10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2014

OR

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

For the transition period from            to            

Commission file number 000-09439

INTERNATIONAL BANCSHARES CORPORATION

(Exact name of registrant as specified in its charter)

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

1200 San Bernardo Avenue, Laredo, Texas 78042-1359

(Address of principal executive offices)

(Zip Code)

(956) 722-7611

(Registrant’s telephone number, including area code)

None

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

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

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

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

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

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

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

Class	Shares Issued and Outstanding
Common Stock, $1.00 par value	66,595,786 shares outstanding at November 4, 2014

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Condition (Unaudited)

(Dollars in Thousands)

	September 30,			December 31,
	2014			2013
Assets
Cash and cash equivalents	$	303,570		$	274,785
Investment securities:
Held-to-maturity (Market value of $2,400 on September 30, 2014 and $2,400 on December 31, 2013)	2,400			2,400
Available-for-sale (Amortized cost of $4,803,160 on September 30, 2014 and $5,372,594 on December 31, 2013)	4,803,290			5,304,579
Total investment securities	4,805,690			5,306,979
Loans	5,660,578			5,199,235
Less allowance for probable loan losses	(71,727		)	(70,161		)
Net loans	5,588,851			5,129,074
Bank premises and equipment, net	524,384			504,842
Accrued interest receivable	28,573			30,654
Other investments	402,672			388,563
Identified intangible assets, net	940			3,186
Goodwill	282,532			282,532
Other assets	141,975			158,862
Total assets	$	12,079,187		$	12,079,477

1

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Condition, continued (Unaudited)

(Dollars in Thousands)

	September 30,			December 31,
	2014			2013
Liabilities and Shareholders’ Equity
Liabilities:
Deposits:
Demand – non-interest bearing	$	2,894,294		$	2,666,510
Savings and interest bearing demand	2,997,540			2,925,612
Time	2,522,239			2,651,303
Total deposits	8,414,073			8,243,425
Securities sold under repurchase agreements	869,411			957,381
Other borrowed funds	987,181			1,223,950
Junior subordinated deferrable interest debentures	180,416			190,726
Other liabilities	90,496			39,587
Total liabilities	10,541,577			10,655,069
Shareholders’ equity:
Common shares of $1.00 par value. Authorized 275,000,000 shares; issued 95,773,984 shares on September 30, 2014 and 95,743,592 shares on December 31, 2013	95,774			95,744
Surplus	165,088			163,947
Retained earnings	1,546,841			1,467,000
Accumulated other comprehensive income (loss) (including $(5,217) and $(5,646) of comprehensive loss related to other- than-temporary impairment for non-credit related issues)	133			(43,774		)
	1,807,836			1,682,917
Less cost of shares in treasury, 29,029,808 shares on September 30, 2014 and 28,537,180 December 31, 2013	(270,226		)	(258,509		)
Total shareholders’ equity	1,537,610			1,424,408
Total liabilities and shareholders’ equity	$	12,079,187		$	12,079,477

See accompanying notes to consolidated financial statements.

2

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

(Dollars in Thousands, except per share data)

	Three Months EndedSeptember 30,					Nine Months EndedSeptember 30,
	2014			2013		2014		2013
Interest income:
Loans, including fees	$	71,026		$	66,482	$	208,934	$	194,633
Investment securities:
Taxable	24,149			21,821		76,873		60,941
Tax-exempt	2,744			3,318		8,995		9,439
Other interest income	39			29		133		71
Total interest income	97,958			91,650		294,935		265,084
Interest expense:
Savings deposits	898			885		2,684		2,852
Time deposits	2,976			3,644		9,115		12,067
Securities sold under repurchase agreements	6,150			7,162		18,474		22,042
Other borrowings	488			454		1,608		1,033
Junior subordinated interest deferrable debentures	1,063			862		3,201		3,191
Total interest expense	11,575			13,007		35,082		41,185
Net interest income	86,383			78,643		259,853		223,899
Provision for probable loan losses	2,816			5,800		8,539		17,561
Net interest income after provision for probable loan losses	83,567			72,843		251,314		206,338
Non-interest income:
Service charges on deposit accounts	22,514			25,026		67,026		72,363
Other service charges, commissions and fees
Banking	10,880			11,327		33,791		31,362
Non-banking	2,083			2,092		5,143		4,668
Investment securities transactions, net	(6,446		)	—		1,283		9,601
Other investments, net	5,641			3,871		17,008		19,503
Other income	1,811			2,165		11,873		6,941
Total non-interest income	36,483			44,481		136,124		144,438

3

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income, continued (Unaudited)

(Dollars in Thousands, except per share data)

	Three Months EndedSeptember 30,					Nine Months EndedSeptember 30,
	2014			2013		2014		2013
Non-interest expense:
Employee compensation and benefits	$	32,326		$	30,627	$	92,560	$	91,602
Occupancy	7,865			7,604		22,729		22,596
Depreciation of bank premises and equipment	5,937			6,433		18,083		19,677
Professional fees	3,416			3,669		10,343		11,344
Deposit insurance assessments	1,515			1,683		4,512		5,061
Net expense, other real estate owned	(55		)	1,360		1,704		4,724
Amortization of identified intangible assets	117			1,156		2,246		3,451
Advertising	1,928			1,795		5,713		5,664
Early termination fee — securities sold under repurchase agreements	—			—		11,000		12,303
Impairment charges (Total other-than-temporary impairment losses, $(8), net of $(281), $(13), net of $(560), $(115), net of $(667), and $(27), net of $(1,273), included in other comprehensive income)	273			573		552		1,300
Other	16,835			15,327		47,043		47,080
Total non-interest expense	70,157			70,227		216,485		224,802
Income before income taxes	49,893			47,097		170,953		125,974
Provision for income taxes	16,660			15,271		56,356		38,566
Net income	$	33,233		$	31,826	$	114,597	$	87,408
Basic earnings per common share:
Weighted average number of shares outstanding:	66,860,997			67,197,847		66,971,555		67,192,112
Net income	$	.50		$	.47	$	1.71	$	1.30
Fully diluted earnings per common share:
Weighted average number of shares outstanding:	67,016,937			67,333,442		67,119,213		67,301,863
Net income	$	.50		$	.47	$	1.71	$	1.30

See accompanying notes to consolidated financial statements.

4

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)

	Three Months EndedSeptember 30,					Nine Months EndedSeptember 30,
	2014			2013		2014			2013
Net income	$	33,233		$	31,826	$	114,597		$	87,408
Other comprehensive income (loss), net of tax
Net unrealized holding gains (losses) on securities available for sale arising during period (tax effects of $(7,888), $609, $23,898 and $(39,816))	(14,649		)	1,132		44,382			(73,943		)
Reclassification adjustment for losses (gains) on securities available for sale included in net income (tax effects of $2,256, $0, $(449) and $(3,360))	4,190			—		(834		)	(6,241		)
Reclassification adjustment for impairment charges on available for sale securities included in net income (tax effects of $96 , $201, $193 and $455)	177			372		359			845
	(10,282		)	1,504		43,907			(79,339		)
Comprehensive income	$	22,951		$	33,330	$	158,504		$	8,069

See accompanying notes to consolidated financial statements.

5

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)

	Nine Months EndedSeptember 30,
	2014			2013
Operating activities:
Net income	$	114,597		$	87,408
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for probable loan losses	8,539			17,561
Specific reserve, other real estate owned	371			478
Depreciation of bank premises and equipment	18,083			19,677
Gain on sale of bank premises and equipment	(3,955		)	(626		)
Gain on sale of other real estate owned	(314		)	(201		)
Accretion of investment securities discounts	(2,161		)	(2,844		)
Amortization of investment securities premiums	20,096			35,666
Investment securities transactions, net	(1,283		)	(9,601		)
Impairment charges on available-for-sale investment securities	552			1,300
Amortization of identified intangible assets	2,246			3,451
Stock based compensation expense	766			322
Earnings from affiliates and other investments	(10,455		)	(16,085		)
Deferred tax benefit	(2,993		)	(2,325		)
Decrease in accrued interest receivable	2,081			2,051
Net (increase) decrease in other assets	(4,779		)	16,624
Net decrease in other liabilities	8,300			7,535
Net cash provided by operating activities	149,691			160,391
Investing activities:
Proceeds from sales and calls of available for sale securities	621,588			178,124
Purchases of available for sale securities	(648,910		)	(1,274,574		)
Principal collected on mortgage-backed securities	582,631			1,025,015
Net increase in loans	(470,723		)	(285,453		)
Purchases of other investments	(12,930		)	(1,637		)
Distributions received on other investments	23,311			4,159
Purchases of bank premises and equipment	(42,089		)	(30,792		)
Proceeds from sales of other real estate owned	10,251			19,303
Proceeds from sale of bank premises and equipment	8,419			653
Net cash (used in) provided by investing activities	71,548			(365,202		)

6

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows, continued (Unaudited)

(Dollars in Thousands)

	Nine Months EndedSeptember 30,
	2014			2013
Financing activities:
Net increase in non-interest bearing demand deposits	$	227,784		$	185,882
Net increase (decrease) in savings and interest bearing demand deposits	71,928			(108,029		)
Net decrease in time deposits	(129,064		)	(252,260		)
Net decrease in securities sold under repurchase agreements	(87,970		)	(128,542		)
Net (decrease) increase in other borrowed funds	(236,769		)	540,466
Purchase of treasury stock	(11,717		)	—
Repayment of long-term debt	(10,310		)	—
Proceeds from stock transactions	405			146
Payments of dividends on common stock	(16,741		)	(13,438		)
Net cash provided by (used in) financing activities	(192,454		)	224,225
Increase in cash and cash equivalents	28,785			19,414
Cash and cash equivalents at beginning of period	274,785			283,100
Cash and cash equivalents at end of period	$	303,570		$	302,514
Supplemental cash flow information:
Interest paid	$	35,764		$	43,405
Income taxes paid	64,912			45,480
Non-cash investing and financing activities:
Dividends declared, not yet paid on common stock	18,021			15,456
Net transfer from loans to other real estate owned	(2,406		)	(371		)

See accompanying notes to consolidated financial statements.

7

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 - Basis of Presentation

The accounting and reporting policies of International Bancshares Corporation (“Corporation”) and Subsidiaries (the Corporation and Subsidiaries collectively referred to herein as the “Company”) conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.  The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries, International Bank of Commerce, Laredo (“IBC”), Commerce Bank, International Bank of Commerce, Zapata, International Bank of Commerce, Brownsville and the Corporation’s wholly-owned non-bank subsidiaries, IBC Subsidiary Corporation, IBC Life Insurance Company, IBC Trading Company, IBC Capital Corporation, Premier Tierra Holdings, Inc and IBC Charitable and Community Development Corporation.  All significant inter-company balances and transactions have been eliminated in consolidation.  The consolidated financial statements are unaudited, but include all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the periods presented.  All such adjustments were of a normal and recurring nature.  It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto in the Company’s latest Annual Report on Form 10-K.  The consolidated statement of condition at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  Certain reclassifications have been made to make prior periods comparable.  Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results for the year ending December 31, 2014, or any future period.

The Company operates as one segment.  The operating information used by the Company’s chief executive officer for purposes of assessing performance and making operating decisions about the Company is the consolidated statements presented in this report.  The Company has four active operating subsidiaries, namely, the bank subsidiaries, otherwise known as International Bank of Commerce, Laredo, Commerce Bank, International Bank of Commerce, Zapata and International Bank of Commerce, Brownsville.  The Company applies the provision of ASC Topic 280, “Segment Reporting,” in determining its reportable segments and related disclosures.

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

Note 2 — Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  ASC 820 applies to all financial instruments that are being measured and reported on a fair value basis.  ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; it also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into the following three levels:

·Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities.

·Level 2 Inputs — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

·Level 3 Inputs — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, 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.

8

The following table represents financial instruments reported on the consolidated balance sheets at their fair value on a recurring basis as of September 30, 2014 by level within the fair value measurement hierarchy:

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage-backed securities	$	4,499,264	$	—	$	4,474,311	$	24,953
States and political subdivisions	275,120		—		275,120		—
Other	28,906		28,906		—		—
Total	$	4,803,290	$	28,906	$	4,749,431	$	24,953

The following table represents financial instruments reported on the consolidated balance sheets at their fair value on a recurring basis as of December 31, 2013 by level within the fair value measurement hierarchy:

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage-backed securities	$	5,027,701	$	—	$	4,999,849	$	27,852
States and political subdivisions	248,410		—		248,410		—
Other	28,468		28,468		—		—
Total	$	5,304,579	$	28,468	$	5,248,259	$	27,852

Investment securities available-for-sale are classified within level 2 and level 3 of the valuation hierarchy, with the exception of certain equity investments that are classified within level 1.  For investments classified as level 2 in the fair value hierarchy, the Company obtains fair value measurements for investment securities 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.  Investment securities classified as level 3 are non-agency mortgage-backed securities.  The non-agency mortgage-backed securities held by the Company are traded in inactive markets and markets that have experienced significant decreases in volume and level of activity, as evidenced by few recent transactions, a significant decline or absence of new issuances, price quotations that are not based on comparable securities transactions and wide bid-ask spreads among other factors.  As a result of the inability to use quoted market prices to determine fair value for these securities, the Company determined that fair value, as determined by level 3 inputs in the fair value hierarchy, is more appropriate for financial reporting and more consistent with the expected performance of the investments.  For the investments classified within level 3 of the fair value hierarchy, the Company used a discounted cash flow model to determine fair value.  Inputs in the model included both historical performance and expected future performance based on information currently available.

9

Assumptions used in the discounted cash flow model as of September 30, 2014 and December 31, 2013, were applied separately to those portions of the bond where the underlying residential mortgage loans had been performing under original contract terms for at least the prior 24 months and those where the underlying residential mortgages had not been meeting the original contractual obligation for the same period.  Unobservable inputs included in the model are estimates on future principal prepayment rates, and default and loss severity rates.  For that portion of the bond where the underlying residential mortgage had been meeting the original contract terms for at least 24 months, the Company used the following estimates in the model: (i) a voluntary prepayment rate of 7%, (ii) a 1% default rate, (iii) a loss severity rate of 25%, and (iv) a discount rate of 13%.  The assumptions used in the model for the rest of the bond included the following estimates:  (i) a voluntary prepayment rate of 2 %, (ii) a default rate of 4.5%, (iii) a loss severity rate that started at 60% for the first year (2012)  then declines by 5% for the following five years (2013, 2014, 2015, 2016 and 2017) and remains at 25% thereafter (2018 and beyond), and (iv) a discount rate of 13%.  The estimates used in the model to determine fair value are based on observable historical data of the underlying collateral.  The model anticipates that the housing market will gradually improve and that the underlying collateral will eventually all perform in accordance with the original contract terms on the bond.  Should the number of loans in the underlying collateral that default and go into foreclosure or the severity of the losses in the underlying collateral significantly change, the results of the model would be impacted.  The Company will continue to evaluate the actual historical performance of the underlying collateral and will modify the assumptions used in the model as necessary.

The following table presents a reconciliation of activity for such mortgage-backed securities on a net basis (Dollars in Thousands):

Balance at December 31, 2013	$	27,852
Principal pay downs	(3,014		)
Total unrealized gains (losses) included in:
Other comprehensive income	667
Impairment realized in earnings	(552		)
Balance at September 30, 2014	$	24,953

Certain financial instruments are measured at fair value on a nonrecurring basis.  They are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended September 30, 2014 by level within the fair value measurement hierarchy:

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities  Measured at Fair Value September 30,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Provision During Nine Month
	2014		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurring basis:
Assets:
Impaired loans	$	29,993	$	—	$	—	$	29,993	$	5,743
Other real estate owned	13,931		—		—		13,931		371

10

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the year ended December 31, 2013 by level within the fair value measurement hierarchy:

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Provision During Twelve Month
	2013		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurring basis:
Assets:
Impaired loans	$	28,391	$	—	$	—	$	28,391	$	13,229
Other real estate owned	16,329		—		—		16,329		1,204

The Company’s assets measured at fair value on a non-recurring basis are limited to impaired loans and other real estate owned.  Impaired loans are classified within level 3 of the valuation hierarchy.  The fair value of impaired loans is derived in accordance with FASB ASC 310, “Receivables”.  Impaired loans are primarily comprised of collateral-dependent commercial loans.   Understanding that as the primary sources of loan repayments decline, the secondary repayment source comes into play and correctly evaluating the fair value of that secondary source, the collateral, becomes even more important.  Re-measurement of the impaired loan to fair value is done through a specific valuation allowance included in the allowance for probable loan losses.  The fair value of impaired loans is based on the fair value of the collateral, as determined through either an appraisal or evaluation process.  The basis for the Company’s appraisal and appraisal review process is based on regulatory guidelines and strives to comply with all regulatory appraisal laws, regulations and the Uniform Standards of Professional Appraisal Practice. All appraisals and evaluations are “as is” (the property’s highest and best use) valuations based on the current conditions of the property/project at that point in time.  The determination of the fair value of the collateral is based on the net realizable value, which is the appraised value less any closing costs, when applicable.  As of September 30, 2014, the Company had $67,602,000 of impaired commercial collateral dependent loans, of which $21,015,000 had an appraisal or evaluation performed within the immediately preceding twelve months.  As of December 31, 2013, the Company had $64,585,000 of impaired commercial collateral dependent loans, of which $50,346,000 had an appraisal or evaluation performed within the immediately preceding twelve months.

The determination to either seek an appraisal or to perform an evaluation begins in weekly credit quality meetings, where the committee analyzes the existing collateral values of the impaired loans and where obsolete appraisals are identified.  In order to determine whether the Company would obtain a new appraisal or perform an internal evaluation to determine the fair value of the collateral, the credit committee reviews the existing appraisal to determine if the collateral value is reasonable in view of the current use of the collateral and the economic environment related to the collateral.  If the analysis of the existing appraisal does not find that the collateral value is reasonable under the current circumstances, the Company would obtain a new appraisal on the collateral or perform an internal evaluation of the collateral.  The ultimate decision to get a new appraisal rests with the independent credit administration group. A new appraisal is not required if an internal evaluation, as performed by in-house experts, is able to appropriately update the original appraisal assumptions to reflect current market conditions and provide an estimate of the collateral’s market value for impairment analysis.  The internal evaluations must be in writing and contain sufficient information detailing the analysis, assumptions and conclusions and they must support performing an evaluation in lieu of ordering a new appraisal.

Other real estate owned is comprised of real estate acquired by foreclosure and deeds in lieu of foreclosure. Other real estate owned is carried at the lower of the recorded investment in the property or its fair value less estimated costs to sell such property (as determined by independent appraisal) within level 3 of the fair value hierarchy.  Prior to foreclosure, the value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the allowance for probable loan losses, if necessary.  The fair value is reviewed periodically and subsequent write downs are made accordingly through a charge to operations.  Other real estate owned is included in other assets on the consolidated financial statements.  For the nine months ended September 30, 2014 and the twelve months ended December 31, 2013, respectively the Company recorded $328,000 and $402,000 in charges to the allowance for probable loan losses in connection with loans transferred to

11

other real estate owned.  For the nine months ended September 30, 2014 and twelve months ended December 31, 2013, respectively, the Company recorded $371,000 and $1,204,000 in adjustments to fair value in connection with other real estate owned.

The fair value estimates, methods, and assumptions for the Company’s financial instruments at September 30, 2014 and December 31, 2013 are outlined below.

Cash and Cash Equivalents

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

Time Deposits with Banks

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

Investment Securities Held-to-Maturity

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

Investment Securities

For investment securities, which include U.S. Treasury securities, obligations of other U.S. government agencies, obligations of states and political subdivisions and mortgage pass through and related securities, fair values are from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.  See disclosures of fair value of investment securities in Note 6.

Loans

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

For variable rate performing loans, the carrying amount approximates the fair value.  For fixed rate performing loans, except residential mortgage loans, the fair value is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan.  For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources or the primary origination market.  Fixed rate performing loans are within Level 3 of the fair value hierarchy.  At September 30, 2014, and December 31, 2013, the carrying amount of fixed rate performing loans was $1,307,205,000 and $1,243,252,000 respectively, and the estimated fair value was $1,238,356,000 and $1,196,916,000, 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 September 30, 2014 and December 31, 2013.  The fair value of time deposits is based on the discounted value of contractual cash flows.  The discount rate is based on currently offered rates.  Time deposits are within Level 3 of the fair value hierarchy.  At September 30, 2014 and December 31, 2013, the carrying amount of time deposits was $2,522,239,000 and $2,651,303,000, respectively, and the estimated fair value was $2,521,059,000 and $2,649,452,000, respectively.

Securities Sold Under Repurchase Agreements

Securities sold under repurchase agreements include both short and long-term maturities.  Due to the contractual

12

terms of the short-term instruments, the carrying amounts approximated fair value at September 30, 2014 and December 31, 2013.  The fair value of the long-term instruments is based on established market spreads using option adjusted spread methodology.  Long-term repurchase agreements are within level 3 of the fair value hierarchy.  At September 30, 2014 and December 31, 2013, respectively, the carrying amount of long-term repurchase agreements was $610,000,000 and $710,000,000 and the estimated fair value was $663,833,000 and $792,215,500, respectively.

Junior Subordinated Deferrable Interest Debentures

The Company currently has floating rate junior subordinated deferrable interest debentures outstanding.  Due to the contractual terms of the floating rate junior subordinated deferrable interest debentures, the carrying amounts approximated fair value at September 30, 2014 and December 31, 2013.

Other Borrowed Funds

The Company currently has short and long-term borrowings issued from the Federal Home Loan Bank (“FHLB”).  Due to the contractual terms of the short-term borrowings, the carrying amounts approximated fair value at September 30, 2014 and December 31, 2013.  The fair value of the long-term borrowings is based on established market spreads for similar types of borrowings.  The long-term borrowings are included in Level 2 of the fair value hierarchy.  At September 30, 2014 and December 31, 2013, the carrying amount of the long-term FHLB borrowings was $6,281,000 and $8,950,000 respectively, and the estimated fair value was $6,665,000 and $8,950,000, respectively.

Commitments to Extend Credit and Letters of Credit

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

Limitations

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

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

Note 3— Loans

A summary of loans, by loan type at September 30, 2014 and December 31, 2013 is as follows:

	September 30,		December 31,
	2014		2013
	(Dollars in Thousands)
Commercial, financial and agricultural	$	3,105,682	$	2,894,779
Real estate — mortgage	887,734		847,692
Real estate — construction	1,413,912		1,208,508
Consumer	61,993		66,414
Foreign	191,257		181,842
Total loans	$	5,660,578	$	5,199,235

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Note 4 - Allowance for Probable Loan Losses

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

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

The loan loss provision is determined using the following methods.  On a weekly basis, loan past due reports are reviewed by the credit quality committee to determine if a loan has any potential problems and if a loan should be placed on the Company’s internal classified report.  Additionally, the Company’s credit department reviews the majority of the Company’s loans for proper internal classification purposes regardless of whether they are past due and segregates any loans with potential problems for further review.  The credit department will discuss the potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the evaluation.  Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the review process.  After the above analysis is completed, the Company will determine if a loan should be placed on an internal classified report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.

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

	Quarter Ended September 30, 2014
	Domestic																					Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily			Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at June 30,	$	28,006		$	13,006		$	19,538		$	786		$	3,721		$	4,736		$	706		$	1,038		$	71,537
Losses charge to allowance	(2,920		)	(43		)	(38		)	—			(131		)	(242		)	(146		)	—			(3,520		)
Recoveries credited to allowance	740			14			42			—			11			40			47			—			894
Net (losses) gains charged to allowance	(2,180		)	(29		)	4			—			(120		)	(202		)	(99		)	—			(2,626		)
Provision (credit) charged to operations	2,454			852			(701		)	(41		)	27			164			79			(18		)	2,816
Balance at September 30,	$	28,280		$	13,829		$	18,841		$	745		$	3,628		$	4,698		$	686		$	1,020		$	71,727

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	Quarter Ended September 30, 2013
	Domestic																			Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial		Commercial real estate: multifamily		Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at June 30,	$	20,676		$	11,624		$	22,383	$	623	$	3,855		$	4,047		$	797		$	1,046		$	65,051
Losses charge to allowance	(3,540		)	(2		)	—		—		(22		)	(149		)	(130		)	(2		)	(3,845		)
Recoveries credited to allowance	658			10			9		—		45			80			21			—			823
Net (losses) gains charged to allowance	(2,882		)	8			9		—		23			(69		)	(109		)	(2		)	(3,022		)
Provision (credit) charged to operations	3,370			(10		)	1,549		112		186			404			124			65			5,800
Balance at September 30,	$	21,164		$	11,622		$	23,941	$	735	$	4,064		$	4,382		$	812		$	1,109		$	67,829

	Nine Months Ended September 30, 2014
	Domestic																					Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily			Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at December 31,	$	22,433		$	12,541		$	24,467		$	776		$	3,812		$	4,249		$	750		$	1,133		$	70,161
Losses charge to allowance	(7,780		)	(442		)	(208		)	—			(261		)	(395		)	(555		)	(50		)	(9,691		)
Recoveries credited to allowance	2,156			66			100			—			16			140			194			46			2,718
Net losses charged to allowance	(5,624		)	(376		)	(108		)	—			(245		)	(255		)	(361		)	(4		)	(6,973		)
Provision (credit) charged to operations	11,471			1,664			(5,518		)	(31		)	61			704			297			(109		)	8,539
Balance at September 30,	$	28,280		$	13,829		$	18,841		$	745		$	3,628		$	4,698		$	686		$	1,020		$	71,727

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	Nine Months Ended September 30, 2013
	Domestic																				Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily		Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at December 31,	$	11,632		$	12,720		$	21,880		$	694	$	4,390		$	4,448		$	1,289		$	1,140		$	58,193
Losses charge to allowance	(8,866		)	(250		)	(61		)	—		(221		)	(544		)	(446		)	(22		)	(10,410		)
Recoveries credited to allowance	1,909			36			150			—		54			204			127			5			2,485
Net (losses) gains charged to allowance	(6,957		)	(214		)	89			—		(167		)	(340		)	(319		)	(17		)	(7,925		)
Provision (credit) charged to operations	16,489			(884		)	1,972			41		(159		)	274			(158		)	(14		)	17,561
Balance at September 30,	$	21,164		$	11,622		$	23,941		$	735	$	4,064		$	4,382		$	812		$	1,109		$	67,829

The allowance for probable loan losses is a reserve established through a provision for probable loan losses charged to expense, which represents management’s best estimate of probable loan losses when evaluating loans (i) individually or (ii) collectively.

The table below provides additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class as of September 30, 2014 and December 31, 2013:

	September 30, 2014
	Loans individually evaluated for impairment				Loans collectively evaluated for impairment
	(Dollars in Thousands)
	Recorded Investment		Allowance		Recorded Investment		Allowance
Domestic
Commercial	$	40,195	$	16,302	$	1,219,188	$	11,978
Commercial real estate: other construction & land development	11,535		2,022		1,402,377		11,807
Commercial real estate: farmland & commercial	15,771		2,984		1,729,809		15,857
Commercial real estate: multifamily	251		—		100,468		745
Residential: first lien	5,457		—		412,101		3,628
Residential: junior lien	2,933		—		467,243		4,698
Consumer	1,408		—		60,585		686
Foreign	417		—		190,840		1,020
Total	$	77,967	$	21,308	$	5,582,611	$	50,419

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	December 31, 2013
	Loans individually evaluated for impairment				Loans collectively evaluated for impairment
	(Dollars in Thousands)
	Recorded Investment		Allowance		Recorded Investment		Allowance
Domestic
Commercial	$	34,183	$	12,234	$	1,008,459	$	10,199
Commercial real estate: other construction & land development	13,976		852		1,194,532		11,689
Commercial real estate: farmland & commercial	16,038		2,916		1,734,001		21,551
Commercial real estate: multifamily	295		—		101,803		776
Residential: first lien	6,153		—		432,309		3,812
Residential: junior lien	3,206		—		406,024		4,249
Consumer	1,606		—		64,808		750
Foreign	436		—		181,406		1,133
Total	$	75,893	$	16,002	$	5,123,342	$	54,159

The table below provides additional information on loans accounted for on a non-accrual basis by loan class at September 30, 2014 and December 31, 2013:

	September 30, 2014		December 31, 2013
	(Dollars in Thousands)
Domestic
Commercial	$	40,140	$	34,110
Commercial real estate: other construction & land development	9,281		11,726
Commercial real estate: farmland & commercial	13,508		13,775
Commercial real estate: multifamily	251		295
Residential: first lien	516		1,266
Residential: junior lien	1,549		1,576
Consumer	39		75
Total non-accrual loans	$	65,284	$	62,823

Impaired loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected.  The Company has identified these loans through its normal loan review procedures.  Impaired loans are measured based on (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent.  Substantially all of the Company’s impaired loans are measured at the fair value of the collateral. In limited cases the Company may use other methods to determine the level of impairment of a loan if such loan is not collateral dependent.

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The following tables detail key information regarding the Company’s impaired loans by loan class at September 30, 2014 and December 31, 2013:

	September 30, 2014
							Quarter to Date				Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,659	$	17,685	$	16,302	$	17,677	$	—	$	17,550	$	—
Commercial real estate: other construction & land development	7,344		7,386		2,022		7,329		—		7,326		—
Commercial real estate: farmland & commercial	7,427		7,789		2,984		7,519		23		6,839		69
Total impaired loans with related allowance	$	32,430	$	32,860	$	21,308	$	32,525	$	23	$	31,715	$	69

	September 30, 2014
					Quarter to Date				Year to Date
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	22,536	$	22,606	$	21,265	$	1	$	19,557	$	3
Commercial real estate: other construction & land development	4,191		4,262		4,192		19		5,121		56
Commercial real estate: farmland & commercial	8,344		9,664		8,418		—		8,643		—
Commercial real estate: multifamily	251		251		256		—		270		—
Residential: first lien	5,457		5,507		5,648		64		6,028		191
Residential: junior lien	2,933		2,954		2,992		22		3,080		69
Consumer	1,408		1,410		1,408		1		1,407		3
Foreign	417		417		420		5		426		14
Total impaired loans with no related allowance	$	45,537	$	47,071	$	44,599	$	112	$	44,532	$	336

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	December 31, 2013
			Unpaid				Year to Date
	Recorded Investment		Principal Balance		Related Allowance		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,178	$	17,177	$	12,234	$	18,019	$	38
Commercial real estate: other construction & land development	6,818		6,825		852		6,058		—
Commercial real estate: farmland & commercial	7,259		10,697		2,916		7,167		92
Total impaired loans with related allowance	$	31,255	$	34,699	$	16,002	$	31,244	$	130

	December 31, 2013
					Year to Date
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	17,005	$	17,023	$	16,778	$	2
Commercial real estate: other construction & land development	7,158		7,187		18,164		74
Commercial real estate: farmland & commercial	8,779		9,949		7,313		—
Commercial real estate: multifamily	295		295		322		—
Residential: first lien	6,153		6,258		4,860		179
Residential: junior lien	3,206		3,226		2,347		99
Consumer	1,606		1,612		1,380		1
Foreign	436		436		452		19
Total impaired loans with no related allowance	$	44,638	$	45,986	$	51,616	$	374

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The following tables detail key information regarding the Company’s average recorded investment in impaired loans and interest recognized on impaired loans by loan class at September 30, 2013:

	September 30, 2013
	Quarter to Date				Year to Date
	Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,884	$	9	$	17,898	$	29
Commercial real estate: other construction & land development	6,821		—		5,804		—
Commercial real estate: farmland & commercial	7,771		23		7,034		69
Total impaired loans with related allowance	$	32,476	$	32	$	30,736	$	98

	September 30, 2013
	Quarter to Date				Year to Date
	Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	17,238	$	—	$	16,915	$	—
Commercial real estate: other construction & land development	22,414		17		20,788		53
Commercial real estate: farmland & commercial	8,775		—		6,787		—
Commercial real estate: multifamily	316		—		330		—
Residential: first lien	4,878		45		4,441		117
Residential: junior lien	2,731		25		2,059		74
Consumer	1,458		—		1,313		—
Foreign	457		5		456		14
Total impaired loans with no related allowance	$	58,267	$	92	$	53,089	$	258

A portion of the impaired loans have adequate collateral and credit enhancements not requiring a related allowance for loan loss.  The level of impaired loans is reflective of the economic weakness that has been created by the financial crisis and the subsequent economic downturn.  Management is confident the Company’s loss exposure regarding these credits will be significantly reduced due to the Company’s long-standing practices that emphasize secured lending with strong collateral positions and guarantor support.  Management is likewise confident the reserve for probable loan losses is adequate.  The Company has no direct exposure to sub-prime loans in its loan portfolio, but the sub-prime crisis has affected the credit markets on a national level, and as a result, the Company has experienced an increasing amount of impaired loans; however, management’s decision to place loans in this category does not necessarily mean that the Company will experience significant losses from these loans or significant increases in impaired loans from these levels.

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Management of the Company recognizes the risks associated with these impaired loans.  However, management’s decision to place loans in this category does not necessarily mean that losses will occur. In the current environment, troubled loan management can be protracted because of the legal and process problems that delay the collection of an otherwise collectable loan.  Additionally, management believes that the collateral related to these impaired loans and/or the secondary support from guarantors mitigates the potential for losses from impaired loans.  It is also important to note that even though the economic conditions in Texas and Oklahoma are weakened, we believe these markets are continuing to improve and continue to be in a position to recover better than many other areas of the country.

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

	September 30, 2014		December 31, 2013
	(Dollars in Thousands)
Domestic
Commercial	$	2,512	$	150
Commercial real estate: other construction & land development	2,255		8,860
Commercial real estate: farmland & commercial	4,556		2,863
Residential: first lien	4,941		4,887
Residential: junior lien	1,384		1,631
Consumer	1,368		1,531
Foreign	417		436
Total trouble debt restructuring	$	17,433	$	20,358

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

While management of the Company considers that it is generally able to identify borrowers with financial problems reasonably early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses.  The determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an exercise of judgment.  Similarly, the determination of the adequacy of the allowance for probable loan losses can be made only on a subjective basis.  It is the judgment of the Company’s management that the allowance for probable loan losses at September 30, 2014 was adequate to absorb probable losses from loans in the portfolio at that date.

21

The following table presents information regarding the aging of past due loans by loan class at September 30, 2014 and December 31, 2013:

	September 30, 2014
	30 – 59 Days		60 – 89 Days		90 Days or Greater		90 Days or Greater & Still Accruing		Total Past Due		Current		Total Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	7,780	$	3,183	$	46,840	$	11,510	$	57,803	$	1,201,580	$	1,259,383
Commercial real estate: other construction & land development	2,591		16		8,454		204		11,061		1,402,851		1,413,912
Commercial real estate: farmland & commercial	14,466		878		8,475		892		23,819		1,721,761		1,745,580
Commercial real estate: multifamily	878		—		251		—		1,129		99,590		100,719
Residential: first lien	7,451		1,680		3,409		3,016		12,540		405,018		417,558
Residential: junior lien	844		164		2,033		508		3,041		467,135		470,176
Consumer	986		202		653		621		1,841		60,152		61,993
Foreign	1,392		559		170		170		2,121		189,136		191,257
Total past due loans	$	36,388	$	6,682	$	70,285	$	16,921	$	113,355	$	5,547,223	$	5,660,578

	December 31, 2013
	30 – 59 Days		60 – 89 Days		90 Days or Greater		90 Days or Greater & Still Accruing		Total Past Due		Current		Total Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	4,240	$	538	$	36,066	$	2,051	$	40,844	$	1,001,798	$	1,042,642
Commercial real estate: other construction & land development	1,042		—		9,942		62		10,984		1,197,524		1,208,508
Commercial real estate: farmland & commercial	6,216		520		6,990		417		13,726		1,736,313		1,750,039
Commercial real estate: multifamily	39		142		295		—		476		101,622		102,098
Residential: first lien	4,758		3,046		4,541		3,518		12,345		426,117		438,462
Residential: junior lien	606		198		1,900		368		2,704		406,526		409,230
Consumer	1,523		469		803		781		2,795		63,619		66,414
Foreign	1,467		417		—		—		1,884		179,958		181,842
Total past due loans	$	19,891	$	5,330	$	60,537	$	7,197	$	85,758	$	5,113,477	$	5,199,235

The Company’s internal classified report is segregated into the following categories:  (i) “Special Review Credits,” (ii) “Watch List - Pass Credits,” or (iii) “Watch List - Substandard Credits.”  The loans placed in the “Special Review Credits” category reflect the Company’s opinion that the loans reflect potential weakness which require monitoring on a more frequent basis.  The “Special Review Credits” are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted.  The loans placed in the “Watch List - Pass Credits”

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category reflect the Company’s opinion that the credit contains weaknesses which represent a greater degree of risk, which warrant “extra attention.”  The “Watch List — Pass Credits” are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted.  The loans placed in the “Watch List — Substandard Credits” classification are considered to be potentially inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral.  These credit obligations, even if apparently protected by collateral value, have shown defined weaknesses related to adverse financial, managerial, economic, market or political conditions which may jeopardize repayment of principal and interest.  Furthermore, there is the possibility that some future loss could be sustained by the Company if such weaknesses are not corrected.  For loans that are classified as impaired, management evaluates these credits in accordance with the provisions of ASC 310-10, “Receivables,” and, if deemed necessary, a specific reserve is allocated to the credit.  The specific reserve allocated under ASC 310-10, is based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral if the loan is collateral dependent.  Substantially all of the Company’s loans evaluated as impaired under ASC 310-10 are measured using the fair value of collateral method.  In limited cases, the Company may use other methods to determine the specific reserve of a loan under ASC 310-10 if such loan is not collateral dependent.

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

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A summary of the loan portfolio by credit quality indicator by loan class at September 30, 2014 and December 31, 2013 is as follows:

	September 30, 2014
	Pass		Special Review		Watch List - Pass		Watch List - Substandard		Watch List - Impaired
	(Dollars in Thousands)
Domestic
Commercial	$	1,165,427	$	992	$	1,759	$	51,010	$	40,195
Commercial real estate: other construction & land development	1,347,079		340		10,561		44,397		11,535
Commercial real estate: farmland & commercial	1,630,133		8,114		20,690		70,872		15,771
Commercial real estate: multifamily	99,649		—		—		819		251
Residential: first lien	411,888		112		—		101		5,457
Residential: junior lien	466,798		—		—		445		2,933
Consumer	60,452		—		—		133		1,408
Foreign	190,840		—		—		—		417
Total	$	5,372,266	$	9,558	$	33,010	$	167,777	$	77,967

	December 31, 2013
	Pass		Special Review		Watch List - Pass		Watch List - Substandard		Watch List - Impaired
	(Dollars in Thousands)
Domestic
Commercial	$	955,522	$	2,270	$	4,389	$	46,278	$	34,183
Commercial real estate: other construction & land development	1,167,295		14,247		9,318		3,672		13,976
Commercial real estate: farmland & commercial	1,635,179		56,438		21,912		20,472		16,038
Commercial real estate: multifamily	100,948		—		—		855		295
Residential: first lien	432,067		122		—		120		6,153
Residential: junior lien	405,731		—		—		293		3,206
Consumer	64,808		—		—		—		1,606
Foreign	180,837		—		—		569		436
Total	$	4,942,387	$	73,077	$	35,619	$	72,259	$	75,893

The increase in the watch-list substandard category can be attributed primarily to a loan relationship that further deteriorated in the first nine months of 2014.  The majority of the relationship had previously been included in the special review category at December 31, 2013.

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Note 5 — Stock Options

On April 5, 2012, the Board of Directors adopted the 2012 International Bancshares Corporation Stock Option Plan (the “2012 Plan”). There are 800,000 shares available for stock option grants under the 2012 Plan. Under the 2012 Plan, both qualified incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”) may be granted. Options granted may be exercisable for a period of up to 10 years from the date of grant, excluding ISOs granted to 10% shareholders, which may be exercisable for a period of up to only five years. As of September 30, 2014, 211,500 shares were available for future grants under the 2012 Plan.

A summary of option activity under the stock option plans for the nine months ended September 30, 2014 is as follows:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($)
					(Dollars in Thousands)
Options outstanding at December 31, 2013	515,143	$	15.98
Plus: Options granted	549,750	21.42
Less:
Options exercised	30,392	13.36
Options expired	11,825	26.70
Options forfeited	19,775	18.60
Options outstanding at September 30, 2014	1,002,901	18.86		6.77	$	7,011
Options fully vested and exercisable at September 30, 2014	230,006	$	17.08	2.10	$	2,057

Stock-based compensation expense included in the consolidated statements of income for the three and nine months ended September 30, 2014 was approximately $301,000 and $766,000, respectively.  Stock-based compensation expense included in the consolidated statements of income for the three and nine months ended September 30, 2013 was approximately $101,000 and $322,000, respectively.  As of September 30, 2014, there was approximately $4,226,000           of total unrecognized stock-based compensation cost related to non-vested options granted under the Company plans that will be recognized over a weighted average period of 2.4 years.

Note 6 - Investment Securities

The Company classifies debt and equity securities into one of three categories:  held-to maturity, available-for-sale, or trading.  Such 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.

The amortized cost and estimated fair value by type of investment security at September 30, 2014 are as follows:

	Held to Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

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	Available for Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Carrying Value (1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	4,513,064	$	46,900	$	(60,700	)	$	4,499,264	$	4,499,264
Obligations of states and political subdivisions	262,021		18,662		(5,563		)	275,120		275,120
Equity securities	28,075		1,101		(270		)	28,906		28,906
Total investment securities	$	4,803,160	$	66,663	$	(66,533	)	$	4,803,290	$	4,803,290

(1)   Included in the carrying value of residential mortgage-backed securities are $1,551,363 of mortgage-backed securities issued by Ginnie Mae, $2,922,948 of mortgage-backed securities issued by Fannie Mae and Freddie Mac and $24,953 issued by non-government entities

The amortized cost and estimated fair value by type of investment security at December 31, 2013 are as follows:

	Held to Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	Available for Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Carrying Value (1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	5,096,165	$	56,110	$	(124,574	)	$	5,027,701	$	5,027,701
Obligations of states and political subdivisions	248,354		8,063		(8,007		)	248,410		248,410
Equity securities	28,075		931		(538		)	28,468		28,468
Total investment securities	$	5,372,594	$	65,104	$	(133,119	)	$	5,304,579	$	5,304,579

(1)   Included in the carrying value of residential mortgage-backed securities are $1,799,807 of mortgage-backed securities issued by Ginnie Mae, $3,200,042 of mortgage-backed securities issued by Fannie Mae and Freddie Mac and $27,852 issued by non-government entities

The amortized cost and estimated fair value of investment securities at September 30, 2014, 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.

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	Held to Maturity				Available for Sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Due in one year or less	$	1,075	$	1,075	$	—	$	—
Due after one year through five years	1,325		1,325		—		—
Due after five years through ten years	—		—		727		810
Due after ten years	—		—		261,294		274,310
Residential mortgage-backed securities	—		—		4,513,064		4,499,264
Equity securities	—		—		28,075		28,906
Total investment securities	$	2,400	$	2,400	$	4,803,160	$	4,803,290

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

The amortized cost and fair value of available for sale investment securities pledged to qualify for fiduciary powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was $2,156,453,000 and $2,164,872,000 at September 30, 2014.

Proceeds from the sale of securities available-for-sale were $253,292,000 and $621,588,000 for the three and nine months ended September 30, 2014, which included $253,292,000 and $620,933,000 of mortgage-backed securities. Gross gains of $0 and $9,479,000 and gross losses of $(6,446,000) and $(8,196,000) were realized on the sales for the three and nine months ended September 30, 2014, respectively.  Proceeds from the sale of securities available-for-sale were $0 and $178,124,000 for the three and nine months ended September 30, 2013, which included $0 and $177,623,000 of mortgage-backed securities. Gross gains of $0 and $9,601,000 and gross losses of $0 and $0 were realized on the sales for the three and nine months ended September 30, 2013, respectively.

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2014, were as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities	$	664,223	$	(3,327	)	$	1,889,249	$	(57,373	)	$	2,553,472	$	(60,700	)
Obligations of states and political subdivisions	1,595		(51		)	30,833		(5,512		)	32,428		(5,563		)
Other equity securities	—		—			10,480		(270		)	10,480		(270		)
	$	665,818	$	(3,378	)	$	1,930,562	$	(63,155	)	$	2,596,380	$	(66,533	)

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Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2013 were as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities	$	2,459,565	$	(98,022	)	$	420,262	$	(26,552	)	$	2,879,827	$	(124,574	)
Obligations of states and political subdivisions	55,327		(3,025		)	14,292		(4,982		)	69,619		(8,007		)
Equity securities	19,462		(538		)	—		—			19,462		(538		)
	$	2,534,354	$	(101,585	)	$	434,554	$	(31,534	)	$	2,968,908	$	(133,119	)

The unrealized losses on investments in residential mortgage-backed securities are primarily caused by changes in market interest rates.  Residential mortgage-backed securities are primarily securities issued by Freddie Mac, Fannie Mae and Ginnie Mae.  The contractual cash obligations of the securities issued by Ginnie Mae are fully guaranteed by the U.S. Government.  The contractual cash obligations of the securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government; however, the Company believes that the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008 and because securities issued by others that are collateralized by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated securities.  The decrease in fair value on residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae is due to market interest rates.  The Company has no intent to sell such mortgage-backed securities, and will more than likely not be required to sell such securities before a market price recovery or maturity of the securities; therefore, it is the conclusion of the Company that the investments in residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae are not considered other-than-temporarily impaired.  In addition, the Company has a small investment in non-agency residential mortgage-backed securities that have strong credit backgrounds and include additional credit enhancements to protect the Company from losses arising from high foreclosure rates.  These securities have additional market volatility beyond economically induced interest rate events.  It is the conclusion of the Company that the investments in non-agency residential mortgage-backed securities are other-than-temporarily impaired due to both credit and other than credit issues.  Impairment charges of $273,000 ($177,000, after tax) and $552,000 ($359,000, after tax) were recorded for the three and nine months ended September 30, 2014, respectively. Impairment charges of $573,000 ($372,000, after tax) and $1,300,000 ($845,000, after tax) were recorded for the three and nine months ended September 30, 2013, respectively. The impairment charge represents the credit related impairment on the securities.

The unrealized losses on investments in other securities are caused by fluctuations in market interest rates.  The underlying cash obligations of the securities are guaranteed by the entity underwriting the debt instrument.  It is the belief of the Company that the entity issuing the debt will honor its interest payment schedule, as well as the full debt at maturity.  The securities are purchased by the Company for their economic value.  The decrease in fair value is primarily due to market interest rates and not other factors, and because the Company has no intent to sell and will more than likely not be required to sell before a market price recovery or maturity of the securities, it is the conclusion of the Company that the investments are not considered other-than-temporarily impaired.

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investments recognized in earnings for the three months ended September 30, 2014 (Dollars in Thousands):

Balance at June 30, 2014	$	12,085
Impairment charges recognized during period	273
Balance at September 30, 2014	$	12,358

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The following table presents a reconciliation of credit-related impairment charges on available-for-sale investments recognized in earnings for the nine months ended September 30, 2014 (Dollars in Thousands):

Balance at December 31, 2013	$	11,806
Impairment charges recognized during period	552
Balance at September 30, 2014	$	12,358

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investment recognized in earnings for the three months ended September 30, 2013 (Dollars in Thousands):

Balance at June 30, 2013	$	11,159
Impairment charges recognized during period	573
Balance at September 30, 2013	$	11,732

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investment recognized in earnings for the nine months ended September 30, 2013 (Dollars in Thousands):

Balance at December 31, 2012	$	10,432
Impairment charges recognized during period	1,300
Balance at September 30, 2013	$	11,732

Note 7 — Other Borrowed Funds

Other borrowed funds include Federal Home Loan Bank borrowings, which are short-term and long-term borrowings issued by the FHLB of Dallas at the market price offered at the time of funding.  These borrowings are secured by residential mortgage-backed investment securities and a portion of the Company’s loan portfolio.  At September 30, 2014, other borrowed funds totaled $987,181,000, a decrease of 19.3% from $1,223,950,000 at December 31, 2013.

Note 8 — Junior Subordinated Interest Deferrable Debentures

The Company has formed seven statutory business trusts under the laws of the State of Delaware, for the purpose of issuing trust preferred securities. The seven statutory business trusts formed by the Company (the “Trusts”) have each issued Capital and Common Securities and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (the “Debentures”) issued by the Company. As of September 30, 2014 and December 31, 2013, the principal amount of debentures outstanding totaled $180,416,000 and $190,726,000, respectively. On February 11, 2014, the Company bought back the capital securities of IB Capital Trust VII from the holder of the securities for a price that reflected an approximate six percent discount from the redemption price of the securities and thereby retired the $10,310,000 of related Junior Subordinated Deferrable Interest Debentures related to IB Capital Trust VII.

The Debentures are subordinated and junior in right of payment to all present and future senior indebtedness (as defined in the respective indentures) of the Company, and are pari passu with one another. The interest rate payable on, and the payment terms of the Debentures are the same as the distribution rate and payment terms of the respective issues of Capital and Common Securities issued by the Trusts. The Company has fully and unconditionally guaranteed the obligations of each of the Trusts with respect to the Capital and Common Securities. The Company has the right, unless an Event of Default (as defined in the Indentures) has occurred and is continuing, to defer payment of interest on the Debentures for up to twenty consecutive quarterly periods on Trusts VI, VIII, IX, X, XI and XII. If interest payments on any of the Debentures are deferred, distributions on both the Capital and Common Securities related to that Debenture would also be deferred. The redemption prior to maturity of any of the Debentures may require the prior approval of the Federal Reserve and/or other regulatory bodies.  In February 2014, the Company redeemed all of the outstanding Capital and Common Securities issued by Trust VII.

For financial reporting purposes, the Trusts are treated as investments of the Company and not consolidated in the consolidated financial statements.  Although the Capital Securities issued by each of the Trusts are not included as a component of shareholders’ equity on the consolidated statement of condition, the Capital Securities are treated as capital for regulatory purposes.  Specifically, under applicable regulatory guidelines, the Capital 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 September 30, 2014 and December 31, 2013, the total $180,416,000 and $190,726,000, respectively, of the Capital Securities outstanding qualified as Tier 1 capital.

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The following table illustrates key information about each of the Capital and Common Securities and their interest rate at September 30, 2014:

	Junior Subordinated Deferrable Interest Debentures		Repricing Frequency	Interest Rate		Interest Rate Index	Maturity Date	Optional Redemption Date(1)
(In Thousands)
Trust VI	$	25,774	Quarterly	3.68	%	LIBOR + 3.45	November 2032	February 2008
Trust VIII	25,774		Quarterly	3.28	%	LIBOR + 3.05	October 2033	October 2008
Trust IX	41,238		Quarterly	1.85	%	LIBOR + 1.62	October 2036	October 2011
Trust X	34,021		Quarterly	1.89	%	LIBOR + 1.65	February 2037	February 2012
Trust XI	32,990		Quarterly	1.85	%	LIBOR + 1.62	July 2037	July 2012
Trust XII	20,619		Quarterly	1.68	%	LIBOR + 1.45	September 2037	September 2012
	$	180,416

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

Note 9 — Common Stock and Dividends

The Company had outstanding 216,000 shares of Series A cumulative perpetual preferred stock (the “Senior Preferred Stock”), issued to the US Treasury under the Company’s participation in the Troubled Asset Relief Program Capital Purchase Program (the “TARP Capital Purchase Program”).  The Company redeemed all of the Senior Preferred Stock in 2012.  In conjunction with the purchase of the Senior Preferred Stock, the US Treasury received a warrant (the “Warrant”) to purchase 1,326,238 shares of the Company’s common stock (the “Warrant Shares”) at $24.43 per share, which would represent an aggregate common stock investment in the Company on exercise of the warrant in full equal to 15% of the Senior Preferred Stock investment.  The term of the Warrant is ten years and was immediately exercisable.  The Warrant is included as a component of Tier 1 capital.  On June 12, 2013, the U. S. Treasury sold the Warrant to a third party.  As of September 30, 2014, the Warrant is still outstanding, but expires on December 23, 2018 with no value if not exercised before that date.

The Company paid cash dividends to the common shareholders of $.25 per share on April 18, 2014 to all holders of record on April 1, 2014 and $.27 per share on October 15, 2014 to all shareholders of record on September 30, 2014.  The Company paid cash dividends to the common shareholders of $.20 per share on April 20, 2013 to all holders of record on April 1, 2013 and $.23 per share on October 15, 2013 to all holders of record on September 30, 2013, respectively.

In April 2009, following receipt of the Treasury Department’s consent, the Board of Directors re-established a formal stock repurchase program that authorized the repurchase of up to $40 million of common stock within the following twelve months and on March 7, 2014,  the Board of Directors extended the repurchase program and again authorized the repurchase of up to $40 million of common stock during the twelve month period commencing on April 9, 2014, which repurchase cap the Board is inclined to increase over time.  Stock repurchases may be made from time to time, on the open market or through private transactions.  Shares repurchased in this program will be held in treasury for reissue for various corporate purposes, including employee stock option plans.  As of November 5, 2014, a total of 8,489,280 shares had been repurchased under all programs at a cost of $252,989,000.

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Note 10 - Commitments and Contingent Liabilities

The Company is involved in various legal proceedings that are in various stages of litigation.  Some of these actions allege “lender liability” claims on a variety of theories and claim substantial actual and punitive damages.  The Company has determined, based on discussions with its counsel that any material loss in such actions, individually or in the aggregate, is remote or the damages sought, even if fully recovered, would not be considered material to the consolidated financial position, results of operations or cash flows of the Company.  However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.

Note 11 — Capital Ratios

The Company had a Tier 1 capital to average total asset (leverage) ratio of 12.16% and 11.61%, risk-weighted Tier 1 capital ratio of 19.11% and 19.33% and risk-weighted total capital ratio of 20.11% and 20.36% at September 30, 2014 and December 31, 2013, respectively.  The identified intangibles and goodwill of $283,472,000 as of September 30, 2014, recorded in connection with the acquisitions made by the Company, are deducted from the sum of core capital elements when determining the capital ratios of the Company.  Under applicable regulatory guidelines, the Capital 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 qualifies as Tier 2 capital.  As of September 30, 2014, the total of $180,416,000 of the Capital Securities outstanding qualified as Tier 1 capital.  The Company actively monitors the regulatory capital ratios to ensure that the Company’s bank subsidiaries are well capitalized under the regulatory framework.

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

The following discussion should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the year-ended December 31, 2013, included in the Company’s 2013 Form 10-K.  Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results for the year ending December 31, 2014, or any future period.

Special Cautionary Notice Regarding Forward Looking Information

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

Risk factors that could cause actual results to differ materially from any results that are projected, forecasted, estimated or budgeted by the Company in forward-looking statements include, among others, the following possibilities:

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

·Volatility and disruption in national and international financial markets.

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

·The Company relies, in part, on external financing to fund the Company’s operations from the FHLB, the Fed and other sources and the unavailability of such funding sources in the future could adversely impact the Company’s growth strategy, prospects and performance.

·Changes in consumer spending, borrowings and savings habits.

·Changes in interest rates and market prices, which could reduce the Company’s net interest margins, asset valuations and expense expectations, including, without limitation, the repeal of federal prohibitions on the payment of interest on demand deposits.

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·Changes in the capital markets utilized by the Company and its subsidiaries, including changes in the interest rate environment that may reduce margins.

·Changes in state and/or federal laws and regulations to which the Company and its subsidiaries, as well as their customers, competitors and potential competitors, are subject, including, without limitation, the impact of the Consumer Financial Protection Bureau as a new 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, without limitation, reductions in border crossings and commerce resulting from the Homeland Security Programs called “US-VISIT,” which is derived from Section 110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996.

·The reduction of deposits from nonresident alien individuals due to the new IRS rules requiring U.S. financial institutions to report to the IRS deposit interest payments made to nonresident alien individuals.

·The loss of senior management or operating personnel.

·Increased competition from both within and outside the banking industry.

·The timing, impact and other uncertainties of the Company’s potential future acquisitions including the Company’s ability to identify suitable potential future acquisition candidates, the success or failure in the integration of their operations and the Company’s ability to maintain its current branch network and to enter new markets successfully and capitalize on growth opportunities.

·Changes in the Company’s ability to pay dividends on its Common Stock.

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

·Additions to the Company’s loan loss allowance as a result of changes in local, national or international conditions which adversely affect the Company’s customers, including, without limitation, lower real estate values or environmental liability risks associated with foreclosed properties.

·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 the Company interacts.

·Political instability in the United States or Mexico.

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

·Acts of war or terrorism.

·Natural disasters.

·Reduced earnings resulting from the write down of the carrying value of securities held in our securities available-for-sale portfolio following a determination that the securities are other-than-temporarily impaired.

·The effect of changes in accounting policies and practices as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standards setters.

·The costs and effects of regulatory developments, including the resolution of regulatory or other governmental inquiries and the results of regulatory examinations or reviews.

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

·The reduction of income and possible increase in required capital levels related to the adoption of new legislation, including, without limitation, the Dodd-Frank Regulatory Reform Act (the “Dodd-Frank Act”) and the implementing rules and regulations, including the Federal Reserve’s rule that establishes debit card interchange fee standards and prohibits network exclusivity arrangements and routing restrictions that is negatively affecting interchange revenue from debit card transactions as well as revenue from consumer services.

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

·The enhanced due diligence burden imposed on banks related to the banks’ inability to rely on credit ratings under Dodd-Frank which may result in a limitation on the types of securities certain banks will be able to purchase as a result of the due diligence burden.

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·The Company’s success at managing the risks involved in the foregoing items, or a failure or circumvention of the Company’s internal controls and risk management, policies and procedures.

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

Overview

The Company, which is headquartered in Laredo, Texas, with 217 facilities and more than 320 ATMs, provides banking services for commercial, consumer and international customers of South, Central and Southeast Texas and the State of Oklahoma.  The Company is one of the largest independent commercial bank holding companies headquartered in Texas.  The Company, through its bank subsidiaries, is in the business of gathering funds from various sources and investing those funds in order to earn a return.  The Company either directly or through a bank subsidiary owns two insurance agencies, a liquidating subsidiary, a broker/dealer and a fifty percent interest in an investment banking unit that owns a broker/dealer.  The Company’s primary earnings come from the spread between the interest earned on interest-bearing assets and the interest paid on interest-bearing liabilities.  In addition, the Company generates income from fees on products offered to commercial, consumer and international customers.

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

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

Results of Operations

Summary

Consolidated Statements of Condition Information

	September 30, 2014		December 31, 2013		Percent Increase (Decrease)
	(Dollars in Thousands)
Assets	$	12,079,187	$	12,079,477	—	%
Net loans	5,588,851		5,129,074		9.0
Deposits	8,414,073		8,243,425		2.1
Other borrowed funds	987,181		1,223,950		(19.3	)
Junior subordinated deferrable interest debentures	180,416		190,729		(5.4	)
Shareholders’ equity	1,537,610		1,424,408		7.9

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Consolidated Statements of Income Information

	Three Months Ended September 30,				Percent		Nine Months Ended September 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2014		2013		(Decrease)		2014		2013		(Decrease)
Interest income	$	97,958	$	91,650	6.9	%	$	294,935	$	265,084	11.3	%
Interest expense	11,575		13,007		(11.0	)	35,082		41,185		(14.8	)
Net interest income	86,383		78,643		9.8		259,853		223,899		16.1
Provision for probable loan losses	2,816		5,800		(51.4	)	8,539		17,561		(51.4	)
Non-interest income	36,483		44,481		(18.0	)	136,124		144,438		(5.8	)
Non-interest expense	70,157		70,227		(.1	)	216,485		224,802		(3.7	)
Net income	33,233		31,826		4.4		114,597		87,408		31.1
Per common share:
Basic	$	.50	$	.47	6.4	%	$	1.71	$	1.30	31.5	%
Diluted	.50		.47		6.4		1.71		1.30		31.5

Net Income

Net income for the three and nine months ended September 30, 2014 increased by 4.4% and 31.1%, respectively, when compared to the same period in 2013.  Net income for the three and nine months ended September 30, 2014 was positively impacted by an increase in the Company’s net interest margin, as well as a 51.4% decrease in the provision for probable loan losses for the nine months ended September 30, 2014.  The increase in the net interest margin can be primarily attributed to increased levels of interest income arising from the repositioning of the investment portfolio the Company undertook in 2013, an increase in loans outstanding, and a decrease in interest expense on securities sold under repurchase agreements arising from the early termination of some of the long-term repurchase agreements by the lead bank subsidiary.

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Net Interest Income

	Three Months Ended September 30,				Percent		Nine Months Ended September 30,				Percent
	(Dollars in Thousands)				Increase		(Dollars in Thousands)				Increase
	2014		2013		(Decrease)		2014		2013		(Decrease)
Interest income:
Loans, including fees	$	71,026	$	66,482	6.8	%	$	208,934	$	194,633	7.3	%
Investment securities:
Taxable	24,149		21,821		10.7		76,873		60,941		26.1
Tax-exempt	2,744		3,318		(17.3	)	8,995		9,439		(4.7	)
Other interest income	39		29		34.5		133		71		87.3
Total interest income	97,958		91,650		6.9		294,935		265,084		11.3
Interest expense:
Savings deposits	898		885		1.5		2,684		2,852		(5.9	)
Time deposits	2,976		3,644		(18.3	)	9,115		12,067		(24.5	)
Securities sold under Repurchase agreements	6,150		7,162		(14.1	)	18,474		22,042		(16.2	)
Other borrowings	488		454		7.5		1,608		1,033		55.7
Junior subordinated interest deferrable debentures	1,063		862		23.3		3,201		3,191		.3
Total interest expense	11,575		13,007		(11.0	)	35,082		41,185		(14.8	)
Net interest income	$	86,383	$	78,643	9.8	%	$	259,853	$	223,899	16.1	%

Net interest income is the spread between income on interest earning assets, such as loans and securities, and the interest expense on liabilities used to fund those assets, such as deposits, repurchase agreements and funds borrowed.  As part of its strategy to manage interest rate risk, the Company strives to manage both assets and liabilities so that interest sensitivities match. One method of calculating interest rate sensitivity is through gap analysis.  A gap is the difference between the amount of interest rate sensitive assets and interest rate sensitive liabilities that re-price or mature in a given time period.  Positive gaps occur when interest rate sensitive assets exceed interest rate sensitive liabilities, and negative gaps occur when interest rate sensitive liabilities exceed interest rate sensitive assets.  A positive gap position in a period of rising interest rates should have a positive effect on net interest income as assets will re-price faster than liabilities.  Conversely, net interest income should contract somewhat in a period of falling interest rates.  Management can quickly change the Company’s interest rate position at any given point in time as market conditions dictate.  Additionally, interest rate changes do not affect all categories of assets and liabilities equally or at the same time.  Analytical techniques employed by the Company to supplement gap analysis include simulation analysis to quantify interest rate risk exposure.  The gap analysis prepared by management is reviewed by the Investment Committee of the Company twice a year (see table on page 40 for the September 30, 2014 gap analysis).  Management currently believes that the Company is properly positioned for interest rate changes; however if management determines at any time that the Company is not properly positioned, it will strive to adjust the interest rate sensitive assets and liabilities in order to manage the effect of interest rate changes.

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Non-Interest Income

	Three Months Ended September 30,					Percent		Nine Months Ended September 30,				Percent
	(Dollars in Thousands)					Increase		(Dollars in Thousands)				Increase
	2014			2013		(Decrease)		2014		2013		(Decrease)
Service charges on deposit accounts	$	22,514		$	25,026	(10.0	)%	$	67,026	$	72,363	(7.4	)%
Other service charges, commissions and fees
Banking	10,880			11,327		(3.9	)	33,791		31,362		7.7
Non-banking	2,083			2,092		(.4	)	5,143		4,668		10.2
Investment securities transactions, net	(6,446		)	—		(100	)	1,283		9,601		(86.6	)
Other investments, net	5,641			3,871		45.7		17,008		19,503		(12.8	)
Other income	1,811			2,165		(16.4	)	11,873		6,941		71.1
Total non-interest income	$	36,483		$	44,481	(18.0	)%	$	136,124	$	144,438	(5.8	)%

Total non-interest income decreased 5.8% for the nine months ended September 30, 2014 from the same period of 2013.  The increase in other income for the nine months ended September 30, 2014 can be primarily attributed to the sale of property originally held by the bank subsidiaries resulting in a net gain of approximately $2,900,000, and the discount recorded in connection with the buyback of $10.3 million of the outstanding capital securities issued by one of the statutory business trusts formed by the Company in the amount of approximately $600,000, which were recorded in the first quarter of 2014.  The decrease in other investment income for the nine months ended September 30, 2014 compared to the same period of 2013 can be attributed to the sale of a partnership where the holding company held an equity position resulting in income of $5.5 million and recorded in the second quarter of 2013.  Non-interest income for the three months ended September 30, 2014 was negatively impacted by a net loss recorded on the sale of available-for-sale investment securities.  The securities were sold to re-position the Company’s balance sheet.

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Non-Interest Expense

	Three Months Ended September 30,					Percent		Nine Months Ended September 30,				Percent
	(Dollars in Thousands)					Increase		(Dollars in Thousands)				Increase
	2014			2013		(Decrease)		2014		2013		(Decrease)
Employee compensation and benefits	$	32,326		$	30,627	5.5	%	$	92,560	$	91,602	1.0	%
Occupancy	7,865			7,604		3.4		22,729		22,596		.6
Depreciation of bank premises and equipment	5,937			6,433		(7.7	)	18,083		19,677		(8.1	)
Professional fees	3,416			3,669		(6.9	)	10,343		11,344		(8.8	)
Deposit insurance assessments	1,515			1,683		(10.0	)	4,512		5,061		(10.8	)
Net expense, other real estate owned	(55		)	1,360		(104.0	)	1,704		4,724		(63.9	)
Amortization of identified intangible assets	117			1,156		(89.9	)	2,246		3,451		(34.9	)
Advertising	1,928			1,795		7.4		5,713		5,664		.9
Early termination fee — securities sold under repurchase agreements	—			—		—		11,000		12,303		(10.6	)
Impairment charges (Total other- than-temporary impairment less, $(8), net of $(281), $(13), net of $(560), $(115), net of $(667), and $(27), net of $(1,273), included in other comprehensive income)	273			573		(52.4	)	552		1,300		(57.5	)
Other	16,835			15,327		9.8		47,043		47,080		(.1	)
Total non-interest expense	$	70,157		$	70,227	(.1	)%	$	216,485	$	224,802	(3.7	)%

Non-interest expense decreased .1% for the three months ended September 30, 2014 and 3.7% for the nine months ended September 30, 2014 compared to the same periods of 2013.  Included in total non-interest expense for the nine months ended September 30, 2014 and 2013 are charges of $11.0 million and $12.3 million, respectively.  The lead bank subsidiary terminated a portion of its long-term repurchase agreements outstanding in order to help manage its long-term funding costs.

Financial Condition

Allowance for Probable Loan Losses

The allowance for probable loan losses increased 2.2% to $71,727,000 at September 30, 2014 from $70,161,000 at December 31, 2013.  The provision for probable loan losses charged to expense decreased 51.4% to $8,539,000 for the nine months ended September 30, 2014 from $17,561,000 for the same period in 2013. The change is primarily driven by the addition of a specific reserve of approximately $10,000,000 during the nine months ended September 30, 2013 on a loan relationship that is collateralized by multiple pieces of transportation equipment, the value of which fluctuates due to market factors and the amount of use of the equipment.  The impaired commercial relationship further deteriorated during the nine months of 2013, in which the Company obtained updated appraisals, offset by a decrease in the general reserve due to the stability of general economic factors used in the calculation for the same period.  The commercial real estate - farmland and commercial portfolio’s provision for probable loan losses decreased $5,518,000 for the nine months ended September 30, 2014 primarily due to a reduction in the quantitative historical loss percentages used by the Company applicable to “pass” rated loans, partially offset by an increase in the portion of the allowance related to loans rated “watch-list substandard”.  The Company evaluates the necessity for adjusting the qualitative data considered when significant movements occur in the quantitative historical loss percentages.  The quantitative and qualitative data is applied by loan grade and distributed by class at each bank subsidiary. This methodology conforms to the regulatory guidance provided by the Company’s banking regulators. The allowance for probable loan losses was 1.3% of total loans at September 30, 2014 and December 31, 2013, respectively.

Investment Securities

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

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

Loans

Net loans increased 8.9% to $5,588,851,000 at September 30, 2014, from $5,129,074,000 at December 31, 2013.  The increase in loans can be attributed to improved opportunities for loan growth.

Deposits

Deposits increased by 2.1% to $8,414,073,000 at September 30, 2014, from $8,243,425,000 at December 31, 2013.  The increase in deposits is the result of the increased availability of deposits in the banking market.  Even though the Company increased its deposits, the Company is still experiencing a substantial amount of competition for deposits at higher than market rates.  As a result, the Company has attempted to maintain certain deposit relationships but has allowed certain deposits to leave as the result of aggressive pricing.

Foreign Operations

On September 30, 2014, the Company had $12,079,187,000 of consolidated assets, of which approximately $191,257,000, or 1.6%, was related to loans outstanding to borrowers domiciled in foreign countries, compared to $181,842,000, or 1.5%, at December 31, 2013.  Of the $191,257,000, 81.8% is directly or indirectly secured by U.S. assets, certificates of deposits and real estate; 9.0% is secured by foreign real estate; and 9.2% is unsecured.

Critical Accounting Policies

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

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

Liquidity and Capital Resources

The maintenance of adequate liquidity provides the Company’s bank subsidiaries with the ability to meet potential depositor withdrawals, provide for customer credit needs, maintain adequate statutory reserve levels and take full advantage of high-yield investment opportunities as they arise.  Liquidity is afforded by access to financial markets and by holding appropriate amounts of liquid assets.  The Company’s bank subsidiaries derive their liquidity largely from deposits of individuals and business entities.  Deposits from persons and entities domiciled in Mexico comprise a stable portion of the deposit base of the Company’s bank subsidiaries. Other important funding sources for the Company’s bank subsidiaries during 2014 and 2013 were borrowings from FHLB, securities sold under repurchase agreements and large certificates of deposit, requiring management to closely monitor its asset/liability mix in terms of both rate sensitivity and maturity

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distribution.  The borrowings from FHLB are primarily short term in nature and are renewed at maturity.  The Company’s bank subsidiaries have had a long-standing relationship with the FHLB and keep open unused lines of credit in order to fund liquidity needs.  In the event that the bank subsidiaries choose not to renew short term borrowings, the repayment of the outstanding indebtedness would more than likely be repaid through proceeds generated from the sales of available for sale securities.  The Company maintains a sizable, high quality investment portfolio to provide significant liquidity.  These securities can be sold or sold under agreements to repurchase to provide immediate liquidity. As in the past, the Company will continue to monitor the volatility and cost of funds in an attempt to match maturities of rate-sensitive assets and liabilities and respond accordingly to anticipated fluctuations in interest rates over reasonable periods of time.

The Company maintains an adequate level of capital as a margin of safety for its depositors and shareholders.  At September 30, 2014, shareholders’ equity was $1,537,610,000 compared to $1,424,408,000 at December 31, 2013, an increase of $113,202,000 or 7.9%.  The increase is primarily due to a decrease in other comprehensive loss and the payment of cash dividends to shareholders, offset by the retention of earnings.

The Company had a leverage ratio of 12.16% and 11.61%, risk-weighted Tier 1 capital ratio of 19.11% and 19.33% and risk-weighted total capital ratio of 20.11% and 20.36% at September 30, 2014 and December 31, 2013, respectively.  The identified intangibles and goodwill of $283,472,000 as of September 30, 2014, recorded in connection with the Company’s acquisitions, are deducted from the sum of core capital elements when determining the capital ratios of the Company.

As in the past, the Company will continue to monitor the volatility and cost of funds in an attempt to match maturities of rate-sensitive assets and liabilities, and respond accordingly to anticipate fluctuations in interest rates by adjusting the balance between sources and uses of funds as deemed appropriate.  The net-interest rate sensitivity as of September 30, 2014 is illustrated in the table entitled “Interest Rate Sensitivity.”  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.

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

Interest Rate Sensitivity

(Dollars in Thousands)

	Rate/Maturity
September 30, 2014	3 Months or Less			Over 3 Months to 1 Year			Over 1 Year to 5 Years		Over 5 Years		Total
Rate sensitive assets
Investment securities	$	239,196		$	896,718		$	3,394,656	$	275,120	$	4,805,690
Loans, net of non-accruals	4,264,722			210,429			361,415		758,728		5,595,294
Total earning assets	$	4,503,918		$	1,107,147		$	3,756,071	$	1,033,848	$	10,400,984
Cumulative earning assets	$	4,503,918		$	5,611,065		$	9,367,136	$	10,400,984
Rate sensitive liabilities
Time deposits	$	1,048,461		$	1,164,894		$	308,819	$	64	$	2,522,238
Other interest bearing deposits	2,997,540			—			—		—		2,997,540
Securities sold under repurchase agreements	350,657			7,721			511,033		—		869,411
Other borrowed funds	980,900			—			—		6,281		987,181
Junior subordinated deferrable interest debentures	180,416			—			—		—		180,416
Total interest bearing liabilities	$	5,557,974		$	1,172,615		$	819,852	$	6,345	$	7,556,786
Cumulative sensitive liabilities	$	5,557,974		$	6,730,589		$	7,550,441	$	7,556,786
Repricing gap	(1,054,056		)	(65,468		)	2,936,219		1,027,503		2,844,198
Cumulative repricing gap	(1,054,056		)	(1,119,524		)	1,816,695		2,844,198
Ratio of interest-sensitive assets to liabilities	.81			.94			4.58		162.94		1.38
Ratio of cumulative, interest- sensitive assets to liabilities	.81			.83			1.24		1.38

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

During the first nine months of 2014, 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 18 through 24 of the Company’s 2013 Annual Report as filed as an exhibit to the Company’s Form 10-K for the year ended December 31, 2013.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

40

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

Internal Control Over Financial Reporting

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

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

The Company is involved in various legal proceedings that are in various stages of litigation.  Some of these actions allege “lender liability” claims on a variety of theories and claim substantial actual and punitive damages.  The Company has determined, based on discussions with its counsel that any material loss in such actions, individually or in the aggregate, is remote or the damages sought, even if fully recovered, would not be considered material to the consolidated financial position or results of operations of the Company.  However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.

1A. Risk Factors

There were no material changes in the risk factors as previously disclosed in Item 1A to Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

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

From time to time, the Company’s Board of Directors has authorized stock repurchase plans.  In April 2009, the Board of Directors established a formal stock repurchase program that authorized the repurchase of up to $40 million of common stock within the following twelve months and on March 7, 2014, the Board of Directors extended the repurchase program and again authorized the repurchase of up to $40 million of common stock during the twelve month period commencing on April 9, 2014, which repurchase cap the Board is inclined to increase over time.  Stock repurchases may be made from time to time, on the open market or through private transactions.  During the second quarter, the Company’s Board of Directors adopted a Rule 10b5-1 plan and intends to adopt additional Rule 10b5-1 trading plans that will allow the Company to purchase its shares of common stock during certain trading blackout periods when the Company ordinarily would not be in the market due to trading restrictions in its internal trading policy.  During the term of a 10b5-1 Plan, purchases of common stock are automatic to the extent the conditions of the 10b5-1 Plan’s trading instructions are met.  Shares repurchased in this program will be held in treasury for reissue for various corporate purposes, including employee stock option plans.  As of November 4, 2014, a total of 8,489,280 shares had been repurchased under all repurchase programs at a cost of $252,989,000.  The Company is not obligated to repurchase shares under its stock purchase program or to enter into additional Rule 10b5-1 plans.  The timing, actual number and value of shares purchased will depend on many factors, including the Company’s cash flow and the liquidity and price performance of its shares of common stock.

41

Except for repurchases in connection with the administration of an employee benefit plan in the ordinary course of business and consistent with past practices, common stock repurchases are only conducted under publicly announced repurchase programs approved by the Board of Directors.  The following table includes information about common stock share repurchases for the quarter ended September 30, 2014.

	Total Number of Shares Purchased	Average Price Paid Per Share		Shares Purchased as Part of a Publicly- Announced Program	Approximate Dollar Value of Shares Available for Repurchase (1)
July 1 — July 31, 2014	—	$	—	—	$	39,850,000
August 1 — August 31, 2014	57,410	25.30		57,410	38,373,000
September 1 — September 30, 2014	93,786	25.62		93.786	38,081,000
	151,196	$	25.50	151,196

(1) The repurchase program was extended on March 7, 2014 and allows for the repurchase of up to an additional $40,000,000 of treasury stock through April 9, 2015.

42

Item 6.  Exhibits

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

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

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

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

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

101++ — Interactive Data File

++ Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language):  (i) the Condensed Consolidated Statement of Earnings for the three and nine months ended September 30, 2014 and 2013, (ii) the Condensed Consolidated Balance Sheet as of September 30, 2014 and December 31, 2013, and (iii) the Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2014 and 2013.

43

SIGNATURES

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

		INTERNATIONAL BANCSHARES CORPORATION
Date:	November 10, 2014	/s/ Dennis E. Nixon
		Dennis E. Nixon
		President
Date:	November 10, 2014	/s/ Imelda Navarro
		Imelda Navarro
		Treasurer

44

EX-31.A

Exhibit 31(a)

Certification of Chief Executive Officer

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

I, Dennis E. Nixon, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 10, 2014
	/s/ Dennis E. Nixon
	Dennis E. Nixon
	President (Chief Executive Officer)

1

EX-31.B

Exhibit 31(b)

Certification of Chief Financial Officer

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

I, Imelda Navarro, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: November 10, 2014
	/s/ Imelda Navarro
	Imelda Navarro
	Treasurer (Chief Financial Officer)

1

EX-32.A

Exhibit 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of International Bancshares Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dennis E. Nixon, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

By:	/s/ Dennis E. Nixon
	Dennis E. Nixon
	President
Date:	November 10, 2014

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

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

1

EX-32.B

Exhibit 32(b)

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of International Bancshares Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Imelda Navarro, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

By:	/s/ Imelda Navarro
	Imelda Navarro
	Treasurer
Date:	November 10, 2014

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

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

1

XML

Investment Securities (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Held-to-maturity securities
Amortized Cost	$ 2,400	$ 2,400
Estimated Fair Value	2,400	2,400
Carrying Value	2,400	2,400
Available-for-sale securities
Amortized Cost	4,803,160	5,372,594
Gross Unrealized Gains	66,663	65,104
Gross Unrealized Losses	(66,533)	(133,119)
Total investment securities	4,803,290	5,304,579
Estimate of Fair Value Measurement [Member]
Available-for-sale securities
Total investment securities	4,803,290	5,304,579
Reported Value Measurement [Member]
Available-for-sale securities
Total investment securities	4,803,290	5,304,579
Other Debt Obligations [Member]
Held-to-maturity securities
Amortized Cost	2,400	2,400
Estimated Fair Value	2,400	2,400
Carrying Value	2,400	2,400
Collateralized Mortgage Backed Securities [Member]
Available-for-sale securities
Amortized Cost	4,513,064	5,096,165
Gross Unrealized Gains	46,900	56,110
Gross Unrealized Losses	(60,700)	(124,574)
Collateralized Mortgage Backed Securities [Member] | Estimate of Fair Value Measurement [Member]
Available-for-sale securities
Total investment securities	4,499,264	5,027,701
Collateralized Mortgage Backed Securities [Member] | Reported Value Measurement [Member]
Available-for-sale securities
Total investment securities	4,499,264	5,027,701
US Government Corporations and Agencies Securities [Member]
Available-for-sale securities
Total investment securities	1,551,363	1,799,807
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available-for-sale securities
Total investment securities	2,922,948	3,200,042
Mortgage-backed Securities, Issued by Private Enterprises [Member]
Available-for-sale securities
Total investment securities	24,953	27,852
US States and Political Subdivisions Debt Securities [Member]
Available-for-sale securities
Amortized Cost	262,021	248,354
Gross Unrealized Gains	18,662	8,063
Gross Unrealized Losses	(5,563)	(8,007)
US States and Political Subdivisions Debt Securities [Member] | Estimate of Fair Value Measurement [Member]
Available-for-sale securities
Total investment securities	275,120	248,410
US States and Political Subdivisions Debt Securities [Member] | Reported Value Measurement [Member]
Available-for-sale securities
Total investment securities	275,120	248,410
Equity Securities [Member]
Available-for-sale securities
Amortized Cost	28,075	28,075
Gross Unrealized Gains	1,101	931
Gross Unrealized Losses	(270)	(538)
Equity Securities [Member] | Estimate of Fair Value Measurement [Member]
Available-for-sale securities
Total investment securities	28,906	28,468
Equity Securities [Member] | Reported Value Measurement [Member]
Available-for-sale securities
Total investment securities	$ 28,906	$ 28,468

XML

Common Stock and Dividends (Details) (USD $)	0 Months Ended					1 Months Ended	9 Months Ended
	Oct. 15, 2014	Apr. 18, 2014	Apr. 09, 2014	Oct. 15, 2013	Apr. 20, 2013	Apr. 30, 2014	Sep. 30, 2014	Nov. 05, 2014	Mar. 31, 2014	Mar. 07, 2014
Common Stock and Dividends
Series A cumulative perpetual preferred shares, outstanding							216,000
Warrants to purchase entity's common stock (in shares)							1,326,238
Warrants, exercise price (in dollars per share)							$ 24.43
Percentage of aggregate common stock investment on exercise of warrant to Senior Preferred Stock investment							15.00%
Warrants, term							10 years
Cash dividends paid to common shareholders (in dollars per share)	$ 0.27	$ 0.25		$ 0.23	$ 0.20
Repurchase of common stock, authorized amount									$ 40,000,000	$ 40,000,000
Period of repurchase of common stock			12 months			12 months
Cumulative number of shares repurchased under all stock repurchase programs								8,489,280
Cumulative cost of shares repurchased under all stock repurchase programs								$ 252,989,000

XML

Allowance for Probable Loan Losses (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	$ 77,967	$ 75,893
Loans individually evaluated for impairment, Allowance	21,308	16,002
Loans collectively evaluated for impairment, Recorded Investment	5,582,611	5,123,342
Loans collectively evaluated for impairment, Allowance	50,419	54,159
Commercial Loan [Member]
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	40,195	34,183
Loans individually evaluated for impairment, Allowance	16,302	12,234
Loans collectively evaluated for impairment, Recorded Investment	1,219,188	1,008,459
Loans collectively evaluated for impairment, Allowance	11,978	10,199
Commercial Real Estate Other Construction and Land Development Receivable [Member]
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	11,535	13,976
Loans individually evaluated for impairment, Allowance	2,022	852
Loans collectively evaluated for impairment, Recorded Investment	1,402,377	1,194,532
Loans collectively evaluated for impairment, Allowance	11,807	11,689
Commercial Real Estate Farmland and Commercial Receivable [Member]
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	15,771	16,038
Loans individually evaluated for impairment, Allowance	2,984	2,916
Loans collectively evaluated for impairment, Recorded Investment	1,729,809	1,734,001
Loans collectively evaluated for impairment, Allowance	15,857	21,551
Commercial Real Estate Multifamily Receivable [Member]
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	251	295
Loans collectively evaluated for impairment, Recorded Investment	100,468	101,803
Loans collectively evaluated for impairment, Allowance	745	776
Residential First Mortgage Financing Receivable [Member]
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	5,457	6,153
Loans collectively evaluated for impairment, Recorded Investment	412,101	432,309
Loans collectively evaluated for impairment, Allowance	3,628	3,812
Residential Second Mortgage Financing Receivable [Member]
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	2,933	3,206
Loans collectively evaluated for impairment, Recorded Investment	467,243	406,024
Loans collectively evaluated for impairment, Allowance	4,698	4,249
Consumer Loan [Member]
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	1,408	1,606
Loans collectively evaluated for impairment, Recorded Investment	60,585	64,808
Loans collectively evaluated for impairment, Allowance	686	750
Foreign Receivables [Member]
Loan loss allowances, impaired financing receivable, evaluated individually or collectively
Loans individually evaluated for impairment, Recorded Investment	417	436
Loans collectively evaluated for impairment, Recorded Investment	190,840	181,406
Loans collectively evaluated for impairment, Allowance	$ 1,020	$ 1,133

XML

Junior Subordinated Interest Deferrable Debentures (Tables)

9 Months Ended

Sep. 30, 2014

Junior Subordinated Interest Deferrable Debentures

Junior subordinated deferrable interest debentures, major types of business trusts

The following table illustrates key information about each of the Capital and Common Securities and their interest rate at September 30, 2014:

	Junior Subordinated Deferrable Interest Debentures		Repricing Frequency	Interest Rate		Interest Rate Index	Maturity Date	Optional Redemption Date(1)
(In Thousands)
Trust VI	$	25,774	Quarterly	3.68	%	LIBOR + 3.45	November 2032	February 2008
Trust VIII	25,774		Quarterly	3.28	%	LIBOR + 3.05	October 2033	October 2008
Trust IX	41,238		Quarterly	1.85	%	LIBOR + 1.62	October 2036	October 2011
Trust X	34,021		Quarterly	1.89	%	LIBOR + 1.65	February 2037	February 2012
Trust XI	32,990		Quarterly	1.85	%	LIBOR + 1.62	July 2037	July 2012
Trust XII	20,619		Quarterly	1.68	%	LIBOR + 1.45	September 2037	September 2012
	$	180,416

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

XML

Investment Securities (Details 4) (Available-for-sale Securities [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Available-for-sale Securities [Member]
Reconciliation of credit-related impairment charges on investments recognized in earnings
Balance at the beginning	$ 12,085	$ 11,159	$ 11,806	$ 10,432
Impairment charges recognized in earnings during period	273	573	552	1,300
Balance at the end	$ 12,358	$ 11,732	$ 12,358	$ 11,732

XML

Allowance for Probable Loan Losses (Details 6) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Loan portfolio by credit quality indicator
Portfolio, total	$ 5,660,578	$ 5,199,235
Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	5,372,266	4,942,387
Special Mention [Member]
Loan portfolio by credit quality indicator
Portfolio, total	9,558	73,077
Special Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	33,010	35,619
Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total	167,777	72,259
Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	77,967	75,893
Commercial Loan [Member]
Loan portfolio by credit quality indicator
Portfolio, total	1,259,383	1,042,642
Commercial Loan [Member] | Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	1,165,427	955,522
Commercial Loan [Member] | Special Mention [Member]
Loan portfolio by credit quality indicator
Portfolio, total	992	2,270
Commercial Loan [Member] | Special Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	1,759	4,389
Commercial Loan [Member] | Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total	51,010	46,278
Commercial Loan [Member] | Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	40,195	34,183
Commercial Real Estate Other Construction and Land Development Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	1,413,912	1,208,508
Commercial Real Estate Other Construction and Land Development Receivable [Member] | Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	1,347,079	1,167,295
Commercial Real Estate Other Construction and Land Development Receivable [Member] | Special Mention [Member]
Loan portfolio by credit quality indicator
Portfolio, total	340	14,247
Commercial Real Estate Other Construction and Land Development Receivable [Member] | Special Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	10,561	9,318
Commercial Real Estate Other Construction and Land Development Receivable [Member] | Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total	44,397	3,672
Commercial Real Estate Other Construction and Land Development Receivable [Member] | Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	11,535	13,976
Commercial Real Estate Farmland and Commercial Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	1,745,580	1,750,039
Commercial Real Estate Farmland and Commercial Receivable [Member] | Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	1,630,133	1,635,179
Commercial Real Estate Farmland and Commercial Receivable [Member] | Special Mention [Member]
Loan portfolio by credit quality indicator
Portfolio, total	8,114	56,438
Commercial Real Estate Farmland and Commercial Receivable [Member] | Special Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	20,690	21,912
Commercial Real Estate Farmland and Commercial Receivable [Member] | Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total	70,872	20,472
Commercial Real Estate Farmland and Commercial Receivable [Member] | Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	15,771	16,038
Commercial Real Estate Multifamily Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	100,719	102,098
Commercial Real Estate Multifamily Receivable [Member] | Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	99,649	100,948
Commercial Real Estate Multifamily Receivable [Member] | Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total	819	855
Commercial Real Estate Multifamily Receivable [Member] | Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	251	295
Residential First Mortgage Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	417,558	438,462
Residential First Mortgage Financing Receivable [Member] | Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	411,888	432,067
Residential First Mortgage Financing Receivable [Member] | Special Mention [Member]
Loan portfolio by credit quality indicator
Portfolio, total	112	122
Residential First Mortgage Financing Receivable [Member] | Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total	101	120
Residential First Mortgage Financing Receivable [Member] | Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	5,457	6,153
Residential Second Mortgage Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	470,176	409,230
Residential Second Mortgage Financing Receivable [Member] | Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	466,798	405,731
Residential Second Mortgage Financing Receivable [Member] | Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total	445	293
Residential Second Mortgage Financing Receivable [Member] | Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	2,933	3,206
Consumer Loan [Member]
Loan portfolio by credit quality indicator
Portfolio, total	61,993	66,414
Consumer Loan [Member] | Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	60,452	64,808
Consumer Loan [Member] | Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total	133
Consumer Loan [Member] | Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	1,408	1,606
Foreign Receivables [Member]
Loan portfolio by credit quality indicator
Portfolio, total	191,257	181,842
Foreign Receivables [Member] | Pass [Member]
Loan portfolio by credit quality indicator
Portfolio, total	190,840	180,837
Foreign Receivables [Member] | Substandard [Member]
Loan portfolio by credit quality indicator
Portfolio, total		569
Foreign Receivables [Member] | Nonperforming Financing Receivable [Member]
Loan portfolio by credit quality indicator
Portfolio, total	$ 417	$ 436

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Capital Ratios (Details) (USD $)	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2013
Capital Ratios
Tier 1 Capital (to Average Assets), Actual Ratio (as a percent)	12.14%	11.61%	12.14%
Tier 1 Capital (to Risk Weighted Assets), Actual Ratio (as a percent)	19.11%	19.33%
Total Capital (to Risk Weighted Assets), Actual Ratio (as a percent)	20.11%	20.36%
Identified intangibles and goodwill	$ 283,472,000
Percentage of capital securities issued by trust qualifying as Tier I capital, maximum	25.00%
Percentage of capital securities issued by trust qualifying as Tier II capital, minimum	25.00%
Capital securities issued by the trust, qualifying as Tier I capital	$ 180,416,000	$ 190,726,000

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Basis of Presentation

9 Months Ended

Sep. 30, 2014

Basis of Presentation

Basis of Presentation

Note 1 - Basis of Presentation

The accounting and reporting policies of International Bancshares Corporation (“Corporation”) and Subsidiaries (the Corporation and Subsidiaries collectively referred to herein as the “Company”) conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.  The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiaries, International Bank of Commerce, Laredo (“IBC”), Commerce Bank, International Bank of Commerce, Zapata, International Bank of Commerce, Brownsville and the Corporation’s wholly-owned non-bank subsidiaries, IBC Subsidiary Corporation, IBC Life Insurance Company, IBC Trading Company, IBC Capital Corporation, Premier Tierra Holdings, Inc and IBC Charitable and Community Development Corporation.  All significant inter-company balances and transactions have been eliminated in consolidation.  The consolidated financial statements are unaudited, but include all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results of the periods presented.  All such adjustments were of a normal and recurring nature.  It is suggested that these financial statements be read in conjunction with the financial statements and the notes thereto in the Company’s latest Annual Report on Form 10-K.  The consolidated statement of condition at December 31, 2013 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  Certain reclassifications have been made to make prior periods comparable.  Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results for the year ending December 31, 2014, or any future period.

The Company operates as one segment.  The operating information used by the Company’s chief executive officer for purposes of assessing performance and making operating decisions about the Company is the consolidated statements presented in this report.  The Company has four active operating subsidiaries, namely, the bank subsidiaries, otherwise known as International Bank of Commerce, Laredo, Commerce Bank, International Bank of Commerce, Zapata and International Bank of Commerce, Brownsville.  The Company applies the provision of ASC Topic 280, “Segment Reporting,” in determining its reportable segments and related disclosures.

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

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Other Borrowed Funds (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Other Borrowed Funds
Other borrowed funds	$ 987,181	$ 1,223,950
Percentage of decrease in other borrowed funds	19.30%

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Fair Value Measurements (Details 3) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Assets:
Impaired Loans	$ 67,602,000	$ 64,585,000
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Charges to allowance for probable loan losses in connection with other real estate owned	328,000	402,000
Adjustment to fair value in connection with other real estate owned	371,000	1,204,000
Impaired commercial collateral dependent loans	67,602,000	64,585,000
Impaired commercial collateral dependent receivables appraisals to determine fair value within immediately preceding twelve months	21,015,000	50,346,000
Fair Value, Inputs, Level 3 [Member] | Bond Meeting Original Contract Terms [Member]
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Minimum period of residential mortgage loan performance under original contract terms	24 months	24 months
Estimated future principal prepayment rate assumption, low end of range (as a percent)	7.00%	7.00%
Default rate assumptions (as a percent)	1.00%	1.00%
Loss severity rate assumptions, first year (as a percent)	25.00%	25.00%
Estimated future principal prepayment rate assumption, discount rate (as a percent)	13.00%	13.00%
Fair Value, Inputs, Level 3 [Member] | Bond Not Meeting Original Contract Terms [Member]
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Estimated future principal prepayment rate assumption, low end of range (as a percent)	2.00%	2.00%
Default rate assumptions (as a percent)	4.50%	4.50%
Loss severity rate assumptions, first year (as a percent)	60.00%	60.00%
Decrease in loss severity rates, following five years (as a percent)	5.00%	5.00%
Loss severity rate, thereafter (as a percent)	25.00%	25.00%
Estimated future principal prepayment rate assumption, discount rate (as a percent)	13.00%	13.00%
Fair Value, Measurements, Nonrecurring [Member]
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Change in net provision, impaired loans	5,743,000	13,229,000
Change in net provision, other real estate owned	371,000	1,204,000
Fair Value, Measurements, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Assets:
Impaired Loans	29,993,000	28,391,000
Non-financial assets:
Other real estate owned	13,931,000	16,329,000
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Impaired commercial collateral dependent loans	29,993,000	28,391,000
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Impaired Loans	29,993,000	28,391,000
Non-financial assets:
Other real estate owned	13,931,000	16,329,000
Assumptions used in discounted cash flow model to determine fair value of investments classified within level 3
Impaired commercial collateral dependent loans	$ 29,993,000	$ 28,391,000

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Fair Value Measurements (Details 2) (Collateralized Mortgage Backed Securities [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Collateralized Mortgage Backed Securities [Member]
Reconciliation of activity for mortgage-backed securities on a net basis
Balance at the beginning of the period	$ 27,852
Principal paydowns	(3,014)
Total unrealized gains included in:
Other comprehensive income	667
Impairment realized in earnings	(552)
Balance at the end of the period	$ 24,953

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Junior Subordinated Interest Deferrable Debentures (Details) (USD $)	9 Months Ended		0 Months Ended
	Sep. 30, 2014 item	Dec. 31, 2013	Feb. 11, 2014 Trust Seven [Member]
Junior Subordinated Interest Deferrable Debentures
Number of statutory business trusts issuing trust preferred securities	7
Junior subordinated deferrable interest debentures	$ 180,416,000	$ 190,726,000
Junior subordinated deferrable interest debentures, major types of business trusts
Redemption price discount (as a percent)			6.00%
Retirement of capital securities			10,310,000
Maximum number of consecutive quarterly period available for deferral of interest payment on Trusts VI, VII, VIII, IX, X, XI and XII	20
Percentage of capital securities issued by trust qualifying as Tier I capital, maximum	25.00%
Percentage of capital securities issued by trust qualifying as Tier II capital, minimum	25.00%
Capital securities issued by the trust, qualifying as Tier I capital	$ 180,416,000	$ 190,726,000

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Fair Value Measurements (Details 4) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Deposits
Carrying amount of time deposits	$ 2,522,239,000	$ 2,651,303,000
Fair Value, Inputs, Level 3 [Member]
Assets and liabilities reported at fair value on recurring
Estimated fair value of fixed rate performing loans	1,238,356,000	1,196,916,000
Loans
Carrying amount of fixed rate performing loans	1,307,205,000	1,243,252,000
Deposits
Carrying amount of time deposits	2,522,239,000	2,651,303,000
Estimated fair value of time deposits	2,521,059,000	2,649,452,000
Securities Sold Under Repurchase Agreements
Carrying amount of long-term repurchase agreements	610,000,000	710,000,000
Estimated fair value of long-term repurchase agreements	663,833,000	792,215,500
Fair Value, Inputs, Level 2 [Member]
Other borrowed funds
Carrying amount of the long-term FHLB borrowings	6,281,000	8,950,000
Estimated fair value of long-term FHLB borrowings	$ 6,665,000	$ 8,950,000

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Loans (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Summary of loans, by loan type
Total loans	$ 5,660,578	$ 5,199,235
Loans Receivable Commercial Financial and Agricultural [Member]
Summary of loans, by loan type
Total loans	3,105,682	2,894,779
Residential Mortgage [Member]
Summary of loans, by loan type
Total loans	887,734	847,692
Commercial Real Estate Other Construction and Land Development Receivable [Member]
Summary of loans, by loan type
Total loans	1,413,912	1,208,508
Consumer Loan [Member]
Summary of loans, by loan type
Total loans	61,993	66,414
Foreign Receivables [Member]
Summary of loans, by loan type
Total loans	$ 191,257	$ 181,842

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Consolidated Statements of Cash Flows (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating activities:
Net income	$ 114,597,000	$ 87,408,000
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for probable loan losses	8,539,000	17,561,000
Specific reserve, other real estate owned	371,000	478,000
Depreciation of bank premises and equipment	18,083,000	19,677,000
Gain on sale of bank premises and equipment	(3,955,000)	(626,000)
Gain on sale of other real estate owned	(314,000)	(201,000)
Accretion of investment securities discounts	(2,161,000)	(2,844,000)
Amortization of investment securities premiums	20,096,000	35,666,000
Investment securities transactions, net	(1,283,000)	(9,601,000)
Impairment charges on available-for-sale investment securities	552,000	1,300,000
Amortization of identified intangible assets	2,246,000	3,451,000
Stock based compensation expense	766,000	322,000
Earnings from affiliates and other investments	(10,455,000)	(16,085,000)
Deferred tax benefit	(2,993,000)	(2,325,000)
Decrease in accrued interest receivable	2,081,000	2,051,000
Net (increase) decrease in other assets	(4,779,000)	16,624,000
Net (decrease) in other liabilities	8,300,000	7,535,000
Net cash provided by operating activities	149,691,000	160,391,000
Investing activities:
Proceeds from sales and calls of available for sale securities	621,588,000	178,124,000
Purchases of available for sale securities	(648,910,000)	(1,274,574,000)
Principal collected on mortgage-backed securities	582,631,000	1,025,015,000
Net increase in loans	(470,723,000)	(285,453,000)
Purchases of other investments	(12,930,000)	(1,637,000)
Distributions from other investments	23,311,000	4,159,000
Purchases of bank premises and equipment	(42,089,000)	(30,792,000)
Proceeds from sales of other real estate owned	10,251,000	19,303,000
Proceeds from sale of bank premises and equipment	8,419,000	653,000
Net cash (used in) provided by investing activities	71,548,000	(365,202,000)
Financing activities:
Net increase in non-interest bearing demand deposits	227,784,000	185,882,000
Net increase (decrease) in savings and interest bearing demand deposits	71,928,000	(108,029,000)
Net decrease in time deposits	(129,064,000)	(252,260,000)
Net decrease in securities sold under repurchase agreements	(87,970,000)	(128,542,000)
Net (decrease) increase in other borrowed funds	(236,769,000)	540,466,000
Purchases of treasury stock	(11,717,000)
Repayment of long-term debt	(10,310,000)
Proceeds from stock transactions	405,000	146,000
Payments of dividends on common stock	(16,741,000)	(13,438,000)
Net cash provided by (used in) financing activities	(192,454,000)	224,225,000
Increase in cash and cash equivalents	28,785,000	19,414,000
Cash and cash equivalents at beginning of period	274,785,000	283,100,000
Cash and cash equivalents at end of period	303,570,000	302,514,000
Supplemental cash flow information:
Interest paid	35,764,000	43,405,000
Income taxes paid	64,912,000	45,480,000
Non-cash investing and financing activities:
Dividends declared, not yet paid on common stock	18,021,000	15,456,000
Net transfer from loans to other real estate owned	$ (2,406,000)	$ (371,000)

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Allowance for Probable Loan Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Allowance for probable loan losses
Balance at the beginning of the period	$ 71,537	$ 65,051	$ 70,161	$ 58,193
Losses charged to allowance	(3,520)	(3,845)	(9,691)	(10,410)
Recoveries credited to allowance	894	823	2,718	2,485
Net (losses) gains charged to allowance	(2,626)	(3,022)	(6,973)	(7,925)
Provision charged to operations	2,816	5,800	8,539	17,561
Balance at the end of the period	71,727	67,829	71,727	67,829
Commercial Loan [Member]
Allowance for probable loan losses
Balance at the beginning of the period	28,006	20,676	22,433	11,632
Losses charged to allowance	(2,920)	(3,540)	(7,780)	(8,866)
Recoveries credited to allowance	740	658	2,156	1,909
Net (losses) gains charged to allowance	(2,180)	(2,882)	(5,624)	(6,957)
Provision charged to operations	2,454	3,370	11,471	16,489
Balance at the end of the period	28,280	21,164	28,280	21,164
Commercial Real Estate Other Construction and Land Development Receivable [Member]
Allowance for probable loan losses
Balance at the beginning of the period	13,006	11,624	12,541	12,720
Losses charged to allowance	(43)	(2)	(442)	(250)
Recoveries credited to allowance	14	10	66	36
Net (losses) gains charged to allowance	(29)	8	(376)	(214)
Provision charged to operations	852	(10)	1,664	(884)
Balance at the end of the period	13,829	11,622	13,829	11,622
Commercial Real Estate Farmland and Commercial Receivable [Member]
Allowance for probable loan losses
Balance at the beginning of the period	19,538	22,383	24,467	21,880
Losses charged to allowance	(38)		(208)	(61)
Recoveries credited to allowance	42	9	100	150
Net (losses) gains charged to allowance	4	9	(108)	89
Provision charged to operations	(701)	1,549	(5,518)	1,972
Balance at the end of the period	18,841	23,941	18,841	23,941
Commercial Real Estate Multifamily Receivable [Member]
Allowance for probable loan losses
Balance at the beginning of the period	786	623	776	694
Provision charged to operations	(41)	112	(31)	41
Balance at the end of the period	745	735	745	735
Residential First Mortgage Financing Receivable [Member]
Allowance for probable loan losses
Balance at the beginning of the period	3,721	3,855	3,812	4,390
Losses charged to allowance	(131)	(22)	(261)	(221)
Recoveries credited to allowance	11	45	16	54
Net (losses) gains charged to allowance	(120)	23	(245)	(167)
Provision charged to operations	27	186	61	(159)
Balance at the end of the period	3,628	4,064	3,628	4,064
Residential Second Mortgage Financing Receivable [Member]
Allowance for probable loan losses
Balance at the beginning of the period	4,736	4,047	4,249	4,448
Losses charged to allowance	(242)	(149)	(395)	(544)
Recoveries credited to allowance	40	80	140	204
Net (losses) gains charged to allowance	(202)	(69)	(255)	(340)
Provision charged to operations	164	404	704	274
Balance at the end of the period	4,698	4,382	4,698	4,382
Consumer Loan [Member]
Allowance for probable loan losses
Balance at the beginning of the period	706	797	750	1,289
Losses charged to allowance	(146)	(130)	(555)	(446)
Recoveries credited to allowance	47	21	194	127
Net (losses) gains charged to allowance	(99)	(109)	(361)	(319)
Provision charged to operations	79	124	297	(158)
Balance at the end of the period	686	812	686	812
Foreign Receivables [Member]
Allowance for probable loan losses
Balance at the beginning of the period	1,038	1,046	1,133	1,140
Losses charged to allowance		(2)	(50)	(22)
Recoveries credited to allowance			46	5
Net (losses) gains charged to allowance		(2)	(4)	(17)
Provision charged to operations	(18)	65	(109)	(14)
Balance at the end of the period	$ 1,020	$ 1,109	$ 1,020	$ 1,109

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Investment Securities (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Held-to-maturity debt securities amortized cost disclosures
Due in one year or less, held-to-maturity debt securities amortized cost	$ 1,075,000		$ 1,075,000
Due after one year through five years, held-to-maturity debt securities amortized cost	1,325,000		1,325,000
Amortized cost, held-to-maturity debt securities	2,400,000		2,400,000		2,400,000
Held-to-maturity debt securities, Estimated fair value disclosures
Due in one year or less, held-to-maturity debt securities, Estimated fair value	1,075,000		1,075,000
Due after one year through five years, held-to-maturity debt securities, Estimated fair value	1,325,000		1,325,000
Estimated Fair Value	2,400,000		2,400,000		2,400,000
Available-for-sale debt securities amortized cost disclosures
Due after five years through ten years, available-for-sale debt securities amortized cost	727,000		727,000
Due after ten years, available-for-sale debt securities amortized cost	261,294,000		261,294,000
Residential mortgage-backed securities, amortized cost	4,513,064,000		4,513,064,000
Equity securities, amortized cost	28,075,000		28,075,000
Amortized cost, Available for sale securities	4,803,160,000		4,803,160,000		5,372,594,000
Available for sale debt securities, Estimated Fair Value Disclosures
Due after five years through ten years, available-for-sale debt securities, Estimated Fair Value	810,000		810,000
Due after ten years, available-for-sale debt securities, Estimated Fair Value	274,310,000		274,310,000
Residential mortgage-backed securities, Estimated Fair Value	4,499,264,000		4,499,264,000
Equity securities, Estimated Fair Value	28,906,000		28,906,000
Estimated fair value, Available for sale securities	4,803,290,000		4,803,290,000		5,304,579,000
Amortized cost of available for sale investment securities pledged	2,156,453,000		2,156,453,000
Fair value of available for sale investment securities pledged	2,164,872,000		2,164,872,000
Proceeds from sales and calls of available for sale securities	253,292,000	0	621,588,000	178,124,000
Proceeds from sales of mortgage-backed securities	253,292,000	0	620,933,000	177,623,000
Gross gains realized on sales	0	0	9,479,000	9,601,000
Gross losses realized on sales	(6,446,000)	0	(8,196,000)	0
Impairment charges on available for sale securities	273,000	573,000	552,000	1,300,000
Impairment charges on available-for-sale investment securities, after tax	$ 177,000	$ 372,000	$ 359,000	$ 845,000

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Consolidated Statements of Condition (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets
Cash and cash equivalents	$ 303,570	$ 274,785
Investment securities:
Held-to-maturity (Market value of $2,400 on September 30, 2014 and $2,400 on December 31, 2013)	2,400	2,400
Available-for-sale (Amortized cost of $ 4,803,160 on September 30, 2014 and $5,372,594 on December 31, 2013)	4,803,290	5,304,579
Total investment securities	4,805,690	5,306,979
Loans	5,660,578	5,199,235
Less allowance for probable loan losses	(71,727)	(70,161)
Net loans	5,588,851	5,129,074
Bank premises and equipment, net	524,384	504,842
Accrued interest receivable	28,573	30,654
Other investments	402,672	388,563
Identified intangible assets, net	940	3,186
Goodwill	282,532	282,532
Other assets	141,975	158,862
Total assets	12,079,187	12,079,477
Deposits:
Demand - non-interest bearing	2,894,294	2,666,510
Savings and interest bearing demand	2,997,540	2,925,612
Time	2,522,239	2,651,303
Total deposits	8,414,073	8,243,425
Securities sold under repurchase agreements	869,411	957,381
Other borrowed funds	987,181	1,223,950
Junior subordinated deferrable interest debentures	180,416	190,726
Other liabilities	90,496	39,587
Total liabilities	10,541,577	10,655,069
Shareholders' equity:
Common shares of $1.00 par value. Authorized 275,000,000 shares; issued 95,773,984 shares on September 30, 2014 and 95,743,592 shares on December 31, 2013	95,774	95,744
Surplus	165,088	163,947
Retained earnings	1,546,841	1,467,000
Accumulated other comprehensive income (loss) (including $(5,217) and $(5,646) of comprehensive loss related to other-than-temporary impairment for non-credit related issues)	133	(43,774)
Total shareholders' equity before treasury stock	1,807,836	1,682,917
Less cost of shares in treasury, 29,029,808 shares on September 30, 2014 and 28,537,180 December 31, 2013	(270,226)	(258,509)
Total shareholders' equity	1,537,610	1,424,408
Total liabilities and shareholders' equity	$ 12,079,187	$ 12,079,477

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Junior Subordinated Interest Deferrable Debentures (Details 2) (USD $) In Thousands, unless otherwise specified			9 Months Ended
	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 Trust Six [Member]	Sep. 30, 2014 Trust Eight [Member]	Sep. 30, 2014 Trust Nine [Member]	Sep. 30, 2014 Trust Ten [Member]	Sep. 30, 2014 Trust Eleven [Member]	Sep. 30, 2014 Trust Twelve [Member]
Junior subordinated deferrable interest debentures, major types of business trusts
Junior subordinated deferrable interest debentures	$ 180,416	$ 190,726	$ 25,774	$ 25,774	$ 41,238	$ 34,021	$ 32,990	$ 20,619
Interest rate (as a percent)			3.68%	3.28%	1.85%	1.89%	1.85%	1.68%
Interest rate index			LIBOR	LIBOR	LIBOR	LIBOR	LIBOR	LIBOR
Spread on interest rate index (as a percent)			3.45%	3.05%	1.62%	1.65%	1.62%	1.45%

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Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Consolidated Statements of Comprehensive Income
Net income	$ 33,233	$ 31,826	$ 114,597	$ 87,408
Other comprehensive income, net of tax:
Net unrealized holding gains (losses) on securities available for sale arising during period (tax effects of $(7,888), $609, $23,898 and $(39,816))	(14,649)	1,132	44,382	(73,943)
Reclassification adjustment for losses (gains) on securities available for sale included in net income (tax effects of $2,256, $0, $(449) and $(3,360))	4,190		(834)	(6,241)
Reclassification adjustment for impairment charges on available for sale securities included in net income (tax effects of $96 ,$201, $193 and $455)	177	372	359	845
Other comprehensive income (loss), net of tax	(10,282)	1,504	43,907	(79,339)
Comprehensive income	$ 22,951	$ 33,330	$ 158,504	$ 8,069

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Allowance for Probable Loan Losses (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Dec. 31, 2013
Interest Recognized
Total trouble debt restructuring	$ 17,433		$ 17,433		$ 20,358
Period of charge off for past due unsecured commercial loans			90 days
Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with related allowance	32,430		32,430		31,255
Total impaired loans with no related allowance	45,537		45,537		44,638
Unpaid principal balance:
Total impaired loans with an allowance recorded	32,860		32,860		34,699
Total impaired loans with no related allowance recorded	47,071		47,071		45,986
Related Allowance	21,308		21,308		16,002
Average recorded investment:
Total impaired loans with an allowance recorded	32,525	32,476	31,715	30,736	31,244
Total impaired loans with no related allowance recorded	44,599	58,267	44,532	53,089	51,616
Interest Recognized
Total impaired loans with an allowance recorded	23	32	69	98	130
Total impaired loans with no related allowance recorded	112	92	336	258	374
Commercial Loan [Member]
Interest Recognized
Total trouble debt restructuring	2,512		2,512		150
Commercial Loan [Member] | Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with related allowance	17,659		17,659		17,178
Total impaired loans with no related allowance	22,536		22,536		17,005
Unpaid principal balance:
Total impaired loans with an allowance recorded	17,685		17,685		17,177
Total impaired loans with no related allowance recorded	22,606		22,606		17,023
Related Allowance	16,302		16,302		12,234
Average recorded investment:
Total impaired loans with an allowance recorded	17,677	17,884	17,550	17,898	18,019
Total impaired loans with no related allowance recorded	21,265	17,238	19,557	16,915	16,778
Interest Recognized
Total impaired loans with an allowance recorded		9		29	38
Total impaired loans with no related allowance recorded	1		3		2
Commercial Real Estate Other Construction and Land Development Receivable [Member]
Interest Recognized
Total trouble debt restructuring	2,255		2,255		8,860
Commercial Real Estate Other Construction and Land Development Receivable [Member] | Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with related allowance	7,344		7,344		6,818
Total impaired loans with no related allowance	4,191		4,191		7,158
Unpaid principal balance:
Total impaired loans with an allowance recorded	7,386		7,386		6,825
Total impaired loans with no related allowance recorded	4,262		4,262		7,187
Related Allowance	2,022		2,022		852
Average recorded investment:
Total impaired loans with an allowance recorded	7,329	6,821	7,326	5,804	6,058
Total impaired loans with no related allowance recorded	4,192	22,414	5,121	20,788	18,164
Interest Recognized
Total impaired loans with no related allowance recorded	19	17	56	53	74
Commercial Real Estate Farmland and Commercial Receivable [Member]
Interest Recognized
Total trouble debt restructuring	4,556		4,556		2,863
Commercial Real Estate Farmland and Commercial Receivable [Member] | Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with related allowance	7,427		7,427		7,259
Total impaired loans with no related allowance	8,344		8,344		8,779
Unpaid principal balance:
Total impaired loans with an allowance recorded	7,789		7,789		10,697
Total impaired loans with no related allowance recorded	9,664		9,664		9,949
Related Allowance	2,984		2,984		2,916
Average recorded investment:
Total impaired loans with an allowance recorded	7,519	7,771	6,839	7,034	7,167
Total impaired loans with no related allowance recorded	8,418	8,775	8,643	6,787	7,313
Interest Recognized
Total impaired loans with an allowance recorded	23	23	69	69	92
Commercial Real Estate Multifamily Receivable [Member] | Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with no related allowance	251		251		295
Unpaid principal balance:
Total impaired loans with no related allowance recorded	251		251		295
Average recorded investment:
Total impaired loans with no related allowance recorded	256	316	270	330	322
Residential First Mortgage Financing Receivable [Member]
Interest Recognized
Total trouble debt restructuring	4,941		4,941		4,887
Residential First Mortgage Financing Receivable [Member] | Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with no related allowance	5,457		5,457		6,153
Unpaid principal balance:
Total impaired loans with no related allowance recorded	5,507		5,507		6,258
Average recorded investment:
Total impaired loans with no related allowance recorded	5,648	4,878	6,028	4,441	4,860
Interest Recognized
Total impaired loans with no related allowance recorded	64	45	191	117	179
Residential Second Mortgage Financing Receivable [Member]
Interest Recognized
Total trouble debt restructuring	1,384		1,384		1,631
Residential Second Mortgage Financing Receivable [Member] | Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with no related allowance	2,933		2,933		3,206
Unpaid principal balance:
Total impaired loans with no related allowance recorded	2,954		2,954		3,226
Average recorded investment:
Total impaired loans with no related allowance recorded	2,992	2,731	3,080	2,059	2,347
Interest Recognized
Total impaired loans with no related allowance recorded	22	25	69	74	99
Consumer Loan [Member]
Interest Recognized
Total trouble debt restructuring	1,368		1,368		1,531
Consumer Loan [Member] | Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with no related allowance	1,408		1,408		1,606
Unpaid principal balance:
Total impaired loans with no related allowance recorded	1,410		1,410		1,612
Average recorded investment:
Total impaired loans with no related allowance recorded	1,408	1,458	1,407	1,313	1,380
Interest Recognized
Total impaired loans with no related allowance recorded	1		3		1
Foreign Receivables [Member]
Interest Recognized
Total trouble debt restructuring	417		417		436
Foreign Receivables [Member] | Unallocated Financing Receivables [Member]
Recorded investment:
Total impaired loans with no related allowance	417		417		436
Unpaid principal balance:
Total impaired loans with no related allowance recorded	417		417		436
Average recorded investment:
Total impaired loans with no related allowance recorded	420	457	426	456	452
Interest Recognized
Total impaired loans with no related allowance recorded	$ 5	$ 5	$ 14	$ 14	$ 19

XML

Allowance for Probable Loan Losses (Tables)

9 Months Ended

Sep. 30, 2014

Allowance for Probable Loan Losses

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

	Quarter Ended September 30, 2014
	Domestic																					Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily			Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at June 30,	$	28,006		$	13,006		$	19,538		$	786		$	3,721		$	4,736		$	706		$	1,038		$	71,537
Losses charge to allowance	(2,920		)	(43		)	(38		)	—			(131		)	(242		)	(146		)	—			(3,520		)
Recoveries credited to allowance	740			14			42			—			11			40			47			—			894
Net (losses) gains charged to allowance	(2,180		)	(29		)	4			—			(120		)	(202		)	(99		)	—			(2,626		)
Provision (credit) charged to operations	2,454			852			(701		)	(41		)	27			164			79			(18		)	2,816
Balance at September 30,	$	28,280		$	13,829		$	18,841		$	745		$	3,628		$	4,698		$	686		$	1,020		$	71,727

	Quarter Ended September 30, 2013
	Domestic																			Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial		Commercial real estate: multifamily		Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at June 30,	$	20,676		$	11,624		$	22,383	$	623	$	3,855		$	4,047		$	797		$	1,046		$	65,051
Losses charge to allowance	(3,540		)	(2		)	—		—		(22		)	(149		)	(130		)	(2		)	(3,845		)
Recoveries credited to allowance	658			10			9		—		45			80			21			—			823
Net (losses) gains charged to allowance	(2,882		)	8			9		—		23			(69		)	(109		)	(2		)	(3,022		)
Provision (credit) charged to operations	3,370			(10		)	1,549		112		186			404			124			65			5,800
Balance at September 30,	$	21,164		$	11,622		$	23,941	$	735	$	4,064		$	4,382		$	812		$	1,109		$	67,829

	Nine Months Ended September 30, 2014
	Domestic																					Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily			Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at December 31,	$	22,433		$	12,541		$	24,467		$	776		$	3,812		$	4,249		$	750		$	1,133		$	70,161
Losses charge to allowance	(7,780		)	(442		)	(208		)	—			(261		)	(395		)	(555		)	(50		)	(9,691		)
Recoveries credited to allowance	2,156			66			100			—			16			140			194			46			2,718
Net losses charged to allowance	(5,624		)	(376		)	(108		)	—			(245		)	(255		)	(361		)	(4		)	(6,973		)
Provision (credit) charged to operations	11,471			1,664			(5,518		)	(31		)	61			704			297			(109		)	8,539
Balance at September 30,	$	28,280		$	13,829		$	18,841		$	745		$	3,628		$	4,698		$	686		$	1,020		$	71,727

	Nine Months Ended September 30, 2013
	Domestic																				Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily		Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at December 31,	$	11,632		$	12,720		$	21,880		$	694	$	4,390		$	4,448		$	1,289		$	1,140		$	58,193
Losses charge to allowance	(8,866		)	(250		)	(61		)	—		(221		)	(544		)	(446		)	(22		)	(10,410		)
Recoveries credited to allowance	1,909			36			150			—		54			204			127			5			2,485
Net (losses) gains charged to allowance	(6,957		)	(214		)	89			—		(167		)	(340		)	(319		)	(17		)	(7,925		)
Provision (credit) charged to operations	16,489			(884		)	1,972			41		(159		)	274			(158		)	(14		)	17,561
Balance at September 30,	$	21,164		$	11,622		$	23,941		$	735	$	4,064		$	4,382		$	812		$	1,109		$	67,829

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

	September 30, 2014
	Loans individually evaluated for impairment				Loans collectively evaluated for impairment
	(Dollars in Thousands)
	Recorded Investment		Allowance		Recorded Investment		Allowance
Domestic
Commercial	$	40,195	$	16,302	$	1,219,188	$	11,978
Commercial real estate: other construction & land development	11,535		2,022		1,402,377		11,807
Commercial real estate: farmland & commercial	15,771		2,984		1,729,809		15,857
Commercial real estate: multifamily	251		—		100,468		745
Residential: first lien	5,457		—		412,101		3,628
Residential: junior lien	2,933		—		467,243		4,698
Consumer	1,408		—		60,585		686
Foreign	417		—		190,840		1,020
Total	$	77,967	$	21,308	$	5,582,611	$	50,419

	December 31, 2013
	Loans individually evaluated for impairment				Loans collectively evaluated for impairment
	(Dollars in Thousands)
	Recorded Investment		Allowance		Recorded Investment		Allowance
Domestic
Commercial	$	34,183	$	12,234	$	1,008,459	$	10,199
Commercial real estate: other construction & land development	13,976		852		1,194,532		11,689
Commercial real estate: farmland & commercial	16,038		2,916		1,734,001		21,551
Commercial real estate: multifamily	295		—		101,803		776
Residential: first lien	6,153		—		432,309		3,812
Residential: junior lien	3,206		—		406,024		4,249
Consumer	1,606		—		64,808		750
Foreign	436		—		181,406		1,133
Total	$	75,893	$	16,002	$	5,123,342	$	54,159

Loans accounted on non-accrual basis, by loan class

	September 30, 2014		December 31, 2013
	(Dollars in Thousands)
Domestic
Commercial	$	40,140	$	34,110
Commercial real estate: other construction & land development	9,281		11,726
Commercial real estate: farmland & commercial	13,508		13,775
Commercial real estate: multifamily	251		295
Residential: first lien	516		1,266
Residential: junior lien	1,549		1,576
Consumer	39		75
Total non-accrual loans	$	65,284	$	62,823

Impaired loans, by loan class

	September 30, 2014
							Quarter to Date				Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,659	$	17,685	$	16,302	$	17,677	$	—	$	17,550	$	—
Commercial real estate: other construction & land development	7,344		7,386		2,022		7,329		—		7,326		—
Commercial real estate: farmland & commercial	7,427		7,789		2,984		7,519		23		6,839		69
Total impaired loans with related allowance	$	32,430	$	32,860	$	21,308	$	32,525	$	23	$	31,715	$	69

	September 30, 2014
					Quarter to Date				Year to Date
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	22,536	$	22,606	$	21,265	$	1	$	19,557	$	3
Commercial real estate: other construction & land development	4,191		4,262		4,192		19		5,121		56
Commercial real estate: farmland & commercial	8,344		9,664		8,418		—		8,643		—
Commercial real estate: multifamily	251		251		256		—		270		—
Residential: first lien	5,457		5,507		5,648		64		6,028		191
Residential: junior lien	2,933		2,954		2,992		22		3,080		69
Consumer	1,408		1,410		1,408		1		1,407		3
Foreign	417		417		420		5		426		14
Total impaired loans with no related allowance	$	45,537	$	47,071	$	44,599	$	112	$	44,532	$	336

	December 31, 2013
			Unpaid				Year to Date
	Recorded Investment		Principal Balance		Related Allowance		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,178	$	17,177	$	12,234	$	18,019	$	38
Commercial real estate: other construction & land development	6,818		6,825		852		6,058		—
Commercial real estate: farmland & commercial	7,259		10,697		2,916		7,167		92
Total impaired loans with related allowance	$	31,255	$	34,699	$	16,002	$	31,244	$	130

	December 31, 2013
					Year to Date
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	17,005	$	17,023	$	16,778	$	2
Commercial real estate: other construction & land development	7,158		7,187		18,164		74
Commercial real estate: farmland & commercial	8,779		9,949		7,313		—
Commercial real estate: multifamily	295		295		322		—
Residential: first lien	6,153		6,258		4,860		179
Residential: junior lien	3,206		3,226		2,347		99
Consumer	1,606		1,612		1,380		1
Foreign	436		436		452		19
Total impaired loans with no related allowance	$	44,638	$	45,986	$	51,616	$	374

	September 30, 2013
	Quarter to Date				Year to Date
	Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,884	$	9	$	17,898	$	29
Commercial real estate: other construction & land development	6,821		—		5,804		—
Commercial real estate: farmland & commercial	7,771		23		7,034		69
Total impaired loans with related allowance	$	32,476	$	32	$	30,736	$	98

	September 30, 2013
	Quarter to Date				Year to Date
	Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	17,238	$	—	$	16,915	$	—
Commercial real estate: other construction & land development	22,414		17		20,788		53
Commercial real estate: farmland & commercial	8,775		—		6,787		—
Commercial real estate: multifamily	316		—		330		—
Residential: first lien	4,878		45		4,441		117
Residential: junior lien	2,731		25		2,059		74
Consumer	1,458		—		1,313		—
Foreign	457		5		456		14
Total impaired loans with no related allowance	$	58,267	$	92	$	53,089	$	258

Loans accounted for as trouble debt restructuring, by loan class

	September 30, 2014		December 31, 2013
	(Dollars in Thousands)
Domestic
Commercial	$	2,512	$	150
Commercial real estate: other construction & land development	2,255		8,860
Commercial real estate: farmland & commercial	4,556		2,863
Residential: first lien	4,941		4,887
Residential: junior lien	1,384		1,631
Consumer	1,368		1,531
Foreign	417		436
Total trouble debt restructuring	$	17,433	$	20,358

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

	September 30, 2014
	30 – 59 Days		60 – 89 Days		90 Days or Greater		90 Days or Greater & Still Accruing		Total Past Due		Current		Total Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	7,780	$	3,183	$	46,840	$	11,510	$	57,803	$	1,201,580	$	1,259,383
Commercial real estate: other construction & land development	2,591		16		8,454		204		11,061		1,402,851		1,413,912
Commercial real estate: farmland & commercial	14,466		878		8,475		892		23,819		1,721,761		1,745,580
Commercial real estate: multifamily	878		—		251		—		1,129		99,590		100,719
Residential: first lien	7,451		1,680		3,409		3,016		12,540		405,018		417,558
Residential: junior lien	844		164		2,033		508		3,041		467,135		470,176
Consumer	986		202		653		621		1,841		60,152		61,993
Foreign	1,392		559		170		170		2,121		189,136		191,257
Total past due loans	$	36,388	$	6,682	$	70,285	$	16,921	$	113,355	$	5,547,223	$	5,660,578

	December 31, 2013
	30 – 59 Days		60 – 89 Days		90 Days or Greater		90 Days or Greater & Still Accruing		Total Past Due		Current		Total Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	4,240	$	538	$	36,066	$	2,051	$	40,844	$	1,001,798	$	1,042,642
Commercial real estate: other construction & land development	1,042		—		9,942		62		10,984		1,197,524		1,208,508
Commercial real estate: farmland & commercial	6,216		520		6,990		417		13,726		1,736,313		1,750,039
Commercial real estate: multifamily	39		142		295		—		476		101,622		102,098
Residential: first lien	4,758		3,046		4,541		3,518		12,345		426,117		438,462
Residential: junior lien	606		198		1,900		368		2,704		406,526		409,230
Consumer	1,523		469		803		781		2,795		63,619		66,414
Foreign	1,467		417		—		—		1,884		179,958		181,842
Total past due loans	$	19,891	$	5,330	$	60,537	$	7,197	$	85,758	$	5,113,477	$	5,199,235

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

	September 30, 2014
	Pass		Special Review		Watch List - Pass		Watch List - Substandard		Watch List - Impaired
	(Dollars in Thousands)
Domestic
Commercial	$	1,165,427	$	992	$	1,759	$	51,010	$	40,195
Commercial real estate: other construction & land development	1,347,079		340		10,561		44,397		11,535
Commercial real estate: farmland & commercial	1,630,133		8,114		20,690		70,872		15,771
Commercial real estate: multifamily	99,649		—		—		819		251
Residential: first lien	411,888		112		—		101		5,457
Residential: junior lien	466,798		—		—		445		2,933
Consumer	60,452		—		—		133		1,408
Foreign	190,840		—		—		—		417
Total	$	5,372,266	$	9,558	$	33,010	$	167,777	$	77,967

	December 31, 2013
	Pass		Special Review		Watch List - Pass		Watch List - Substandard		Watch List - Impaired
	(Dollars in Thousands)
Domestic
Commercial	$	955,522	$	2,270	$	4,389	$	46,278	$	34,183
Commercial real estate: other construction & land development	1,167,295		14,247		9,318		3,672		13,976
Commercial real estate: farmland & commercial	1,635,179		56,438		21,912		20,472		16,038
Commercial real estate: multifamily	100,948		—		—		855		295
Residential: first lien	432,067		122		—		120		6,153
Residential: junior lien	405,731		—		—		293		3,206
Consumer	64,808		—		—		—		1,606
Foreign	180,837		—		—		569		436
Total	$	4,942,387	$	73,077	$	35,619	$	72,259	$	75,893

XML

Allowance for Probable Loan Losses (Details 5) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Financing receivable recorded investment
Past due 30-59 days	$ 36,388	$ 19,891
Past due 60-89 days	6,682	5,330
Past due 90 days or greater	70,285	60,537
Past due 90 days or Greater and Still Accruing	16,921	7,197
Past due, total	113,355	85,758
Loans, current	5,547,223	5,113,477
Total loans	5,660,578	5,199,235
Commercial Loan [Member]
Financing receivable recorded investment
Past due 30-59 days	7,780	4,240
Past due 60-89 days	3,183	538
Past due 90 days or greater	46,840	36,066
Past due 90 days or Greater and Still Accruing	11,510	2,051
Past due, total	57,803	40,844
Loans, current	1,201,580	1,001,798
Total loans	1,259,383	1,042,642
Commercial Real Estate Other Construction and Land Development Receivable [Member]
Financing receivable recorded investment
Past due 30-59 days	2,591	1,042
Past due 60-89 days	16
Past due 90 days or greater	8,454	9,942
Past due 90 days or Greater and Still Accruing	204	62
Past due, total	11,061	10,984
Loans, current	1,402,851	1,197,524
Total loans	1,413,912	1,208,508
Commercial Real Estate Farmland and Commercial Receivable [Member]
Financing receivable recorded investment
Past due 30-59 days	14,466	6,216
Past due 60-89 days	878	520
Past due 90 days or greater	8,475	6,990
Past due 90 days or Greater and Still Accruing	892	417
Past due, total	23,819	13,726
Loans, current	1,721,761	1,736,313
Total loans	1,745,580	1,750,039
Commercial Real Estate Multifamily Receivable [Member]
Financing receivable recorded investment
Past due 30-59 days	878	39
Past due 60-89 days		142
Past due 90 days or greater	251	295
Past due, total	1,129	476
Loans, current	99,590	101,622
Total loans	100,719	102,098
Residential First Mortgage Financing Receivable [Member]
Financing receivable recorded investment
Past due 30-59 days	7,451	4,758
Past due 60-89 days	1,680	3,046
Past due 90 days or greater	3,409	4,541
Past due 90 days or Greater and Still Accruing	3,016	3,518
Past due, total	12,540	12,345
Loans, current	405,018	426,117
Total loans	417,558	438,462
Residential Second Mortgage Financing Receivable [Member]
Financing receivable recorded investment
Past due 30-59 days	844	606
Past due 60-89 days	164	198
Past due 90 days or greater	2,033	1,900
Past due 90 days or Greater and Still Accruing	508	368
Past due, total	3,041	2,704
Loans, current	467,135	406,526
Total loans	470,176	409,230
Consumer Loan [Member]
Financing receivable recorded investment
Past due 30-59 days	986	1,523
Past due 60-89 days	202	469
Past due 90 days or greater	653	803
Past due 90 days or Greater and Still Accruing	621	781
Past due, total	1,841	2,795
Loans, current	60,152	63,619
Total loans	61,993	66,414
Foreign Receivables [Member]
Financing receivable recorded investment
Past due 30-59 days	1,392	1,467
Past due 60-89 days	559	417
Past due 90 days or greater	170
Past due 90 days or Greater and Still Accruing	170
Past due, total	2,121	1,884
Loans, current	189,136	179,958
Total loans	$ 191,257	$ 181,842

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2014

Investment Securities

Amortized cost and estimated fair value by type of investment security

The amortized cost and estimated fair value by type of investment security at September 30, 2014 are as follows:

	Held to Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	Available for Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Carrying Value (1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	4,513,064	$	46,900	$	(60,700	)	$	4,499,264	$	4,499,264
Obligations of states and political subdivisions	262,021		18,662		(5,563		)	275,120		275,120
Equity securities	28,075		1,101		(270		)	28,906		28,906
Total investment securities	$	4,803,160	$	66,663	$	(66,533	)	$	4,803,290	$	4,803,290

(1) Included in the carrying value of residential mortgage-backed securities are $1,551,363 of mortgage-backed securities issued by Ginnie Mae, $2,922,948 of mortgage-backed securities issued by Fannie Mae and Freddie Mac and $24,953 issued by non-government entities

The amortized cost and estimated fair value by type of investment security at December 31, 2013 are as follows:

	Held to Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	Available for Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Carrying Value (1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	5,096,165	$	56,110	$	(124,574	)	$	5,027,701	$	5,027,701
Obligations of states and political subdivisions	248,354		8,063		(8,007		)	248,410		248,410
Equity securities	28,075		931		(538		)	28,468		28,468
Total investment securities	$	5,372,594	$	65,104	$	(133,119	)	$	5,304,579	$	5,304,579

(1) Included in the carrying value of residential mortgage-backed securities are $1,799,807 of mortgage-backed securities issued by Ginnie Mae, $3,200,042 of mortgage-backed securities issued by Fannie Mae and Freddie Mac and $27,852 issued by non-government entities

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

	Held to Maturity				Available for Sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Due in one year or less	$	1,075	$	1,075	$	—	$	—
Due after one year through five years	1,325		1,325		—		—
Due after five years through ten years	—		—		727		810
Due after ten years	—		—		261,294		274,310
Residential mortgage-backed securities	—		—		4,513,064		4,499,264
Equity securities	—		—		28,075		28,906
Total investment securities	$	2,400	$	2,400	$	4,803,160	$	4,803,290

Gross unrealized losses on investment securities and the related fair value

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2014, were as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities	$	664,223	$	(3,327	)	$	1,889,249	$	(57,373	)	$	2,553,472	$	(60,700	)
Obligations of states and political subdivisions	1,595		(51		)	30,833		(5,512		)	32,428		(5,563		)
Other equity securities	—		—			10,480		(270		)	10,480		(270		)
	$	665,818	$	(3,378	)	$	1,930,562	$	(63,155	)	$	2,596,380	$	(66,533	)

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2013 were as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities	$	2,459,565	$	(98,022	)	$	420,262	$	(26,552	)	$	2,879,827	$	(124,574	)
Obligations of states and political subdivisions	55,327		(3,025		)	14,292		(4,982		)	69,619		(8,007		)
Equity securities	19,462		(538		)	—		—			19,462		(538		)
	$	2,534,354	$	(101,585	)	$	434,554	$	(31,534	)	$	2,968,908	$	(133,119	)

Reconciliation of credit-related impairment charges on available-for-sale investment

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investments recognized in earnings for the three months ended September 30, 2014 (Dollars in Thousands):

Balance at June 30, 2014	$	12,085
Impairment charges recognized during period	273
Balance at September 30, 2014	$	12,358

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investments recognized in earnings for the nine months ended September 30, 2014 (Dollars in Thousands):

Balance at December 31, 2013	$	11,806
Impairment charges recognized during period	552
Balance at September 30, 2014	$	12,358

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investment recognized in earnings for the three months ended September 30, 2013 (Dollars in Thousands):

Balance at June 30, 2013	$	11,159
Impairment charges recognized during period	573
Balance at September 30, 2013	$	11,732

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investment recognized in earnings for the nine months ended September 30, 2013 (Dollars in Thousands):

Balance at December 31, 2012	$	10,432
Impairment charges recognized during period	1,300
Balance at September 30, 2013	$	11,732

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Consolidated Statements of Comprehensive Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Consolidated Statements of Comprehensive Income
Net unrealized holding gains (losses) on securities available for sale arising during period, tax effects	$ (7,888)	$ 23,898	$ 609	$ (39,816)
Reclassification adjustment for gains on securities available for sale included in net income, tax effects	2,256	0	(449)	(3,360)
Reclassification adjustment for impairment charges on available for sale securities included in net income, tax effects	$ 96	$ 201	$ 193	$ 455

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Consolidated Statements of Condition (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Consolidated Statements of Condition
Held to maturity, Market value (in dollars)	$ 2,400	$ 2,400
Available for sale, Amortized cost (in dollars)	4,803,160	5,372,594
Common shares, par value (in dollars per share)	$ 1.00	$ 1.00
Common shares, Authorized shares	275,000,000	275,000,000
Common shares, issued shares	95,773,984	95,743,592
Accumulated other comprehensive income, comprehensive loss related to other-than-temporary impairment for non-credit related issues (in dollars)	$ (5,217)	$ (5,646)
Treasury, shares	29,029,808	28,537,180

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Common Stock and Dividends

9 Months Ended

Sep. 30, 2014

Common Stock and Dividends

Common Stock and Dividends

Note 9 — Common Stock and Dividends

The Company had outstanding 216,000 shares of Series A cumulative perpetual preferred stock (the “Senior Preferred Stock”), issued to the US Treasury under the Company’s participation in the Troubled Asset Relief Program Capital Purchase Program (the “TARP Capital Purchase Program”).  The Company redeemed all of the Senior Preferred Stock in 2012.  In conjunction with the purchase of the Senior Preferred Stock, the US Treasury received a warrant (the “Warrant”) to purchase 1,326,238 shares of the Company’s common stock (the “Warrant Shares”) at $24.43 per share, which would represent an aggregate common stock investment in the Company on exercise of the warrant in full equal to 15% of the Senior Preferred Stock investment.  The term of the Warrant is ten years and was immediately exercisable.  The Warrant is included as a component of Tier 1 capital.  On June 12, 2013, the U. S. Treasury sold the Warrant to a third party.  As of September 30, 2014, the Warrant is still outstanding, but expires on December 23, 2018 with no value if not exercised before that date.

The Company paid cash dividends to the common shareholders of $.25 per share on April 18, 2014 to all holders of record on April 1, 2014 and $.27 per share on October 15, 2014 to all shareholders of record on September 30, 2014.  The Company paid cash dividends to the common shareholders of $.20 per share on April 20, 2013 to all holders of record on April 1, 2013 and $.23 per share on October 15, 2013 to all holders of record on September 30, 2013, respectively.

In April 2009, following receipt of the Treasury Department’s consent, the Board of Directors re-established a formal stock repurchase program that authorized the repurchase of up to $40 million of common stock within the following twelve months and on March 7, 2014,  the Board of Directors extended the repurchase program and again authorized the repurchase of up to $40 million of common stock during the twelve month period commencing on April 9, 2014, which repurchase cap the Board is inclined to increase over time.  Stock repurchases may be made from time to time, on the open market or through private transactions.  Shares repurchased in this program will be held in treasury for reissue for various corporate purposes, including employee stock option plans.  As of November 5, 2014, a total of 8,489,280 shares had been repurchased under all programs at a cost of $252,989,000.

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Document and Entity Information	3 Months Ended
	Sep. 30, 2014	Nov. 04, 2014
Document and Entity Information
Entity Registrant Name	INTERNATIONAL BANCSHARES CORP
Entity Central Index Key	0000315709
Document Type	10-Q
Document Period End Date	Sep. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		66,595,786
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

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Commitments and Contingent Liabilities

9 Months Ended

Sep. 30, 2014

Commitments and Contingent Liabilities

Commitments and Contingent Liabilities

Note 10 - Commitments and Contingent Liabilities

The Company is involved in various legal proceedings that are in various stages of litigation.  Some of these actions allege “lender liability” claims on a variety of theories and claim substantial actual and punitive damages.  The Company has determined, based on discussions with its counsel that any material loss in such actions, individually or in the aggregate, is remote or the damages sought, even if fully recovered, would not be considered material to the consolidated financial position, results of operations or cash flows of the Company.  However, many of these matters are in various stages of proceedings and further developments could cause management to revise its assessment of these matters.

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Consolidated Statements of Income (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Interest income:
Loans, including fees	$ 71,026,000	$ 66,482,000	$ 208,934,000	$ 194,633,000
Investment securities:
Taxable	24,149,000	21,821,000	76,873,000	60,941,000
Tax-exempt	2,744,000	3,318,000	8,995,000	9,439,000
Other interest income	39,000	29,000	133,000	71,000
Total interest income	97,958,000	91,650,000	294,935,000	265,084,000
Interest expense:
Savings deposits	898,000	885,000	2,684,000	2,852,000
Time deposits	2,976,000	3,644,000	9,115,000	12,067,000
Securities sold under repurchase agreements	6,150,000	7,162,000	18,474,000	22,042,000
Other borrowings	488,000	454,000	1,608,000	1,033,000
Junior subordinated interest deferrable debentures	1,063,000	862,000	3,201,000	3,191,000
Total interest expense	11,575,000	13,007,000	35,082,000	41,185,000
Net interest income	86,383,000	78,643,000	259,853,000	223,899,000
Provision for probable loan losses	2,816,000	5,800,000	8,539,000	17,561,000
Net interest income after provision for probable loan losses	83,567,000	72,843,000	251,314,000	206,338,000
Non-interest income:
Service charges on deposit accounts	22,514,000	25,026,000	67,026,000	72,363,000
Other service charges, commissions and fees
Banking	10,880,000	11,327,000	33,791,000	31,362,000
Non-banking	2,083,000	2,092,000	5,143,000	4,668,000
Investment securities transactions, net	(6,446,000)		1,283,000	9,601,000
Other investments, net	5,641,000	3,871,000	17,008,000	19,503,000
Other income	1,811,000	2,165,000	11,873,000	6,941,000
Total non-interest income	36,483,000	44,481,000	136,124,000	144,438,000
Non-interest expense:
Employee compensation and benefits	32,326,000	30,627,000	92,560,000	91,602,000
Occupancy	7,865,000	7,604,000	22,729,000	22,596,000
Depreciation of bank premises and equipment	5,937,000	6,433,000	18,083,000	19,677,000
Professional fees	3,416,000	3,669,000	10,343,000	11,344,000
Deposit insurance assessments	1,515,000	1,683,000	4,512,000	5,061,000
Net expense, other real estate owned	(55,000)	1,360,000	1,704,000	4,724,000
Amortization of identified intangible assets	117,000	1,156,000	2,246,000	3,451,000
Advertising	1,928,000	1,795,000	5,713,000	5,664,000
Early termination fee - securities sold under repurchase agreements			11,000,000	12,303,000
Impairment charges (Total other-than-temporary impairment losses, $(8), net of $(281), $(13), net of $(560), $(115), net of $(667), and $27, net of $(1,273), included in other comprehensive income)	273,000	573,000	552,000	1,300,000
Other	16,835,000	15,327,000	47,043,000	47,080,000
Total non-interest expense	70,157,000	70,227,000	216,485,000	224,802,000
Income before income taxes	49,893,000	47,097,000	170,953,000	125,974,000
Provision for income taxes	16,660,000	15,271,000	56,356,000	38,566,000
Net income	$ 33,233,000	$ 31,826,000	$ 114,597,000	$ 87,408,000
Basic earnings per common share:
Weighted average number of shares outstanding: (in shares)	66,860,997	67,197,847	66,971,555	67,192,112
Net income (in dollars per share)	$ 0.50	$ 0.47	$ 1.71	$ 1.30
Fully diluted earnings per common share:
Weighted average number of shares outstanding: (in shares)	67,016,937	67,333,442	67,119,213	67,301,863
Net income (in dollars per share)	$ 0.50	$ 0.47	$ 1.71	$ 1.30

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Allowance for Probable Loan Losses

9 Months Ended

Sep. 30, 2014

Allowance for Probable Loan Losses

Allowance for Probable Loan Losses

Note 4 - Allowance for Probable Loan Losses

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

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

The loan loss provision is determined using the following methods.  On a weekly basis, loan past due reports are reviewed by the credit quality committee to determine if a loan has any potential problems and if a loan should be placed on the Company’s internal classified report.  Additionally, the Company’s credit department reviews the majority of the Company’s loans for proper internal classification purposes regardless of whether they are past due and segregates any loans with potential problems for further review.  The credit department will discuss the potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the evaluation.  Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the review process.  After the above analysis is completed, the Company will determine if a loan should be placed on an internal classified report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.

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

	Quarter Ended September 30, 2014
	Domestic																					Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily			Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at June 30,	$	28,006		$	13,006		$	19,538		$	786		$	3,721		$	4,736		$	706		$	1,038		$	71,537
Losses charge to allowance	(2,920		)	(43		)	(38		)	—			(131		)	(242		)	(146		)	—			(3,520		)
Recoveries credited to allowance	740			14			42			—			11			40			47			—			894
Net (losses) gains charged to allowance	(2,180		)	(29		)	4			—			(120		)	(202		)	(99		)	—			(2,626		)
Provision (credit) charged to operations	2,454			852			(701		)	(41		)	27			164			79			(18		)	2,816
Balance at September 30,	$	28,280		$	13,829		$	18,841		$	745		$	3,628		$	4,698		$	686		$	1,020		$	71,727

	Quarter Ended September 30, 2013
	Domestic																			Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial		Commercial real estate: multifamily		Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at June 30,	$	20,676		$	11,624		$	22,383	$	623	$	3,855		$	4,047		$	797		$	1,046		$	65,051
Losses charge to allowance	(3,540		)	(2		)	—		—		(22		)	(149		)	(130		)	(2		)	(3,845		)
Recoveries credited to allowance	658			10			9		—		45			80			21			—			823
Net (losses) gains charged to allowance	(2,882		)	8			9		—		23			(69		)	(109		)	(2		)	(3,022		)
Provision (credit) charged to operations	3,370			(10		)	1,549		112		186			404			124			65			5,800
Balance at September 30,	$	21,164		$	11,622		$	23,941	$	735	$	4,064		$	4,382		$	812		$	1,109		$	67,829

	Nine Months Ended September 30, 2014
	Domestic																					Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily			Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at December 31,	$	22,433		$	12,541		$	24,467		$	776		$	3,812		$	4,249		$	750		$	1,133		$	70,161
Losses charge to allowance	(7,780		)	(442		)	(208		)	—			(261		)	(395		)	(555		)	(50		)	(9,691		)
Recoveries credited to allowance	2,156			66			100			—			16			140			194			46			2,718
Net losses charged to allowance	(5,624		)	(376		)	(108		)	—			(245		)	(255		)	(361		)	(4		)	(6,973		)
Provision (credit) charged to operations	11,471			1,664			(5,518		)	(31		)	61			704			297			(109		)	8,539
Balance at September 30,	$	28,280		$	13,829		$	18,841		$	745		$	3,628		$	4,698		$	686		$	1,020		$	71,727

	Nine Months Ended September 30, 2013
	Domestic																				Foreign
	Commercial			Commercial real estate: other construction & land development			Commercial real estate: farmland & commercial			Commercial real estate: multifamily		Residential: first lien			Residential: junior lien			Consumer			Foreign			Total
	(Dollars in Thousands)
Balance at December 31,	$	11,632		$	12,720		$	21,880		$	694	$	4,390		$	4,448		$	1,289		$	1,140		$	58,193
Losses charge to allowance	(8,866		)	(250		)	(61		)	—		(221		)	(544		)	(446		)	(22		)	(10,410		)
Recoveries credited to allowance	1,909			36			150			—		54			204			127			5			2,485
Net (losses) gains charged to allowance	(6,957		)	(214		)	89			—		(167		)	(340		)	(319		)	(17		)	(7,925		)
Provision (credit) charged to operations	16,489			(884		)	1,972			41		(159		)	274			(158		)	(14		)	17,561
Balance at September 30,	$	21,164		$	11,622		$	23,941		$	735	$	4,064		$	4,382		$	812		$	1,109		$	67,829

The allowance for probable loan losses is a reserve established through a provision for probable loan losses charged to expense, which represents management’s best estimate of probable loan losses when evaluating loans (i) individually or (ii) collectively.

The table below provides additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class as of September 30, 2014 and December 31, 2013:

	September 30, 2014
	Loans individually evaluated for impairment				Loans collectively evaluated for impairment
	(Dollars in Thousands)
	Recorded Investment		Allowance		Recorded Investment		Allowance
Domestic
Commercial	$	40,195	$	16,302	$	1,219,188	$	11,978
Commercial real estate: other construction & land development	11,535		2,022		1,402,377		11,807
Commercial real estate: farmland & commercial	15,771		2,984		1,729,809		15,857
Commercial real estate: multifamily	251		—		100,468		745
Residential: first lien	5,457		—		412,101		3,628
Residential: junior lien	2,933		—		467,243		4,698
Consumer	1,408		—		60,585		686
Foreign	417		—		190,840		1,020
Total	$	77,967	$	21,308	$	5,582,611	$	50,419

	December 31, 2013
	Loans individually evaluated for impairment				Loans collectively evaluated for impairment
	(Dollars in Thousands)
	Recorded Investment		Allowance		Recorded Investment		Allowance
Domestic
Commercial	$	34,183	$	12,234	$	1,008,459	$	10,199
Commercial real estate: other construction & land development	13,976		852		1,194,532		11,689
Commercial real estate: farmland & commercial	16,038		2,916		1,734,001		21,551
Commercial real estate: multifamily	295		—		101,803		776
Residential: first lien	6,153		—		432,309		3,812
Residential: junior lien	3,206		—		406,024		4,249
Consumer	1,606		—		64,808		750
Foreign	436		—		181,406		1,133
Total	$	75,893	$	16,002	$	5,123,342	$	54,159

The table below provides additional information on loans accounted for on a non-accrual basis by loan class at September 30, 2014 and December 31, 2013:

	September 30, 2014		December 31, 2013
	(Dollars in Thousands)
Domestic
Commercial	$	40,140	$	34,110
Commercial real estate: other construction & land development	9,281		11,726
Commercial real estate: farmland & commercial	13,508		13,775
Commercial real estate: multifamily	251		295
Residential: first lien	516		1,266
Residential: junior lien	1,549		1,576
Consumer	39		75
Total non-accrual loans	$	65,284	$	62,823

Impaired loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected.  The Company has identified these loans through its normal loan review procedures.  Impaired loans are measured based on (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the loan’s observable market price; or (3) the fair value of the collateral if the loan is collateral dependent.  Substantially all of the Company’s impaired loans are measured at the fair value of the collateral. In limited cases the Company may use other methods to determine the level of impairment of a loan if such loan is not collateral dependent.

The following tables detail key information regarding the Company’s impaired loans by loan class at September 30, 2014 and December 31, 2013:

	September 30, 2014
							Quarter to Date				Year to Date
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,659	$	17,685	$	16,302	$	17,677	$	—	$	17,550	$	—
Commercial real estate: other construction & land development	7,344		7,386		2,022		7,329		—		7,326		—
Commercial real estate: farmland & commercial	7,427		7,789		2,984		7,519		23		6,839		69
Total impaired loans with related allowance	$	32,430	$	32,860	$	21,308	$	32,525	$	23	$	31,715	$	69

	September 30, 2014
					Quarter to Date				Year to Date
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	22,536	$	22,606	$	21,265	$	1	$	19,557	$	3
Commercial real estate: other construction & land development	4,191		4,262		4,192		19		5,121		56
Commercial real estate: farmland & commercial	8,344		9,664		8,418		—		8,643		—
Commercial real estate: multifamily	251		251		256		—		270		—
Residential: first lien	5,457		5,507		5,648		64		6,028		191
Residential: junior lien	2,933		2,954		2,992		22		3,080		69
Consumer	1,408		1,410		1,408		1		1,407		3
Foreign	417		417		420		5		426		14
Total impaired loans with no related allowance	$	45,537	$	47,071	$	44,599	$	112	$	44,532	$	336

	December 31, 2013
			Unpaid				Year to Date
	Recorded Investment		Principal Balance		Related Allowance		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,178	$	17,177	$	12,234	$	18,019	$	38
Commercial real estate: other construction & land development	6,818		6,825		852		6,058		—
Commercial real estate: farmland & commercial	7,259		10,697		2,916		7,167		92
Total impaired loans with related allowance	$	31,255	$	34,699	$	16,002	$	31,244	$	130

	December 31, 2013
					Year to Date
	Recorded Investment		Unpaid Principal Balance		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	17,005	$	17,023	$	16,778	$	2
Commercial real estate: other construction & land development	7,158		7,187		18,164		74
Commercial real estate: farmland & commercial	8,779		9,949		7,313		—
Commercial real estate: multifamily	295		295		322		—
Residential: first lien	6,153		6,258		4,860		179
Residential: junior lien	3,206		3,226		2,347		99
Consumer	1,606		1,612		1,380		1
Foreign	436		436		452		19
Total impaired loans with no related allowance	$	44,638	$	45,986	$	51,616	$	374

The following tables detail key information regarding the Company’s average recorded investment in impaired loans and interest recognized on impaired loans by loan class at September 30, 2013:

	September 30, 2013
	Quarter to Date				Year to Date
	Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with Related Allowance
Domestic
Commercial	$	17,884	$	9	$	17,898	$	29
Commercial real estate: other construction & land development	6,821		—		5,804		—
Commercial real estate: farmland & commercial	7,771		23		7,034		69
Total impaired loans with related allowance	$	32,476	$	32	$	30,736	$	98

	September 30, 2013
	Quarter to Date				Year to Date
	Average Recorded Investment		Interest Recognized		Average Recorded Investment		Interest Recognized
	(Dollars in Thousands)
Loans with No Related Allowance
Domestic
Commercial	$	17,238	$	—	$	16,915	$	—
Commercial real estate: other construction & land development	22,414		17		20,788		53
Commercial real estate: farmland & commercial	8,775		—		6,787		—
Commercial real estate: multifamily	316		—		330		—
Residential: first lien	4,878		45		4,441		117
Residential: junior lien	2,731		25		2,059		74
Consumer	1,458		—		1,313		—
Foreign	457		5		456		14
Total impaired loans with no related allowance	$	58,267	$	92	$	53,089	$	258

A portion of the impaired loans have adequate collateral and credit enhancements not requiring a related allowance for loan loss.  The level of impaired loans is reflective of the economic weakness that has been created by the financial crisis and the subsequent economic downturn.  Management is confident the Company’s loss exposure regarding these credits will be significantly reduced due to the Company’s long-standing practices that emphasize secured lending with strong collateral positions and guarantor support.  Management is likewise confident the reserve for probable loan losses is adequate.  The Company has no direct exposure to sub-prime loans in its loan portfolio, but the sub-prime crisis has affected the credit markets on a national level, and as a result, the Company has experienced an increasing amount of impaired loans; however, management’s decision to place loans in this category does not necessarily mean that the Company will experience significant losses from these loans or significant increases in impaired loans from these levels.

Management of the Company recognizes the risks associated with these impaired loans.  However, management’s decision to place loans in this category does not necessarily mean that losses will occur. In the current environment, troubled loan management can be protracted because of the legal and process problems that delay the collection of an otherwise collectable loan.  Additionally, management believes that the collateral related to these impaired loans and/or the secondary support from guarantors mitigates the potential for losses from impaired loans.  It is also important to note that even though the economic conditions in Texas and Oklahoma are weakened, we believe these markets are continuing to improve and continue to be in a position to recover better than many other areas of the country.

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

	September 30, 2014		December 31, 2013
	(Dollars in Thousands)
Domestic
Commercial	$	2,512	$	150
Commercial real estate: other construction & land development	2,255		8,860
Commercial real estate: farmland & commercial	4,556		2,863
Residential: first lien	4,941		4,887
Residential: junior lien	1,384		1,631
Consumer	1,368		1,531
Foreign	417		436
Total trouble debt restructuring	$	17,433	$	20,358

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

While management of the Company considers that it is generally able to identify borrowers with financial problems reasonably early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses.  The determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an exercise of judgment.  Similarly, the determination of the adequacy of the allowance for probable loan losses can be made only on a subjective basis.  It is the judgment of the Company’s management that the allowance for probable loan losses at September 30, 2014 was adequate to absorb probable losses from loans in the portfolio at that date.

The following table presents information regarding the aging of past due loans by loan class at September 30, 2014 and December 31, 2013:

	September 30, 2014
	30 – 59 Days		60 – 89 Days		90 Days or Greater		90 Days or Greater & Still Accruing		Total Past Due		Current		Total Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	7,780	$	3,183	$	46,840	$	11,510	$	57,803	$	1,201,580	$	1,259,383
Commercial real estate: other construction & land development	2,591		16		8,454		204		11,061		1,402,851		1,413,912
Commercial real estate: farmland & commercial	14,466		878		8,475		892		23,819		1,721,761		1,745,580
Commercial real estate: multifamily	878		—		251		—		1,129		99,590		100,719
Residential: first lien	7,451		1,680		3,409		3,016		12,540		405,018		417,558
Residential: junior lien	844		164		2,033		508		3,041		467,135		470,176
Consumer	986		202		653		621		1,841		60,152		61,993
Foreign	1,392		559		170		170		2,121		189,136		191,257
Total past due loans	$	36,388	$	6,682	$	70,285	$	16,921	$	113,355	$	5,547,223	$	5,660,578

	December 31, 2013
	30 – 59 Days		60 – 89 Days		90 Days or Greater		90 Days or Greater & Still Accruing		Total Past Due		Current		Total Portfolio
	(Dollars in Thousands)
Domestic
Commercial	$	4,240	$	538	$	36,066	$	2,051	$	40,844	$	1,001,798	$	1,042,642
Commercial real estate: other construction & land development	1,042		—		9,942		62		10,984		1,197,524		1,208,508
Commercial real estate: farmland & commercial	6,216		520		6,990		417		13,726		1,736,313		1,750,039
Commercial real estate: multifamily	39		142		295		—		476		101,622		102,098
Residential: first lien	4,758		3,046		4,541		3,518		12,345		426,117		438,462
Residential: junior lien	606		198		1,900		368		2,704		406,526		409,230
Consumer	1,523		469		803		781		2,795		63,619		66,414
Foreign	1,467		417		—		—		1,884		179,958		181,842
Total past due loans	$	19,891	$	5,330	$	60,537	$	7,197	$	85,758	$	5,113,477	$	5,199,235

The Company’s internal classified report is segregated into the following categories:  (i) “Special Review Credits,” (ii) “Watch List - Pass Credits,” or (iii) “Watch List - Substandard Credits.”  The loans placed in the “Special Review Credits” category reflect the Company’s opinion that the loans reflect potential weakness which require monitoring on a more frequent basis.  The “Special Review Credits” are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted.  The loans placed in the “Watch List - Pass Credits” category reflect the Company’s opinion that the credit contains weaknesses which represent a greater degree of risk, which warrant “extra attention.”  The “Watch List — Pass Credits” are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted.  The loans placed in the “Watch List — Substandard Credits” classification are considered to be potentially inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral.  These credit obligations, even if apparently protected by collateral value, have shown defined weaknesses related to adverse financial, managerial, economic, market or political conditions which may jeopardize repayment of principal and interest.  Furthermore, there is the possibility that some future loss could be sustained by the Company if such weaknesses are not corrected.  For loans that are classified as impaired, management evaluates these credits in accordance with the provisions of ASC 310-10, “Receivables,” and, if deemed necessary, a specific reserve is allocated to the credit.  The specific reserve allocated under ASC 310-10, is based on (i) the present value of expected future cash flows discounted at the loan’s effective interest rate; (ii) the loan’s observable market price; or (iii) the fair value of the collateral if the loan is collateral dependent.  Substantially all of the Company’s loans evaluated as impaired under ASC 310-10 are measured using the fair value of collateral method.  In limited cases, the Company may use other methods to determine the specific reserve of a loan under ASC 310-10 if such loan is not collateral dependent.

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

A summary of the loan portfolio by credit quality indicator by loan class at September 30, 2014 and December 31, 2013 is as follows:

	September 30, 2014
	Pass		Special Review		Watch List - Pass		Watch List - Substandard		Watch List - Impaired
	(Dollars in Thousands)
Domestic
Commercial	$	1,165,427	$	992	$	1,759	$	51,010	$	40,195
Commercial real estate: other construction & land development	1,347,079		340		10,561		44,397		11,535
Commercial real estate: farmland & commercial	1,630,133		8,114		20,690		70,872		15,771
Commercial real estate: multifamily	99,649		—		—		819		251
Residential: first lien	411,888		112		—		101		5,457
Residential: junior lien	466,798		—		—		445		2,933
Consumer	60,452		—		—		133		1,408
Foreign	190,840		—		—		—		417
Total	$	5,372,266	$	9,558	$	33,010	$	167,777	$	77,967

	December 31, 2013
	Pass		Special Review		Watch List - Pass		Watch List - Substandard		Watch List - Impaired
	(Dollars in Thousands)
Domestic
Commercial	$	955,522	$	2,270	$	4,389	$	46,278	$	34,183
Commercial real estate: other construction & land development	1,167,295		14,247		9,318		3,672		13,976
Commercial real estate: farmland & commercial	1,635,179		56,438		21,912		20,472		16,038
Commercial real estate: multifamily	100,948		—		—		855		295
Residential: first lien	432,067		122		—		120		6,153
Residential: junior lien	405,731		—		—		293		3,206
Consumer	64,808		—		—		—		1,606
Foreign	180,837		—		—		569		436
Total	$	4,942,387	$	73,077	$	35,619	$	72,259	$	75,893

The increase in the watch-list substandard category can be attributed primarily to a loan relationship that further deteriorated in the first nine months of 2014.  The majority of the relationship had previously been included in the special review category at December 31, 2013.

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Loans

9 Months Ended

Sep. 30, 2014

Loans

Loans

Note 3— Loans

A summary of loans, by loan type at September 30, 2014 and December 31, 2013 is as follows:

	September 30,		December 31,
	2014		2013
	(Dollars in Thousands)
Commercial, financial and agricultural	$	3,105,682	$	2,894,779
Real estate — mortgage	887,734		847,692
Real estate — construction	1,413,912		1,208,508
Consumer	61,993		66,414
Foreign	191,257		181,842
Total loans	$	5,660,578	$	5,199,235

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Stock Options (Tables)

9 Months Ended

Sep. 30, 2014

Stock Options

Summary of option activity under stock option plan

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($)
					(Dollars in Thousands)
Options outstanding at December 31, 2013	515,143	$	15.98
Plus: Options granted	549,750	21.42
Less:
Options exercised	30,392	13.36
Options expired	11,825	26.70
Options forfeited	19,775	18.60
Options outstanding at September 30, 2014	1,002,901	18.86		6.77	$	7,011
Options fully vested and exercisable at September 30, 2014	230,006	$	17.08	2.10	$	2,057

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Capital Ratios

9 Months Ended

Sep. 30, 2014

Capital Ratios

Capital Ratios

Note 11 — Capital Ratios

The Company had a Tier 1 capital to average total asset (leverage) ratio of 12.16% and 11.61%, risk-weighted Tier 1 capital ratio of 19.11% and 19.33% and risk-weighted total capital ratio of 20.11% and 20.36% at September 30, 2014 and December 31, 2013, respectively.  The identified intangibles and goodwill of $283,472,000 as of September 30, 2014, recorded in connection with the acquisitions made by the Company, are deducted from the sum of core capital elements when determining the capital ratios of the Company.  Under applicable regulatory guidelines, the Capital 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 qualifies as Tier 2 capital.  As of September 30, 2014, the total of $180,416,000 of the Capital Securities outstanding qualified as Tier 1 capital.  The Company actively monitors the regulatory capital ratios to ensure that the Company’s bank subsidiaries are well capitalized under the regulatory framework.

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Other Borrowed Funds

9 Months Ended

Sep. 30, 2014

Other Borrowed Funds

Other Borrowed Funds

Note 7 — Other Borrowed Funds

Other borrowed funds include Federal Home Loan Bank borrowings, which are short-term and long-term borrowings issued by the FHLB of Dallas at the market price offered at the time of funding.  These borrowings are secured by residential mortgage-backed investment securities and a portion of the Company’s loan portfolio.  At September 30, 2014, other borrowed funds totaled $987,181,000, a decrease of 19.3% from $1,223,950,000 at December 31, 2013.

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Stock Options

9 Months Ended

Sep. 30, 2014

Stock Options

Stock Options

Note 5 — Stock Options

On April 5, 2012, the Board of Directors adopted the 2012 International Bancshares Corporation Stock Option Plan (the “2012 Plan”). There are 800,000 shares available for stock option grants under the 2012 Plan. Under the 2012 Plan, both qualified incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”) may be granted. Options granted may be exercisable for a period of up to 10 years from the date of grant, excluding ISOs granted to 10% shareholders, which may be exercisable for a period of up to only five years. As of September 30, 2014, 211,500 shares were available for future grants under the 2012 Plan.

A summary of option activity under the stock option plans for the nine months ended September 30, 2014 is as follows:

	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value ($)
					(Dollars in Thousands)
Options outstanding at December 31, 2013	515,143	$	15.98
Plus: Options granted	549,750	21.42
Less:
Options exercised	30,392	13.36
Options expired	11,825	26.70
Options forfeited	19,775	18.60
Options outstanding at September 30, 2014	1,002,901	18.86		6.77	$	7,011
Options fully vested and exercisable at September 30, 2014	230,006	$	17.08	2.10	$	2,057

Stock-based compensation expense included in the consolidated statements of income for the three and nine months ended September 30, 2014 was approximately $301,000 and $766,000, respectively.  Stock-based compensation expense included in the consolidated statements of income for the three and nine months ended September 30, 2013 was approximately $101,000 and $322,000, respectively.  As of September 30, 2014, there was approximately $4,226,000           of total unrecognized stock-based compensation cost related to non-vested options granted under the Company plans that will be recognized over a weighted average period of 2.4 years.

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Investment Securities

9 Months Ended

Sep. 30, 2014

Investment Securities

Investment Securities

Note 6 - Investment Securities

The Company classifies debt and equity securities into one of three categories:  held-to maturity, available-for-sale, or trading.  Such 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.

The amortized cost and estimated fair value by type of investment security at September 30, 2014 are as follows:

	Held to Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	Available for Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Carrying Value (1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	4,513,064	$	46,900	$	(60,700	)	$	4,499,264	$	4,499,264
Obligations of states and political subdivisions	262,021		18,662		(5,563		)	275,120		275,120
Equity securities	28,075		1,101		(270		)	28,906		28,906
Total investment securities	$	4,803,160	$	66,663	$	(66,533	)	$	4,803,290	$	4,803,290

(1) Included in the carrying value of residential mortgage-backed securities are $1,551,363 of mortgage-backed securities issued by Ginnie Mae, $2,922,948 of mortgage-backed securities issued by Fannie Mae and Freddie Mac and $24,953 issued by non-government entities

The amortized cost and estimated fair value by type of investment security at December 31, 2013 are as follows:

	Held to Maturity
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Carrying Value
	(Dollars in Thousands)
Other securities	$	2,400	$	—	$	—	$	2,400	$	2,400
Total investment securities	$	2,400	$	—	$	—	$	2,400	$	2,400

	Available for Sale
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Carrying Value (1)
	(Dollars in Thousands)
Residential mortgage-backed securities	$	5,096,165	$	56,110	$	(124,574	)	$	5,027,701	$	5,027,701
Obligations of states and political subdivisions	248,354		8,063		(8,007		)	248,410		248,410
Equity securities	28,075		931		(538		)	28,468		28,468
Total investment securities	$	5,372,594	$	65,104	$	(133,119	)	$	5,304,579	$	5,304,579

(1) Included in the carrying value of residential mortgage-backed securities are $1,799,807 of mortgage-backed securities issued by Ginnie Mae, $3,200,042 of mortgage-backed securities issued by Fannie Mae and Freddie Mac and $27,852 issued by non-government entities

The amortized cost and estimated fair value of investment securities at September 30, 2014, 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 Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(Dollars in Thousands)
Due in one year or less	$	1,075	$	1,075	$	—	$	—
Due after one year through five years	1,325		1,325		—		—
Due after five years through ten years	—		—		727		810
Due after ten years	—		—		261,294		274,310
Residential mortgage-backed securities	—		—		4,513,064		4,499,264
Equity securities	—		—		28,075		28,906
Total investment securities	$	2,400	$	2,400	$	4,803,160	$	4,803,290

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

The amortized cost and fair value of available for sale investment securities pledged to qualify for fiduciary powers, to secure public monies as required by law, repurchase agreements and short-term fixed borrowings was $2,156,453,000 and $2,164,872,000 at September 30, 2014.

Proceeds from the sale of securities available-for-sale were $253,292,000 and $621,588,000 for the three and nine months ended September 30, 2014, which included $253,292,000 and $620,933,000 of mortgage-backed securities. Gross gains of $0 and $9,479,000 and gross losses of $(6,446,000) and $(8,196,000) were realized on the sales for the three and nine months ended September 30, 2014, respectively.  Proceeds from the sale of securities available-for-sale were $0 and $178,124,000 for the three and nine months ended September 30, 2013, which included $0 and $177,623,000 of mortgage-backed securities. Gross gains of $0 and $9,601,000 and gross losses of $0 and $0 were realized on the sales for the three and nine months ended September 30, 2013, respectively.

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2014, were as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities	$	664,223	$	(3,327	)	$	1,889,249	$	(57,373	)	$	2,553,472	$	(60,700	)
Obligations of states and political subdivisions	1,595		(51		)	30,833		(5,512		)	32,428		(5,563		)
Other equity securities	—		—			10,480		(270		)	10,480		(270		)
	$	665,818	$	(3,378	)	$	1,930,562	$	(63,155	)	$	2,596,380	$	(66,533	)

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2013 were as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(Dollars in Thousands)
Available for sale:
Residential mortgage-backed securities	$	2,459,565	$	(98,022	)	$	420,262	$	(26,552	)	$	2,879,827	$	(124,574	)
Obligations of states and political subdivisions	55,327		(3,025		)	14,292		(4,982		)	69,619		(8,007		)
Equity securities	19,462		(538		)	—		—			19,462		(538		)
	$	2,534,354	$	(101,585	)	$	434,554	$	(31,534	)	$	2,968,908	$	(133,119	)

The unrealized losses on investments in residential mortgage-backed securities are primarily caused by changes in market interest rates.  Residential mortgage-backed securities are primarily securities issued by Freddie Mac, Fannie Mae and Ginnie Mae.  The contractual cash obligations of the securities issued by Ginnie Mae are fully guaranteed by the U.S. Government.  The contractual cash obligations of the securities issued by Freddie Mac and Fannie Mae are not fully guaranteed by the U.S. Government; however, the Company believes that the quality of the bonds is similar to other AAA rated bonds with limited credit risk, particularly given the placement of Fannie Mae and Freddie Mac into conservatorship by the federal government in early September 2008 and because securities issued by others that are collateralized by residential mortgage-backed securities issued by Fannie Mae or Freddie Mac are rated consistently as AAA rated securities.  The decrease in fair value on residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae is due to market interest rates.  The Company has no intent to sell such mortgage-backed securities, and will more than likely not be required to sell such securities before a market price recovery or maturity of the securities; therefore, it is the conclusion of the Company that the investments in residential mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae are not considered other-than-temporarily impaired.  In addition, the Company has a small investment in non-agency residential mortgage-backed securities that have strong credit backgrounds and include additional credit enhancements to protect the Company from losses arising from high foreclosure rates.  These securities have additional market volatility beyond economically induced interest rate events.  It is the conclusion of the Company that the investments in non-agency residential mortgage-backed securities are other-than-temporarily impaired due to both credit and other than credit issues.  Impairment charges of $273,000 ($177,000, after tax) and $552,000 ($359,000, after tax) were recorded for the three and nine months ended September 30, 2014, respectively. Impairment charges of $573,000 ($372,000, after tax) and $1,300,000 ($845,000, after tax) were recorded for the three and nine months ended September 30, 2013, respectively. The impairment charge represents the credit related impairment on the securities.

The unrealized losses on investments in other securities are caused by fluctuations in market interest rates.  The underlying cash obligations of the securities are guaranteed by the entity underwriting the debt instrument.  It is the belief of the Company that the entity issuing the debt will honor its interest payment schedule, as well as the full debt at maturity.  The securities are purchased by the Company for their economic value.  The decrease in fair value is primarily due to market interest rates and not other factors, and because the Company has no intent to sell and will more than likely not be required to sell before a market price recovery or maturity of the securities, it is the conclusion of the Company that the investments are not considered other-than-temporarily impaired.

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investments recognized in earnings for the three months ended September 30, 2014 (Dollars in Thousands):

Balance at June 30, 2014	$	12,085
Impairment charges recognized during period	273
Balance at September 30, 2014	$	12,358

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investments recognized in earnings for the nine months ended September 30, 2014 (Dollars in Thousands):

Balance at December 31, 2013	$	11,806
Impairment charges recognized during period	552
Balance at September 30, 2014	$	12,358

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investment recognized in earnings for the three months ended September 30, 2013 (Dollars in Thousands):

Balance at June 30, 2013	$	11,159
Impairment charges recognized during period	573
Balance at September 30, 2013	$	11,732

The following table presents a reconciliation of credit-related impairment charges on available-for-sale investment recognized in earnings for the nine months ended September 30, 2013 (Dollars in Thousands):

Balance at December 31, 2012	$	10,432
Impairment charges recognized during period	1,300
Balance at September 30, 2013	$	11,732

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Junior Subordinated Interest Deferrable Debentures

9 Months Ended

Sep. 30, 2014

Junior Subordinated Interest Deferrable Debentures

Junior Subordinated Interest Deferrable Debentures

Note 8 — Junior Subordinated Interest Deferrable Debentures

The Company has formed seven statutory business trusts under the laws of the State of Delaware, for the purpose of issuing trust preferred securities. The seven statutory business trusts formed by the Company (the “Trusts”) have each issued Capital and Common Securities and invested the proceeds thereof in an equivalent amount of junior subordinated debentures (the “Debentures”) issued by the Company. As of September 30, 2014 and December 31, 2013, the principal amount of debentures outstanding totaled $180,416,000 and $190,726,000, respectively. On February 11, 2014, the Company bought back the capital securities of IB Capital Trust VII from the holder of the securities for a price that reflected an approximate six percent discount from the redemption price of the securities and thereby retired the $10,310,000 of related Junior Subordinated Deferrable Interest Debentures related to IB Capital Trust VII.

The Debentures are subordinated and junior in right of payment to all present and future senior indebtedness (as defined in the respective indentures) of the Company, and are pari passu with one another. The interest rate payable on, and the payment terms of the Debentures are the same as the distribution rate and payment terms of the respective issues of Capital and Common Securities issued by the Trusts. The Company has fully and unconditionally guaranteed the obligations of each of the Trusts with respect to the Capital and Common Securities. The Company has the right, unless an Event of Default (as defined in the Indentures) has occurred and is continuing, to defer payment of interest on the Debentures for up to twenty consecutive quarterly periods on Trusts VI, VIII, IX, X, XI and XII. If interest payments on any of the Debentures are deferred, distributions on both the Capital and Common Securities related to that Debenture would also be deferred. The redemption prior to maturity of any of the Debentures may require the prior approval of the Federal Reserve and/or other regulatory bodies.  In February 2014, the Company redeemed all of the outstanding Capital and Common Securities issued by Trust VII.

For financial reporting purposes, the Trusts are treated as investments of the Company and not consolidated in the consolidated financial statements.  Although the Capital Securities issued by each of the Trusts are not included as a component of shareholders’ equity on the consolidated statement of condition, the Capital Securities are treated as capital for regulatory purposes.  Specifically, under applicable regulatory guidelines, the Capital 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 September 30, 2014 and December 31, 2013, the total $180,416,000 and $190,726,000, respectively, of the Capital 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 September 30, 2014:

	Junior Subordinated Deferrable Interest Debentures		Repricing Frequency	Interest Rate		Interest Rate Index	Maturity Date	Optional Redemption Date(1)
(In Thousands)
Trust VI	$	25,774	Quarterly	3.68	%	LIBOR + 3.45	November 2032	February 2008
Trust VIII	25,774		Quarterly	3.28	%	LIBOR + 3.05	October 2033	October 2008
Trust IX	41,238		Quarterly	1.85	%	LIBOR + 1.62	October 2036	October 2011
Trust X	34,021		Quarterly	1.89	%	LIBOR + 1.65	February 2037	February 2012
Trust XI	32,990		Quarterly	1.85	%	LIBOR + 1.62	July 2037	July 2012
Trust XII	20,619		Quarterly	1.68	%	LIBOR + 1.45	September 2037	September 2012
	$	180,416

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

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Allowance for Probable Loan Losses (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Loan loss allowances, financing receivable past due
Non-accrual loans, total	$ 65,284	$ 62,823
Commercial Loan [Member]
Loan loss allowances, financing receivable past due
Non-accrual loans, total	40,140	34,110
Commercial Real Estate Other Construction and Land Development Receivable [Member]
Loan loss allowances, financing receivable past due
Non-accrual loans, total	9,281	11,726
Commercial Real Estate Farmland and Commercial Receivable [Member]
Loan loss allowances, financing receivable past due
Non-accrual loans, total	13,508	13,775
Commercial Real Estate Multifamily Receivable [Member]
Loan loss allowances, financing receivable past due
Non-accrual loans, total	251	295
Residential First Mortgage Financing Receivable [Member]
Loan loss allowances, financing receivable past due
Non-accrual loans, total	516	1,266
Residential Second Mortgage Financing Receivable [Member]
Loan loss allowances, financing receivable past due
Non-accrual loans, total	1,549	1,576
Consumer Loan [Member]
Loan loss allowances, financing receivable past due
Non-accrual loans, total	$ 39	$ 75

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Loans (Tables)

9 Months Ended

Sep. 30, 2014

Loans

Summary of loans, by loan type

	September 30,		December 31,
	2014		2013
	(Dollars in Thousands)
Commercial, financial and agricultural	$	3,105,682	$	2,894,779
Real estate — mortgage	887,734		847,692
Real estate — construction	1,413,912		1,208,508
Consumer	61,993		66,414
Foreign	191,257		181,842
Total loans	$	5,660,578	$	5,199,235

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Basis of Presentation (Details)	9 Months Ended
	Sep. 30, 2014 item
Basis of Presentation
Number of operating segments	1
Number of active operating bank subsidiaries	4

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Investment Securities (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Available for sale:
Fair value, less than 12 Months	$ 665,818	$ 2,534,354
Unrealized losses, less than 12 Months	(3,378)	(101,585)
Fair value, 12 Months or More	1,930,562	434,554
Unrealized losses, 12 Months or More	(63,155)	(31,534)
Fair value, total	2,596,380	2,968,908
Unrealized losses, total	(66,533)	(133,119)
Collateralized Mortgage Backed Securities [Member]
Available for sale:
Fair value, less than 12 Months	664,223	2,459,565
Unrealized losses, less than 12 Months	(3,327)	(98,022)
Fair value, 12 Months or More	1,889,249	420,262
Unrealized losses, 12 Months or More	(57,373)	(26,552)
Fair value, total	2,553,472	2,879,827
Unrealized losses, total	(60,700)	(124,574)
US States and Political Subdivisions Debt Securities [Member]
Available for sale:
Fair value, less than 12 Months	1,595	55,327
Unrealized losses, less than 12 Months	(51)	(3,025)
Fair value, 12 Months or More	30,833	14,292
Unrealized losses, 12 Months or More	(5,512)	(4,982)
Fair value, total	32,428	69,619
Unrealized losses, total	(5,563)	(8,007)
Equity Securities [Member]
Available for sale:
Fair value, less than 12 Months		19,462
Unrealized losses, less than 12 Months		(538)
Fair value, 12 Months or More	10,480
Unrealized losses, 12 Months or More	(270)
Fair value, total	10,480	19,462
Unrealized losses, total	$ (270)	$ (538)

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Consolidated Statements of Income (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Consolidated Statements of Income
Impairment charges, other-than-temporary impairment charges	$ (8)	$ (13)	$ (115)	$ (27)
Impairment charges, other comprehensive (loss) income	$ (281)	$ (560)	$ (667)	$ (1,273)

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Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Fair Value Measurements

Fair Value Measurements

Note 2 — Fair Value Measurements

ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  ASC 820 applies to all financial instruments that are being measured and reported on a fair value basis.  ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; it also establishes a fair value hierarchy that prioritizes the inputs used in valuation methodologies into the following three levels:

· Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities.

· Level 2 Inputs — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3 Inputs — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy is set forth below.

The following table represents financial instruments reported on the consolidated balance sheets at their fair value on a recurring basis as of September 30, 2014 by level within the fair value measurement hierarchy:

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage-backed securities	$	4,499,264	$	—	$	4,474,311	$	24,953
States and political subdivisions	275,120		—		275,120		—
Other	28,906		28,906		—		—
Total	$	4,803,290	$	28,906	$	4,749,431	$	24,953

The following table represents financial instruments reported on the consolidated balance sheets at their fair value on a recurring basis as of December 31, 2013 by level within the fair value measurement hierarchy:

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage-backed securities	$	5,027,701	$	—	$	4,999,849	$	27,852
States and political subdivisions	248,410		—		248,410		—
Other	28,468		28,468		—		—
Total	$	5,304,579	$	28,468	$	5,248,259	$	27,852

Investment securities available-for-sale are classified within level 2 and level 3 of the valuation hierarchy, with the exception of certain equity investments that are classified within level 1.  For investments classified as level 2 in the fair value hierarchy, the Company obtains fair value measurements for investment securities 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.  Investment securities classified as level 3 are non-agency mortgage-backed securities.  The non-agency mortgage-backed securities held by the Company are traded in inactive markets and markets that have experienced significant decreases in volume and level of activity, as evidenced by few recent transactions, a significant decline or absence of new issuances, price quotations that are not based on comparable securities transactions and wide bid-ask spreads among other factors.  As a result of the inability to use quoted market prices to determine fair value for these securities, the Company determined that fair value, as determined by level 3 inputs in the fair value hierarchy, is more appropriate for financial reporting and more consistent with the expected performance of the investments.  For the investments classified within level 3 of the fair value hierarchy, the Company used a discounted cash flow model to determine fair value.  Inputs in the model included both historical performance and expected future performance based on information currently available.

Assumptions used in the discounted cash flow model as of September 30, 2014 and December 31, 2013, were applied separately to those portions of the bond where the underlying residential mortgage loans had been performing under original contract terms for at least the prior 24 months and those where the underlying residential mortgages had not been meeting the original contractual obligation for the same period.  Unobservable inputs included in the model are estimates on future principal prepayment rates, and default and loss severity rates.  For that portion of the bond where the underlying residential mortgage had been meeting the original contract terms for at least 24 months, the Company used the following estimates in the model: (i) a voluntary prepayment rate of 7%, (ii) a 1% default rate, (iii) a loss severity rate of 25%, and (iv) a discount rate of 13%.  The assumptions used in the model for the rest of the bond included the following estimates:  (i) a voluntary prepayment rate of 2 %, (ii) a default rate of 4.5%, (iii) a loss severity rate that started at 60% for the first year (2012)  then declines by 5% for the following five years (2013, 2014, 2015, 2016 and 2017) and remains at 25% thereafter (2018 and beyond), and (iv) a discount rate of 13%.  The estimates used in the model to determine fair value are based on observable historical data of the underlying collateral.  The model anticipates that the housing market will gradually improve and that the underlying collateral will eventually all perform in accordance with the original contract terms on the bond.  Should the number of loans in the underlying collateral that default and go into foreclosure or the severity of the losses in the underlying collateral significantly change, the results of the model would be impacted.  The Company will continue to evaluate the actual historical performance of the underlying collateral and will modify the assumptions used in the model as necessary.

The following table presents a reconciliation of activity for such mortgage-backed securities on a net basis (Dollars in Thousands):

Balance at December 31, 2013	$	27,852
Principal pay downs	(3,014		)
Total unrealized gains (losses) included in:
Other comprehensive income	667
Impairment realized in earnings	(552		)
Balance at September 30, 2014	$	24,953

Certain financial instruments are measured at fair value on a nonrecurring basis.  They are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the period ended September 30, 2014 by level within the fair value measurement hierarchy:

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities  Measured at Fair Value September 30,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Provision During Nine Month
	2014		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurringbasis:
Assets:
Impaired loans	$	29,993	$	—	$	—	$	29,993	$	5,743
Other real estate owned	13,931		—		—		13,931		371

The following table represents financial instruments measured at fair value on a non-recurring basis as of and for the year ended December 31, 2013 by level within the fair value measurement hierarchy:

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Provision During Twelve Month
	2013		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurringbasis:
Assets:
Impaired loans	$	28,391	$	—	$	—	$	28,391	$	13,229
Other real estate owned	16,329		—		—		16,329		1,204

The Company’s assets measured at fair value on a non-recurring basis are limited to impaired loans and other real estate owned.  Impaired loans are classified within level 3 of the valuation hierarchy.  The fair value of impaired loans is derived in accordance with FASB ASC 310, “Receivables”.  Impaired loans are primarily comprised of collateral-dependent commercial loans.   Understanding that as the primary sources of loan repayments decline, the secondary repayment source comes into play and correctly evaluating the fair value of that secondary source, the collateral, becomes even more important.  Re-measurement of the impaired loan to fair value is done through a specific valuation allowance included in the allowance for probable loan losses.  The fair value of impaired loans is based on the fair value of the collateral, as determined through either an appraisal or evaluation process.  The basis for the Company’s appraisal and appraisal review process is based on regulatory guidelines and strives to comply with all regulatory appraisal laws, regulations and the Uniform Standards of Professional Appraisal Practice. All appraisals and evaluations are “as is” (the property’s highest and best use) valuations based on the current conditions of the property/project at that point in time.  The determination of the fair value of the collateral is based on the net realizable value, which is the appraised value less any closing costs, when applicable.  As of September 30, 2014, the Company had $67,602,000 of impaired commercial collateral dependent loans, of which $21,015,000 had an appraisal or evaluation performed within the immediately preceding twelve months.  As of December 31, 2013, the Company had $64,585,000 of impaired commercial collateral dependent loans, of which $50,346,000 had an appraisal or evaluation performed within the immediately preceding twelve months.

The determination to either seek an appraisal or to perform an evaluation begins in weekly credit quality meetings, where the committee analyzes the existing collateral values of the impaired loans and where obsolete appraisals are identified.  In order to determine whether the Company would obtain a new appraisal or perform an internal evaluation to determine the fair value of the collateral, the credit committee reviews the existing appraisal to determine if the collateral value is reasonable in view of the current use of the collateral and the economic environment related to the collateral.  If the analysis of the existing appraisal does not find that the collateral value is reasonable under the current circumstances, the Company would obtain a new appraisal on the collateral or perform an internal evaluation of the collateral.  The ultimate decision to get a new appraisal rests with the independent credit administration group. A new appraisal is not required if an internal evaluation, as performed by in-house experts, is able to appropriately update the original appraisal assumptions to reflect current market conditions and provide an estimate of the collateral’s market value for impairment analysis.  The internal evaluations must be in writing and contain sufficient information detailing the analysis, assumptions and conclusions and they must support performing an evaluation in lieu of ordering a new appraisal.

Other real estate owned is comprised of real estate acquired by foreclosure and deeds in lieu of foreclosure. Other real estate owned is carried at the lower of the recorded investment in the property or its fair value less estimated costs to sell such property (as determined by independent appraisal) within level 3 of the fair value hierarchy.  Prior to foreclosure, the value of the underlying loan is written down to the fair value of the real estate to be acquired by a charge to the allowance for probable loan losses, if necessary.  The fair value is reviewed periodically and subsequent write downs are made accordingly through a charge to operations.  Other real estate owned is included in other assets on the consolidated financial statements.  For the nine months ended September 30, 2014 and the twelve months ended December 31, 2013, respectively the Company recorded $328,000 and $402,000 in charges to the allowance for probable loan losses in connection with loans transferred to other real estate owned.  For the nine months ended September 30, 2014 and twelve months ended December 31, 2013, respectively, the Company recorded $371,000 and $1,204,000 in adjustments to fair value in connection with other real estate owned.

The fair value estimates, methods, and assumptions for the Company’s financial instruments at September 30, 2014 and December 31, 2013 are outlined below.

Cash and Cash Equivalents

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

Time Deposits with Banks

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

Investment Securities Held-to-Maturity

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

Investment Securities

For investment securities, which include U.S. Treasury securities, obligations of other U.S. government agencies, obligations of states and political subdivisions and mortgage pass through and related securities, fair values are from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things.  See disclosures of fair value of investment securities in Note 6.

Loans

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

For variable rate performing loans, the carrying amount approximates the fair value.  For fixed rate performing loans, except residential mortgage loans, the fair value is calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate risk inherent in the loan.  For performing residential mortgage loans, fair value is estimated by discounting contractual cash flows adjusted for prepayment estimates using discount rates based on secondary market sources or the primary origination market.  Fixed rate performing loans are within Level 3 of the fair value hierarchy.  At September 30, 2014, and December 31, 2013, the carrying amount of fixed rate performing loans was $1,307,205,000 and $1,243,252,000 respectively, and the estimated fair value was $1,238,356,000 and $1,196,916,000, 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 September 30, 2014 and December 31, 2013.  The fair value of time deposits is based on the discounted value of contractual cash flows.  The discount rate is based on currently offered rates.  Time deposits are within Level 3 of the fair value hierarchy.  At September 30, 2014 and December 31, 2013, the carrying amount of time deposits was $2,522,239,000 and $2,651,303,000, respectively, and the estimated fair value was $2,521,059,000 and $2,649,452,000, respectively.

Securities Sold Under Repurchase Agreements

Securities sold under repurchase agreements include both short and long-term maturities.  Due to the contractual terms of the short-term instruments, the carrying amounts approximated fair value at September 30, 2014 and December 31, 2013.  The fair value of the long-term instruments is based on established market spreads using option adjusted spread methodology.  Long-term repurchase agreements are within level 3 of the fair value hierarchy.  At September 30, 2014 and December 31, 2013, respectively, the carrying amount of long-term repurchase agreements was $610,000,000 and $710,000,000 and the estimated fair value was $663,833,000 and $792,215,500, respectively.

Junior Subordinated Deferrable Interest Debentures

The Company currently has floating rate junior subordinated deferrable interest debentures outstanding.  Due to the contractual terms of the floating rate junior subordinated deferrable interest debentures, the carrying amounts approximated fair value at September 30, 2014 and December 31, 2013.

Other Borrowed Funds

The Company currently has short and long-term borrowings issued from the Federal Home Loan Bank (“FHLB”).  Due to the contractual terms of the short-term borrowings, the carrying amounts approximated fair value at September 30, 2014 and December 31, 2013.  The fair value of the long-term borrowings is based on established market spreads for similar types of borrowings.  The long-term borrowings are included in Level 2 of the fair value hierarchy.  At September 30, 2014 and December 31, 2013, the carrying amount of the long-term FHLB borrowings was $6,281,000 and $8,950,000 respectively, and the estimated fair value was $6,665,000 and $8,950,000, respectively.

Commitments to Extend Credit and Letters of Credit

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

Limitations

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

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

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets:
Available for sale securities	$ 4,803,290	$ 5,304,579
Fair Value, Measurements, Recurring [Member] | Estimate of Fair Value Measurement [Member]
Assets:
Available for sale securities	4,803,290	5,304,579
Fair Value, Measurements, Recurring [Member] | Estimate of Fair Value Measurement [Member] | Collateralized Mortgage Backed Securities [Member]
Assets:
Available for sale securities	4,499,264	5,027,701
Fair Value, Measurements, Recurring [Member] | Estimate of Fair Value Measurement [Member] | US States and Political Subdivisions Debt Securities [Member]
Assets:
Available for sale securities	275,120	248,410
Fair Value, Measurements, Recurring [Member] | Estimate of Fair Value Measurement [Member] | Equity Securities [Member]
Assets:
Available for sale securities	28,906	28,468
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Assets:
Available for sale securities	28,906	28,468
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Assets:
Available for sale securities	28,906	28,468
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Assets:
Available for sale securities	4,749,431	5,248,259
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Backed Securities [Member]
Assets:
Available for sale securities	4,474,311	4,999,849
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Assets:
Available for sale securities	275,120	248,410
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Assets:
Available for sale securities	24,953	27,852
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Collateralized Mortgage Backed Securities [Member]
Assets:
Available for sale securities	$ 24,953	$ 27,852

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Stock Options (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013	Apr. 05, 2012
Employee Stock Option [Member]
Stock option details
Maximum exercisable period for options granted			10 years
Shares available for future grants	211,500		211,500		800,000
Stock option activity
Options outstanding at the beginning of the period (in shares)			515,143
Plus: Options granted (in shares)			549,750
Less:
Options exercised (in shares)			30,392
Options expired (in shares)			11,825
Options forfeited (in shares)			19,775
Options outstanding at the end of the period (in shares)	1,002,901		1,002,901
Options fully vested and exercisable at the end of the period (in shares)	230,006		230,006
Stock options, weighted average exercise price
Options outstanding at the beginning, weighted average exercise price (in dollars per share)			$ 15.98
Plus: Options granted, weighted average exercise price (in dollars per share)			$ 21.42
Less:
Options exercised, weighted average exercise price (in dollars per share)			$ 13.36
Options expired, weighted average exercise price (in dollars per share)			$ 26.70
Options forfeited, weighted average exercise price (in dollars per share)			$ 18.60
Options outstanding at the end, weighted average exercise price (in dollars per share)	$ 18.86		$ 18.86
Options fully vested and exercisable at the end, weighted average exercise price (in dollars per share)	$ 17.08		$ 17.08
Stock options, weighted average remaining contractual term
Options outstanding at the end, weighted average remaining contractual term			6 years 9 months 7 days
Options fully vested and exercisable at the end, weighted average remaining contractual term			2 years 1 month 6 days
Stock options, aggregate intrinsic value
Options outstanding at the end, aggregate intrinsic value	$ 7,011,000		$ 7,011,000
Options fully vested and exercisable at the end, aggregate intrinsic value	2,057,000		2,057,000
Stock-based compensation expense	301,000	101,000	766,000	322,000
Stock-based compensation cost, unrecognized, related to non-vested options	$ 4,226,000		$ 4,226,000
Stock-based compensation cost, unrecognized, related to non-vested options, weighted-average period of recognition			2 years 4 months 24 days
Incentive Stock Options to 10 Percent Shareholders [Member]
Stock option details
Maximum exercisable period for options granted			5 years

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage-backed securities	$	4,499,264	$	—	$	4,474,311	$	24,953
States and political subdivisions	275,120		—		275,120		—
Other	28,906		28,906		—		—
Total	$	4,803,290	$	28,906	$	4,749,431	$	24,953

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Measured on a recurring basis:
Assets:
Available for sale securities
Residential mortgage-backed securities	$	5,027,701	$	—	$	4,999,849	$	27,852
States and political subdivisions	248,410		—		248,410		—
Other	28,468		28,468		—		—
Total	$	5,304,579	$	28,468	$	5,248,259	$	27,852

Reconciliation of activity for mortgage-backed securities on a net basis

The following table presents a reconciliation of activity for such mortgage-backed securities on a net basis (Dollars in Thousands):

Balance at December 31, 2013	$	27,852
Principal pay downs	(3,014		)
Total unrealized gains (losses) included in:
Other comprehensive income	667
Impairment realized in earnings	(552		)
Balance at September 30, 2014	$	24,953

Financial instruments measured at fair value on a non-recurring basis

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities  Measured at Fair Value September 30,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Provision During Nine Month
	2014		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurringbasis:
Assets:
Impaired loans	$	29,993	$	—	$	—	$	29,993	$	5,743
Other real estate owned	13,931		—		—		13,931		371

			Fair Value Measurements at Reporting Date Using
			(Dollars in Thousands)
	Assets/Liabilities Measured at Fair Value December 31,		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Net Provision During Twelve Month
	2013		(Level 1)		(Level 2)		(Level 3)		Period
Measured on a non-recurringbasis:
Assets:
Impaired loans	$	28,391	$	—	$	—	$	28,391	$	13,229
Other real estate owned	16,329		—		—		16,329		1,204