International Bancshares (US:IBOC)2020-11-05 19:03Accounting 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[35]. - Amortization of the right of use asset for the three months ended September 30, 2020 was $340,000, compared to $267,000 for the same period in 2019[36]. - 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[37]. - The financial statements are unaudited but include all necessary adjustments for fair presentation[32]. - The company adopted ASU 2016-13 on January 1, 2020, transitioning from an incurred loss model to an expected credit loss model, significantly affecting the provision for loan losses[83]. Loan and Credit Losses - The total loans increased to $7,589,235,000 as of September 30, 2020, up from $6,894,946,000 as of December 31, 2019, representing an increase of approximately 10.1%[64]. - The allowance for credit loan losses increased to $102,165,000 as of September 30, 2020, from $94,554,000 at June 30, 2020, reflecting a growth of approximately 8.5%[81]. - The provision charged to operations for the three months ended September 30, 2020, was $8,770,000, compared to a net recovery of $1,159,000 in the previous quarter, indicating a significant increase in provisions[81]. - The company has identified various risk factors affecting loan repayment, including cost overruns and market value deterioration in construction and land development loans[69]. - The company evaluates loans classified as Watch List—Doubtful using the fair value of collateral method, with specific reserves allocated as necessary[76]. - The total recorded investment in loans was $7,585,958,000 with an allowance of $101,684,000[85]. - The total non-accrual loans amounted to $3,761,000 as of September 30, 2020, a decrease from $4,886,000 at December 31, 2019[87]. - The company identified doubtful loans totaling $3,277,000 as of September 30, 2020, with a related allowance of $481,000[85]. Investment Securities - As of September 30, 2020, total investment securities amounted to $3,298,840,000, with available-for-sale debt securities valued at $3,257,601,000[104]. - The company reported gross unrealized losses on available-for-sale debt securities of $4,083,000, with residential mortgage-backed securities contributing $4,069,000 to this total[111]. - The amortized cost of available-for-sale debt investment securities pledged for fiduciary powers was $1,116,960,000, with an estimated fair value of $1,131,366,000 at September 30, 2020[108]. - The company has no intent to sell and is unlikely to be required to sell residential mortgage-backed securities before market price recovery, indicating no other-than-temporary impairment[111]. Capital and Dividends - The company has a CET1 to risk-weighted assets ratio of 18.57% as of September 30, 2020, compared to 18.58% on December 31, 2019[130]. - The company paid cash dividends of $0.55 per share on April 3 and October 5, 2020[120]. - A total of 12,267,402 shares had been repurchased under all programs at a cost of $357,054,000 as of November 3, 2020[122]. - The Capital and Common Securities issued by the Trusts qualify as Tier 1 capital up to a maximum of 25% of Tier 1 capital on an aggregate basis[118]. Economic Conditions and Impact - The provision charged to operations for the nine months ended September 30, 2020, was $36,595,000, reflecting a proactive approach to managing credit risk[81]. - The provision charged to operations for the nine months ended September 30, 2020, was $15,363,000, reflecting the impact of deteriorating economic conditions due to COVID-19[83]. - The company anticipates that approximately 17% of loans in deferral programs will request additional relief, particularly from sectors heavily impacted by COVID-19[91]. Legal and Regulatory Matters - The company is involved in various legal proceedings, but any material loss is considered remote[123]. - The capital conservation buffer is designed to absorb losses during periods of economic stress, with the company exceeding all capital adequacy requirements under the Basel III Capital Rules as of September 30, 2020[128].