CPK raises $200M in 4.88-5.16% notes, extends $250M revolver to 2026

Q: How much debt did Chesapeake Utilities (CPK) issue on August 1 2025?

The Company authorized $200 million of unsecured senior notes; $150 million funded immediately and $50 million is expected to fund 15 Sep 2025.

Q: What are the interest rates and maturities of the new CPK senior notes?

Series 2025-A: 4.88% due 1 Aug 2028; Series 2025-B: 5.16% due 1 Aug 2031; Series 2025-C: 5.02% due 15 Sep 2030.

Q: Did Chesapeake Utilities extend its revolving credit facility?

Yes, the $250 million 364-day revolver maturity was extended one year to 4 Aug 2026 under existing terms.

Q: Will the new senior notes affect Chesapeake Utilities鈥� leverage?

The issuance increases total debt, so leverage and fixed interest expense are expected to rise until the proceeds generate additional earnings.

Q: Are the senior notes registered with the SEC?

No. The notes were privately placed and are not registered under the Securities Act; resale is restricted absent an exemption.

[10-Q] International Bancshares Corp Quarterly Earnings Report

Filing Impact

(Moderate)

Filing Sentiment

(Neutral)

Form Type

10-Q

Rhea-AI Filing Summary

On 1 Aug 2025 Chesapeake Utilities Corporation (NYSE: CPK) entered into two liquidity-enhancing transactions. First, it signed a $200 million unsecured senior note purchase agreement; $150 million closed immediately and $50 million will close on 15 Sep 2025. Tranches include:

$60 m 4.88% Series 2025-A due 1 Aug 2028
$90 m 5.16% Series 2025-B due 1 Aug 2031
$50 m 5.02% Series 2025-C due 15 Sep 2030

Interest is payable semi-annually; optional prepayment is subject to a make-whole. Customary covenants, default acceleration and diversification-event provisions apply. The notes are unregistered and privately placed.

Second, the Company and its lending syndicate exercised a one-year extension option on the $250 million 364-day revolving credit facility, moving maturity to 4 Aug 2026 under unchanged terms.

Combined, the actions secure long-term fixed-rate capital and maintain short-term borrowing capacity, but also increase leverage and future interest expense.

Positive

$200 million of senior notes locked in at fixed <5.2% coupons, extending debt maturities to 2031.
One-year extension of $250 million revolver safeguards short-term liquidity and banking relationships.

Negative

New issuance raises total debt, potentially increasing leverage and interest expense until earnings catch up.
Make-whole prepayment provisions limit flexibility to refinance should rates decline.

Insights

TL;DR: Liquidity up, leverage up; neutral EPS impact short-term, supportive of cap-ex long-term.

The $200 m senior notes lock in sub-5.2% coupons through 2028-2031, attractive versus historical utility spreads. Immediate funding covers 75% of the offering, giving management near-term cash for growth projects without equity dilution. Revolver extension preserves $250 m back-stop, smoothing working-capital swings. However, total debt rises ~10% versus 2024 year-end levels, pressuring leverage metrics until incremental earnings materialize. Covenants appear standard; make-whole clauses restrict opportunistic refinancing if rates decline. Overall, the event is liquidity-positive but earnings-neutral, leaving our valuation unchanged.

TL;DR: Fixed-rate issuance and revolver rollover improve funding profile; modestly credit-positive.

The shift from short-term to longer-tenor unsecured notes reduces refinancing risk through 2031. Coupons sit near the lower end of BBB utility comps, indicating healthy market access. Revolver extension ensures continued access to low-cost bank liquidity. While gross debt increases, the structure鈥攗nsecured, covenant-light, staggered maturities鈥攕upports financial flexibility. Interest-coverage may dip until new capital is deployed, but the balanced debt stack should keep ratings stable. I view the filing as slightly positive for creditors.

08/07/2025 - 03:13 PM

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended June 30, 2025

☐

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		62,156,398 shares outstanding at August 4, 2025

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Condition (Unaudited)

(Dollars in Thousands)


	June 30,		December 31,
	2025		2024
Assets
Cash and cash equivalents	$	731,918	$	352,652
Investment securities:
Held to maturity debt securities (Market value of $4,400 on June 30, 2025 and $4,400 on December 31, 2024)		4,400		4,400
Available for sale debt securities (Amortized cost of $5,397,669 on June 30, 2025 and $5,472,310 on December 31, 2024)		5,009,843		4,987,916
Equity securities with readily determinable fair values		5,483		5,394
Total investment securities		5,019,726		4,997,710
Loans		9,138,620		8,809,826
Less allowance for credit losses		(154,983)		(156,537)
Net loans		8,983,637		8,653,289
Bank premises and equipment, net		428,364		428,221
Accrued interest receivable		74,842		72,175
Other investments		375,686		356,735
Cash surrender value of life insurance policies		307,148		303,042
Goodwill		282,532		282,532
Other assets		258,461		292,496
Total assets	$	16,462,314	$	15,738,852

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Condition, continued (Unaudited)

(Dollars in Thousands)


	June 30,		December 31,
	2025		2024
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand—non-interest bearing	$	4,719,972	$	4,612,344
Savings and interest bearing demand		4,739,099		4,599,957
Time		3,015,589		2,899,543
Total deposits		12,474,660		12,111,844
Securities sold under repurchase agreements		616,154		535,322
Other borrowed funds		60,437		10,541
Junior subordinated deferrable interest debentures		108,868		108,868
Other liabilities		180,126		175,570
Total liabilities		13,440,245		12,942,145
Shareholders’ equity:
Common shares of $1.00 par value. Authorized 275,000,000 shares; issued 96,639,895 shares on June 30, 2025 and 96,616,673 shares on December 31, 2024		96,640		96,617
Surplus		160,169		159,333
Retained earnings		3,509,661		3,356,177
Accumulated other comprehensive loss		(303,489)		(379,054)
		3,462,981		3,233,073
Less cost of shares in treasury, 34,489,206 shares on June 30, 2025 and 34,407,674 on December 31, 2024		(440,912)		(436,366)
Total shareholders’ equity		3,022,069		2,796,707
Total liabilities and shareholders’ equity	$	16,462,314	$	15,738,852

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				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Interest income:
Loans, including fees	$	173,979	$	168,365	$	344,139	$	336,693
Investment securities:
Taxable		41,401		37,137		82,333		73,400
Tax-exempt		1,514		1,539		3,041		3,085
Other interest income		4,073		8,631		6,093		14,583

Total interest income		220,967		215,672		435,606		427,761

Interest expense:
Savings deposits		21,318		20,631		41,768		40,547
Time deposits		25,150		23,450		50,650		44,726
Securities sold under repurchase agreements		4,640		5,319		8,944		10,559
Other borrowings		669		69		2,145		139
Junior subordinated deferrable interest debentures		1,693		1,972		3,383		3,951

Total interest expense		53,470		51,441		106,890		99,922

Net interest income		167,497		164,231		328,716		327,839

Credit loss expense		4,398		8,771		7,727		21,749

Net interest income after provision for credit losses		163,099		155,460		320,989		306,090

Non-interest income:
Service charges on deposit accounts		17,988		18,091		35,655		36,358
Other service charges, commissions and fees
Banking		14,939		14,643		29,004		29,118
Non-banking		2,650		2,893		4,985		5,167
Other investments income (loss), net		348		3,049		(910)		4,672
Other income		4,739		4,844		8,933		10,447

Total non-interest income	$	40,664	$	43,520	$	77,667	$	85,762

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,
	2025		2024		2025		2024
Non-interest expense:
Employee compensation and benefits	$	38,251	$	35,629	$	76,862	$	71,496
Occupancy		7,270		6,686		13,676		12,363
Depreciation of bank premises and equipment		5,486		5,715		11,099		11,344
Professional fees		4,074		4,212		7,645		7,903
Deposit insurance assessments		1,763		1,696		3,533		3,395
Net operations, other real estate owned		990		297		1,366		327
Advertising		1,732		1,462		3,453		3,282
Software and software maintenance		5,721		5,651		11,131		10,963
Other		12,514		12,760		22,811		22,678

Total non-interest expense		77,801		74,108		151,576		143,751

Income before income taxes		125,962		124,872		247,080		248,101

Provision for income taxes		25,820		27,892		50,046		53,790

Net income	$	100,142	$	96,980	$	197,034	$	194,311

Basic earnings per common share:

Weighted average number of shares outstanding		62,150,969		62,177,215		62,182,293		62,163,797
Net income per common share	$	1.61	$	1.56	$	3.17	$	3.13

Fully diluted earnings per common share:

Weighted average number of shares outstanding		62,232,768		62,292,058		62,268,705		62,279,676
Net income per common share	$	1.61	$	1.56	$	3.16	$	3.12

See accompanying notes to consolidated financial statements.

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024

Net income	$	100,142	$	96,980	$	197,034	$	194,311
Other comprehensive income (loss), net of tax:

Net change in unrealized holding gains (losses) on securities available for sale arising during period (net of tax effects of $8,220, $(1,041), $20,087 and $(6,904))		30,923		(3,915)		75,565		(25,971)
Total other comprehensive income (loss), net of tax		30,923		(3,915)		75,565		(25,971)

Comprehensive income	$	131,065	$	93,065	$	272,599	$	168,340

See accompanying notes to consolidated financial statements.

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

Three and Six Months ended June 30, 2025 and 2024

(in Thousands, except per share amounts)


	Number							Other
	of	Common				Retained		Comprehensive		Treasury
	Shares	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance at March 31, 2025	96,626	$	96,626	$	159,712	$	3,409,519	$	(334,412)	$	(436,366)	$	2,895,079
Net income	—		—		—		100,142		—		—		100,142
Purchase of treasury stock (81,532 shares)	—		—		—		—		—		(4,546)		(4,546)
Exercise of stock options	14		14		436		—		—		—		450
Stock compensation expense recognized in earnings	—		—		21		—		—		—		21
Other comprehensive income, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments	—		—		—		—		30,923		—		30,923
Balance at June 30, 2025	96,640	$	96,640	$	160,169	$	3,509,661	$	(303,489)	$	(440,912)	$	3,022,069


	Number							Other
	of	Common				Retained		Comprehensive		Treasury
	Shares	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance at March 31, 2024	96,570	$	96,570	$	157,775	$	3,085,388	$	(419,945)	$	(435,898)	$	2,483,890
Net income	—		—		—		96,980		—		—		96,980
Exercise of stock options	10		10		348		—		—		—		358
Stock compensation expense recognized in earnings	—		—		48		—		—		—		48
Other comprehensive loss, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments	—		—		—		—		(3,915)		—		(3,915)
Balance at June 30, 2024	96,580	$	96,580	$	158,171	$	3,182,368	$	(423,860)	$	(435,898)	$	2,577,361


	Number							Other
	of	Common				Retained		Comprehensive		Treasury
	Shares	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance at December 31, 2024	96,617	$	96,617	$	159,333	$	3,356,177	$	(379,054)	$	(436,366)	$	2,796,707
Net income	—		—		—		197,034		—		—		197,034
Dividends:
Cash ($.70 per share)	—		—		—		(43,550)		—		—		(43,550)
Purchase of treasury stock (81,532 shares)	—		—		—		—		—		(4,546)		(4,546)
Exercise of stock options	23		23		770		—		—		—		793
Stock compensation expense recognized in earnings	—		—		66		—		—		—		66
Other comprehensive income, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments	—		—		—		—		75,565		—		75,565
Balance at June 30, 2025	96,640	$	96,640	$	160,169	$	3,509,661	$	(303,489)	$	(440,912)	$	3,022,069


	Number							Other
	of	Common				Retained		Comprehensive		Treasury
	Shares	Stock		Surplus		Earnings		Income (Loss)		Stock		Total
Balance at December 31, 2023	96,467	$	96,467	$	155,511	$	3,029,088	$	(397,889)	$	(435,403)	$	2,447,774
Net income	—		—		—		194,311		—		—		194,311
Dividends:
Cash ($.66 per share)	—		—		—		(41,031)		—		—		(41,031)
Purchase of treasury stock (9,284 shares)	—		—		—		—		—		(495)		(495)
Exercise of stock options	113		113		2,538		—		—		—		2,651
Stock compensation expense recognized in earnings	—		—		122		—		—		—		122
Other comprehensive loss, net of tax:
Net change in unrealized gains and losses on available for sale securities, net of reclassification adjustments	—		—		—		—		(25,971)		—		(25,971)
Balance at June 30, 2024	96,580	$	96,580	$	158,171	$	3,182,368	$	(423,860)	$	(435,898)	$	2,577,361

See accompanying notes to consolidated financial statements.

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)


	Six Months Ended
	June 30,
	2025		2024
Operating activities:

Net income	$	197,034	$	194,311

Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense		7,727		21,749
Specific reserve, other real estate owned		20		16
Depreciation of bank premises and equipment		11,099		11,344
Gain on sale of bank premises and equipment		(13)		(344)
Loss (gain) on sale of other real estate owned		479		(281)
Accretion of investment securities discounts		(2,181)		(957)
Amortization of investment securities premiums		2,276		2,778
Unrealized (gain) loss on equity securities with readily determinable fair values		(89)		80
Stock based compensation expense		66		122
Loss (earnings) from affiliates and other investments		1,272		(1,781)
Deferred tax expense		2,191		8,664
Increase in accrued interest receivable		(2,667)		(6,424)
Decrease (increase) in other assets		21,627		(3,546)
(Decrease) increase in other liabilities		(2,882)		16,858

Net cash provided by operating activities		235,959		242,589

Investing activities:

Proceeds from maturities of securities		1,200		2,075
Proceeds from sales and calls of available for sale securities		4,235		1,720
Purchases of available for sale securities		(376,800)		(429,932)
Principal collected on mortgage backed securities		445,909		343,558
Net increase in loans		(339,775)		(242,275)
Purchases of other investments		(30,450)		(25,062)
Distributions from other investments		478		6,393
Purchases of bank premises and equipment		(11,242)		(8,882)
Proceeds from sales of bank premises and equipment		13		574
Proceeds from sales of other real estate owned		3,498		1,088

Net cash used in investing activities	$	(302,934)	$	(350,743)

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows, continued (Unaudited)

(Dollars in Thousands)


	Six Months Ended
	June 30,
	2025		2024
Financing activities:

Net increase (decrease) in non-interest bearing demand deposits	$	107,628	$	(178,453)
Net increase in savings and interest bearing demand deposits		139,142		165,783
Net increase in time deposits		116,046		219,736
Net increase in securities sold under repurchase agreements		80,832		81,172
Net increase (decrease) in other borrowed funds		49,896		(101)
Purchase of treasury stock		(4,546)		(495)
Proceeds from stock transactions		793		2,651
Payments of cash dividends		(43,550)		(41,031)

Net cash provided by financing activities		446,241		249,262

Increase in cash and cash equivalents		379,266		141,108

Cash and cash equivalents at beginning of period		352,652		651,058

Cash and cash equivalents at end of period	$	731,918	$	792,166

Supplemental cash flow information:
Interest paid	$	109,258	$	96,325
Income taxes paid		42,976		30,176
Non-cash investing and financing activities:
Net transfers from loans to other real estate owned	$	1,700	$	3,200

See accompanying notes to consolidated financial statements.

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

As used in this report, the words “Company,” “we,” “us” and “our” refer to International Bancshares Corporation, a Texas corporation, its five wholly owned subsidiary banks, and other subsidiaries. The information that follows may contain forward-looking statements, which are qualified as indicated under “Special Cautionary Notice Regarding Forward-Looking Information” in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of this report. Our website address is www.ibc.com.

Note 1 — Basis of Presentation

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“US GAAP”) and to general practices within the banking industry. Our consolidated financial statements include the accounts of International Bancshares Corporation, and our five wholly-owned bank subsidiaries, International Bank of Commerce, Laredo (“IBC”), Commerce Bank, International Bank of Commerce, Zapata, International Bank of Commerce, Brownsville, International Bank of Commerce, Oklahoma (the “Subsidiary Banks”) and our five wholly-owned non-bank subsidiaries, IBC Trading Company, Premier Tierra Holdings, Inc., IBC Charitable and Community Development Corporation, IBC Capital Corporation, and Diamond Beach Holdings, LLC. Our consolidated financial statements are unaudited but include all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the periods presented. All such adjustments were of a normal and recurring nature. These financial statements should be read in conjunction with the financial statements and the notes thereto in our latest Annual Report to Shareholders on Form ARS for the fiscal year ended December 31, 2024, furnished to the U.S. Securities and Exchange Commission (“SEC”) on April 21, 2025 (our “2024 Annual Report”). Our consolidated statement of condition at December 31, 2024 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements.

We operate as one segment, banking. The chief operating decision maker (“CODM”) is our chief executive officer. The operating information used by our CODM for purposes of assessing performance and making operating decisions is the consolidated statements presented in this report. We have five active operating subsidiaries, the Subsidiary Banks. Our Subsidiary Banks offer all products and services on the same basis and on the same terms and operate in the same regulatory environment. We apply the provisions of ASC Topic 280, “Segment Reporting,” in determining our reportable segments and related disclosures.

On July 4, 2025, the “One Big Beautiful Bill Act,” was enacted into law in the United States. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation of business interest expense. The effects of the new law are not reflected in the consolidated financial statements as of and for the period ended June 30, 2025, because the legislation was enacted in July. Although we are currently evaluating the effect of the legislation on our financial statements, we do not expect the legislation to have a material impact to our consolidated financial statements and results of operations.

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

Note 2 — Fair Value Measurements

FASB ASC Topic 820, “Fair Value Measurements” (“ASC 820”), defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 applies to all financial instruments that are being measured and reported on a fair value basis. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date; it also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into the following three levels:

●

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, 2025 by level within the fair value measurement hierarchy:


			Fair Value Measurements at
			Reporting Date Using
			(in Thousands)
			Quoted
			Prices in
			Active		Significant
	Assets/Liabilities		Markets for		Other		Significant
	Measured at		Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
	June 30, 2025		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale debt securities
Residential mortgage-backed securities	$	4,869,078	$	—	$	4,869,078	$	—
States and political subdivisions		140,765		—		140,765		—
Equity Securities		5,483		5,483		—		—
	$	5,015,326	$	5,483	$	5,009,843	$	—

The following table represents assets and liabilities reported on the consolidated balance sheets at their fair value on a recurring basis as of December 31, 2024 by level within the fair value measurement hierarchy:


			Fair Value Measurements at
			Reporting Date Using
			(in Thousands)
			Quoted
			Prices in
			Active		Significant
	Assets/Liabilities		Markets for		Other		Significant
	Measured at		Identical		Observable		Unobservable
	Fair Value		Assets		Inputs		Inputs
	December 31, 2024		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage-backed securities	$	4,835,176	$	—	$	4,835,176	$	—
States and political subdivisions		152,740		—		152,740		—
Equity Securities		5,394		5,394		—		—
	$	4,993,310	$	5,394	$	4,987,916	$	—

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

Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis. The instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Our policy is to recognize transfers between levels at the end of each reporting period, if applicable. There were no transfers between levels of the fair value hierarchy during the six months ended June 30, 2025.

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended June 30, 2025 by level within the fair value measurement hierarchy:

Fair Value Measurements at Reporting

Date Using

(in thousands)

Quoted

Assets/Liabilities

Prices in

Measured at

Active

Significant

Fair Value

Markets for

Other

Significant

Net

Period ended

Identical

Observable

Unobservable

Provision

June 30,

Assets

Inputs

During

2025

(Level 1)

(Level 2)

(Level 3)

Period

Measured on a non-recurring basis:

Assets:

Watch List—Doubtful loans

25,064

—

25,064

2,378

Other real estate owned

225

—

225

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended December 31, 2024 by level within the fair value measurement hierarchy:

Fair Value Measurements at Reporting

Date Using

(in thousands)

Quoted

Assets/Liabilities

Prices in

Measured at

Active

Significant

Fair Value

Markets

Other

Significant

Net

Year ended

for Identical

Observable

Unobservable

Provision

December 31,

Assets

Inputs

During

2024

(Level 1)

(Level 2)

(Level 3)

Period

Measured on a non-recurring basis:

Assets:

Watch List—Doubtful loans

169,246

—

169,246

14,662

Other real estate owned

11,537

—

11,537

632

Our assets measured at fair value on a non-recurring basis are limited to loans classified as Watch List—Doubtful and other real estate owned. The tabular disclosures above include only those loans or other real estate owned that had a change in the provision for credit loss during the reporting period or for which a new specific provision for credit loss was established during the reporting period. The fair value of Watch List—Doubtful loans is derived in accordance with FASB ASC Subtopic 326-10, “Financial Instruments – Credit Losses - Overall”. They are primarily comprised of collateral-dependent commercial loans. As the primary sources of loan repayments decline, the secondary repayment source, the collateral, takes on greater significance. Correctly evaluating the fair value becomes even more important. Re-measurement of the loan to fair value is done through a specific valuation allowance included in the allowance for credit losses (“ACL”). The fair value of the loan is based on the fair value of the collateral, as determined through either an appraisal or internal evaluation process. The basis for our appraisal and appraisal review process are

applicable regulatory guidelines, including regulatory appraisal laws and the Uniform Standards of Professional Appraisal Practice, which are incorporated into our lending policy. All collateral dependent loans are evaluated in accordance with our lending policy to assess if a third-party appraisal is required to be obtained as part of our credit underwriting and monitoring process. Collateral dependent loans that do not meet the requirements for a third-party appraisal are required to undergo an internal evaluation by our in-house independent appraisal staff.

Our determination to either seek an appraisal or to perform an internal evaluation is performed by our credit quality committee, which analyzes the existing collateral values of the doubtful loans and identifies obsolete appraisals or internal evaluations. The credit quality committee reviews the existing appraisal to determine if the collateral value is reasonable in view of the current use of the collateral and the economic environment related to the collateral. The ultimate decision on the appropriate action is made by our independent credit administration team. A new appraisal is not required if an internal evaluation, as performed by our in-house independent appraisal staff, is able to appropriately update the original appraisal assumptions to reflect current market conditions and provide an estimate of the collateral’s market value for analysis of the doubtful loan. The internal evaluations must be in writing and contain sufficient information detailing the analysis, assumptions and conclusions, and they must support performing an evaluation in lieu of ordering a new appraisal.

As of June 30, 2025, we had $158,263,000 of doubtful commercial collateral-dependent loans, of which $110,508,000 had an appraisal performed within the immediately preceding rolling twelve-month period, and of which $0 had an internal evaluation performed within the immediately preceding rolling twelve-month period. As of December 31, 2024, we had approximately $168,621,000 of doubtful commercial collateral-dependent loans, of which $110,583,000 had an appraisal performed within the immediately preceding rolling twelve-month period and of which $0 had an internal evaluation performed within the immediately preceding rolling twelve-month period.

Other real estate owned is comprised of real estate acquired by foreclosure and deeds in lieu of foreclosure. Other real estate owned is carried at the lower of the recorded investment in the property or its fair value less estimated costs to sell such property (as determined by independent appraisal) within Level 3 of the fair value hierarchy. Prior to foreclosure, the value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the ACL, if necessary. The fair value is reviewed periodically, and subsequent write-downs are made through a charge to operations, accordingly. Other real estate owned is included in other assets on the consolidated financial statements. For the three and six months ended June 30, 2025 and the twelve months ended December 31, 2024, we recorded $0, $46,000 and $2,228,000, respectively, in charges to the ACL in connection with loans transferred to other real estate owned. For the three and six months ended June 30, 2025 and the twelve months ended December 31, 2024, we recorded $20,000, $20,000 and $632,000, respectively, in adjustments to fair value in connection with other real estate owned.

The fair value estimates, methods, and assumptions for our financial instruments at June 30, 2025 and December 31, 2024 are outlined below.

Cash and Cash Equivalents

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

Time Deposits with Banks

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

Investment Securities Held-to-Maturity

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

Investment Securities

For investment securities, which include U.S. Treasury securities, obligations of other U.S. government agencies, obligations of states and political subdivisions and mortgage pass-through and related securities, fair values are established by an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market

consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. See disclosures of fair value of investment securities in Note 6.

Loans

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

For variable rate performing loans, the carrying amount approximates fair value. For fixed-rate performing loans, except residential mortgage loans, the fair value is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan. For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources or the primary origination market. Fixed-rate performing loans are within Level 3 of the fair value hierarchy. At June 30, 2025 and December 31, 2024, the carrying amount of fixed rate performing loans was $1,258,953,000 and $1,216,156,000, respectively, and the estimated fair value was $1,183,192,000 and $1,154,862,000, respectively.

Accrued Interest

The carrying amounts of accrued interest approximate fair value.

Deposits

The fair value of deposits with no stated maturity, such as non-interest-bearing demand deposit accounts, savings accounts and interest-bearing demand deposit accounts, was equal to the amount payable on demand as of June 30, 2025 and December 31, 2024. The fair value of time deposits is based on the discounted value of contractual cashflows. The discount rate is based on currently offered rates. Time deposits are within Level 3 of the fair value hierarchy. At June 30, 2025 and December 31, 2024, the carrying amount of time deposits was $3,015,589,000 and $2,899,543,000, respectively, and the estimated fair value was $3,014,207,000 and $2,895,245,000, respectively.

Securities Sold Under Repurchase Agreements

Securities sold under repurchase agreements are short-term maturities. Due to the contractual terms of the instruments, the carrying amounts approximated fair value at June 30, 2025 and December 31, 2024.

Junior Subordinated Deferrable Interest Debentures

We currently have floating-rate junior subordinated deferrable interest debentures outstanding. Due to the contractual terms of the floating-rate junior subordinated deferrable interest debentures, the carrying amounts approximated fair value at June 30, 2025 and December 31, 2024.

Other Borrowed Funds

We currently have short- and long-term borrowings issued from the Federal Home Loan Bank (“FHLB”). Due to the contractual terms of the short-term borrowings, the carrying amounts approximated fair value at June 30, 2025. The long-term borrowings outstanding at June 30, 2025 and December 31, 2024 are fixed-rate borrowings and the fair value is based on established market spreads for similar types of borrowings. The fixed rate long-term borrowings are included in Level 2 of the fair value hierarchy. At June 30, 2025 and December 31, 2024, the carrying amount of the fixed rate long-term FHLB borrowings was $10,437,000 and $10,541,000, respectively, and the estimated fair value was $10,437,000 and $10,541,000, respectively.

Commitments to Extend Credit and Letters of Credit

Commitments to extend credit and fund letters of credit are principally at current interest rates, and, therefore, the carrying amount approximates fair value.

Limitations

Fair value estimates are made at a point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time our entire holdings of a particular financial instrument. Because no market exists for a significant portion of our financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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

Note 3 — Loans

A summary of loans, by loan type, at June 30, 2025 and December 31, 2024 is as follows:


	June 30,		December 31,
	2025		2024

	(Dollars in Thousands)
Commercial, financial and agricultural	$	5,288,360	$	5,089,721
AG真人官方 estate - mortgage		1,050,280		999,313
AG真人官方 estate - construction		2,563,794		2,484,454
Consumer		52,211		49,777
Foreign		183,975		186,561
Total loans	$	9,138,620	$	8,809,826

Note 4 — Allowance for Credit Losses

The ACL is based on a loss-rate methodology that measures lifetime losses on loan pools that have similar risk characteristics. Loans that do not have similar risk characteristics are evaluated on an individual basis. The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk characteristics and containing sufficient loss history to provide meaningful results. Our segmentation starts at the general loan category with further sub-segmentation based on collateral types that may be of meaningful size and/or may contain sufficient differences in risk characteristics based on management’s judgement that would warrant further segmentation. Risk management begins with a strong and conservative lending policy that specifies lending limits that are well below allowable regulatory limits, provides highly restrictive lending authority to lending officers, and promotes judicious lending terms and diversification. The general loan categories along with primary risk characteristics used in our calculation are as follows:

Commercial and industrial loans. This category includes loans extended to a diverse array of businesses for working capital or equipment purchases. These loans are mostly secured by the collateral pledged by a borrower that is directly related to the business activities of the borrower’s company such as equipment, accounts receivable and inventory. The borrower’s abilities to generate revenues from equipment purchases, collect accounts receivable, and turn inventory into sales are risk factors in the repayment of the loan. A small portion of this loan category is related to loans secured by oil and gas production and loans secured by aircraft.

impacted when the market experiences a deterioration in the value of real estate. Risks specifically related to 1-4 family development loans also include mortgage rate risk and the practice by the mortgage industry of imposing more restrictive underwriting standards, which inhibits the buyer from obtaining long term financing, creating excessive housing and lot inventory in the market.

Commercial real estate loans. This category includes loans secured by farmland, multifamily properties, owner-occupied commercial properties, and non-owner-occupied commercial properties. Owner-occupied commercial properties include warehouses often along the U.S. border for import/export operations, office space where the borrower is the primary tenant, restaurants and other single-tenant retail spaces. Non-owner-occupied commercial properties include hotels, retail centers, office and professional buildings, and leased warehouses. These loans carry the risk of repayment when market values deteriorate, the business experiences turnover in key management, the business is unable to attract or maintain stable occupancy levels, or the market experiences an exit of a specific business type that is significant to the local economy, such as a manufacturing plant. Our primary risk management tool is internal monitoring measured against internal concentration limits that are significantly lower than regulatory thresholds and are segmented by low-risk and high-risk characteristics, such as the borrower’s equity, cash flow coverage, and non-amortizing versus amortizing status, further disaggregated by the length of time to pay in full. This monitoring is regularly reported to senior management and the board of directors. Risk management practices also extend to managing the borrower’s relationship with us and are designed to recognize degradation in the borrower’s ability to repay under established terms well before the borrower may default. Loan and deposit activity by the borrower is monitored on a frequent basis, which may prompt a change in risk classification. Once a loan is moved to a more severe risk classification, the loan performance, and when applicable, a plan by the borrower to rectify issues are monitored and reviewed at least quarterly. Additionally, our credit administration team, who is independent from the lending team, reviews a substantial portion of the commercial lending portfolio annually, which includes a significant portion of the commercial real estate loan portfolio given the current mix of loans in our portfolio. The table below summarizes the commercial real estate loan portfolio disaggregated by the type of real estate securing the credit as of June 30, 2025 and December 31, 2024:


	June 30, 2025				December 31, 2024
	(Dollars in Thousands)				(Dollars in Thousands)
		Amount	Percent of Total			Amount	Percent of Total
Commercial real estate:

Commercial real estate construction development	$	1,232,306	20.4	%	$	1,313,984	23.0	%
Hotel		1,087,224	17.9			1,080,706	18.9
Retail multi-tenant		737,880	12.2			738,874	12.9
Lot development: residential and commercial lots		583,601	9.6			513,760	9.0
Warehouse		439,255	7.2			435,783	7.6
Office/Professional buildings		457,096	7.5			416,014	7.3
1 - 4 family construction		374,356	6.2			338,832	5.9
Multi-family		376,628	6.2			310,115	5.4
Owner occupied real estate		354,928	5.9			270,584	4.7
Commercial leased properties		291,943	4.8			194,023	3.4
Farmland		128,146	2.1			109,697	1.9
Total commercial real estate	$	6,063,363	100.0	%	$	5,722,372	100.0	%

1-4 family mortgages. This category includes both first and second lien mortgages for the purposes of home purchases or refinancing existing mortgage loans. A small portion of this loan category is related to home equity lines of credits, lots purchases, and home construction. Loan repayments may be affected by unemployment or underemployment and deteriorating market values of real estate.

Consumer loans. This category includes deposit secured, vehicle secured, and unsecured loans, including overdrafts, made to individuals. Repayment is primarily affected by unemployment or underemployment.

The loan pools are further broken down using a risk-based segmentation based on internal classifications for commercial loans and past due status for consumer mortgage loans. Non-mortgage consumer loans are evaluated as one segment. On a weekly basis, commercial loan past due reports are reviewed by our credit quality committee to determine if a loan has any potential problems and should be placed on our internal Watch List report. Additionally, our credit department reviews the majority of our loans for proper internal classification purposes regardless of whether they are past due and segregates any loans with potential problems for further review. The credit department will discuss the potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the evaluation. Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the review process. After the above analysis is completed, we determine if a loan should be placed on our internal Watch List report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.

Our internal Watch List report is segregated into the following categories: (i) Pass, (ii) Economic Monitoring, (iii) Special Review, (iv) Watch List—Pass, (v) Watch List—Substandard, and (vi) Watch List—Doubtful. Loans placed in the Economic Monitoring or Special Review categories reflect our opinion that the loans have potential weaknesses that require monitoring on a more frequent basis. Credits in those categories are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted. Loans placed in the Watch List—Pass category reflect our opinion that the credit contains weaknesses that represent a greater degree of risk, which warrants “extra attention.” Credits placed in this category are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted. Loans placed in the Watch List—Substandard category are considered to be potentially inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. Those credit obligations, even if apparently protected by collateral value, have shown defined weaknesses related to adverse financial, managerial, economic, market, or political conditions, which may jeopardize repayment of principal and interest under contractual terms. Furthermore, there is a possibility that we may sustain some future loss if such weaknesses are not corrected. Loans placed in the Watch List—Doubtful category have shown defined weaknesses and reflect our belief that it is likely, based on current information and events, that we will be unable to collect all principal and/or interest amounts contractually due. Loans placed in the Watch List—Doubtful category are placed on non-accrual when they are moved to that category.

For the purposes of the ACL, in order to maintain segments with sufficient history for meaningful results, the credits in the Pass and Economic Monitoring categories are aggregated, the credits in the Special Review and Watch List—Pass category are aggregated, and the credits in the Watch List—Substandard category remain in their own segment. For loans classified as Watch List—Doubtful, management evaluates these credits in accordance with FASB ASC Subtopic 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Cost,” and, if deemed necessary, a specific reserve is allocated to the loan. The analysis of the specific reserve is based on a variety of factors, including the borrower’s ability to pay, the economic conditions impacting the borrower’s industry and any collateral deficiency. If it is a collateral-dependent loan, the net realizable fair value of collateral will be evaluated for any deficiencies. Substantially all of our loans evaluated as Watch List – Doubtful are measured using the fair value of collateral method. In rare cases, we may use other methods to determine the specific reserve of a loan if such loan is not collateral dependent.

Within each collectively evaluated pool, the robustness of the lifetime historical loss-rate is evaluated and, if needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative loss factors are then evaluated to incorporate management’s two-year reasonable and supportable forecast period followed by a reversion to the pool’s average lifetime loss-rate. Those qualitative loss factors are: (i) trends in portfolio volume and composition, (ii) volume and trends in classified loans, delinquencies and non-accruals, (iii) concentration risk, (iv) trends in underlying collateral value, (v) changes in policies, procedures, and strategies, and (vi) economic conditions. Qualitative factors also include potential losses stemming from operational risk factors arising from fraud, natural disasters, pandemics, geopolitical events and large loans. The large loan operational risk factor was added to our ACL calculation beginning in the second quarter of 2023. Because of the magnitude of large loans, they pose a higher risk of default. Recognizing this risk and establishing an operational risk factor to capture that risk, is prudent action in the current economic environment. Large loans are usually part of a larger relationship with collateral that is pledged across the relationship. Defaulting on a larger loan may therefore jeopardize an entire collateral relationship. The current

economic environment has created challenges for borrowers to service their debt. Increasing capitalization rates, elevated office vacancies, an upward trend in apartment vacancies and significant increases in interest rates are all contributing to the elevated risk in large loans. Should any of the factors considered by management in evaluating the adequacy of the ACL change, our estimate could also change, which could affect the level of future credit loss expense.

We have elected to not measure an ACL for accrued interest receivable given our timely approach in identifying and writing off uncollectible accrued interest. An ACL for off-balance sheet exposure is derived from a projected usage rate of any unfunded commitment multiplied by the historical loss-rate, plus model risk adjustment, if any, of the on-balance sheet loan pools.

Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate for current expected credit losses change, our estimate of current expected credit losses could also change, which could affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control, including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in interest rates, and the view of regulatory authorities towards loan classifications.

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


	Three Months Ended June 30, 2025
	Domestic														Foreign
			Commercial
			AG真人官方 Estate:
			Other		Commercial
			Construction &		AG真人官方 Estate:		Commercial
			Land		Farmland &		AG真人官方 Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at March 31, 2025	$	28,946	$	61,865	$	45,667	$	4,857	$	5,669	$	10,077	$	262	$	1,364	$	158,707
Losses charged to allowance		(1,749)		(8,121)		—		—		(3)		(82)		(23)		—		(9,978)
Recoveries credited to allowance		1,626		—		106		—		13		109		2		—		1,856
Net (losses) recoveries charged to allowance		(123)		(8,121)		106		—		10		27		(21)		—		(8,122)

Credit loss expense		(409)		321		887		3,143		563		(106)		32		(33)		4,398

Balance at June 30, 2025	$	28,414	$	54,065	$	46,660	$	8,000	$	6,242	$	9,998	$	273	$	1,331	$	154,983


	Three Months Ended June 30, 2024
	Domestic														Foreign
			Commercial
			AG真人官方 Estate:
			Other		Commercial
			Construction &		AG真人官方 Estate:		Commercial
			Land		Farmland &		AG真人官方 Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at March 31, 2024	$	26,676	$	55,097	$	39,402	$	3,768	$	5,757	$	10,648	$	313	$	1,137	$	142,798

Losses charged to allowance		(1,979)		(2,228)		—		—		(1)		—		(52)		—		(4,260)
Recoveries credited to allowance		1,234		—		6		—		34		26		—		—		1,300
Net (losses) recoveries charged to allowance		(745)		(2,228)		6		—		33		26		(52)		—		(2,960)

Credit loss expense		1,324		1,971		5,480		(240)		16		(35)		53		202		8,771

Balance at June 30, 2024	$	27,255	$	54,840	$	44,888	$	3,528	$	5,806	$	10,639	$	314	$	1,339	$	148,609


	Six Months Ended June 30, 2025
	Domestic														Foreign
			Commercial
			AG真人官方 Estate:
			Other		Commercial
			Construction &		AG真人官方 Estate:		Commercial
			Land		Farmland &		AG真人官方 Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at December 31, 2024	$	29,853	$	60,639	$	43,990	$	4,869	$	5,528	$	10,031	$	281	$	1,346	$	156,537

Losses charged to allowance		(3,537)		(8,121)		—		—		(49)		(202)		(68)		—		(11,977)
Recoveries credited to allowance		2,447		—		112		—		15		116		6				2,696
Net (losses) recoveries charged to allowance		(1,090)		(8,121)		112		—		(34)		(86)		(62)		—		(9,281)

Credit loss expense		(349)		1,547		2,558		3,131		748		53		54		(15)		7,727

Balance at June 30, 2025	$	28,414	$	54,065	$	46,660	$	8,000	$	6,242	$	9,998	$	273	$	1,331	$	154,983


	Six Months Ended June 30, 2024
	Domestic														Foreign
			Commercial
			AG真人官方 Estate:
			Other		Commercial
			Construction &		AG真人官方 Estate:		Commercial
			Land		Farmland &		AG真人官方 Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at December 31, 2023	$	35,550	$	55,291	$	42,703	$	5,088	$	5,812	$	11,024	$	318	$	1,283	$	157,069

Losses charged to allowance		(29,720)		(2,228)		—		—		(46)		—		(90)		—		(32,084)
Recoveries credited to allowance		1,789		—		10		—		36		35		5		—		1,875
Net (losses) recoveries charged to allowance		(27,931)		(2,228)		10		—		(10)		35		(85)		—		(30,209)

Credit loss expense		19,636		1,777		2,175		(1,560)		4		(420)		81		56		21,749

Balance at June 30, 2024	$	27,255	$	54,840	$	44,888	$	3,528	$	5,806	$	10,639	$	314	$	1,339	$	148,609

The decrease in losses charged to the ACL in the Commercial category for the six months ended June 30, 2025 can be attributed to a charge-down in the first quarter of 2024 on one loan secured primarily by equipment and pipeline infrastructure used in the oil and gas industry. The credit has been classified as Watch List—Doubtful since the end of 2022 at which time, and going forward, we have evaluated our loss exposure and adjusted reserves accordingly. We also continued to attempt to work with our customer during that period; however, those negotiations came to a halt late in the third quarter of 2023 when the customer declared bankruptcy. In March 2024, the bankruptcy court awarded the winning bid at foreclosure for the assets collateralizing the loan to a principal owner of the business. The bid was not for the full carrying value of the loan and resulted in a charge-down of approximately $25.6 million. We expect to recover a portion of the charge-down by pursuing repayment from the guarantor of the credit through a binding arbitration process. No changes to the qualitative loss factors were made for the June 30, 2025 ACL.

The tables below provide additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class, as of June 30, 2025 and December 31, 2024:


	June 30, 2025
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance

	(Dollars in Thousands)
Domestic
Commercial	$	52,268	$	400	$	1,754,590	$	28,014
Commercial real estate: other construction & land development		—		—		2,563,794		54,065
Commercial real estate: farmland & commercial		63,347		8,228		3,041,955		38,432
Commercial real estate: multifamily		43,038		4,260		333,162		3,740
Residential: first lien		38		—		588,227		6,242
Residential: junior lien		141		—		461,874		9,998
Consumer		—		—		52,211		273
Foreign		—		—		183,975		1,331

Total	$	158,832	$	12,888	$	8,979,788	$	142,095


	December 31, 2024
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance

	(Dollars in Thousands)
Domestic
Commercial	$	52,110	$	400	$	1,799,693	$	29,453
Commercial real estate: other construction & land development		8,195		8,122		2,476,259		52,517
Commercial real estate: farmland & commercial		65,733		8,228		2,862,070		35,762
Commercial real estate: multifamily		42,964		1,882		267,151		2,987
Residential: first lien		45		—		530,039		5,528
Residential: junior lien		141		—		469,088		10,031
Consumer		—		—		49,777		281
Foreign		—		—		186,561		1,346

Total	$	169,188	$	18,632	$	8,640,638	$	137,905

The table below provides additional information on loans accounted for on a non-accrual basis by loan class at June 30, 2025 and December 31, 2024:


	June 30, 2025				December 31, 2024

	(Dollars in Thousands)
		Total Non-Accrual Loans		Non-Accrual Loans with No Credit Allowance		Total Non-Accrual Loans		Non-Accrual Loans with No Credit Allowance
Domestic
Commercial	$	52,268	$	51,583	$	52,110	$	51,276
Commercial real estate: other construction & land development		—		—		8,195		73
Commercial real estate: farmland & commercial		63,347		23,978		65,733		24,757
Commercial real estate: multifamily		43,038		5,067		42,964		73
Residential: first lien		93		93		134		134
Total non-accrual loans	$	158,746	$	80,721	$	169,136	$	76,313

We occasionally provide modifications to borrowers experiencing financial difficulties. Modifications may include certain concessions that we must evaluate under current accounting standards to determine the need for disclosure. Concessions to borrowers experiencing financial difficulties that would require disclosure include principal forgiveness, a term extension, an other-than-insignificant payment delay, an interest rate reduction or a combination of these concessions. For the six months ended June 30, 2025, we did not provide any modifications under these circumstances to any borrower experiencing financial difficulty.

The Subsidiary Banks charge-off that portion of any loan that management considers to represent a loss or that is classified as a “loss” by bank examiners. Management generally considers commercial and industrial or real estate loans to represent a loss, in whole or part, when an exposure beyond any collateral coverage is apparent and when no further collection of the loss portion is anticipated based on the borrower’s financial condition and general economic conditions in the borrower’s industry. Generally, unsecured consumer loans are charged-off when 90 days past due.

While our management believes that it is generally able to identify borrowers with financial problems reasonably early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses. The determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an exercise of judgment. Similarly, the determination of the adequacy of the ACL can be made only on a subjective basis. It is the judgment of our management that the ACL at June 30, 2025 was adequate to absorb probable losses from loans in the portfolio at that date.

The following tables present information regarding the aging of past due loans by loan class at June 30, 2025 and December 31, 2024:


	June 30, 2025
							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	$	7,022	$	589	$	48,119	$	999	$	55,730	$	1,751,128	$	1,806,858
Commercial real estate: other construction & land development		1,719		—		5		5		1,724		2,562,070		2,563,794
Commercial real estate: farmland & commercial		1,276		—		26,339		1,091		27,615		3,077,687		3,105,302
Commercial real estate: multifamily		12,907		—		66		—		12,973		363,227		376,200
Residential: first lien		5,796		3,184		2,812		2,736		11,792		576,473		588,265
Residential: junior lien		2,603		1,027		2,243		2,243		5,873		456,142		462,015
Consumer		271		3		41		41		315		51,896		52,211
Foreign		2,621		900		336		336		3,857		180,118		183,975
Total past due loans	$	34,215	$	5,703	$	79,961	$	7,451	$	119,879	$	9,018,741	$	9,138,620


	December 31, 2024
							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	$	4,070	$	51,577	$	579	$	534	$	56,226	$	1,795,577	$	1,851,803
Commercial real estate: other construction & land development		2,421		15		8,122		—		10,558		2,473,896		2,484,454
Commercial real estate: farmland & commercial		1,221		—		26,416		262		27,637		2,900,166		2,927,803
Commercial real estate: multifamily		—		270		25,064		—		25,334		284,781		310,115
Residential: first lien		4,763		1,337		3,631		3,542		9,731		520,353		530,084
Residential: junior lien		2,599		1,544		2,000		2,000		6,143		463,086		469,229
Consumer		122		32		16		16		170		49,607		49,777
Foreign		816		1,992		339		339		3,147		183,414		186,561
Total past due loans	$	16,012	$	56,767	$	66,167	$	6,693	$	138,946	$	8,670,880	$	8,809,826

The increase in Commercial real estate: multifamily loans past due 30 – 59 days can be attributed to a loan secured by a multifamily affordable housing community. The increase in Commercial loans past due 90 days or more can be attributed to two loans secured by commercial properties that were placed on non-accrual in the fourth quarter of 2024 and are more than 90 days past due. The two loans were past due less than 90 days at December 31, 2024 as reflected in the table above. The decrease in commercial real estate: multifamily loans past due 90 days or greater can be primarily attributed to two loans secured by apartments that are on non-accrual that were brought current during the non-accrual period.

A summary of the loan portfolio by credit quality indicator by loan class and by year of origination at June 30, 2025 and December 31, 2024 is presented below:



		2025	2024		2023		2022		2021		Prior		Total

	(Dollars in Thousands)
Balance at June 30, 2025
Domestic
Commercial
Pass	$	606,234	$	451,967	$	294,786	$	109,643	$	182,551	$	96,997	$	1,742,178
Watch List - Pass		10,855		61		—		—		—		—		10,916
Watch List - Substandard		17		1,010		267		71		93		38		1,496
Watch List - Doubtful		4,439		864		46,874		18		72		1		52,268
Total Commercial	$	621,545	$	453,902	$	341,927	$	109,732	$	182,716	$	97,036	$	1,806,858
Commercial
Current-period gross writeoffs	$	3,022	$	515	$	—	$	—	$	—	$	—	$	3,537
Commercial real estate: other construction & land development
Pass	$	598,585	$	792,337	$	879,835	$	227,451	$	34,959	$	12,535	$	2,545,702
Special Review		17,814		—		—		—		—		—		17,814
Watch List - Substandard		—		278		—		—		—		—		278
Total Commercial real estate: other construction & land development	$	616,399	$	792,615	$	879,835	$	227,451	$	34,959	$	12,535	$	2,563,794
Commercial real estate: other construction & land development
Current-period gross writeoffs	$	—	$	—	$	—	$	8,121	$	—	$	—	$	8,121
Commercial real estate: farmland & commercial
Pass	$	417,160	$	725,235	$	579,807	$	500,224	$	306,286	$	406,368	$	2,935,080
Special Review		18,046		463		66,946		—		—		—		85,455
Watch List - Pass		16,036		199		—		2,076		—				18,311
Watch List - Substandard		—		2,073		240		445		—		351		3,109
Watch List - Doubtful		38,100		12,702		—		12,545		—		—		63,347
Total Commercial real estate: farmland & commercial	$	489,342	$	740,672	$	646,993	$	515,290	$	306,286	$	406,719	$	3,105,302
Commercial real estate: multifamily
Pass	$	100,592	$	43,234	$	20,837	$	117,619	$	18,253	$	32,627	$	333,162
Watch List - Doubtful		12,907		30,131		—		—		—		—		43,038
Total Commercial real estate: multifamily	$	113,499	$	73,365	$	20,837	$	117,619	$	18,253	$	32,627	$	376,200
Residential: first lien
Pass	$	177,047	$	96,279	$	107,988	$	75,158	$	48,162	$	83,206	$	587,840
Watch List - Substandard		—		91		—		—		295		—		386
Watch List - Doubtful		—		22		—		17		—		—		39
Total Residential: first lien	$	177,047	$	96,392	$	107,988	$	75,175	$	48,457	$	83,206	$	588,265
Residential: first lien
Current-period gross writeoffs	$	48	$	—	$	—	$	—	$	—	$	1	$	49
Residential: junior lien
Pass	$	29,766	$	86,397	$	66,502	$	61,011	$	64,754	$	153,444	$	461,874
Watch List- Doubtful		141		—		—		—		—		—		141
Total Residential: junior lien	$	29,907	$	86,397	$	66,502	$	61,011	$	64,754	$	153,444	$	462,015
Residential: junior lien
Current-period gross writeoffs	$	120	$	—	$	—	$	—	$	—	$	82	$	202
Consumer
Pass	$	27,093	$	19,416	$	3,345	$	591	$	316	$	1,450	$	52,211
Total Consumer	$	27,093	$	19,416	$	3,345	$	591	$	316	$	1,450	$	52,211
Consumer
Current-period gross writeoffs	$	32	$	30	$	5	$	—	$	—	$	1	$	68
Foreign
Pass	$	59,552	$	74,100	$	23,136	$	13,972	$	6,485	$	6,730	$	183,975
Total Foreign	$	59,552	$	74,100	$	23,136	$	13,972	$	6,485	$	6,730	$	183,975
Total Loans	$	2,134,384	$	2,336,859	$	2,090,563	$	1,120,841	$	662,226	$	793,747	$	9,138,620



		2024	2023		2022		2021		2020		Prior		Total

	(Dollars in Thousands)
Balance at December 31, 2024
Domestic
Commercial
Pass	$	993,045	$	343,212	$	135,057	$	214,702	$	37,670	$	63,030	$	1,786,716
Special Review		—		—		—		—		—		—		—
Watch List - Pass		—		11,113		—		—		—		—		11,113
Watch List - Substandard		1,341		327		74		122		—		—		1,864
Watch List - Doubtful		881		51,184		45		—		—		—		52,110
Total Commercial	$	995,267	$	405,836	$	135,176	$	214,824	$	37,670	$	63,030	$	1,851,803
Commercial
Current-period gross writeoffs	$	5,711	$	2,689	$	25,686	$	44	$	14	$	5	$	34,149
Commercial real estate: other construction & land development
Pass	$	1,029,399	$	921,180	$	322,348	$	144,221	$	39,908	$	2,925	$	2,459,981
Special Review		—		16,000		—		—		—		—		16,000
Watch List - Substandard		278		—		—		—		—		—		278
Watch List - Doubtful		73		—		8,122		—		—		—		8,195
Total Commercial real estate: other construction & land development	$	1,029,750	$	937,180	$	330,470	$	144,221	$	39,908	$	2,925	$	2,484,454
Commercial real estate: other construction & land development
Current-period gross writeoffs	$	—	$	1,146	$	1,082	$	—	$	—	$	—	$	2,228
Commercial real estate: farmland & commercial
Pass	$	814,273	$	631,806	$	531,035	$	312,757	$	220,510	$	245,334	$	2,755,715
Special Review		643		67,567		—		—		—		—		68,210
Watch List - Pass		16,490		—		—		—		—		—		16,490
Watch List - Substandard		18,934		242		2,122		—		357		—		21,655
Watch List - Doubtful		52,973		115		12,645		—		—		—		65,733
Total Commercial real estate: farmland & commercial	$	903,313	$	699,730	$	545,802	$	312,757	$	220,867	$	245,334	$	2,927,803
Commercial real estate: farmland & commercial
Commercial real estate: multifamily
Pass	$	90,092	$	11,538	$	108,830	$	18,621	$	8,198	$	29,871	$	267,150
Watch List - Doubtful		17,901		25,064		—		—		—		—		42,965
Total Commercial real estate: multifamily	$	107,993	$	36,602	$	108,830	$	18,621	$	8,198	$	29,871	$	310,115
Commercial real estate: multifamily
Residential: first lien
Pass	$	180,743	$	107,100	$	81,618	$	57,503	$	29,316	$	73,390	$	529,670
Watch List - Substandard		95		—		—		274		—		—		369
Watch List - Doubtful		23		—		22		—		—		—		45
Total Residential: first lien	$	180,861	$	107,100	$	81,640	$	57,777	$	29,316	$	73,390	$	530,084
Residential: first lien
Current-period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	46	$	46
Residential: junior lien
Pass	$	91,202	$	73,740	$	65,144	$	70,969	$	65,799	$	102,234	$	469,088
Watch List- Doubtful		141		—		—		—		—		—		141
Total Residential: junior lien	$	91,343	$	73,740	$	65,144	$	70,969	$	65,799	$	102,234	$	469,229
Residential: junior lien
Consumer
Pass	$	38,778	$	8,137	$	904	$	422	$	22	$	1,514	$	49,777
Total Consumer	$	38,778	$	8,137	$	904	$	422	$	22	$	1,514	$	49,777
Consumer
Current-period gross writeoffs	$	43	$	120	$	22	$	—	$	—	$	—	$	185
Foreign
Pass	$	124,716	$	30,648	$	16,877	$	6,962	$	2,879	$	4,479	$	186,561
Total Foreign	$	124,716	$	30,648	$	16,877	$	6,962	$	2,879	$	4,479	$	186,561
Foreign
Total Loans	$	3,472,021	$	2,298,973	$	1,284,843	$	826,553	$	404,659	$	522,777	$	8,809,826

The decrease in Watch List – Substandard Commercial real estate: farmland & commercial loans at June 30, 2025 can be primarily attributed to a change in classification on two loans in one relationship secured by hotels. The loans were upgraded to Special Review during the first quarter of 2025.

Note 5 — Stock Options

On April 5, 2012, our Board of Directors (the “Board”) adopted the 2012 International Bancshares Corporation Stock Option Plan (the “2012 Plan”). There were 800,000 shares of common stock available for stock option grants under the 2012 Plan, which were qualified incentive stock options (“ISOs”) or non-qualified stock options. Options granted may be exercisable for a period of up to 10 years from the date of grant, excluding ISOs granted to 10% shareholders, which may be exercisable for a period of up to only five years. On April 4, 2022, the 2012 Plan expired and was not renewed.

A summary of option activity under the 2012 Plan for the six months ended June 30, 2025 is as follows:


				Weighted
		Weighted		average
		average		remaining	Aggregate
	Number of	exercise		contractual	intrinsic
	options	price		term (years)	value ($)
					(in Thousands)
Options outstanding at December 31, 2024	212,155	$	35.27
Plus: Options granted	—		—
Less:
Options exercised	(23,222)		34.19
Options expired	—		—
Options forfeited	(4,650)		33.57
Options outstanding at June 30, 2025	184,283		35.44	3.75	$	5,734

Options fully vested and exercisable at June 30, 2025	138,392	$	36.21	3.01	$	4,201

Stock-based compensation expense included in the consolidated statements of income for the three and six months ended June 30, 2025 was $21,000 and $66,000, respectively. Stock-based compensation expense included in the consolidated statements of income for the three and six months ended June 30, 2024 was $48,000 and $122,000, respectively. As of June 30, 2025, there was approximately $152,000 of total unrecognized stock-based compensation cost related to non-vested options granted under our plans that will be recognized over a weighted average period of 1.4 years.

On April 18, 2022, the Board adopted the 2022 International Bancshares Corporation Stock Appreciation Rights Plan (the “SAR Plan”). There are 750,000 shares of underlying common stock that may be used for stock appreciation right (“SAR”) grants under the SAR Plan; however, no actual shares will be granted. Upon exercise, the SAR will be settled in cash. SARs granted may be exercisable for a period of up to 10 years from the date of grant and may vest over an eight-year period. As of June 30, 2025, a total of 446,740 SARs had been issued under the SAR Plan.

A summary of activity under the SAR Plan for the six months ended June 30, 2025 is as follows:


				Weighted
		Weighted		average
	Number of	average		remaining	Aggregate
	stock appreciation	exercise		contractual	intrinsic
	rights	price		term (years)	value ($)
					(in Thousands)
SARs outstanding at December 31, 2024	456,702	$	39.61
Plus: SARs granted	—
Less:
SARs exercised	(762)		39.33
SARs expired	—		—
SARs forfeited	(9,200)		39.33
SARs outstanding at June 30, 2025	446,740		39.61	7.04	$	12,038

SARs fully vested and exercisable at June 30, 2025	22,337	$	39.61	7.04	$	597

The fair value of the liability for payments due to SAR holders at June 30, 2025 and December 31, 2024 is approximately $5,787,000 and $4,540,000, respectively, as calculated using a Black-Scholes-Merton pricing model, and is included in other liabilities on the consolidated statements of condition. The expense recorded in connection with all grants under the SAR Plan totaled $874,000 and $1,262,000 for the three and six months ended June 30, 2025, respectively. The expense recorded in connection with all grants under the SAR Plan totaled $344,000 and $1,424,000 for the three and six months ended June 30, 2024, respectively. As of June 30, 2025, there was approximately $7,365,000 in unrecognized liability related to non-vested SARs granted under the SAR Plan that will be recognized over a weighted average period of 7.0 years.

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

We classify debt securities into one of three categories: held-to-maturity, available-for-sale, or trading. Such debt securities are reassessed for appropriate classification at each reporting date. Securities classified as “held-to-maturity” are carried at amortized cost for financial statement reporting, while securities classified as “available-for-sale” and “trading” are carried at their fair value. Unrealized holding gains and losses are included in net income for those securities classified as “trading,” while unrealized holding gains and losses related to those securities classified as “available-for-sale” are excluded from net income and reported net of tax as other comprehensive income (loss) and accumulated other comprehensive income (loss) until realized, or in the case of losses, when deemed other than temporary. Available-for-sale and held-to-maturity debt securities in an unrealized loss position are evaluated for the underlying cause of the loss. In the event that the deterioration in value is attributable to credit related reasons, then the amount of credit-related impairment will be recorded as a charge to our ACL with subsequent changes in the amount of impairment, up or down, also recorded through our ACL. We have evaluated the debt securities classified as available-for-sale and held-to-maturity at June 30, 2025 and have determined that no debt securities in an unrealized loss position are arising from credit related reasons and have therefore not recorded any allowances for debt securities in our ACL for the period. Unrealized gains and losses related to equity securities with readily determinable fair values are included in net income.

The amortized cost and estimated fair value by type of investment security at June 30, 2025 are as follows:


	Held to Maturity
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Carrying
	cost		gains		losses		fair value		value

	(Dollars in Thousands)
Other securities	$	4,400	$	—	$	—	$	4,400	$	4,400
Total investment securities	$	4,400	$	—	$	—	$	4,400	$	4,400


	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	$	5,245,239	$	25,192	$	(401,353)	$	4,869,078	$	4,869,078
Obligations of states and political subdivisions		152,430		5		(11,670)		140,765		140,765
Total investment securities	$	5,397,669	$	25,197	$	(413,023)	$	5,009,843	$	5,009,843

(1)	Included in the carrying value of residential mortgage-backed securities are $921,929 of mortgage-backed securities issued by Ginnie Mae and $3,947,149 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, 2024 are as follows:


	Held to Maturity
			Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Carrying
	cost		gains		losses		fair value		value

	(Dollars in Thousands)
Other securities	$	4,400	$	—	$	—	$	4,400	$	4,400
Total investment securities	$	4,400	$	—	$	—	$	4,400	$	4,400


	Available for Sale
			Gross		Gross		Estimated
	Amortized		unrealized		unrealized		fair		Carrying
	cost		gains		losses		value		value⁽¹⁾

	(Dollars in Thousands)
Residential mortgage-backed securities	$	5,315,488	$	8,858	$	(489,170)		4,835,176		4,835,176
Obligations of states and political subdivisions		156,822		331		(4,413)		152,740		152,740
Total investment securities	$	5,472,310	$	9,189	$	(493,583)	$	4,987,916	$	4,987,916

(1)	Included in the carrying value of residential mortgage-backed securities are $1,001,184 of mortgage-backed securities issued by Ginnie Mae and $3,833,992 of mortgage-backed securities issued by Fannie Mae and Freddie Mac.

The amortized cost and estimated fair value of investment securities at June 30, 2025, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.


	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	$	3,200	$	3,200	$	—	$	—
Due after one year through five years		1,200		1,200		—		—
Due after five years through ten years		—		—		2,240		2,238
Due after ten years		—		—		150,190		138,527
Residential mortgage-backed securities		—		—		5,245,239		4,869,078
Total investment securities	$	4,400	$	4,400	$	5,397,669	$	5,009,843

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

The amortized cost and fair value of available-for-sale debt investment securities pledged to qualify for fiduciary powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was $1,720,908,000 and $1,532,931,000, respectively, at June 30, 2025.

Proceeds from the sales and calls of available-for-sale debt securities were $730,000 and $4,235,000 for the three and six months ended June 30, 2025, respectively, which included $0 and $0 of mortgage-backed securities, respectively. Gross gains of $0 and $0 and gross losses of $0 and $0 were realized on the sales and calls for the three and six months ended June 30, 2025, respectively. Proceeds from the sales and calls of available-for-sale debt securities

were $0 and $1,720,000 for the three and six months ended June 30, 2024, respectively, which included $0 and $0 of mortgage-backed securities, respectively. Gross gains of $0 and $0 and gross losses of $0 and $0 were realized on the sales and calls for the three and six months ended June 30, 2024, respectively.

Gross unrealized losses on debt investment securities and the fair value of those related securities, aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at June 30, 2025, were as follows:


	Less than 12 months				12 months or more				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses

	(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities	$	30,149	$	(73)	$	3,177,133	$	(401,280)	$	3,207,282	$	(401,353)
Obligations of states and political subdivisions		39,297		(2,154)		89,462		(9,516)		128,759		(11,670)
	$	69,446	$	(2,227)	$	3,266,595	$	(410,796)	$	3,336,041	$	(413,023)


	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	$	544,375	$	(4,126)	$	3,358,586	$	(485,044)	$	3,902,961	$	(489,170)
Obligations of states and political subdivisions		66,450		(2,389)		57,551		(2,024)		124,001		(4,413)
	$	610,825	$	(6,515)	$	3,416,137	$	(487,068)	$	4,026,962	$	(493,583)

Equity securities with readily determinable fair values consist primarily of Community Reinvestment Act funds. At June 30, 2025 and December 31, 2024, the balance in equity securities with readily determinable fair values recorded at fair value were $5,483,000 and $5,394,000, respectively. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and six months ended June 30, 2025 and the three and six months ended June 30, 2024:


	Three Months Ended
	June 30, 2025
	(Dollars in Thousands)


Net gains recognized during the period on equity securities	$	22
Less: Net gains and (losses) recognized during the period on equity securities sold during the period		—

Unrealized gains recognized during the reporting period on equity securities still held at the reporting date	$	22


	Three Months Ended
	June 30, 2024
	(Dollars in Thousands)


Net losses recognized during the period on equity securities	$	(23)
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	$	(23)


	Six Months Ended
	June 30, 2025
	(Dollars in Thousands)

Net gains recognized during the period on equity securities	$	89
Less: Net gains and (losses) recognized during the period on equity securities sold during the period		—

Unrealized gains recognized during the reporting period on equity securities still held at the reporting date	$	89


	Six Months Ended
	June 30, 2024
	(Dollars in Thousands)

Net losses recognized during the period on equity securities	$	(80)
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	$	(80)

Other investments include equity and merchant banking investments held by our Subsidiary Banks and non-banking subsidiary entities. We hold ownership interests in limited partnerships for the purpose of investing in low-income housing tax credit (“LIHTC”) projects. The partnerships may acquire, construct or rehabilitate housing for low- and moderate-income individuals. We realize a return primarily from federal tax credits and other federal tax deductions associated with the underlying LIHTC projects. We are a limited partner in the partnerships and are not required to consolidate the entities in our consolidated financial statements. Investments in LIHTC projects totaled $192,616,000 and $186,369,000 at June 30, 2025 and December 31, 2024, respectively, and are included in other investments on the consolidated financial statements. Unfunded commitments to LIHTC projects totaled $32,504,000 at June 30, 2025 and $25,064,000 at December 31, 2024 and are included in other liabilities on the consolidated financial statements. Tax credits and other tax benefits, as well as amortization expense associated with investments in qualified low-income housing partnerships are accounted for using the proportional amortization method of accounting. There was a total of $16,282,000 in estimated tax credits related to these investments for the six months ended June 30, 2025 and $13,084,000 in estimated amortization related to these investments for the six months ended June 30, 2025. There was a total of $11,266,000 in estimated tax credits and $12,437,000 in estimated amortization related to these investments for the six months ended June 30, 2024. There were no impairment losses recorded on tax equity investments during the six months ended June 30, 2025 or June 30, 2024, respectively.

Note 7 — Other Borrowed Funds

Other borrowed funds include FHLB borrowings, which are short-term and long-term borrowings issued by the FHLB of Dallas at the market price offered at the time of funding. These borrowings are secured by residential

mortgage-backed investment securities and a portion of our loan portfolio. At June 30, 2025, other borrowed funds totaled $60,437,000 compared to $10,541,000 at December 31, 2024.

Note 8 — Junior Subordinated Interest Deferrable Debentures

As of June 30, 2025, we had four statutory business trusts under the laws of the State of Delaware (the “Trusts”), for the purpose of issuing trust preferred securities. The four Trusts each issued capital and common securities (“Capital and Common Securities”) and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (“Debentures”) that we issued. As of June 30, 2025 and December 31, 2024, the principal amount of Debentures outstanding totaled $108,868,000, respectively.

The Debentures are subordinated and junior in right of payment to all present and future senior indebtedness (as defined in the respective Indentures) and are pari passu with one another. The interest rate payable on, and the payment terms of the Debentures are the same as the distribution rate and payment terms of the respective issues of Capital and Common Securities issued by the Trusts. We have fully and unconditionally guaranteed the obligations of each of the Trusts with respect to the Capital and Common Securities. We have the right, unless an Event of Default (as defined in the Indentures) has occurred and is continuing, to defer payment of interest on the Debentures for up to 20 consecutive quarterly periods on each of the Trusts. If interest payments on any Debenture is deferred, distributions on both the Capital and Common Securities related to that Debenture would also be deferred. The redemption prior to maturity of any of the Debentures may require the prior approval of the Federal Reserve and/or other regulatory bodies.

For financial reporting purposes, the Trusts are treated as our investments and not consolidated in our consolidated financial statements. Although the Capital and Common Securities issued by each of the Trusts are not included as a component of shareholders’ equity on the consolidated statement of condition, the Capital and Common Securities are treated as capital for regulatory purposes. Specifically, under applicable regulatory guidelines, the Capital and Common Securities issued by the Trusts qualify as Tier 1 capital up to a maximum of 25% of Tier 1 capital on an aggregate basis. Any amount that exceeds the 25% threshold would qualify as Tier 2 capital. At June 30, 2025 and December 31, 2024, the total $108,868,000, respectively, of the Capital and Common Securities outstanding qualified as Tier 1 capital.

The following table illustrates key information about each of the Capital and Common Securities and their interest rate at June 30, 2025:

Junior

Subordinated

Deferrable

Interest

Repricing

Interest

Optional

Debentures

Frequency

Rate

Rate Index⁽¹⁾

Maturity Date

Redemption Date⁽²⁾

(Dollars in Thousands)

Trust IX

41,238

Quarterly

6.18

SOFR

1.62

October 2036

October 2011

Trust X

21,021

Quarterly

6.19

SOFR

1.65

February 2037

February 2012

Trust XI

25,990

Quarterly

6.18

SOFR

1.62

July 2037

July 2012

Trust XII

20,619

Quarterly

6.04

SOFR

1.45

September 2037

September 2012

108,868

(1) On July 1, 2023, the interest rate index on the Capital and Common Securities transitioned from U.S.-dollar London Interbank Offered Rate (“LIBOR”) to the Three-Month CME Term Secured Overnight Financing Rate (“SOFR”) with a 26-basis point spread adjustment.

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

Note 9 — Common Stock and Dividends

We paid cash dividends of $0.70 per share on February 28, 2025 to record holders of our common stock on February 14, 2025. We paid cash dividends of $0.66 per share on February 28, 2024 to record holders of our common stock on February 15, 2024.

In April 2009, the Board re-established a formal stock repurchase program that authorized the repurchase of up to $40 million of common stock within the following 12 months. Annually since then, including on March 12, 2025, the Board extended and increased the repurchase program to purchase up to $150 million of common stock during the 12-month period commencing on March 15, 2025. Shares of common stock may be purchased from time to time on the open market or through privately negotiated transactions. Shares purchased in this program will be held in treasury for reissue for various corporate purposes, including employee compensation plans. During the second quarter of 2025, the Board adopted a Rule 10b-18 trading plan and a Rule 10b5-1 trading plan and intends to adopt additional Rule 10b-18 and Rule 10b5-1 trading plans, which will allow us to purchase shares of our common stock during certain open and blackout periods when we ordinarily would not be in the market due to trading restrictions in our insider trading policy. During the terms of both a Rule 10b-18 and Rule 10b5-1 trading plan, purchases of common stock are automatic to the extent the conditions of the plan’s trading instructions are met. Shares purchased under these trading plans will be held in treasury for reissue for various corporate purposes, including employee stock compensation plans. As of August 4, 2025, a total of 13,795,319 shares had been repurchased under all programs at a cost of $419,939,000. We are not obligated to purchase shares under our stock repurchase program outside of the Rule 10b-18 and Rule 10b5-1trading plans.

Note 10 — Commitments and Contingent Liabilities

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

Note 11 — Capital Ratios

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

In July 2013, the FDIC and other regulatory bodies established a new, comprehensive capital framework for U.S. banking organizations, consisting of minimum requirements that increase both the quantity and quality of capital held by banking organizations. The final rules are a result of the implementation of the Basel III capital reforms and various related capital provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”). Consistent with the Basel international framework, the rules include a new minimum ratio of Common Equity Tier 1 (“CET1”) capital to risk-weighted assets of 4.5% and a CET1 capital conservation buffer of 2.5% of risk-weighted assets, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 capital to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and include a minimum leverage ratio of 4% for all banking organizations. Regarding the quality of capital, the rules emphasize CET1 capital and implements strict eligibility criteria for regulatory capital instruments. We believe that as of June 30, 2025, we meet all fully phased-in capital adequacy requirements.

In November 2017, the OCC, the Federal Reserve Board (“FRB”) and the FDIC finalized a proposed rule that extends the current treatment under the regulatory capital rules for certain regulatory capital deductions and risk weights and certain minority interest requirements, as they apply to banking organizations that are not subject to the advanced approaches capital rules. Effective January 1, 2018, the rule also paused the full transition to the Basel III treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority interests. The agencies are also considering whether to make adjustments to the capital rules in response to the FASB’s Current Expected Credit Loss (“CECL”) Standard and its potential impact on regulatory capital. Pursuant to rules issued by the federal bank regulatory agencies in February 2019 and March 2020, banking organizations were given options to phase in the adoption of CECL over a three-year transition period through December 31, 2022 or over a

five-year transition period through December 31, 2024. Rather than electing to make one of the phase-in options, we immediately recognized the capital impact upon adopting CECL accounting standards on January 1, 2020, which resulted in an increase in our allowance for probable loan losses and a one-time cumulative-effect adjustment to retained earnings upon adoption.

In December 2017, the Basel Committee on Banking Supervision unveiled its final set of standards and reforms to its Basel III regulatory capital framework, commonly called “Basel III Endgame” or “Basel IV.” The Basel IV framework makes changes to the capital framework first introduced as “Basel III” in 2010 and aim to reduce excessive variability in banks’ calculations of risk-weighted capital ratios. Implementation of Basel IV began on January 1, 2023 and will continue over a five-year transition period by regulators in individual countries, including the U.S. federal bank regulatory agencies. The U.S. targeted implementation of Basel IV to begin on July 1, 2025, subject to a three-year transition period with full compliance expected by July 1, 2028. However, the future implementation of Basel IV remains unclear, as the Federal Reserve continues to review the Basel IV rules and has indicated that it may craft a new risk-based capital rule that would be less onerous for banks and require less stringent capital requirements.

As of June 30, 2025, our capital levels continue to exceed all capital adequacy requirements under the Basel III capital rules as currently applicable to us.

On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“EGRRCPA”) was enacted, and among other things, it includes a simplified capital rule change that effectively exempts banks with assets of less than $10 billion that exceed the “community bank leverage ratio,” from all risk-based capital requirements, including Basel III and its predecessors. The federal banking agencies must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8% and 10% before community banks can begin to take advantage of this regulatory relief provision. Some of the Subsidiary Banks, with assets of less than $10 billion, may qualify for this exemption. Additionally, under the EGRRCPA, qualified bank holding companies with assets of up to $3 billion (currently $1 billion) will be eligible for the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, which eases limitations on the issuance of debt by holding companies. On August 28, 2018, the FRB issued an interim final rule expanding the applicability of its Small Bank Holding Company Policy Statement. While holding companies that meet the conditions of the policy statement are excluded from consolidated capital requirements, their depository institutions continue to be subject to minimum capital requirements. Finally, for banks that continue to be subject to the Basel III’s risk-based capital rules (e.g., assignment of a 150% risk weight to certain exposures), certain commercial real estate loans that were formally classified as high volatility commercial real estate (“HVCRE”) will not be subject to heightened risk weights if they meet certain criteria. Also, while acquisition, development, and construction loans will generally be subject to heightened risk weights, certain exceptions will apply. On September 18, 2018, the federal banking agencies issued a proposed rule modifying the agencies’ capital rules for HVCRE.

We had a CET1 to risk-weighted assets ratio of 23.23% on June 30, 2025 and 22.42% on December 31, 2024. We had a Tier 1 capital-to-average-total-asset (leverage) ratio of 19.51% and 18.84%, risk-weighted Tier 1 capital ratio of 23.84% and 23.06%, and risk-weighted total capital ratio of 25.06% and 24.31% at June 30, 2025 and December 31, 2024, respectively. Our CET1 capital consists of common stock and related surplus, net of treasury stock, and retained earnings. We and our Subsidiary Banks elected to opt-out of the requirement to include most components of accumulated other comprehensive income (loss) in the calculation of CET1 capital. CET1 is reduced by goodwill and other intangible assets, net of associated deferred tax liabilities and subject to transition provisions. Tier 1 capital includes CET1 capital and additional Tier 1 capital. Additional Tier 1 capital includes the Capital and Common Securities issued by the Trusts (see Note 8 above) up to a maximum of 25% of Tier 1 capital on an aggregate basis. Any amount that exceeds the 25% threshold qualifies as Tier 2 capital. As of June 30, 2025 and December 31, 2024, the total of $108,868,000 of the Capital and Common Securities outstanding qualified as Tier 1 capital. We actively monitor the regulatory capital ratios to ensure that our Subsidiary Banks are well-capitalized under the regulatory framework.

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

We and our Subsidiary Banks are subject to the regulatory capital requirements administered by the Federal Reserve, and, for our Subsidiary Banks, the FDIC. Regulatory authorities can initiate certain mandatory actions if we or any of our Subsidiary Banks fail to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of June 30, 2025, that we and each of our Subsidiary Banks meet all capital adequacy requirements to which we are subject.

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

The following discussion should be read in conjunction with our consolidated financial statements, and notes thereto, for the year ended December 31, 2024, which are included in our 2024 Annual Report. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results for the year ending December 31, 2025, or any future period.

Special Cautionary Notice Regarding Forward Looking Information

Certain matters discussed in this report, excluding historical information, include forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbor created by these sections. Although we believe such forward-looking statements are based on reasonable assumptions, no assurance can be given that every objective will be reached. The words “estimate,” “expect,” “intend,” “believe” and “project,” as well as other words or expressions of a similar meaning are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. Such statements are based on current expectations, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors.

Risk factors that could cause actual results to differ materially from any results that we project, forecast, estimate or budget in forward-looking statements include those disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 27, 2024, and among others, the following:

●

Local, regional, national, and international economic business conditions and the impact they may have on us, our customers, and such customers’ ability to transact profitable business with us, including the ability of our borrowers to repay their loans according to their terms or a change in the value of the related collateral.

●

Volatility and disruption in national and international financial markets.

●

The imposition of new or increased international tariffs and the impact of potential retaliatory tariffs, which may impact our subsidiary banks’ business and operations with Mexico.

●

Government intervention in the U.S. financial system.

●

The unavailability of funding from the FHLB, the FRB or other sources in the future could adversely impact our growth strategy, prospects, and performance.

●

Changes in consumer spending, borrowing, and saving habits.

●

Changes in interest rates and market prices, including changes in federal regulations on the payment of interest on demand deposits.

●

Changes in our ability to retain or access deposits due to changes in public confidence in the banking system and the potential threat of bank-run contagion fueled by, among other factors, economic instability, inflationary pressures, the public’s increased exposure to social media, and the rapid speed at which communication and coordination via social media can occur.

●

Changes in the capital markets we utilize, including changes in the interest rate environment that may reduce margins.

●

Changes in state and/or federal laws and regulations, including, the impact of the Consumer Financial Protection Bureau (“CFPB”) as a regulator of financial institutions, changes in the accounting, tax, and regulatory treatment of trust-preferred securities, as well as changes in banking, tax, securities, insurance, employment, environmental, and immigration laws and regulations and the risk of litigation that may follow.

●

Changes in U.S.—Mexico trade, including reductions in border crossings and commerce, integration, and implementation of the United States-Mexico-Canada Agreement, the possible imposition of tariffs on imported goods from Mexico, and the potential retaliatory tariffs that Mexico may impose on the United States.

●

Political instability in, and strained geopolitical relations between, the United States and Mexico.

●

General instability of economic and political conditions in the United States, including inflationary pressures, increased interest rates, economic slowdown or recession, low productivity growth, declining business investment, concerns regarding the level of U.S. debt, and escalating geopolitical tensions.

●

The reduction of deposits from nonresident alien individuals due to the Internal Revenue Service rules requiring U.S. financial institutions to report deposit interest payments made to such individuals.

●

The loss of senior management or operating personnel.

●

The timing, impact, and other uncertainties of the potential future acquisitions, as well as our ability to maintain our current branch network and enter new markets to capitalize on growth opportunities.

●

Additions to our allowance for credit loss (“ACL”) as a result of changes in local, national, or international conditions which adversely affect our customers.

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Greater than expected costs or difficulties related to the development and integration of new products and lines of business.

●

Increased labor costs and effects related to health care reform and other laws, regulations, and legal developments impacting labor costs.

●

Impairment of carrying value of goodwill could negatively impact our earnings and capital.

●

Changes in the soundness of other financial institutions with which we interact.

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Political instability in the United States or Mexico.

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

●

Potential loss of revenue streams and reduction of lower cost deposits as a source of funds resulting from the rise in bank-like products and services from financial technology companies and other alternative financial providers, including blockchain-based financial products and banking-as-a-service platforms.

●

Changes in the regulatory landscape for cryptocurrencies, decentralized finance, and fintech services that favor alternative financial products, which may subject us to additional competitive pressures and reduce the demand for traditional banking services.

●

Increased compliance and operational costs associated with investing in, adapting to, integrating, and competing with technological developments that incorporate artificial intelligence (“AI”) into banking services and products.

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Flaws in our introduction and use of AI technologies, which could result in increased exposure to security vulnerabilities, data inconsistencies, operational disruptions, and technological inefficiencies that could hamper the customer experience, negatively impact transaction processing, and undermine our risk-management processes.

●

Acts of war or terrorism.

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Natural disasters or other adverse external events such as pandemics or epidemics.

●

Reduced earnings resulting from the write-down of the carrying value of securities held in our securities available-for-sale portfolios.

●

The effect of changes in accounting policies and practices by the Public Company Accounting Oversight Board (“PCAOB”), the Financial Accounting Standards Board (“FASB”) and other accounting standards setters.

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The costs and effects of regulatory developments or regulatory or other governmental inquiries and the results of regulatory examinations or reviews and obtaining regulatory approvals.

●

The effect of any supervisory and enforcement efforts by the CFPB related to its unfair, deceptive, or abusive acts or practices authority concerning fees charged by financial institutions including late, non-sufficient funds, and overdraft fees, as well as the effect of any other regulatory or legal developments that limit fees and/or overdraft services.

●

Monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the FRB.

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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.

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The increase in required capital levels related to the implementation of capital and liquidity rules of the federal banking agencies that address or are impacted by the Basel III capital and liquidity standards.

●

The enhanced due diligence burden imposed on banks related to the banks’ inability to rely on credit ratings under the Dodd-Frank Act.

●

The failure or circumvention of our internal controls and risk management, policies, and procedures.

Forward-looking statements speak only as of the date on which such statements are made. It is not possible to foresee or identify all such factors. We make no commitment to update any forward-looking statement, or to disclose any facts, events or circumstances after the date hereof that may affect the accuracy of any forward-looking statement, unless required by law.

Overview

We are headquartered in Laredo, Texas with 166 facilities and 255 ATMs, and we provide banking services for commercial, consumer and international customers of North, South, Central and Southeast Texas and the State of Oklahoma. We are one of the largest independent commercial bank holding companies headquartered in Texas. We, through our Subsidiary Banks, are in the business of gathering funds from various sources and investing those funds in order to earn a return. We, either directly or through a Subsidiary Bank, own an insurance agency, a liquidating subsidiary, a fifty percent interest in an investment banking unit that owns a broker/dealer, a controlling interest in four merchant banking entities, and a majority ownership in a real-estate development partnership. Our primary earnings come from the spread between the interest earned on interest-bearing assets and the interest paid on interest-bearing liabilities. In addition, we generate income from fees on products offered to commercial, consumer and international customers. The sales team of each of our Subsidiary Banks aims to match the right mix of products and services to each customer to best serve the customer’s needs. That process entails spending time with customers to assess those needs and servicing the sales arising from those discussions on a long-term basis. The Subsidiary Banks have various compensation plans, including incentive-based compensation, for fairly compensating employees. The Subsidiary Banks also have a robust process in place to review sales that support the incentive-based compensation plan to monitor the quality of the sales and identify any significant irregularities, a process that has been in place for many years.

We are very active in facilitating trade along the United States border with Mexico. We do a large amount of business with customers domiciled in Mexico. Deposits from persons and entities domiciled in Mexico comprise a large and stable portion of the deposit base of our Subsidiary Banks. We also serve the growing Hispanic population through our facilities located throughout South, Central and Southeast Texas and the State of Oklahoma.

Future economic conditions remain uncertain and the impact of those conditions on our business also remains uncertain. Our business depends on the willingness and ability of our customers to conduct banking and other financial transactions. Our revenue streams, including service charges on deposits and banking and non-banking service charges and fees (ATM and interchange income), may be impacted in the future if economic conditions deteriorate. Expense control is an essential element of our long-term profitability. It has been a constant focus of ours for many years and is especially

critical during periods of economic uncertainty. We have kept that focus in mind as we continue to look at operations, create efficiencies, and institute cost-control protocols at all levels. We will continue to closely monitor our efficiency ratio, a measure of non-interest expense to net interest income plus non-interest income and our overhead burden ratio, a ratio of our operating expenses against total assets. We use these measures in determining if we are accomplishing our long-term goals of controlling our costs in order to provide superior returns to our shareholders.

Results of Operations

Summary

Consolidated Statements of Condition Information



	June 30, 2025		December 31, 2024		Percent Increase (Decrease)

	(Dollars in Thousands)
Assets	$	16,462,314	$	15,738,852	4.6	%
Net loans		8,983,637		8,653,289	3.8
Deposits		12,474,660		12,111,844	3.0
Securities sold under repurchase agreements		616,154		535,322	15.1
Other borrowed funds		60,437		10,541	473.4
Junior subordinated deferrable interest debentures		108,868		108,868	—
Shareholders’ equity		3,022,069		2,796,707	8.1

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
	2025		2024		(Decrease)		2025		2024		(Decrease)
Interest income	$	220,967	$	215,672	2.5	%	$	435,606	$	427,761	1.8	%
Interest expense		53,470		51,441	3.9			106,890		99,922	7.0
Net interest income		167,497		164,231	2.0			328,716		327,839	0.3
Provision for probable loan losses		4,398		8,771	(49.9)			7,727		21,749	(64.5)
Non-interest income		40,664		43,520	(6.6)			77,667		85,762	(9.4)
Non-interest expense		77,801		74,108	5.0			151,576		143,751	5.4
Net income		100,142		96,980	3.3	%		197,034		194,311	1.4	%

Per common share:
Basic	$	1.61	$	1.56	3.2	%	$	3.17	$	3.13	1.3	%
Diluted		1.61		1.56	3.2			3.16		3.12	1.3

Net Income

Net income for the three and six months ended June 30, 2025 increased by 3.3% and 1.4%, respectively, compared to the same periods of 2024. Net income continues to be positively impacted by an increase in interest income earned on our investment and loan portfolios driven primarily by both an increase in the size of the portfolios and the rate environment, which remains elevated as a result of FRB actions to raise interest rates in recent years. Net interest income for the same periods has been negatively impacted by an increase in interest expense, primarily driven by increases in rates paid on deposits. We closely monitor rates paid on deposits to remain competitive in the current economic environment and retain deposits. Net income for the three and six months ended June 30, 2025 was also positively impacted by a decrease in our provision for credit loss expense. The provision for credit loss expense recorded for the six months ended June 30, 2024 was primarily impacted by a charge-down of an impaired credit after the results of a bankruptcy related foreclosure. Net income for the three and six months ended June 30, 2025 was negatively impacted by an increase in our non-interest expenses driven by inflation and increased salary and compensation costs in order to attract and retain staff.

Net Interest Income


	Three Months Ended						Six Months Ended
	June 30,				Percent		June 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2025		2024		(Decrease)		2025		2024		(Decrease)
Interest Income:
Loans, including fees	$	173,979	$	168,365	3.3	%	$	344,139	$	336,693	2.2	%
Investment securities:
Taxable		41,401		37,137	11.5			82,333		73,400	12.2
Tax-exempt		1,514		1,539	(1.6)			3,041		3,085	(1.4)
Other interest income		4,073		8,631	(52.8)			6,093		14,583	(58.2)

Total interest income		220,967		215,672	2.5			435,606		427,761	1.8

Interest expense:
Savings deposits		21,318		20,631	3.3			41,768		40,547	3.0
Time deposits		25,150		23,450	7.2			50,650		44,726	13.2
Securities sold under Repurchase agreements		4,640		5,319	(12.8)			8,944		10,559	(15.3)
Other borrowings		669		69	869.6			2,145		139	1,443.2
Junior subordinated interest deferrable debentures		1,693		1,972	(14.1)			3,383		3,951	(14.4)

Total interest expense		53,470		51,441	3.9			106,890		99,922	7.0

Net interest income	$	167,497	$	164,231	2.0	%	$	328,716	$	327,839	0.3	%

The change in net interest income for the three and six months ended June 30, 2025 can be attributed to an increase in interest expense as a result of changes in rates we are paying on deposits to remain competitive with rates offered by our competitors. Interest income continues to be positively impacted by interest income earned on our investment and loan portfolios, driven by both an increase in the size of such portfolios and the current rate environment, which remains elevated due to the FRB raising interest rates recent years. Net interest income is the spread between income on interest earning assets, such as loans and securities, and the interest expense on liabilities used to fund those assets, such as deposits, repurchase agreements and funds borrowed. As part of our strategy to manage interest rate risk, we strive to manage both assets and liabilities so that interest sensitivities match. One method of calculating interest rate sensitivity is through gap analysis. A gap is the difference between the amount of interest rate sensitive assets and interest rate sensitive liabilities that re-price or mature in a given time period. Positive gaps occur when interest rate sensitive assets exceed interest rate sensitive liabilities, and negative gaps occur when interest rate sensitive liabilities exceed interest rate sensitive assets. A positive gap position in a period of rising interest rates should have a positive effect on net interest income as assets will re-price faster than liabilities. Conversely, net interest income should contract somewhat in a period of falling interest rates. Our management can quickly change our interest rate position at any given point in time as market conditions dictate. Additionally, interest rate changes do not affect all categories of assets and liabilities equally or at the same time. Analytical techniques we employ to supplement gap analysis include simulation analysis to quantify interest rate risk exposure. The gap analysis prepared by management is reviewed by our Investment Committee twice a year (see table on page 46 for the June 30, 2025 gap analysis). Our management currently believes that we are properly positioned for interest rate changes; however, if our management determines at any time that we are not properly positioned, we will strive to adjust the interest rate sensitive assets and liabilities in order to manage the effect of interest rate changes.

Non-Interest Income



	Three Months Ended						Six Months Ended
	June 30,				Percent		June 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2025		2024		(Decrease)		2025		2024		(Decrease)

Service charges on deposit accounts	$	17,988	$	18,091	(0.6)	%	$	35,655	$	36,358	(1.9)	%
Other service charges, commissions and fees
Banking		14,939		14,643	2.0			29,004		29,118	(0.4)
Non-banking		2,650		2,893	(8.4)			4,985		5,167	(3.5)
Other investment income (loss), net		348		3,049	(88.6)			(910)		4,672	(119.5)
Other income		4,739		4,844	(2.2)			8,933		10,447	(14.5)
Total non-interest income	$	40,664	$	43,520	(6.6)	%	$	77,667	$	85,762	(9.4)	%

Total non-interest income for the three and six months ended June 30, 2025 decreased by 6.6% and 9.4%, respectively, compared to the same periods of 2024. Non-interest income was negatively impacted due to losses recorded on merchant banking investments and is reflected in other investments, net in the table.

Non-Interest Expense


	Three Months Ended						Six Months Ended
	June 30,				Percent		June 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2025		2024		(Decrease)		2025		2024		(Decrease)

Employee compensation and benefits	$	38,251	$	35,629	7.4	%	$	76,862	$	71,496	7.5	%
Occupancy		7,270		6,686	8.7			13,676		12,363	10.6
Depreciation of bank premises and equipment		5,486		5,715	(4.0)			11,099		11,344	(2.2)
Professional fees		4,074		4,212	(3.3)			7,645		7,903	(3.3)
Deposit insurance assessments		1,763		1,696	4.0			3,533		3,395	4.1
Net operations, other real estate owned		990		297	233.3			1,366		327	317.7
Advertising		1,732		1,462	18.5			3,453		3,282	5.2
Software and software maintenance		5,721		5,651	1.2			11,131		10,963	1.5
Other		12,514		12,760	(1.9)			22,811		22,678	0.6

Total non-interest expense	$	77,801	$	74,108	5.0	%	$	151,576	$	143,751	5.4	%

Non-interest expense increased by 5.0% and 5.4% for the three and six months ended June 30, 2025, respectively, compared to the same periods of 2024. Non-interest expense continues to be primarily impacted by an increase in our employee compensation and benefits as we continue to adjust our compensation programs to retain our workforce and remain competitive in the current employment market. We also continue to monitor and manage our controllable non-interest expenses through a variety of measures with the ultimate goal of ensuring we align non-interest expenses with our operations and revenue streams.

Financial Condition

Allowance for Credit Losses

The ACL decreased 1.0 % to $154,983,000 at June 30, 2025 from $156,537,000 at December 31, 2024 primarily due to the charge-off of a loan that had been fully reserved for in prior periods. The provision for credit losses charged to expense decreased 49.9% to $4,398,000 for the three months ended June 30, 2025 compared to $8,771,000 for the same period of 2024. The provision for credit losses charged to expense decreased 64.5% to $7,727,000 for the six months ended June 30, 2025 compared to $21,749,000 for the same period of 2024. The credit loss charged to expense for the six months ended June 30, 2024 increased in order to absorb the impact of the charge-down. The ACL was 1.70% of total loans at June 30, 2025 and 1.78% of total loans at December 31, 2024.

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, we believe that the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008 and because securities issued by others that are collateralized by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated securities.

Loans

Total loans increased by 3.7% to $9,138,620,000 at June 30, 2025, from $8,809,826,000 at December 31, 2024. Commercial real estate loans have historically been the largest category in our loan portfolio and comprise approximately 66% and 65% of total loans at June 30, 2025 and December 31, 2024, respectively. The loans in this category primarily include owner- and non-owner-occupied commercial buildings such as shopping centers, warehouses, hotels and office buildings and are primarily geographically concentrated in central and south Texas and throughout Oklahoma. Commercial real estate loans generally carry a lower risk of loss; however, they may also be significantly more affected by changes in real estate markets or the general economy. We regularly monitor commercial real estate loan concentrations and also have processes and procedures in place to monitor economic conditions that may adversely affect our commercial real estate portfolio.

Deposits

Deposits increased by 3.0% to $12,474,660,000 at June 30, 2025, compared to $12,111,844,000 at December 31, 2024. Deposits have continued to fluctuate as a result of increased general activities by customers, increased competition for deposits by the federal government, and aggressive competitors’ pricing. We have closely monitored the rates paid on deposits by competitors and have made changes to our pricing accordingly in order to remain competitive in an effort to retain deposits. The five separately charted banks within our holding company structure also allows us to work with customers to maximize their FDIC insurance levels and provide additional levels of insured deposits.

Foreign Operations

On June 30, 2025, we had $16,462,314,000 of consolidated assets, of which approximately $183,975,000, or 1.1%, was related to loans outstanding to borrowers domiciled in foreign countries, compared to $186,561,000, or 1.2%, at December 31, 2024. Of the $183,975,000, 79.1% is directly or indirectly secured by U.S. assets, certificates of deposits and real estate; 5.9% is secured by foreign real estate or other assets; and 15.0% is unsecured.

Critical Accounting Policies

We have established various accounting policies that govern the application of accounting principles in the preparation of our Consolidated Financial Statements. The significant accounting policies are described in the Notes to the Consolidated Financial Statements. Certain accounting policies involve significant subjective judgments and assumptions by management that have a material impact on the carrying value of certain assets and liabilities; management considers such accounting policies to be critical accounting policies.

We consider our estimated ACL as a policy critical to the sound operations of our Subsidiary Banks. The ACL is deducted from the amortized cost of an instrument to present the net amount expected to be collected on the financial asset. Our ACL primarily consists of the aggregate ACL estimates of our Subsidiary Banks. The estimates are established through charges to operations in the form of charges to provisions for credit loss expense. Loan losses or recoveries are charged or credited directly to the ACL. The ACL of each Subsidiary Bank is maintained at a level considered appropriate by management, based on estimated current expected credit losses in the current loan portfolio, including information about past events, current conditions, and reasonable and supportable forecasts.

The estimation of the ACL is based on a loss-rate methodology that measures lifetime losses on loan pools that have similar risk characteristics. Loans that do not have similar risk characteristics are evaluated on an individual basis. The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk characteristics and containing sufficient loss history to provide meaningful results. Our segmentation starts at the general loan category with further sub-segmentation based on collateral types that may be of meaningful size and/or may contain sufficient differences in risk characteristics based on management’s judgement that would warrant further segmentation. Risk management begins with a strong and conservative lending policy that specifies lending limits that are well below allowable regulatory limits, provides highly restrictive lending authority to lending officers, and promotes judicious lending terms and diversification. The general loan categories along with primary risk characteristics used in our calculation are as follows:

Commercial and industrial loans. This category includes loans extended to a diverse array of businesses for working capital or equipment purchases. These loans are mostly secured by the collateral pledged by a borrower that is directly related to the business activities of the borrower’s company such as equipment, accounts receivable and inventory. The borrower’s abilities to generate revenues from equipment purchases, collect accounts receivable, and to turn inventory into sales are risk factors in the repayment of the loan. A small portion of this loan category is related to loans secured by oil and gas production and loans secured by aircraft.

Construction and land development loans. This category includes loans for the development of unimproved land to lot development for both residential and commercial use and vertical construction across residential and commercial real estate classes. These loans carry risk of repayment when projects incur cost overruns, have an increase in the price of construction materials, encounter zoning, entitlement, or environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. Risks specifically related to 1-4 family development loans also include mortgage rate risk and the practice by the mortgage industry of imposing more restrictive underwriting standards, which inhibits the buyer from obtaining long term financing creating excessive housing and lot inventory in the market.

Commercial real estate loans. This category includes loans secured by farmland, multifamily properties, owner-occupied commercial properties, and non-owner-occupied commercial properties. Owner-occupied commercial properties include warehouses often along the U.S./Mexico border for import/export operations, office space where the borrower is the primary tenant, restaurants and other single-tenant retail spaces. Non-owner-occupied commercial properties include hotels, retail centers, office and professional buildings, and leased warehouses. These loans carry the risk of repayment when market values deteriorate, the business experiences turnover in key management, the business is unable to attract or maintain stable occupancy levels, or the market experiences an exit of a specific business type that is significant to the local economy, such as a manufacturing plant. Our primary risk management tool is internal monitoring measured against internal concentration limits that are significantly lower than regulatory thresholds and are segmented by low-risk and high-risk characteristics, such as the borrower’s equity, cash flow coverage, and non-amortizing versus amortizing status, further disaggregated by the length of time to pay in full. This monitoring is regularly reported to senior management and the board of directors. Risk management practices also extend to managing the borrower’s relationship with us and are designed to recognize degradation in the borrower’s ability to repay under established terms well before the borrower may default. Loan and deposit activity by the borrower is monitored on a frequent basis, which may prompt a change in risk classification. Once a loan is moved to a more severe risk classification, the loan performance, and when applicable, a plan by the borrower to rectify issues are monitored and reviewed at least quarterly. Additionally, our credit administration team, who is independent from the lending team, reviews a substantial portion of the commercial lending portfolio annually, which includes a significant portion of the commercial real estate loan portfolio given the current mix of loans in our portfolio. The table below summarizes the commercial real estate loan portfolio disaggregated by the type of real estate securing the credit as of June 30, 2025 and December 31, 2024:


	June 30, 2025				December 31, 2024
	(Dollars in Thousands)				(Dollars in Thousands)
		Amount	Percent of Total			Amount	Percent of Total
Commercial real estate:

Commercial real estate construction development	$	1,232,306	20.4	%	$	1,313,984	23.0	%
Hotel		1,087,224	17.9			1,080,706	18.9
Retail multi-tenant		737,880	12.2			738,874	12.9
Lot development: residential and commercial lots		583,601	9.6			513,760	9.0
Warehouse		439,255	7.2			435,783	7.6
Office/Professional buildings		457,096	7.5			416,014	7.3
1 - 4 family construction		374,356	6.2			338,832	5.9
Multi-family		376,628	6.2			310,115	5.4
Owner occupied real estate		354,928	5.9			270,584	4.7
Commercial leased properties		291,943	4.8			194,023	3.4
Farmland		128,146	2.1			109,697	1.9
Total commercial real estate	$	6,063,363	100.0	%	$	5,722,372	100.0	%

credit department reviews the majority of our loans for proper internal classification purposes regardless of whether they are past due and segregates any loans with potential problems for further review. The credit department will discuss the potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the evaluation. Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the review process. After the above analysis is completed, we will determine if a loan should be placed on an internal Watch List report because of issues related to the analysis of the credit, credit documents, collateral, and/or payment history.

Within each collectively evaluated pool, the robustness of the lifetime historical loss-rate is evaluated and, if needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative loss factors are then evaluated to incorporate management’s two-year reasonable and supportable forecast period followed by a reversion to the pool’s average lifetime loss-rate. Those qualitative loss factors are: (i) trends in portfolio volume and composition, (ii) volume and trends in classified loans, delinquencies and non-accruals, (iii) concentration risk, (iv) trends in underlying collateral value, (v) changes in policies, procedures, and strategies, and (vi) economic conditions. Qualitative factors also include potential losses stemming from operational risk factors arising from fraud, natural disasters, pandemics, geopolitical events, and large loans. The large loan operational risk factor was added to our ACL calculation beginning in the second quarter of 2023. Because of the magnitude of large loans, they pose a higher risk of default. Recognizing this risk and establishing an operational risk factor to capture that risk, is prudent action in the current economic environment. Large loans are usually part of a larger relationship with collateral that is pledged across the relationship. Defaulting on a larger loan may therefore jeopardize an entire collateral relationship. The current economic environment has created challenges for borrowers to service their debt. Increasing capitalization rates, elevated office vacancies, an upward trend in apartment vacancies and significant increases in interest rates are all contributing to the elevated risk in large loans. Should any of the factors considered by management in evaluating the adequacy of the ACL change, our estimate could also change, which could affect the level of future credit loss expense.

rate of any unfunded commitment multiplied by the historical loss-rate, plus model risk adjustment, if any, of the on-balance sheet loan pools.

Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate for current expected credit losses change, our estimate of current expected credit losses could also change, which could affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control, including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in interest rates and the view of regulatory authorities towards loan classifications.

Liquidity and Capital Resources

The maintenance of adequate liquidity provides our Subsidiary Banks with the ability to meet potential depositor withdrawals, provide for customer credit needs, maintain adequate statutory reserve levels and take full advantage of high-yield investment opportunities as they arise. Liquidity is afforded by access to financial markets and by holding appropriate amounts of liquid assets. Our Subsidiary Banks derive their liquidity largely from deposits of individuals and business entities. Deposits from persons and entities domiciled in Mexico comprise a stable portion of the deposit base of our Subsidiary Banks. Other important funding sources for our Subsidiary Banks during 2025 and 2024 were securities sold under repurchase agreements and large certificates of deposit, requiring management to closely monitor our asset/liability mix in terms of both rate sensitivity and maturity distribution. Our Subsidiary Banks have had a long-standing relationship with the FHLB and keep open significant unused lines of credit in order to fund liquidity needs. We also maintain a sizable, high quality investment portfolio to provide significant liquidity. These securities can be pledged to the FHLB, sold, or sold under agreements to repurchase to provide immediate liquidity. The following table summarizes our short-term balancing capacities net of balances outstanding:


		June 30,
		2025
	(in Thousands)
Unsecured fed funds lines available from commercial banks	$	50,000
Unused borrowings capacity from FHLB ⁽¹⁾		3,361,493
Unused borrowings capacity under Federal Reserve discount window		500,423
Unpledged investment securities ⁽²⁾		3,681,653
	$	7,593,569

(1) FHLB borrowings are collateralized by a blanket floating lien on certain real estate secured loans and mortgage finance assets
(2) Market value

We maintain an adequate level of capital as a margin of safety for our depositors and shareholders. At June 30, 2025, shareholders’ equity was $3,022,069,000 compared to $2,796,707,000 at December 31, 2024. The increase in shareholders’ equity can be primarily attributed to the retention of earnings offset by shareholder dividends paid.

various related capital provisions of the Dodd-Frank Act. Consistent with the Basel international framework, the rules include a new minimum ratio of Common Equity Tier 1 (“CET1”) capital to risk-weighted assets of 4.5% and a CET1 capital conservation buffer of 2.5% of risk-weighted assets, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 capital to risk-weighted assets above the minimum requirement but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and include a minimum leverage ratio of 4% for all banking organizations. Regarding the quality of capital, the rules emphasize CET1 capital and implements strict eligibility criteria for regulatory capital instruments. We believe that as of June 30, 2025, we meet all fully phased-in capital adequacy requirements.

In November 2017, the OCC, the FRB and the FDIC finalized a proposed rule that extends the current treatment under the regulatory capital rules for certain regulatory capital deductions and risk weights and certain minority interest requirements, as they apply to banking organizations that are not subject to the advanced approaches capital rules. Effective January 1, 2018, the rule also paused the full transition to the Basel III treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority interests. The agencies are also considering whether to make adjustments to the capital rules in response to CECL (the FASB Standard relating to current expected credit loss) and its potential impact on regulatory capital. Pursuant to rules issued by the federal bank regulatory agencies in February 2019 and March 2020, banking organizations were given options to phase in the adoption of CECL over a three-year transition period through December 31, 2022 or over a five-year transition period through December 31, 2024. Rather than electing to make one of the phase-in options, we immediately recognized the capital impact upon adopting CECL accounting standards on January 1, 2020, which resulted in an increase in our allowance for probable loan losses and a one-time cumulative-effect adjustment to retained earnings upon adoption.

As of June 30, 2025, our capital levels continue to exceed all capital adequacy requirements under the Basel III capital rules as currently applicable to us.

On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“EGRRCPA”) was enacted, and, among other things, it includes a simplified capital rule change that effectively exempts banks with assets of less than $10 billion that exceed the “community bank leverage ratio,” from all risk-based capital requirements, including Basel III and its predecessors. The federal banking agencies must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8% and 10% before community banks can begin to take advantage of this regulatory relief provision. Some of the Subsidiary Banks, with assets of less than $10 billion, may qualify for this exemption. Additionally, under the EGRRCPA, qualified bank holding companies with assets of up to $3 billion (currently $1 billion) will be eligible for the FRB’s Small Bank Holding Company and Savings and Loan Holding Company Policy Statement, which eases limitations on the issuance of debt by holding companies. On August 28, 2018, the FRB issued an interim final rule expanding the applicability of its Small Bank Holding Company Policy Statement. While holding companies that meet the conditions of the policy statement are excluded from consolidated capital requirements, their depository institutions continue to be subject to minimum capital requirements. Finally, for banks that continue to be subject to the Basel III’s risk-based capital rules (e.g., assignment of 150% risk weight to certain exposures), certain commercial real estate loans that were formally classified as high volatility commercial real estate (“HVCRE”) will not be subject to heightened risk weights if they meet certain criteria. Also, while acquisition, development, and construction loans will generally be subject to heightened risk

weights, certain exceptions will apply. On September 18, 2018, the federal banking agencies issued a proposed rule modifying the agencies’ capital rules for HVCRE.

We and our Subsidiary Banks are subject to the regulatory capital requirements administered by the Federal Reserve, and, for our Subsidiary Banks, the FDIC. Regulatory authorities can initiate certain mandatory actions if we or any of our Subsidiary Banks fail to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of June 30, 2025, that we and each of our Subsidiary Banks continue to meet all capital adequacy requirements to which we are subject.

We will continue to monitor the volatility and cost of funds in an attempt to match maturities of rate-sensitive assets and liabilities and respond accordingly to anticipate fluctuations in interest rates by adjusting the balance between sources and uses of funds as deemed appropriate. The net-interest rate sensitivity as of June 30, 2025 is illustrated in the table entitled “Interest Rate Sensitivity,” below. This information reflects the balances of assets and liabilities for which rates are subject to change. A mix of assets and liabilities that are roughly equal in volume and re-pricing characteristics represents a matched interest rate sensitivity position. Any excess of assets or liabilities results in an interest rate sensitivity gap.

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

Interest Rate Sensitivity

(Dollars in Thousands)


	Rate/Maturity
			Over 3		Over 1
	3 Months		Months to		Year to 5		Over 5
June 30, 2025	or Less		1 Year		Years		Years		Total

	(Dollars in Thousands)
Rate sensitive assets
Investment securities	$	250,020	$	757,116	$	3,871,825	$	140,765	$	5,019,726
Loans, net of non-accruals		7,550,290		183,001		481,702		764,881		8,979,874

Total earning assets	$	7,800,310	$	940,117	$	4,353,527	$	905,646	$	13,999,600

Cumulative earning assets	$	7,800,310	$	8,740,427	$	13,093,954	$	13,999,600

Rate sensitive liabilities

Time deposits	$	1,346,018	$	1,525,676	$	143,895	$	—	$	3,015,589
Other interest bearing deposits		4,739,099		—		—		—		4,739,099
Securities sold under repurchase agreements		615,084		1,070		—		—		616,154
Other borrowed funds		50,000		—		—		10,437		60,437
Junior subordinated deferrable interest debentures		108,868		—		—		—		108,868

Total interest bearing liabilities	$	6,859,069	$	1,526,746	$	143,895	$	10,437	$	8,540,147

Cumulative sensitive liabilities	$	6,859,069	$	8,385,815	$	8,529,710	$	8,540,147

Repricing gap	$	941,241	$	(586,629)	$	4,209,632	$	895,209	$	5,459,453
Cumulative repricing gap		941,241		354,612		4,564,244		5,459,453
Ratio of interest-sensitive assets to liabilities		1.14		0.62		30.25		86.77		1.64
Ratio of cumulative, interest-sensitive assets to liabilities		1.14		1.04		1.54		1.64

Item 3. Quantitative and Qualitative Disclosures about Market Risk

During the six months ended June 30, 2025, there were no material changes in market risk exposures that affected the quantitative and qualitative disclosures regarding market risk presented under the caption “Liquidity and Capital Resources” located on pages 15 through 20 of our 2024 Annual Report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

Internal Control Over Financial Reporting

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

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

1A. Risk Factors

There were no material changes in the risk factors as previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 27, 2025.

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

Unregistered Sales of Equity Securities

During the six months ended June 30, 2025, there were no sales of equity securities that were not registered under the Securities Act of 1933, as amended, or which were not previously disclosed or reported in our Annual Report on Form 10-K for the year ended December 31, 2024 or a subsequent Current Report on Form 8-K.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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. The following table includes information about common stock share repurchases for the quarter ended June 30, 2025.


				Total Number of
				Shares
				Purchased as	Approximate
		Average		Part of a	Dollar Value of
	Total Number	Price Paid		Publicly-	Shares Available
	of Shares	Per		Announced	for
	Purchased	Share		Program	Repurchase(1)
April 1 – April 30, 2025	79,609	$	55.60	79,609	$	145,574,000
May 1 – May 31, 2025	—		—	—		145,574,000
June 1 – June 30, 2025	1,923		62.63	—		145,453,000
Total	81,532	$	55.77	79,609

(1)	The repurchase program was extended on March 12, 2025 and allows for the purchase of up to an additional $150,000,000 of common stock through March 15, 2026.

Item 5. Other Information

During the quarter ended June 30, 2025, there was no information required to be disclosed in a Current Report on Form 8-K which was not disclosed in a Current Report on Form 8-K.

During the quarter ended June 30, 2025, there were no material changes to the procedures by which shareholders may recommend nominees to our Board.

During the quarter ended June 30, 2025, none of the Company’s directors or officers adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Item 408 of Regulation S-K.

Item 6. Exhibits

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

(3a)* — Articles of Incorporation of International Bancshares Corporation.

(3b)* — Articles of Amendment to the Articles of Incorporation of International Bancshares Corporation dated May 22, 1998.

(3c)* — Articles of Amendment to the Articles of Incorporation of International Bancshares Corporation dated May 21, 2002.

(3d)* — Articles of Amendment to the Articles of Incorporation of International Bancshares Corporation filed with the Texas Secretary of State on May 17, 2005.

(3e)* — Articles of Amendment to the Articles of Incorporation of International Bancshares Corporation filed with the Texas Secretary of State on December 22, 2008.

(3f)* — Amended and Restated By-Laws of International Bancshares Corporation.

(3g)* — Certificate of Amendment to Articles of Incorporation of International Bancshares Corporation filed with the Texas Secretary of State on May 21, 2013.

13 —Annual report to Shareholders on Form ARS for the fiscal year ended December 31, 2024, furnished to the SEC on April 21, 2025

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

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

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

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

101++ — Interactive Data File

104++ — Cover Page Interactive Data File (included in Exhibit 101)

*Previously Filed

**This certification is furnished herewith and will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

++ Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Cover Page to this Form 10-Q; (ii) the Condensed Consolidated Statement of Earnings for the three and six months ended June 30, 2025 and June 30, 2024; (iii) the Condensed Consolidated Balance Sheet as of June 30, 2025 and December 31, 2024; and (iv) the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2025 and June 30, 2024.

SIGNATURES

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


		INTERNATIONAL BANCSHARES CORPORATION


Date:	August 7, 2025	/s/ Dennis E. Nixon
		Dennis E. Nixon
		President


Date:	August 7, 2025	/s/ Judith I. Wawroski
		Judith I. Wawroski
		Treasurer

Source:

FAQ

How much debt did Chesapeake Utilities (CPK) issue on August 1 2025?

The Company authorized $200 million of unsecured senior notes; $150 million funded immediately and $50 million is expected to fund 15 Sep 2025.

What are the interest rates and maturities of the new CPK senior notes?

Series 2025-A: 4.88% due 1 Aug 2028; Series 2025-B: 5.16% due 1 Aug 2031; Series 2025-C: 5.02% due 15 Sep 2030.

Did Chesapeake Utilities extend its revolving credit facility?

Yes, the $250 million 364-day revolver maturity was extended one year to 4 Aug 2026 under existing terms.

Will the new senior notes affect Chesapeake Utilities鈥� leverage?

The issuance increases total debt, so leverage and fixed interest expense are expected to rise until the proceeds generate additional earnings.

Are the senior notes registered with the SEC?

No. The notes were privately placed and are not registered under the Securities Act; resale is restricted absent an exemption.

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How much debt did Chesapeake Utilities (CPK) issue on August 1 2025?

What are the interest rates and maturities of the new CPK senior notes?

Did Chesapeake Utilities extend its revolving credit facility?

Will the new senior notes affect Chesapeake Utilities鈥� leverage?

Are the senior notes registered with the SEC?

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[10-Q] International Bancshares Corp Quarterly Earnings Report

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FAQ

How much debt did Chesapeake Utilities (CPK) issue on August 1 2025?

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Did Chesapeake Utilities extend its revolving credit facility?

Will the new senior notes affect Chesapeake Utilities鈥� leverage?

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