (the “Debentures”) that we issued. As of December 31, 2025 and December 31, 2024, the principal amount of Debentures outstanding totaled $108,868,000.
The Debentures are subordinated and junior in right of payment to all of our 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 twenty consecutive quarterly periods on each of the Trusts. If interest payments on any of the Debentures are 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 investments and not consolidated in the 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 December 31, 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 Debentures and their interest rates at December 31, 2025:
Junior
Subordinated
Deferrable
Interest
Repricing
Interest Rate
Optional
Debentures
Frequency
Interest Rate
Index(1)
Maturity Date
Redemption Date(2)
(in thousands)
Trust IX
Quarterly
SOFR + 1.62
October 2036
October 2011
Trust X
Quarterly
SOFR + 1.65
February 2037
February 2012
Trust XI
Quarterly
SOFR + 1.62
July 2037
July 2012
Trust XII
Quarterly
SOFR + 1.45
September 2037
September 2012
The Capital and Common Securities may be redeemed in whole or in part on any interest payment date after the Optional Redemption Date.
Contractual Obligations and Commercial Commitments
The following table presents contractual cash obligations (other than deposit liabilities) as of December 31, 2025:
Payments due by Period
(Dollars in Thousands)
Less than
One to Three
Three to
After Five
Contractual Cash Obligations
Total
One Year
Years
Five Years
Years
Securities sold under repurchase agreements
Federal Home Loan Bank borrowings
Junior subordinated deferrable interest debentures
Operating leases
Total Contractual Cash Obligations
The following table presents contractual commercial commitments (other than deposit liabilities) as of December 31, 2025:
Amount of Commitment Expiration Per Period
(Dollars in Thousands)
Less than
One to Three
Three to Five
After Five
Commercial Commitments
Total
One Year
Years
Years
Years
Financial and Performance Standby Letters of Credit
Commercial Letters of Credit
Credit Card Lines
Other Commercial Commitments
Total Commercial Commitments
Due to the nature of our commercial commitments, including unfunded loan commitments and lines of credit, the amounts presented above do not necessarily reflect the amounts we anticipate funding in the periods above.
Critical Accounting Policies
We have established various accounting policies which 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 which 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 the 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 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 the development of land from 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, and 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 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./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 December 31, 2025 and December 31, 2024:
December 31, 2025
December 31, 2024
(Dollars in Thousands)
(Dollars in Thousands)
Amount
Percent of Total
Amount
Percent of Total
Commercial real estate:
Commercial real estate construction development
Hotel
Multi-family
Lot development: residential and commercial lots
Retail multi-tenant
Warehouse
Office/Professional buildings
1 - 4 family construction
Owner occupied real estate
Commercial leased properties
Farmland
Total commercial real estate
1-4 family mortgages. This category includes both first and second lien mortgages for the purpose of home purchases or refinancing of 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 the 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.
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 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 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 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 cap 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.
Recent Accounting Standards Issued
See Note 1—Summary of Significant Accounting Policies in our accompanying Notes to Consolidated Financial Statements for details of recently issued and recently adopted accounting standards and their impact on our consolidated financial statements.
Common Stock and Dividends
We have issued and outstanding 62,177,719 shares of $1.00 par value common stock held by approximately 1,689 holders of record at February 23, 2026. The book value of the common stock at December 31, 2025 was $54.86 per share compared with $47.47 per share at December 31, 2024.
Our common stock is traded on the Nasdaq National Market under the symbol “IBOC.” The following table sets forth the approximate high and low bid prices in our common stock during 2025 and 2024, as quoted on the Nasdaq National Market for each of the quarters in the two-year period ended December 31, 2025. Some of the quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The closing sales price of our common stock was $68.34 per share at February 23, 2026.
High
Low
First quarter
Second quarter
Third quarter
Fourth quarter
High
Low
First quarter
Second quarter
Third quarter
Fourth quarter
We paid cash dividends of $.70 per share on February 28 and August 29, 2025, respectively, to all record holders of our common stock on February 14 and August 15, 2025, respectively. We paid cash dividends of $.66 per share on
February 28 and August 28, 2024, respectively, to all record holders of our common stock on February 15 and August 14, 2024, respectively.
Our principal source of funds to pay cash dividends on our common stock is cash dividends from our Subsidiary Banks. For a discussion of the limitations, please see Note 18 of our Notes to Consolidated Financial Statements.
Stock Repurchase Program
In April 2009, the Board of Directors 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 of Directors 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. On February 17, 2026, our Board of Directors authorized the renewal and increase of the repurchase program to purchase up to $150 million of common stock during the 12-month period commencing on March 15, 2026 upon the expiration of our current repurchase program on that date. 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 fourth quarter of 2025, the Board of Directors 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 a 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 February 23, 2026, a total of 13,796,988 shares had been repurchased under all programs at a cost of $420,060,000. 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 repurchase programs approved by the Board of Directors. The following table includes information about common stock share repurchases for the quarter ended December 31, 2025.
Total Number of
Shares
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)
October 1 – October 31, 2025
November 1 – November 30, 2025
October 1 – October 31, 2025
Total
The repurchase program was extended on March 12, 2025 and allows for the repurchase of up to an additional $150,000,000 of treasury stock through March 15, 2026.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2025, with respect to our equity compensation plans:
Number of securities
remaining available for
future issuance under
Number of securities to
Weighted average
equity compensation
be issued upon exercise
exercise price of
plans (excluding
of outstanding options,
outstanding options,
securities reflected in
Plan Category
warrants and rights
warrants and rights
column A)
Equity Compensation plans approved by security holders
Total
Stock Performance
COMPARISON OF CUMULATIVE FIVE-YEAR TOTAL RETURN
Total Return To Shareholders
(Includes reinvestment of dividends)
Base
INDEXED RETURNS
Period
December 31,
Company / Index
International Bancshares Corporation
S&P 400 Index
S&P 400 Banks
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors
of International Bancshares Corporation and its Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of condition of International Bancshares Corporation and its Subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2025, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 26, 2026 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Allowance for Credit Losses
As described in Note 4 of the consolidated financial statements, the Company established an allowance for credit losses totaling $159,174,000 as of December 31, 2025. The allowance for credit losses is derived from 1) a loss-rate methodology that measures lifetime losses on loan pools that have similar risk characteristics; and 2) estimated losses on individually evaluated loans that do not have similar risk characteristics. The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk characteristics and sufficient loss history to provide relevant results. Loan pools are further broken down using a risk-based segmentation based on internal classifications of credit
quality. Within each loan pool, the lifetime historical loss-rate is evaluated and, if needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative factors are applied at the loan pool level to incorporate management’s two-year forecast period followed by a reversion to the pool’s average lifetime loss-rate. Those qualitative factors include: (i) trends in portfolio volume and composition, (ii) volume and trends in classified loans, delinquencies, non-accruals and troubled loan modifications (TLM’s), (iii) concentration risk, (iv) trends in underlying collateral value, (v) changes in policies, procedures, and strategies, (vi) economic conditions, and (vii) operational and other risk factors to capture potential losses arising from fraud, natural disasters, pandemics, geopolitical events and large loans.
We identified the qualitative factor component of the allowance for credit losses as a critical audit matter. Auditing management’s estimate of the qualitative factors required a high degree of auditor judgment due to the nature of the adjustments and the subjectivity in judgments applied by management in forming them.
Our audit procedures related to the Company’s qualitative factors included, the following, among others:
We obtained an understanding of the relevant controls related to the allowance for credit losses, including the qualitative factors, and tested such controls for design and operating effectiveness, including controls related to management’s review of the qualitative factors and approval of the allowance for credit losses calculation.
We evaluated the appropriateness and consistency of management’s methods and assumptions used to determine qualitative factors by (1) evaluating management’s identification and quantification of qualitative factors; (2) testing the completeness and accuracy of data and information used in calculating the components of the qualitative factors; (3) evaluating the reasonableness, directional consistency, and magnitude of the quantification of the qualitative factors; and (4) reviewing subsequent events and considering their impact on judgments applied in forming the qualitative factor component of the allowance for credit losses as of the consolidated balance sheet date.
/s/ RSM US LLP
We have served as the Company's auditor since 2007.
Austin, Texas
February 26, 2026
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Condition
December 31, 2025 and 2024
(Dollars in Thousands, Except Per Share Amounts)
December 31,
December 31,
Assets
Cash and cash equivalents
Investment securities:
Held to maturity debt securities (Market value of $ 4,400 on December 31, 2025 and $ 4,400 on December 31, 2024)
Available for sale debt securities (Amortized cost of $ 5,281,090 on December 31, 2025 and $ 5,472,310 on December 31, 2024)
Equity securities with readily determinable fair values
Total investment securities
Loans
Less allowance for credit losses
Net loans
Bank premises and equipment, net
Accrued interest receivable
Other investments
Cash surrender value of life insurance policies
Goodwill
Other assets
Total assets
See accompanying notes to consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Condition Continued
December 31, 2025 and 2024
(Dollars in Thousands, Except Per Share Amounts)
December 31,
December 31,
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand—non-interest bearing
Savings and interest bearing demand
Time
Total deposits
Securities sold under repurchase agreements
Other borrowed funds
Junior subordinated deferrable interest debentures
Other liabilities
Total liabilities
Shareholders’ equity:
Common shares of $ 1.00 par value. Authorized 275,000,000 shares; issued 96,658,794 shares on December 31, 2025 and 96,616,673 shares on December 31, 2024
Surplus
Retained earnings
Accumulated other comprehensive loss
Less cost of shares in treasury, 34,490,048 shares on December 31, 2025 and 34,407,674 on December 31, 2024
Total shareholders’ equity
Total liabilities and shareholders’ equity
See accompanying notes to consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 2025, 2024 and 2023
(Dollars in Thousands, Except Per Share Amounts)
Interest income:
Loans, including fees
Investment securities:
Taxable
Tax-exempt
Other interest income
Total interest income
Interest expense:
Savings deposits
Time deposits
Securities sold under repurchase agreements
Other borrowings
Junior subordinated deferrable interest debentures
Total interest expense
Net interest income
Credit loss expense
Net interest income after provision for credit losses
Non-interest income:
Service charges on deposit accounts
Other service charges, commissions and fees
Banking
Non-banking
Investment securities transactions, net
Other investments income, net
Other income
Total non-interest income
See accompanying notes to consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income, continued
Years ended December 31, 2025, 2024 and 2023
(Dollars in Thousands, Except Per Share Amounts)
Non-interest expense:
Employee compensation and benefits
Occupancy
Depreciation of bank premises and equipment
Professional fees
Deposit insurance assessments
Net operations, other real estate owned
Advertising
Software and software maintenance
Other
Total non-interest expense
Income before income taxes
Provision for income taxes
Net income
Basic earnings per common share:
Weighted average number of shares outstanding
Net income per common share
Fully diluted earnings per common share:
Weighted average number of shares outstanding
Net income per common share
See accompanying notes to consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
Years ended December 31, 2025, 2024 and 2023
(Dollars in Thousands)
Net income
Other comprehensive income, net of tax:
Net change in unrealized holding gains on securities available for sale arising during period (net of tax effects of $ 35,285 , $ 5,007 and $ 19,300 )
Reclassification adjustment for losses on securities available for sale included in net income (net of tax effects of $ 0 , $ 0 and $ 1 )
Total other comprehensive income, net of tax
Comprehensive income
See accompanying notes to consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
Years ended December 31, 2025, 2024 and 2023
(in Thousands, except per share amounts)
Number
Other
Preferred
Common
Retained
Comprehensive
Treasury
Stock
Shares
Stock
Surplus
Earnings
Income (Loss)
Stock
Total
Balance at December 31, 2022
Net Income
Dividends:
Cash ($ 1.26 per share)
Purchase of treasury ( 112,567 shares)
Exercise of stock options
Stock compensation expense recognized in earnings
Other comprehensive loss, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustment
Balance at December 31, 2023
Net Income
Dividends:
Cash ($ 1.32 per share)
Purchase of treasury ( 16,490 shares)
Exercise of stock options
Stock compensation expense recognized in earnings
Other comprehensive income, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments
Balance at December 31, 2024
Net Income
Dividends:
Cash ($ 1.40 per share)
Purchase of treasury ( 82,374 shares)
Exercise of stock options
Stock compensation expense recognized in earnings
Other comprehensive income, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments
Balance at December 31, 2025
See accompanying notes to consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2025, 2024 and 2023
(Dollars in Thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense
Specific reserve, other real estate owned
Depreciation of bank premises and equipment
Gain on sale of bank premises and equipment
Loss (gain) on sale of other real estate owned
Accretion of investment securities discounts
Amortization of investment securities premiums
Investment securities transactions, net
Unrealized (gain) loss on equity securities with readily determinable fair values
Stock based compensation expense
Earnings from affiliates and other investments
Deferred tax expense (benefit)
Increase in accrued interest receivable
Decrease (increase) in other assets
(Decrease) increase in other liabilities
Net cash provided by operating activities
Investing activities:
Proceeds from maturities of securities
Proceeds from sales and calls of available for sale securities
Purchases of available for sale securities
Principal collected on mortgage backed securities
Net increase in loans
Purchases of other investments
Distributions from other investments
Purchases of bank premises and equipment
Proceeds from sales of bank premises and equipment
Proceeds from sales of other real estate owned
Net cash used in investing activities
See accompanying notes to consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
Years ended December 31, 2025, 2024 and 2023
(Dollars in Thousands)
Financing activities:
Net decrease in non-interest bearing demand deposits
Net increase (decrease) in savings and interest bearing demand deposits
Net increase in time deposits
Net increase in securities sold under repurchase agreements
Paydowns on long-term other borrowed funds
Redemption of long-term debt
Purchase of treasury stock
Proceeds from stock transactions
Payments of cash dividends
Net cash provided by (used in) financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Interest paid
U.S. federal income taxes paid
State income/franchise taxes paid (refunded):
Texas
Other states
Non-cash investing and financing activities:
Net transfers from loans to other real estate owned
Net transfers from loans to other investments
See accompanying notes to consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Our accounting and reporting policies conform to U.S. generally accepted accounting principles (“GAAP”) and to general practices within the banking industry. The following is a description of the more significant of those policies.
Consolidation and Basis of Presentation
Our consolidated financial statements include the accounts of the International Bancshares Corporation, its wholly owned Subsidiary Banks and its wholly owned non-bank subsidiaries, IBC Trading Company, Premier Tierra Holdings, Inc., IBC Charitable and Community Development Corporation, IBC Capital Corporation, WCMH, LLC, and Diamond Beach Holdings, LLC. All significant inter-company balances and transactions have been eliminated in consolidation.
We, through our Subsidiary Banks, are primarily engaged in the business of banking, including the acceptance of checking and savings deposits and the making of commercial, real estate, personal, home improvement, automobile, and other installment and term loans. Our primary markets are north, south, central, and southeast Texas and the state of Oklahoma. Each of our Subsidiary Banks is highly active in facilitating international trade along the United States border with Mexico and elsewhere. Although our loan portfolio is diversified, the ability of our debtors to honor their contracts is primarily dependent upon the economic conditions in our trade area. In addition, the investment portfolio is directly impacted by fluctuations in market interest rates. We are subject to the regulations of certain federal agencies as well as the Texas Department of Banking and the Oklahoma Department of Banking and undergo periodic examinations by those regulatory authorities. Such agencies may require certain standards or impose certain limitations based on their judgments or changes in law and regulations.
We own one insurance-related subsidiary, IBC Insurance Agency, Inc., a wholly owned subsidiary of our Subsidiary Bank, International Bank of Commerce, Laredo. The insurance-related subsidiary does not conduct underwriting activities.
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the dates of the statement of condition and income and expenses for the periods. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant changes in the near-term relate to the determination of the allowance for credit losses (“ACL”).
Subsequent Events
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.
Investment Securities
We classify debt securities into one of these categories: held-to-maturity, available-for-sale, or trading. Such classifications are reassessed for appropriate classification at each reporting date. Securities that are intended and expected to be held until maturity are classified as “held-to-maturity” and are carried at amortized cost for financial statement reporting. Securities that are not positively expected to be held until maturity but are intended to be held for an indefinite period of time are classified as “available-for-sale” or “trading” and 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 in shareholders’ equity as accumulated other comprehensive income (loss) until realized. Unrealized gains and losses related to equity securities with readily determinable fair values are included in net income. 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 would be recorded as a charge to our ACL with subsequent changes in the amount of impairment,
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
up or down, also recorded through our ACL. The exception to this process will occur if we intend to sell an impaired available- for-sale debt security or if we will more likely than not be required to sell a credit impaired available-for-sale debt security prior to the value recovering to the security’s amortized cost. In those situations, the entire credit-related impairment amount would be required to be recognized in earnings. We have evaluated the debt securities classified as available-for-sale and held-to-maturity at December 31, 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 periods. We did not maintain any trading securities during the three-year period ended December 31, 2025.
Mortgage-backed securities held at December 31, 2025 and December 31, 2024 represent participating interests in pools of long-term first mortgage loans originated and serviced by the issuers of the securities. Mortgage-backed securities are either issued or guaranteed by the U.S. government or its agencies including Freddie Mac, Fannie Mae, Ginnie Mae or other non-government entities. 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 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. Market interest rate fluctuations can affect the prepayment speed of principal and the yield on the security.
Premiums and discounts are amortized using the level yield or “interest method” over the terms of the securities. Declines in the fair value of held-to-maturity and available-for sale-securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In determining whether other-than-temporary impairment exists, management considers many factors, including (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) our intent to hold and our determination of whether we will more likely than not be required to sell the security prior to a recovery in fair value. If we determine that (i) we intend to sell the security or (ii) it is more likely than not that we will be required to sell the security before it’s anticipated recovery, the other-than-temporary impairment that is recognized in earnings is equal to the difference between the fair value of the security and our amortized cost of the security. If we determine that we (i) do not intend to sell the security and (ii) we will not be more likely than not required to sell the security before it’s anticipated recovery, the other-than-temporary impairment is segregated into its two components (i) the amount of impairment related to credit loss and (ii) the amount of impairment related to other factors. The difference between the present value of the cash flows expected to be collected and the amortized cost is the credit loss recognized through earnings and an adjustment to the cost basis of the security. The amount of impairment related to other factors is included in other comprehensive income (loss). Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
Equity Securities
Equity securities with readily determinable fair values at December 31, 2025 and December 31, 2024 consist primarily of Community Reinvestment Act funds. Unrealized gains and losses on the equity securities are recognized in net income.
Provision and Allowance for Credit Losses
Our ACL is based on an expected credit loss model that recognizes credit losses over the life of a financial asset. Expected credit losses capture historical information, current conditions, and reasonable and supportable forecasts of future conditions. 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.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
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. We believe that the allowance for probable loan losses is adequate.
The Subsidiary Banks charge-off that portion of any loan which management considers to represent a loss as well as that portion of any other loan which is classified as a “loss” by bank examiners. Commercial, financial, and agricultural or real estate loans are generally considered by management to represent a loss, in whole or part, (i) when an exposure beyond any collateral coverage is apparent, (ii) when no further collection of the portion of the loan so exposed is anticipated based on actual results, (iii) when the credit enhancements, if any, are not adequate, and (iv) when the borrower’s financial condition would indicate so. Generally, unsecured consumer loans are charged-off when 90 days past due.
Loans
Loans are reported at the principal balance outstanding, net of unearned discounts. Interest income on loans is reported on an accrual basis. Loan fees and costs associated with originating the loans are accreted or amortized over the life of the loan using the interest method. We originate mortgage loans that may subsequently be sold to an unaffiliated third party. The loans are not securitized and if sold, are sold without recourse. Loans held for sale are carried at cost and the principal amount outstanding is not significant to the consolidated financial statements.
Doubtful Loans
Doubtful loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected. Doubtful loans are measured based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral if the loan is collateral dependent. Substantially all our doubtful loans are measured at the fair value of the collateral. In limited cases, we may use other methods to determine the level of impairment of a loan if such loan is not collateral dependent.
Troubled Loan Modifications
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.
Non-Accrual Loans
The non-accrual loan policy of our Subsidiary Banks is to discontinue the accrual of interest on loans when management determines that it is probable that future interest accruals will be un-collectible. As it relates to consumer loans, management charges-off those loans when the loan is contractually 90 days past due. Under special circumstances, a consumer or non-consumer loan may be more than 90 days delinquent as to interest or principal and not be placed on non-accrual status. This situation generally results when a Subsidiary Bank has a borrower who is experiencing financial difficulties, but not to the extent that requires a restructuring of indebtedness. The majority of this category is composed
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
of loans that are considered to be adequately secured and/or for which there are expected future payments. When a loan is placed on non-accrual status, any interest accrued, not paid is reversed and charged to operations against interest income. As it relates to non-consumer loans that are not 90 days past due, management will evaluate each of these loans to determine if placing the loan on non-accrual status is warranted. Interest income on non-accrual loans is recognized only to the extent payments are received or when, in management’s opinion, the debtor’s financial condition warrants reestablishment of interest accruals.
Other Real Estate Owned and Repossessed Assets
Other real estate owned is comprised of real estate acquired by foreclosure and deeds in lieu of foreclosure. Other real estate 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). 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. Any subsequent write-downs are charged against other non-interest expense through a valuation allowance. Other real estate owned totaled approximately $ 19,368,000 and $ 28,193,000 at December 31, 2025 and 2024, respectively. Other real estate owned is included in other assets. Repossessed assets consist primarily of non-real estate assets acquired by foreclosure. Prior to foreclosure, the value of the underlying loan is written down to the fair value of the asset to be repossessed by a charge to the ACL, if necessary. Repossessed assets are included in other assets on the consolidated financial statements and totaled approximately $ 288,000 and $ 358,000 at December 31, 2025 and December 31, 2024, respectively.
Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed on straight-line and accelerated methods over the estimated useful lives of the assets. Repairs and maintenance are charged to operations as incurred and expenditures for renewals and betterments are capitalized. We primarily own all the property we occupy, with the exception of certain branches operating in grocery store or retail shopping centers and certain ATM locations, which are all under operating leases as classified under guidance prior to the issuance of ASU 2016-02, “Leases (Topic 842).”
Other Investments
Other investments include equity investments in non-financial companies, as well as equity securities with no readily determinable fair market value. Equity investments are accounted for using the equity method of accounting. Due to timing issues in the accounting by some of the non-financial companies in which we hold an investment, activity recorded to our books is recorded one quarter in arrears. Equity securities with no readily determinable fair value are accounted for using the cost method.
Revenue Recognition
Our revenue is primarily comprised of net interest income on financial assets and liabilities, which are excluded from the scope of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The remaining non-interest revenue streams were identified and then analyzed under the provisions of the update, to: (i) identify the contract, (ii) identify the performance obligation, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when the performance obligation was satisfied. Our non-interest revenue contracts with customers are primarily short term and our performance obligation is satisfied at a single point in time, typically within a single period.
Income Taxes
Deferred income tax assets and liabilities are determined using the asset and liability method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the differences between the book and tax basis of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. We file a consolidated federal income tax return with our subsidiaries.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Recognition of deferred tax assets is based on management’s assessment that the benefit related to certain temporary differences, tax operating loss carry forwards, and tax credits are more likely than not to be realized. A valuation allowance is recorded for the amount of the deferred tax items for which it is more likely than not that the tax benefits will not be realized.
We evaluate uncertain tax positions at the end of each reporting period. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit recognized in the financial statements from any such a position is measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. As of December 31, 2025 and December 31, 2024, respectively, after evaluating all uncertain tax positions, we have recorded no liability for unrecognized tax benefits at the end of the reporting period. We would recognize any interest accrued on unrecognized tax benefits as other interest expense and penalties as other non-interest expense. During the years ended December 31, 2025, 2024, and 2023, we recognized no interest expense or penalties related to uncertain tax positions.
We file consolidated tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are no longer subject to U.S. federal or state income tax examinations by tax authorities for years before 2022.
Stock Options and Stock Appreciation Rights
Compensation expense for stock-based awards is based on the market price of the stock on the measurement date, which is generally the date of grant, and is recognized ratably over the service period of the award. The fair value of stock options and stock appreciation rights granted was estimated using a Black-Scholes-Merton pricing model. These models were developed for use in estimating the fair value of publicly traded options and stock appreciation rights that have no vesting restrictions and are fully transferable. Additionally, these models require the input of highly subjective assumptions. Because our employee stock options and stock appreciation rights have characteristics significantly different from those of publicly traded options and appreciation rights, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the Black-Scholes-Merton pricing models do not necessarily provide a reliable single measure of the fair value of our stock options and stock appreciation rights.
Net Income Per Share
Basic Earnings Per Share (“EPS”) is calculated by dividing net income by the weighted average number of common shares outstanding. The computation of diluted EPS assumes the issuance of common shares for all dilutive potential common shares outstanding during the reporting period. The dilutive effect of stock options is considered in earnings per share calculations, if dilutive, using the treasury stock method.
Goodwill and Identified Intangible Assets
Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill is tested for impairment at least annually or on an interim basis if an event triggering impairment may have occurred. As of October 1, 2025, after completing goodwill testing, we have determined that no goodwill impairment exists. There were no changes in the carrying amount of goodwill for the years ended December 31, 2025 and December 31, 2024.
Identified intangible assets are acquired assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability.
Impairment of Long-Lived Assets
Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying value of the asset
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying value of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying value of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the statement of condition and reported at the lower of the carrying value or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the statement of condition.
Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, we consider all short-term investments with a maturity at date of purchase of three months or less to be cash equivalents. Also, we report transactions related to deposits and loans to customers on a net basis.
Accounting for Transfers and Servicing of Financial Assets
We account for transfers and servicing of financial assets and extinguishments of liabilities based on the application of a financial-components approach that focuses on control. After a transfer of financial assets, we recognize the financial and servicing assets we control and liabilities we have incurred, derecognize financial assets when control has been surrendered and derecognize liabilities when extinguished. We have retained mortgage servicing rights in connection with the sale of mortgage loans. Because we may not initially identify loans as originated for resale, all loans are initially treated as held for investment. The value of the mortgage servicing rights is reviewed periodically for impairment and are amortized in proportion to, and over the period of estimated net servicing income or net servicing losses. The value of the mortgage servicing rights is not significant to the consolidated statements of condition.
Segments of an Enterprise and Related Information
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 financial statements presented in this report. We have five active operating subsidiaries, namely, 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.
Comprehensive Income (Loss)
Comprehensive income (loss) consists of net income and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale.
Advertising
Advertising costs are expensed as incurred.
Reclassifications
Certain amounts in the prior year’s presentations have been reclassified to conform to the current presentation. These reclassifications had no effect on previously reported net income or shareholders’ equity.
New Accounting Standards
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, an Amendment. ASU 2023-09 is intended to enhance transparency and decisions usefulness of income tax disclosures. ASU 2023-09 requires that public entities disclose specific categories in the annual rate reconciliation and provides additional guidance for reconciling items that meet a quantitative threshold.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Explanation of individual reconciling items is also required. ASU 2023-09 also requires certain disclosures regarding income taxes paid, including disaggregation of taxes paid (net of refunds) by federal, state and foreign taxes, including disaggregation by individual jurisdictions in which taxes paid (net of refunds), exceed a quantitative threshold. The provisions of ASU 2023-09 are effective for annual periods beginning after December 15, 2024. The adoption of ASU 2023-09 impacted the disclosures included in Note 13 – Income Taxes and did not have an impact on the measurement of the amounts reported in the consolidated financial statements. We chose to apply the disclosure requirements of ASU 2023-09 retrospectively to all periods reported in the consolidated financial statements.
In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires new tabular disclosures of certain prescribed income statement expenses, including among other things, employee compensation and depreciation. Additionally, ASU 2024-03 requires disclosure of selling expenses based upon an entity’s own definition. The provisions of ASU 2024-03 are effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The adoption of ASU 2024-03 is not expected to have a significant impact on our consolidated financial statements. In January 2025, the FASB issued Accounting Standards Update No. 2025-01, Income Statements-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) to clarify the initial effective dates for non-calendar year entities. The adoption of ASU 2025-01 is not expected to have a significant impact on our consolidated financial statements.
In September 2025, the FASB issued Accounting Standards Update No. 2025-06 Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 modernizes current accounting guidelines by aligning the accounting for internal-use software costs with current, iterative development methods (such as agile) rather than prescriptive project “stages.” The update removes references to development stages and requires entities to begin capitalizing software development costs when (1) management has authorized and committed to funding the project and (2) it is probable the software will be completed and used as intended, while also relocating website development guidance into existing guidance and clarifying related disclosure requirements. The provisions of ASU 2025-06 are effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. The adoption of ASU 2025-06 is not expected to have a significant impact on our consolidated financial statements.
In November 2025, the FASB issued Accounting Standards Update No. 2025-08, Financial Instruments-Credit Losses (Topic 326): Purchased Loans . ASU 2025-08 simplifies and improves the accounting for acquired loans by expanding the use of the “gross-up” approach at acquisition. Certain acquired loans (excluding credit cards) that qualify as purchased seasoned loans , including all non-purchased financial assets with credit deterioration (PCD) loans acquired in a business combination and other non-PCD loans purchased at least 90 days after origination when the acquirer was not involved in origination, are recognized at purchase price plus an allowance for expected credit losses , aligning the accounting with that of PCD assets and eliminating a Day one credit loss expense and perceived double counting under prior guidance. ASU 2025-08 leaves existing PCD guidance otherwise unchanged. The provisions of ASU 2025-08 are effective for annual periods beginning after December 15, 2026, and interim periods within those annual periods. The adoption of ASU 2025-08 is not expected to have a significant impact on our consolidated financial statements.
In December 2025, the FASB issued Accounting Standards Update No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. ASU 2025-11 clarifies when and how interim reporting guidance applies and improves the organization and navigability of ASC 270 without changing the fundamental nature or overall volume of interim disclosure requirements. The update specifies that ASC 270 applies to all entities that provide interim financial statements and accompanying notes in accordance with U.S. GAAP, clarifies form and content requirements (including guidance for non-SEC registrants), compiles a comprehensive list of interim disclosures required by other Codification topics, and introduces a principle requiring disclosure of events occurring since the most recent annual reporting period that have a material impact on the entity. The provisions of ASU 2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. The adoption of ASU 2025 is not expected to have a significant impact on our consolidated financial statements.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(2) Investment Securities, Equity Securities with Readily Determinable Fair Values and Other Investments
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 would be recorded as a charge to our ACL with subsequent changes in the amount of impairment, up or down, also recorded through our ACL. The exception to this process will occur if we intend to sell an impaired available-for-sale debt security or if we will more likely than not be required to sell a credit impaired available-for-sale debt security prior to the value recovering to the security’s amortized cost. In those situations, the entire credit-related impairment amount would be required to be recognized in earnings. We have evaluated the debt securities classified as available-for-sale and held-to-maturity at December 31, 2025 and December 31, 2024, 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 December 31, 2025 are as follows:
Held to Maturity
Gross
Gross
Amortized
unrealized
unrealized
Estimated
Carrying
cost
gains
losses
fair value
value
(Dollars in Thousands)
Other securities
Total investment securities
Available for Sale Debt Securities
Gross
Gross
Amortized
unrealized
unrealized
Estimated
Carrying
cost
gains
losses
fair value
value (1)
(Dollars in Thousands)
Residential mortgage-backed securities
Obligations of states and political subdivisions
Total investment securities
Included in the carrying value of residential mortgage- backed securities are $ 854,726 of mortgage-backed securities issued by Ginnie Mae and $ 3,975,862 of mortgage-backed securities issued by Fannie Mae and Freddie Mac
The amortized cost and estimated fair value of investment securities at December 31, 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.
Held to Maturity
Available for Sale
Amortized
Estimated
Amortized
Estimated
Cost
fair value
Cost
fair value
(Dollars in Thousands)
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Residential mortgage-backed securities
Total investment securities
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The amortized cost and estimated fair value by type of investment security at December 31, 2024 are as follows:
Held to Maturity
Gross
Gross
Amortized
unrealized
unrealized
Estimated
Carrying
cost
gains
losses
fair value
value
(Dollars in Thousands)
Other securities
Total investment securities
Available for Sale
Gross
Gross
Estimated
Amortized
unrealized
unrealized
fair
Carrying
cost
gains
losses
value
value (1)
(Dollars in Thousands)
Residential mortgage-backed securities
Obligations of states and political subdivisions
Total investment securities
Included in the carrying value of residential mortgage- backed securities are $ 1,001,184 of mortgage-backed securities issued by Ginnie Mae, $ 3,833,992 of mortgage-backed securities issued by Fannie Mae and Freddie Mac
Residential mortgage-backed securities are securities issued by Freddie Mac, Fannie Mae, Ginnie Mae or non-government entities. Investments in residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. government. Investments in 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 and Freddie Mac are rated consistently as AAA rated securities. Obligations of states and political subdivisions are securities issued by public school districts and are guaranteed by the Permanent School Fund (PSF) of the State of Texas under the Texas Education Code. The PSF guarantee provides an unconditional and irrevocable guarantee of principal and interest payments.
The amortized cost and fair value of available for sale investment securities pledged to qualify for fiduciary powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was $ 1,780,145,000 and $ 1,619,467,000 , respectively, at December 31, 2025.
Proceeds from the sale and call of securities available-for-sale were $ 15,490,000 , $ 3,750,000 , and $ 2,045,000 during 2025, 2024 and 2023, respectively, which amounts included $ 0 , $ 0 and $ 0 of mortgage-backed securities. Gross gains of $ 0 , $ 0 and $ 0 , and gross losses of $ 1,000 , $ 1,000 and $ 3,000 were realized on the sales and calls in 2025, 2024 and 2023, respectively.
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2025 were as follows:
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities
Obligations of states and political subdivisions
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at December 31, 2024 were as follows:
Less than 12 months
12 months or more
Total
Unrealized
Unrealized
Unrealized
Fair Value
Losses
Fair Value
Losses
Fair Value
Losses
(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities
Obligations of states and political subdivisions
The unrealized losses on investments in residential mortgage-backed securities and obligations of states and political subdivision securities are primarily caused by changes in market interest rates. We have no intent to sell and more likely than not be required to sell before a market price recovery or maturity of the securities; therefore, it is our conclusion that the investments in residential mortgage-backed securities issued by Freddie Mac, Fannie Mae, and Ginnie Mae and the obligations of states and political subdivisions guaranteed by the PSF are not considered other-than-temporarily impaired.
Equity securities with readily determinable fair values consist primarily of Community Reinvestment Act funds. At December 31, 2025 and December 31, 2024, the balance in equity securities with readily determinable fair values recorded at fair value were $ 5,573,000 and $ 5,394,000 , respectively. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities for the twelve months ended December 31, 2025, 2024, and 2023:
Year Ended
December 31, 2025
(Dollars in Thousands)
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
Year Ended
December 31, 2024
(Dollars in Thousands)
Net losses recognized during the period on equity securities
Less: Net gains and (losses) recognized during the period on equity securities sold during the period
Unrealized losses recognized during the reporting period on equity securities still held at the reporting date
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Year Ended
December 31, 2023
(Dollars in Thousands)
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
Other investments include equity and merchant banking investments held by our subsidiary banks and non-banking 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 projects. We are a limited partner in the partnerships, and not required to consolidate the entities in our consolidated financial statements. Investments in LIHTC projects totaled $ 261,128,000 at December 31, 2025 and $ 186,369,000 at December 31, 2024 and are included in other investments on the consolidated financial statements. Unfunded commitments to LIHTC projects totaled $ 37,200,000 at December 31, 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 $ 32,996,000 and $ 28,310,000 in estimated tax credits related to these investments recorded for the twelve months ended December 31, 2025 and December 31, 2024, respectively. There was a total of $ 28,627,000 and $ 26,615,000 in estimated amortization related to these investments for the twelve months ended December 31, 2025 and December 31, 2024, respectively. There were no impairment losses recorded on tax equity investments during the twelve months ended December 31, 2025 or December 31, 2024.
(3) Loans
A summary of loans, by loan type at December 31, 2025 and 2024 is as follows:
December 31,
December 31,
(Dollars in Thousands)
Commercial, financial and agricultural
Real estate - mortgage
Real estate - construction
Consumer
Foreign
Total loans
(4) Allowance for Credit Losses
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:
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
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 the 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 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 the development of land from 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 and 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 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.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The table below summarizes the commercial real estate loan portfolio disaggregated by the type of real estate securing the credit as of December 31, 2025 and December 31, 2024:
December 31, 2025
December 31, 2024
(Dollars in Thousands)
(Dollars in Thousands)
Amount
Percent of Total
Amount
Percent of Total
Commercial real estate:
Commercial real estate construction development
Hotel
Multi-family
Lot development: residential and commercial lots
Retail multi-tenant
Warehouse
Office/Professional buildings
1 - 4 family construction
Owner occupied real estate
Commercial leased properties
Farmland
Total commercial real estate
1-4 family mortgages. This category includes both first and second lien mortgages for the purpose of home purchases or refinancing of 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 the 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.
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
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
value, have shown defined weaknesses related to adverse financial, managerial, economic, market, or political conditions which may jeopardize repayment of principal 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 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 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 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.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
A summary of the changes in the allowance for probable loan losses by loan class is as follows:
December 31, 2025
Domestic
Foreign
Commercial
real estate:
other
Commercial
construction &
real estate:
Commercial
land
farmland &
real estate:
Residential:
Residential:
Commercial
development
commercial
multifamily
first lien
junior lien
Consumer
Foreign
Total
(Dollars in Thousands)
Balance at December 31, 2024
Losses charged to allowance
Recoveries credited to allowance
Net losses charged to allowance
Provision (credit) charged to operations
Balance at December 31, 2025
December 31, 2024
Domestic
Foreign
Commercial
real estate:
other
Commercial
construction &
real estate:
Commercial
land
farmland &
real estate:
Residential:
Residential:
Commercial
development
commercial
multifamily
first lien
junior lien
Consumer
Foreign
Total
(Dollars in Thousands)
Balance at December 31, 2023
Losses charged to allowance
Recoveries credited to allowance
Net losses charged to allowance
Provision (credit) charged to operations
Balance at December 31, 2024
December 31, 2023
Domestic
Foreign
Commercial
real estate:
other
Commercial
construction &
real estate:
Commercial
land
farmland &
real estate:
Residential:
Residential:
Commercial
development
commercial
multifamily
first lien
junior lien
Consumer
Foreign
Total
(Dollars in Thousands)
Balance at December 31, 2022
Losses charged to allowance
Recoveries credited to allowance
Net losses charged to allowance
Provision (credit) charged to operations
Balance at December 31, 2023
The decrease in losses charged to the ACL for the year ended December 31, 2025 in the Commercial category can be attributed to a charge-down on one loan secured primarily by equipment and pipeline infrastructure used in the oil and gas industry that occurred in 2024. The credit had 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. The pool specific qualitative loss factors management deemed appropriate for the ACL calculation at December 31, 2024 remained constant in the December 31, 2025 calculation.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The table below provides additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class:
December 31, 2025
Loans Individually
Loans Collectively
Evaluated For
Evaluated For
Impairment
Impairment
Recorded
Recorded
Investment
Allowance
Investment
Allowance
(Dollars in Thousands)
Domestic
Commercial
Commercial real estate: other construction & land development
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Residential: first lien
Residential: junior lien
Consumer
Foreign
Total
December 31, 2024
Loans Individually
Loans Collectively
Evaluated For
Evaluated For
Impairment
Impairment
Recorded
Recorded
Investment
Allowance
Investment
Allowance
(Dollars in Thousands)
Domestic
Commercial
Commercial real estate: other construction & land development
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Residential: first lien
Residential: junior lien
Consumer
Foreign
Total
Loans accounted for on a non-accrual basis at December 31, 2025, 2024, and 2023 amounted to $ 140,302,000 , $ 169,136,000 , and $ 47,170,000 , respectively. The effect of such non-accrual loans reduced interest income by approximately $ 10,580,000 , $ 12,661,000 , and $ 6,614,000 for the years ended December 31, 2025, 2024, and 2023, respectively. Amounts received on non-accruals are applied, for financial accounting purposes, first to principal and then to interest after all principal has been collected. Accruing loans contractually past due 90 days or more as to principal or interest payments at December 31, 2025, 2024, and 2023 amounted to approximately $ 9,826,000 , $ 6,693,000 , and $ 5,597,000 , respectively.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The table below provides additional information on loans accounted for on a non-accrual basis by loan class:
December 31, 2025
December 31, 2024
(Dollars in Thousands)
Total Non-Accrual Loans
Non-Accrual Loans with No Credit Allowance
Total Non-Accrual Loans
Non-Accrual Loans with No Credit Allowance
Domestic
Commercial
Commercial real estate: other construction & land development
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Residential: first lien
Total non-accrual loans
Doubtful loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected. We have identified these loans through our normal loan review procedures. Doubtful loans are measured based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral if the loan is collateral dependent. Substantially all of our doubtful loans are measured at the fair value of the collateral. In limited cases, we may use other methods to determine the level of impairment of a loan if such loan is not collateral dependent.
We occasionally provide modifications to borrowers experiencing financial difficulties. Modifications may include certain concessions that we must evaluate under ASU 2022-02 to determine the need for disclosure. Concessions to borrowers experiencing financial difficulties that would require disclosure include principal forgiveness, term extension, an other-than-insignificant payment delay, an interest rate reduction or a combination of these concessions. For the twelve months ended December 31, 2025, we did not provide any material modifications under these circumstances to any borrower experiencing financial difficulty that would require disclosure.
The Subsidiary Banks charge-off that portion of any loan which management considers to represent a loss as well as that portion of any other loan which is classified as a “loss” by bank examiners. Commercial and industrial or real estate loans are generally considered by management 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 management considers 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 (formerly allowance for probable loan losses) can be made only on a subjective basis. It is the judgment of our management that the ACL at December 31, 2025 and December 31, 2024 was adequate to absorb expected losses from loans in the portfolio at that date.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
The following table presents information regarding the aging of past due loans by loan class:
December 31, 2025
90 Days or
Total
90 Days or
greater &
Past
Total
Days
Days
Greater
still accruing
Due
Current
Portfolio
(Dollars in Thousands)
Domestic
Commercial
Commercial real estate: other construction & land development
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Residential: first lien
Residential: junior lien
Consumer
Foreign
Total past due loans
December 31, 2024
90 Days or
Total
90 Days or
greater &
Past
Total
Days
Days
Greater
still accruing
Due
Current
Portfolio
(Dollars in Thousands)
Domestic
Commercial
Commercial real estate: other construction & land development
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Residential: first lien
Residential: junior lien
Consumer
Foreign
Total past due loans
The increase in Commercial real estate: multifamily loans past due 30 – 59 days at December 31, 2025 can be attributed to a loan secured by multifamily affordable apartments. The decrease in Commercial loans past due 60 - 89 days at December 31, 2025 can be primarily attributed to a loan secured by a multifamily affordable housing community that is past due 90 days or greater and on non-accrual. The increase in Commercial real estate: farmland & commercial loans past due 60 – 89 days at December 31, 2025 can be attributed to a loan secured by real estate for future development. The decrease in Commercial real estate: farmland and commercial loans past due 90 days or greater at December 31, 2025 can be attributed to two loans, one is a hotel that was paid off by the borrower in the fourth quarter of 2025 and one is a commercial building, which was placed on non-accrual. Our internal classified report is segregated into the following categories: (i) “Special Review Credits,” (ii) “Watch List—Pass Credits,” or (iii) “Watch List—Substandard Credits.” The loans placed in the “Special Review Credits” category reflect our opinion that the loans reflect potential weakness which require monitoring on a more frequent basis. The “Special Review Credits” 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. The loans placed in the “Watch List—Pass Credits” category reflect our opinion that the credit contains weaknesses which represent a greater degree of risk, which warrant “extra attention.” The “Watch List—Pass Credits” 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. The loans placed in the “Watch List—Substandard Credits” classification are considered to be potentially inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. These 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. Furthermore, there is the possibility that we could sustain some future loss if such weaknesses are not corrected.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
A summary of the loan portfolio by credit quality indicator by loan class is as follows:
Prior
Total
(Dollars in Thousands)
Balance at December 31, 2025
Domestic
Commercial
Pass
Watch List - Pass
Watch List - Substandard
Watch List - Doubtful
Total Commercial
Commercial
Current-period gross writeoffs
Commercial real estate: other construction & land development
Pass
Watch List - Substandard
Total Commercial real estate: other construction & land development
Commercial real estate: other construction & land development
Current-period gross writeoffs
Commercial real estate: farmland & commercial
Pass
Special Review
Watch List - Pass
Watch List - Substandard
Watch List - Doubtful
Total Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Pass
Watch List - Doubtful
Total Commercial real estate: multifamily
Residential: first lien
Pass
Watch List - Substandard
Watch List - Doubtful
Total Residential: first lien
Residential: first lien
Current-period gross writeoffs
Residential: junior lien
Pass
Total Residential: junior lien
Residential: junior lien
Current-period gross writeoffs
Consumer
Pass
Total Consumer
Consumer
Current-period gross writeoffs
Foreign
Pass
Total Foreign
Total Loans
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Prior
Total
(Dollars in Thousands)
Balance at December 31, 2024
Domestic
Commercial
Pass
Special Review
Watch List - Pass
Watch List - Substandard
Watch List - Doubtful
Total Commercial
Commercial
Current-period gross writeoffs
Commercial real estate: other construction & land development
Pass
Special Review
Watch List - Substandard
Watch List - Doubtful
Total Commercial real estate: other construction & land development
Commercial real estate: other construction & land development
Current-period gross writeoffs
Commercial real estate: farmland & commercial
Pass
Special Review
Watch List - Pass
Watch List - Substandard
Watch List - Doubtful
Total Commercial real estate: farmland & commercial
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Pass
Watch List - Doubtful
Total Commercial real estate: multifamily
Commercial real estate: multifamily
Residential: first lien
Pass
Watch List - Substandard
Watch List - Doubtful
Total Residential: first lien
Residential: first lien
Current-period gross writeoffs
Residential: junior lien
Pass
Watch List- Doubtful
Total Residential: junior lien
Residential: junior lien
Consumer
Pass
Total Consumer
Consumer
Current-period gross writeoffs
Foreign
Pass
Total Foreign
Foreign
Total Loans
The decrease in Commercial real estate: other construction and land development Special Review loans at December 31, 2025 can be attributed to a loan secured by commercial real estate that was upgraded to economic monitoring. The change in Commercial real estate: farmland & commercial Special Review loans at December 31, 2025
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
can be attributed to one loan secured by a retail center that was upgraded to economic monitoring and two loans secured by hotels that were upgraded from Watch List - Substandard to Special Review. The increase in Commercial real estate: farmland & commercial Watch List-Pass loans at December 31, 2025 can be attributed to a loan secured by a retirement home and a loan secured by an industrial warehouse, both of which were downgraded from Economic Monitoring. The decrease in Commercial real estate: farmland & commercial Watch List – Substandard loans at December 31, 2025 can be attributed to two loans secured by hotels that were upgraded to Special Review as previously noted, and one loan secured by a convenience store that was upgraded to Pass. The decrease in Commercial real estate: farmland & commercial Doubtful loans at December 31, 2025 can be attributed to a partial paydown on a relationship secured by commercial buildings on which childcare centers are operated and a loan secured by a hotel, which was paid off in the fourth quarter of 2025.
(5) Bank Premises and Equipment
A summary of bank premises and equipment, by asset classification, at December 31, 2025 and 2024 were as follows:
Estimated
useful lives
(Dollars in Thousands)
Bank buildings and improvements
years
Furniture, equipment and vehicles
years
Land
Less: accumulated depreciation
Bank premises and equipment, net
(6) Deposits
Deposits as of December 31, 2025 and 2024 and related interest expense for the years ended December 31, 2025, 2024, and 2023 were as follows:
(Dollars in Thousands)
Deposits:
Demand - non-interest bearing
Domestic
Foreign
Total demand non-interest bearing
Savings and interest bearing demand
Domestic
Foreign
Total savings and interest bearing demand
Time, certificates of deposit $100,000 or more
Domestic
Foreign
Less than $100,000
Domestic
Foreign
Total time, certificates of deposit
Total deposits
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands)
Interest expense:
Savings and interest bearing demand
Domestic
Foreign
Total savings and interest bearing demand
Time, certificates of deposit $100,000 or more
Domestic
Foreign
Less than $100,000
Domestic
Foreign
Total time, certificates of deposit
Total interest expense on deposits
Scheduled maturities of time deposits as of December 31, 2025 were as follows:
Total
(in thousands)
Thereafter
Total
Scheduled maturities of time deposits in amounts of $100,000 or more at December 31, 2025, were as follows:
Total
(in thousands)
Due within 3 months or less
Due after 3 months and within 6 months
Due after 6 months and within 12 months
Due after 12 months
Time deposits that meet or exceed the FDIC insurance limit of $250,000 at December 31, 2025 and December 31, 2024 were $ 1,702,199,000 and $ 1,494,267,000 , respectively.
(7) Securities Sold Under Repurchase Agreements
Our Subsidiary Banks have entered into repurchase agreements with individual customers of the Subsidiary Banks. The purchasers have agreed to resell to the Subsidiary Banks identical securities upon the maturities of the agreements. Securities sold under repurchase agreements were mortgage-backed securities and averaged $ 616,547,000 and $ 616,208,000 during 2025 and 2024, respectively, and the maximum amount outstanding at any month end during 2025 and 2024 was $ 670,596,000 and $ 713,772,000 , respectively.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Further information related to repurchase agreements at December 31, 2025 and 2024 is set forth in the following table:
Collateral Securities
Repurchase Borrowing
Book Value of
Fair Value of
Balance of
Weighted Average
Securities Sold
Securities Sold
Liability
Interest Rate
(Dollars in Thousands)
December 31, 2025 term:
Overnight agreements
1 to 29 days
30 to 90 days
Over 90 days
Total
December 31, 2024 term:
Overnight agreements
1 to 29 days
30 to 90 days
Over 90 days
Total
The book value and fair value of securities sold includes the entire book value and fair value of securities partially or fully pledged under repurchase agreements.
(8) Other Borrowed Funds
Other borrowed funds include Federal Home Loan Bank borrowings, which may be short, and long-term fixed borrowings issued by the Federal Home Loan Bank of Dallas and the Federal Home Loan Bank of Topeka at the market price offered at the time of funding. These borrowings are secured by mortgage-backed investment securities and a portion of our loan portfolio.
Further information regarding our other borrowed funds at December 31, 2025 and 2024 is set forth in the following table:
December 31,
(Dollars in Thousands)
Federal Home Loan Bank advances—short-term
Average daily balance
Average rate
Maximum amount outstanding at any month end
Federal Home Loan Bank advances—long-term(1)
Balance at year end
Rate on balance outstanding at year end
Average daily balance
Average rate
Maximum amount outstanding at any month end
Long-term advances at December 31, 2025 and December 31, 2024 consisted of amortizing advances. Two amortizing advances are outstanding at December 31, 2025 in the amounts of $ 2,788,000 and $ 7,544,000 and mature in December 2033 and November 2033, respectively. The amortization on the amortizing long-term advances totals approximately $ 215,000 , $ 221,000 , $ 227,000 , $ 233,000 and $ 239,000 for the years ending December 31, 2026, 2027, 2028, 2029 and December 31, 2030, respectively .
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(9) Junior Subordinated Deferrable Interest Debentures
We currently have four statutory business trusts, Trusts IX, X, XI and XII (the “Trusts”), formed under the laws of the State of Delaware for the purpose of issuing trust preferred securities. The Trusts each issued capital and common securities (“Capital and Common Securities”) and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (the “Debentures”) we issued. As of December 31, 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 our 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 twenty consecutive quarterly periods on each of the Trusts. If interest payments on any of the Debentures are 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 investments and not consolidated in the 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 December 31, 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 Debentures and their interest rates at December 31, 2025:
Junior
Subordinated
Deferrable
Interest
Repricing
Interest
Interest
Optional
Debentures
Frequency
Rate
Rate Index (1)
Maturity Date
Redemption Date (2)
(Dollars in Thousands)
Trust IX
Quarterly
SOFR
October 2036
October 2011
Trust X
Quarterly
SOFR
February 2037
February 2012
Trust XI
Quarterly
SOFR
July 2037
July 2012
Trust XII
Quarterly
SOFR
September 2037
September 2012
The Capital and Common Securities may be redeemed in whole or in part on any interest payment date after the Optional Redemption Date.
(10) Earnings per Share (“EPS”)
Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding. The computation of diluted EPS assumes the issuance of common shares for all dilutive potential common shares
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
outstanding during the reporting period. The calculation of the basic EPS and the diluted EPS for the years ended December 31, 2025, 2024, and 2023 is set forth in the following table:
Net Income
Shares
Per Share
(Numerator)
(Denominator)
Amount
(Dollars in Thousands,
Except Per Share Amounts)
December 31, 2025:
Basic EPS
Net income available to common shareholders
Potential dilutive common shares
Diluted EPS
December 31, 2024:
Basic EPS
Net income available to common shareholders
Potential dilutive common shares
Diluted EPS
December 31, 2023:
Basic EPS
Net income available to common shareholders
Potential dilutive common shares
Diluted EPS
(11) Employees’ Profit-Sharing Plan
We have a deferred profit-sharing plan for full-time employees with a minimum of one year of continuous employment. Our annual contribution to the plan is based on a percentage, as determined by our Board of Directors, of income before income taxes, as defined, for the year. Allocation of the contribution among officers and employees’ accounts is based on length of service and amount of salary earned. Profit sharing costs of $ 4,655,000 , $ 4,460,000 , and $ 4,011,000 were charged to income for the years ended December 31, 2025, 2024, and 2023, respectively.
(12) International Operations
We provide international banking services for our customers through our Subsidiary Banks. Neither we nor our Subsidiary Banks have facilities located outside the United States. International operations are distinguished from domestic operations based upon the domicile of the customer.
Because the resources we employ are common to both international and domestic operations, it is not practical to determine net income generated exclusively from international activities.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
A summary of assets attributable to international operations at December 31, 2025 and 2024 are as follows:
(Dollars in Thousands)
Loans:
Commercial
Others
Less allowance for probable credit losses
Net loans
Accrued interest receivable
At December 31, 2025 and December 31, 2024, we had $ 135,581,000 and $ 149,543,000 , respectively, in outstanding standby and commercial letters of credit to facilitate trade activities.
Revenues directly attributable to international operations were approximately $ 10,993,000 , $ 8,669,000 , and $ 8,212,000 for the years ended December 31, 2025, 2024, and 2023, respectively.
(13) Income Taxes
We file a consolidated U.S. Federal and State income tax return. The current and deferred portions of net income tax expense included in the consolidated statements of income are presented below for the years ended December 31:
(Dollars in Thousands)
Current
State
Total current taxes
Deferred
State
Total deferred taxes
Total income taxes
The income tax expense differs from the amount computed by applying the U.S. Federal income tax rate of 21 % for 2025, 2024, and 2023 to income before income taxes. There were no activities or transactions that had foreign income taxes or cross-border tax effects during 2025, 2024, or 2023. State income/franchise taxes are primarily related to the States of Texas and Oklahoma. Included in the table below is the net tax benefit related to investments in LIHTC projects. Additional information on LIHTC investments can be found in Note 2 – Investment Securities, Equity Securities with
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Readily Determinable Fair Values and Other Investments. The reasons for the differences for the years ended December 31 are as follows (Dollars in Thousands):
Dollars
Percent
Dollars
Percent
Dollars
Percent
U.S. federal income tax expense computed at the statutory rate
State income/franchise taxes, net of U.S. federal income tax effects (1)
Net investment in low income housing investments
Non-taxable or non-deductible items
Actual tax expense
(1) State income/franchise taxes, net of U.S. federal income tax effects are related to taxes paid in the States of Texas and Oklahoma
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are reflected below:
(Dollars in Thousands)
Deferred tax assets:
Loans receivable, principally due to the allowance for probable loan losses
Other real estate owned
Accrued expenses
Net unrealized losses on available for sale investment securities
Other
Total deferred tax assets
Deferred tax liabilities:
Bank premises and equipment, principally due to differences on depreciation
Impairment charges on available-for-sale securities
Identified intangible assets and goodwill
Partnership investment pass through
Other
Total deferred tax liabilities
Net deferred tax asset
The net deferred tax asset of $ 10,661,000 and $ 61,560,000 at December 31, 2025 and December 31, 2024, respectively, is included in other assets in the consolidated statements of condition.
(14) Stock Options and Stock Appreciation Rights
On April 5, 2012, the Board of Directors 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.
The fair value of each option award granted under the plan was estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses the assumptions noted in the following table. Expected volatility
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
was based on the historical volatility of the price of our stock. We used historical data to estimate the expected dividend yield and employee termination rates within the valuation model. The expected term of options was derived from historical exercise behavior. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant.
A summary of option activity under the stock option plans for the twelve months ended December 31, 2025 is as follows:
Weighted
Weighted
average
average
remaining
Aggregate
Number of
exercise
contractual
intrinsic
options
price
term (years)
value ($)
(in Thousands)
Options outstanding at December 31, 2024
Plus: Options granted
Less:
Options exercised
Options expired
Options forfeited
Options outstanding at December 31, 2025
Options fully vested and exercisable at December 31, 2025
Stock-based compensation expense included in the consolidated statements of income for the years ended December 31, 2025, 2024, and 2023 was approximately $ 104,000 , $ 214,000 , and $ 330,000 , respectively. As of December 31, 2025, there was approximately $ 113,000 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 1.2 years.
Other information pertaining to option activity during the twelve months ended December 31, 2025, 2024, and 2023 is as follows:
Twelve Months Ended December 31,
Weighted average grant date fair value of stock options granted
Total fair value of stock options vested
Total intrinsic value of stock options exercised
On April 18, 2022, the Board of Directors adopted the 2022 International Bancshares 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 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 December 31, 2025, a total of 426,743 SARS had been issued under the SAR Plan.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
A summary of activity under the SAR Plan for the twelve months ended December 31, 2025 is as follows:
Weighted
Weighted
average
Number of
average
remaining
Aggregate
stock appreciation
exercise
contractual
intrinsic
rights
price
term (years)
value ($)
(in Thousands)
SARs outstanding at December 31, 2024
Plus: SARs granted
Less:
SARs exercised
SARs expired
SARs forfeited
SARs outstanding at December 31, 2025
SARs fully vested and exercisable at December 31, 2025
The fair value of the liability for payments due to stock appreciation rights holders at December 31, 2025 and December 31, 2024 is approximately $ 6,620,000 and $ 4,540,000 , respectively, as calculated using a Black-Scholes-Merton 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 $ 2,131,000 , $ 3,144,000 , and $ 918,000 , respectively, for the twelve months ended December 31, 2025, 2024, and 2023. As of December 31, 2025, there was approximately $ 6,810,000 in unrecognized liability related to non-vested SARs granted under the plan that will be recognized over a weighted average period of 6.5 years.
(15) Commitments, Contingent Liabilities and Other Matters
On March 15, 2020, the FRB announced that it had reduced regulatory reserve requirements to zero percent effective on March 26, 2020; therefore, no cash is required to be maintained to satisfy regulatory reserve requirements.
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 statements of condition and related statements of income, comprehensive income, shareholders’ equity, and cash flows. However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.
(16) Transactions with Related Parties
In the ordinary course of business, the Subsidiary Banks make loans to our directors and executive officers, including their affiliates, families, and companies in which they are principal owners. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collectability or present other unfavorable features. The aggregate amounts receivable from such related parties amounted to approximately $ 14,020,000 and $ 6,669,000 at December 31, 2025 and 2024, respectively.
We are a financial holding company and under current regulatory authority, are allowed to make certain equity investments in non-financial companies. We hold interests in several non-financial companies in various industries including oil and gas operations, hotel development, and aviation. Our ownership interests range from less than approximately 5 % to approximately 44 %, and none of the investments are significant to our overall financial position. We account for ownership interests under either the cost or equity method of accounting, depending on our ownership level. For equity method investments, the net income (loss) is recorded as other investment income on our consolidated income statement, and the invested amount is included in other investments on our consolidated statement of
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
condition. We are a limited partner in all the investments, and do not exert significant control over the day-to-day operations of the investee. Our Subsidiary Banks have outstanding loans to some of the entities in which we hold an equity investment, and loans outstanding to entities in which we hold a greater than 20% equity interest totaled $ 289,161,000 and $ 269,013,000 at December 31, 2025 and December 31, 2024, respectively. The terms of those credits are extended at arms-length under the same terms and conditions available to all customers for that type of industry, creditworthiness, collateral position and ability to repay. Deposit liabilities related to the same investees are not significant at December 31, 2025 or December 31, 2024.
(17) Financial Instruments with Off-Statement of Condition Risk and Concentrations of Credit Risk
In the normal course of business, the Subsidiary Banks are party to financial instruments with off-statement of condition risk to meet the financing needs of their customers. These financial instruments include commitments to their customers. These financial instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the consolidated statement of condition. The contract amounts of these instruments reflect the extent of involvement the Subsidiary Banks have in particular classes of financial instruments. At December 31, 2025, the following financial amounts of instruments, whose contract amounts represent credit risks, were outstanding (in thousands):
Commitments to extend credit
Credit card lines
Standby letters of credit
Commercial letters of credit
We enter into a standby letter of credit to guarantee performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved is represented by the contractual amounts of those instruments. Under the standby letters of credit, we are required to make payments to the beneficiary of the letters of credit upon request by the beneficiary so long as all performance criteria have been met. At December 31, 2025, the maximum potential amount of future payments is approximately $ 134,581,000 . At December 31, 2025, the fair value of these guarantees is not significant. Unsecured letters of credit totaled approximately $ 29,406,000 and $ 23,334,000 at December 31, 2025 and 2024, respectively.
We enter into commercial letters of credit on behalf of our customers which authorize a third party to draw drafts upon us up to a stipulated amount and with specific terms and conditions. A commercial letter of credit is a conditional commitment on our part to provide payment on drafts drawn in accordance with the terms of the commercial letter of credit.
The Subsidiary Banks’ exposure to credit loss in the event of nonperformance by the other party to the above financial instruments is represented by the contractual amounts of the instruments. The Subsidiary Banks use the same credit policies in making commitments and conditional obligations as they do for on-statement of condition instruments. The Subsidiary Banks control the credit risk of these transactions through credit approvals, limits, and monitoring procedures. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates normally less than one year or other termination clauses and may require the payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Subsidiary Banks evaluate each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Subsidiary Banks upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies, but may include residential and commercial real estate, bank certificates of deposit, accounts receivable, and inventory.
The Subsidiary Banks make commercial, real estate and consumer loans to customers principally located in south, central and southeast Texas and the State of Oklahoma. Although the loan portfolio is diversified, a substantial portion of its debtors’ ability to honor their contracts is dependent upon the economic conditions in these areas, especially in the real estate and commercial business sectors.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(18) Capital Requirements
Bank regulatory agencies limit the amount of dividends, which the Subsidiary Banks can pay, without obtaining prior approval from such agencies. At December 31, 2025, the Subsidiary Banks could pay dividends of up to $ 1,644,000,000 without prior regulatory approval and without adversely affecting their “well-capitalized” status under regulatory capital rules in effect at December 31, 2025. In addition to legal requirements, regulatory authorities also consider the adequacy of the Subsidiary Banks’ total capital in relation to their deposits and other factors. These capital adequacy considerations also limit amounts available for payment of dividends. We historically have not allowed any Subsidiary Bank to pay dividends in such a manner as to impair its capital adequacy.
We and the Subsidiary Banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-statement of condition items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
Current quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table on the following page) of Total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of December 31, 2025, that we met all capital adequacy requirements to which we are subject.
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 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. The rules also improve the methodology for calculating risk-weighted assets to enhance risk sensitivity. The rules were subject to a four-year phase-in period for mandatory compliance, and we were required to begin to phase-in the new rules beginning on January 1, 2015. We believe that as of December 31, 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, 2025. 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
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
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 across the Basel Committee’s member jurisdictions 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. regulators originally 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. Most recently, in September 2025, the federal banking agencies indicated that they intend to unveil a re-proposal of the Basel IV capital rules by early 2026. Accordingly, the previously established implementation dates for Basel IV are no longer definitive, and the timing, scope, and final form of the re-proposed Basel IV framework remains uncertain.
As of December 31, 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 which 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 established the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) at 9%, which became effective on January 1, 2020, and qualifying community banks may elect to take advantage of this regulatory relief provision. Some of our 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 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”) are not subject to heightened risk weights if they meet certain criteria. Also, while acquisition, development, and construction loans are generally subject to heightened risk weights, certain exceptions apply. In November 2019, the federal banking agencies issued a final rule modifying the agencies’ capital rules for HVCRE, which became effective on April 1, 2020.
As of December 31, 2025, the most recent notification from the FDIC categorized all our Subsidiary Banks as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” we must maintain minimum Total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed our categorization as well-capitalized.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Our actual capital amounts and ratios for 2025 under current guidelines are presented in the following table:
For Capital Adequacy
To Be Well-Capitalized
Purposes
Under Prompt Corrective
Actual
Phase In Schedule
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(greater than
(greater than
(greater than
(greater than
or equal to)
or equal to)
or equal to)
or equal to)
(Dollars in Thousands)
As of December 31, 2025:
Common Equity Tier 1 (to Risk Weighted Assets):
Consolidated
International Bank of Commerce, Laredo
International Bank of Commerce, Brownsville
International Bank of Commerce, Oklahoma
Commerce Bank
International Bank of Commerce, Zapata
Total Capital (to Risk Weighted Assets):
Consolidated
International Bank of Commerce, Laredo
International Bank of Commerce, Brownsville
International Bank of Commerce, Oklahoma
Commerce Bank
International Bank of Commerce, Zapata
Tier 1 Capital (to Risk Weighted Assets):
Consolidated
International Bank of Commerce, Laredo
International Bank of Commerce, Brownsville
International Bank of Commerce, Oklahoma
Commerce Bank
International Bank of Commerce, Zapata
Tier 1 Capital (to Average Assets):
Consolidated
International Bank of Commerce, Laredo
International Bank of Commerce, Brownsville
International Bank of Commerce, Oklahoma
Commerce Bank
International Bank of Commerce, Zapata
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Our actual capital amounts and ratios for 2024 are also presented in the following table:
To Be Well-Capitalized
For Capital Adequacy
Under Prompt Corrective
Actual
Purposes
Action Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
(greater than
(greater than
(greater than
(greater than
or equal to)
or equal to)
or equal to)
or equal to)
(Dollars in Thousands)
As of December 31, 2024:
Common Equity Tier 1 (to Risk Weighted Assets):
Consolidated
International Bank of Commerce, Laredo
International Bank of Commerce, Oklahoma
International Bank of Commerce, Brownsville
International Bank of Commerce, Zapata
Commerce Bank
Total Capital (to Risk Weighted Assets):
Consolidated
International Bank of Commerce, Laredo
International Bank of Commerce, Oklahoma
International Bank of Commerce, Brownsville
International Bank of Commerce, Zapata
Commerce Bank
Tier 1 Capital (to Risk Weighted Assets):
Consolidated
International Bank of Commerce, Laredo
International Bank of Commerce, Oklahoma
International Bank of Commerce, Brownsville
International Bank of Commerce, Zapata
Commerce Bank
Tier 1 Capital (to Average Assets):
Consolidated
International Bank of Commerce, Laredo
International Bank of Commerce, Oklahoma
International Bank of Commerce, Brownsville
International Bank of Commerce, Zapata
Commerce Bank
(19) Fair Value
ASC Topic 820, “Fair Value Measurements and Disclosures” (“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:
Level 1 Inputs—Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 Inputs—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Inputs—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques,
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
as well as instruments for which the determination of fair value requires significant management judgment or estimation.
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 financial instruments reported on the consolidated statements of condition at their fair value as of December 31, 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
Other
Significant
Measured at
Identical
Observable
Unobservable
Fair Value
Assets
Inputs
Inputs
December 31, 2025
(Level 1)
(Level 2)
(Level 3)
Measured on a recurring basis:
Assets:
Available for sale debt securities
Residential mortgage-backed securities
States and political subdivisions
Equity Securities
The following table represents financial instruments reported on the consolidated balance sheets at their fair value as of December 31, 2024 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
Other
Significant
Measured at
Identical
Observable
Unobservable
Fair Value
Assets
Inputs
Inputs
December 31, 2024
(Level 1)
(Level 2)
(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage-backed securities
States and political subdivisions
Equity Securities
For the years ended December 31, 2025 and December 31, 2024, debt investment securities available-for-sale are classified within Level 2 of the valuation hierarchy. Equity securities with readily determinable fair values are classified within Level 1. For debt securities 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.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Certain financial instruments are measured at fair value on a nonrecurring basis. They 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).
The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended December 31, 2025 by level within the fair value measurement hierarchy:
Fair Value Measurements at Reporting
Date Using
(in thousands)
Quoted
Assets/Liabilities
Prices in
Measured at
Active
Significant
Fair Value
Markets for
Other
Significant
Net
Period ended
Identical
Observable
Unobservable
Provision
December 31,
Assets
Inputs
Inputs
During
(Level 1)
(Level 2)
(Level 3)
Period
Measured on a non-recurring basis:
Assets:
Watch List—Doubtful loans
Other real estate owned
The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the year ended December 31, 2024 by level within the fair value measurement hierarchy:
Fair Value Measurements at Reporting
Date Using
(in thousands)
Quoted
Assets/Liabilities
Prices in
Measured at
Active
Significant
Fair Value
Markets
Other
Significant
Net
Year ended
for Identical
Observable
Unobservable
Provision
December 31,
Assets
Inputs
Inputs
During
(Level 1)
(Level 2)
(Level 3)
Period
Measured on a non-recurring basis:
Assets:
Watch List—Doubtful loans
Other real estate owned
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 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
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
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 December 31, 2025, we had $ 139,643,000 of doubtful commercial collateral-dependent loans, of which $ 0 had an appraisal performed within the immediately preceding rolling twelve-month period, and of which $ 139,643,000 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 (formerly allowance for probable loan losses), if necessary. The fair value is reviewed periodically, and subsequent write downs are made accordingly through a charge to operations. Other real estate owned is included in other assets on the consolidated financial statements. For the twelve months ended December 31, 2025, 2024, and 2023, we recorded approximately $ 101,000 , $ 2,228,000 , and $ 0 , respectively, in charges to the ACL in connection with loans transferred to other real estate owned. For the twelve months ended December 31, 2025, 2024, and 2023, we recorded approximately $ 1,296,000 , $ 632,000 , and $ 2,538,000 , 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 December 31, 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.
Investment securities held-to-maturity
The carrying amounts of investments held-to-maturity approximate fair value.
Investment Securities
For debt investment securities, which may 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 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. See disclosures of fair value of investment securities in Note 2 – Investment Securities, Equity Securities with Readily Determinable Fair Values and Other Investments.
Loans
Fair values are estimated for portfolios of loans with similar financial characteristics.
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
For variable rate performing loans, the carrying amount approximates the fair value. For fixed rate performing loans, the fair value is calculated by discounting scheduled cash flows using current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality. Fixed rate performing loans are within Level 3 of the fair value hierarchy. At December 31, 2025 and December 31, 2024, the carrying amount of fixed rate performing loans was $ 1,200,539,000 and $ 1,216,156,000 , respectively, and the estimated fair value was $ 1,166,537,000 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 December 31, 2025 and December 31, 2024. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is based on currently offered rates. Time deposits are within Level 3 of the fair value hierarchy. At December 31, 2025 and December 31, 2024, the carrying amount of time deposits was $ 3,201,320,000 and $ 2,899,543,000 , respectively, and the estimated fair value was $ 3,196,649,000 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 December 31, 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 December 31, 2025 and December 31, 2024.
Other Borrowed Funds
We currently have long-term borrowings issued from the Federal Home Loan Bank (“FHLB”). The long-term borrowings outstanding at December 31, 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 December 31, 2025 and December 31, 2024, the carrying amount of the fixed-rate long-term FHLB borrowings was $ 10,332,000 and $ 10,541,000 , respectively, and the estimated fair value was $ 10,332,000 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 of 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
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
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.
(20) International Bancshares Corporation (Parent Company Only) Financial Information
Statements of Condition
(Parent Company Only)
December 31, 2025 and 2024
(Dollars in Thousands)
ASSETS
Cash
Other investments
Net loans
Investment in subsidiaries
Goodwill
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Junior subordinated deferrable interest debentures
Due to IBC Trading
Other liabilities
Total liabilities
Shareholders’ equity:
Common shares
Surplus
Retained earnings
Accumulated other comprehensive loss
Less cost of shares in treasury
Total shareholders’ equity
Total liabilities and shareholders’ equity
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(21) International Bancshares Corporation (Parent Company Only) Financial Information
Statements of Income
(Parent Company Only)
Years ended December 31, 2025, 2024 and 2023
(Dollars in Thousands)
Income:
Dividends from subsidiaries
Interest income on notes receivable
Loss on other investments
Other
Total income
Expenses:
Interest expense (Debentures)
Credit loss expense
Other
Total expenses
Income before federal income taxes and equity in undistributed net income of subsidiaries
Income tax benefit
Income before equity in undistributed net income of subsidiaries
Equity in undistributed net income of subsidiaries
Net income
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(22) International Bancshares Corporation (Parent Company Only) Financial Information
Statements of Cash Flows
(Parent Company Only)
Years ended December 31, 2025, 2024 and 2023
(Dollars in Thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense
Unrealized gain on equity securities with readily determinable fair values
Increase in accrued interest receivable
Stock compensation expense
Increase (decrease) in other liabilities
Equity in undistributed net income of subsidiaries
Net cash provided by operating activities
Investing activities:
Net increase in loans
Increase in other assets and other investments
Net cash used in investing activities
Financing activities:
Redemption of long-term debt
Proceeds from stock transactions
Payments of cash dividends - common
Purchase of treasury stock
Net cash used in financing activities
Increase (decrease) in cash
Cash at beginning of year
Cash at end of year
Non-cash investing activities:
Net transfers from loans to other investments
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Condensed Quarterly Income Statements
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Interest income
Interest expense
Net interest income
Provision for probable loan losses
Non-interest income
Non-interest expense
Income before income taxes
Income taxes
Net income
Per common share:
Basic
Net income
Diluted
Net income
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Condensed Quarterly Income Statements
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Fourth
Third
Second
First
Quarter
Quarter
Quarter
Quarter
Interest income
Interest expense
Net interest income
Provision for probable loan losses
Non-interest income
Non-interest expense
Income before income taxes
Income taxes
Net income
Per common share:
Basic
Net income
Diluted
Net income
INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
Condensed Average Statements of Condition
(Dollars in Thousands)
(Unaudited)
Distribution of Assets, Liabilities and Shareholders’ Equity
The following table sets forth a comparative summary of average interest earning assets and average interest-bearing liabilities and related interest yields for the years ended December 31, 2025, 2024, and 2023. Tax-exempt income has not been adjusted to a tax-equivalent basis:
Average
Average
Average
Average
Average
Average
Balance
Interest
Rate/Cost
Balance
Interest
Rate/Cost
Balance
Interest
Rate/Cost
(Dollars in Thousands)
Assets
Interest earning assets:
Loan, net of unearned discounts:
Domestic
Foreign
Investment securities:
Taxable
Tax-exempt
Other
Total interest-earning assets
Non-interest earning assets:
Cash and cash equivalents
Bank premises and equipment, net
Other assets
Less allowance for probable loan losses
Total
Liabilities and Shareholders’ Equity
Interest bearing liabilities:
Savings and interest bearing demand deposits
Time deposits:
Domestic
Foreign
Securities sold under repurchase agreements
Other borrowings
Junior subordinated interest deferrable debentures
Total interest bearing liabilities
Non-interest bearing liabilities:
Demand Deposits
Other liabilities
Shareholders’ equity
Total
Net interest income
Net yield on interest earning assets
INTERNATIONAL BANCSHARES CORPORATION
OFFICERS AND DIRECTORS
OFFICERS
DIRECTORS
DENNIS E. NIXON
DENNIS E. NIXON
Chairman of the Board and President
Chairman of the Board
International Bank of Commerce
JUDITH I. WAWROSKI
Chief Financial Officer and Treasurer
JAVIER DE ANDA
Senior Vice President
DALIA F. MARTINEZ
B.P. Newman Investment Company
Vice President
DOUG HOWLAND
MIRTA SALCEDO
Investments
Auditor
RUDOLPH M. MILES
MARISA V. SANTOS
Investments
Secretary
LARRY NORTON
HILDA V. TORRES
Investments
Assistant Secretary
ROBERTO R. RESENDEZ
Investments
ANTONIO R. SANCHEZ, JR.
Chairman of the Board
Sanchez Oil & Gas Corporation
Investments
DIANA G. ZUNIGA
President and Owner
Investors Alliance, Inc.
