International Bancshares (IBOC) - 2020 Q2 - Quarterly Report

Accounting Standards and Financial Reporting - The adoption of ASU 2016-02 resulted in a right of use asset and lease liability of approximately $6.4 million as of January 1, 2019[34]. - The amortization of the right of use asset for the three and six months ended June 30, 2020 was $338,000 and $658,000 respectively[34][35]. - The adoption of ASU 2016-13 increased the allowance for probable loan losses by approximately 17.2%, resulting in a cumulative-effect adjustment to retained earnings of approximately $8.3 million, net of tax[36]. - The consolidated financial statements are unaudited but include all necessary adjustments for fair presentation[31]. - The financial statements should be read in conjunction with the latest Annual Report on Form 10-K for complete information[31]. - The company applies the provisions of FASB ASC 280 for determining reportable segments and related disclosures[32]. Loan and Credit Losses - The allowance for credit losses (ACL) is based on a loss-rate methodology that measures lifetime losses on loan pools with similar risk characteristics[66]. - The allowance for credit loan losses increased to $94,554,000 as of June 30, 2020, up from $85,273,000 at March 31, 2020, reflecting a rise of approximately 10.4%[80]. - The provision charged to operations for the three months ended June 30, 2020, was $10,989,000, compared to $2,665,000 for the same period in 2019, indicating a significant increase in provisions[80]. - The total losses charged to the allowance for the six months ended June 30, 2020, amounted to $5,322,000, indicating a substantial impact on the allowance due to credit losses[80]. - The company recorded recoveries credited to the allowance of $634,000 for the three months ended June 30, 2020, compared to $552,000 for the same period in 2019, reflecting an increase in recoveries[80]. - The company identified doubtful loans totaling $3,478,000 as of June 30, 2020, with an allowance of $528,000[83]. - A specific reserve of $9,500,000 was placed on a relationship classified as doubtful due to significant fraud leading to bankruptcy[82]. - The company adopted the expected credit loss model on January 1, 2020, transitioning from the incurred loss model[82]. Loan Portfolio and Performance - The total loans increased to $7,501,807,000 as of June 30, 2020, up from $6,894,946,000 as of December 31, 2019, representing an increase of approximately 8.8%[63]. - The total loan portfolio amounted to $2,090,901,000, a decrease from $2,347,379,000 in 2019, representing a decline of approximately 10.9%[93]. - The commercial loan category showed a total of $982,334,000, down from $1,228,110,000 in 2019, indicating a decrease of about 19.9%[94]. - The residential first lien loans totaled $41,957,000, compared to $71,159,000 in 2019, reflecting a decline of approximately 41.2%[94]. - The total non-accrual loans as of June 30, 2020, were $4,102,000, a decrease from $4,886,000 as of December 31, 2019[84]. - The company has approximately $1,853,640,000 in loans with some degree of payment deferrals due to the COVID-19 economic crisis[87]. - Total past due loans as of June 30, 2020, reached $109,367,000, compared to $84,450,000 as of December 31, 2019, indicating an increase in delinquency[92]. Investment Securities - As of June 30, 2020, the total investment securities amounted to $3,097,734,000, with residential mortgage-backed securities contributing $3,023,413,000 to this total[102]. - The amortized cost of available-for-sale debt securities pledged for fiduciary powers was $1,151,578,000, with an estimated fair value of $1,170,646,000 at June 30, 2020[104]. - The gross unrealized losses on available-for-sale debt investment securities totaled $3,630,000 as of June 30, 2020, with residential mortgage-backed securities accounting for $3,617,000 of this loss[106]. - The company has no intent to sell residential mortgage-backed securities, which are primarily affected by changes in market interest rates, indicating a long-term investment strategy[106]. Capital and Dividends - Cash dividends of $0.55 per share were paid on April 3, 2020, to common stockholders[116]. - The company authorized a stock repurchase program of up to $50 million starting March 16, 2020[117]. - A total of 12,267,402 shares had been repurchased at a cost of $357,054,000 as of August 4, 2020[118]. - The company believes it meets all capital adequacy requirements as of June 30, 2020[128]. Economic Conditions and Risks - Construction and land development loans carry repayment risks due to cost overruns, increased construction material prices, and market value deterioration[68]. - Commercial real estate loans are affected by market value declines and business turnover, with risks associated with specific local economic conditions[69]. - 1-4 family mortgages may face repayment challenges due to unemployment and declining real estate market values[70]. - Consumer loans, including unsecured loans, are primarily impacted by unemployment or underemployment[71]. - The company’s management believes the allowance for credit losses (ACL) at June 30, 2020, was adequate to absorb probable losses from loans in the portfolio[90].