IBC Reports Strong Earnings for the First Half of 2024

Rhea-AI Summary

International Bancshares (NASDAQ:IBOC) reported net income of $194.3 million for the first half of 2024, a 3.9% decrease from the same period in 2023. Diluted earnings per share were $3.12, down 4.0% year-over-year. The company's performance was supported by increased interest income from investment and loan portfolios, but negatively impacted by higher interest expenses on deposits and an increased provision for credit losses.

Total assets reached $15.5 billion as of June 30, 2024, up from $15.1 billion at the end of 2023. Net loans grew to $8.1 billion, and deposits increased to $12.0 billion. Despite the slight decline in earnings, CEO Dennis E. Nixon expressed confidence in the company's industry-leading financial results and long-standing practices.

Positive

• Increase in interest income from investment and loan portfolios
• Growth in total assets to $15.5 billion, up from $15.1 billion at year-end 2023
• Net loans increased to $8.1 billion from $7.9 billion at year-end 2023
• Deposits grew to $12.0 billion from $11.8 billion at year-end 2023

Negative

• 3.9% decrease in net income for the first half of 2024 compared to 2023
• 4.0% decline in diluted earnings per share for the first half of 2024
• Increase in interest expenses, primarily due to higher rates paid on deposits
• Increase in provision for credit losses due to a charge-down of an impaired credit

Insights

Financial Analyst

As a seasoned financial analyst, I find IBC's H1 2024 results to be a mixed bag. While the company maintains a strong position, there are some concerning trends to note:

• Net income decreased by 3.9% to $194.3 million for H1 2024, with diluted EPS down 4.0% to $3.12.
• Q2 2024 saw a 3.5% decrease in net income to $97.0 million, with diluted EPS down 3.7% to $1.56.
• The decline in earnings is attributed to increased interest expenses, primarily due to higher rates paid on deposits to remain competitive.
• A notable negative impact came from an increase in provision for credit losses, driven by a charge-down of an impaired credit following a bankruptcy-related foreclosure.

On the positive side, IBC's balance sheet shows growth:

• Total assets increased to $15.5 billion, up from $15.1 billion at the end of 2023.
• Net loans grew to $8.1 billion from $7.9 billion.
• Deposits rose to $12.0 billion from $11.8 billion.

While the company's CEO, Dennis E. Nixon, expresses confidence in IBC's "industry-leading financial results," investors should be cautious. The slight declines in earnings and the increased provision for credit losses suggest potential headwinds. However, the growth in assets, loans and deposits indicates that IBC is still expanding its business despite these challenges.

Investors should closely monitor IBC's ability to manage interest expenses and credit quality in the coming quarters, as these factors will be important for maintaining profitability in the current high-interest rate environment.

Banking Industry Expert

As a banking industry expert, I find IBC's performance noteworthy in the context of the current financial landscape. The company's results reflect the broader challenges facing the banking sector:

• The impact of the Federal Reserve's interest rate hikes is evident in IBC's financials. While higher rates have boosted interest income from investments and loans, they've also increased the cost of deposits, squeezing net interest margins.
• IBC's focus on deposit retention through competitive rates is a double-edged sword. It helps maintain the deposit base (up to $12.0 billion) but pressures profitability.
• The increase in provision for credit losses, particularly due to a bankruptcy-related foreclosure, signals potential asset quality concerns. This is a trend to watch across the banking sector as economic uncertainties persist.

IBC's strategy of maintaining strong cost controls and seeking efficiencies is prudent in this environment. The company's extensive network of 166 facilities and 256 ATMs across Texas and Oklahoma provides a solid foundation for customer service and market presence.

However, the slight decline in earnings (3.9% for H1) in a rising rate environment suggests that IBC, like many banks, is grappling with the transition to higher rates. The key for IBC will be to optimize its balance sheet management and potentially diversify its income streams to offset pressure on net interest income.

Looking ahead, IBC's performance relative to peers will depend on its ability to navigate the evolving interest rate landscape, manage credit quality and capitalize on growth opportunities in its regional markets. The banking sector remains under scrutiny and IBC's "industry-leading" position will be tested in the coming quarters.

LAREDO, Texas--(BUSINESS WIRE)-- International Bancshares Corporation (NASDAQ:IBOC), one of the largest independent bank holding companies in Texas, today reported net income for the six months ended June 30, 2024 of $194.3 million or $3.12 diluted earnings per common share ($3.13 per share basic) compared to $202.1 million or $3.25 diluted earnings per common share ($3.25 per share basic), which represents a decrease of 3.9% in net income and 4.0% in diluted earnings per share over the corresponding period of 2023. Net income for the three months ended June 30, 2024 was $97.0 million or $1.56 diluted earnings per common share ($1.56 per share basic) compared to $100.5 million or $1.62 diluted earnings per common share ($1.62 per share basic), which represents a decrease of 3.7% in diluted earnings per share and a 3.5% decrease in net income over the corresponding period in 2023.

Net income for the first six months of 2024 continues to be positively supported by an increase in interest income earned on our investment and loan portfolios driven primarily by both an increase in the size of our investment and loan portfolios and the Federal Reserve Board actions to raise interest rates in 2022 and 2023 and to maintain those elevated rates so far in 2024. Net interest income has been negatively impacted by an increase in interest expense, primarily driven by increases in rates paid on deposits. We continue to closely monitor and adjust rates paid on deposits to remain competitive to grow and retain deposits. Net income for the six months ended June 30, 2024 was negatively impacted by an increase in our provision for credit losses, which was primarily driven by a charge-down of an impaired credit after the results of a bankruptcy related foreclosure.

“With the first six months of 2024 over, we continue to be pleased with our industry-leading financial results, which we feel will continue to keep us at the top of the rankings against other publicly held banks in America. As we move into the last six months of 2024, our team remains focused on superior customer service, continued execution of our long-standing practices of balance sheet, asset liability and liquidity management, strong cost controls and continued identification of opportunities for efficiencies across our system. We believe that with continued focus on these long-standing practices supported by new initiatives, IBC will continue to deliver industry-leading financial results,” said Dennis E. Nixon, president and CEO.

Total assets at June 30, 2024 were $15.5 billion compared to $15.1 billion at Dec. 31, 2023. Total net loans were $8.1 billion at June 30, 2024 compared to $7.9 billion at Dec. 31, 2023. Deposits were $12.0 billion at June 30, 2024 compared to $11.8 billion at Dec. 31, 2023.

IBC is a multi-bank financial holding company headquartered in Laredo, Texas, with 166 facilities and 256 ATMs serving 75 communities in Texas and Oklahoma.

“Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this release which are not historical facts contain forward looking information with respect to plans, projections or future performance of IBC and its subsidiaries, the occurrence of which involve certain risks and uncertainties detailed in IBC’s filings with the Securities and Exchange Commission.

Copies of IBC’s SEC filings and Annual Report (as an exhibit to the 10-K) may be downloaded from the SEC filings site located at http://www.sec.gov/edgar.shtml.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801439661/en/

Judith Wawroski,

Treasurer and Principal Financial Officer

International Bancshares Corporation

(956) 722-7611

Source: International Bancshares Corporation

FAQ

What was IBOC's net income for the first half of 2024?

International Bancshares (IBOC) reported a net income of $194.3 million for the first half of 2024.

How did IBOC's earnings per share change in the first half of 2024 compared to 2023?

IBOC's diluted earnings per share decreased by 4.0%, from $3.25 in the first half of 2023 to $3.12 in the first half of 2024.

What were IBOC's total assets as of June 30, 2024?

IBOC's total assets were $15.5 billion as of June 30, 2024, an increase from $15.1 billion at December 31, 2023.

How much did IBOC's deposits grow in the first half of 2024?

IBOC's deposits grew to $12.0 billion as of June 30, 2024, up from $11.8 billion at December 31, 2023.