10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to           

Commission file number 000-09439

INTERNATIONAL BANCSHARES CORPORATION

(Exact name of registrant as specified in its charter)

Texas	74-2157138
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

1200 San Bernardo Avenue, Laredo, Texas 78042-1359

(Address of principal executive offices)

(Zip Code)

(956) 722-7611

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒  No ☐

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company, in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date

Class	Shares Issued and Outstanding
Common Stock, $1.00 par value	66,136,936 shares outstanding at August 3, 2018

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Condition (Unaudited)

(Dollars in Thousands)

	June 30,		December 31,
	2018		2017
Assets
Cash and cash equivalents	$	265,122	$	265,357
Investment securities:
Held to maturity debt securities (Fair value of $2,400 on June 30, 2018 and $2,400 on December 31, 2017)		2,400		2,400
Available for sale debt securities (Amortized cost of $3,822,194 on June 30, 2018 and $4,196,263 on December 31, 2017)		3,720,566		4,124,185
Equity securities with readily determinable fair values		27,054		27,885
Total investment securities		3,750,020		4,154,470
Loans		6,439,420		6,348,172
Less allowance for probable loan losses		(62,853)		(67,687)
Net loans		6,376,567		6,280,485
Bank premises and equipment, net		511,337		514,454
Accrued interest receivable		35,762		34,456
Other investments		586,338		571,415
Goodwill		282,532		282,532
Other assets		181,317		81,529
Total assets	$	11,988,995	$	12,184,698

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Condition, continued (Unaudited)

(Dollars in Thousands)

	June 30,		December 31,
	2018		2017
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand—non-interest bearing	$	3,437,023	$	3,243,255
Savings and interest bearing demand		3,230,386		3,245,131
Time		2,002,219		2,056,506
Total deposits		8,669,628		8,544,892
Securities sold under repurchase agreements		306,755		353,805
Other borrowed funds		852,950		1,195,225
Junior subordinated deferrable interest debentures		160,416		160,416
Other liabilities		119,516		91,380
Total liabilities		10,109,265		10,345,718
Shareholders’ equity:
Common shares of $1.00 par value. Authorized 275,000,000 shares; issued 96,065,679 shares on June 30, 2018 and 96,019,028 shares on December 31, 2017		96,066		96,019
Surplus		173,057		171,816
Retained earnings		1,982,464		1,891,805
Accumulated other comprehensive loss		(79,537)		(28,397)
		2,172,050		2,131,243
Less cost of shares in treasury, 29,940,843 shares on June 30, 2018 and 29,939,545 on December 31, 2017		(292,320)		(292,263)
Total shareholders’ equity		1,879,730		1,838,980
Total liabilities and shareholders’ equity	$	11,988,995	$	12,184,698

See accompanying notes to consolidated financial statements.

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

(Dollars in Thousands, except per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Interest income:
Loans, including fees	$	92,083	$	79,466	$	179,916	$	154,867
Investment securities:
Taxable		20,694		20,989		41,908		39,995
Tax-exempt		2,087		2,457		4,282		4,948
Other interest income		202		262		367		345
Total interest income		115,066		103,174		226,473		200,155
Interest expense:
Savings deposits		3,291		1,353		5,519		2,642
Time deposits		3,010		2,401		5,679		4,777
Securities sold under repurchase agreements		348		1,146		1,371		4,214
Other borrowings		4,379		2,575		9,068		3,838
Junior subordinated deferrable interest debentures		1,765		1,322		3,291		2,572
Total interest expense		12,793		8,797		24,928		18,043
Net interest income		102,273		94,377		201,545		182,112
Provision for probable loan losses		(2,730)		805		(1,068)		2,505
Net interest income after provision for probable loan losses		105,003		93,572		202,613		179,607
Non-interest income:
Service charges on deposit accounts		17,555		17,882		35,267		35,788
Other service charges, commissions and fees
Banking		11,152		11,025		22,274		21,410
Non-banking		2,028		1,864		3,388		3,199
Investment securities transactions, net		—		(2,539)		—		(1,612)
Other investments, net		5,841		2,830		10,567		7,098
Other income		5,727		2,901		9,782		5,795
Total non-interest income	$	42,303	$	33,963	$	81,278	$	71,678

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income, continued (Unaudited)

(Dollars in Thousands, except per share data)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Non-interest expense:
Employee compensation and benefits	$	34,692	$	32,739	$	69,310	$	65,469
Occupancy		7,163		6,417		13,238		12,408
Depreciation of bank premises and equipment		6,364		6,302		12,637		12,529
Professional fees		3,375		3,850		5,947		7,566
Deposit insurance assessments		974		913		1,974		1,303
Net expense, other real estate owned		2,649		482		2,378		1,396
Amortization of identified intangible assets		—		—		—		25
Advertising		1,808		2,116		3,647		4,384
Early termination fee—securities sold under repurchase agreements		—		—		—		5,765
Software and software maintenance		4,390		4,062		8,462		7,853
Other		19,186		16,832		31,917		30,641
Total non-interest expense		80,601		73,713		149,510		149,339
Income before income taxes		66,705		53,822		134,381		101,946
Provision for income taxes		13,818		13,253		28,074		29,373
Net income	$	52,887	$	40,569	$	106,307	$	72,573
Basic earnings per common share:
Weighted average number of shares outstanding		66,114,497		66,053,741		66,103,499		66,024,135
Net income	$	0.80	$	0.61	$	1.61	$	1.10
Fully diluted earnings per common share:
Weighted average number of shares outstanding		66,932,113		66,715,171		66,898,065		66,731,499
Net income	$	0.79	$	0.61	$	1.59	$	1.09

See accompanying notes to consolidated financial statements

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Net income	$	52,887	$	40,569	$	106,307	$	72,573
Other comprehensive income, net of tax:
Net unrealized holding (losses) gains on securities available for sale arising during period (net of tax effects of $(2,974), $2,894, $(13,594) and $10,092)		(11,187)		5,374		(51,140)		18,742
Reclassification adjustment for losses on securities available for sale included in net income (net of tax effects of $0, $889, $0 and $564)		—		1,650		—		1,048
		(11,187)		7,024		(51,140)		19,790
Comprehensive income	$	41,700	$	47,593	$	55,167	$	92,363

See accompanying notes to consolidated financial statements.

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)

	Six Months Ended
	June 30,
	2018		2017
Operating activities:
Net income	$	106,307	$	72,573
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for probable loan losses		(1,068)		2,505
Specific reserve, other real estate owned		2,658		317
Depreciation of bank premises and equipment		12,637		12,529
Gain on sale of bank premises and equipment		(147)		(16)
(Gain) loss on sale of other real estate owned		(688)		3
Accretion of investment securities discounts		(133)		(219)
Amortization of investment securities premiums		10,857		12,577
Investment securities transactions, net		—		1,612
Unrealized loss on equity securities with readily determinable fair values		1,021		—
Amortization of identified intangible assets		—		25
Stock based compensation expense		470		484
Earnings from affiliates and other investments		(7,683)		(5,590)
Deferred tax expense		363		212
(Increase) decrease in accrued interest receivable		(1,306)		591
(Increase) decrease in other assets		(42,795)		720
Net increase in other liabilities		21,724		5,691
Net cash provided by operating activities		102,217		104,014
Investing activities:
Proceeds from maturities of securities		1,075		—
Proceeds from sales and calls of available for sale securities		18,145		272,184
Purchases of available for sale securities		(47,346)		(542,112)
Principal collected on mortgage backed securities		363,406		372,717
Net increase in loans		(126,153)		(244,855)
Purchases of other investments		(27,457)		(4,540)
Distributions from other investments		8,702		5,467
Purchases of bank premises and equipment		(10,274)		(7,615)
Proceeds from sales of bank premises and equipment		901		682
Proceeds from sales of other real estate owned		2,191		8,207
Net cash provided by (used in) investing activities	$	183,190	$	(139,865)

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows, continued (Unaudited)

(Dollars in Thousands)

	Six Months Ended
	June 30,
	2018		2017
Financing activities:
Net increase in non-interest bearing demand deposits	$	193,768	$	124,390
Net (decrease) increase in savings and interest bearing demand deposits		(14,745)		31,011
Net decrease in time deposits		(54,287)		(59,556)
Net decrease in securities sold under repurchase agreements		(47,050)		(144,574)
Net (decrease) increase in other borrowed funds		(342,275)		153,125
Purchase of treasury stock		(57)		(121)
Proceeds from stock transactions		818		1,092
Payments of cash dividends - common		(21,814)		(21,793)
Net cash (used in) provided by financing activities		(285,642)		83,574
(Decrease) increase in cash and cash equivalents		(235)		47,723
Cash and cash equivalents at beginning of period		265,357		269,198
Cash and cash equivalents at end of period	$	265,122	$	316,921
Supplemental cash flow information:
Interest paid	$	11,593	$	10,242
Income taxes paid		27,948		34,941
Non-cash investing and financing activities:
Purchases of available-for-sale securities not yet settled	$	—	$	30,612
Net transfers from loans to other real estate owned		31,139		1,450

See accompanying notes to consolidated financial statements.

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 — Basis of Presentation

The accounting and reporting policies of International Bancshares Corporation (the “Corporation”) and Subsidiaries (the Corporation and Subsidiaries collectively referred to herein as the “Company”) conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.  The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries, International Bank of Commerce, Laredo (“IBC”), Commerce Bank, International Bank of Commerce, Zapata, International Bank of Commerce, Brownsville, International Bank of Commerce, Oklahoma and the Corporation’s wholly-owned non-bank subsidiaries, IBC Subsidiary Corporation, IBC Trading Company, Premier Tierra Holdings, Inc., IBC Charitable and Community Development Corporation, and IBC Capital Corporation.  All significant inter-company balances and transactions have been eliminated in consolidation.  The consolidated financial statements are unaudited, but include all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the periods presented.  All such adjustments were of a normal and recurring nature.  These financial statements should be read in conjunction with the financial statements and the notes thereto in the Company’s latest Annual Report on Form 10-K.  The consolidated statement of condition at December 31, 2017 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“US GAAP”) for complete financial statements.  Certain reclassifications have been made to make prior periods comparable. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results for the year ending December 31, 2018 or any future period.

The Company operates as one segment.  The operating information used by the Company’s chief executive officer for purposes of assessing performance and making operating decisions about the Company is the consolidated statements presented in this report.  The Company has five active operating subsidiaries, the bank subsidiaries. The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), FASB ASC 280, “Segment Reporting,” in determining its reportable segments and related disclosures.

The Company has evaluated all events or transactions that occurred through the date the Company issued these financial statements. During this period, the Company did not have any material recognizable or non-recognizable subsequent events.

On January 1, 2018, the Company adopted the provisions of ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,”  and ASU 2018-03, “Technical Corrections and Improvements to Financial Instruments – Overall,” which affects current US GAAP as it relates to the accounting for equity investments, financial liability under the fair value option, and the presentation and disclosure requirements for financial instruments.  ASU 2016-01 also supersedes the guidance that requires:  (i) the classification of equity securities with readily determinable fair values into different categories, and (ii) recognition in changes in fair value of available-for-sale securities in other comprehensive income.  The main effect resulting from the adoption of the new standards is that beginning on January 1, 2018, equity securities with readily determinable fair values are now reported in a single line item on the face of the Company’s consolidated statement of condition under the caption, “Equity securities with readily determinable fair values.”  Additionally, the changes in fair value of the equity securities is now recognized in net income and is included in other non-interest expense on the face of the Company’s consolidated income statement. Prior to January 1, 2018, the equity securities were classified as available-for-sale and stated at fair value with unrealized gains and losses included in accumulated comprehensive income, net of tax and had a net unrealized loss of $189,000.  Other equity securities without readily determinable fair values are recorded at cost less any impairment, if any, and included in other investments in the Company’s consolidated financial statements.

On January 1, 2018, the Company adopted the provisions of ASU 2014-09 to ASC 606, “Revenue from Contracts with Customers.”  ASC 606 sets a common standard that defines revenue and the principles for recognizing

8

revenue.  The core principle of the accounting standards update requires an entity to recognize revenue in a manner that reflects the consideration that an entity is expected to receive in exchange for goods or services as performance obligations are satisfied.  The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASC 606.  The Company has evaluated the impact of the accounting standards update on certain other non-interest revenue streams that the provisions of the update apply to and has determined that the adoption of the new provisions to ASC 606 did not have a significant impact to the Company’s consolidated financial statements or operations. 

The Company adopted the provisions of ASU 2018-02 to ASC 220, “Income Statement- Reporting Comprehensive Income” in the second quarter of 2018.  ASU 2018-02 amends current guidance surrounding the reclassification of certain tax effects from accumulated other comprehensive income (loss) as a result of the 2017 Tax Cuts and Jobs Act and the related impact to comprehensive income (loss) as a result of the application of existing guidance with respect to changes in tax rates.  Under prior guidance, entities were to evaluate the carrying value of deferred tax assets and liabilities and adjust them for the tax effect of the rate change and record that change through earnings.  The result is that the tax effects for items that normally would only be recognized in comprehensive income would be recognized through earnings and would result in stranded tax effects in other comprehensive income (loss) for the impact of the rate change.  ASU 2018-02 allows for a reclassification from accumulated other comprehensive income (loss) to retained earnings for the stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act.  The Company recorded a one-time reclassification of $5,979,000 between accumulated comprehensive income (loss) and retained earnings as a result of the adoption of the accounting standards update.

Note 2 — Fair Value Measurements

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 inputs, 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, 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.

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The following table represents assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of June 30, 2018 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
	June 30, 2018		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale debt securities
Residential mortgage-backed securities	$	3,509,643	$	—	$	3,509,643	$	—
States and political subdivisions		210,923		—		210,923		—
Equity Securities		27,054		27,054		—		—
	$	3,747,620	$	27,054	$	3,720,566	$	—

The following table represents assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of December 31, 2017 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, 2017		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage - backed securities	$	3,891,233	$	—	$	3,891,233	$	—
States and political subdivisions		232,951		—		232,951		—
Equity Securities		27,886		27,886		—		—
	$	4,152,070	$	27,886	$	4,124,184	$	—

Available-for-sale debt securities are classified within Level 2 of the valuation hierarchy.  Equity securities with readily determinable fair values are classified within Level 1.  For debt investments classified as Level 2 in the fair value hierarchy, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis.  The instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

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The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended June 30, 2018 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 Provision
	Year ended		Identical		Observable		Unobservable		(Credit)
	June 30,		Assets		Inputs		Inputs		During
	2018		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurring basis:
Assets:
Impaired loans	$	8,738	$	—	$	—	$	8,738	$	574
Other real estate owned		6,854		—		—		6,854		2,658

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended December 31, 2017 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 (Credit)
	Year ended		for Identical		Observable		Unobservable		Provision
	December 31,		Assets		Inputs		Inputs		During
	2017		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurring basis:
Assets:
Impaired loans	$	11,210	$	—	$	—	$	11,210	$	2,138
Other real estate owned		2,000		—		—		2,000		710

The Company’s assets measured at fair value on a non-recurring basis are limited to impaired loans and other real estate owned.  Impaired loans are classified within Level 3 of the valuation hierarchy.  The fair value of impaired loans is derived in accordance with FASB ASC 310, “Receivables”.  Impaired loans 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 impaired loan to fair value is done through a specific valuation allowance included in the allowance for probable loan losses.  The fair value of impaired loans is based on the fair value of the collateral, as determined through either an appraisal or evaluation process.  The basis for the Company’s appraisal and appraisal review process is based on regulatory guidelines and strives to comply with all regulatory appraisal laws, regulations, and the Uniform Standards of Professional Appraisal Practice. All appraisals and evaluations are “as is” (the property’s highest and best use) valuations based on the current conditions of the property/project at that point in time.  The determination of the fair value of the collateral is based on the net realizable value, which is the appraised value less any closing costs, when applicable.  As of June 30, 2018, the Company had $25,827,000 of impaired commercial collateral dependent loans, of which $11,922,000 had an appraisal performed within the immediately preceding twelve months, and of which $0 had an evaluation performed within the immediately preceding twelve months.  As of December 31, 2017, the Company had $53,267,000 of impaired commercial collateral dependent loans, of which $18,585,000 had an appraisal performed within the immediately preceding twelve months and of which $0 had an evaluation performed within the immediately preceding twelve months.

The determination to either seek an appraisal or to perform an evaluation begins in weekly credit quality meetings, where the committee analyzes the existing collateral values of the impaired loans and where obsolete appraisals are identified.  In order to determine whether the Company would obtain a new appraisal or perform an

11

internal evaluation to determine the fair value of the collateral, the credit 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.  If the analysis of the existing appraisal does not find that the collateral value is reasonable under the current circumstances, the Company would obtain a new appraisal on the collateral or perform an internal evaluation of the collateral.  The ultimate decision to get a new appraisal rests with the independent credit administration group.  A new appraisal is not required if an internal evaluation, as performed by in-house experts, 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 impairment analysis.  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.  

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 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 three and six months ended June 30, 2018 and the twelve months ended December 31, 2017, the Company recorded $138,000, $162,000 and $30,000, respectively, in charges to the allowance for probable loan losses in connection with loans transferred to other real estate owned.  For the three and six months ended June 30, 2018 and the twelve months ended December 31, 2017, the Company recorded $2,587,000, $2,658,000 and $710,000, respectively, in adjustments to fair value in connection with other real estate owned.

The fair value estimates, methods, and assumptions for the Company’s financial instruments at June 30, 2018 and December 31, 2017 are outlined below.

Cash and Cash Equivalents

For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Time Deposits with Banks

The carrying amounts of time deposits with banks approximate fair value.

Investment Securities Held-to-Maturity

The carrying amounts of investments held-to-maturity approximate fair value.

Investment Securities

For investment securities, which include U.S. Treasury securities, obligations of other U.S. government agencies, obligations of states and political subdivisions and mortgage pass-through and related securities, fair values are 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 6.

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics.  Loans are segregated by type, such as commercial, real estate and consumer loans, as outlined by regulatory reporting guidelines.  Each category is segmented into fixed and variable interest rate terms and by performing and non-performing categories.

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For variable rate performing loans, the carrying amount approximates the fair value.  For fixed-rate performing loans, except residential mortgage loans, the fair value is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan.  For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources or the primary origination market.  Fixed-rate performing loans are within Level 3 of the fair value hierarchy.  At June 30, 2018, and December 31, 2017, the carrying amount of fixed-rate performing loans was $1,537,587,000 and $1,505,531,000, respectively, and the estimated fair value was $1,499,578,000 and $1,454,434,000, respectively.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Deposits

The fair value of deposits with no stated maturity, such as non-interest bearing demand deposit accounts, savings accounts and interest bearing demand deposit accounts, was equal to the amount payable on demand as of June 30, 2018 and December 31, 2017.  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 June 30, 2018 and December 31, 2017, the carrying amount of time deposits was $2,002,219,000 and $2,056,506,000, respectively, and the estimated fair value was $2,004,385,000 and $2,058,621,000, respectively.

Securities Sold Under Repurchase Agreements

Securities sold under repurchase agreements include short- and long-term maturities.  Due to the contractual terms of the short-term instruments, the carrying amounts approximated fair value at June 30, 2018 and December 31, 2017.  The fair value of the long-term instruments is based on established market spreads using option adjusted spread methodology.  Long-term repurchase agreements are within Level 3 of the fair value hierarchy.  The only remaining long-term repurchase agreement outstanding matured in the first quarter of 2018 and was not renewed.  At December 31, 2017, the carrying amount of long-term repurchase agreements was $100,000,000 and the estimated fair value was $99,504,000.

Junior Subordinated Deferrable Interest Debentures

The Company currently has floating-rate junior subordinated deferrable interest debentures outstanding.  Due to the contractual terms of the floating-rate junior subordinated deferrable interest debentures, the carrying amounts approximated fair value at June 30, 2018 and December 31, 2017.

Other Borrowed Funds

The Company currently has short- and long-term borrowings issued from the Federal Home Loan Bank (“FHLB”).  Due to the contractual terms of the short-term borrowings, the carrying amounts approximated fair value at June 30, 2018 and December 31, 2017.  The long-term borrowings outstanding at June 30, 2018 are fixed-rate borrowings and the fair value is based on established market spreads for similar types of borrowings.  The fixed rate long-term borrowings are included in Level 2 of the fair value hierarchy.  At June 30, 2018 and December 31, 2017, the carrying amount of the fixed rate long-term FHLB borrowings was $100,000,000 and $250,000,000, respectively, and the estimated fair value was $100,597,000 and $249,728,000, 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.

13

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 the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-statement of condition financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Other significant assets and liabilities that are not considered financial assets or liabilities include the bank premises and equipment and core deposit value.  In addition, the tax ramifications related to the effect of fair value estimates have not been considered in the above estimates.

Note 3 — Loans

A summary of loans, by loan type at June 30, 2018 and December 31, 2017 is as follows:

	June 30,		December 31,
	2018		2017
	(Dollars in Thousands)
Commercial, financial and agricultural	$	3,321,341	$	3,322,668
Real estate - mortgage		1,136,921		1,133,525
Real estate - construction		1,781,953		1,683,550
Consumer		47,747		49,543
Foreign		151,458		158,886
Total loans	$	6,439,420	$	6,348,172

Note 4 — Allowance for Probable Loan Losses

The allowance for probable loan losses primarily consists of the aggregate loan loss allowances of the bank subsidiaries.  The allowances are established through charges to operations in the form of provisions for probable loan losses.  Loan losses or recoveries are charged or credited directly to the allowances.  The allowance for probable loan losses of each bank subsidiary is maintained at a level considered appropriate by management, based on estimated probable losses in the loan portfolio.  The allowance for probable loan losses is derived from the following elements:  (i) allowances established on specific impaired loans, which are based on a review of the individual characteristics of each loan, including the customer’s ability to repay the loan, the underlying collateral values, and the industry in which the customer operates; (ii) allowances based on actual historical loss experience for similar types of loans in the Company’s loan portfolio; and (iii) allowances based on general economic conditions, changes in the mix of loans, company resources, border risk and credit quality indicators, among other things.  All segments of the loan portfolio continue to be impacted by economic uncertainty as the economy recovers from the recent prolonged downturn.

The Company’s management continually reviews the allowance for loan losses of the bank subsidiaries using the amounts determined from the allowances established on specific impaired loans, the allowance established on quantitative historical loss percentages, and the allowance based on qualitative data to establish an appropriate amount to maintain in the Company’s allowance for loan losses.  Should any of the factors considered by management in evaluating the adequacy of the allowance for probable loan losses change, the Company’s estimate of probable loan losses could also change, which could affect the level of future provisions for probable loan losses.  While the calculation of the allowance for probable loan losses utilizes management’s best judgment and all information reasonably available, the adequacy of the allowance is dependent on a variety of factors beyond the Company’s control, including, among other things, the performance of the entire loan portfolio, the economy, changes in interest rates and the view of regulatory authorities towards loan classifications.

14

The loan loss provision is determined using the following methods.  On a weekly basis, 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 the Company’s internal classified report.  Additionally, the Company’s credit department reviews the majority of the Company’s 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, the Company determines if a loan should be placed on an internal classified report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.

A summary of the transactions in the allowance for probable loan losses by loan class is as follows:

	Three Months Ended June 30, 2018
	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 March 31,	$	20,691	$	11,798	$	24,803	$	947	$	3,006	$	4,689	$	437	$	783	$	67,154
Losses charged to allowance		(2,284)		—		(70)		—		(30)		(9)		(65)		—		(2,458)
Recoveries credited to allowance		447		2		192		—		1		229		15		1		887
Net (losses) recoveries  charged to allowance		(1,837)		2		122		—		(29)		220		(50)		1		(1,571)
Provision charged to operations		(2,258)		2,903		(6,629)		627		614		1,884		63		66		(2,730)
Balance at June 30,	$	16,596	$	14,703	$	18,296	$	1,574	$	3,591	$	6,793	$	450	$	850	$	62,853

	Three Months Ended June 30, 2017
	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 March 31,	$	25,853	$	13,789	$	16,721	$	818	$	2,391	$	3,186	$	504	$	924	$	64,186
Losses charged to allowance		(2,264)		—		(40)		—		(30)		(33)		(39)		—		(2,406)
Recoveries credited to allowance		2,154		2		89		—		2		73		13		1		2,334
Net (losses) recoveries charged to allowance		(110)		2		49		—		(28)		40		(26)		1		(72)
Provision charged to operations		(603)		(542)		702		179		(49)		1,131		10		(23)		805
Balance at June 30,	$	25,140	$	13,249	$	17,472	$	997	$	2,314	$	4,357	$	488	$	902	$	64,919

15

	Six Months Ended June 30, 2018
	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,	$	27,905	$	11,675	$	16,663	$	1,109	$	2,950	$	6,103	$	440	$	842	$	67,687
Losses charged to allowance		(4,999)		(1)		(70)		—		(44)		(39)		(182)		—		(5,335)
Recoveries credited to allowance		1,030		4		210		—		2		295		27		1		1,569
Net (losses) recoveries  charged to allowance		(3,969)		3		140		—		(42)		256		(155)		1		(3,766)
Provision charged to operations		(7,340)		3,025		1,493		465		683		434		165		7		(1,068)
Balance at June 30,	$	16,596	$	14,703	$	18,296	$	1,574	$	3,591	$	6,793	$	450	$	850	$	62,853

	Six Months Ended June 30, 2017
	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,	$	25,649	$	13,889	$	16,731	$	806	$	2,455	$	3,716	$	531	$	884	$	64,661
Losses charged to allowance		(4,999)		—		(40)		—		(61)		(138)		(160)		—		(5,398)
Recoveries credited to allowance		2,853		3		147		—		7		97		29		15		3,151
Net (losses) recoveries  charged to allowance		(2,146)		3		107		—		(54)		(41)		(131)		15		(2,247)
Provision charged to operations		1,637		(643)		634		191		(87)		682		88		3		2,505
Balance at June 30,	$	25,140	$	13,249	$	17,472	$	997	$	2,314	$	4,357	$	488	$	902	$	64,919

The allowance for probable loan losses is a reserve established through a provision for probable loan losses charged to expense, which represents management’s best estimate of probable loan losses when evaluating loans individually or collectively.  The decreases in provision for probable loan losses charged to expense for the three and six months ended June 30, 2018 and June 30, 2017 can be attributed to a decrease in the historical loss experience in the commercial category of the calculation and a decrease in loans classified as Watch-List Substandard and Impaired.  As discussed in prior periods, charge-offs increased from historical levels due to the deterioration of one relationship that is secured by multiple pieces of transportation equipment beginning in the fourth quarter of 2014.  The Company uses a three year historical charge-off experience in the calculation, therefore, as those charge-offs are eliminated from the calculation, the allowance for probable loan losses is impacted.  As fluctuations occur in historical loss factors, management evaluates the need to adjust the qualitative factors used in the calculation to properly reflect probable loan losses.  

16

The table below provides additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class as of June 30, 2018 and December 31, 2017:

	June 30, 2018
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance
	(Dollars in Thousands)
Domestic
Commercial	$	17,933	$	460	$	1,072,061	$	16,136
Commercial real estate: other construction & land development		2,166		116		1,779,787		14,587
Commercial real estate: farmland & commercial		6,020		—		2,011,747		18,296
Commercial real estate: multifamily		664		—		212,916		1,574
Residential: first lien		6,387		—		420,951		3,591
Residential: junior lien		799		—		708,784		6,793
Consumer		1,141		—		46,606		450
Foreign		330		—		151,128		850
Total	$	35,440	$	576	$	6,403,980	$	62,277

	December 31, 2017
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance
	(Dollars in Thousands)
Domestic
Commercial	$	17,947	$	300	$	1,068,520	$	27,605
Commercial real estate: other construction & land development		2,455		116		1,681,095		11,559
Commercial real estate: farmland & commercial		33,123		18		2,010,162		16,645
Commercial real estate: multifamily		476		—		192,440		1,109
Residential: first lien		6,852		—		425,925		2,950
Residential: junior lien		723		—		700,025		6,103
Consumer		1,281		—		48,262		440
Foreign		347		—		158,539		842
Total	$	63,204	$	434	$	6,284,968	$	67,253

17

The table below provides additional information on loans accounted for on a non-accrual basis by loan class at June 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
	(Dollars in Thousands)
Domestic
Commercial	$	17,896	$	17,909
Commercial real estate: other construction & land development		2,166		2,455
Commercial real estate: farmland & commercial		6,020		33,123
Commercial real estate: multifamily		664		476
Residential: first lien		485		712
Residential: junior lien		—		11
Consumer		39		44
Total non-accrual loans	$	27,270	$	54,730

The decrease in impaired and non-accrual loans at June 30, 2018 compared to December 31, 2017 can be attributed to a relationship secured by a waterpark foreclosed upon in the second quarter of 2018.  The relationship was classified as Watch-List Impaired at December 31, 2017.  Impaired loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected.  The Company has identified these loans through its normal loan review procedures. Impaired 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 the Company’s impaired loans are measured at the fair value of the collateral. In limited cases, the Company may use other methods to determine the level of impairment of a loan if such loan is not collateral dependent.

The following tables detail key information regarding the Company’s impaired loans by loan class at June 30, 2018 and December 31, 2017:

	June 30, 2018
							Quarter to Date				Year to Date
			Unpaid				Average				Average
	Recorded		Principal		Related		Recorded		Interest		Recorded		Interest
	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	1,402	$	1,992	$	460	$	1,604	$	—	$	1,661	$	—
Commercial real estate: other construction & land development		142		169		116		143		—		144		—
Total impaired loans with related allowance	$	1,544	$	2,161	$	576	$	1,747	$	—	$	1,805	$	—

18

	June 30, 2018
					Quarter to Date				Year to Date
			Unpaid		Average				Average
	Recorded		Principal		Recorded		Interest		Recorded		Interest
	Investment		Balance		Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	16,531	$	43,980	$	16,594	$	1	$	16,738	$	1
Commercial real estate: other construction & land development		2,024		2,230		2,148		—		2,216		—
Commercial real estate: farmland & commercial		6,020		6,520		36,790		—		36,686		—
Commercial real estate: multifamily		664		696		664		—		568		—
Residential: first lien		6,387		6,508		6,426		76		6,864		152
Residential: junior lien		799		810		803		12		811		22
Consumer		1,141		1,144		1,145		1		1,179		2
Foreign		330		330		333		4		337		7
Total impaired loans with no related allowance	$	33,896	$	62,218	$	64,903	$	94	$	65,399	$	184

	December 31, 2017
			Unpaid				Average
	Recorded		Principal		Related		Recorded		Interest
	Investment		Balance		Allowance		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial real estate: other construction & land development	$	1,300	$	1,577	$	300	$	1,346	$	—
Commercial real estate: farmland & commercial		145		169		116		150		—
Commercial real estate: multifamily		449		590		18		489		—
Total impaired loans with related allowance	$	1,894	$	2,336	$	434	$	1,985	$	—

	December 31, 2017
			Unpaid		Average
	Recorded		Principal		Recorded		Interest
	Investment		Balance		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	16,646	$	44,095	$	19,354	$	3
Commercial real estate: other construction & land development		2,310		2,455		2,336		67
Commercial real estate: farmland & commercial		32,675		33,275		8,523		110
Commercial real estate: multifamily		476		505		401		—
Residential: first lien		6,852		6,968		6,860		298
Residential: junior lien		723		736		1,011		52
Consumer		1,281		1,283		1,214		1
Foreign		347		347		751		16
Total impaired loans with no related allowance	$	61,310	$	89,664	$	40,450	$	547

19

The following table details key information regarding the Company’s impaired loans by loan class at June 30, 2017:

	June 30, 2017
	Quarter to Date					Year to Date
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	1,152	$	—	$	1,158	$	—
Commercial real estate: other construction & land development		767		—		1,033		—
Commercial real estate: farmland & commercial		1,314		—		1,567		—
Total impaired loans with related allowance	$	3,233	$	—	$	3,758	$	—

	June 30, 2017
	Quarter to Date				Year to Date
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	20,005	$	1	$	20,463	$	1
Commercial real estate: other construction & land development		2,482		—		2,610		—
Commercial real estate: farmland & commercial		8,532		30		8,774		58
Commercial real estate: multifamily		521		—		530		—
Residential: first lien		6,774		81		6,874		159
Residential: junior lien		977		12		982		23
Consumer		1,156		—		1,212		1
Foreign		755		4		751		8
Total impaired loans with no related allowance	$	41,202	$	128	$	42,196	$	250

A portion of the impaired loans have adequate collateral and credit enhancements not requiring a related allowance for loan loss.  Management recognizes the risks associated with these impaired loans, however, management is confident the Company’s loss exposure regarding these credits will be significantly reduced due to the Company’s long-standing practices that encompass the following principles:  (i) the financial strength of the borrower, including strong earnings, a high net worth, significant liquidity and an acceptable debt to worth ratio, (ii) managerial and business competence, (iii) the ability to repay, (iv) for a new business, projected cash flows, (v) loan to value, (vi) in the case of a secondary guarantor, a guarantor financial statement, and (viii) financial and/or other character references.  Management’s decision to place loans in this category does not necessarily mean that the Company will experience significant losses from these loans or significant increases in impaired loans from these levels.

20

The following table details loans accounted for as “troubled debt restructuring,” segregated by loan class.  Loans accounted for as troubled debt restructuring are included in impaired loans.

	June 30, 2018		December 31, 2017
		(Dollars in Thousands)
Domestic
Commercial	$	6,742	$	6,910
Commercial real estate:  farmland & commercial		—		—
Residential:  first lien		5,902		6,140
Residential:  junior lien		799		712
Consumer		1,101		1,237
Foreign		330		347
Total troubled debt restructuring	$	14,874	$	15,346

The bank subsidiaries 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 of the Company believes that it is generally able to identify borrowers with financial problems reasonably early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses.  The determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an exercise of judgment.  Similarly, the determination of the adequacy of the allowance for probable loan losses can be made only on a subjective basis.  It is the judgment of the Company’s management that the allowance for probable loan losses at June 30, 2018 was adequate to absorb probable losses from loans in the portfolio at that date.

The following tables present information regarding the aging of past due loans by loan class at June 30, 2018 and December 31, 2017:

	June 30, 2018
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	3,192	$	833	$	17,806	$	618	$	21,831	$	1,068,163	$	1,089,994
Commercial real estate: other construction & land development		639		124		3,452		2,638		4,215		1,777,738		1,781,953
Commercial real estate: farmland & commercial		2,069		3,336		3,394		532		8,799		2,008,968		2,017,767
Commercial real estate: multifamily		191		—		664		—		855		212,725		213,580
Residential: first lien		3,343		699		4,298		4,053		8,340		418,998		427,338
Residential: junior lien		1,230		284		994		994		2,508		707,075		709,583
Consumer		532		51		55		36		638		47,109		47,747
Foreign		2,355		1,322		14		14		3,691		147,767		151,458
Total past due loans	$	13,551	$	6,649	$	30,677	$	8,885	$	50,877	$	6,388,543	$	6,439,420

21

	December 31, 2017
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio
		(Dollars in Thousands)
Domestic
Commercial	$	3,790	$	398	$	18,308	$	537	$	22,496	$	1,063,971	$	1,086,467
Commercial real estate: other construction & land development		354		308		820		6		1,482		1,682,068		1,683,550
Commercial real estate: farmland & commercial		3,925		518		31,133		954		35,576		2,007,709		2,043,285
Commercial real estate: multifamily		84		—		476		—		560		192,356		192,916
Residential: first lien		4,295		2,458		4,095		3,861		10,848		421,929		432,777
Residential: junior lien		1,310		580		1,110		1,099		3,000		697,748		700,748
Consumer		868		98		160		133		1,126		48,417		49,543
Foreign		1,229		69		667		667		1,965		156,921		158,886
Total past due loans	$	15,855	$	4,429	$	56,769	$	7,257	$	77,053	$	6,271,119	$	6,348,172

The decrease in the 90 days or greater Commercial real estate:  farmland and commercial category can be attributed to the removal of a loan relationship primarily secured by a water park due to the foreclosure of the collateral in the second quarter of 2018.

The Company’s internal classified report is segregated into the following categories:  (i) “Special Review Credits,” (ii) “Watch List-Pass Credits,” and (iii) “Watch List-Substandard Credits.”  The loans placed in the “Special Review Credits” category reflect management’s opinion that the loans reflect potential weakness which requires 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 the Company’s 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 some future loss could be sustained by the Company if such weaknesses are not corrected.  For loans that are classified as impaired, management evaluates these credits in accordance with the provisions of ASC 310-10, “Receivables,” and, if deemed necessary, a specific reserve is allocated to the credit.  The specific reserve allocated under ASC 310-10 is 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 the Company’s loans evaluated as impaired under ASC 310-10 are measured using the fair value of collateral method.  In limited cases, the Company may use other methods to determine the specific reserve of a loan under ASC 310-10 if such loan is not collateral dependent.

The allowance based on historical loss experience on the Company’s remaining loan portfolio, which includes the “Special Review Credits,” “Watch List - Pass Credits,” and “Watch List - Substandard Credits” is determined by segregating the remaining loan portfolio into certain categories such as commercial loans, installment loans, international loans, loan concentrations and overdrafts.  Installment loans are then further segregated by number of days past due.  A historical loss percentage, adjusted for (i) management’s evaluation of changes in lending policies and procedures, (ii) current economic conditions in the market area served by the Company, (iii) other risk factors, (iv) the effectiveness of the internal loan review function, (v) changes in loan portfolios, and (vi) the composition and concentration of credit volume is applied to each category.  Each category is then added together to determine the allowance allocated under ASC 450-20.

22

A summary of the loan portfolio by credit quality indicator by loan class at June 30, 2018 and December 31, 2017 is as follows:

			June 30, 2018
			Special		Watch		Watch List—		Watch List—
	Pass		Review		List—Pass		Substandard		Impaired
			(Dollars in Thousands)
Domestic
Commercial	$	951,055	$	256	$	1,034	$	119,716	$	17,933
Commercial real estate: other construction & land development		1,715,667		1,115		7,169		55,836		2,166
Commercial real estate: farmland & commercial		1,817,420		57,123		39,372		97,832		6,020
Commercial real estate: multifamily		211,972		—		—		944		664
Residential: first lien		420,198		—		129		624		6,387
Residential: junior lien		707,903		—		881		—		799
Consumer		46,606		—		—		—		1,141
Foreign		151,128		—		—		—		330
Total	$	6,021,949	$	58,494	$	48,585	$	274,952	$	35,440

			December 31, 2017
			Special		Watch		Watch List—		Watch List—
	Pass		Review		List—Pass		Substandard		Impaired
			(Dollars in Thousands)
Domestic
Commercial	$	905,707	$	—	$	3,170	$	159,643	$	17,947
Commercial real estate: other construction & land development		1,616,604		1,288		672		62,531		2,455
Commercial real estate: farmland & commercial		1,863,763		5,134		41,820		99,445		33,123
Commercial real estate: multifamily		192,440		—		—		—		476
Residential: first lien		425,811		40		—		74		6,852
Residential: junior lien		699,875		150		—		—		723
Consumer		48,262		—		—		—		1,281
Foreign		158,539		—		—		—		347
Total	$	5,911,001	$	6,612	$	45,662	$	321,693	$	63,204

The increase in Special Review credits at June 30, 2018 compared to December 31, 2017 can be attributed to the reclassification of one relationship secured by real estate used for day care facilities from Pass.  The decrease in Watch List-Substandard credits at June 30, 2018 compared to December 31, 2017 can be primarily attributed to the  payoff of a loan relationship secured by barges used in the transportation of petroleum products.  The decrease in Watch List-Impaired at June 30, 2018 compared to December 31, 2017 can be attributed to the foreclosure of a loan relationship primarily secured by a water park.

Note 5 — Stock Options

On April 5, 2012, the Board of Directors adopted the 2012 International Bancshares Corporation Stock Option Plan (the “2012 Plan”). There are 800,000 shares of common stock available for stock option grants under the 2012 Plan, which may be 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. As of June 30, 2018, 2,500 shares were available for future grants under the 2012 Plan. 

23

A summary of option activity under the stock option plan for the six months ended June 30, 2018 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, 2017	668,166	$	20.41
Plus: Options granted	229,700		38.30
Less:
Options exercised	46,351		17.50
Options expired	—		—
Options forfeited	15,800		18.58
Options outstanding at June 30, 2018	835,715		25.53	6.44	$	14,436
Options fully vested and exercisable at June 30, 2018	327,341	$	19.64	4.56	$	7,582

Stock-based compensation expense included in the consolidated statements of income for the three and six months ended June 30, 2018 was $285,000 and $470,000, respectively.  Stock-based compensation expense included in the consolidated statements of income for the three and six months ended June 30, 2017 was approximately $216,000 and $484,000, respectively.  As of June 30, 2018, there was approximately $3,316,000 of total unrecognized stock-based compensation cost related to non-vested options granted under the Company plans that will be recognized over a weighted average period of 1.9 years.

Note 6 — Investment Securities and Equity Securities with Readily Determinable Fair Values

The Company classifies debt securities into one of three categories:  held-to maturity, available-for-sale, or trading.  Such debt securities are reassessed for appropriate classification at each reporting date.  Securities classified as “held-to-maturity” are carried at amortized cost for financial statement reporting, while securities classified as “available-for-sale” and “trading” are carried at their fair value.  Unrealized holding gains and losses are included in net income for those securities classified as “trading,” while unrealized holding gains and losses related to those securities classified as “available-for-sale” are excluded from net income and reported net of tax as other comprehensive income (loss) and accumulated other comprehensive income (loss) until realized, or in the case of losses, when deemed other than temporary.  In accordance with the provisions of ASU 2016-01, which the Company adopted on January 1, 2018, unrealized holding gains and losses related to equity securities with readily determinable fair values are included in net income.

24

The amortized cost and estimated fair value by type of investment security at June 30, 2018 are as follows:

	Held to Maturity
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Carrying
	cost		gains		losses		fair value		value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	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	$	3,615,831	$	9,299	$	(115,487)	$	3,509,643	$	3,509,643
Obligations of states and political subdivisions		206,363		4,705		(145)		210,923		210,923
Total investment securities	$	3,822,194	$	14,004	$	(115,632)	$	3,720,566	$	3,720,566

(1) Included in the carrying value of residential mortgage-backed securities are $571,385 of mortgage-backed securities issued by Ginnie Mae and $2,938,258 of mortgage-backed securities issued by Fannie Mae and Freddie Mac.

The amortized cost and estimated fair value by type of investment security at December 31, 2017 are as follows:

	Held to Maturity
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Carrying
	cost		gains		losses		fair value		value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	Available for Sale
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair		Carrying
	cost		gains		losses		value		value(1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	3,943,092	$	14,110	$	(65,969)	$	3,891,233	$	3,891,233
Obligations of states and political subdivisions		225,096		7,871		(16)		232,951		232,951
Equity securities		28,075		293		(482)		27,886		27,886
Total investment securities	$	4,196,263	$	22,274	$	(66,467)	$	4,152,070	$	4,152,070

(1) Included in the carrying value of residential mortgage-backed securities are $654,063 of mortgage-backed securities issued by Ginnie Mae and $3,237,170 of mortgage-backed securities issued by Fannie Mae and Freddie.

25

The amortized cost and estimated fair value of investment securities at June 30, 2018, 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	$	1,200	$	1,200	$	—	$	—
Due after one year through five years		1,200		1,200		—		—
Due after five years through ten years		—		—		1,720		1,736
Due after ten years		—		—		204,643		209,187
Residential mortgage-backed securities		—		—		3,615,831		3,509,643
Total investment securities	$	2,400	$	2,400	$	3,822,194	$	3,720,566

Residential mortgage-backed securities are securities primarily issued by the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”), or the Government National Mortgage Association (“Ginnie Mae”).  Investments in residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. Government.  Investments in residential mortgage-backed securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government, however, the Company believes that the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008 and because securities issued by others that are collateralized by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated securities.

The amortized cost and fair value of available-for-sale debt investment securities pledged to qualify for fiduciary powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was $1,221,859,000 and $1,179,583,000, respectively, at June 30, 2018.

Proceeds from the sale and calls of debt securities available-for-sale were $0 and $18,145,000 for the three and six months ended June 30, 2018, which included $0 and $0 of mortgage-backed securities. Gross gains of $0 and $0 and gross losses of $0 and $0 were realized on the sales and calls for the three and six months ended June 30, 2018.  Proceeds from the sale and call of debt securities available-for-sale were $150,634,000 and $272,184,000 for the three and six months ended June 30, 2017, respectively, which included $150,634,000 and $266,967,000 of mortgage-backed securities, respectively.  Gross gains of $10,000 and $1,186,000 and gross losses of $2,549,000 and $2,798,000 were realized on the sales and calls for the three and six months ended June 30, 2017.

Gross unrealized losses on debt investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at June 30, 2018, 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	$	1,000,142	$	(23,712)	$	2,047,402	$	(91,775)	$	3,047,544	$	(115,487)
Obligations of states and political subdivisions		15,879		(137)		516		(8)		16,395		(145)
	$	1,016,021	$	(23,849)	$	2,047,918	$	(91,783)	$	3,063,939	$	(115,632)

26

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, 2017 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	$	1,061,577	$	(13,157)	$	2,029,455	$	(52,812)	$	3,091,032	$	(65,969)
Obligations of states and political subdivisions		5,534		(9)		522		(7)		6,056		(16)
Equity securities		11,499		(251)		8,019		(231)		19,518		(482)
	$	1,078,610	$	(13,417)	$	2,037,996	$	(53,050)	$	3,116,606	$	(66,467)

The unrealized losses on investments in residential mortgage-backed securities are primarily caused by changes in market interest rates.  Residential mortgage-backed securities are primarily securities issued by Freddie Mac, Fannie Mae and Ginnie Mae.  The contractual cash obligations of the securities issued by Ginnie Mae are fully guaranteed by the U.S. Government.  The contractual cash obligations of the securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government; however, the Company believes 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.  The decrease in fair value on residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae is due to market interest rates.  The Company has no intent to sell and will more than likely not be required to sell before a market price recovery or maturity of the securities; therefore, it is the conclusion of the Company that the investments in residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae are not considered other-than-temporarily impaired. 

Equity securities with readily determinable fair values consist primarily of Community Reinvestment Act funds.  At June 30, 2018 and December 31, 2017, the balance in equity securities with readily determinable fair values recorded at fair value were $27,054,000 and $27,885,000, respectively.  Prior to January 1, 2018, the equity securities were included in available-for-sale securities, with the related unrealized gain or loss recorded as a component of other comprehensive income.  The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and six months ended June 30, 2018:

	Three Months Ended
	June 30,
	(Dollars in Thousands)
	2018
Net losses recognized during the period on equity securities	$	(247)
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	$	(247)

27

	Six Months Ended
	June 30,
	(Dollars in Thousands)
	2018
Net losses recognized during the period on equity securities	$	(1,021)
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	$	(1,021)

Note 7 — Other Borrowed Funds

Other borrowed funds include FHLB borrowings, which are short-term and long-term borrowings issued by the FHLB of Dallas at the market price offered at the time of funding. These borrowings are secured by residential mortgage-backed investment securities and a portion of the Company’s loan portfolio.  At June 30, 2018, other borrowed funds totaled $852,950,000, a decrease of 28.6% from $1,195,225,000 at December 31, 2017.  The decrease in borrowings can be attributed to an increase in cash arising from principal pay downs on available-for-sale debt securities and deposits. 

Note 8 — Junior Subordinated Interest Deferrable Debentures

The Company has six statutory business trusts under the laws of the State of Delaware, for the purpose of issuing trust preferred securities. The six statutory business trusts formed by the Company (the “Trusts”) have each issued Capital and Common Securities and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (“Debentures”) issued by the Company. As of June 30, 2018 and December 31, 2017, the principal amount of Debentures outstanding totaled $160,416,000.    

The Debentures are subordinated and junior in right of payment to all present and future senior indebtedness (as defined in the respective Indentures) of the Company, 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. The Company has fully and unconditionally guaranteed the obligations of each of the Trusts with respect to the Capital and Common Securities. The Company has 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 Trusts VI, VIII, IX, X, XI and XII. 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 of the Company 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 June 30, 2018 and December 31, 2017, the total $160,416,000 of the Capital and Common Securities outstanding qualified as Tier 1 capital.

28

The following table illustrates key information about each of the Capital and Common Securities and their interest rate at June 30, 2018:

	Junior
	Subordinated
	Deferrable
	Interest		Repricing	Interest		Interest				Optional
	Debentures		Frequency	Rate		Rate Index(1)			Maturity Date	Redemption Date(1)
	(Dollars in Thousands)
Trust VI	$	25,774	Quarterly	5.79	%	LIBOR	+	3.45	November 2032	February 2008
Trust VIII		25,774	Quarterly	5.40	%	LIBOR	+	3.05	October 2033	October 2008
Trust IX		41,238	Quarterly	3.93	%	LIBOR	+	1.62	October 2036	October 2011
Trust X		21,021	Quarterly	4.01	%	LIBOR	+	1.65	February 2037	February 2012
Trust XI		25,990	Quarterly	3.93	%	LIBOR	+	1.62	July 2037	July 2012
Trust XII		20,619	Quarterly	3.75	%	LIBOR	+	1.45	September 2037	September 2012
	$	160,416

(1) The Capital and Common Securities may be redeemed in whole or in part on any interest payment date after the Optional Redemption Date.

Note 9 — Common Stock and Dividends

In connection with the Company’s participation in the Troubled Asset Relief Program Capital Purchase Program in 2008, the US Treasury received a warrant (“Warrant”) to purchase 1,326,238 shares of the Company’s common stock at $24.43 per share. The term of the Warrant is ten years and was immediately exercisable. The Warrant is included as a component of Tier 1 capital. On June 12, 2013, the U. S. Treasury sold the Warrant to a third party. As of August 3, 2018, the Warrant is still outstanding, but expires on December 23, 2018. Adjustments to the $24.43 per share Exercise Price of the Warrant will be made if the Company pays cash dividends in excess of $0.33 per semi‑annual period or makes certain other shareholder distributions before the Warrant expires.

On April 16, 2018, the Company paid cash dividends of $0.33 per share to record holders of the Company’s common stock on April 2, 2018.  On April 17 and October 16, 2017, the Company paid cash dividends of $0.33 per share to record holders of the Company’s common stock on April 13, and September 29, 2017, respectively. 

In April 2009, following receipt of the Treasury Department’s consent, 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 15, 2018, the Board of Directors extended the repurchase program and authorized the purchase of up to $40 million of common stock during each successive 12 month period commencing again on April 9, 2018. 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 first quarter of 2018, the Board of Directors adopted a Rule 10b5‑1 trading plan, and intends to adopt additional Rule 10b5‑1 trading plans, that will allow the Company to purchase shares of its common stock during certain trading blackout periods when the Company ordinarily would not be in the market due to trading restrictions in its insider trading policy. During the term of 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 the Rule 10b5-1 trading plan will be held in treasury for reissue for various corporate purposes, including employee stock compensation plans. As of August 3, 2018, a total of 9,246,956 shares had been repurchased under all programs at a cost of $271,347,000. The Company is not obligated to purchase shares under its stock repurchase program outside of its Rule 10b5-1 trading plan.

Note 10 — Commitments and Contingent Liabilities and Other Tax Matters

The Company is involved in various legal proceedings that are in various stages of litigation.  The Company has determined, based on discussions with its counsel, that any material loss in such actions, individually or in the aggregate,

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is remote or the damages sought, even if fully recovered, would not be considered material to the consolidated financial position or results of operations of the Company.  However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law.  The Tax Act materially changes U. S. corporate income tax rates, among other things.  The Company was in a net deferred tax liability position at the time the Tax Act was enacted and subsequently revalued the carrying value of the net deferred liability and its components to the new 21% effective tax rate.  The revaluation resulted in a net benefit to the Company of $3,168,000 and was included as a reduction to income tax expense in the consolidated income statement for the year ended December 31, 2017.  No adjustments to the revalued carrying value for deferred tax assets or liabilities were made during the three or six months ended June 30, 2018. 

Note 11 — Capital Ratios

Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amount and classifications are also subject to qualitative judgements by regulators about components, risk-weighting and other factors.

In July 2013, the Federal Deposit Insurance Corporation (“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 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) related capital provisions. Consistent with the Basel international framework, the rules include a minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of 4.5% and a CET1 capital conservation buffer of 2.5% of risk-weighted assets.  The capital conservation buffer began phasing-in on January 1, 2016 at .625% and will increase each year until January 1, 2019, when the Company will be required to have a 2.5% capital conservation buffer, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. 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 are subject to a four year phase in period for mandatory compliance and the Company was required to begin to phase in the rules beginning on January 1, 2016.  Management believes, as of June 30, 2018, that the Company and each of the bank subsidiaries will meet all capital adequacy requirements once the capital conservation is fully phased-in.  On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“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 must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8% and 10% before community banks can begin to take advantage of this regulatory relief provision.  Some of the Company’s bank subsidiaries, with assets of less than $10 billion, may qualify for this exemption. 

The Company had a CET1 to risk-weighted assets ratio of 17.75% on June 30, 2018 and 17.11% on December 31, 2017.  The Company had a Tier 1 capital-to-average-total-asset (leverage) ratio of 15.32% and 14.62%, risk-weighted Tier 1 capital ratio of 19.32% and 18.73% and risk-weighted total capital ratio of 20.04% and 19.51% at June 30, 2018 and December 31, 2017, respectively.  The Company’s CET1 capital consists of common stock and related surplus, net of treasury stock, and retained earnings.  The Company and its subsidiary banks elected to opt-out of the requirement to include most components of accumulated other comprehensive income (loss) in the calculation of CET1 capital.  CET1 is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions.  Tier 1 capital includes CET1 capital and additional Tier 1 capital.  Additional Tier 1 capital of the Company includes the Capital and Common Securities issued by the Trusts (see Note 8 above) up to a maximum of 25% of Tier 1 capital on an aggregate basis.  Any amount that exceeds the 25% threshold qualifies as Tier 2 capital.  As of

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June 30, 2018, the total of $160,416,000 of the Capital and Common Securities outstanding qualified as Tier 1 capital.  The Company actively monitors the regulatory capital ratios to ensure that the Company’s bank subsidiaries are well-capitalized under the regulatory framework.

The CET1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, excluding goodwill and other intangible assets, allocated by risk-weight category, and certain off-balance-sheet items, among other things. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things.

The aforementioned 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.

As of June 30, 2018, capital levels at the Company exceed all capital adequacy requirements under the Basel III Capital Rules as currently applicable to the Company, including the capital conservation buffer. Based on the ratios presented above, capital levels as of June 30, 2018 at the Company exceed the minimum levels necessary to be considered “well-capitalized.”

The Company and its subsidiary banks are subject to the regulatory capital requirements administered by the Federal Reserve, and, for the subsidiary banks, the FDIC. Regulatory authorities can initiate certain mandatory actions if the Company or any of the subsidiary banks fail to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of June 30, 2018, that the Company and each of its subsidiary banks meet all capital adequacy requirements to which they are subject.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the year ended December 31, 2017, included in the Company’s 2017 Form 10-K.  Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results for the year ending December 31, 2018, or any future period.

Special Cautionary Notice Regarding Forward Looking Information

Certain matters discussed in this report, excluding historical information, include forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by these sections.  Although the Company believes 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 are projected, forecasted, estimated or budgeted by the Company 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 the Company, the Company’s customers, and such customers’ ability to transact profitable business with the Company, including the ability of its 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.

· Government intervention in the U.S. financial system.

· The unavailability of funding from the FHLB, Fed or other sources in the future could adversely impact the Company’s growth strategy, prospects and performance.

· Changes in consumer spending, borrowing and saving habits.

· Changes in interest rates and market prices, including, the repeal of federal prohibitions on the payment of interest on demand deposits.

· Changes in the capital markets utilized by the Company and its subsidiaries, 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, renegotiation and potential changes to the North American Free Trade Agreement (“NAFTA”), or the possible imposition of tariffs on imported goods.

· The reduction of deposits from nonresident alien individuals due to the IRS 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 potential future acquisitions as well as the Company’s ability to maintain its current branch network and enter new markets to capitalize on growth opportunities.

· Changes in estimates of future reserve requirements based upon periodic review thereof under relevant regulatory and accounting requirements.

· Additions to the Company’s loan loss allowance as a result of changes in local, national or international conditions which adversely affect the Company’s customers.

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· Greater than expected costs or difficulties related to the development and integration of new products and lines of business, including the proposed restrictions of arbitration clauses by the CFPB.

· 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 the Company interacts.

· Political instability in the United States or Mexico.

· Technological changes or system failures or breaches of our network security, as well as other cyber security risks, could subject us to increased operating costs, litigation and other liabilities.

· Acts of war or terrorism.

· Natural disasters.

· 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, the Financial Accounting Standards Board 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 required regulatory approvals.

· The effect of final rules amending Regulation E that prohibit financial institutions from charging consumer fees for paying overdrafts on ATM and one‑time debit card transactions, as well as the effect of any other regulatory or legal developments that limit overdraft services.

· 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 Dodd‑Frank.

· The Company’s failure or circumvention of its 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. The Company makes 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

The Company, which is headquartered in Laredo, Texas, with 191 facilities and 289 ATMs, provides banking services for commercial, consumer and international customers of South, Central and Southeast Texas and the State of Oklahoma.  The Company is one of the largest independent commercial bank holding companies headquartered in Texas.  The Company, through its bank subsidiaries, is in the business of gathering funds from various sources and investing those funds in order to earn a return.  The Company, either directly or through a bank subsidiary, owns an insurance agency, a liquidating subsidiary, a broker/dealer and a fifty percent interest in an investment banking unit that owns a broker/dealer.  The Company’s primary earnings come from the spread between the interest earned on interest-bearing assets and the interest paid on interest-bearing liabilities.  In addition, the Company generates income from fees on products offered to commercial, consumer and international customers.  The sales team of each of the Company’s bank subsidiaries aims to match the right mix of products and services to each customer to best serve the customer’s needs.  That process entails spending time with customers to assess those needs and servicing the sales arising from those discussions on a long-term basis.  The bank subsidiaries have various compensation plans, including incentive based compensation, for fairly compensating employees.  The bank subsidiaries 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.

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The Company is very active in facilitating trade along the United States border with Mexico.  The Company does a large amount of business with customers domiciled in Mexico.  Deposits from persons and entities domiciled in Mexico comprise a large and stable portion of the deposit base of the Company’s bank subsidiaries.  The Company also serves the growing Hispanic population through the Company’s facilities located throughout South, Central and Southeast Texas and the State of Oklahoma.

 Expense control is an essential element in the Company’s long-term profitability.  As a result, the Company monitors closely the efficiency ratio, which is a measure of non-interest expense to net interest income plus non-interest income.  As the Company adjusts to regulatory changes related to Dodd-Frank, including congressional efforts to revamp or reform it, the Company’s efficiency ratio may suffer because the additional regulatory compliance costs are expected to increase non-interest expense.  The Company monitors this ratio over time to assess the Company’s efficiency relative to its peers.  The Company uses this measure as one factor in determining if the Company is accomplishing its long-term goals of providing superior returns to the Company’s shareholders.

Results of Operations

Summary

Consolidated Statements of Condition Information

	June 30, 2018		December 31, 2017		Percent Increase (Decrease)
	(Dollars in Thousands)
Assets	$	11,988,995	$	12,184,698	(1.6)	%
Net loans		6,376,567		6,280,485	1.5
Deposits		8,669,628		8,544,892	1.5
Securities sold under repurchase agreements		306,755		353,805	(13.3)
Other borrowed funds		852,950		1,195,225	(28.6)
Junior subordinated deferrable interest debentures		160,416		160,416	—
Shareholders’ equity		1,879,730		1,838,980	2.2

Consolidated Statements of Income Information

	Three Months Ended						Six Months Ended
	June 30,				Percent		June 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2018		2017		(Decrease)		2018		2017		(Decrease)
Interest income	$	115,066	$	103,174	11.5	%	$	226,473	$	200,155	13.1	%
Interest expense		12,793		8,797	45.4			24,928		18,043	38.2
Net interest income		102,273		94,377	8.4			201,545		182,112	10.7
Provision for probable loan losses		(2,730)		805	(439.1)			(1,068)		2,505	(142.6)
Non-interest income		42,303		33,963	24.6			81,278		71,678	13.4
Non-interest expense		80,601		73,713	9.3			149,510		149,339	0.1
Net income		52,887		40,569	30.4	%		106,307		72,573	46.5	%
Per common share:
Basic	$	.80	$	.61	31.1	%	$	1.61	$	1.10	46.4	%
Diluted		.79		.61	29.5			1.59		1.09	45.9

Net Income

Net income for the three and six months ended June 30, 2018 increased by 30.4% and 46.5%, respectively, compared to the same periods of 2017.  Net income for the three and six months ended June 30, 2018 was positively affected by a decrease in the provision for probable loan losses compared to the same periods of 2017 as a result of a

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decrease in the historical loss experience in the commercial category of the allowance for probable loan loss calculation.  As discussed in prior periods, charge-offs had increased due to the deterioration of one relationship that is secured by multiple pieces of transportation equipment beginning in the fourth quarter of 2014.  The Company uses a three year historical charge-off experience in the calculation, therefore, as those charge-offs begin to be eliminated, the allowance for probable loan losses will be impacted.  As fluctuations occur in historical loss factors, management evaluates the need to adjust the qualitative factors used in the calculation to properly reflect probable loan losses.  Net income for the three and six months ended June 30, 2018 was positively impacted by an increase in net interest income due to a higher volume of loans and an increase in the overall yield of the loan portfolio.  Interest expense increased for the three and six months ended June 30, 2018 and can be attributed primarily to an increase in the cost of borrowings expense, and an increase in the interest paid on savings and time deposit accounts, which have increased as a result of recent Federal Reserve Board actions to raise interest rates.  Net income for the six months ended June 30, 2018 was also positively impacted by a decrease in the effective tax rate arising from the Tax Cut and Jobs Act signed into law on December 22, 2017, resulting in a decrease in income tax expense of approximately $19 million due to the decrease in the corporate tax rate from 35% to 21%. 

Net Interest Income

	Three Months Ended						Six Months Ended
	June 30,				Percent		June 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2018		2017		(Decrease)		2018		2017		(Decrease)
Interest Income:
Loans, including fees	$	92,083	$	79,466	15.9	%	$	179,916	$	154,867	16.2	%
Investment securities:
Taxable		20,694		20,989	(1.4)			41,908		39,995	4.8
Tax-exempt		2,087		2,457	(15.1)			4,282		4,948	(13.5)
Other interest income		202		262	(22.9)			367		345	6.4
Total interest income		115,066		103,174	11.5			226,473		200,155	13.1
Interest expense:
Savings deposits		3,291		1,353	143.2			5,519		2,642	108.9
Time deposits		3,010		2,401	25.4			5,679		4,777	18.9
Securities sold under Repurchase agreements		348		1,146	(69.6)			1,371		4,214	(67.5)
Other borrowings		4,379		2,575	70.1			9,068		3,838	136.3
Junior subordinated interest deferrable debentures		1,765		1,322	33.5			3,291		2,572	28.0
Total interest expense		12,793		8,797	45.4			24,928		18,043	38.2
Net interest income	$	102,273	$	94,377	8.4	%	$	201,545	$	182,112	10.7	%

The increase in net interest income for the three and six months ended June 30, 2018 compared to the same periods of 2017 can be attributed to increased levels of interest income arising from the repositioning of investments in the available-for-sale investment portfolio that the Company has undertaken in prior periods, an increase in loans outstanding and a decrease in interest expense on securities sold under repurchase agreements.  The decrease in interest expense on securities sold under repurchase agreements can be attributed to the early termination of some of the long-term repurchase agreements by the lead bank subsidiary in prior periods.  Interest expense on other borrowings consists of interest expense on FHLB borrowings and has steadily increased in line with increases in market interest rates as a result of Federal Reserve Board actions.  Interest expense on savings and time deposits for the three and six months ended June 30, 2018 also increased in line with internal rate increases paid on such deposits in line with market interest rates as a result of Federal Reserve Board actions and to remain competitive with competitors in the markets we serve. 

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Net interest income is the spread between income on interest earning assets, such as loans and securities, and the interest expense on liabilities used to fund those assets, such as deposits, repurchase agreements and funds borrowed.  As part of its strategy to manage interest rate risk, the Company strives 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.  Management can quickly change the Company’s interest rate position at any given point in time as market conditions dictate.  Additionally, interest rate changes do not affect all categories of assets and liabilities equally or at the same time.  Analytical techniques employed by the Company to supplement gap analysis include simulation analysis to quantify interest rate risk exposure.  The gap analysis prepared by management is reviewed by the Company’s Investment Committee twice a year (see table on page 41 for the June 30, 2018 gap analysis).  Management currently believes that the Company is properly positioned for interest rate changes; however if management determines at any time that the Company is not properly positioned, it will strive to adjust the interest rate sensitive assets and liabilities in order to manage the effect of interest rate changes. 

Non-Interest Income

	Three Months Ended						Six Months Ended
	June 30,				Percent		June 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2018		2017		(Decrease)		2018		2017		(Decrease)
Service charges on deposit accounts	$	17,555	$	17,882	(1.8)	%	$	35,267	$	35,788	(1.5)	%
Other service charges, commissions and fees
Banking		11,152		11,025	1.2			22,274		21,410	4.0
Non-banking		2,028		1,864	8.8			3,388		3,199	5.9
Investment securities transactions, net		—		(2,539)	(100.0)			—		(1,612)	(100.0)
Other investments, net		5,841		2,830	106.4			10,567		7,098	48.9
Other income		5,727		2,901	97.4			9,782		5,795	68.8
Total non-interest income	$	42,303	$	33,963	24.6	%	$	81,278	$	71,678	13.4	%

Total non-interest income increased 24.6% and 13.4% for the three and six months ended June 30, 2018, respectively, compared to the same periods of 2017.  Other income was positively impacted by the Company’s share of income from a real estate development partnership in which it holds a majority interest.  Other investment income was positively impacted by the sale of an investment by a merchant banking entity in which the Company holds a majority interest.

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Non-Interest Expense

	Three Months Ended						Six Months Ended
	June 30,				Percent		June 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2018		2017		(Decrease)		2018		2017		(Decrease)
Employee compensation and benefits	$	34,692	$	32,739	6.0	%	$	69,310	$	65,469	5.9	%
Occupancy		7,163		6,417	11.6			13,238		12,408	6.7
Depreciation of bank premises and equipment		6,364		6,302	1.0			12,637		12,529	0.9
Professional fees		3,375		3,850	(12.3)			5,947		7,566	(21.4)
Deposit insurance assessments		974		913	6.7			1,974		1,303	51.5
Net expense, other real estate owned		2,649		482	449.6			2,378		1,396	70.3
Amortization of identified intangible assets		—		—	—			—		25	(100.0)
Advertising		1,808		2,116	(14.6)			3,647		4,384	(16.8)
Early termination fee—securities sold under repurchase agreements		—		—	—			—		5,765	(100.0)
Software and software maintenance		4,390		4,062	8.1			8,462		7,853	7.8
Other		19,186		16,832	14.0			31,917		30,641	4.2
Total non-interest expense	$	80,601	$	73,713	9.3	%	$	149,510	$	149,339	0.1	%

Non-interest expense increased 9.3% and .1% for the three and six months ended June 30, 2018, respectively,  compared to the same periods of 2017.  The slight increase in non-interest expense for the six months ended June 30, 2018 can be primarily attributed to the charge taken by the Company’s lead bank subsidiary in the first quarter of 2017 of $5.8 million to terminate $200 million of its long-term repurchase agreements outstanding in order to help manage its long term funding costs, offset by an increase in employee compensation and benefits.  The terminations of the portfolio of long-term repurchase agreements have been done periodically beginning in 2014.  Non-interest expense for the three and six months ended June 30, 2018 was negatively impacted by an increase in the net cost of operations on other real estate owned due to an increase in the specific reserve on a property as part of the re-evaluation of the carrying value of said property.  Non-interest expense for the three and six months ended June 30, 2018 continues to be negatively impacted by increased technological costs related to certain network infrastructure modifications.

Financial Condition

Allowance for Probable Loan Losses

The allowance for probable loan losses decreased 7.1% to $62,853,000 at June 30, 2018 from $67,687,000 at December 31, 2017.  The provision for probable loan losses charged to expense decreased 439.1% and 142.6% for the three and six months ended June 30, 2018 to $(2,730,000) and $(1,068,000), respectively, compared to $805,000 and $2,505,000 for the same periods of 2017, respectively.  As discussed in prior periods, charge-offs had increased due to the deterioration of one relationship that is secured by multiple pieces of transportation equipment beginning in the fourth quarter of 2014.  The Company uses a three year historical charge-off experience in the calculation, therefore, as those charge-offs begin to be eliminated from the calculation, the allowance for probable loan losses will be impacted.  As fluctuations occur in historical loss factors, management evaluates the need to adjust the qualitative factors used in the calculation to properly reflect probable loan losses.  The allowance for probable loan losses was 0.98% and 1.07% of total loans at June 30, 2018 and December 31, 2017, respectively.

Investment Securities

Residential mortgage-backed debt securities are securities primarily issued by Freddie Mac, Fannie Mae, or Ginnie Mae.  Investments in debt residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. Government.  Investments in debt residential mortgage-backed securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government, however, the Company believes 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

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Mac into conservatorship by the federal government in early September 2008 and because securities issued by others that are collateralized by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated securities.

Loans

Net loans increased by 1.5% to $6,376,567,000 at June 30, 2018, from $6,280,485,000 at December 31, 2017. 

Deposits

Deposits increased by 1.5% to $8,669,628,000 at June 30, 2018, compared to $8,544,892,000 at December 31, 2017.  Although deposits at June 30, 2018 increased from December 31, 2017, and the Company has experienced some growth in deposits over the last few years, the Company is still experiencing a substantial amount of competition for deposits at higher than market rates.  As a result, the Company has attempted to maintain certain deposit relationships but has allowed certain deposits to leave as the result of aggressive pricing by competitors.

Foreign Operations

On June 30, 2018, the Company had $11,988,995,000 of consolidated assets, of which approximately $151,458,000, or 1.3%, was related to loans outstanding to borrowers domiciled in foreign countries, compared to $158,886,000, or 1.3%, at December 31, 2017.  Of the $151,458,000, 85.0% is directly or indirectly secured by U.S. assets, certificates of deposits and real estate; 14.5% is secured by foreign real estate or other assets; and 0.5% is unsecured.

Critical Accounting Policies

The Company has established various accounting policies that govern the application of accounting principles in the preparation of the Company’s consolidated financial statements.  The significant accounting policies are described in the notes to the consolidated financial statements.  Certain accounting policies involve significant subjective judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies.

The Company considers its allowance for probable loan losses as a policy critical to the sound operations of the bank subsidiaries.  The allowance for probable loan losses primarily consists of the aggregate loan loss allowances of the bank subsidiaries.  The allowances are established through charges to operations in the form of provisions for probable loan losses.  Loan losses or recoveries are charged or credited directly to the allowances.  The allowance for probable loan losses of each bank subsidiary is maintained at a level considered appropriate by management, based on estimated probable losses in the loan portfolio.  The allowance is derived from the following elements:  (i) allowances established on specific impaired loans, which are based on a review of the individual characteristics of each loan, including the customer’s ability to repay the loan, the underlying collateral values, and the industry in which the customer operates; (ii) allowances based on actual historical loss experience for similar types of loans in the Company’s loan portfolio; and (iii) allowances based on general economic conditions, changes in the mix of loans, Company resources, border risk and credit quality indicators, among other things.  See also discussion regarding the allowance for probable loan losses and provision for probable loan losses included in the results of operations and “Provision and Allowance for Probable Loan Losses” included in Notes 1 and 4 of the notes to Consolidated Financial Statements in the Company’s latest Annual Report on Form 10-K for further information regarding the Company’s provision and allowance for probable loan losses policy.

Liquidity and Capital Resources

The maintenance of adequate liquidity provides the Company’s bank subsidiaries 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.  The Company’s bank subsidiaries derive their liquidity largely

38

from deposits of individuals and business entities.  Deposits from persons and entities domiciled in Mexico comprise a stable portion of the deposit base of the Company’s bank subsidiaries.  Other important funding sources for the Company’s bank subsidiaries during 2018 and 2017 were borrowings from the FHLB, 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.  The borrowings from FHLB are primarily short-term in nature and are renewed at maturity.  The Company’s bank subsidiaries have had a long-standing relationship with the FHLB and keep open unused lines of credit in order to fund liquidity needs.  In the event that the FHLB bank indebtedness is not renewed, the repayment of the outstanding indebtedness would more than likely be repaid through proceeds generated from the sales of unpledged, available-for-sale securities.  The Company maintains 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 Company will continue to monitor the volatility and cost of funds in an attempt to match maturities of rate-sensitive assets and liabilities and respond accordingly to anticipated fluctuations in interest rates over reasonable periods of time.

The Company maintains an adequate level of capital as a margin of safety for its depositors and shareholders.  At June 30, 2018, shareholders’ equity was $1,879,730,000 compared to $1,838,980,000 at December 31, 2017.  The increase in shareholders’ equity can be primarily attributed to the retention of earnings. 

Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amount and classifications are also subject to qualitative judgements by regulators about components, risk-weighting and other factors.

In July 2013, the Federal Deposit Insurance Corporation (“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 Dodd-Frank related capital provisions. Consistent with the Basel international framework, the rules include a minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of 4.5% and a CET1 capital conservation buffer of 2.5% of risk-weighted assets.  The capital conservation buffer began phasing-in on January 1, 2016 at .625% and will increase each year until January 1, 2019, when the Company will be required to have a 2.5% capital conservation buffer, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. 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 are subject to a four year phase in period for mandatory compliance and the Company was required to begin to phase in the rules beginning on January 1, 2016.  Management believes, as of June 30, 2018, that the Company and each of the bank subsidiaries will meet all capital adequacy requirements once the capital conservation is fully phased-in.  On May 24, 2018, the 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 must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8% and 10% before community banks can begin to take advantage of this regulatory relief provision.  Some of the Company’s bank subsidiaries, with assets of less than $10 billion, may qualify for this exemption.   

The Company had a CET1 to risk-weighted assets ratio of 17.75% on June 30, 2018 and 17.11% on December 31, 2017.  The Company had a Tier 1 capital-to-average-total-asset (leverage) ratio of 15.32% and 14.62%, risk-weighted Tier 1 capital ratio of 19.32% and 18.73% and risk-weighted total capital ratio of 20.04% and 19.51% at June 30, 2018 and December 31, 2017, respectively.  The Company’s CET1 capital consists of common stock and related surplus, net of treasury stock, and retained earnings.  The Company and its subsidiary banks elected to opt-out of the requirement to include most components of accumulated other comprehensive income (loss) in the calculation of CET1 capital.  CET1 is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions.  Tier 1 capital includes CET1 capital and additional Tier 1 capital.  Additional Tier 1 capital of the

39

Company includes the Capital and Common Securities issued by the Trusts (see Note 8 above) up to a maximum of 25% of Tier 1 capital on an aggregate basis.  Any amount that exceeds the 25% threshold qualifies as Tier 2 capital.  As of June 30, 2018, the total of $160,416,000 of the Capital and Common Securities outstanding qualified as Tier 1 capital.  The Company actively monitors the regulatory capital ratios to ensure that the Company’s bank subsidiaries are well-capitalized under the regulatory framework.

The CET1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, excluding goodwill and other intangible assets, allocated by risk-weight category, and certain off-balance-sheet items, among other things. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things.

The aforementioned 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.

As of June 30, 2018, capital levels at the Company exceed all capital adequacy requirements under the Basel III Capital Rules as currently applicable to the Company, including the capital conservation buffer. Based on the ratios presented above, capital levels as of June 30, 2018 at the Company exceed the minimum levels necessary to be considered “well-capitalized.”

The Company and its subsidiary banks are subject to the regulatory capital requirements administered by the Federal Reserve, and, for the subsidiary banks, the FDIC. Regulatory authorities can initiate certain mandatory actions if the Company or any of the subsidiary banks fail to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of June 30, 2018, that the Company and each of its subsidiary banks meet all capital adequacy requirements to which they are subject.

The Company will continue to monitor the volatility and cost of funds in an attempt to match maturities of rate-sensitive assets and liabilities, and respond accordingly to anticipate fluctuations in interest rates by adjusting the balance between sources and uses of funds as deemed appropriate.  The net-interest rate sensitivity as of June 30, 2018 is illustrated in the table entitled “Interest Rate Sensitivity,” below.  This information reflects the balances of assets and liabilities for which rates are subject to change.  A mix of assets and liabilities that are roughly equal in volume and re-pricing characteristics represents a matched interest rate sensitivity position.  Any excess of assets or liabilities results in an interest rate sensitivity gap.

The Company undertakes an interest rate sensitivity analysis to monitor the potential risk on future earnings resulting from the impact of possible future changes in interest rates on currently existing net asset or net liability positions.  However, this type of analysis is as of a point-in-time position, when in fact that position can quickly change as market conditions, customer needs, and management strategies change. Thus, interest rate changes do not affect all categories of assets and liabilities equally or at the same time.  As indicated in the table, the Company is liability sensitive during the shorter time periods and asset sensitive in the longer periods.  The Company’s Asset and Liability Committee semi-annually reviews the consolidated position along with simulation and duration models, and makes adjustments as needed to control the Company’s interest rate risk position.  The Company uses modeling of future events as a primary tool for monitoring interest rate risk.

40

Interest Rate Sensitivity

(Dollars in Thousands)

	Rate/Maturity
			Over 3		Over 1
	3 Months		Months to		Year to 5		Over 5
June 30, 2018	or Less		1 Year		Years		Years		Total
	(Dollars in Thousands)
Rate sensitive assets
Investment securities	$	228,949	$	696,223	$	2,613,926	$	210,922	$	3,750,020
Loans, net of non-accruals		4,875,809		250,584		221,049		1,064,705		6,412,147
Total earning assets	$	5,104,758	$	946,807	$	2,834,975	$	1,275,627	$	10,162,167
Cumulative earning assets	$	5,104,758	$	6,051,565	$	8,886,540	$	10,162,167
Rate sensitive liabilities
Time deposits	$	860,301	$	935,626	$	206,246	$	46	$	2,002,219
Other interest bearing deposits		3,230,386		—		—		—		3,230,386
Securities sold under repurchase agreements		295,678		11,077		—		—		306,755
Other borrowed funds		752,950		—		—		100,000		852,950
Junior subordinated deferrable interest debentures		160,416		—		—		—		160,416
Total interest bearing liabilities	$	5,299,731	$	946,703	$	206,246	$	100,046	$	6,552,726
Cumulative sensitive liabilities	$	5,299,731	$	6,246,434	$	6,452,680	$	6,552,726
Repricing gap	$	(194,973)	$	104	$	2,628,729	$	1,175,581	$	3,609,441
Cumulative repricing gap		(194,973)		(194,869)		2,433,860		3,609,441
Ratio of interest-sensitive assets to liabilities		0.96		1.00		13.75		12.75		1.55
Ratio of cumulative, interest-sensitive assets to liabilities		0.96		0.97		1.38		1.55

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the first six months of 2018, there were no material changes in market risk exposures that affected the quantitative and qualitative disclosures regarding market risk presented under the caption “Liquidity and Capital Resources” located on pages 19 through 25 of the Company’s 2017 Annual Report as filed as Exhibit 13 to the Company’s Form 10-K for the year ended December 31, 2017.

41

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within specified time periods.  As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s principal executive officer and principal financial officer evaluated, with the participation of the Company’s management, the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)).  Based on the evaluation, which disclosed no material weaknesses, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in various legal proceedings that are in various stages of litigation.  The Company has determined, based on discussions with its counsel that any material loss in any current legal proceedings, individually or in the aggregate, is remote or the damages sought, even if fully recovered, would not be considered material to the consolidated financial position or results of operations of the Company.  However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.

1A. Risk Factors

There were no material changes in the risk factors as previously disclosed in Item 1A to Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In April 2009, following receipt of the Treasury Department’s consent, 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 15, 2018, the Board of Directors extended the repurchase program and authorized the purchase of up to $40 million of common stock during each successive 12 month period commencing again on April 9, 2018. 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 first quarter of 2018, the Board of Directors adopted a Rule 10b5‑1 trading plan, and intends to adopt additional Rule 10b5‑1 trading plans, that will allow the Company to purchase shares of its common stock during certain trading blackout periods when the Company ordinarily would not be in the market due to trading restrictions in its insider trading policy. During the term of 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 the Rule 10b5-1 trading plan will be held in treasury for reissue for various corporate purposes, including employee stock compensation plans. As of August 3, 2018, a total of 9,246,956 shares had been repurchased under all programs at a cost of $271,347,000. The Company is not obligated to purchase shares under its stock repurchase program outside of its Rule 10b5-1 trading plan. 

42

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 June 30, 2018.

				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)
April 1 – April 30, 2018	—	$	—	—	$	40,000,000
May 1 – May 31, 2018	—		—	—		40,000,000
June 1 – June 30, 2018	1,298		44.23	1,298		39,943,000
Total	1,298	$	44.23	1,298

(1) The repurchase program was extended on March 15, 2018 and allows for the purchase of up to an additional $40,000,000 of common stock through April 9, 2019.

Item 6. Exhibits

The following exhibits are filed as a part of this Report:

31(a) —Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

31(b) —Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 

32(a) —Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

32(b) —Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

101++ — Interactive Data File

++ Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language):  (i) the Condensed Consolidated Statement of Earnings for the three and six months ended June 30, 2018 and 2017; (ii) the Condensed Consolidated Balance Sheet as of June 30, 2018 and December 31, 2017; and (iii) the Condensed Consolidated Statement of Cash Flows for the three and six months ended June 30, 2018 and June 30, 2017.

43

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		INTERNATIONAL BANCSHARES CORPORATION
Date:	August 7, 2018	/s/ Dennis E. Nixon
		Dennis E. Nixon
		President
Date:	August 7, 2018	/s/ Judith I. Wawroski
		Judith I. Wawroski
		Treasurer

44

EX-31.(A)

Exhibit 31(a)

Certification of Chief Executive Officer

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dennis E. Nixon, certify that:

1.I have reviewed this report on form 10-Q of International Bancshares Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 7, 2018

/s/  Dennis E. Nixon

Dennis E. Nixon

President (Chief Executive Officer)

EX-31.(B)

Exhibit 31(b)

Certification of Chief Financial Officer

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Judith I. Wawroski, certify that:

1.I have reviewed this report on form 10-Q of International Bancshares Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2018

/s/ Judith I. Wawroski

Judith I. Wawroski

Treasurer (Principal Financial Officer)

EX-32.(A)

Exhibit 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of International Bancshares Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dennis E. Nixon, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)), as applicable; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Dennis E. Nixon
	Dennis E. Nixon
	President
Date:	August 7, 2018

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. 1350, and not being filed for purposes of Section 18 of the Securities Exchange Act, as amended, and is not to be incorporated by reference into any filing of the Company, whether on, before or after the date hereof, regardless of any general incorporation language in such filing.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.(B)

Exhibit 32(b)

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of International Bancshares Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Judith I. Wawroski, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)), as applicable; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Ay 9
	By:	/s/ Judith I. Wawroski
		Judith I. Wawroski
		Treasurer
	Date:	August 7, 2018

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. 1350, and not being filed for purposes of Section 18 of the Securities Exchange Act, as amended, and is not to be incorporated by reference into any filing of the Company, whether on, before or after the date hereof, regardless of any general incorporation language in such filing.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 03, 2018
Document and Entity Information
Entity Registrant Name	INTERNATIONAL BANCSHARES CORP
Entity Central Index Key	0000315709
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		66,136,936
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

XML

Consolidated Statements of Condition - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Assets
Cash and cash equivalents	$ 265,122,000	$ 265,357,000
Investment securities:
Held to maturity debt securities (Fair value of $2,400 on June 30, 2018 and $2,400 on December 31, 2017)	2,400,000	2,400,000
Available for sale debt securities (Amortized cost of $3,822,194 on June 30, 2018 and $4,196,263 on December 31, 2017)	3,720,566,000	4,124,185,000
Equity securities with readily determinable fair values	27,054,000	27,885,000
Total investment securities	3,750,020,000	4,154,470,000
Loans	6,439,420,000	6,348,172,000
Less allowance for probable loan losses	(62,853,000)	(67,687,000)
Net loans	6,376,567,000	6,280,485,000
Bank premises and equipment, net	511,337,000	514,454,000
Accrued interest receivable	35,762,000	34,456,000
Other investments	586,338,000	571,415,000
Goodwill	282,532,000	282,532,000
Other assets	181,317,000	81,529,000
Total assets	11,988,995,000	12,184,698,000
Deposits:
Demand - non-interest bearing	3,437,023,000	3,243,255,000
Savings and interest bearing demand	3,230,386,000	3,245,131,000
Time	2,002,219,000	2,056,506,000
Total deposits	8,669,628,000	8,544,892,000
Securities sold under repurchase agreements	306,755,000	353,805,000
Other borrowed funds	852,950,000	1,195,225,000
Junior subordinated deferrable interest debentures	160,416,000	160,416,000
Other liabilities	119,516,000	91,380,000
Total liabilities	10,109,265,000	10,345,718,000
Shareholders' equity:
Common shares of $1.00 par value. Authorized 275,000,000 shares; issued 96,065,679 shares on June 30, 2018 and 96,019,028 shares on December 31, 2017	96,066,000	96,019,000
Surplus	173,057,000	171,816,000
Retained earnings	1,982,464,000	1,891,805,000
Accumulated other comprehensive loss	(79,537,000)	(28,397,000)
Total shareholders' equity before treasury stock	2,172,050,000	2,131,243,000
Less cost of shares in treasury, 29,940,843 shares on June 30, 2018 and 29,939,545 on December 31, 2017	(292,320,000)	(292,263,000)
Total shareholders' equity	1,879,730,000	1,838,980,000
Total liabilities and shareholders' equity	$ 11,988,995,000	$ 12,184,698,000

XML

Consolidated Statements of Condition (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Consolidated Statements of Condition
Held to maturity, Fair value (in dollars)	$ 2,400	$ 2,400
Available for sale, Amortized cost (in dollars)	$ 3,822,194	$ 4,196,263
Common shares, par value (in dollars per share)	$ 1.00	$ 1.00
Common shares, Authorized shares	275,000,000	275,000,000
Common shares, issued shares	96,065,679	96,019,028
Treasury, shares	29,940,843	29,939,545

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Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Interest income:
Loans, including fees	$ 92,083	$ 79,466	$ 179,916	$ 154,867
Investment securities:
Taxable	20,694	20,989	41,908	39,995
Tax-exempt	2,087	2,457	4,282	4,948
Other interest income	202	262	367	345
Total interest income	115,066	103,174	226,473	200,155
Interest expense:
Savings deposits	3,291	1,353	5,519	2,642
Time deposits	3,010	2,401	5,679	4,777
Securities sold under repurchase agreements	348	1,146	1,371	4,214
Other borrowings	4,379	2,575	9,068	3,838
Junior subordinated deferrable interest debentures	1,765	1,322	3,291	2,572
Total interest expense	12,793	8,797	24,928	18,043
Net interest income	102,273	94,377	201,545	182,112
Provision for probable loan losses	(2,730)	805	(1,068)	2,505
Net interest income after provision for probable loan losses	105,003	93,572	202,613	179,607
Non-interest income:
Investment securities transactions, net		(2,539)		(1,612)
Other investments, net	5,841	2,830	10,567	7,098
Other income	5,727	2,901	9,782	5,795
Total non-interest income	42,303	33,963	81,278	71,678
Non-interest expense:
Employee compensation and benefits	34,692	32,739	69,310	65,469
Occupancy	7,163	6,417	13,238	12,408
Depreciation of bank premises and equipment	6,364	6,302	12,637	12,529
Professional fees	3,375	3,850	5,947	7,566
Deposit insurance assessments	974	913	1,974	1,303
Net expense, other real estate owned	2,649	482	2,378	1,396
Amortization of identified intangible assets				25
Advertising	1,808	2,116	3,647	4,384
Early termination fee - securities sold under repurchase agreements				5,765
Software and software maintenance	4,390	4,062	8,462	7,853
Other	19,186	16,832	31,917	30,641
Total non-interest expense	80,601	73,713	149,510	149,339
Income before income taxes	66,705	53,822	134,381	101,946
Provision for income taxes	13,818	13,253	28,074	29,373
Net income	$ 52,887	$ 40,569	$ 106,307	$ 72,573
Basic earnings per common share:
Weighted average number of shares outstanding (in shares)	66,114,497	66,053,741	66,103,499	66,024,135
Net income (in dollars per share)	$ 0.80	$ 0.61	$ 1.61	$ 1.10
Fully diluted earnings per common share:
Weighted average number of shares outstanding (in shares)	66,932,113	66,715,171	66,898,065	66,731,499
Net income (in dollars per share)	$ 0.79	$ 0.61	$ 1.59	$ 1.09
Services charges on deposit accounts
Non-interest income:
Service charges	$ 17,555	$ 17,882	$ 35,267	$ 35,788
Other service charges, commissions and fees, Banking
Non-interest income:
Service charges	11,152	11,025	22,274	21,410
Other service charges, commissions and fees, Non-banking
Non-interest income:
Service charges	$ 2,028	$ 1,864	$ 3,388	$ 3,199

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Consolidated Statements of Comprehensive Income
Net income	$ 52,887	$ 40,569	$ 106,307	$ 72,573
Other comprehensive income, net of tax:
Net unrealized holding (losses) gains on securities available for sale arising during period (net of tax effects of $(2,974), $2,894, $(13,594) and $10,092)	(11,187)	5,374	(51,140)	18,742
Reclassification adjustment for losses on securities available for sale included in net income (net of tax effects of $0, $889, $0 and $564)		1,650		1,048
Other comprehensive income, net of tax	(11,187)	7,024	(51,140)	19,790
Comprehensive income	$ 41,700	$ 47,593	$ 55,167	$ 92,363

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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Consolidated Statements of Comprehensive Income
Net unrealized holding (losses) gains on securities available for sale arising during period, tax effects	$ (2,974)	$ 2,894	$ (13,594)	$ 10,092
Reclassification adjustment for (losses) gains on securities available for sale included in net income, tax effects	$ 0	$ 889	$ 0	$ 564

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Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Operating activities:
Net income	$ 106,307,000	$ 72,573,000
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for Loan and Lease Losses	(1,068,000)	2,505,000
Specific reserve, other real estate owned	2,658,000	317,000
Depreciation of bank premises and equipment	12,637,000	12,529,000
Gain on sale of bank premises and equipment	(147,000)	(16,000)
(Gain) loss on sale of other real estate owned	(688,000)	3,000
Accretion of investment securities discounts	(133,000)	(219,000)
Amortization of investment securities premiums	10,857,000	12,577,000
Investment securities transactions, net		1,612,000
Unrealized loss on equity securities with readily determinable fair values	1,021,000
Amortization of identified intangible assets		25,000
Stock based compensation expense	470,000	484,000
Earnings from affiliates and other investments	(7,683,000)	(5,590,000)
Deferred tax expense	363,000	212,000
(Increase) decrease in accrued interest receivable	(1,306,000)	591,000
(Increase) decrease in other assets	(42,795,000)	720,000
Net increase in other liabilities	21,724,000	5,691,000
Net cash provided by operating activities	102,217,000	104,014,000
Investing activities:
Proceeds from maturities of securities	1,075,000
Proceeds from sales and calls of available for sale securities	18,145,000	272,184,000
Purchases of available for sale securities	(47,346,000)	(542,112,000)
Principal collected on mortgage backed securities	363,406,000	372,717,000
Net increase in loans	(126,153,000)	(244,855,000)
Purchases of other investments	(27,457,000)	(4,540,000)
Distributions from other investments	8,702,000	5,467,000
Purchases of bank premises and equipment	(10,274,000)	(7,615,000)
Proceeds from sales of bank premises and equipment	2,191,000	8,207,000
Proceeds from sales of other real estate owned	901,000	682,000
Net cash provided by (used in) investing activities	183,190,000	(139,865,000)
Financing activities:
Net increase in non-interest bearing demand deposits	193,768,000	124,390,000
Net (decrease) increase in savings and interest bearing demand deposits	(14,745,000)	31,011,000
Net decrease in time deposits	(54,287,000)	(59,556,000)
Net decrease in securities sold under repurchase agreements	(47,050,000)	(144,574,000)
Net (decrease) increase in other borrowed funds	(342,275,000)	153,125,000
Purchase of treasury stock	(57,000)	(121,000)
Proceeds from stock transactions	818,000	1,092,000
Payments of cash dividends - common	(21,814,000)	(21,793,000)
Net cash (used in) provided by financing activities	(285,642,000)	83,574,000
(Decrease) increase in cash and cash equivalents	(235,000)	47,723,000
Cash and cash equivalents at beginning of period	265,357,000	269,198,000
Cash and cash equivalents at end of period	265,122,000	316,921,000
Supplemental cash flow information:
Interest paid	11,593,000	10,242,000
Income taxes paid	27,948,000	34,941,000
Non-cash investing and financing activities:
Purchases of available-for-sale securities not yet settled		30,612,000
Net transfers from loans to other real estate owned	$ 31,139,000	$ 1,450,000

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Basis of Presentation

6 Months Ended

Jun. 30, 2018

Basis of Presentation

Basis of Presentation

Note 1 — Basis of Presentation

The accounting and reporting policies of International Bancshares Corporation (the “Corporation”) and Subsidiaries (the Corporation and Subsidiaries collectively referred to herein as the “Company”) conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.  The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries, International Bank of Commerce, Laredo (“IBC”), Commerce Bank, International Bank of Commerce, Zapata, International Bank of Commerce, Brownsville, International Bank of Commerce, Oklahoma and the Corporation’s wholly-owned non-bank subsidiaries, IBC Subsidiary Corporation, IBC Trading Company, Premier Tierra Holdings, Inc., IBC Charitable and Community Development Corporation, and IBC Capital Corporation.  All significant inter-company balances and transactions have been eliminated in consolidation.  The consolidated financial statements are unaudited, but include all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the periods presented.  All such adjustments were of a normal and recurring nature.  These financial statements should be read in conjunction with the financial statements and the notes thereto in the Company’s latest Annual Report on Form 10-K.  The consolidated statement of condition at December 31, 2017 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“US GAAP”) for complete financial statements.  Certain reclassifications have been made to make prior periods comparable. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results for the year ending December 31, 2018 or any future period.

The Company operates as one segment.  The operating information used by the Company’s chief executive officer for purposes of assessing performance and making operating decisions about the Company is the consolidated statements presented in this report.  The Company has five active operating subsidiaries, the bank subsidiaries. The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), FASB ASC 280, “Segment Reporting,” in determining its reportable segments and related disclosures.

The Company has evaluated all events or transactions that occurred through the date the Company issued these financial statements. During this period, the Company did not have any material recognizable or non-recognizable subsequent events.

On January 1, 2018, the Company adopted the provisions of ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,”  and ASU 2018-03, “Technical Corrections and Improvements to Financial Instruments – Overall,” which affects current US GAAP as it relates to the accounting for equity investments, financial liability under the fair value option, and the presentation and disclosure requirements for financial instruments.  ASU 2016-01 also supersedes the guidance that requires:  (i) the classification of equity securities with readily determinable fair values into different categories, and (ii) recognition in changes in fair value of available-for-sale securities in other comprehensive income.  The main effect resulting from the adoption of the new standards is that beginning on January 1, 2018, equity securities with readily determinable fair values are now reported in a single line item on the face of the Company’s consolidated statement of condition under the caption, “Equity securities with readily determinable fair values.”  Additionally, the changes in fair value of the equity securities is now recognized in net income and is included in other non-interest expense on the face of the Company’s consolidated income statement. Prior to January 1, 2018, the equity securities were classified as available-for-sale and stated at fair value with unrealized gains and losses included in accumulated comprehensive income, net of tax and had a net unrealized loss of $189,000.  Other equity securities without readily determinable fair values are recorded at cost less any impairment, if any, and included in other investments in the Company’s consolidated financial statements.

On January 1, 2018, the Company adopted the provisions of ASU 2014-09 to ASC 606, “Revenue from Contracts with Customers.”  ASC 606 sets a common standard that defines revenue and the principles for recognizing revenue.  The core principle of the accounting standards update requires an entity to recognize revenue in a manner that reflects the consideration that an entity is expected to receive in exchange for goods or services as performance obligations are satisfied.  The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASC 606.  The Company has evaluated the impact of the accounting standards update on certain other non-interest revenue streams that the provisions of the update apply to and has determined that the adoption of the new provisions to ASC 606 did not have a significant impact to the Company’s consolidated financial statements or operations. 

The Company adopted the provisions of ASU 2018-02 to ASC 220, “Income Statement- Reporting Comprehensive Income” in the second quarter of 2018.  ASU 2018-02 amends current guidance surrounding the reclassification of certain tax effects from accumulated other comprehensive income (loss) as a result of the 2017 Tax Cuts and Jobs Act and the related impact to comprehensive income (loss) as a result of the application of existing guidance with respect to changes in tax rates.  Under prior guidance, entities were to evaluate the carrying value of deferred tax assets and liabilities and adjust them for the tax effect of the rate change and record that change through earnings.  The result is that the tax effects for items that normally would only be recognized in comprehensive income would be recognized through earnings and would result in stranded tax effects in other comprehensive income (loss) for the impact of the rate change.  ASU 2018-02 allows for a reclassification from accumulated other comprehensive income (loss) to retained earnings for the stranded tax effects resulting from the 2017 Tax Cuts and Jobs Act.  The Company recorded a one-time reclassification of $5,979,000 between accumulated comprehensive income (loss) and retained earnings as a result of the adoption of the accounting standards update.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Measurements

Fair Value Measurements

Note 2 — Fair Value Measurements

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 inputs, 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, 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 assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of June 30, 2018 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
	June 30, 2018		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale debt securities
Residential mortgage-backed securities	$	3,509,643	$	—	$	3,509,643	$	—
States and political subdivisions		210,923		—		210,923		—
Equity Securities		27,054		27,054		—		—
	$	3,747,620	$	27,054	$	3,720,566	$	—

The following table represents assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of December 31, 2017 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, 2017		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage - backed securities	$	3,891,233	$	—	$	3,891,233	$	—
States and political subdivisions		232,951		—		232,951		—
Equity Securities		27,886		27,886		—		—
	$	4,152,070	$	27,886	$	4,124,184	$	—

Available-for-sale debt securities are classified within Level 2 of the valuation hierarchy.  Equity securities with readily determinable fair values are classified within Level 1.  For debt investments classified as Level 2 in the fair value hierarchy, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis.  The instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended June 30, 2018 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 Provision
	Year ended		Identical		Observable		Unobservable		(Credit)
	June 30,		Assets		Inputs		Inputs		During
	2018		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurring basis:
Assets:
Impaired loans	$	8,738	$	—	$	—	$	8,738	$	574
Other real estate owned		6,854		—		—		6,854		2,658

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended December 31, 2017 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 (Credit)
	Year ended		for Identical		Observable		Unobservable		Provision
	December 31,		Assets		Inputs		Inputs		During
	2017		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurring basis:
Assets:
Impaired loans	$	11,210	$	—	$	—	$	11,210	$	2,138
Other real estate owned		2,000		—		—		2,000		710

The Company’s assets measured at fair value on a non-recurring basis are limited to impaired loans and other real estate owned.  Impaired loans are classified within Level 3 of the valuation hierarchy.  The fair value of impaired loans is derived in accordance with FASB ASC 310, “Receivables”.  Impaired loans 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 impaired loan to fair value is done through a specific valuation allowance included in the allowance for probable loan losses.  The fair value of impaired loans is based on the fair value of the collateral, as determined through either an appraisal or evaluation process.  The basis for the Company’s appraisal and appraisal review process is based on regulatory guidelines and strives to comply with all regulatory appraisal laws, regulations, and the Uniform Standards of Professional Appraisal Practice. All appraisals and evaluations are “as is” (the property’s highest and best use) valuations based on the current conditions of the property/project at that point in time.  The determination of the fair value of the collateral is based on the net realizable value, which is the appraised value less any closing costs, when applicable.  As of June 30, 2018, the Company had $25,827,000 of impaired commercial collateral dependent loans, of which $11,922,000 had an appraisal performed within the immediately preceding twelve months, and of which $0 had an evaluation performed within the immediately preceding twelve months.  As of December 31, 2017, the Company had $53,267,000 of impaired commercial collateral dependent loans, of which $18,585,000 had an appraisal performed within the immediately preceding twelve months and of which $0 had an evaluation performed within the immediately preceding twelve months.

The determination to either seek an appraisal or to perform an evaluation begins in weekly credit quality meetings, where the committee analyzes the existing collateral values of the impaired loans and where obsolete appraisals are identified.  In order to determine whether the Company would obtain a new appraisal or perform an internal evaluation to determine the fair value of the collateral, the credit 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.  If the analysis of the existing appraisal does not find that the collateral value is reasonable under the current circumstances, the Company would obtain a new appraisal on the collateral or perform an internal evaluation of the collateral.  The ultimate decision to get a new appraisal rests with the independent credit administration group.  A new appraisal is not required if an internal evaluation, as performed by in-house experts, 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 impairment analysis.  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.  

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 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 three and six months ended June 30, 2018 and the twelve months ended December 31, 2017, the Company recorded $138,000,  $162,000 and $30,000, respectively, in charges to the allowance for probable loan losses in connection with loans transferred to other real estate owned.  For the three and six months ended June 30, 2018 and the twelve months ended December 31, 2017, the Company recorded  $2,587,000,  $2,658,000 and $710,000, respectively, in adjustments to fair value in connection with other real estate owned.

The fair value estimates, methods, and assumptions for the Company’s financial instruments at June 30, 2018 and December 31, 2017 are outlined below.

Cash and Cash Equivalents

For these short-term instruments, the carrying amount is a reasonable estimate of fair value.

Time Deposits with Banks

The carrying amounts of time deposits with banks approximate fair value.

Investment Securities Held-to-Maturity

The carrying amounts of investments held-to-maturity approximate fair value.

Investment Securities

For investment securities, which include U.S. Treasury securities, obligations of other U.S. government agencies, obligations of states and political subdivisions and mortgage pass-through and related securities, fair values are 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 6.

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics.  Loans are segregated by type, such as commercial, real estate and consumer loans, as outlined by regulatory reporting guidelines.  Each category is segmented into fixed and variable interest rate terms and by performing and non-performing categories.

For variable rate performing loans, the carrying amount approximates the fair value.  For fixed-rate performing loans, except residential mortgage loans, the fair value is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan.  For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources or the primary origination market.  Fixed-rate performing loans are within Level 3 of the fair value hierarchy.  At June 30, 2018, and December 31, 2017, the carrying amount of fixed-rate performing loans was $1,537,587,000 and $1,505,531,000, respectively, and the estimated fair value was $1,499,578,000 and $1,454,434,000, respectively.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Deposits

The fair value of deposits with no stated maturity, such as non-interest bearing demand deposit accounts, savings accounts and interest bearing demand deposit accounts, was equal to the amount payable on demand as of June 30, 2018 and December 31, 2017.  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 June 30, 2018 and December 31, 2017, the carrying amount of time deposits was  $2,002,219,000 and $2,056,506,000, respectively, and the estimated fair value was $2,004,385,000 and $2,058,621,000, respectively.

Securities Sold Under Repurchase Agreements

Securities sold under repurchase agreements include short- and long-term maturities.  Due to the contractual terms of the short-term instruments, the carrying amounts approximated fair value at June 30, 2018 and December 31, 2017.  The fair value of the long-term instruments is based on established market spreads using option adjusted spread methodology.  Long-term repurchase agreements are within Level 3 of the fair value hierarchy.  The only remaining long-term repurchase agreement outstanding matured in the first quarter of 2018 and was not renewed.  At December 31, 2017, the carrying amount of long-term repurchase agreements was $100,000,000 and the estimated fair value was $99,504,000.

Junior Subordinated Deferrable Interest Debentures

The Company currently has floating-rate junior subordinated deferrable interest debentures outstanding.  Due to the contractual terms of the floating-rate junior subordinated deferrable interest debentures, the carrying amounts approximated fair value at June 30, 2018 and December 31, 2017.

Other Borrowed Funds

The Company currently has short- and long-term borrowings issued from the Federal Home Loan Bank (“FHLB”).  Due to the contractual terms of the short-term borrowings, the carrying amounts approximated fair value at June 30, 2018 and December 31, 2017.  The long-term borrowings outstanding at June 30, 2018 are fixed-rate borrowings and the fair value is based on established market spreads for similar types of borrowings.  The fixed rate long-term borrowings are included in Level 2 of the fair value hierarchy.  At June 30, 2018 and December 31, 2017, the carrying amount of the fixed rate long-term FHLB borrowings was $100,000,000 and $250,000,000, respectively, and the estimated fair value was $100,597,000 and $249,728,000, 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 the Company’s entire holdings of a particular financial instrument.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-statement of condition financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.  Other significant assets and liabilities that are not considered financial assets or liabilities include the bank premises and equipment and core deposit value.  In addition, the tax ramifications related to the effect of fair value estimates have not been considered in the above estimates.

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Loans

6 Months Ended

Jun. 30, 2018

Loans

Loans

Note 3 — Loans

A summary of loans, by loan type at June 30, 2018 and December 31, 2017 is as follows:

	June 30,		December 31,
	2018		2017
	(Dollars in Thousands)
Commercial, financial and agricultural	$	3,321,341	$	3,322,668
Real estate - mortgage		1,136,921		1,133,525
Real estate - construction		1,781,953		1,683,550
Consumer		47,747		49,543
Foreign		151,458		158,886
Total loans	$	6,439,420	$	6,348,172

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Allowance for Probable Loan Losses

6 Months Ended

Jun. 30, 2018

Allowance for Probable Loan Losses

Allowance for Probable Loan Losses

Note 4 — Allowance for Probable Loan Losses

The allowance for probable loan losses primarily consists of the aggregate loan loss allowances of the bank subsidiaries.  The allowances are established through charges to operations in the form of provisions for probable loan losses.  Loan losses or recoveries are charged or credited directly to the allowances.  The allowance for probable loan losses of each bank subsidiary is maintained at a level considered appropriate by management, based on estimated probable losses in the loan portfolio.  The allowance for probable loan losses is derived from the following elements:  (i) allowances established on specific impaired loans, which are based on a review of the individual characteristics of each loan, including the customer’s ability to repay the loan, the underlying collateral values, and the industry in which the customer operates; (ii) allowances based on actual historical loss experience for similar types of loans in the Company’s loan portfolio; and (iii) allowances based on general economic conditions, changes in the mix of loans, company resources, border risk and credit quality indicators, among other things.  All segments of the loan portfolio continue to be impacted by economic uncertainty as the economy recovers from the recent prolonged downturn.

The Company’s management continually reviews the allowance for loan losses of the bank subsidiaries using the amounts determined from the allowances established on specific impaired loans, the allowance established on quantitative historical loss percentages, and the allowance based on qualitative data to establish an appropriate amount to maintain in the Company’s allowance for loan losses.  Should any of the factors considered by management in evaluating the adequacy of the allowance for probable loan losses change, the Company’s estimate of probable loan losses could also change, which could affect the level of future provisions for probable loan losses.  While the calculation of the allowance for probable loan losses utilizes management’s best judgment and all information reasonably available, the adequacy of the allowance is dependent on a variety of factors beyond the Company’s control, including, among other things, the performance of the entire loan portfolio, the economy, changes in interest rates and the view of regulatory authorities towards loan classifications.

The loan loss provision is determined using the following methods.  On a weekly basis, 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 the Company’s internal classified report.  Additionally, the Company’s credit department reviews the majority of the Company’s 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, the Company determines if a loan should be placed on an internal classified report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.

A summary of the transactions in the allowance for probable loan losses by loan class is as follows:

	Three Months Ended June 30, 2018
	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 March 31,	$	20,691	$	11,798	$	24,803	$	947	$	3,006	$	4,689	$	437	$	783	$	67,154
Losses charged to allowance		(2,284)		—		(70)		—		(30)		(9)		(65)		—		(2,458)
Recoveries credited to allowance		447		2		192		—		1		229		15		1		887
Net (losses) recoveries  charged to allowance		(1,837)		2		122		—		(29)		220		(50)		1		(1,571)
Provision charged to operations		(2,258)		2,903		(6,629)		627		614		1,884		63		66		(2,730)
Balance at June 30,	$	16,596	$	14,703	$	18,296	$	1,574	$	3,591	$	6,793	$	450	$	850	$	62,853

	Three Months Ended June 30, 2017
	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 March 31,	$	25,853	$	13,789	$	16,721	$	818	$	2,391	$	3,186	$	504	$	924	$	64,186
Losses charged to allowance		(2,264)		—		(40)		—		(30)		(33)		(39)		—		(2,406)
Recoveries credited to allowance		2,154		2		89		—		2		73		13		1		2,334
Net (losses) recoveries charged to allowance		(110)		2		49		—		(28)		40		(26)		1		(72)
Provision charged to operations		(603)		(542)		702		179		(49)		1,131		10		(23)		805
Balance at June 30,	$	25,140	$	13,249	$	17,472	$	997	$	2,314	$	4,357	$	488	$	902	$	64,919

	Six Months Ended June 30, 2018
	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,	$	27,905	$	11,675	$	16,663	$	1,109	$	2,950	$	6,103	$	440	$	842	$	67,687
Losses charged to allowance		(4,999)		(1)		(70)		—		(44)		(39)		(182)		—		(5,335)
Recoveries credited to allowance		1,030		4		210		—		2		295		27		1		1,569
Net (losses) recoveries  charged to allowance		(3,969)		3		140		—		(42)		256		(155)		1		(3,766)
Provision charged to operations		(7,340)		3,025		1,493		465		683		434		165		7		(1,068)
Balance at June 30,	$	16,596	$	14,703	$	18,296	$	1,574	$	3,591	$	6,793	$	450	$	850	$	62,853

	Six Months Ended June 30, 2017
	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,	$	25,649	$	13,889	$	16,731	$	806	$	2,455	$	3,716	$	531	$	884	$	64,661
Losses charged to allowance		(4,999)		—		(40)		—		(61)		(138)		(160)		—		(5,398)
Recoveries credited to allowance		2,853		3		147		—		7		97		29		15		3,151
Net (losses) recoveries  charged to allowance		(2,146)		3		107		—		(54)		(41)		(131)		15		(2,247)
Provision charged to operations		1,637		(643)		634		191		(87)		682		88		3		2,505
Balance at June 30,	$	25,140	$	13,249	$	17,472	$	997	$	2,314	$	4,357	$	488	$	902	$	64,919

The allowance for probable loan losses is a reserve established through a provision for probable loan losses charged to expense, which represents management’s best estimate of probable loan losses when evaluating loans individually or collectively.  The decreases in provision for probable loan losses charged to expense for the three and six months ended June 30, 2018 and June 30, 2017 can be attributed to a decrease in the historical loss experience in the commercial category of the calculation and a decrease in loans classified as Watch-List Substandard and Impaired.  As discussed in prior periods, charge-offs increased from historical levels due to the deterioration of one relationship that is secured by multiple pieces of transportation equipment beginning in the fourth quarter of 2014.  The Company uses a three year historical charge-off experience in the calculation, therefore, as those charge-offs are eliminated from the calculation, the allowance for probable loan losses is impacted.  As fluctuations occur in historical loss factors, management evaluates the need to adjust the qualitative factors used in the calculation to properly reflect probable loan losses.  

The table below provides additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class as of June 30, 2018 and December 31, 2017:

	June 30, 2018
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance
	(Dollars in Thousands)
Domestic
Commercial	$	17,933	$	460	$	1,072,061	$	16,136
Commercial real estate: other construction & land development		2,166		116		1,779,787		14,587
Commercial real estate: farmland & commercial		6,020		—		2,011,747		18,296
Commercial real estate: multifamily		664		—		212,916		1,574
Residential: first lien		6,387		—		420,951		3,591
Residential: junior lien		799		—		708,784		6,793
Consumer		1,141		—		46,606		450
Foreign		330		—		151,128		850
Total	$	35,440	$	576	$	6,403,980	$	62,277

	December 31, 2017
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance
	(Dollars in Thousands)
Domestic
Commercial	$	17,947	$	300	$	1,068,520	$	27,605
Commercial real estate: other construction & land development		2,455		116		1,681,095		11,559
Commercial real estate: farmland & commercial		33,123		18		2,010,162		16,645
Commercial real estate: multifamily		476		—		192,440		1,109
Residential: first lien		6,852		—		425,925		2,950
Residential: junior lien		723		—		700,025		6,103
Consumer		1,281		—		48,262		440
Foreign		347		—		158,539		842
Total	$	63,204	$	434	$	6,284,968	$	67,253

The table below provides additional information on loans accounted for on a non-accrual basis by loan class at June 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
	(Dollars in Thousands)
Domestic
Commercial	$	17,896	$	17,909
Commercial real estate: other construction & land development		2,166		2,455
Commercial real estate: farmland & commercial		6,020		33,123
Commercial real estate: multifamily		664		476
Residential: first lien		485		712
Residential: junior lien		—		11
Consumer		39		44
Total non-accrual loans	$	27,270	$	54,730

The decrease in impaired and non-accrual loans at June 30, 2018 compared to December 31, 2017 can be attributed to a relationship secured by a waterpark foreclosed upon in the second quarter of 2018.  The relationship was classified as Watch-List Impaired at December 31, 2017.  Impaired loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected.  The Company has identified these loans through its normal loan review procedures. Impaired 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 the Company’s impaired loans are measured at the fair value of the collateral. In limited cases, the Company may use other methods to determine the level of impairment of a loan if such loan is not collateral dependent.

The following tables detail key information regarding the Company’s impaired loans by loan class at June 30, 2018 and December 31, 2017:

	June 30, 2018
							Quarter to Date				Year to Date
			Unpaid				Average				Average
	Recorded		Principal		Related		Recorded		Interest		Recorded		Interest
	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	1,402	$	1,992	$	460	$	1,604	$	—	$	1,661	$	—
Commercial real estate: other construction & land development		142		169		116		143		—		144		—
Total impaired loans with related allowance	$	1,544	$	2,161	$	576	$	1,747	$	—	$	1,805	$	—

	June 30, 2018
					Quarter to Date				Year to Date
			Unpaid		Average				Average
	Recorded		Principal		Recorded		Interest		Recorded		Interest
	Investment		Balance		Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	16,531	$	43,980	$	16,594	$	1	$	16,738	$	1
Commercial real estate: other construction & land development		2,024		2,230		2,148		—		2,216		—
Commercial real estate: farmland & commercial		6,020		6,520		36,790		—		36,686		—
Commercial real estate: multifamily		664		696		664		—		568		—
Residential: first lien		6,387		6,508		6,426		76		6,864		152
Residential: junior lien		799		810		803		12		811		22
Consumer		1,141		1,144		1,145		1		1,179		2
Foreign		330		330		333		4		337		7
Total impaired loans with no related allowance	$	33,896	$	62,218	$	64,903	$	94	$	65,399	$	184

	December 31, 2017
			Unpaid				Average
	Recorded		Principal		Related		Recorded		Interest
	Investment		Balance		Allowance		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial real estate: other construction & land development	$	1,300	$	1,577	$	300	$	1,346	$	—
Commercial real estate: farmland & commercial		145		169		116		150		—
Commercial real estate: multifamily		449		590		18		489		—
Total impaired loans with related allowance	$	1,894	$	2,336	$	434	$	1,985	$	—

	December 31, 2017
			Unpaid		Average
	Recorded		Principal		Recorded		Interest
	Investment		Balance		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	16,646	$	44,095	$	19,354	$	3
Commercial real estate: other construction & land development		2,310		2,455		2,336		67
Commercial real estate: farmland & commercial		32,675		33,275		8,523		110
Commercial real estate: multifamily		476		505		401		—
Residential: first lien		6,852		6,968		6,860		298
Residential: junior lien		723		736		1,011		52
Consumer		1,281		1,283		1,214		1
Foreign		347		347		751		16
Total impaired loans with no related allowance	$	61,310	$	89,664	$	40,450	$	547

The following table details key information regarding the Company’s impaired loans by loan class at June 30, 2017:

	June 30, 2017
	Quarter to Date					Year to Date
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	1,152	$	—	$	1,158	$	—
Commercial real estate: other construction & land development		767		—		1,033		—
Commercial real estate: farmland & commercial		1,314		—		1,567		—
Total impaired loans with related allowance	$	3,233	$	—	$	3,758	$	—

	June 30, 2017
	Quarter to Date				Year to Date
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	20,005	$	1	$	20,463	$	1
Commercial real estate: other construction & land development		2,482		—		2,610		—
Commercial real estate: farmland & commercial		8,532		30		8,774		58
Commercial real estate: multifamily		521		—		530		—
Residential: first lien		6,774		81		6,874		159
Residential: junior lien		977		12		982		23
Consumer		1,156		—		1,212		1
Foreign		755		4		751		8
Total impaired loans with no related allowance	$	41,202	$	128	$	42,196	$	250

A portion of the impaired loans have adequate collateral and credit enhancements not requiring a related allowance for loan loss.  Management recognizes the risks associated with these impaired loans, however, management is confident the Company’s loss exposure regarding these credits will be significantly reduced due to the Company’s long-standing practices that encompass the following principles:  (i) the financial strength of the borrower, including strong earnings, a high net worth, significant liquidity and an acceptable debt to worth ratio, (ii) managerial and business competence, (iii) the ability to repay, (iv) for a new business, projected cash flows, (v) loan to value, (vi) in the case of a secondary guarantor, a guarantor financial statement, and (viii) financial and/or other character references.  Management’s decision to place loans in this category does not necessarily mean that the Company will experience significant losses from these loans or significant increases in impaired loans from these levels.

The following table details loans accounted for as “troubled debt restructuring,” segregated by loan class.  Loans accounted for as troubled debt restructuring are included in impaired loans.

	June 30, 2018		December 31, 2017
		(Dollars in Thousands)
Domestic
Commercial	$	6,742	$	6,910
Commercial real estate:  farmland & commercial		—		—
Residential:  first lien		5,902		6,140
Residential:  junior lien		799		712
Consumer		1,101		1,237
Foreign		330		347
Total troubled debt restructuring	$	14,874	$	15,346

The bank subsidiaries 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 of the Company believes that it is generally able to identify borrowers with financial problems reasonably early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses.  The determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an exercise of judgment.  Similarly, the determination of the adequacy of the allowance for probable loan losses can be made only on a subjective basis.  It is the judgment of the Company’s management that the allowance for probable loan losses at June 30, 2018 was adequate to absorb probable losses from loans in the portfolio at that date.

The following tables present information regarding the aging of past due loans by loan class at June 30, 2018 and December 31, 2017:

	June 30, 2018
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	3,192	$	833	$	17,806	$	618	$	21,831	$	1,068,163	$	1,089,994
Commercial real estate: other construction & land development		639		124		3,452		2,638		4,215		1,777,738		1,781,953
Commercial real estate: farmland & commercial		2,069		3,336		3,394		532		8,799		2,008,968		2,017,767
Commercial real estate: multifamily		191		—		664		—		855		212,725		213,580
Residential: first lien		3,343		699		4,298		4,053		8,340		418,998		427,338
Residential: junior lien		1,230		284		994		994		2,508		707,075		709,583
Consumer		532		51		55		36		638		47,109		47,747
Foreign		2,355		1,322		14		14		3,691		147,767		151,458
Total past due loans	$	13,551	$	6,649	$	30,677	$	8,885	$	50,877	$	6,388,543	$	6,439,420

	December 31, 2017
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio
		(Dollars in Thousands)
Domestic
Commercial	$	3,790	$	398	$	18,308	$	537	$	22,496	$	1,063,971	$	1,086,467
Commercial real estate: other construction & land development		354		308		820		6		1,482		1,682,068		1,683,550
Commercial real estate: farmland & commercial		3,925		518		31,133		954		35,576		2,007,709		2,043,285
Commercial real estate: multifamily		84		—		476		—		560		192,356		192,916
Residential: first lien		4,295		2,458		4,095		3,861		10,848		421,929		432,777
Residential: junior lien		1,310		580		1,110		1,099		3,000		697,748		700,748
Consumer		868		98		160		133		1,126		48,417		49,543
Foreign		1,229		69		667		667		1,965		156,921		158,886
Total past due loans	$	15,855	$	4,429	$	56,769	$	7,257	$	77,053	$	6,271,119	$	6,348,172

The decrease in the 90 days or greater Commercial real estate:  farmland and commercial category can be attributed to the removal of a loan relationship primarily secured by a water park due to the foreclosure of the collateral in the second quarter of 2018.

The Company’s internal classified report is segregated into the following categories:  (i) “Special Review Credits,” (ii) “Watch List-Pass Credits,” and (iii) “Watch List-Substandard Credits.”  The loans placed in the “Special Review Credits” category reflect management’s opinion that the loans reflect potential weakness which requires 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 the Company’s 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 some future loss could be sustained by the Company if such weaknesses are not corrected.  For loans that are classified as impaired, management evaluates these credits in accordance with the provisions of ASC 310-10, “Receivables,” and, if deemed necessary, a specific reserve is allocated to the credit.  The specific reserve allocated under ASC 310-10 is 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 the Company’s loans evaluated as impaired under ASC 310-10 are measured using the fair value of collateral method.  In limited cases, the Company may use other methods to determine the specific reserve of a loan under ASC 310-10 if such loan is not collateral dependent.

The allowance based on historical loss experience on the Company’s remaining loan portfolio, which includes the “Special Review Credits,” “Watch List - Pass Credits,” and “Watch List - Substandard Credits” is determined by segregating the remaining loan portfolio into certain categories such as commercial loans, installment loans, international loans, loan concentrations and overdrafts.  Installment loans are then further segregated by number of days past due.  A historical loss percentage, adjusted for (i) management’s evaluation of changes in lending policies and procedures, (ii) current economic conditions in the market area served by the Company, (iii) other risk factors, (iv) the effectiveness of the internal loan review function, (v) changes in loan portfolios, and (vi) the composition and concentration of credit volume is applied to each category.  Each category is then added together to determine the allowance allocated under ASC 450-20.

A summary of the loan portfolio by credit quality indicator by loan class at June 30, 2018 and December 31, 2017 is as follows:

			June 30, 2018
			Special		Watch		Watch List—		Watch List—
	Pass		Review		List—Pass		Substandard		Impaired
			(Dollars in Thousands)
Domestic
Commercial	$	951,055	$	256	$	1,034	$	119,716	$	17,933
Commercial real estate: other construction & land development		1,715,667		1,115		7,169		55,836		2,166
Commercial real estate: farmland & commercial		1,817,420		57,123		39,372		97,832		6,020
Commercial real estate: multifamily		211,972		—		—		944		664
Residential: first lien		420,198		—		129		624		6,387
Residential: junior lien		707,903		—		881		—		799
Consumer		46,606		—		—		—		1,141
Foreign		151,128		—		—		—		330
Total	$	6,021,949	$	58,494	$	48,585	$	274,952	$	35,440

			December 31, 2017
			Special		Watch		Watch List—		Watch List—
	Pass		Review		List—Pass		Substandard		Impaired
			(Dollars in Thousands)
Domestic
Commercial	$	905,707	$	—	$	3,170	$	159,643	$	17,947
Commercial real estate: other construction & land development		1,616,604		1,288		672		62,531		2,455
Commercial real estate: farmland & commercial		1,863,763		5,134		41,820		99,445		33,123
Commercial real estate: multifamily		192,440		—		—		—		476
Residential: first lien		425,811		40		—		74		6,852
Residential: junior lien		699,875		150		—		—		723
Consumer		48,262		—		—		—		1,281
Foreign		158,539		—		—		—		347
Total	$	5,911,001	$	6,612	$	45,662	$	321,693	$	63,204

The increase in Special Review credits at June 30, 2018 compared to December 31, 2017 can be attributed to the reclassification of one relationship secured by real estate used for day care facilities from Pass.  The decrease in Watch List-Substandard credits at June 30, 2018 compared to December 31, 2017 can be primarily attributed to the  payoff of a loan relationship secured by barges used in the transportation of petroleum products.  The decrease in Watch List-Impaired at June 30, 2018 compared to December 31, 2017 can be attributed to the foreclosure of a loan relationship primarily secured by a water park.

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Stock Options

6 Months Ended

Jun. 30, 2018

Stock Options

Stock Options

Note 5 — Stock Options

On April 5, 2012, the Board of Directors adopted the 2012 International Bancshares Corporation Stock Option Plan (the “2012 Plan”). There are 800,000 shares of common stock available for stock option grants under the 2012 Plan, which may be 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. As of June 30, 2018, 2,500 shares were available for future grants under the 2012 Plan. 

A summary of option activity under the stock option plan for the six months ended June 30, 2018 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, 2017	668,166	$	20.41
Plus: Options granted	229,700		38.30
Less:
Options exercised	46,351		17.50
Options expired	—		—
Options forfeited	15,800		18.58
Options outstanding at June 30, 2018	835,715		25.53	6.44	$	14,436
Options fully vested and exercisable at June 30, 2018	327,341	$	19.64	4.56	$	7,582

Stock-based compensation expense included in the consolidated statements of income for the three and six months ended June 30, 2018 was $285,000 and $470,000, respectively.  Stock-based compensation expense included in the consolidated statements of income for the three and six months ended June 30, 2017 was approximately $216,000 and $484,000, respectively.  As of June 30, 2018, there was approximately $3,316,000 of total unrecognized stock-based compensation cost related to non-vested options granted under the Company plans that will be recognized over a weighted average period of 1.9 years.

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Investment Securities and Equity Securities with Readily Determinable Fair Values

6 Months Ended

Jun. 30, 2018

Investment Securities and Equity Securities with Readily Determinable Fair Values

Investment Securities and Equity Securities with Readily Determinable Fair Values

Note 6 — Investment Securities and Equity Securities with Readily Determinable Fair Values

The Company classifies debt securities into one of three categories:  held-to maturity, available-for-sale, or trading.  Such debt securities are reassessed for appropriate classification at each reporting date.  Securities classified as “held-to-maturity” are carried at amortized cost for financial statement reporting, while securities classified as “available-for-sale” and “trading” are carried at their fair value.  Unrealized holding gains and losses are included in net income for those securities classified as “trading,” while unrealized holding gains and losses related to those securities classified as “available-for-sale” are excluded from net income and reported net of tax as other comprehensive income (loss) and accumulated other comprehensive income (loss) until realized, or in the case of losses, when deemed other than temporary.  In accordance with the provisions of ASU 2016-01, which the Company adopted on January 1, 2018, unrealized holding gains and losses related to equity securities with readily determinable fair values are included in net income.

The amortized cost and estimated fair value by type of investment security at June 30, 2018 are as follows:

	Held to Maturity
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Carrying
	cost		gains		losses		fair value		value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	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	$	3,615,831	$	9,299	$	(115,487)	$	3,509,643	$	3,509,643
Obligations of states and political subdivisions		206,363		4,705		(145)		210,923		210,923
Total investment securities	$	3,822,194	$	14,004	$	(115,632)	$	3,720,566	$	3,720,566

(1) Included in the carrying value of residential mortgage-backed securities are $571,385 of mortgage-backed securities issued by Ginnie Mae and $2,938,258 of mortgage-backed securities issued by Fannie Mae and Freddie Mac.

The amortized cost and estimated fair value by type of investment security at December 31, 2017 are as follows:

	Held to Maturity
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Carrying
	cost		gains		losses		fair value		value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	Available for Sale
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair		Carrying
	cost		gains		losses		value		value(1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	3,943,092	$	14,110	$	(65,969)	$	3,891,233	$	3,891,233
Obligations of states and political subdivisions		225,096		7,871		(16)		232,951		232,951
Equity securities		28,075		293		(482)		27,886		27,886
Total investment securities	$	4,196,263	$	22,274	$	(66,467)	$	4,152,070	$	4,152,070

(1) Included in the carrying value of residential mortgage-backed securities are $654,063 of mortgage-backed securities issued by Ginnie Mae and $3,237,170 of mortgage-backed securities issued by Fannie Mae and Freddie.

The amortized cost and estimated fair value of investment securities at June 30, 2018, 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	$	1,200	$	1,200	$	—	$	—
Due after one year through five years		1,200		1,200		—		—
Due after five years through ten years		—		—		1,720		1,736
Due after ten years		—		—		204,643		209,187
Residential mortgage-backed securities		—		—		3,615,831		3,509,643
Total investment securities	$	2,400	$	2,400	$	3,822,194	$	3,720,566

Residential mortgage-backed securities are securities primarily issued by the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”), or the Government National Mortgage Association (“Ginnie Mae”).  Investments in residential mortgage-backed securities issued by Ginnie Mae are fully guaranteed by the U.S. Government.  Investments in residential mortgage-backed securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government, however, the Company believes that the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008 and because securities issued by others that are collateralized by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated securities.

The amortized cost and fair value of available-for-sale debt investment securities pledged to qualify for fiduciary powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was $1,221,859,000 and $1,179,583,000, respectively, at June 30, 2018.

Proceeds from the sale and calls of debt securities available-for-sale were $0 and $18,145,000 for the three and six months ended June 30, 2018, which included $0 and $0 of mortgage-backed securities. Gross gains of $0 and $0 and gross losses of $0 and $0 were realized on the sales and calls for the three and six months ended June 30, 2018.  Proceeds from the sale and call of debt securities available-for-sale were $150,634,000 and $272,184,000 for the three and six months ended June 30, 2017, respectively, which included $150,634,000 and $266,967,000 of mortgage-backed securities, respectively.  Gross gains of $10,000 and $1,186,000 and gross losses of $2,549,000 and $2,798,000 were realized on the sales and calls for the three and six months ended June 30, 2017.

Gross unrealized losses on debt investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at June 30, 2018, 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	$	1,000,142	$	(23,712)	$	2,047,402	$	(91,775)	$	3,047,544	$	(115,487)
Obligations of states and political subdivisions		15,879		(137)		516		(8)		16,395		(145)
	$	1,016,021	$	(23,849)	$	2,047,918	$	(91,783)	$	3,063,939	$	(115,632)

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, 2017 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	$	1,061,577	$	(13,157)	$	2,029,455	$	(52,812)	$	3,091,032	$	(65,969)
Obligations of states and political subdivisions		5,534		(9)		522		(7)		6,056		(16)
Equity securities		11,499		(251)		8,019		(231)		19,518		(482)
	$	1,078,610	$	(13,417)	$	2,037,996	$	(53,050)	$	3,116,606	$	(66,467)

The unrealized losses on investments in residential mortgage-backed securities are primarily caused by changes in market interest rates.  Residential mortgage-backed securities are primarily securities issued by Freddie Mac, Fannie Mae and Ginnie Mae.  The contractual cash obligations of the securities issued by Ginnie Mae are fully guaranteed by the U.S. Government.  The contractual cash obligations of the securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government; however, the Company believes 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.  The decrease in fair value on residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae is due to market interest rates.  The Company has no intent to sell and will more than likely not be required to sell before a market price recovery or maturity of the securities; therefore, it is the conclusion of the Company that the investments in residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae are not considered other-than-temporarily impaired. 

Equity securities with readily determinable fair values consist primarily of Community Reinvestment Act funds.  At June 30, 2018 and December 31, 2017, the balance in equity securities with readily determinable fair values recorded at fair value were $27,054,000 and $27,885,000, respectively.  Prior to January 1, 2018, the equity securities were included in available-for-sale securities, with the related unrealized gain or loss recorded as a component of other comprehensive income.  The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and six months ended June 30, 2018:

	Three Months Ended
	June 30,
	(Dollars in Thousands)
	2018
Net losses recognized during the period on equity securities	$	(247)
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	$	(247)

	Six Months Ended
	June 30,
	(Dollars in Thousands)
	2018
Net losses recognized during the period on equity securities	$	(1,021)
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	$	(1,021)

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Other Borrowed Funds

6 Months Ended

Jun. 30, 2018

Other Borrowed Funds

Other Borrowed Funds

Note 7 — Other Borrowed Funds

Other borrowed funds include FHLB borrowings, which are short-term and long-term borrowings issued by the FHLB of Dallas at the market price offered at the time of funding.  These borrowings are secured by residential mortgage-backed investment securities and a portion of the Company’s loan portfolio.  At June 30, 2018, other borrowed funds totaled $852,950,000, a decrease of 28.6% from $1,195,225,000 at December 31, 2017.    

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Junior Subordinated Interest Deferrable Debentures

6 Months Ended

Jun. 30, 2018

Junior Subordinated Interest Deferrable Debentures

Junior Subordinated Interest Deferrable Debentures

Note 8 — Junior Subordinated Interest Deferrable Debentures

The Company has six statutory business trusts under the laws of the State of Delaware, for the purpose of issuing trust preferred securities. The six statutory business trusts formed by the Company (the “Trusts”) have each issued Capital and Common Securities and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (“Debentures”) issued by the Company. As of June 30, 2018 and December 31, 2017, the principal amount of Debentures outstanding totaled $160,416,000.    

The Debentures are subordinated and junior in right of payment to all present and future senior indebtedness (as defined in the respective Indentures) of the Company, 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. The Company has fully and unconditionally guaranteed the obligations of each of the Trusts with respect to the Capital and Common Securities. The Company has 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 Trusts VI, VIII, IX, X, XI and XII. 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 of the Company 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 June 30, 2018 and December 31, 2017, the total $160,416,000 of the Capital and Common Securities outstanding qualified as Tier 1 capital.

The following table illustrates key information about each of the Capital and Common Securities and their interest rate at June 30, 2018:

	Junior
	Subordinated
	Deferrable
	Interest		Repricing	Interest		Interest				Optional
	Debentures		Frequency	Rate		Rate Index(1)			Maturity Date	Redemption Date(1)
	(Dollars in Thousands)
Trust VI	$	25,774	Quarterly	5.79	%	LIBOR	+	3.45	November 2032	February 2008
Trust VIII		25,774	Quarterly	5.40	%	LIBOR	+	3.05	October 2033	October 2008
Trust IX		41,238	Quarterly	3.93	%	LIBOR	+	1.62	October 2036	October 2011
Trust X		21,021	Quarterly	4.01	%	LIBOR	+	1.65	February 2037	February 2012
Trust XI		25,990	Quarterly	3.93	%	LIBOR	+	1.62	July 2037	July 2012
Trust XII		20,619	Quarterly	3.75	%	LIBOR	+	1.45	September 2037	September 2012
	$	160,416

(1) The Capital and Common Securities may be redeemed in whole or in part on any interest payment date after the Optional Redemption Date.

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Common Stock and Dividends

6 Months Ended

Jun. 30, 2018

Common Stock and Dividends

Common Stock and Dividends

Note 9 — Common Stock and Dividends

In connection with the Company’s participation in the Troubled Asset Relief Program Capital Purchase Program in 2008, the US Treasury received a warrant (“Warrant”) to purchase 1,326,238 shares of the Company’s common stock at $24.43 per share. The term of the Warrant is ten years and was immediately exercisable. The Warrant is included as a component of Tier 1 capital. On June 12, 2013, the U. S. Treasury sold the Warrant to a third party. As of August 3, 2018, the Warrant is still outstanding, but expires on December 23, 2018. Adjustments to the $24.43 per share Exercise Price of the Warrant will be made if the Company pays cash dividends in excess of $0.33 per semi‑annual period or makes certain other shareholder distributions before the Warrant expires.

On April 16, 2018, the Company paid cash dividends of $0.33 per share to record holders of the Company’s common stock on April 2, 2018.  On April 17 and October 16, 2017, the Company paid cash dividends of $0.33 per share to record holders of the Company’s common stock on April 13, and September 29, 2017, respectively. 

In April 2009, following receipt of the Treasury Department’s consent, 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 15, 2018, the Board of Directors extended the repurchase program and authorized the purchase of up to $40 million of common stock during each successive 12 month period commencing again on April 9, 2018. 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 first quarter of 2018, the Board of Directors adopted a Rule 10b5‑1 trading plan, and intends to adopt additional Rule 10b5‑1 trading plans, that will allow the Company to purchase shares of its common stock during certain trading blackout periods when the Company ordinarily would not be in the market due to trading restrictions in its insider trading policy. During the term of 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 the Rule 10b5-1 trading plan will be held in treasury for reissue for various corporate purposes, including employee stock compensation plans. As of August 3, 2018, a total of 9,246,956 shares had been repurchased under all programs at a cost of $271,347,000.  The Company is not obligated to purchase shares under its stock repurchase program outside of its Rule 10b5-1 trading plan.

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Commitments, Contingent Liabilities and Other Tax Matters

6 Months Ended

Jun. 30, 2018

Commitments, Contingent Liabilities and Other Tax Matters

Commitments, Contingent Liabilities and Other Tax Matters

Note 10 — Commitments and Contingent Liabilities and Other Tax Matters

The Company is involved in various legal proceedings that are in various stages of litigation.  The Company has determined, based on discussions with its 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 the consolidated financial position or results of operations of the Company.  However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law.  The Tax Act materially changes U. S. corporate income tax rates, among other things.  The Company was in a net deferred tax liability position at the time the Tax Act was enacted and subsequently revalued the carrying value of the net deferred liability and its components to the new 21% effective tax rate.  The revaluation resulted in a net benefit to the Company of $3,168,000 and was included as a reduction to income tax expense in the consolidated income statement for the year ended December 31, 2017.  No adjustments to the revalued carrying value for deferred tax assets or liabilities were made during the three or six months ended June 30, 2018. 

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Capital Ratios

6 Months Ended

Jun. 30, 2018

Capital Ratios

Capital Ratios

Note 11 — Capital Ratios

Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies.  Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices.  Capital amount and classifications are also subject to qualitative judgements by regulators about components, risk-weighting and other factors.

In July 2013, the Federal Deposit Insurance Corporation (“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 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) related capital provisions. Consistent with the Basel international framework, the rules include a minimum ratio of Common Equity Tier 1 (“CET1”) to risk-weighted assets of 4.5% and a CET1 capital conservation buffer of 2.5% of risk-weighted assets.  The capital conservation buffer began phasing-in on January 1, 2016 at .625% and will increase each year until January 1, 2019, when the Company will be required to have a 2.5% capital conservation buffer, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. 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 are subject to a four year phase in period for mandatory compliance and the Company was required to begin to phase in the rules beginning on January 1, 2016.  Management believes, as of June 30, 2018, that the Company and each of the bank subsidiaries will meet all capital adequacy requirements once the capital conservation is fully phased-in.  On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“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 must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8% and 10% before community banks can begin to take advantage of this regulatory relief provision.  Some of the Company’s bank subsidiaries, with assets of less than $10 billion, may qualify for this exemption. 

The Company had a CET1 to risk-weighted assets ratio of 17.75% on June 30, 2018 and 17.11% on December 31, 2017.  The Company had a Tier 1 capital-to-average-total-asset (leverage) ratio of 15.32% and 14.62%, risk-weighted Tier 1 capital ratio of 19.32% and 18.73% and risk-weighted total capital ratio of 20.04% and 19.51% at June 30, 2018 and December 31, 2017, respectively.  The Company’s CET1 capital consists of common stock and related surplus, net of treasury stock, and retained earnings.  The Company and its subsidiary banks elected to opt-out of the requirement to include most components of accumulated other comprehensive income (loss) in the calculation of CET1 capital.  CET1 is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions.  Tier 1 capital includes CET1 capital and additional Tier 1 capital.  Additional Tier 1 capital of the Company includes the Capital and Common Securities issued by the Trusts (see Note 8 above) up to a maximum of 25% of Tier 1 capital on an aggregate basis.  Any amount that exceeds the 25% threshold qualifies as Tier 2 capital.  As of June 30, 2018, the total of $160,416,000 of the Capital and Common Securities outstanding qualified as Tier 1 capital.  The Company actively monitors the regulatory capital ratios to ensure that the Company’s bank subsidiaries are well-capitalized under the regulatory framework.

The CET1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, excluding goodwill and other intangible assets, allocated by risk-weight category, and certain off-balance-sheet items, among other things. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things.

The aforementioned 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.

As of June 30, 2018, capital levels at the Company exceed all capital adequacy requirements under the Basel III Capital Rules as currently applicable to the Company, including the capital conservation buffer. Based on the ratios presented above, capital levels as of June 30, 2018 at the Company exceed the minimum levels necessary to be considered “well-capitalized.”

The Company and its subsidiary banks are subject to the regulatory capital requirements administered by the Federal Reserve, and, for the subsidiary banks, the FDIC. Regulatory authorities can initiate certain mandatory actions if the Company or any of the subsidiary banks fail to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of June 30, 2018, that the Company and each of its subsidiary banks meet all capital adequacy requirements to which they are subject.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis

The following table represents assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of June 30, 2018 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
	June 30, 2018		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale debt securities
Residential mortgage-backed securities	$	3,509,643	$	—	$	3,509,643	$	—
States and political subdivisions		210,923		—		210,923		—
Equity Securities		27,054		27,054		—		—
	$	3,747,620	$	27,054	$	3,720,566	$	—

The following table represents assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of December 31, 2017 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, 2017		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage - backed securities	$	3,891,233	$	—	$	3,891,233	$	—
States and political subdivisions		232,951		—		232,951		—
Equity Securities		27,886		27,886		—		—
	$	4,152,070	$	27,886	$	4,124,184	$	—

Assets measured at fair value on a non-recurring basis

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended June 30, 2018 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 Provision
	Year ended		Identical		Observable		Unobservable		(Credit)
	June 30,		Assets		Inputs		Inputs		During
	2018		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurring basis:
Assets:
Impaired loans	$	8,738	$	—	$	—	$	8,738	$	574
Other real estate owned		6,854		—		—		6,854		2,658

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended December 31, 2017 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 (Credit)
	Year ended		for Identical		Observable		Unobservable		Provision
	December 31,		Assets		Inputs		Inputs		During
	2017		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurring basis:
Assets:
Impaired loans	$	11,210	$	—	$	—	$	11,210	$	2,138
Other real estate owned		2,000		—		—		2,000		710

XML

Loans (Tables)

6 Months Ended

Jun. 30, 2018

Loans

Summary of loans, by loan type

	June 30,		December 31,
	2018		2017
	(Dollars in Thousands)
Commercial, financial and agricultural	$	3,321,341	$	3,322,668
Real estate - mortgage		1,136,921		1,133,525
Real estate - construction		1,781,953		1,683,550
Consumer		47,747		49,543
Foreign		151,458		158,886
Total loans	$	6,439,420	$	6,348,172

XML

Allowance for Probable Loan Losses (Tables)

6 Months Ended

Jun. 30, 2018

Allowance for Probable Loan Losses

Summary of the transactions in the allowance for probable loan losses by loan class

	Three Months Ended June 30, 2018
	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 March 31,	$	20,691	$	11,798	$	24,803	$	947	$	3,006	$	4,689	$	437	$	783	$	67,154
Losses charged to allowance		(2,284)		—		(70)		—		(30)		(9)		(65)		—		(2,458)
Recoveries credited to allowance		447		2		192		—		1		229		15		1		887
Net (losses) recoveries  charged to allowance		(1,837)		2		122		—		(29)		220		(50)		1		(1,571)
Provision charged to operations		(2,258)		2,903		(6,629)		627		614		1,884		63		66		(2,730)
Balance at June 30,	$	16,596	$	14,703	$	18,296	$	1,574	$	3,591	$	6,793	$	450	$	850	$	62,853

	Three Months Ended June 30, 2017
	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 March 31,	$	25,853	$	13,789	$	16,721	$	818	$	2,391	$	3,186	$	504	$	924	$	64,186
Losses charged to allowance		(2,264)		—		(40)		—		(30)		(33)		(39)		—		(2,406)
Recoveries credited to allowance		2,154		2		89		—		2		73		13		1		2,334
Net (losses) recoveries charged to allowance		(110)		2		49		—		(28)		40		(26)		1		(72)
Provision charged to operations		(603)		(542)		702		179		(49)		1,131		10		(23)		805
Balance at June 30,	$	25,140	$	13,249	$	17,472	$	997	$	2,314	$	4,357	$	488	$	902	$	64,919

	Six Months Ended June 30, 2018
	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,	$	27,905	$	11,675	$	16,663	$	1,109	$	2,950	$	6,103	$	440	$	842	$	67,687
Losses charged to allowance		(4,999)		(1)		(70)		—		(44)		(39)		(182)		—		(5,335)
Recoveries credited to allowance		1,030		4		210		—		2		295		27		1		1,569
Net (losses) recoveries  charged to allowance		(3,969)		3		140		—		(42)		256		(155)		1		(3,766)
Provision charged to operations		(7,340)		3,025		1,493		465		683		434		165		7		(1,068)
Balance at June 30,	$	16,596	$	14,703	$	18,296	$	1,574	$	3,591	$	6,793	$	450	$	850	$	62,853

	Six Months Ended June 30, 2017
	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,	$	25,649	$	13,889	$	16,731	$	806	$	2,455	$	3,716	$	531	$	884	$	64,661
Losses charged to allowance		(4,999)		—		(40)		—		(61)		(138)		(160)		—		(5,398)
Recoveries credited to allowance		2,853		3		147		—		7		97		29		15		3,151
Net (losses) recoveries  charged to allowance		(2,146)		3		107		—		(54)		(41)		(131)		15		(2,247)
Provision charged to operations		1,637		(643)		634		191		(87)		682		88		3		2,505
Balance at June 30,	$	25,140	$	13,249	$	17,472	$	997	$	2,314	$	4,357	$	488	$	902	$	64,919

Loans individually or collectively evaluated for their impairment and related allowance, by loan class

	June 30, 2018
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance
	(Dollars in Thousands)
Domestic
Commercial	$	17,933	$	460	$	1,072,061	$	16,136
Commercial real estate: other construction & land development		2,166		116		1,779,787		14,587
Commercial real estate: farmland & commercial		6,020		—		2,011,747		18,296
Commercial real estate: multifamily		664		—		212,916		1,574
Residential: first lien		6,387		—		420,951		3,591
Residential: junior lien		799		—		708,784		6,793
Consumer		1,141		—		46,606		450
Foreign		330		—		151,128		850
Total	$	35,440	$	576	$	6,403,980	$	62,277

	December 31, 2017
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance
	(Dollars in Thousands)
Domestic
Commercial	$	17,947	$	300	$	1,068,520	$	27,605
Commercial real estate: other construction & land development		2,455		116		1,681,095		11,559
Commercial real estate: farmland & commercial		33,123		18		2,010,162		16,645
Commercial real estate: multifamily		476		—		192,440		1,109
Residential: first lien		6,852		—		425,925		2,950
Residential: junior lien		723		—		700,025		6,103
Consumer		1,281		—		48,262		440
Foreign		347		—		158,539		842
Total	$	63,204	$	434	$	6,284,968	$	67,253

Loans accounted on non-accrual basis, by loan class

	June 30, 2018		December 31, 2017
	(Dollars in Thousands)
Domestic
Commercial	$	17,896	$	17,909
Commercial real estate: other construction & land development		2,166		2,455
Commercial real estate: farmland & commercial		6,020		33,123
Commercial real estate: multifamily		664		476
Residential: first lien		485		712
Residential: junior lien		—		11
Consumer		39		44
Total non-accrual loans	$	27,270	$	54,730

Impaired loans, by loan class

	June 30, 2018
							Quarter to Date				Year to Date
			Unpaid				Average				Average
	Recorded		Principal		Related		Recorded		Interest		Recorded		Interest
	Investment		Balance		Allowance		Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	1,402	$	1,992	$	460	$	1,604	$	—	$	1,661	$	—
Commercial real estate: other construction & land development		142		169		116		143		—		144		—
Total impaired loans with related allowance	$	1,544	$	2,161	$	576	$	1,747	$	—	$	1,805	$	—

	June 30, 2018
					Quarter to Date				Year to Date
			Unpaid		Average				Average
	Recorded		Principal		Recorded		Interest		Recorded		Interest
	Investment		Balance		Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	16,531	$	43,980	$	16,594	$	1	$	16,738	$	1
Commercial real estate: other construction & land development		2,024		2,230		2,148		—		2,216		—
Commercial real estate: farmland & commercial		6,020		6,520		36,790		—		36,686		—
Commercial real estate: multifamily		664		696		664		—		568		—
Residential: first lien		6,387		6,508		6,426		76		6,864		152
Residential: junior lien		799		810		803		12		811		22
Consumer		1,141		1,144		1,145		1		1,179		2
Foreign		330		330		333		4		337		7
Total impaired loans with no related allowance	$	33,896	$	62,218	$	64,903	$	94	$	65,399	$	184

	December 31, 2017
			Unpaid				Average
	Recorded		Principal		Related		Recorded		Interest
	Investment		Balance		Allowance		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial real estate: other construction & land development	$	1,300	$	1,577	$	300	$	1,346	$	—
Commercial real estate: farmland & commercial		145		169		116		150		—
Commercial real estate: multifamily		449		590		18		489		—
Total impaired loans with related allowance	$	1,894	$	2,336	$	434	$	1,985	$	—

	December 31, 2017
			Unpaid		Average
	Recorded		Principal		Recorded		Interest
	Investment		Balance		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	16,646	$	44,095	$	19,354	$	3
Commercial real estate: other construction & land development		2,310		2,455		2,336		67
Commercial real estate: farmland & commercial		32,675		33,275		8,523		110
Commercial real estate: multifamily		476		505		401		—
Residential: first lien		6,852		6,968		6,860		298
Residential: junior lien		723		736		1,011		52
Consumer		1,281		1,283		1,214		1
Foreign		347		347		751		16
Total impaired loans with no related allowance	$	61,310	$	89,664	$	40,450	$	547

The following table details key information regarding the Company’s impaired loans by loan class at June 30, 2017:

	June 30, 2017
	Quarter to Date					Year to Date
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	1,152	$	—	$	1,158	$	—
Commercial real estate: other construction & land development		767		—		1,033		—
Commercial real estate: farmland & commercial		1,314		—		1,567		—
Total impaired loans with related allowance	$	3,233	$	—	$	3,758	$	—

	June 30, 2017
	Quarter to Date				Year to Date
	Average				Average
	Recorded		Interest		Recorded		Interest
	Investment		Recognized		Investment		Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	20,005	$	1	$	20,463	$	1
Commercial real estate: other construction & land development		2,482		—		2,610		—
Commercial real estate: farmland & commercial		8,532		30		8,774		58
Commercial real estate: multifamily		521		—		530		—
Residential: first lien		6,774		81		6,874		159
Residential: junior lien		977		12		982		23
Consumer		1,156		—		1,212		1
Foreign		755		4		751		8
Total impaired loans with no related allowance	$	41,202	$	128	$	42,196	$	250

Loans accounted for as trouble debt restructuring, by loan class

	June 30, 2018		December 31, 2017
		(Dollars in Thousands)
Domestic
Commercial	$	6,742	$	6,910
Commercial real estate:  farmland & commercial		—		—
Residential:  first lien		5,902		6,140
Residential:  junior lien		799		712
Consumer		1,101		1,237
Foreign		330		347
Total troubled debt restructuring	$	14,874	$	15,346

Information regarding the aging of past due loans, by loan class

	June 30, 2018
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	3,192	$	833	$	17,806	$	618	$	21,831	$	1,068,163	$	1,089,994
Commercial real estate: other construction & land development		639		124		3,452		2,638		4,215		1,777,738		1,781,953
Commercial real estate: farmland & commercial		2,069		3,336		3,394		532		8,799		2,008,968		2,017,767
Commercial real estate: multifamily		191		—		664		—		855		212,725		213,580
Residential: first lien		3,343		699		4,298		4,053		8,340		418,998		427,338
Residential: junior lien		1,230		284		994		994		2,508		707,075		709,583
Consumer		532		51		55		36		638		47,109		47,747
Foreign		2,355		1,322		14		14		3,691		147,767		151,458
Total past due loans	$	13,551	$	6,649	$	30,677	$	8,885	$	50,877	$	6,388,543	$	6,439,420

	December 31, 2017
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio
		(Dollars in Thousands)
Domestic
Commercial	$	3,790	$	398	$	18,308	$	537	$	22,496	$	1,063,971	$	1,086,467
Commercial real estate: other construction & land development		354		308		820		6		1,482		1,682,068		1,683,550
Commercial real estate: farmland & commercial		3,925		518		31,133		954		35,576		2,007,709		2,043,285
Commercial real estate: multifamily		84		—		476		—		560		192,356		192,916
Residential: first lien		4,295		2,458		4,095		3,861		10,848		421,929		432,777
Residential: junior lien		1,310		580		1,110		1,099		3,000		697,748		700,748
Consumer		868		98		160		133		1,126		48,417		49,543
Foreign		1,229		69		667		667		1,965		156,921		158,886
Total past due loans	$	15,855	$	4,429	$	56,769	$	7,257	$	77,053	$	6,271,119	$	6,348,172

Summary of the loan portfolio by credit quality indicator, by loan class

			June 30, 2018
			Special		Watch		Watch List—		Watch List—
	Pass		Review		List—Pass		Substandard		Impaired
			(Dollars in Thousands)
Domestic
Commercial	$	951,055	$	256	$	1,034	$	119,716	$	17,933
Commercial real estate: other construction & land development		1,715,667		1,115		7,169		55,836		2,166
Commercial real estate: farmland & commercial		1,817,420		57,123		39,372		97,832		6,020
Commercial real estate: multifamily		211,972		—		—		944		664
Residential: first lien		420,198		—		129		624		6,387
Residential: junior lien		707,903		—		881		—		799
Consumer		46,606		—		—		—		1,141
Foreign		151,128		—		—		—		330
Total	$	6,021,949	$	58,494	$	48,585	$	274,952	$	35,440

			December 31, 2017
			Special		Watch		Watch List—		Watch List—
	Pass		Review		List—Pass		Substandard		Impaired
			(Dollars in Thousands)
Domestic
Commercial	$	905,707	$	—	$	3,170	$	159,643	$	17,947
Commercial real estate: other construction & land development		1,616,604		1,288		672		62,531		2,455
Commercial real estate: farmland & commercial		1,863,763		5,134		41,820		99,445		33,123
Commercial real estate: multifamily		192,440		—		—		—		476
Residential: first lien		425,811		40		—		74		6,852
Residential: junior lien		699,875		150		—		—		723
Consumer		48,262		—		—		—		1,281
Foreign		158,539		—		—		—		347
Total	$	5,911,001	$	6,612	$	45,662	$	321,693	$	63,204

XML

Stock Options (Tables)

6 Months Ended

Jun. 30, 2018

Stock Options

Summary of option activity under stock option plans

				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	options	price		term (years)	value ($)
					(in Thousands)
Options outstanding at December 31, 2017	668,166	$	20.41
Plus: Options granted	229,700		38.30
Less:
Options exercised	46,351		17.50
Options expired	—		—
Options forfeited	15,800		18.58
Options outstanding at June 30, 2018	835,715		25.53	6.44	$	14,436
Options fully vested and exercisable at June 30, 2018	327,341	$	19.64	4.56	$	7,582

XML

Investment Securities and Equity Securities with Readily Determinable Fair Values (Tables)

6 Months Ended

Jun. 30, 2018

Investment Securities and Equity Securities with Readily Determinable Fair Values

Amortized cost and estimated fair value by type of investment security

The amortized cost and estimated fair value by type of investment security at June 30, 2018 are as follows:

	Held to Maturity
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Carrying
	cost		gains		losses		fair value		value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	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	$	3,615,831	$	9,299	$	(115,487)	$	3,509,643	$	3,509,643
Obligations of states and political subdivisions		206,363		4,705		(145)		210,923		210,923
Total investment securities	$	3,822,194	$	14,004	$	(115,632)	$	3,720,566	$	3,720,566

(1) Included in the carrying value of residential mortgage-backed securities are $571,385 of mortgage-backed securities issued by Ginnie Mae and $2,938,258 of mortgage-backed securities issued by Fannie Mae and Freddie Mac.

The amortized cost and estimated fair value by type of investment security at December 31, 2017 are as follows:

	Held to Maturity
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Carrying
	cost		gains		losses		fair value		value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	Available for Sale
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair		Carrying
	cost		gains		losses		value		value(1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	3,943,092	$	14,110	$	(65,969)	$	3,891,233	$	3,891,233
Obligations of states and political subdivisions		225,096		7,871		(16)		232,951		232,951
Equity securities		28,075		293		(482)		27,886		27,886
Total investment securities	$	4,196,263	$	22,274	$	(66,467)	$	4,152,070	$	4,152,070

(1) Included in the carrying value of residential mortgage-backed securities are $654,063 of mortgage-backed securities issued by Ginnie Mae and $3,237,170 of mortgage-backed securities issued by Fannie Mae and Freddie.

Amortized cost and fair value of investment securities, by contractual maturity

	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	$	1,200	$	1,200	$	—	$	—
Due after one year through five years		1,200		1,200		—		—
Due after five years through ten years		—		—		1,720		1,736
Due after ten years		—		—		204,643		209,187
Residential mortgage-backed securities		—		—		3,615,831		3,509,643
Total investment securities	$	2,400	$	2,400	$	3,822,194	$	3,720,566

Gross unrealized losses on investment securities and the related fair value

Gross unrealized losses on debt investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at June 30, 2018, 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	$	1,000,142	$	(23,712)	$	2,047,402	$	(91,775)	$	3,047,544	$	(115,487)
Obligations of states and political subdivisions		15,879		(137)		516		(8)		16,395		(145)
	$	1,016,021	$	(23,849)	$	2,047,918	$	(91,783)	$	3,063,939	$	(115,632)

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, 2017 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	$	1,061,577	$	(13,157)	$	2,029,455	$	(52,812)	$	3,091,032	$	(65,969)
Obligations of states and political subdivisions		5,534		(9)		522		(7)		6,056		(16)
Equity securities		11,499		(251)		8,019		(231)		19,518		(482)
	$	1,078,610	$	(13,417)	$	2,037,996	$	(53,050)	$	3,116,606	$	(66,467)

Summary of unrealized and realized gains and losses recognized in net income on equity securities

	Three Months Ended
	June 30,
	(Dollars in Thousands)
	2018
Net losses recognized during the period on equity securities	$	(247)
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	$	(247)

	Six Months Ended
	June 30,
	(Dollars in Thousands)
	2018
Net losses recognized during the period on equity securities	$	(1,021)
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	$	(1,021)

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Junior Subordinated Interest Deferrable Debentures (Tables)

6 Months Ended

Jun. 30, 2018

Junior Subordinated Interest Deferrable Debentures

Junior subordinated deferrable interest debentures, major types of business trusts

	Junior
	Subordinated
	Deferrable
	Interest		Repricing	Interest		Interest				Optional
	Debentures		Frequency	Rate		Rate Index(1)			Maturity Date	Redemption Date(1)
	(Dollars in Thousands)
Trust VI	$	25,774	Quarterly	5.79	%	LIBOR	+	3.45	November 2032	February 2008
Trust VIII		25,774	Quarterly	5.40	%	LIBOR	+	3.05	October 2033	October 2008
Trust IX		41,238	Quarterly	3.93	%	LIBOR	+	1.62	October 2036	October 2011
Trust X		21,021	Quarterly	4.01	%	LIBOR	+	1.65	February 2037	February 2012
Trust XI		25,990	Quarterly	3.93	%	LIBOR	+	1.62	July 2037	July 2012
Trust XII		20,619	Quarterly	3.75	%	LIBOR	+	1.45	September 2037	September 2012
	$	160,416

The Capital and Common Securities may be redeemed in whole or in part on any interest payment date after the Optional Redemption Date.

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Basis of Presentation (Details)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2018 item	Dec. 31, 2017 USD ($)
Basis of presentation
Number of operating segments | item		1
Number of active operating bank subsidiaries | item		5
On-time reclassification from AOCI to retained earnings, relating to the Tax Cuts and Jobs Act of 2017 | $	$ 5,979,000
Equity securities
Basis of presentation
Net unrealized loss on available-for-sale equity securities | $			$ 189,000

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Fair Value (Fair Value By Level) (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Assets:
Available for sale debt securities	$ 3,720,566,000	$ 4,124,185,000
Equity Securities	27,054,000	27,885,000
Marketable Securities	3,750,020,000	4,154,470,000
Assets/liabilities measured at fair value
Assets:
Available for sale debt securities	3,720,566,000
Assets/liabilities measured at fair value | Residential mortgage-backed securities
Assets:
Available for sale debt securities	3,509,643,000	3,891,233,000
Assets/liabilities measured at fair value | Obligations of states and political subdivisions
Assets:
Available for sale debt securities	210,923,000	232,951,000
Assets/liabilities measured at fair value | Equity securities
Assets:
Equity Securities		27,886,000
Measured on a recurring basis: | Assets/liabilities measured at fair value
Assets:
Marketable Securities	3,747,620,000	4,152,070,000
Measured on a recurring basis: | Assets/liabilities measured at fair value | Residential mortgage-backed securities
Assets:
Available for sale debt securities	3,509,643,000	3,891,233,000
Measured on a recurring basis: | Assets/liabilities measured at fair value | Obligations of states and political subdivisions
Assets:
Available for sale debt securities	210,923,000	232,951,000
Measured on a recurring basis: | Assets/liabilities measured at fair value | Equity securities
Assets:
Equity Securities	27,054,000	27,886,000
Measured on a recurring basis: | Assets/liabilities measured at fair value | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Marketable Securities	27,054,000	27,886,000
Measured on a recurring basis: | Assets/liabilities measured at fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Equity securities
Assets:
Equity Securities	27,054,000	27,886,000
Measured on a recurring basis: | Assets/liabilities measured at fair value | Significant Other Observable Inputs (Level 2)
Assets:
Marketable Securities	3,720,566,000	4,124,184,000
Measured on a recurring basis: | Assets/liabilities measured at fair value | Significant Other Observable Inputs (Level 2) | Residential mortgage-backed securities
Assets:
Available for sale debt securities	3,509,643,000	3,891,233,000
Measured on a recurring basis: | Assets/liabilities measured at fair value | Significant Other Observable Inputs (Level 2) | Obligations of states and political subdivisions
Assets:
Available for sale debt securities	$ 210,923,000	$ 232,951,000

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Fair Value (Fair Value Measurement and Assumptions) (Details) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Assets:
Impaired Loans	$ 25,827,000	$ 25,827,000	$ 53,267,000
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Charges to allowance for probable loan losses in connection with other real estate owned	138,000	162,000	30,000
Adjustment to fair value in connection with other real estate owned	2,587,000	2,658,000	710,000
Impaired commercial collateral dependent loans	25,827,000	25,827,000	53,267,000
Impaired commercial collateral dependent receivables appraisals to determine fair value within immediately preceding twelve months	11,922,000	11,922,000	18,585,000
Impaired collateral dependent commercial loans with internal evaluation completed within last twelve months	0	0	0
Measured on a non-recurring basis
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Change in net provision, impaired loans	574,000	574,000	2,138,000
Change in net provision, other real estate owned	2,658,000	2,658,000	710,000
Measured on a non-recurring basis | Significant Unobservable Inputs (Level 3)
Assets:
Impaired Loans	8,738,000	8,738,000	11,210,000
Non-financial assets:
Other real estate owned	6,854,000	6,854,000	2,000,000
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Impaired commercial collateral dependent loans	8,738,000	8,738,000	11,210,000
Measured on a non-recurring basis | Assets/liabilities measured at fair value
Assets:
Impaired Loans	8,738,000	8,738,000	11,210,000
Non-financial assets:
Other real estate owned	6,854,000	6,854,000	2,000,000
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Impaired commercial collateral dependent loans	$ 8,738,000	$ 8,738,000	$ 11,210,000

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Fair Value Measurements (Other Assumptions) (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Deposits
Carrying amount of time deposits	$ 2,002,219,000	$ 2,056,506,000
Significant Unobservable Inputs (Level 3)
Loans
Carrying amount of fixed rate performing loans	1,537,587,000	1,505,531,000
Estimated fair value of fixed rate performing loans	1,499,578,000	1,454,434,000
Deposits
Carrying amount of time deposits	2,002,219,000	2,056,506,000
Estimated fair value of time deposits	2,004,385,000	2,058,621,000
Securities Sold Under Repurchase Agreements
Carrying amount of long-term repurchase agreements	100,000,000
Estimated fair value of long-term repurchase agreements	99,504,000
Significant Other Observable Inputs (Level 2)
Other borrowed funds
Carrying amount of the long-term FHLB borrowings	100,000,000	250,000,000
Estimated fair value of long-term FHLB borrowings	$ 100,597,000	$ 249,728,000

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Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Summary of loans, by loan type
Total loans	$ 6,439,420	$ 6,348,172
Commercial, financial and agricultural
Summary of loans, by loan type
Total loans	3,321,341	3,322,668
Real estate - mortgage
Summary of loans, by loan type
Total loans	1,136,921	1,133,525
Commercial Real Estate:Other Construction and Land Development
Summary of loans, by loan type
Total loans	1,781,953	1,683,550
Consumer
Summary of loans, by loan type
Total loans	47,747	49,543
Foreign
Summary of loans, by loan type
Total loans	$ 151,458	$ 158,886

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Allowance for Probable Loan Losses (By Loan Class) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Allowance for probable loan losses
Balance at the beginning of the period	$ 67,154	$ 64,186	$ 67,687	$ 64,661
Losses charged to allowance	(2,458)	(2,406)	(5,335)	(5,398)
Recoveries credited to allowance	887	2,334	1,569	3,151
Net (losses) recoveries charged to allowance	(1,571)	(72)	(3,766)	(2,247)
Provision charged to operations	(2,730)	805	(1,068)	2,505
Balance at the end of the period	62,853	64,919	$ 62,853	64,919
Period of time for determining the historical charge-off experience			3 years
Commercial
Allowance for probable loan losses
Balance at the beginning of the period	20,691	25,853	$ 27,905	25,649
Losses charged to allowance	(2,284)	(2,264)	(4,999)	(4,999)
Recoveries credited to allowance	447	2,154	1,030	2,853
Net (losses) recoveries charged to allowance	(1,837)	(110)	(3,969)	(2,146)
Provision charged to operations	(2,258)	(603)	(7,340)	1,637
Balance at the end of the period	16,596	25,140	16,596	25,140
Commercial Real Estate:Other Construction and Land Development
Allowance for probable loan losses
Balance at the beginning of the period	11,798	13,789	11,675	13,889
Losses charged to allowance			(1)
Recoveries credited to allowance	2	2	4	3
Net (losses) recoveries charged to allowance	2	2	3	3
Provision charged to operations	2,903	(542)	3,025	(643)
Balance at the end of the period	14,703	13,249	14,703	13,249
Commercial Real Estate: Farmland and Commercial
Allowance for probable loan losses
Balance at the beginning of the period	24,803	16,721	16,663	16,731
Losses charged to allowance	(70)	(40)	(70)	(40)
Recoveries credited to allowance	192	89	210	147
Net (losses) recoveries charged to allowance	122	49	140	107
Provision charged to operations	(6,629)	702	1,493	634
Balance at the end of the period	18,296	17,472	18,296	17,472
Commercial Real Estate: Multifamily
Allowance for probable loan losses
Balance at the beginning of the period	947	818	1,109	806
Provision charged to operations	627	179	465	191
Balance at the end of the period	1,574	997	1,574	997
Residential First Lien
Allowance for probable loan losses
Balance at the beginning of the period	3,006	2,391	2,950	2,455
Losses charged to allowance	(30)	(30)	(44)	(61)
Recoveries credited to allowance	1	2	2	7
Net (losses) recoveries charged to allowance	(29)	(28)	(42)	(54)
Provision charged to operations	614	(49)	683	(87)
Balance at the end of the period	3,591	2,314	3,591	2,314
Residential Junior Lien
Allowance for probable loan losses
Balance at the beginning of the period	4,689	3,186	6,103	3,716
Losses charged to allowance	(9)	(33)	(39)	(138)
Recoveries credited to allowance	229	73	295	97
Net (losses) recoveries charged to allowance	220	40	256	(41)
Provision charged to operations	1,884	1,131	434	682
Balance at the end of the period	6,793	4,357	6,793	4,357
Consumer
Allowance for probable loan losses
Balance at the beginning of the period	437	504	440	531
Losses charged to allowance	(65)	(39)	(182)	(160)
Recoveries credited to allowance	15	13	27	29
Net (losses) recoveries charged to allowance	(50)	(26)	(155)	(131)
Provision charged to operations	63	10	165	88
Balance at the end of the period	450	488	450	488
Foreign
Allowance for probable loan losses
Balance at the beginning of the period	783	924	842	884
Recoveries credited to allowance	1	1	1	15
Net (losses) recoveries charged to allowance	1	1	1	15
Provision charged to operations	66	(23)	7	3
Balance at the end of the period	$ 850	$ 902	$ 850	$ 902

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Allowance for Probable Loan Losses (Impairment By Loan Class) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	$ 35,440	$ 63,204
Loans Individually Evaluated for Impairment, Allowance	576	434
Loans Collectively Evaluated for Impairment, Recorded Investment	6,403,980	6,284,968
Loans Collectively Evaluated for Impairment, Allowance	62,277	67,253
Commercial
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	17,933	17,947
Loans Individually Evaluated for Impairment, Allowance	460	300
Loans Collectively Evaluated for Impairment, Recorded Investment	1,072,061	1,068,520
Loans Collectively Evaluated for Impairment, Allowance	16,136	27,605
Commercial Real Estate:Other Construction and Land Development
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	2,166	2,455
Loans Individually Evaluated for Impairment, Allowance	116	116
Loans Collectively Evaluated for Impairment, Recorded Investment	1,779,787	1,681,095
Loans Collectively Evaluated for Impairment, Allowance	14,587	11,559
Commercial Real Estate: Farmland and Commercial
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	6,020	33,123
Loans Individually Evaluated for Impairment, Allowance		18
Loans Collectively Evaluated for Impairment, Recorded Investment	2,011,747	2,010,162
Loans Collectively Evaluated for Impairment, Allowance	18,296	16,645
Commercial Real Estate: Multifamily
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	664	476
Loans Collectively Evaluated for Impairment, Recorded Investment	212,916	192,440
Loans Collectively Evaluated for Impairment, Allowance	1,574	1,109
Residential First Lien
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	6,387	6,852
Loans Collectively Evaluated for Impairment, Recorded Investment	420,951	425,925
Loans Collectively Evaluated for Impairment, Allowance	3,591	2,950
Residential Junior Lien
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	799	723
Loans Collectively Evaluated for Impairment, Recorded Investment	708,784	700,025
Loans Collectively Evaluated for Impairment, Allowance	6,793	6,103
Consumer
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	1,141	1,281
Loans Collectively Evaluated for Impairment, Recorded Investment	46,606	48,262
Loans Collectively Evaluated for Impairment, Allowance	450	440
Foreign
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans Individually Evaluated for Impairment, Recorded Investment	330	347
Loans Collectively Evaluated for Impairment, Recorded Investment	151,128	158,539
Loans Collectively Evaluated for Impairment, Allowance	$ 850	$ 842

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Allowance for Probable Loan Losses (Non-accrual Basis By Loan Class) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Loan loss allowances, financing receivable past due
Non-accrual loans, total	$ 27,270	$ 54,730
Commercial
Loan loss allowances, financing receivable past due
Non-accrual loans, total	17,896	17,909
Commercial Real Estate:Other Construction and Land Development
Loan loss allowances, financing receivable past due
Non-accrual loans, total	2,166	2,455
Commercial Real Estate: Farmland and Commercial
Loan loss allowances, financing receivable past due
Non-accrual loans, total	6,020	33,123
Commercial Real Estate: Multifamily
Loan loss allowances, financing receivable past due
Non-accrual loans, total	664	476
Residential First Lien
Loan loss allowances, financing receivable past due
Non-accrual loans, total	485	712
Residential Junior Lien
Loan loss allowances, financing receivable past due
Non-accrual loans, total		11
Consumer
Loan loss allowances, financing receivable past due
Non-accrual loans, total	$ 39	$ 44

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Allowance for Probable Loan Losses (Impaired Loans) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Interest Recognized
Total trouble debt restructuring	$ 14,874		$ 14,874		$ 15,346
Period of time for determining the historical charge-off experience			3 years
Period of charge off for past due unsecured commercial loans			90 days
Class of Financing Receivable
Recorded investment:
Total impaired loans with related allowance	1,544		$ 1,544		1,894
Total impaired loans with no related allowance	33,896		33,896		61,310
Unpaid principal balance:
Total impaired loans with an allowance recorded	2,161		2,161		2,336
Total impaired loans with no related allowance recorded	62,218		62,218		89,664
Related Allowance	576		576		434
Average recorded investment:
Total impaired loans with an allowance recorded	1,747	$ 3,233	1,805	$ 3,758	1,985
Total impaired loans with no related allowance recorded	64,903	41,202	65,399	42,196	40,450
Interest Recognized
Total impaired loans with no related allowance recorded	94	128	184	250	547
Commercial
Interest Recognized
Total trouble debt restructuring	6,742		6,742		6,910
Commercial | Class of Financing Receivable
Recorded investment:
Total impaired loans with related allowance	1,402		1,402
Total impaired loans with no related allowance	16,531		16,531		16,646
Unpaid principal balance:
Total impaired loans with an allowance recorded	1,992		1,992
Total impaired loans with no related allowance recorded	43,980		43,980		44,095
Related Allowance	460		460
Average recorded investment:
Total impaired loans with an allowance recorded	1,604	1,152	1,661	1,158
Total impaired loans with no related allowance recorded	16,594	20,005	16,738	20,463	19,354
Interest Recognized
Total impaired loans with no related allowance recorded	1	1	1	1	3
Commercial Real Estate:Other Construction and Land Development | Class of Financing Receivable
Recorded investment:
Total impaired loans with related allowance	142		142		1,300
Total impaired loans with no related allowance	2,024		2,024		2,310
Unpaid principal balance:
Total impaired loans with an allowance recorded	169		169		1,577
Total impaired loans with no related allowance recorded	2,230		2,230		2,455
Related Allowance	116		116		300
Average recorded investment:
Total impaired loans with an allowance recorded	143	767	144	1,033	1,346
Total impaired loans with no related allowance recorded	2,148	2,482	2,216	2,610	2,336
Interest Recognized
Total impaired loans with no related allowance recorded					67
Commercial Real Estate: Farmland and Commercial | Class of Financing Receivable
Recorded investment:
Total impaired loans with related allowance					145
Total impaired loans with no related allowance	6,020		6,020		32,675
Unpaid principal balance:
Total impaired loans with an allowance recorded					169
Total impaired loans with no related allowance recorded	6,520		6,520		33,275
Related Allowance					116
Average recorded investment:
Total impaired loans with an allowance recorded		1,314		1,567	150
Total impaired loans with no related allowance recorded	36,790	8,532	36,686	8,774	8,523
Interest Recognized
Total impaired loans with no related allowance recorded		30		58	110
Commercial Real Estate: Multifamily | Class of Financing Receivable
Recorded investment:
Total impaired loans with related allowance					449
Total impaired loans with no related allowance	664		664		476
Unpaid principal balance:
Total impaired loans with an allowance recorded					590
Total impaired loans with no related allowance recorded	696		696		505
Related Allowance					18
Average recorded investment:
Total impaired loans with an allowance recorded					489
Total impaired loans with no related allowance recorded	664	521	568	530	401
Residential First Lien
Interest Recognized
Total trouble debt restructuring	5,902		5,902		6,140
Residential First Lien | Class of Financing Receivable
Recorded investment:
Total impaired loans with no related allowance	6,387		6,387		6,852
Unpaid principal balance:
Total impaired loans with no related allowance recorded	6,508		6,508		6,968
Average recorded investment:
Total impaired loans with no related allowance recorded	6,426	6,774	6,864	6,874	6,860
Interest Recognized
Total impaired loans with no related allowance recorded	76	81	152	159	298
Residential Junior Lien
Interest Recognized
Total trouble debt restructuring	799		799		712
Residential Junior Lien | Class of Financing Receivable
Recorded investment:
Total impaired loans with no related allowance	799		799		723
Unpaid principal balance:
Total impaired loans with no related allowance recorded	810		810		736
Average recorded investment:
Total impaired loans with no related allowance recorded	803	977	811	982	1,011
Interest Recognized
Total impaired loans with no related allowance recorded	12	12	22	23	52
Consumer
Interest Recognized
Total trouble debt restructuring	1,101		1,101		1,237
Consumer | Class of Financing Receivable
Recorded investment:
Total impaired loans with no related allowance	1,141		1,141		1,281
Unpaid principal balance:
Total impaired loans with no related allowance recorded	1,144		1,144		1,283
Average recorded investment:
Total impaired loans with no related allowance recorded	1,145	1,156	1,179	1,212	1,214
Interest Recognized
Total impaired loans with no related allowance recorded	1		2	1	1
Foreign
Interest Recognized
Total trouble debt restructuring	330		330		347
Foreign | Class of Financing Receivable
Recorded investment:
Total impaired loans with no related allowance	330		330		347
Unpaid principal balance:
Total impaired loans with no related allowance recorded	330		330		347
Average recorded investment:
Total impaired loans with no related allowance recorded	333	755	337	751	751
Interest Recognized
Total impaired loans with no related allowance recorded	$ 4	$ 4	$ 7	$ 8	$ 16

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Allowance for Probable Loan Losses (Aging By Loan Class) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Financing receivable recorded investment
Past due	$ 50,877	$ 77,053
Past due 90 days or Greater and Still Accruing	8,885	7,257
Loans, current	6,388,543	6,271,119
Total loans	6,439,420	6,348,172
30 to 59 Days
Financing receivable recorded investment
Past due	13,551	15,855
60 to 89 Days
Financing receivable recorded investment
Past due	6,649	4,429
90 Days or Greater
Financing receivable recorded investment
Past due	30,677	56,769
Commercial
Financing receivable recorded investment
Past due	21,831	22,496
Past due 90 days or Greater and Still Accruing	618	537
Loans, current	1,068,163	1,063,971
Total loans	1,089,994	1,086,467
Commercial | 30 to 59 Days
Financing receivable recorded investment
Past due	3,192	3,790
Commercial | 60 to 89 Days
Financing receivable recorded investment
Past due	833	398
Commercial | 90 Days or Greater
Financing receivable recorded investment
Past due	17,806	18,308
Commercial Real Estate:Other Construction and Land Development
Financing receivable recorded investment
Past due	4,215	1,482
Past due 90 days or Greater and Still Accruing	2,638	6
Loans, current	1,777,738	1,682,068
Total loans	1,781,953	1,683,550
Commercial Real Estate:Other Construction and Land Development | 30 to 59 Days
Financing receivable recorded investment
Past due	639	354
Commercial Real Estate:Other Construction and Land Development | 60 to 89 Days
Financing receivable recorded investment
Past due	124	308
Commercial Real Estate:Other Construction and Land Development | 90 Days or Greater
Financing receivable recorded investment
Past due	3,452	820
Commercial Real Estate: Farmland and Commercial
Financing receivable recorded investment
Past due	8,799	35,576
Past due 90 days or Greater and Still Accruing	532	954
Loans, current	2,008,968	2,007,709
Total loans	2,017,767	2,043,285
Commercial Real Estate: Farmland and Commercial | 30 to 59 Days
Financing receivable recorded investment
Past due	2,069	3,925
Commercial Real Estate: Farmland and Commercial | 60 to 89 Days
Financing receivable recorded investment
Past due	3,336	518
Commercial Real Estate: Farmland and Commercial | 90 Days or Greater
Financing receivable recorded investment
Past due	3,394	31,133
Commercial Real Estate: Multifamily
Financing receivable recorded investment
Past due	855	560
Loans, current	212,725	192,356
Total loans	213,580	192,916
Commercial Real Estate: Multifamily | 30 to 59 Days
Financing receivable recorded investment
Past due	191	84
Commercial Real Estate: Multifamily | 90 Days or Greater
Financing receivable recorded investment
Past due	664	476
Residential First Lien
Financing receivable recorded investment
Past due	8,340	10,848
Past due 90 days or Greater and Still Accruing	4,053	3,861
Loans, current	418,998	421,929
Total loans	427,338	432,777
Residential First Lien | 30 to 59 Days
Financing receivable recorded investment
Past due	3,343	4,295
Residential First Lien | 60 to 89 Days
Financing receivable recorded investment
Past due	699	2,458
Residential First Lien | 90 Days or Greater
Financing receivable recorded investment
Past due	4,298	4,095
Residential Junior Lien
Financing receivable recorded investment
Past due	2,508	3,000
Past due 90 days or Greater and Still Accruing	994	1,099
Loans, current	707,075	697,748
Total loans	709,583	700,748
Residential Junior Lien | 30 to 59 Days
Financing receivable recorded investment
Past due	1,230	1,310
Residential Junior Lien | 60 to 89 Days
Financing receivable recorded investment
Past due	284	580
Residential Junior Lien | 90 Days or Greater
Financing receivable recorded investment
Past due	994	1,110
Consumer
Financing receivable recorded investment
Past due	638	1,126
Past due 90 days or Greater and Still Accruing	36	133
Loans, current	47,109	48,417
Total loans	47,747	49,543
Consumer | 30 to 59 Days
Financing receivable recorded investment
Past due	532	868
Consumer | 60 to 89 Days
Financing receivable recorded investment
Past due	51	98
Consumer | 90 Days or Greater
Financing receivable recorded investment
Past due	55	160
Foreign
Financing receivable recorded investment
Past due	3,691	1,965
Past due 90 days or Greater and Still Accruing	14	667
Loans, current	147,767	156,921
Total loans	151,458	158,886
Foreign | 30 to 59 Days
Financing receivable recorded investment
Past due	2,355	1,229
Foreign | 60 to 89 Days
Financing receivable recorded investment
Past due	1,322	69
Foreign | 90 Days or Greater
Financing receivable recorded investment
Past due	$ 14	$ 667

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Allowance for Probable Loan Losses (Portfolio Credit Quality By Loan Class) (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Loan portfolio by credit quality indicator
Portfolio, total	$ 6,439,420	$ 6,348,172
Pass
Loan portfolio by credit quality indicator
Portfolio, total	6,021,949	5,911,001
Special Review
Loan portfolio by credit quality indicator
Portfolio, total	58,494	6,612
Watch List - Pass
Loan portfolio by credit quality indicator
Portfolio, total	48,585	45,662
Watch List - Substandard
Loan portfolio by credit quality indicator
Portfolio, total	274,952	321,693
Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	35,440	63,204
Commercial
Loan portfolio by credit quality indicator
Portfolio, total	1,089,994	1,086,467
Commercial | Pass
Loan portfolio by credit quality indicator
Portfolio, total	951,055	905,707
Commercial | Special Review
Loan portfolio by credit quality indicator
Portfolio, total	256
Commercial | Watch List - Pass
Loan portfolio by credit quality indicator
Portfolio, total	1,034	3,170
Commercial | Watch List - Substandard
Loan portfolio by credit quality indicator
Portfolio, total	119,716	159,643
Commercial | Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	17,933	17,947
Commercial Real Estate:Other Construction and Land Development
Loan portfolio by credit quality indicator
Portfolio, total	1,781,953	1,683,550
Commercial Real Estate:Other Construction and Land Development | Pass
Loan portfolio by credit quality indicator
Portfolio, total	1,715,667	1,616,604
Commercial Real Estate:Other Construction and Land Development | Special Review
Loan portfolio by credit quality indicator
Portfolio, total	1,115	1,288
Commercial Real Estate:Other Construction and Land Development | Watch List - Pass
Loan portfolio by credit quality indicator
Portfolio, total	7,169	672
Commercial Real Estate:Other Construction and Land Development | Watch List - Substandard
Loan portfolio by credit quality indicator
Portfolio, total	55,836	62,531
Commercial Real Estate:Other Construction and Land Development | Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	2,166	2,455
Commercial Real Estate: Farmland and Commercial
Loan portfolio by credit quality indicator
Portfolio, total	2,017,767	2,043,285
Commercial Real Estate: Farmland and Commercial | Pass
Loan portfolio by credit quality indicator
Portfolio, total	1,817,420	1,863,763
Commercial Real Estate: Farmland and Commercial | Special Review
Loan portfolio by credit quality indicator
Portfolio, total	57,123	5,134
Commercial Real Estate: Farmland and Commercial | Watch List - Pass
Loan portfolio by credit quality indicator
Portfolio, total	39,372	41,820
Commercial Real Estate: Farmland and Commercial | Watch List - Substandard
Loan portfolio by credit quality indicator
Portfolio, total	97,832	99,445
Commercial Real Estate: Farmland and Commercial | Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	6,020	33,123
Commercial Real Estate: Multifamily
Loan portfolio by credit quality indicator
Portfolio, total	213,580	192,916
Commercial Real Estate: Multifamily | Pass
Loan portfolio by credit quality indicator
Portfolio, total	211,972	192,440
Commercial Real Estate: Multifamily | Watch List - Substandard
Loan portfolio by credit quality indicator
Portfolio, total	944
Commercial Real Estate: Multifamily | Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	664	476
Residential First Lien
Loan portfolio by credit quality indicator
Portfolio, total	427,338	432,777
Residential First Lien | Pass
Loan portfolio by credit quality indicator
Portfolio, total	420,198	425,811
Residential First Lien | Special Review
Loan portfolio by credit quality indicator
Portfolio, total		40
Residential First Lien | Watch List - Pass
Loan portfolio by credit quality indicator
Portfolio, total	129
Residential First Lien | Watch List - Substandard
Loan portfolio by credit quality indicator
Portfolio, total	624	74
Residential First Lien | Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	6,387	6,852
Residential Junior Lien
Loan portfolio by credit quality indicator
Portfolio, total	709,583	700,748
Residential Junior Lien | Pass
Loan portfolio by credit quality indicator
Portfolio, total	707,903	699,875
Residential Junior Lien | Special Review
Loan portfolio by credit quality indicator
Portfolio, total		150
Residential Junior Lien | Watch List - Pass
Loan portfolio by credit quality indicator
Portfolio, total	881
Residential Junior Lien | Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	799	723
Consumer
Loan portfolio by credit quality indicator
Portfolio, total	47,747	49,543
Consumer | Pass
Loan portfolio by credit quality indicator
Portfolio, total	46,606	48,262
Consumer | Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	1,141	1,281
Foreign
Loan portfolio by credit quality indicator
Portfolio, total	151,458	158,886
Foreign | Pass
Loan portfolio by credit quality indicator
Portfolio, total	151,128	158,539
Foreign | Watch - List Impaired
Loan portfolio by credit quality indicator
Portfolio, total	$ 330	$ 347

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Stock Options (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Apr. 05, 2012
Stock options under 2012 Plan
Stock option details
Shares available for future grants	2,500		2,500		800,000
Maximum exercisable period for options granted			10 years
Stock option activity
Options outstanding at the beginning of the period (in shares)			668,166
Plus: Options granted (in shares)			229,700
Less:
Options exercised (in shares)			46,351
Options forfeited (in shares)			15,800
Options outstanding at the end of the period (in shares)	835,715		835,715
Options fully vested and exercisable at the end of the period (in shares)	327,341		327,341
Stock Options, Weighted average exercise price
Options outstanding at the beginning, weighted average exercise price (in dollars per share)			$ 20.41
Plus: Options granted, weighted average exercise price (in dollars per share)			38.30
Less:
Options exercised, weighted average exercise price (in dollars per share)			17.50
Options forfeited, weighted average exercise price (in dollars per share)			18.58
Options outstanding at the end, weighted average exercise price (in dollars per share)	$ 25.53		25.53
Options fully vested and exercisable at the end, weighted average exercise price (in dollars per share)	$ 19.64		$ 19.64
Stock Options, Weighted average remaining contractual term (years)
Options outstanding at the end, weighted average remaining contractual term (years)			6 years 5 months 9 days
Options fully vested and exercisable at the end, weighted average remaining contractual term (years)			4 years 6 months 22 days
Stock Options, Aggregate intrinsic value
Options outstanding at the end, aggregate intrinsic value	$ 14,436,000		$ 14,436,000
Options fully vested and exercisable at the end, aggregate intrinsic value	7,582,000		7,582,000
Stock-based compensation expense	285,000	$ 216,000	470,000	$ 484,000
Stock-based compensation cost, unrecognized, related to non-vested options	$ 3,316,000		$ 3,316,000
Stock-based compensation cost, unrecognized, related to non-vested options, weighted-average period of recognition			1 year 10 months 24 days
Incentive stock options granted to 10% shareholders
Stock option details
Maximum exercisable period for options granted			5 years

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Investment Securities and Equity Securities with Readily Determinable Fair Values (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Held-to-maturity securities
Amortized cost	$ 2,400,000	$ 2,400,000
Estimated fair value	2,400,000	2,400,000
Carrying Value	2,400,000	2,400,000
Available-for-sale securities
Amortized cost, Available-for-sale securities	3,822,194,000	4,196,263,000
Gross Unrealized Gains	14,004,000
Gross Unrealized Losses	(115,632,000)
Available for sale debt securities	3,720,566,000	4,124,185,000
Equity Securities	27,054,000	27,885,000
Total Amortized cost		4,196,263,000
Total Gross unrealized gains		22,274,000
Total Gross unrealized losses		66,467,000
Assets/liabilities measured at fair value
Available-for-sale securities
Available for sale debt securities	3,720,566,000
Available for sale debt securities and equity securities		4,152,070,000
Carrying Value
Available-for-sale securities
Available for sale debt securities	3,720,566,000
Available for sale debt securities and equity securities		4,152,070,000
Residential mortgage-backed securities
Available-for-sale securities
Amortized cost, Available-for-sale securities	3,615,831,000	3,943,092,000
Gross Unrealized Gains	9,299,000	14,110,000
Gross Unrealized Losses	(115,487,000)	(65,969,000)
Residential mortgage-backed securities | Assets/liabilities measured at fair value
Available-for-sale securities
Available for sale debt securities	3,509,643,000	3,891,233,000
Residential mortgage-backed securities | Carrying Value
Available-for-sale securities
Available for sale debt securities	3,509,643,000	3,891,233,000
Mortgage-backed securities by Ginnie Mae
Available-for-sale securities
Available for sale debt securities	571,385,000	654,063,000
Mortgage-backed securities by Fannie Mae and Freddie Mac
Available-for-sale securities
Available for sale debt securities	2,938,258,000	3,237,170,000
Obligations of states and political subdivisions
Available-for-sale securities
Amortized cost, Available-for-sale securities	206,363,000	225,096,000
Gross Unrealized Gains	4,705,000	7,871,000
Gross Unrealized Losses	(145,000)	(16,000)
Obligations of states and political subdivisions | Assets/liabilities measured at fair value
Available-for-sale securities
Available for sale debt securities	210,923,000	232,951,000
Obligations of states and political subdivisions | Carrying Value
Available-for-sale securities
Available for sale debt securities	210,923,000	232,951,000
Other securities
Held-to-maturity securities
Amortized cost	2,400,000	2,400,000
Estimated fair value	2,400,000	2,400,000
Carrying Value	$ 2,400,000	2,400,000
Equity securities
Available-for-sale securities
Gross Unrealized Gains		293,000
Amortized Cost, Equity securities		28,075,000
Gross Unrealized Losses, Equity securities		(482,000)
Equity securities | Assets/liabilities measured at fair value
Available-for-sale securities
Equity Securities		27,886,000
Equity securities | Carrying Value
Available-for-sale securities
Equity Securities		$ 27,886,000

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Investment Securities and Equity Securities with Readily Determinable Fair Values (Contractual Maturities and Estimated Fair Values) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Held-to-maturity debt securities amortized cost disclosures
Due in one year or less, held-to-maturity debt securities amortized cost	$ 1,200,000		$ 1,200,000
Due after one year through five years, held-to-maturity debt securities amortized cost	1,200,000		1,200,000
Amortized cost, held-to-maturity debt securities	2,400,000		2,400,000		$ 2,400,000
Held-to-maturity debt securities, Estimated fair value disclosures
Due in one year or less, held-to-maturity debt securities, Estimated fair value	1,200,000		1,200,000
Due after one year through five years, held-to-maturity debt securities, Estimated fair value	1,200,000		1,200,000
Estimated fair value	2,400,000		2,400,000		2,400,000
Available-for-sale debt securities amortized cost disclosures
Due after five years through ten years, available-for-sale debt securities amortized cost	1,720,000		1,720,000
Due after ten years, available-for-sale debt securities amortized cost	204,643,000		204,643,000
Residential mortgage-backed securities, amortized cost	3,615,831,000		3,615,831,000
Amortized cost, Available-for-sale securities	3,822,194,000		3,822,194,000		4,196,263,000
Available for sale debt securities, Estimated Fair Value Disclosures
Due after five years through ten years, available-for-sale debt securities, Estimated Fair Value	1,736,000		1,736,000
Due after ten years, available-for-sale debt securities, Estimated Fair Value	209,187,000		209,187,000
Residential mortgage-backed securities, Estimated Fair Value	3,509,643,000		3,509,643,000
Estimated fair value, Available for sale securities	3,720,566,000		3,720,566,000		$ 4,124,185,000
Amortized cost of available for sale investment securities pledged	1,221,859,000		1,221,859,000
Fair value of available for sale investment securities pledged	1,179,583,000		1,179,583,000
Proceeds from sales and calls of available for sale securities	0	$ 150,634,000	18,145,000	$ 272,184,000
Proceeds from sales of mortgage-backed securities	0	150,634,000	0	266,967,000
Gross gains realized on sales	0	10,000	0	1,186,000
Gross losses realized on sales	$ 0	$ 2,549,000	$ 0	$ 2,798,000

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Investment Securities and Equity Securities with Readily Determinable Fair Values (Fair Value and Gross Unrealized Loss) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Available for sale:
Fair value, less than 12 months	$ 1,016,021
Marketable securities, less than 12 months		$ 1,078,610
Unrealized losses, less than 12 Months	(23,849)
Marketable securities, less than 12 Months		(13,417)
Fair value, 12 months or more	2,047,918
Marketable securities, 12 months or more		2,037,996
Unrealized losses, 12 Months or More	91,783
Marketable securities		53,050
Fair value, Total	3,063,939
Marketable securities, Total		3,116,606
Unrealized losses, Total	115,632
Marketable securities, Total		66,467
Residential mortgage-backed securities
Available for sale:
Fair value, less than 12 months	1,000,142	1,061,577
Unrealized losses, less than 12 Months	(23,712)	(13,157)
Fair value, 12 months or more	2,047,402	2,029,455
Unrealized losses, 12 Months or More	91,775	52,812
Fair value, Total	3,047,544	3,091,032
Unrealized losses, Total	115,487	65,969
Obligations of states and political subdivisions
Available for sale:
Fair value, less than 12 months	15,879	5,534
Unrealized losses, less than 12 Months	(137)	(9)
Fair value, 12 months or more	516	522
Unrealized losses, 12 Months or More	8	7
Fair value, Total	16,395	6,056
Unrealized losses, Total	$ 145	16
Equity securities
Available for sale:
Equity Securities, less than 12 months		11,499
Equity Securities, less than 12 Months		(251)
Equity Securities, 12 months or more		8,019
Equity Securities		231
Equity Securities, Total		19,518
Equity securities		$ 482

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Investment Securities and Equity Securities with Readily Determinable Fair Values (Unrealized and realized gains and losses recognized in net income on equity securities ) (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Investment Securities and Equity Securities with Readily Determinable Fair Values
Equity Securities	$ 27,054,000	$ 27,054,000	$ 27,885,000
Summary of unrealized and realized gains and losses recognized in net income on equity securities
Net losses recognized during the period on equity securities	(247,000)	(1,021,000)
Unrealized losses recognized during the reporting period on equity securities still held at the reporting date	$ (247,000)	$ (1,021,000)

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Other Borrowed Funds (Details) - USD ($)	Jun. 30, 2018	Dec. 31, 2017
Federal Home Loan Bank advances
Other borrowed funds	$ 852,950,000	$ 1,195,225,000
Percentage of decrease in other borrowed funds	28.60%

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Junior Subordinated Deferrable Interest Debentures (Details)	6 Months Ended
	Jun. 30, 2018 USD ($) item	Dec. 31, 2017 USD ($)
Junior subordinated deferrable interest debentures, major types of business trusts
Number of statutory business trusts issuing trust preferred securities | item	6
Junior subordinated deferrable interest debentures	$ 160,416,000	$ 160,416,000
Maximum number of consecutive quarterly period available for deferral of interest payment on Trusts VI, VIII, IX, X, XI and XII | item	20
Percentage of capital securities issued by trust qualifying as Tier I capital, maximum	25.00%
Percentage of capital securities issued by trust qualifying as Tier II capital, minimum	25.00%
Capital securities issued by the trust, qualifying as Tier I capital	$ 160,416,000	$ 160,416,000
Trust XI
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	25,990,000
Trust X
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 21,021,000

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Junior Subordinated Deferrable Interest Debentures (Key Information) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 160,416	$ 160,416
Trust VI
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 25,774
Interest rate (as a percent)	5.79%
Interest rate index	LIBOR
Spread on interest rate index (as a percent)	3.45%
Trust VIII
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 25,774
Interest rate (as a percent)	5.40%
Interest rate index	LIBOR
Spread on interest rate index (as a percent)	3.05%
Trust IX
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 41,238
Interest rate (as a percent)	3.93%
Interest rate index	LIBOR
Spread on interest rate index (as a percent)	1.62%
Trust X
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 21,021
Interest rate (as a percent)	4.01%
Interest rate index	LIBOR
Spread on interest rate index (as a percent)	1.65%
Trust XI
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 25,990
Interest rate (as a percent)	3.93%
Interest rate index	LIBOR
Spread on interest rate index (as a percent)	1.62%
Trust XII
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 20,619
Interest rate (as a percent)	3.75%
Interest rate index	LIBOR
Spread on interest rate index (as a percent)	1.45%

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Common Stock and Dividends (Details) - USD ($)						1 Months Ended	6 Months Ended
	Aug. 03, 2018	Apr. 16, 2018	Oct. 16, 2017	Apr. 17, 2017	Apr. 09, 2017	Apr. 30, 2009	Jun. 30, 2018	Apr. 03, 2018
Common Stock and Dividends
Warrants to purchase entity's common stock (in shares)							1,326,238
Warrants, exercise price (in dollars per share)							$ 24.43
Warrants, term							10 years
Maximum cash dividend paid in semi-annual period (in dollars per share)							$ 0.33
Cash dividends paid to common shareholders (in dollars per share)		$ 0.33	$ 0.33	$ 0.33
Repurchase of common stock, authorized amount						$ 40,000,000		$ 40,000,000
Period of repurchase of common stock					12 months	12 months
Cumulative number of shares repurchased under all stock repurchase programs	9,246,956
Cumulative cost of shares repurchased under all stock repurchase programs	$ 271,347,000

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Commitments, Contingent Liabilities and Other Tax Matters (Details) - USD ($)	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Commitments, Contingent Liabilities and Other Tax Matters
Effective tax rate (in percent)		21.00%
Net benefit included as a reduction to income tax expense			$ 3,168,000
Adjustments to the revalued carrying value for deferred tax assets or liabilities	$ 0	$ 0

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Capital Ratios (Details) - USD ($) $ in Thousands	Jan. 01, 2016	Jun. 30, 2018	May 24, 2018	Dec. 31, 2017	Dec. 31, 2016	Jul. 31, 2013
Total Capital (to Risk Weighted Assets), Actual Ratio (as a percent)		20.04%		19.51%
Total Capital (to Risk Weighted Assets), For Capital Adequacy Purposes Ratio (as a percent)	0.625%				2.50%
Amount of assets to exempt banks		$ 11,988,995		$ 12,184,698
CET 1 ratio		17.75%		17.11%
Tier 1 capital (to Average Assets), Actual Ratio (as a percent)		15.32%		14.62%
Tier 1 capital (to Risk Weighted Assets), Actual Ratio (as a percent)		19.32%		18.73%		6.00%
Term of mandatory compliance	4 years
Minimum
Community bank leverage ratio			8.00%
CET 1 ratio		7.00%
Tier 1 capital (to Risk Weighted Assets), Actual Ratio (as a percent)					4.50%	4.00%
Maximum
Amount of assets to exempt banks			$ 10,000,000
Community bank leverage ratio			10.00%