SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

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

For the fiscal year ended                                 Commission file number
    December 31, 1999                                             0-9439

                      INTERNATIONAL BANCSHARES CORPORATION
           ----------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

              TEXAS                                      74-2157138
------------------------------------        ------------------------------------
      (State of Incorporation)              (I.R.S. Employer Identification No.)

      1200 San Bernardo Avenue
      Laredo, Texas 78042-1359                      Area Code (956) 722-7611
------------------------------------             -------------------------------
  (Address of principal executive                (Registrant's telephone number)
       office and Zip Code)

Securities registered pursuant to Section 12(b) of the Act:

                                                      Name of Each Exchange on
       Title of Each Class                               Which Registered
------------------------------------             -------------------------------
              None                                              None

Securities Registered Pursuant to Section 12(g) of the Act:

                         COMMON STOCK ($1.00 PAR VALUE)
                          -----------------------------
                                (Title of Class)

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 [ ].

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 20, 2000 was $407,924,478 based on the closing sales
price of the stock on such date.

As of March 20, 2000, there were 17,226,715 shares of the Registrant's Common
Stock outstanding.

Portions of the following documents are incorporated by reference into the
designated parts of this Form 10-K: (a) Annual Report to security holders for
the fiscal year ended December 31, 1999 (in Parts I and II) and (b) Proxy
Statement dated April 14, 2000 (in Part III).
<PAGE>
                                    CONTENTS

                                     PART I

                                                                           PAGE

Item 1.   Business.......................................................    3
Item 2.   Properties.....................................................   26
Item 3.   Legal Proceedings..............................................   27
Item 4.   Submission of Matters to a Vote of Security Holders............   27
Item 4A.  Executive Officers of the Registrant...........................   27

                                     PART II

Item 5.   Market for the Registrant's Common Stock
            and Related Security Holder Matters..........................   28
Item 6.   Selected Financial Data........................................   28
Item 7.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations..........................   28
Item 7A.  Quantitative and Qualitative Disclosure about Market Risk......   28
Item 8.   Financial Statements and Supplementary Data....................   28
Item 9.   Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosure..........................   28

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.............   28
Item 11.  Executive Compensation.........................................   28
Item 12.  Security Ownership of Certain Beneficial Owners and Management.   29
Item 13.  Certain Relationships and Related Transactions.................   29

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.  29

FORWARD LOOKING INFORMATION

Certain matters discussed in this report, excluding historical information,
include forward-looking statements. 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" and "project," as well as other words or expressions of 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 annual 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.

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.

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ITEM 1. BUSINESS

GENERAL

      International Bancshares Corporation (the "Company") is a bank holding
company with four bank subsidiaries providing commercial and retail banking
services through over 90 main banking and branch facilities located in 28
communities in South and Southeast Texas. The Company was incorporated under the
General Corporation Law of the State of Delaware in 1979 and has its principal
corporate offices in Laredo, Texas. Effective June 7, 1995, the Company's state
of incorporation was changed from Delaware to Texas. The Company was organized
for the purpose of operating as a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended, and as such, is subject to
supervision and regulation by the Board of Governors of the Federal Reserve
System (the "FRB"). As a registered bank holding company, the Company may own
one or more banks and may engage directly, or through subsidiary corporations,
in those activities closely related to banking which are specifically permitted
under the Bank Holding Company Act and by the FRB. The Company's principal
assets at December 31, 1999 consisted of all the outstanding capital stock of
four Texas state banking associations (the "Banks" or "bank subsidiaries"). All
of the Company's bank subsidiaries are members of the Federal Deposit Insurance
Corporation.

     The bank subsidiaries are in the business of gathering funds from various
sources and investing these funds in order to earn a return. Funds gathering
primarily takes the form of accepting demand and time deposits from individuals,
partnerships, corporations and public entities. Investments principally are made
in loans to various individuals and entities as well as in debt securities of
the U.S. Government and various other entities whose payments are guaranteed by
the U.S. Government. Historically, the bank subsidiaries have primarily focused
on providing commercial banking services to small and medium sized businesses
located in its trade area and international banking services. In recent years,
the bank subsidiaries have also emphasized consumer and retail banking,
including mortgage lending, as well as branches situated in retail locations and
grocery stores.

      The Company's philosophy focuses on customer service as represented by its
motto, "We Do More." The Banks maintain a strong commitment to their local
communities by, among other things, appointing selected members of the
communities in which the Banks' branches are located to local advisory boards
(the "local boards"). The local boards direct the operations of the branches,
with the supervision of the lead Bank's board of directors, and assist in
introducing prospective customers to the Banks as well as developing or
modifying products and services to meet customer needs. The Banks function
largely on a delegated basis, and the Company believes that such decentralized
structure enhances the commitment of the Banks to the communities in which their
branches are located. In contrast to many of its principal competitors, the
credit decisions of the Banks are made locally and promptly. The Company
believes that the knowledge and expertise afforded by the local boards are key
components to sound credit decisions.

      Expense control is an essential element in the Company's profitability.
The Company has centralized virtually all of the Banks' back office support and
investment functions in order to achieve consistency and cost efficiencies in
the delivery of products and services. The Company's efficiency ratio (other
operating expenses

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divided by net interest income and other operating income) for the year ended
December 31, 1999 stands at 49% and has been under 53% for each of the last five
years, which the Company believes is well below national peer group ratios. One
of the benefits derived from such operating efficiencies is that the Company is
not subjected to undue pressure to generate interest income from high-risk
loans. Accordingly, the Company believes it is able to be more selective and
conservative with respect to its credit decisions. Despite this lack of economic
pressure, the Banks aggressively pursue, with the help of the local boards,
quality credits with an emphasis on loans to small and medium sized businesses.
During 1999, net loans increased 18% over the corresponding 1998 period.

      During the last several years, IBC, as defined below, has been an acquiror
of financial institutions and banking assets in its trade area. The community
focus of IBC and the involvement of the local boards has resulted in IBC
becoming aware of acquisition possibilities in the ordinary course of its
business and in many instances before other potential purchasers. IBC's decision
to pursue an acquisition is based on a multitude of factors, including the
ability to efficiently assimilate the operations and assets of the acquired
entity, the cost efficiencies to be attained and the growth potential of the
market.

      On July 28, 1980, the Company acquired all of the outstanding shares of
its predecessor, International Bank of Commerce ("IBC"), which is today the
flagship bank of the Company, representing 84% of the Company's banking assets.
IBC was chartered under the banking laws of Texas in 1966 and has its principal
place of business at 1200 San Bernardo Avenue, Laredo, Webb County, Texas. It is
a wholly-owned subsidiary of the Company. Since the acquisition of the flagship
bank in 1980, the Company formed three banks and acquired $1,845,971,000 in
assets and assumed $1,762,051,000 of deposits in numerous acquisition
transactions, which totals are as of the acquisition date and do not take into
account any runoff or other subsequent events. In addition to the acquisitions,
IBC has also focused on deposit growth from its traditional banking activities.

      Effective February 19, 1999, IBC purchased certain assets and assumed
certain liabilities of the Laredo branch of Pacific Southwest Bank, Corpus
Christi, Texas. IBC purchased loans of approximately $4,503,000 and assumed
deposits of approximately $27,873,000 and received cash and other assets in the
amount of approximately $23,432,000. The acquisition was accounted for as a
purchase transaction. IBC recorded intangible assets, goodwill and core deposit
premium totaling $2,525,000 which are being amortized on a straight line basis
over a fifteen year period.

      Effective November 5, 1997, University Bank, Houston, Texas a state bank
organized under the laws of the state of Texas, was merged with and into IBC. At
the date of closing, total assets acquired were approximately $250,978,000. The
acquisition was accounted for as a purchase transaction. IBC recorded intangible
assets, goodwill and core deposit premium of totaling $17,613,000 which are
being amortized on a straight line basis over a fifteen year period.

      Effective March 7, 1997, IBC purchased certain assets and assumed certain
liabilities of five branches of Bank of America Texas, N. A., Irving, Texas. IBC
purchased loans of approximately $381,000 and assumed deposits of approximately
$84,834,000 and received cash and other assets in the amount of approximately

                                        4
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$84,799,000. The acquisition was accounted for as a purchase transaction. IBC
recorded intangible assets, goodwill and core deposit premium totaling
$3,705,000 which are being amortized on a straight line basis over a fifteen
year period.

      For more information regarding the acquisition transactions of the Company
during the last three years, see note 2 of notes to Consolidated Financial
Statements of the Company located on page 20 of the 1999 Annual Report which is
incorporated herein by reference.

      In addition to IBC, the Company has three other bank subsidiaries. The
three additional banks are (i) Commerce Bank, a Texas state banking association
which commenced operations in 1982, located in Laredo, Texas ("Commerce Bank");
(ii) International Bank of Commerce, a Texas state banking association which
commenced operations in 1984, located in Brownsville, Texas ("IBC-Brownsville");
and (iii) International Bank of Commerce, a Texas state banking association
which commenced operations in 1984, located in Zapata, Texas ("IBC-Zapata").

      The Company also has four non-banking subsidiaries. They are (i) IBC Life
Insurance Company, a Texas chartered subsidiary which reinsures a small
percentage of credit life and accident and health risks related to loans made by
bank subsidiaries, (ii) IBC Trading Company, an export trading company which is
currently inactive, (iii) IBC Subsidiary Corporation, a second-tier bank holding
company incorporated in the State of Delaware, and (iv) IBC Capital Corporation,
a company incorporated in the State of Delaware for the purpose of holding
certain investments of the Company.

SERVICES AND EMPLOYEES

      The Company, through its bank subsidiaries, IBC, Commerce Bank, IBC Zapata
and IBC Brownsville, is engaged in the business of banking, including the
acceptance of checking and savings deposits and the making of commercial, real
estate, personal, home improvement, automobile and other installment and term
loans. Certain of the bank subsidiaries are very active in facilitating
international trade along the United States border with Mexico and elsewhere.
The international banking business of the Company includes providing letters of
credit, making commercial and industrial loans, and a nominal amount of currency
exchange. As part of its international strategy the Company also aims to provide
a full array of banking services to "maquiladoras," including account and
payroll services. A "maquiladora" is a type of assembly or manufacturing plant
under Mexican law which is typically owned by a United States company and
located on Mexico's northern border for the purpose of temporarily importing
materials to be assembled in Mexico and re-exported to the United States. Each
bank subsidiary also offers other related services, such as credit cards,
travelers' checks, safety deposit, collection, notary public, escrow, drive-up
and walk-up facilities and other customary banking services. Additionally, each
bank subsidiary makes available certain securities products through third party
providers. The bank subsidiaries also make banking services available during
traditional and nontraditional banking hours through their network of 176
automated teller machines, and through their branches situated in retail
locations and grocery stores. To date, as part of the Company's expansion of its
retail banking services, 34 grocery store branches have been opened.

                                        5
<PAGE>
      The Company owns U.S. service mark registrations for "INTERNATIONAL BANK
OF COMMERCE," "WALL STREET INTERNATIONAL," "INTERNATIONAL BANK OF COMMERCE
CENTRE," "OVERDRAFT COURTESY," and "IT'S A BRIGHTER CHRISTMAS" as well as the
design mark depicting the United States and Mexico and the design mark depicting
"WALL STREET INTERNATIONAL." In addition, the Company owns Texas service mark
registrations for "WALL STREET INTERNATIONAL," "INTERNATIONAL BANK OF COMMERCE"
and the design marks depicting "CHECK'N SAVE" and "WALL STREET INTERNATIONAL,"
as well as the design mark depicting the United States and Mexico. Also, IBC
owns certain pending applications for federal registrations of other proprietary
service marks and is regularly investigating the availability of service mark
registrations related to certain proprietary products.

      No material portion of the business of the Company may be deemed seasonal
and the deposit and loan base of the Company's bank subsidiaries are diverse in
nature. There has been no material effect upon the Company's capital
expenditures, earnings or competitive position as a result of Federal, State or
local environmental regulation.

     As of December 31, 1999 the Company and its subsidiaries employed
approximately 1,332 persons full-time and 214 persons part-time.

COMPETITION

      The Company is the largest minority-owned bank holding company in the
United States, with more than a majority of its common stock being held by
Hispanic shareholders. The Company is the second largest independent Texas bank
holding company. The primary market area of the Company is South and Southeast
Texas, an area bordered on the east by the Houston area, to the northwest by San
Antonio, to the southwest by Laredo and to the southeast by Brownsville. The
Company has increased its market share in its primary market area over the last
seven years through strategic acquisitions. The Company, through its bank
subsidiaries, competes for deposits and loans with other commercial banks,
savings and loan associations, credit unions and nonbank entities, which nonbank
entities serve as an alternative to traditional financial institutions and are
considered to be formidable competitors.

      The Company and its bank subsidiaries do a significant amount of business
for customers domiciled in Mexico, with an emphasis in Northern Mexico. Deposits
from persons and entities domiciled in Mexico comprise a significant and stable
portion of the deposit base of the Company's bank subsidiaries. Such deposits
comprised approximately 41%, 38% and 35% of the Company's bank subsidiaries'
total deposits as of December 31, 1999, 1998 and 1997, respectively.

      Under the Gramm-Leach-Bliley Act ("GLBA"), effective March 11, 2000,
banks, securities firms and insurance companies may affiliate under an entity to
be known as a financial holding company which could then serve its customers'
varied financial needs through a single corporate structure. The GLBA may
significantly change the competitive environment in which the Company and its
subsidiaries conduct business. The financial services industry is also likely to
become even more competitive as further technological advances enable more
companies to provide financial services. These technological advances may
diminish the importance of depository institutions and other financial
intermediaries in the transfer of funds between parties.

                                        6
<PAGE>
SUPERVISION AND REGULATION

      GENERAL - THE COMPANY. In addition to the generally applicable state and
Federal laws governing businesses and employers, the Company and its bank
subsidiaries are further extensively regulated by special Federal and state laws
governing financial institutions. These laws comprehensively regulate the
operations of the Company's bank subsidiaries and include, among other matters,
requirements to maintain reserves against deposits; restrictions on the nature
and amount of loans that may be made and the interest that may be charged
thereon; restrictions on the amounts, terms and conditions of loans to
directors, officers, large shareholders and their affiliates; restrictions
related to investments in activities other than banking; and minimum capital
requirements. With few exceptions, state and Federal banking laws have as their
principal objective either the maintenance of the safety and soundness of the
Federal deposit insurance system or the protection of consumers, rather than the
specific protection of shareholders of the Company. Further, the earnings of the
Company are affected by the fiscal and monetary policies of the Federal Reserve
System, which regulates the national money supply in order to mitigate
recessionary and inflationary pressures. These monetary policies influence to a
significant extent the overall growth of bank loans, investments and deposits
and the interest rates charged on loans or paid on time and savings deposits.
The nature of future monetary policies and the effect of such policies on the
future earnings and business of the Company cannot be predicted.

      FRB APPROVALS. The Company is a registered bank holding company within the
meaning of the Bank Holding Company Act of 1956, as amended ("BHCA"), and is
subject to supervision by the FRB and to a certain extent the Texas Department
of Banking (the "DOB"). The Company is required to file with the FRB annual
reports and other information regarding the business operations of itself and
its subsidiaries. It is also subject to examination by the FRB. Under the BHCA,
a bank holding company is, with limited exceptions, prohibited from acquiring
direct or indirect ownership or control of any voting stock of any company which
is not a bank or bank holding company, and must engage only in the business of
banking, managing, controlling banks, and furnishing services to or performing
services for its subsidiary banks. One of the exceptions to this prohibition is
the ownership of shares of any company provided such shares do not constitute
more than 5% of the outstanding voting shares of the company and so long as the
FRB does not disapprove such ownership. Another exception to this prohibition is
the ownership of shares of a company the activities of which the FRB has
specifically determined to be so closely related to banking, managing or
controlling banks as to be a proper incident thereto.

      The BHCA and the Change in Bank Control Act of 1978 require that,
depending on the circumstances, either FRB approval must be obtained or notice
must be furnished to the FRB and not disapproved prior to any person or company
acquiring "control" of a bank holding company, such as the Company, subject to
certain exceptions for certain transactions. Control is conclusively presumed to
exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person acquires 10% or more but less than 25% of any class of voting
securities where the bank holding company, such as the Company, has registered
Securities under Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act").

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      As a bank holding company, the Company is required to obtain approval
prior to merging or consolidating with any other bank holding company, acquiring
all or substantially all of the assets of any bank or acquiring ownership or
control of shares of a bank or bank holding company if, after the acquisition,
the Company would directly or indirectly own or control 5% or more of the voting
shares of such bank or bank holding company.

      FINANCIAL MODERNIZATION. On November 12, 1999, President Clinton signed
into law GLBA. This comprehensive legislation eliminates the barriers to
affiliations among banks, securities firms, insurance companies and other
financial service providers. GLBA provides for a new type of financial holding
company structure under which affiliations among these entities may occur,
subject to the "umbrella" regulation of the FRB and regulation of affiliates by
the functional regulators, including the Securities and Exchange Commission
("SEC") and state insurance regulators. Under GLBA, a financial holding company
may engage in a broad list of financial activities and any non-financial
activity that the FRB determines is complementary to a financial activity and
poses no substantial risk to the safety and soundness of depository institutions
or the financial system. Addition, GLBA permits certain non-banking financial
and financially related activities to be conducted by financial subsidiaries of
a national bank. Additionaly, GLBA imposes strict new privacy disclosure and
opt-out requirements regarding the ability of financial institutions to share
personal non-public customer information with third parties.

      Under the GLBA, a bank holding company may become certified as a financial
holding company by filing a declaration with the FRB, together with a
certification that each of its subsidiary banks is well capitalized, is well
managed, and has at least a satisfactory rating under the Community Reinvestment
Act of 1977 ("CRA"). The Company has elected to become a financial holding
company under GLBA and the election was made effective by the FRB as of March
13, 2000. To date, the Company has not engaged in any additional financial
activities permitted by GLBA.

      INTERSTATE BANKING. In 1994, Congress enacted the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 ("Interstate Banking Act"), which
rewrote federal law governing the interstate expansion of banks in the United
States. Effective as of September 29, 1995, adequately capitalized, well managed
bank holding companies with FRB approval may acquire banks located in any State
in the United States, provided that the target bank meets the minimum age (up to
a maximum of five years, which is the maximum Texas has adopted) established by
the host State. Under the Interstate Banking Act, an anti-concentration limit
will bar interstate acquisitions that would give a bank holding company control
of more than ten percent (10%) of all deposits nationwide or thirty percent
(30%) of any one State's deposits, or such higher or lower percentage
established by the host State. The anti-concentration limit in Texas has been
set at twenty percent (20%) of all federally insured deposits in Texas.

      In addition to providing for interstate acquisitions of banks by bank
holding companies, the Interstate Banking Act provides for interstate branching
by permitting mergers between banks domiciled in different States beginning June
1, 1997. The Interstate Banking Act provides that States may opt out of
interstate branching by enacting non-discriminatory legislation prohibiting
interstate bank mergers before June 1, 1997. In 1995, Texas passed legislation
opting out of the interstate branching provisions of The Interstate Banking Act
until September 1999. In May 1998, the Texas

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DOB determined that the Texas opt-out statute was not effective and the Texas
DOB began accepting applications for interstate branching transactions. During
1999, legislation implementing interstate branching was adopted by the Texas
legislature. No accurate prediction can be made at this time as to how this
legislation will affect the Company and/or its bank subsidiaries.

      FRB ENFORCEMENT POWERS. The FRB has certain cease-and-desist and
divestiture powers over bank holding companies and non-banking subsidiaries
where their actions would constitute a serious threat to the safety, soundness
or stability of a subsidiary bank. These powers may be exercised through the
issuance of cease-and-desist orders or other actions. In the event a bank
subsidiary experiences either a significant loan loss or rapid growth of loans
or deposits, the Company may be compelled by the FRB to invest additional
capital in the bank subsidiary. Further, the Company would be required to
guaranty performance of the capital restoration plan of any undercapitalized
bank subsidiary. The FRB is also empowered to assess civil money penalties
against companies or individuals who violate the BHCA in amounts up to
$1,000,000 per day, to order termination of non-banking activities of
non-banking subsidiaries of bank holding companies and to order termination of
ownership and control of a non-banking subsidiary. Under certain circumstances
the Texas Banking Commissioner may bring enforcement proceedings against a bank
holding company in Texas.

      COMPANY DIVIDENDS. The FRB's policy discourages the payment of dividends
from borrowed funds and discourages payments that would affect capital adequacy.
The FRB has issued policy statements which generally state that bank holding
companies should serve as a source of financial and managerial strength to their
bank subsidiaries, and generally should not pay dividends except out of current
earnings, and should not borrow to pay dividends if the bank holding company is
experiencing capital or other financial problems.

      CROSS-GUARANTEE PROVISIONS. The Financial Institutions Reform Recovery and
Enforcement Act of 1989 ("FIRREA") contains a "cross-guarantee" provision which
generally makes commonly controlled insured depository institutions liable to
the FDIC for any losses incurred in connection with the failure of a commonly
controlled depository institution.

      AUDIT REPORTS. Insured institutions with total assets of $500 million or
more must submit annual audit reports prepared by independent auditors to
federal and state regulators. In some instances, the audit report of the
institution's holding company can be used to satisfy this requirement. Auditors
must receive examination reports and examination related correspondence. In
addition, financial statements prepared in accordance with generally accepted
accounting principles, management's certifications concerning responsibility for
the financial statements, internal controls and compliance with legal
requirements designated by the FDIC, and an attestation by the auditor regarding
the statements of management relating to the internal controls must be submitted
to federal and state regulators. For institutions with total assets of more than
$3 billion, independent auditors may be required to review quarterly financial
statements. The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") requires that independent audit committees be formed, consisting of
outside directors only. The committees of such institutions must include members
with experience in banking or financial management, must have access to outside
counsel, and must not include representatives of large customers. During 1999,
the SEC adopted new

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rules, which will become effective during 2000, to improve the function of
corporate audit committees. The new rules require, among other things, that
independent auditors review public companies' interim financial information
prior to filing with the SEC and that companies include in their proxy
statements certain information about their audit committees.

      GENERAL - BANK SUBSIDIARIES. All of the bank subsidiaries of the Company
are state banks subject to regulation by, and supervision of, the Texas DOB and
the FDIC. All of the bank subsidiaries of the Company are members of the FDIC,
which currently insures the deposits of each member bank to a maximum of
$100,000 per depositor. For this protection, each member bank pays a statutory
assessment and is subject to the rules and regulations of the FDIC. The premiums
increase incrementally based on the rating of the member bank.

      DEPOSIT INSURANCE. The deposits of the Bank are insured by the FDIC
through the Bank Insurance Fund ("BIF") to the extent provided by law. Under the
FDIC's risk-based insurance system, BIF-insured institutions are currently
assessed premiums of between zero and twenty seven cents per $100 of eligible
deposits, depending upon the institution's capital position and other
supervisory factors. During 1996, Congress enacted legislation that, among other
things, provides for assessments against BIF- insured institutions that will be
used to pay certain Financing Corporation ("FICO") obligations. BIF and Savings
Association Insurance Fund payers are assessed pro rata for the FICO bond
obligations.

      CAPITAL ADEQUACY. The Company and its bank subsidiaries are currently
required to meet certain minimum regulatory capital guidelines utilizing total
capital-to-risk-weighted assets and Tier 1 Capital elements. At December 31,
1999 the Company's ratio of total capital-to-risk-weighted assets was 14.46%.
The guidelines make regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations, consider off-balance
sheet exposure in assessing capital adequacy, and encourage the holding of
liquid, low-risk assets. At least one-half of the minimum total capital must be
comprised of Tier 1 Capital elements. Tier 1 Capital of the Company is comprised
of common shareholders' equity. The core deposit intangibles and goodwill of
$42,568,000 booked in connection with all the financial institution acquisitions
of the Company are deducted from the sum of core capital elements when
determining the capital ratios of the Company.

      In addition, the FRB has established minimum leverage ratio guidelines for
bank holding companies. These guidelines provide for a minimum leverage ratio of
Tier 1 capital to adjusted average quarterly assets ("leverage ratio") equal to
three percent for bank holding companies that meet certain specified criteria,
including having the highest regulatory rating. All other bank holding companies
will generally be required to maintain a leverage ratio of at least four to five
percent. The Company's leverage ratio at December 31, 1999 was 6.58 percent. The
guidelines also provide that bank holding companies experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets. Furthermore, the guidelines indicate that the FRB will
continue to consider a "tangible tier 1 leverage ratio" (deducting all
intangibles) in evaluating proposals for expansion or new activity. The FRB has
not advised the Company of any specific minimum leverage ratio or tangible tier
1 leverage ratio applicable to it.

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      Each of the Company's bank subsidiaries is subject to similar capital
requirements adopted by the FDIC. Each of the Company's bank subsidiaries had a
leverage ratio in excess of five percent as of December 31, 1999. As of that
date, the federal banking agencies had not advised any of the bank subsidiaries
of any specific minimum leverage ratio applicable to it.

      Effective December 19, 1992, the federal bank regulatory agencies adopted
regulations which mandate a five-tier scheme of capital requirements and
corresponding supervisory actions to implement the prompt corrective action
provisions of FDICIA. The regulations include requirements for the capital
categories that will serve as benchmarks for mandatory supervisory actions.
Under the regulations, the highest of the five categories would be a well
capitalized institution with a total risk-based capital ratio of 10%, a Tier 1
risk-based capital ratio of 6% and a Tier 1 leverage ratio of 5%. An institution
would be prohibited from declaring any dividends, making any other capital
distribution or paying a management fee if the capital ratios drop below the
levels for an adequately capitalized institution, which are 8%, 4% and 4%,
respectively. The corresponding provisions of FDICIA mandate corrective actions
be taken if a bank is undercapitalized. Based on the Company and each of the
bank subsidiaries capital ratios as of December 31, 1999, the Company and each
of the bank subsidiaries were classified as "well capitalized" under the
applicable regulations.

      In 1995, in accordance with FDICIA, the FDIC modified its risk-based
capital adequacy guidelines to explicitly include a bank's exposure to declines
in the economic value of its capital due to changes in interest rates as a
factor that it will consider in evaluating a bank's capital adequacy. In 1996
the bank regulatory agencies introduced risk-based examination procedures.
Effective January 1, 1997, the federal banking agencies jointly adopted
regulations that amend the risk-based capital standards to incorporate measures
for market risk. Applicable banking institutions will be required to adjust
their risk-based capital ratio to reflect market risk. On December 19, 1996, the
FFIEC revised the Uniform Financial Institutions Rating System commonly referred
to as the CAMEL rating system. A sixth component addressing sensitivity to
market risk was added. Sensitivity to market risk reflects the degree to which
changes in interest rates, foreign exchange rates, commodity prices or equity
prices can adversely affect a financial institution's earnings or economic
capital.

      STATE ENFORCEMENT POWERS. The Banking Commissioner of Texas may determine
to close a Texas state bank when she finds that the interests of depositors and
creditors of a state bank are jeopardized through its insolvency or imminent
insolvency and that it is in the best interest of such depositors and creditors
that the bank be closed. The Texas DOB also has broad enforcement powers over
the Bank, including the power to impose orders, remove officers and directors,
impose fines and appoint supervisors and conservators.

      DEPOSITOR PREFERENCE. Because the Company is a legal entity separate and
distinct from its bank subsidiaries, its right to participate in the
distribution of assets of any subsidiary upon the subsidiary's liquidation or
reorganization will be subject to the prior claims of the subsidiary's
creditors. In the event of a liquidation or other resolution of a subsidiary
bank, the claims of depositors and other general or subordinated creditors of
the bank are entitled to a priority of payment over the claims of holders of any
obligation of the institution to its

                                       11
<PAGE>
shareholders, including any depository institution holding company (such as the
Company) or any shareholder or creditor thereof.

      TEXAS LAW. Effective September 1, 1995, the new Texas Banking Act ("Act")
became effective and the Texas Banking Code of 1943 was repealed. The purpose of
the Act was to modernize and streamline the Texas banking laws. One of the many
significant provisions of the Act adopts by reference the Texas Business
Corporation Act, subject to modification by the Banking Commissioner. Among
other matters, these corporate provisions will permit Texas state banks to merge
with non-banking business entities, while national banks are only permitted to
merge with banking entities. During 1997, the Texas Constitution was amended to
permit home equity lending in Texas effective January 1, 1998 and the Company's
bank subsidiaries are currently offering home equity loans.

      CRA. Under the Community Reinvestment Act ("CRA"), the FDIC is required to
assess the record of each bank subsidiary to determine if the bank meets the
credit needs of its entire community, including low and moderate-income
neighborhoods served by the institution, and to take that record into account in
its evaluation of any application made by the bank for, among other things,
approval of the acquisition or establishment of a branch or other deposit
facility, an office relocation, a merger, or the acquisition of shares of
capital stock of another financial institution. The FDIC prepares a written
evaluation of an institution's record of meeting the credit needs of its entire
community and assigns a rating. FIRREA requires federal banking agencies to make
public a rating of a bank's performance under the CRA. Each bank subsidiary
received either an "outstanding" or "satisfactory" CRA rating in its most
recently completed examination. Further, there are fair lending laws which
prohibit discrimination in connection with lending decisions.

      CONSUMER LAWS. In addition to the laws and regulations discussed herein,
the Bank is also subject to certain consumer laws and regulations that are
designed to protect consumers in transactions with banks. While the list set
forth herein is not exhaustive, these laws and regulations include the Truth in
Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the
Expedited Funds Availability Act, the Equal Credit Opportunity Act, and the Fair
Housing Act, among others. These laws and regulations mandate certain disclosure
requirements and regulate the manner in which financial institutions must deal
with customers when taking deposits or making loans to such customers. The Bank
must comply with the applicable provisions of these consumer protection laws and
regulations as part of their ongoing customer relations.

      AFFILIATE TRANSACTIONS. The Company, IBC and the other bank subsidiaries
of the Company are "affiliates" within the meaning of Section 23A of the Federal
Reserve Act which sets forth certain restrictions on loans and extensions of
credit between a bank subsidiary and affiliates, on investments in an
affiliate's stock or other securities, and on acceptance of such stock or other
securities as collateral for loans. Such restrictions prevent a bank holding
company from borrowing from any of its bank subsidiaries unless the loans are
secured by specific obligations. Further, such secured loans and investments by
a bank subsidiary are limited in amount, as to a bank holding company or any
other affiliate, to 10% of such bank subsidiary's capital and surplus and, as to
the bank holding company and its affiliates, to an aggregate of 20% of such bank
subsidiary's capital and surplus. Certain restrictions do not apply to 80% or
more owned sister banks of bank holding companies. Each bank subsidiary of the

                                       12
<PAGE>
Company is wholly-owned by the Company. Section 23B of the Federal Reserve Act
requires that the terms of affiliate transactions be comparable to terms of
similar non-affiliate transactions.

      INSIDER LOANS. The restrictions on loans to directors, executive officers,
principal shareholders and their related interests (collectively referred to
herein as "insiders") contained in the Federal Reserve Act and Regulation O
apply to all insured institutions and their subsidiaries and holding companies.
These restrictions include limits on loans to one borrower and conditions that
must be met before such a loan can be made. There is also an aggregate
limitation on all loans to insiders and their related interests. These loans
cannot exceed the institution's total unimpaired capital and surplus, and the
FDIC may determine that a lesser amount is appropriate. Insiders are subject to
enforcement actions for knowingly accepting loans in violation of applicable
restrictions.

      LENDING RESTRICTIONS. The operations of the Banks are also subject to
lending limit restrictions pertaining to the extension of credit and making of
loans to one borrower. The scope and requirements of such laws and regulations
have been expanded significantly in recent years. Further, under the BHCA and
the regulations of the FRB thereunder, the Company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements with respect to any
extension of credit or provision of property or services; however, recently the
FRB adopted a rule relaxing tying restrictions by permitting a bank holding
company to offer a discount on products or services if a customer obtains other
products or services from such company.

      DIVIDENDS. The ability of the Company to pay dividends is largely
dependent on the amount of cash derived from dividends declared by its bank
subsidiaries. The payment of dividends by any bank or bank holding company is
affected by the requirement to maintain adequate capital as discussed above. At
December 31, 1999 there was an aggregate of approximately $58,641,000 available
for the payment of dividends to the Company, by IBC, Commerce Bank, IBC Zapata
and IBC Brownsville under the applicable restrictions, assuming that each of
such banks continues to be classified as "well capitalized". Further, the
Company could expend the entire $58,641,000 and continue to be classified as
"well capitalized". Note 17 of notes to Consolidated Financial Statements of the
Company located on page 33 of the 1999 Annual Report is incorporated herein by
reference.

      POWERS. As a result of FDICIA, the authority of the FDIC over
state-chartered banks was expanded. FDICIA limits state-chartered banks to only
those principal activities permissible for national banks, except for other
activities specifically approved by the FDIC. The new Texas Banking Act includes
a parity provision which establishes procedures for state banks to notify the
Banking Commissioner if the bank intends to conduct any activity permitted for a
national bank that is otherwise denied to a state bank. The Banking Commissioner
has thirty (30) days to prohibit the activity. During 1999, a super parity
provision was added to the Texas Finance Code which established procedures for
state banks to notify the Banking Commissioner if the bank intends to conduct
any activity permitted for any depository institution in the United States. The
Banking Commissioner has thirty (30) days to prohibit the activity.

     FINANCIAL SUBSIDIARIES. Under GLBA, a national bank may establish a
financial subsidiary and engage, subject to limitations on investment, in
activities that are

                                       13
<PAGE>
financial in nature, other than insurance underwriting as principal, insurance
company portfolio investment, real estate development, real estate investment
and annuity issuance. To do so, a bank must be well capitalized, well managed
and have a CRA rating of satisfactory or better. Subsidiary banks of a financial
holding company or national banks with financial subsidiaries must remain well
capitalized and well managed in order to continue to engage in activities that
are financial in nature without regulatory actions or restrictions, which could
include divestiture of the financial in nature subsidiary or subsidiaries. In
addition, a bank may not acquire a company that is engaged in activities that
are financial in nature unless the bank and each affiliated bank has a CRA
rating of satisfactory or better.

      The powers of state-chartered banks that are not members of the Federal
Reserve System were not directly addressed by GLBA. However, Texas state
nonmember banks should indirectly benefit from the enhanced powers made
available to financial subsidiaries of national banks by GLBA through the Texas
parity statute, which authorizes state-chartered banks to engage in powers
available for national banks, subject to certain state and federal law
restrictions.

      INSTABILITY OF REGULATORY STRUCTURE. Various legislation, including
proposals to overhaul the bank regulatory system, expand the powers of banking
institutions and bank holding companies and limit the investments that a
depository institution may make with insured funds, is from time to time
introduced in Congress. Such legislation may change banking statutes and the
operating environment of the Company and the bank subsidiaries in substantial
and unpredictable ways. The Company cannot determine the ultimate effect that
GLBA will have or the effect that potential legislation, if enacted, or
implementing regulations with respect thereto, would have upon the financial
condition or results of operations of the Company or its subsidiaries.

YEAR 2000

      This section contains forward-looking statements that have been prepared
on the basis of the Company's best judgments and currently available
information. These forward-looking statements are inherently subject to
significant business, third party, and regulatory uncertainties and other
contingencies, many of which are beyond the control of the Company.

      The Company successfully completed its transition to the Year 2000 with no
impact to the Company's results of operations or financial condition other than
the cost of the project. In addition, management is not aware of any vendor or
provider used by the Company for data processing or related services which
experienced a material failure of its product or service due to a Year 2000
related problem. The Company is also subject to risks associated with Year 2000
noncompliance by its customers. Management is not aware of any customer which
suffered losses related to a Year 2000 problem which would adversely affect that
customer's financial condition or its ability to repay any outstanding loan it
has with the Company.

      As of February 15, 2000, the Company incurred expenses to remediate the
Year 2000 issue in the amount of $695,000, which amount includes expenses in
years 1998, 1999 and 2000. These costs are being expensed as incurred. While the
Company believes that it will incur no additional material expenses related to
the Year 2000 issue, there can be no assurance that the Company will not be
impacted by a Year 2000 related problem

                                       14
<PAGE>
which occurs after the date hereof or by the failure of a third party to achieve
proper Year 2000 compliance.

      Although many of the critical dates related to potential Year 2000 related
problems have passed, experts predict that Year 2000 related failures could
occur throughout the year, such as December 31, 2000. Accordingly, the Company's
Year 2000 project team will continue to monitor the Company's programs and
systems and attempt to identify any potential problems during the course of the
year. In addition, the Company will continue to monitor the Year 2000 compliance
of the third parties with which the Company transacts business.

      The Company continues to maintain its contingency plans with respect to
Year 2000 issues. These plans focus on an application-by-application strategy
that would be implemented in the event of Year 2000 related problems in
particular applications, which strategies include, among others, the replacement
of the faulty application as well as strategies to be employed should the
Company suffer an area wide interruption of data processing capabilities due to
loss of power or communications or a similar failure, which strategies would
include, among others, alternate processing facilities.

      While the Company will have contingency plans in place to address a
temporary disruption in these services, there can be no assurance that any
disruption or failure will be only temporary, that the Company's contingency
plans will function as anticipated, or that the results of operations, financial
condition, or liquidity of the Company will not be adversely affected in the
event of a prolonged disruption or failure.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY

      The main areas in which the Company has directed its lendable assets are
(i) commercial, financial and industrial loans; (ii) real estate loans; and
(iii) loans to individuals for household, family and other consumer
expenditures. The relationship that these three categories of loans bear to the
total assets of the Company and other detailed statistical information about the
business of the Company are presented on the following pages.

                                       15
<PAGE>
          DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY

      The following table sets forth a comparative summary of average interest
earning assets and average interest bearing liabilities and related interest
yields for the years ended December 31, 1999, 1998 and 1997 (Dollars in
Thousands) (Note 1). Nonaccrual loans have been included in assets for the
purpose of this analysis:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                      -----------------------------------------------------------------------
                                                       1999                              1998
                                      ---------------------------------   ---------------------------------
                                        AVERAGE                AVERAGE      AVERAGE                AVERAGE
                                        BALANCE     INTEREST  RATE/COST     BALANCE     INTEREST  RATE/COST
                                      -----------   --------  ---------   -----------   --------  ---------
<S>                                   <C>           <C>       <C>         <C>           <C>       <C>
   ASSETS

Interest earning assets:
   Loans, net of unearned discounts:
     Domestic ......................  $ 1,540,536   $144,788       9.40%  $ 1,351,796   $133,221       9.86%
     Foreign .......................      191,105     15,317       8.01       141,869     11,795       8.31
   Investment securities:
     Taxable .......................    2,762,895    175,042       6.34     2,771,927    179,030       6.46
     Tax-exempt ....................       87,744      4,432       5.05         4,824        241       5.00
   Time deposits with banks ........        1,640        104       6.34         1,005         89       8.86
   Federal funds sold ..............       14,148        710       5.02        22,738      1,462       6.43
   Other ...........................        2,744        343      12.50         2,686        336      12.51
                                      -----------   --------  ---------   -----------   --------  ---------
     Total interest-earning assets .  $ 4,600,812   $340,736       7.41   $ 4,296,845   $326,174       7.59

Non-interest earning assets:
   Cash and due from banks .........  $   110,704                         $   131,539
   Bank premises and equipment, net       142,098                             134,152
   Other assets ....................      219,041                             132,620
   Less allowance for possible
     loan losses ...................      (26,797)                            (25,837)
                                      -----------                         -----------
     Total .........................  $ 5,045,858                         $ 4,669,319
                                      ===========                         ===========
   LIABILITIES AND
   SHAREHOLDERS' EQUITY

Interest bearing liabilities:
   Savings and interest bearing
     demand deposits ...............  $   937,322   $ 27,182       2.90%  $   867,594   $ 26,419       3.05%
   Time deposits:
     Domestic ......................      929,627     46,948       5.05     1,009,000     53,230       5.28
     Foreign .......................    1,134,484     50,678       4.47       964,459     48,593       5.04
   Securities sold under
     repurchase agreements and
     federal funds purchased .......      105,039      6,047       5.76       257,589     13,396       5.20
   Other borrowings ................    1,064,307     54,340       5.11       751,628     39,969       5.32
   Other ...........................         --           10        --          2,664        302      11.34
                                      -----------   --------  ---------   -----------   --------  ---------
     Total interest bearing
       liabilities .................  $ 4,170,779    185,205       4.44   $ 3,852,934   $181,909       4.72

Non-interest bearing liabilities:
   Demand deposits .................      462,510                             433,863
   Other liabilities ...............       42,016                              35,532
Shareholders' equity ...............      370,553                             346,990
                                      -----------                         -----------
     Total .........................  $ 5,045,858                         $ 4,669,319
                                      ===========                         ===========
          Net interest income ......                $155,531                            $144,265
                                                    ========                            ========
          Net yield on interest
            earning assets .........                               3.38%                               3.36%
                                                              =========                           =========

<PAGE>
<CAPTION>
                                            YEARS ENDED DECEMBER 31,
                                      ---------------------------------
                                                      1997
                                      ---------------------------------
                                       AVERAGE                 AVERAGE
                                       BALANCE      INTEREST  RATE/COST
                                      -----------   --------  ---------
<S>                                   <C>           <C>           <C>
   ASSETS

Interest earning assets:
   Loans, net of unearned discounts:
     Domestic ......................  $ 1,152,566   $115,527      10.02%
     Foreign .......................      128,923     11,821       9.17
   Investment securities:
     Taxable .......................    2,121,927    146,820       6.92
     Tax-exempt ....................        1,348         90       6.68
   Time deposits with banks ........          404         47      11.63
   Federal funds sold ..............       14,906      1,120       7.51
   Other ...........................        2,565        307      11.97
                                      -----------   --------  ---------
     Total interest-earning assets .  $ 3,422,639   $275,732       8.06

Non-interest earning assets:
   Cash and due from banks .........  $   144,573
   Bank premises and equipment, net       105,800
   Other assets ....................      117,381
   Less allowance for possible
     loan losses ...................      (23,075)
                                      -----------
     Total .........................  $ 3,767,318
                                      ===========
   LIABILITIES AND
   SHAREHOLDERS' EQUITY

Interest bearing liabilities:
   Savings and interest bearing
     demand deposits ...............  $   722,559   $ 22,152       3.07%
   Time deposits:
     Domestic ......................      905,157     46,456       5.13
     Foreign .......................      821,214     42,957       5.23
   Securities sold under
     repurchase agreements and
     federal funds purchased .......      301,511     15,754       5.23
   Other borrowings ................      331,308     18,052       5.45
   Other ...........................         --         --         --
                                      -----------   --------  ---------
     Total interest bearing
       liabilities .................  $ 3,081,749   $145,371       4.72

Non-interest bearing liabilities:
   Demand deposits .................      361,379
   Other liabilities ...............       26,261
Shareholders' equity ...............      297,929
                                      -----------
     Total .........................  $ 3,767,318
                                      ===========
          Net interest income ......                $130,361
                                                    ========
          Net yield on interest
            earning assets .........                               3.81%
                                                              =========
</TABLE>
(Note 1) The average balances for purposes of the above table are calculated on
the basis of month-end balances.

                                       16
<PAGE>
                    INTEREST RATES AND INTEREST DIFFERENTIAL

     The following table analyzes the changes in net interest income during 1999
and 1998 and the relative effect of changes in interest rates and volumes for
each major classification of interest earning assets and interest-bearing
liabilities. Nonaccrual loans have been included in assets for the purpose of
this analysis, which reduces the resulting yields (Note 1):
<TABLE>
<CAPTION>
                                        1999 COMPARED TO 1998              1998 COMPARED TO 1997
                                     ------------------------------   ------------------------------
                                        NET INCREASE (DECREASE)          NET INCREASE (DECREASE)
                                                 DUE TO                           DUE TO
                                     ------------------------------   ------------------------------
                                      VOLUME      RATE       TOTAL     VOLUME      RATE       TOTAL
                                     --------   --------   --------   --------   --------   --------
                                         (Dollars in Thousands)            (Dollars in Thousands)
<S>                                  <C>        <C>        <C>        <C>        <C>        <C>
Interest earned on:
  Loans, net of unearned discounts:
    Domestic ......................  $ 17,992   $ (6,425)  $ 11,567   $ 19,574   $ (1,880)  $ 17,694
    Foreign .......................     3,961       (439)     3,522      1,133     (1,159)       (26)
  Investment securities:
    Taxable .......................      (595)    (3,393)    (3,988)    42,507    (10,297)    32,210
    Tax-exempt ....................     4,189          2      4,191        179        (28)       151
  Time deposits with banks ........        45        (30)        15         55        (13)        42
  Federal funds sold ..............      (476)      (276)      (752)       521       (179)       342
  Other ...........................         7       --            7         15         14         29
                                     --------   --------   --------   --------   --------   --------
  Total interest income ...........  $ 25,123   $(10,561)  $ 14,562   $ 63,984   $(13,542)  $ 50,442
                                     --------   --------   --------   --------   --------   --------
Interest incurred on:
  Savings and interest
    bearing demand deposits........  $  2,088   $ (1,325)  $    763   $  4,413   $   (146)  $  4,267
  Time deposits:
    Domestic ......................    (4,043)    (2,239)    (6,282)     5,398      1,376      6,774
    Foreign .......................     7,968     (5,883)     2,085      7,247     (1,611)     5,636
  Securities sold under
    repurchase agreements and
    federal funds purchased .......    (8,659)     1,310     (7,349)    (2,269)       (89)    (2,358)
  Other borrowings ................    16,009     (1,638)    14,371     22,358       (441)    21,917
  Other ...........................      (292)      --         (292)       302       --          302
                                     --------   --------   --------   --------   --------   --------
  Total interest expense ..........  $ 13,071   $ (9,775)  $  3,296   $ 37,449   $   (911)  $ 36,538
                                     --------   --------   --------   --------   --------   --------
Net interest income ...............  $ 12,052   $   (786)  $ 11,266   $ 26,535   $(12,631)  $ 13,904
                                     ========   ========   ========   ========   ========   ========
</TABLE>
(Note 1) The change in interest due to both rate and volume has been allocated
to volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.

                                       17
<PAGE>
                            INTEREST RATE SENSITIVITY

     The net interest rate sensitivity as of December 31, 1999 is illustrated in
the following table. This information reflects the balances of assets and
liabilities whose rates are subject to change. As indicated in the table, the
Company is liability sensitive during the early time periods and is asset
sensitive in the longer periods. The table shows the sensitivity of the balance
sheet at one point in time and is not necessarily indicative of the position at
future dates.

<TABLE>
<CAPTION>
                                          RATE/MATURITY  RATE/MATURITY  RATE/MATURITY  RATE/MATURITY
     December 31, 1999                       3 MONTHS    OVER 3 MONTHS    OVER 1 YEAR      OVER
     (Dollars in Thousands)                  OR LESS       TO 1 YEAR      TO 5 YEARS      5 YEARS     TOTAL
     =========================================================================================================
     SECTION A
     ---------------------------------------------------------------------------------------------------------
     RATE SENSITIVE ASSETS
<S>                                     <C>           <C>            <C>             <C>           <C>
     FEDERAL FUNDS SOLD                 $    13,300           -              -               -     $    13,300
     DUE FROM BANK INTEREST EARNING             491         1,386            -               -           1,877
     INVESTMENT SECURITIES                  231,480       501,266      1,997,559         265,412     2,995,717
     LOANS, NET OF NON-ACCRUALS           1,323,540       149,393        284,764         146,520     1,904,217
     ---------------------------------------------------------------------------------------------------------
     TOTAL EARNING ASSETS               $ 1,568,811   $   652,045    $ 2,282,323     $   411,932   $ 4,915,111
     ---------------------------------------------------------------------------------------------------------
     CUMULATIVE EARNING ASSETS          $ 1,568,811   $ 2,220,856    $ 4,503,179     $ 4,915,111
     =========================================================================================================
     SECTION B

     ---------------------------------------------------------------------------------------------------------
     RATE SENSITIVE LIABILITIES

     TIME DEPOSITS                      $ 1,073,440   $   829,896    $   195,853     $       199   $ 2,099,388
     OTHER INTEREST BEARING DEPOSITS        928,455           -              -               -         928,455
     FED FUNDS PURCHASED AND REPOS           37,995        82,985          2,772             -         123,752
     OTHER BORROWINGS                     1,380,000           -              -               -       1,380,000
     ---------------------------------------------------------------------------------------------------------
     TOTAL INTEREST BEARING LIABILITIES $ 3,419,890   $   912,881    $   198,625     $       199   $ 4,531,595
     ---------------------------------------------------------------------------------------------------------
     CUMULATIVE SENSITIVE LIABILITIES   $ 3,419,890   $ 4,332,771    $ 4,531,396     $ 4,531,595
     =========================================================================================================
     SECTION C
     ---------------------------------------------------------------------------------------------------------
     REPRICING GAP                      $(1,851,079)  $ (260,836)    $ 2,083,698     $   411,733   $   383,516
     CUMULATIVE REPRICING GAP            (1,851,079)  (2,111,915)        (28,217)        383,516       383,516
     RATIO OF INTEREST-SENSITIVE
        ASSETS TO LIABILITIES                   .46          .71           11.49             -            1.09
     RATIO OF CUMULATIVE, INTEREST-
        SENSITIVE ASSETS TO LIABILITIES         .46          .51             .99           1.09
     =========================================================================================================
</TABLE>
                                       18
<PAGE>
                              INVESTMENT SECURITIES

     The following table sets forth the carrying value of investment securities
as of December 31, 1999, 1998 and 1997:

                                                 YEARS ENDED DECEMBER 31,
                                        ----------------------------------------
                                           1999           1998           1997
                                        ----------     ----------     ----------
                                                (Dollars in Thousands)

U.S. Treasury securities
  Available for sale ..............     $  260,980     $  207,688     $  202,123
Mortgage-backed securities
  Available for sale ..............      2,491,963      2,551,395      2,347,722
Obligations of states and
 political subdivisions
  Held to maturity ................            321            518            695
  Available for sale ..............         90,416         28,200            520
Equity securities
  Available for sale ..............         75,798         62,995         30,383
Other securities
  Held to maturity ................          2,085          1,990          2,015
  Available for sale ..............         74,154        155,091           --
                                        ----------     ----------     ----------

      Total .......................     $2,995,717     $3,007,877     $2,583,458
                                        ==========     ==========     ==========

     The following tables set forth the contractual maturities of investment
securities at December 31, 1999 and the average yields of such securities,
except for the totals which reflect the weighted average yields. Actual
maturities will differ from contractual maturities because borrowers may have
the right to prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
                                                     AVAILABLE FOR SALE
                                                           MATURING
                       -----------------------------------------------------------------------------------
                                                 AFTER ONE         AFTER FIVE
                             WITHIN             BUT WITHIN          BUT WITHIN               AFTER
                            ONE YEAR            FIVE YEARS          TEN YEARS               TEN YEARS
                       ------------------   ------------------   ------------------   --------------------
                             ADJUSTED            ADJUSTED             ADJUSTED               ADJUSTED
                         COST      YIELD      COST      YIELD      COST      YIELD       COST      YIELD
                       --------  --------   --------  --------   --------  --------   ----------  --------
                                                        (Dollars in Thousands)
<S>                    <C>           <C>    <C>           <C>    <C>           <C>    <C>             <C>
U.S. Treasury and
  obligations of
  other U.S. Govern-
  agencies ..........  $ 10,495      6.87%  $    249      5.00%  $ 10,000      7.00%  $  241,236      7.89%
Mortgage-backed
  securities ........    25,707      6.64    182,102      6.90    226,282      7.60    2,100,370      6.92
Obligations of states
  and political
  subdivisions ......       312      5.75        543      7.50       --        --        101,355      4.51
Other securities ....      --        --         --        --         --        --         76,212      7.56
Equity securities ...    75,236      5.75       --        --         --        --           --        --
                       --------  --------   --------  --------   --------  --------   ----------  --------
          Total .....  $111,750      6.06%  $182,894      6.90%  $236,282      7.57%  $2,519,173      6.93%
                       ========  ========   ========  ========   ========  ========   ==========  ========
</TABLE>
                                       19
<PAGE>
<TABLE>
<CAPTION>
                                                      HELD TO MATURITY
                                                           MATURING
                       -----------------------------------------------------------------------------------
                                                 AFTER ONE         AFTER FIVE
                             WITHIN             BUT WITHIN          BUT WITHIN               AFTER
                            ONE YEAR            FIVE YEARS          TEN YEARS               TEN YEARS
                       ------------------   ------------------   ------------------   --------------------
                             ADJUSTED            ADJUSTED             ADJUSTED               ADJUSTED
                         COST      YIELD      COST      YIELD      COST      YIELD       COST      YIELD
                       --------  --------   --------  --------   --------  --------   ----------  --------
                                                        (Dollars in Thousands)
<S>                    <C>           <C>    <C>           <C>    <C>                  <C>
Obligations of states
  and political
  subdivisions ......  $    260      8.30%  $     61      7.70%  $   --          -%   $   --          -%
Other securities ....      --         --       1,825      7.79        260      7.07       --        --
                       --------  --------   --------  --------   --------  --------   --------  --------

         Total ......  $    260      8.30%  $  1,886      7.79%  $    260      7.07%  $   --         - %
                       ========  ========   ========  ========   ========  ========   ========  ========
</TABLE>
Mortgage-backed securities are primarily securities issued by the Federal Home
Loan Mortgage Corporation ("Freddie Mac") and Federal National Mortgage
Association ("Fannie Mae").

                                 LOAN PORTFOLIO

     The amounts of loans outstanding, by classification, at December 31, 1999,
1998, 1997, 1996 and 1995 are shown in the following table:
<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                          -------------------------------------------------------------------
                              1999         1998           1997          1996         1995
                          -----------   -----------   -----------   -----------   -----------
                                                 (Dollars in Thousands)
<S>                       <C>           <C>           <C>           <C>           <C>
Commercial, financial
  and agricultural .....  $ 1,115,511   $   896,060   $   800,964   $   723,061   $   722,274
Real estate-mortgage ...      278,819       215,689       188,122       193,101       200,998
Real estate-construction      129,813        94,374        59,239        32,610        39,527
Consumer ...............      171,104       250,917       272,478       161,594       124,843
Foreign ................      216,632       166,324       130,401       128,932       120,748
                          -----------   -----------   -----------   -----------   -----------
     Total loans .......    1,911,879     1,623,364     1,451,204     1,239,298     1,208,390

Unearned discount ......       (8,355)       (8,025)       (6,508)       (3,303)       (3,479)
                          -----------   -----------   -----------   -----------   -----------
     Loans, net of
     unearned discount .  $ 1,903,524   $ 1,615,339   $ 1,444,696   $ 1,235,995   $ 1,204,911
                          ===========   ===========   ===========   ===========   ===========
</TABLE>
     The table on the following page shows the amounts of loans (excluding real
estate mortgages and consumer loans) outstanding as of December 31, 1999 which,
based on remaining scheduled repayments of principal, are due in the years
indicated. Also, the amounts due after one year are classified according to the
sensitivity to changes in interest rates:

                                       20
<PAGE>
                                                      MATURING
                                    --------------------------------------------
                                              AFTER ONE
                                     WITHIN   BUT WITHIN    AFTER
                                    ONE YEAR  FIVE YEARS  FIVE YEARS    TOTAL
                                    --------  ----------  ----------  ----------
                                               (Dollars in Thousands)
Commercial, financial and
  agricultural ...................  $362,297  $  617,105  $  136,109  $1,115,511
Real estate - construction .......    58,561      64,393       6,859     129,813
Foreign ..........................   107,878      96,319      12,435     216,632
                                    --------  ----------  ----------  ----------
          Total ..................  $528,736  $  777,817  $  155,403  $1,461,956
                                    ========  ==========  ==========  ==========

                                                           INTEREST SENSITIVITY
                                                         -----------------------
                                                           Fixed        Variable
                                                           RATE           RATE
                                                         --------       --------
                                               (Dollars in Thousands)

Due after one but within five years ..............       $186,161       $591,656
Due after five years .............................         75,936         79,467
                                                         --------       --------
          Total ..................................       $262,097       $671,123
                                                         ========       ========

     The following table presents information concerning the aggregate amount of
non- accrual, past due and restructured domestic loans; certain loans may be
classified in one or more category:

                                                  YEARS ENDED DECEMBER 31,
                                     -------------------------------------------
                                      1999      1998     1997     1996     1995
                                     -------   ------   ------   ------   ------
                                             (Dollars in Thousands)
Loans accounted for on
  a non-accrual basis ............   $ 7,234   $4,868   $5,014   $3,363   $5,291
Loans contractually
  past due ninety days
  or more as to interest
  or principal payments ..........    13,758    8,543    9,700    5,075    7,954
Loans accounted for
  as "troubled debt
  restructuring" .................       543      592      363    1,462    2,742

     The following table presents information concerning the aggregate amount of
non- accrual and past due foreign loans extended to persons or entities in
Mexico or to the Mexican Government, certain loans may be classified in one or
more category:

                                                   YEARS ENDED DECEMBER 31,
                                        ----------------------------------------
                                        1999    1998     1997      1996     1995
                                        ----    ----    ------    ------    ----
                                              (Dollars in Thousands)
Loans accounted for on
  a non-accrual basis ..............    $428    $670    $  728    $1,062    $942
Loans contractually
  past due ninety days
  or more as to interest
  or principal payments ............     490     242     2,096     1,321     944

                                       21
<PAGE>
     The gross income that would have been recorded during 1999 on non-accrual
and restructured loans in accordance with their original contract terms was
$777,000 on domestic loans and $97,000 on foreign loans. The amount of interest
income on such loans that was recognized in 1999 was $9,000 on domestic loans
and none for foreign loans.

     The non-accrual loan policy of the bank subsidiaries is to discontinue the
accrual of interest on loans when management determines that it is probable that
future interest accruals will be uncollectible. Interest income on non-accrual
loans is recognized only to the extent payments are received or when, in
management's opinion, the creditor's financial condition warrants
reestablishment of interest accruals. Under special circumstances, a loan may be
more than 90 days delinquent as to interest or principal and not be placed on
non-accrual status. When any of the above occurs, loan officers are required to
recommend placing a loan on non-accrual status by sending a memo to the senior
loan officer who gives instructions to the commercial note teller that the loan
is on non-accrual status. When a loan is placed on non-accrual status, any
interest accrued but not paid is reversed and charged to operations against
interest income.

     The preceding tables indicate that there are certain loans technically past
due 90 days or more on performing status. This situation generally results when
a bank subsidiary has a borrower who is experiencing financial difficulties but
not to the extent that requires a restructuring of indebtedness. The majority of
this category is composed of loans that are considered to be adequately secured
and/or for which there has been a recent payment.

     The Company believes, after reviewing each bank subsidiary's loan
portfolio, that the majority of the loans with a loss potential have been
included under the categories of past due and non-accrual. Adjustments to the
loan loss allowance have been made for other credits that may have
characteristics indicating a potential for future non- performing status and
some possible loss.

     The following table presents certain information about cross-border
outstanding loans, acceptances, and accrued interest thereon, related to Mexico:

                                                   YEARS ENDED DECEMBER 31,
                                            -----------------------------------
                                               1999        1998         1997
                                            ---------    ---------    ---------
                                                (Dollars in Thousands)
Loans:
  Commercial, financial, industrial
    and agricultural ....................   $ 184,129    $ 135,328    $  91,945
  Real estate-mortgage ..................       9,388        8,133       18,416
  Consumer ..............................      23,115       22,863       20,040
                                            ---------    ---------    ---------
                                              216,632      166,324      130,401
  Less allowance for possible
    loan losses .........................      (1,322)      (1,124)      (1,184)
                                            ---------    ---------    ---------
           Net loans ....................   $ 215,310    $ 165,200    $ 129,217
                                            =========    =========    =========
Accrued interest receivable .............   $   1,725    $   1,327    $   1,198
                                            =========    =========    =========

                                       22
<PAGE>
                         SUMMARY OF LOAN LOSS EXPERIENCE

     The following table summarizes loan balances at the end of each year and
average loans outstanding during the year; changes in the allowance for possible
loan losses arising from loans charged-off and recoveries on loans previously
charged-off by loan category; and additions to the allowance which have been
charged to expense:
<TABLE>
<CAPTION>
                                                          AT YEARS ENDED DECEMBER 31,
                                    ----------------------------------------------------------------------
                                      1999            1998           1997          1996           1995
                                   -----------    -----------    -----------    -----------    -----------
                                                   (Dollars in Thousands)
<S>                       <C>      <C>            <C>            <C>            <C>            <C>
Loans, net of unearned discounts,
  outstanding at December 31, ...  $ 1,898,549    $ 1,615,339    $ 1,444,696    $ 1,235,995    $ 1,204,911
                                   ===========    ===========    ===========    ===========    ===========
Average loans outstanding during
  the year (Note 1) .............  $ 1,731,640    $ 1,493,664    $ 1,281,489    $ 1,199,591    $ 1,202,136
                                   ===========    ===========    ===========    ===========    ===========
Balance of allowance
  at January 1, .................  $    25,551    $    24,516    $    21,036    $    18,455    $    17,025
Provision charged to expense ....        6,379          8,571          7,740          6,630          5,150
                                   -----------    -----------    -----------    -----------    -----------
Loans charged-off:
  Domestic:
  Commercial, financial
   and agricultural .............       (1,634)        (2,180)        (1,503)        (1,518)        (2,248)
  Real estate-mortgage ..........         (227)          (157)          (279)          (261)          (619)
  Consumer ......................       (4,688)        (6,483)        (4,552)        (3,363)        (1,849)
  Foreign .......................         --              (65)            (2)           (23)           (48)
                                   -----------    -----------    -----------    -----------    -----------
Total loans charged-off .........       (6,549)        (8,885)        (6,336)        (5,165)        (4,764)
                                   -----------    -----------    -----------    -----------    -----------
Recoveries credited to allowance:
  Domestic:
  Commercial, financial
    and agricultural ............          735            795            270            305            190
  Real estate mortgage ..........           89             18            382             51             80
  Consumer ......................          564            531            250            755            229
  Foreign .......................            1              5             95              5            110
                                   -----------    -----------    -----------    -----------    -----------
Total recoveries ................        1,389          1,349            997          1,116            609
                                   -----------    -----------    -----------    -----------    -----------
Net loans charged-off: ..........       (5,160)        (7,536)        (5,339)        (4,049)        (4,155)
                                   -----------    -----------    -----------    -----------    -----------
Allowance acquired in purchase
  transactions ..................         --             --            1,079           --              435
                                   -----------    -----------    -----------    -----------    -----------
Balance of allowance
  at December 31, ...............  $    26,770    $    25,551    $    24,516    $    21,036    $    18,455
                                   ===========    ===========    ===========    ===========    ===========
Ratio of net loans charged-off
  during the year to average
  loans outstanding during
  the year (Note 1) .............          .30%           .50%           .42%           .34%           .35%
                                   ===========    ===========    ===========    ===========    ===========
Ratio of allowance to loans, net
  of unearned discounts, out-
  standing at December 31, ......         1.41%          1.58%          1.70%          1.70%          1.53%
                                   ===========    ===========    ===========    ===========    ===========
</TABLE>
(Note 1) The average balances for purposes of the above table are calculated on
the basis of month-end balances.

                                       23
<PAGE>
    Each bank subsidiary has always provided an amount for possible loan losses
sufficient both to cover net loan losses sustained and to maintain an
appropriate balance in the allowance for possible loan losses that considers the
element of risk which is estimated to be present in outstanding loans. The
aggregate allowance for possible loan losses of all bank subsidiaries
approximated 1.41% and 1.58% of total loans of bank subsidiaries, net of
unearned income, for December 31, 1999 and 1998, respectively.

    The amount charged against 1999 earnings and the other years presented as a
provision for possible loan losses was the sum required to bring the allowance
to the point which management of each bank subsidiary considers adequate to
cover potential loan losses. Such a determination is based on a continual and
conservative review process of the loan portfolio performed by senior officers
of each bank subsidiary who consider certain factors, including but not limited
to, previous loss experience in portfolio segments and assessment of current
economic conditions.

    The allowance for possible loan losses has been allocated based on the
amount management has deemed to be reasonably necessary to provide for the
possibility of losses being incurred within the following categories of loans at
the dates indicated and the percentage of loans to total loans in each category:
<TABLE>
<CAPTION>
                                                                    AT DECEMBER 31,
                    --------------------------------------------------------------------------------------------------------------
                           1999                   1998                   1997                   1996                   1995
                    ------------------     ------------------     -------------------     ------------------    ------------------
                               PERCENT                PERCENT                PERCENT                PERCENT                PERCENT
                    ALLOWANCE OF LOANS     ALLOWANCE OF LOANS     ALLOWANCE OF LOANS     ALLOWANCE OF LOANS     ALLOWANCE OF LOANS
                    --------- --------     --------- --------     --------- --------     --------- --------     --------- --------
                                                              (Dollars in Thousands)
<S>                  <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>
Commercial,
financial and
  agricultural       $ 16,745    58.4%      $ 15,022    55.2%      $ 14,149    55.2%      $ 12,981    58.3%      $ 11,569    59.7%
Real estate
  mortgage              4,185    14.6          3,616    13.3          3,323    12.9          3,467    15.6          3,219    16.6
Real estate
  construction          1,949     6.8          1,582     5.8          1,047     4.1            586     2.6            633     3.3
Consumer                2,569     8.9          4,207    15.5          4,813    18.8          2,901    13.1          1,999    10.4
Foreign                 1,322    11.3          1,124    10.2          1,184     9.0          1,101    10.4          1,035    10.0
                       ------   -----         ------   -----         ------   -----         ------   -----         ------   -----
                     $ 26,770   100.0%      $ 25,551   100.0%      $ 24,516   100.0%      $ 21,036   100.0%      $ 18,455   100.0%
                       ======   =====         ======   =====         ======   =====         ======   =====         ======   =====
</TABLE>
                                                 24
<PAGE>
                                    DEPOSITS

     The average amount of deposits, based on month-end balances and interest
expense is summarized for the years indicated in the following table:
<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                          ----------------------------------
                                                             1999       1998        1997
                                                          ----------  ----------  ----------
                                                                (Dollars in Thousands)
<S>                                                       <C>         <C>         <C>
Deposits:
          Demand - non-interest bearing
                 Domestic ..............................  $  402,738  $  377,084  $  317,759
                 Foreign ...............................      59,772      56,779      43,620
                                                          ----------  ----------  ----------
                 Total demand non-interest
                   bearing .............................     462,510     433,863     361,379
                                                          ----------  ----------  ----------

          Savings and interest bearing demand
                 Domestic ..............................     724,321     660,870     560,956
                 Foreign ...............................     213,001     206,724     161,603
                                                          ----------  ----------  ----------
                 Total savings and interest
                   bearing demand ......................     937,322     867,594     722,559
                                                          ----------  ----------  ----------

          Time certificates of deposit $100,000 or more:

                 Domestic ..............................     466,384     465,789     363,471
                 Foreign ...............................     840,059     713,060     602,170

            Less than $100,000:
                 Domestic ..............................     463,243     543,211     541,686
                 Foreign ...............................     294,425     251,399     219,044
                                                          ----------  ----------  ----------
          Total time, certificates of
              deposit ..................................   2,064,111   1,973,459   1,726,371
                                                          ----------  ----------  ----------

          Total deposits ...............................  $3,463,943  $3,274,916  $2,810,309
                                                          ==========  ==========  ==========

       Interest Expense:
          Savings and interest bearing demand
                 Domestic ..............................  $   21,678  $   21,580  $   17,559
                 Foreign ...............................       5,504       4,839       4,593
                                                          ----------  ----------  ----------
          Total savings and interest
            bearing demand .............................  $   27,182  $   26,419  $   22,152
                                                          ----------  ----------  ----------
          Time, certificates of deposit
            $100,000 or more
                 Domestic ..............................  $   22,790  $   24,484  $   19,256
                 Foreign ...............................      38,497      36,865      32,532
            Less than $100,000
                 Domestic ..............................      24,158      28,746      27,200
                 Foreign ...............................      12,181      11,728      10,425
                                                          ----------  ----------  ----------
          Total time, certificates
                   of deposit ..........................  $   97,626  $  101,823  $   89,413
                                                          ----------  ----------  ----------

          Total interest expense on deposits ...........  $  124,808  $  128,242  $  111,565
                                                          ==========  ==========  ==========
</TABLE>
                                       25
<PAGE>
     Maturities of time certificates of deposit outstanding at December 31, 1999
are summarized as follows:

                                                   DECEMBER 31, 1999
                                                  -------------------
                                         $100,000 OR MORE     LESS THAN $100,000
                                         ----------------     ------------------
                                                  (Dollars in Thousands)
      3 months or less                    $   703,091             $   370,349
      Over 3 but through 12 months            527,673                 302,223
      Over 12 months                           98,007                  98,045
                                          -----------             -----------
           Total                          $ 1,328,771             $   770,617
                                          ===========             ===========

                           RETURN ON EQUITY AND ASSETS

     Certain key ratios for the Company for the years ended December 31, 1999,
1998 and 1997 follows (Note 1):

                                                YEARS ENDED DECEMBER 31,
                                             ---------------------------
                                             1999         1998        1997
                                             ----         ----        ----

Percentage of net income to:
   Average shareholders' equity             17.88%       15.48%       16.41%
   Average total assets                      1.31         1.15         1.30
Percentage of average shareholders'
   equity to average total assets            7.34         7.43         7.91
Percentage of cash dividends per share
   to net income per share                  28.63        23.65        11.37

(Note 1) The average balances for purposes of the above table are calculated on
the basis of month-end balances.

                               FOREIGN ACTIVITIES

     Information regarding foreign activities has been provided in the preceding
sections and Note 11 of notes to consolidated financial statements located on
page 27 of the 1999 Annual Report to Shareholders which is incorporated herein
by reference.

Item 2.  PROPERTIES

     The principal offices of the Company and IBC are located at 1200 San
Bernardo Avenue, Laredo, Texas in a modern building owned and completely
occupied by the Company and IBC and containing approximately 97,000 square feet.
The bank subsidiaries of IBC have a total of 93 main banking and branch
facilities. All the facilities are customary to the banking industry. Most of
the bank subsidiaries own their banking facilities and the remainder are leased.
The facilities are located in Laredo, San Antonio, Houston, Zapata, the Rio
Grande Valley of Texas and the Coastal Bend area of Texas.

     As Texas state-chartered banks, no bank subsidiary of the Company may,
without the prior written consent of the Banking Commissioner, invest an amount
in excess of its capital and certified surplus in bank facilities, furniture,
fixtures and equipment. None of the Company's bank subsidiaries exceed such
limitation.

                                       26
<PAGE>
Item 3.  LEGAL PROCEEDINGS

     The Company and its bank subsidiaries are 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 and its subsidiaries have determined,
based on discussions with their 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 financial condition or
results of operations of the Company and its subsidiaries. However, many of
these matters are in various stages of proceedings and further developments
could cause management to revise its assessment of these matters.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Since the 1999 Annual Meeting of Shareholders of the Company held on May
20, 1999, no matter was submitted to a vote of Registrant's security holders
through the solicitation of proxies or otherwise.

Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

     Certain information is set forth in the following table concerning the
executive officers of the Company, each of whom has been elected to serve until
the 1999 Annual Meeting of shareholders and until his successor is duly elected
and qualified.

<TABLE>
<CAPTION>
                                                                    OFFICER OF THE
     NAME               AGE        POSITION OF OFFICE           COMPANY OR IBC SINCE
<S>                      <C>                                             <C>
Dennis E. Nixon          57        Chairman of the Board and             1979
                                   President of the Company,
                                   Chief Executive Officer of IBC

Leonardo Salinas         66        Vice President of the Company         1982
                                   and Senior Executive Vice
                                   President of IBC

R. David Guerra          47        Vice President of the Company         1986
                                   and President of IBC McAllen
                                   Branch

Imelda Navarro           42        Treasurer of the Company              1982
                                   and Senior Executive Vice
                                   President of IBC
</TABLE>
There are no family relationships among any of the named persons. Each executive
officer has held the same position or another executive position with the
Company or IBC during the past five years.

                                       27
<PAGE>
                                     PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
        MATTERS

     The information set forth under the caption "Common Stock and Dividends"
located on page 10 of Registrant's 1999 Annual Report is incorporated herein by
reference.

Item 6.  SELECTED FINANCIAL DATA

     The information set forth under the caption "Selected Financial Data"
located on page 1 of Registrant's 1999 Annual Report is incorporated herein by
reference.

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" located on pages 2
through 10 of Registrant's 1999 Annual Report is incorporated herein by
reference.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The information set forth under the caption "Liquidity and Capital
Resources" located on pages 5 through 7 of the Registrant's 1999 Annual Report
is incorporated herein by reference.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements located on pages 12 through 16 of
Registrant's 1999 Annual Report are incorporated herein by reference.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.
                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     There is incorporated in this Item 10 by reference (i) that portion of the
Company's definitive proxy statement dated April 14, 2000 entitled "Election of
Directors" and (ii) Item 4A of this report entitled "Executive Officers of the
Registrant."

Item 11. EXECUTIVE COMPENSATION

     There are incorporated in this Item 11 by reference those portions of the
Company's definitive proxy statement dated April 14, 2000 entitled "Executive
Compensation"; provided, however, that such incorporation by reference shall not
include the information referred to in item 402(a) (8) of Securities and
Exchange Commission Regulation S-K.

                                       28
<PAGE>
Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     There are incorporated in this Item 12 by reference those portions of the
Company's definitive proxy statement dated April 14, 2000 entitled "Principal
Shareholders" and "Security Ownership of Management."

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     There is incorporated in this Item 13 by reference that portion of the
Company's definitive proxy statement dated April 14, 2000 entitled "Interest of
Management in Certain Transactions."

                                     PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  DOCUMENTS

        1.  The consolidated financial statements of the Company and
            subsidiaries are incorporated into Item 8 of this report by
            reference from the 1999 Annual Report to Shareholders filed as an
            exhibit hereto and they include:

            Independent Auditors' Report

            Consolidated:
            Statements of Condition as of December 31, 1999 and 1998
            Statements of Income for the years ended December 31, 1999, 1998
              and 1997
            Statements of Comprehensive Income for the years ended December 31,
              1999, 1998 and 1997
            Statements of Shareholders' Equity for the years ended December 31,
              1999, 1998 and 1997
            Statements of Cash Flows for the years ended December 31, 1999, 1998
              and 1997
            Notes to Financial Statements

        2.  All Financial Statement Schedules are omitted as the required
            information is inapplicable or the information is presented in the
            financial statements or related notes.

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

            (3)(a)*-Articles of Incorporation of International Bancshares
            Corporation incorporated herein as an exhibit by reference to the
            Current Report, Exhibit 3.1 therein, under the Securities Exchange
            Act of 1934, filed by Registrant on Form 8-K with the Securities and
            Exchange Commission on June 20, 1995, SEC File No. 09439.

            (3)(b)*-By-Laws of International Bancshares Corporation incorporated
            herein as an exhibit by reference to the Current Report, Exhibit 3.2
            therein, under the Securities Exchange Act of 1934, filed by
            Registrant on Form 8-K with the Securities and Exchange Commission
            on June 20, 1995, SEC File No. 0-9439.

                                       29
<PAGE>
            (3)(c) -Articles of Amendment to the Articles of Incorporation of
            International Bancshares Corporation dated May 22, 1998.

            (10)*-Sublease between Commerce Bank and Americity Federal Savings
            Bank incorporated herein as an exhibit by reference to the Annual
            Report, Exhibit 11(b) therein, under the Securities Exchange Act of
            1934, filed by Registrant on Form 10-K with the Securities and
            Exchange Commission on March 23, 1982, SEC File No. 0-9439.

            (10a)*-Purchase and Assumption Agreement dated June 29, 1990 by and
            between the Resolution Trust Corporation, receiver of Valley Federal
            Savings Association and New Valley Federal Savings Association
            incorporated herein as an exhibit by reference to the Annual Report,
            Exhibit 10(a) therein, under the Securities Exchange Act of 1934,
            filed by Registrant on Form 10-K with the Securities and Exchange
            Commission on March 30, 1992, SEC File No. 0-9439.

            (10b)*-Purchase and Assumption Agreement for Oakar transaction dated
            June 29, 1990 between New Valley Federal Savings Association,
            International Bancshares Corporation and International Bank of
            Commerce incorporated herein as an exhibit by reference to the
            Annual Report, Exhibit 10(b) therein, under the Securities Exchange
            Act of 1934, filed by Registrant on Form 10-K with the Securities
            and Exchange Commission on March 30, 1991, SEC File No. 0-9439.

            (10c)*-Purchase and Assumption Agreement dated June 21, 1991 by and
            between the Resolution Trust Corporation, receiver of Travis Federal
            Savings and Loan Association and New Travis Federal Savings
            Association incorporated herein as an exhibit by reference to the
            Annual Report, Exhibit 10(C) therein, under the Securities Exchange
            Act of 1934, filed by Registrant on Form 10-K with the Securities
            and Exchange Commission on March 30, 1992, SEC File No. 0-9439.

            (10d)*-Oakar Agreement dated June 21, 1991 between New Travis
            Federal Savings Association and International Bank of Commerce
            incorporated herein as an exhibit by reference to the Annual Report,
            Exhibit 10(d) therein, under the Securities Exchange Act of 1934,
            filed by Registrant on Form 10-K with the Securities and Exchange
            Commission on March 30, 1992, SEC File No. 0-9439.

            (10e)*+-The 1987 International Bancshares Corporation Key
            Contributor Stock Option Plan as amended and restated (formerly the
            International Bancshares Corporation 1981 Incentive Stock Option
            Plan) incorporated herein as an exhibit by reference to Exhibit 28
            to the Registration Statement on Form S-8 filed with the Securities
            and Exchange Commission on July 13, 1987, SEC File No. 33-15655.

                                       30
<PAGE>
            (10f)*-Merger Agreement by and between International Bank of
            Commerce, Michigan National Corporation and First State Bank and
            Trust Company, dated May 5, 1994 incorporated herein by reference to
            Exhibit 10(f) of the Form 10Q filed with the Securities and Exchange
            Commission on August 15, 1994, SEC File No. 0-9439.

            (10g)*-Merger Agreement by and between International Bank of
            Commerce, and The Bank of Corpus Christi, dated August 19, 1994
            incorporated herein by reference to Exhibit 10(g) of Form 10-Q filed
            with the Securities and Exchange Commission on November 14, 1994,
            SEC File No. 0-9439.

            (10h)*-Merger Agreement by and between International Bank of
            Commerce, and Stone Oak National Bank, dated February 28, 1995,
            incorporated by reference to Exhibit 10(h) of the Registrant's
            Quarterly Report on Form 10Q for the period ended March 31, 1995,
            filed with the Securities and Exchange Commission on May 15, 1995,
            SEC File No. 0-9439.

            (10i)*-Agreement and Plan of Merger dated as of June 7, 1995, by and
            between International Bancshares Corporation, a Delaware
            corporation, and International Bancshares Corporation, a Texas
            corporation, incorporated herein by reference to Exhibit 2 of the
            Current Report on Form 8-K filed with the Securities and Exchange
            Commission on June 20, 1995, SEC File No. 0-9439.

            (10j)*-Purchase and Assumption Agreement dated as of February 27,
            1996, by and between International Bank of Commerce, River Valley
            Bank, F.S.B. and Western Capital Holdings, Inc. incorporated herein,
            by reference to Exhibit 10(j) of the Registrant's Annual Report on
            Form 10-K filed with the Securities and Exchange Commission on April
            1, 1996, SEC File No. 09439.

            (10k)*-Purchase of Asset and Liability Agreement dated as of July
            30, 1996, by and between International Bank of Commerce and Home
            Savings of America F.S.B. incorporated herein by reference to
            Exhibit 10(k) of the Registrant's Quarterly Report on Form 10-Q
            filed with the Securities and Exchange Commission on November 13,
            1996.

            (10l)*+-The 1996 International Bancshares Corporation Stock Option
            Plan incorporated herein by reference to Exhibit 99.1 to the Post
            Effective Amendment No. 1 to Form S-8 filed with the Securities and
            Exchange Commission on March 21, 1997, SEC File No. 33-15655.

            (10m)*+-Executive Incentive Compensation Plan of the Registrant
            incorporated herein by reference to exhibit "A" of the Registrant's
            Proxy Statement filed with the Securities Exchange Commission on
            April 15, 1997, SEC File No. 09439.

            (10n)*-Agreement and Plan of Merger by and among International
            Bancshares Corporation, University Bancshares, Inc., Joe L.
            Allbritton and Robert L. Allbritton, dated as of August 15, 1997.

            (13)**-International Bancshares Corporation 1999 Annual Report

                                       31
<PAGE>
            (21) -List of Subsidiaries of International Bancshares Corporation
            as of March 30, 2000

            (23)  -Accountants' Consent

            (27)  -Financial Data Schedule

            *  Previously filed

            ** Deemed filed only with respect to those portions thereof
               incorporated herein by reference

            +  Executive Compensation Plans and Arrangements

(b)     REPORTS ON FORM 8-K

        Registrant filed a current report on Form 8-K on January 11, 2000,
        covering Item 5 - Other Events and Item 7 - Financial Statements and
        Exhibits in connection with the announcement of the expansion of the
        Company's stock repurchase program.

        Registrant filed a current report on Form 8-K on March 2, 2000, covering
        Item 5 - Other Events and Item 7 - Financial Statements and Exhibits in
        connection with the announcement of the Company's Annual 1999 Earnings.

        Registrant filed a current report on Form 8-K on March 20, 2000,
        covering Item 5 - Other Events and Item 7 - Financial Statements and
        Exhibits in connection with the announcement of a cash dividend by the
        Company.

        Registrant filed a current report on Form 8-K on March 23, 2000,
        covering Item 5 - Other Events and Item 7 - Financial Statements and
        Exhibits in connection with the announcement of the Company's election
        to become a Financial Holding Company.

                                       32
<PAGE>
                                   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
                                                    (Registrant)

                                        By:    /S/ DENNIS E. NIXON

                                                   Dennis E. Nixon
                                                   President

                                        Date:  MARCH 30, 2000

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.

        SIGNATURES                     TITLE                      DATE

 /S/ DENNIS E. NIXON          President and Director          MARCH 30, 2000
 Dennis E. Nixon              (Principal Executive Officer)

 /S/ IMELDA NAVARRO           Treasurer                       MARCH 30, 2000
 Imelda Navarro               (Principal Financial Officer)

 /S/ LEONARDO SALINAS         Vice President and              MARCH 30, 2000
 Leonardo Salinas             Director

 /S/ LESTER AVIGAEL           Director                        MARCH 30, 2000
 Lester Avigael

 /S/ IRVING GREENBLUM         Director                        MARCH 30, 2000
 Irving Greenblum

 /S/ R. DAVID GUERRA          Director                        MARCH 30, 2000
 R. David Guerra

 /S/ RICHARD E. HAYNES        Director                        MARCH 30, 2000
 Richard E. Haynes

__________________________    Director                        ________________
 Sioma Neiman

 /S/ ANTONIO R. SANCHEZ JR.   Director                        MARCH 30, 2000
 Antonio R. Sanchez Jr.

 /S/ PEGGY J. NEWMAN          Director                        MARCH 30, 2000
 Peggy J. Newman

                                       33
<PAGE>
                                  EXHIBIT INDEX

Exhibit 13 -   International Bancshares Corporation 1999 Annual Report, Exhibit
               13, page 1

Exhibit 21 -   List of Subsidiaries of International Bancshares Corporation as
               of March 30, 2000, page 130

Exhibit 23 -   Accountants' Consent, page 131

Exhibit 27 -   Financial Data Schedule, page 132


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