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 September 30, 2021

☐

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

For the transition period from to

Commission file number 000-09439

INTERNATIONAL BANCSHARES CORPORATION

(Exact name of registrant as specified in its charter)


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

1200 San Bernardo Avenue, Laredo, Texas 78042-1359

(Address of principal executive offices)

(Zip Code)

(956) 722-7611

(Registrant’s telephone number, including area code)

None

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Common Stock, $1.00 par value	IBOC	NASDAQ

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

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


Large accelerated filer ⌧		Accelerated filer ◻

Non-accelerated filer ◻		Smaller reporting company ☐
Emerging growth company ☐

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

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

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


Class		Shares Issued and Outstanding
Common Stock, $1.00 par value		63,367,206 shares outstanding at November 1, 2021

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Condition (Unaudited)

(Dollars in Thousands)


	September 30,		December 31,
	2021		2020
Assets
Cash and cash equivalents	$	2,287,318	$	1,997,238
Investment securities:
Held to maturity debt securities (Market value of $3,400 on September 30, 2021 and $3,400 on December 31, 2020)		3,400		3,400
Available for sale debt securities (Amortized cost of $4,540,752 on September 30, 2021 and $3,054,289 on December 31, 2020)		4,554,314		3,080,768
Equity securities with readily determinable fair values		6,132		6,202
Total investment securities		4,563,846		3,090,370
Loans		7,404,158		7,541,754
Less allowance for credit losses		(109,325)		(109,059)
Net loans		7,294,833		7,432,695
Bank premises and equipment, net		459,291		479,878
Accrued interest receivable		31,394		37,881
Other investments		298,664		254,413
Cash surrender value of life insurance policies		295,513		292,381
Goodwill		282,532		282,532
Other assets		164,105		162,079
Total assets	$	15,677,496	$	14,029,467

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Condition, continued (Unaudited)

(Dollars in Thousands)


	September 30,		December 31,
	2021		2020
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand—non-interest bearing	$	5,596,765	$	4,715,814
Savings and interest bearing demand		4,460,557		3,852,505
Time		2,186,651		2,153,541
Total deposits		12,243,973		10,721,860
Securities sold under repurchase agreements		424,397		428,148
Other borrowed funds		436,186		436,327
Junior subordinated deferrable interest debentures		134,642		134,642
Other liabilities		143,926		130,492
Total liabilities		13,383,124		11,851,469
Shareholders’ equity:
Common shares of $1.00 par value. Authorized 275,000,000 shares; issued 96,343,252 shares on September 30, 2021 and 96,240,977 shares on December 31, 2020		96,343		96,241
Surplus		151,855		149,334
Retained earnings		2,414,183		2,289,626
Accumulated other comprehensive income		10,723		20,825
		2,673,104		2,556,026
Less cost of shares in treasury, 32,979,001 shares on September 30, 2021 and 32,961,289 on December 31, 2020		(378,732)		(378,028)
Total shareholders’ equity		2,294,372		2,177,998
Total liabilities and shareholders’ equity	$	15,677,496	$	14,029,467

See accompanying notes to consolidated financial statements.

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

(Dollars in Thousands, except per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Interest income:
Loans, including fees	$	88,280	$	90,614	$	272,210	$	287,608
Investment securities:
Taxable		11,669		8,469		21,558		40,049
Tax-exempt		360		605		1,132		2,024
Other interest income		883		295		2,145		564
Total interest income		101,192		99,983		297,045		330,245

Interest expense:
Savings deposits		1,082		1,028		3,001		5,424
Time deposits		2,814		4,292		8,941		15,581
Securities sold under repurchase agreements		165		164		448		777
Other borrowings		1,929		1,930		5,726		6,844
Junior subordinated deferrable interest debentures		692		756		2,102		3,109

Total interest expense		6,682		8,170		20,218		31,735

Net interest income		94,510		91,813		276,827		298,510

Provision for credit losses		2,801		8,770		5,137		36,595

Net interest income after provision for credit losses		91,709		83,043		271,690		261,915

Non-interest income:
Service charges on deposit accounts		17,294		15,037		47,971		45,554
Other service charges, commissions and fees
Banking		15,750		14,471		41,166		36,866
Non-banking		2,046		1,800		5,831		5,584
Investment securities transactions, net		(12)		—		(16)		(5)
Other investments, net		5,490		3,235		68,495		3,621
Other income		6,641		5,574		17,905		17,223

Total non-interest income	$	47,209	$	40,117	$	181,352	$	108,843

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income, continued (Unaudited)

(Dollars in Thousands, except per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Non-interest expense:
Employee compensation and benefits	$	30,552	$	31,718	$	91,262	$	100,367
Occupancy		6,491		6,677		18,638		19,346
Depreciation of bank premises and equipment		6,028		7,049		19,263		21,348
Professional fees		2,558		4,121		7,675		12,004
Deposit insurance assessments		1,026		810		2,840		1,012
Net expense, other real estate owned		438		1,341		5,351		7,178
Advertising		1,470		1,413		4,349		5,289
Software and software maintenance		4,115		4,964		13,081		14,712
Other		17,049		11,960		39,407		39,686

Total non-interest expense		69,727		70,053		201,866		220,942

Income before income taxes		69,191		53,107		251,176		149,816

Provision for income taxes		14,592		10,365		53,780		30,726

Net income	$	54,599	$	42,742	$	197,396	$	119,090

Basic earnings per common share:

Weighted average number of shares outstanding		63,372,777		63,269,966		63,347,922		63,876,496
Net income	$	0.86	$	0.68	$	3.12	$	1.86

Fully diluted earnings per common share:

Weighted average number of shares outstanding		63,498,542		63,386,292		63,479,174		64,001,883
Net income	$	0.86	$	0.67	$	3.11	$	1.86

See accompanying notes to consolidated financial statements

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

Net income	$	54,599	$	42,742	$	197,396	$	119,090
Other comprehensive income, net of tax:

Net unrealized holding (losses) gains on securities available for sale arising during period (net of tax effects of $(2,015), $(2,366), $(2,689) and $7,993)		(7,578)		(8,901)		(10,115)		30,069
Reclassification adjustment for losses on securities available for sale included in net income (net of tax effects of $3, $0, $3 and $1)		9		—		13		4
		(7,569)		(8,901)		(10,102)		30,073

Comprehensive income	$	47,030	$	33,841	$	187,294	$	149,163

See accompanying notes to consolidated financial statements.

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

Three and Nine Months ended September 30, 2021 and 2020

(in Thousands, except per share amounts)


	Number							Other
	of	Common				Retained		Comprehensive		Treasury
	Shares	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance at June 30, 2021	96,332	$	96,332	$	151,512	$	2,397,610	$	18,292	$	(378,076)	$	2,285,670
Net income	—		—		—		54,599		—		—		54,599
Dividends:
Payable ($.60 per share)	—		—		—		(38,026)		—		—		(38,026)
Purchase of treasury stock (16,713 shares)	—		—		—		—		—		(656)		(656)
Exercise of stock options	11		11		225		—		—		—		236
Stock compensation expense recognized in earnings	—		—		118		—		—		—		118
Other comprehensive income, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments	—		—		—		—		(7,569)		—		(7,569)
Balance at September 30, 2021	96,343	$	96,343	$	151,855	$	2,414,183	$	10,723	$	(378,732)	$	2,294,372


		Number							Other
		of	Common				Retained		Comprehensive		Treasury
		Shares	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance at June 30, 2020		96,229	$	96,229	$	148,744	$	2,233,455	$	41,319	$	(377,887)	$	2,141,860
Net income		—		—		—		42,742		—		—		42,742
Dividends:
Payable ($.55 per share)		—		—		—		(34,800)		—		—		(34,800)
Purchase of treasury (5,016 shares)	—	—		—	—	—	—	—	—	—		(141)		(141)
Exercise of stock options		5		5		114		—		—		—		119
Stock compensation expense recognized in earnings		—		—		176		—		—		—		176
Other comprehensive income, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments		—		—		—		—		(8,901)		—		(8,901)
Balance at September 30, 2020		96,234	$	96,234	$	149,034	$	2,241,397	$	32,418	$	(378,028)	$	2,141,055


	Number							Other
	of	Common				Retained		Comprehensive		Treasury
	Shares	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance at December 31, 2020	96,241	$	96,241	$	149,334	$	2,289,626	$	20,825	$	(378,028)	$	2,177,998
Net income	—		—		—		197,396		—		—		197,396
Dividends: