<PAGE>

                       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, 2000                             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. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 20, 2001 was $519,768,833 based on the closing sales
price of the stock on such date.

As of March 20, 2001, there were 21,307,510 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, 2000 (in Parts I and II) and (b) Proxy
Statement dated April 16, 2001 (in Part III).

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                                    CONTENTS

                                     PART I
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Item 1.   Business...........................................................    3
Item 2.   Properties.........................................................   23
Item 3.   Legal Proceedings..................................................   23
Item 4.   Submission of Matters to a Vote of Security Holders................   24
Item 4A.  Executive Officers of the Registrant...............................   24

                                     PART II

Item 5.   Market for the Registrant's Common Stock
            and Related Security Holder Matters..............................   24
Item 6.   Selected Financial Data............................................   24
Item 7.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations..............................   24
Item 7A.  Quantitative and Qualitative Disclosure about Market Risk..........   24
Item 8.   Financial Statements and Supplementary Data........................   25
Item 9.   Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosure..............................   25

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.................   25
Item 11.  Executive Compensation.............................................   25
Item 12.  Security Ownership of Certain Beneficial Owners and Management.....   25
Item 13.  Certain Relationships and Related Transactions.....................   25

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K....   25
</TABLE>

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, unless
required by law.

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ITEM 1. BUSINESS

GENERAL

      International Bancshares Corporation (the "Company") is a financial
holding company with four bank subsidiaries providing commercial and retail
banking services through over 100 main banking and branch facilities located
in 30 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.
Effective March 13, 2000, the Company became certified as a financial holding
company. As a financial holding company, the company may engage in a broad
list of financial and non-financial activities. The Company's principal assets
at December 31, 2000 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 divided by net interest income and
other operating income) for the year ended December 31, 2000 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 2000, net
loans increased 18% over the corresponding 1999 period.

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         During the last several years, IBC, the Company's lead bank, 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 83% 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 core deposit premium totaling $2,525,000
which is being amortized on a straight line basis over a fifteen year period.

         During 2000, IBC established an insurance subsidiary and acquired the
assets of two insurance agencies in Texas. The acquisitions were accounted for
as a purchase transaction. In connection with the acquisitions, IBC recorded
goodwill totaling $3,003,000 which is being amortized on a straight line basis
over a fifteen year period.

         Effective October 2, 2000, the Company purchased a controlling
interest in the GulfStar Group, a Houston-based investment banking firm
serving middle-market corporations primarily in Texas. The acquisition was
accounted for as a purchase transaction. In connection with the acquisition,
the Company recorded goodwill totaling $13,199,000 which is being amortized on
a straight line basis over a fifteen year period.

         Effective February 16, 2001, IBC acquired the assets of First Equity
Corporation, an Austin-based mortgage banker. The acquisition was accounted
for as a purchase transaction. In connection with the acquisition, IBC
recorded goodwill totaling $5,304,000 which is being amortized on a straight
line basis over a fifteen year period.

         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.

                                       4
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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 205 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, 47 grocery
store branches have been opened. Currently, IBC is in the process of
installing software in order to provide customers online access to banking
information and services 24 hours a day.

         The Company owns U.S. service mark registrations for "INTERNATIONAL
BANK OF COMMERCE," "WALL STREET INTERNATIONAL," "INTERNATIONAL BANK OF
COMMERCE CENTRE," "OVERDRAFT COURTESY," "IBC," "IBC CONNECTION," "IBC ELITE,"
"BIZ RITE CHECKING," 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 "RITE CHECK," "THE CLUB," "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 is
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, 2000 the Company and its subsidiaries employed
approximately 1,390 persons full-time and 244 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.

                                       5
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         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 42%, 41% and 38% of the
Company's bank subsidiaries' total deposits as of December 31, 2000, 1999 and
1998, 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.

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,

                                       6
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such as the Company, has registered Securities under Section 12 of the
Securities Exchange Act of 1934 (the "Exchange Act").

         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, the Gramm-Leach-Bliley
Act of 1999 ("GLBA") was enacted. 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. 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. In addition, GLBA permits certain non-banking financial and
financially related activities to be conducted by financial subsidiaries of a
national bank. Additionally, 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. During the second quarter of 2000, IBC
established an insurance agency subsidiary which acquired two insurance
agencies. As a result of GLBA, the Texas Department of Insurance issued
Commissioner's Bulletin No. B-0005-00 indicating that bank insurance agency
activities could be conducted without geographic limitations. Effective
October 2, 2000, the Company acquired a controlling interest in GulfStar
Group, a Houston-based investment banking firm with a securities affiliate
registered under the Securities Exchange Act of 1934. A financial holding
company that has a securities affiliate registered under the Securities Act of
1934 or a qualified insurance affiliate may make permissible merchant banking
investments. As of December 31, 2000, the Company had not made any merchant
banking investments.

         In January 2001, the Federal Reserve Board and the Secretary of the
Treasury promulgated final regulations governing the scope of permissible
merchant banking investments. The investments that may be made under this new
authority are substantially broader in scope than the investment activities
otherwise permissible for bank holding companies, and are referred to as
"merchant banking investments" in "portfolio companies." The merchant banking
investments may be made by the financial holding company or any of its
subsidiaries, other than a depository institution or subsidiary of a
depository institution. The regulation places restrictions on the ability of a
financial holding company to become involved in the routine management or
operation of any of its portfolio companies. The regulation also generally
limits the ownership period of merchant banking investments to no more than
ten years.

         The Federal Reserve Board, the OCC, and the FDIC have proposed for
comment a rule which would establish special regulatory capital charges for
equity investments in non-financial companies. The proposed capital treatment
would apply a graduated capital charge on covered equity investments which
would increase as the proportion of such investments to Tier 1 Capital
increases. This is the second proposal the agencies have made of this nature
and the Company cannot predict what final form the regulation may take.

         The Federal Reserve Board and Secretary of Treasury have also
requested public comment on the issue of whether to add the activities of real
estate brokerage and real estate management to the list of permissible
activities for financial holding

                                       7
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companies and financial subsidiaries of national banks. The Company cannot
predict whether the proposal will be adopted or the form any final rule might
take.

         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 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.

         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

                                       8
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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 Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers adopted new rules, which became effective during 2000, to
improve the function of corporate audit committees. The new rules require,
among other things, that the audit committee review and assess the adequacy of
its charter on an annual basis, 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 assessments 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,
2000, the Company's ratio of total capital-to-risk-weighted assets was 14.29%.
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 $54,795,000 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, 2000 was 6.54%. 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.

                                       9
<PAGE>

         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, 2000. 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,
2000, 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 he 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 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.

                                       10
<PAGE>

         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 a "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 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. 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, 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

                                       11
<PAGE>

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,
2000 there was an aggregate of approximately $68,119,000 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 $68,119,000 and continue to be classified as "well
capitalized". Note 17 of notes to Consolidated Financial Statements of the
Company located on page 32 of the 2000 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 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 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. New legislation could be adopted
which would 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.

                                       12
<PAGE>

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.

         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, 2000, 1999 and 1998 (Dollars
in Thousands) (Note 1). Nonaccrual loans have been included in assets for the
purpose of this analysis:
<TABLE>
<CAPTION>
                                                                       YEARS ENDED DECEMBER 31,
                                  -------------------------------------------------------------------------------------------------
                                                 2000                           1999                           1998
                                  -------------------------------------------------------------------------------------------------
                                      AVERAGE             AVERAGE    AVERAGE             AVERAGE    AVERAGE             AVERAGE
                                      BALANCE  INTEREST  RATE/COST   BALANCE  INTEREST  RATE/COST   BALANCE  INTEREST  RATE/COST
                                      -------  --------  ---------   -------  --------  ---------   -------  --------  ---------
   ASSETS
   ------
<S>                                <C>         <C>       <C>       <C>        <C>       <C>        <C>       <C>       <C>
INTEREST EARNING ASSETS:
   LOANS, NET OF UNEARNED DISCOUNTS:
     DOMESTIC                      $ 1,856,462  $189,696   10.22%  $ 1,540,536  $144,788    9.40%  $ 1,351,796  $133,221    9.86%
     FOREIGN                           247,130    22,826    9.24       191,105    15,317    8.01       141,869    11,795    8.31
   INVESTMENT SECURITIES:
     TAXABLE                         2,932,778   202,579    6.91     2,762,895   175,042    6.34     2,771,927   179,030    6.46
     TAX-EXEMPT                         91,236     5,119    5.61        87,744     4,432    5.05         4,824       241    5.00
   TIME DEPOSITS WITH BANKS              2,135       157    7.35         1,640       104    6.34         1,005        89    8.86
   FEDERAL FUNDS SOLD                   15,180       929    6.12        14,148       710    5.02        22,738     1,462    6.43
   OTHER                                 2,568       321   12.50         2,744       343   12.50         2,686       336   12.51
                                   -----------  --------   -----   -----------  --------   -----   -----------  --------   -----
     TOTAL INTEREST-EARNING ASSETS $ 5,147,489  $421,627    8.19   $ 4,600,812  $340,736    7.41   $ 4,296,845  $326,174    7.59

NON-INTEREST EARNING ASSETS:
   CASH AND DUE FROM BANKS         $   110,843                     $   110,704                     $   131,539
   BANK PREMISES AND EQUIPMENT, NET    148,579                         142,098                         134,152
   OTHER ASSETS                        276,178                         219,041                         132,620
   LESS ALLOWANCE FOR POSSIBLE
     LOAN LOSSES                       (29,201)                        (26,797)                        (25,837)
                                   -----------                     -----------                     -----------
     TOTAL                         $ 5,653,888                     $ 5,045,858                     $ 4,669,319
                                   ===========                     ===========                     ===========
   LIABILITIES AND
   ---------------
   SHAREHOLDERS' EQUITY
   --------------------

INTEREST BEARING LIABILITIES:
   SAVINGS AND INTEREST BEARING
     DEMAND DEPOSITS               $   907,402  $ 27,945    3.08%  $   937,322  $ 27,182    2.90%  $   867,594 $ 26,419    3.05%
   TIME DEPOSITS:
     DOMESTIC                          966,670    53,115    5.49       929,627    46,948    5.05     1,009,000   53,230    5.28
     FOREIGN                         1,228,445    67,628    5.51     1,134,484    50,678    4.47       964,459   48,593    5.04
   SECURITIES SOLD UNDER
     REPURCHASE AGREEMENTS AND
     FEDERAL FUNDS PURCHASED           149,802     8,160    5.45       105,039     6,047    5.76       257,589   13,396    5.20
   OTHER BORROWINGS                  1,467,692    94,908    6.47     1,064,307    54,340    5.11       751,628   39,969    5.32
   OTHER                                  -         -        -            -           10     -           2,664      302   11.34
                                   -----------  --------   -----   -----------  --------   -----   -----------  --------   -----
     TOTAL INTEREST BEARING
       LIABILITIES                 $ 4,720,011  $251,756    5.33   $ 4,170,779  $185,205    4.44   $ 3,852,934 $181,909    4.72

NON-INTEREST BEARING LIABILITIES:
   DEMAND DEPOSITS                     532,434                         462,510                         433,863
   OTHER LIABILITIES                    42,093                          42,016                          35,532
SHAREHOLDERS' EQUITY                   359,350                         370,553                         346,990
                                   -----------                     -----------                     -----------
     TOTAL                         $ 5,653,888                     $ 5,045,858                     $ 4,669,319
                                   ===========                     ===========                     ===========

          NET INTEREST INCOME                   $169,871                        $155,531                       $144,265
                                                ========                        ========                       ========
          NET YIELD ON INTEREST
            EARNING ASSETS                                  3.30%                           3.38%                          3.36%
                                                            ====                            ====                           ====
</TABLE>

(NOTE 1) THE AVERAGE BALANCES FOR PURPOSES OF THE ABOVE TABLE ARE CALCULATED ON
THE BASIS OF MONTH-END BALANCES.


                                       13
<PAGE>

                    INTEREST RATES AND INTEREST DIFFERENTIAL

     The following table analyzes the changes in net interest income during 2000
and 1999 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>
                               2000 COMPARED TO 1999        1999 COMPARED TO 1998
                             -------------------------    -------------------------
                              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                $31,506   $13,402  $44,908   $17,992  $ (6,425) $11,567
    Foreign                   4,928     2,581    7,509     3,961      (439)   3,522
  Investment securities:
    Taxable                  11,184    16,353   27,537      (595)   (3,393)  (3,988)
    Tax-exempt                  181       506      687     4,189         2    4,191
  Time deposits with banks       35        18       53        45       (30)      15
  Federal funds sold             55       164      219      (476)     (276)    (752)
  Other                         (22)      -        (22)        7       -          7
                            -------   -------  -------   -------  --------  -------
  Total interest income     $47,867   $33,024  $80,891   $25,123  $(10,561) $14,562
                            -------   -------  -------   -------  --------  -------

Interest incurred on:
  Savings and interest
    bearing demand deposits $  (887)  $ 1,650      763   $ 2,088  $ (1,325) $   763
  Time deposits:
    Domestic                  1,935     4,232    6,167    (4,043)   (2,239)  (6,282)
    Foreign                   4,450    12,500   16,950     7,968    (5,883)   2,085
  Securities sold under
    repurchase agreements and
    federal funds purchased   2,454      (341)   2,113    (8,659)    1,310   (7,349)
  Other borrowings           23,833    16,735   40,568    16,009    (1,638)  14,371
  Other                        -         -        -         (292)      -       (292)
                            -------   -------  -------   -------  --------  -------
  Total interest expense    $31,785   $34,776  $66,561   $13,071  $ (9,775) $ 3,296
                            -------   -------  -------   -------  --------  -------
Net interest income         $16,082   $(1,752) $14,330   $12,052  $   (786) $11,266
                            =======   =======  =======   =======  ========  =======
</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.


                                       14
<PAGE>

                            INTEREST RATE SENSITIVITY

     The net interest rate sensitivity as of December 31, 2000 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, 2000                       3 MONTHS    OVER 3 MONTHS    OVER 1 YEAR      OVER
     (DOLLARS IN THOUSANDS)                  OR LESS       TO 1 YEAR      TO 5 YEARS      5 YEARS     TOTAL
     =========================================================================================================
<S>                                     <C>           <C>           <C>              <C>           <C>
     SECTION A
     ---------------------------------------------------------------------------------------------------------
     RATE SENSITIVE ASSETS

     FEDERAL FUNDS SOLD                 $       500           -              -               -     $       500
     DUE FROM BANK INTEREST EARNING             590         1,782             99             -           2,471
     INVESTMENT SECURITIES                  180,225       230,277      2,479,729         208,615     3,098,846
     LOANS, NET OF NON-ACCRUALS           1,608,983       182,262        263,671         189,289     2,244,205
     ---------------------------------------------------------------------------------------------------------
     TOTAL EARNING ASSETS               $ 1,790,298   $   414,321    $ 2,743,499     $   397,904   $ 5,346,022
     ---------------------------------------------------------------------------------------------------------
     CUMULATIVE EARNING ASSETS          $ 1,790,298   $ 2,204,619    $ 4,948,118     $ 5,346,022
     =========================================================================================================
     SECTION B
     ---------------------------------------------------------------------------------------------------------
     RATE SENSITIVE LIABILITIES

     TIME DEPOSITS                      $ 1,127,572   $   954,858    $   174,350     $       243   $ 2,257,023
     OTHER INTEREST BEARING DEPOSITS        913,894           -              -               -         913,894
     FED FUNDS PURCHASED AND REPOS           82,743       147,365            -               -         230,108
     OTHER BORROWINGS                     1,432,500           -              -               -       1,432,500
     ---------------------------------------------------------------------------------------------------------
     TOTAL INTEREST BEARING LIABILITIES $ 3,556,709   $ 1,102,223    $   174,350     $       243   $ 4,833,525
     ---------------------------------------------------------------------------------------------------------
     CUMULATIVE SENSITIVE LIABILITIES   $ 3,556,709   $ 4,658,932    $ 4,833,282     $ 4,833,525
     =========================================================================================================
     SECTION C
     ---------------------------------------------------------------------------------------------------------
     REPRICING GAP                      $(1,766,411)  $ (687,902)    $ 2,569,149     $   397,661   $   512,497
     CUMULATIVE REPRICING GAP            (1,766,411)  (2,454,313)        114,836         512,497       512,497
     RATIO OF INTEREST-SENSITIVE
        ASSETS TO LIABILITIES                   .50          .38           15.74             -            1.11
     RATIO OF CUMULATIVE, INTEREST-
        SENSITIVE ASSETS TO LIABILITIES         .50          .47            1.02           1.11
     =========================================================================================================
</TABLE>

                                       15
<PAGE>

                              INVESTMENT SECURITIES

     The following table sets forth the carrying value of investment securities
as of December 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>
                                         YEARS ENDED DECEMBER 31,
                                     ----------------------------------
                                      2000          1999          1998
                                     ----------------------------------
                                         (DOLLARS IN THOUSANDS)
<S>                              <C>           <C>           <C>
     U.S. Treasury securities
       Available for sale        $   244,811   $   260,980   $   207,688
     Mortgage-backed securities
       Available for sale          2,583,323     2,491,963     2,551,395
     Obligations of states and
      political subdivisions
       Held to maturity                   60           321           518
       Available for sale             96,791        90,416        28,200
     Equity securities
       Available for sale             85,978        75,798        62,995
     Other securities
       Held to maturity                2,160         2,085         1,990
       Available for sale             85,723        74,154       155,091
                                 -----------   -----------   -----------
           Total                 $ 3,098,846   $ 2,995,717   $ 3,007,877
                                 ===========   ===========   ===========
</TABLE>

     The following tables set forth the contractual maturities of investment
securities at December 31, 2000 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          $  743  5.55%  $   -     -  %  $ 20,000 7.00%  $  258,142 6.78%
Mortgage-backed
  securities         9,298  6.92    181,766 6.81    173,215 7.54    2,201,363 7.15
Obligations of states
  and political
  subdivisions        -      -          537 7.50       -     -        101,851 4.47
Other securities      -      -         -     -         -     -         93,232 7.56
Equity securities   85,960  5.75       -     -         -     -           -     -
                  --------         --------        --------        ----------
          Total   $ 96,001  5.86%  $182,303 6.81%  $193,215 7.49%  $2,654,588 7.02%
                  ========         ========        ========        ==========
</TABLE>

                                       16
<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>        <C>    <C>
Obligations of states
  and political
  subdivisions       $    60 7.70%   $  -     -  %     $  -   -  %     $  -     -  %
Other securities       1,550 8.00       485  7.82        125 6.95         -     -
                     -------         ------            -----           -----
         Total       $ 1,610 7.99%   $  485  7.82%     $ 125 6.95%     $  -     -  %
                     =======         ======            =====           =====
</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, 2000,
1999, 1998, 1997 and 1996 are shown in the following table:
<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                               -----------------------------------------------------
                               2000        1999        1998        1997        1996
                               ----        ----        ----        ----        ----
                                                 (DOLLARS IN THOUSANDS)
<S>                       <C>         <C>         <C>          <C>        <C>
Commercial, financial
  and agricultural        $1,286,576  $1,115,511  $  896,060   $ 800,964  $  723,061
Real estate-mortgage         287,319     278,819     215,689     188,122     193,101
Real estate-construction     232,589     129,813      94,374      59,239      32,610
Consumer                     165,875     171,104     250,917     272,478     161,594
Foreign                      278,119     216,632     166,324     130,401     128,932
                          ----------  ----------  ----------  ----------  ----------
     Total loans           2,250,478   1,911,879   1,623,364   1,451,204   1,239,298

Unearned discount             (7,199)     (8,355)     (8,025)     (6,508)     (3,303)
                          ----------  ----------  ----------  ----------  ----------
     Loans, net of
     unearned discount    $2,243,279  $1,903,524  $1,615,339  $1,444,696  $1,235,995
                          ==========  ==========  ==========  ==========  ==========
</TABLE>

     The table on the following page shows the amounts of loans (excluding real
estate mortgages and consumer loans) outstanding as of December 31, 2000 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:


                                       17
<PAGE>
<TABLE>
<CAPTION>
                                                      MATURING
                                  -------------------------------------------------
                                               AFTER ONE
                                   WITHIN     BUT WITHIN       AFTER
                                  ONE YEAR    FIVE YEARS     FIVE YEARS     TOTAL
                                  --------    ----------     ----------     -----
                                                (DOLLARS IN THOUSANDS)
<S>                              <C>          <C>           <C>         <C>
Commercial, financial and
  agricultural                   $ 449,932    $ 705,005     $ 131,639   $ 1,286,576
Real estate - construction         159,378       65,314         7,897       232,589
Foreign                            119,326      147,467        11,326       278,119
                                 ---------    ---------     ---------   -----------
          Total                  $ 728,636    $ 917,786     $ 150,862   $ 1,797,284
                                 =========    =========     =========   ===========
</TABLE>
<TABLE>
<CAPTION>
                                                INTEREST SENSITIVITY
                                                --------------------
                                                 FIXED      VARIABLE
                                                 RATE         RATE
                                                 ----         ----
                                               (DOLLARS IN THOUSANDS)
<S>                                           <C>           <C>
Due after one but within five years           $ 198,241     $ 719,545
Due after five years                             83,308        67,554
                                              ---------     ---------
          Total                               $ 281,549     $ 787,099
                                              =========     =========
</TABLE>

     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:
<TABLE>
<CAPTION>
                                             YEARS ENDED DECEMBER 31,
                            --------------------------------------------------------
                               2000        1999        1998       1997        1996
                               ----        ----        ----       ----        ----
                                             (DOLLARS IN THOUSANDS)
<S>                         <C>         <C>         <C>         <C>        <C>
Loans accounted for on
  a non-accrual basis       $ 6,191     $ 7,234     $ 4,868     $ 5,014    $ 3,363
Loans contractually
  past due ninety days
  or more as to interest
  or principal payments       7,064      13,758       8,543       9,700      5,075
Loans accounted for
  as "troubled debt
  restructuring"                491         543         592         363      1,462
</TABLE>

     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:
<TABLE>
<CAPTION>
                                             YEARS ENDED DECEMBER 31,
                             ------------------------------------------------------
                               2000        1999        1998       1997        1996
                               ----        ----        ----       ----        ----
                                              (DOLLARS IN THOUSANDS)
<S>                         <C>         <C>         <C>         <C>        <C>
Loans accounted for on
  a non-accrual basis       $    82     $   428     $   670     $   728    $ 1,062
Loans contractually
  past due ninety days
  or more as to interest
  or principal payments         258         490         242       2,096      1,321
</TABLE>

         The gross income that would have been recorded during 2000 on
non-accrual and restructured loans in accordance with their original contract
terms was $722,000 on domestic loans and $120,000 on foreign loans. The amount
of interest income on such loans that was recognized in 2000 was $10,000 on
domestic loans and none for foreign loans.


                                       18
<PAGE>

     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:
<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                                          ------------------------------------
                                          2000           1999           1998
                                          ----           ----           ----
                                                (DOLLARS IN THOUSANDS)
<S>                                   <C>            <C>            <C>
Loans:
  Commercial, financial and
    agricultural                      $ 242,450      $ 184,129      $ 135,328
  Real estate-mortgage                    8,674          9,388          8,133
  Consumer                               26,995         23,115         22,863
                                      ---------      ---------      ---------
                                        278,119        216,632        166,324
  Less allowance for possible
    loan losses                          (1,831)        (1,322)        (1,124)
                                      ---------      ---------      ---------
           Net loans                  $ 276,288      $ 215,310      $ 165,200
                                      =========      =========      =========

Accrued interest receivable           $   2,630      $   1,725      $   1,327
                                      =========      =========      =========
</TABLE>

                                       19
<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,
                                      --------------------------------------------------------
                                        2000        1999        1998        1997        1996
                                        ----        ----        ----        ----        ----
                                                   (DOLLARS IN THOUSANDS)
<S>                                <C>         <C>         <C>         <C>         <C>
Loans, net of unearned discounts,
  outstanding at December 31,      $2,243,279  $1,903,524  $1,615,339  $1,444,696  $1,235,995
                                   ==========  ==========  ==========  ==========  ==========
Average loans outstanding during
  the year (Note 1)                $2,103,593  $1,731,640  $1,493,664  $1,281,489  $1,199,591
                                   ==========  ==========  ==========  ==========  ==========
Balance of allowance

  at January 1,                      $ 26,770    $ 25,551    $ 24,516    $ 21,036    $ 18,455
Provision charged to expense            6,824       6,379       8,571       7,740       6,630
                                   ----------  ----------  ----------  ----------  ----------
Loans charged-off:
  Domestic:
  Commercial, financial
   and agricultural                    (1,161)     (1,634)     (2,180)     (1,503)     (1,518)
  Real estate-mortgage                   (176)       (227)       (157)       (279)       (261)
  Consumer                             (2,323)     (4,688)     (6,483)     (4,552)     (3,363)
  Foreign                                 (22)        -           (65)         (2)        (23)
                                          ---                     ---          --         ---
Total loans charged-off                (3,682)     (6,549)     (8,885)     (6,336)     (5,165)
                                   ----------  ----------  ----------  ----------  ----------
Recoveries credited to allowance:
  Domestic:
  Commercial, financial
    and agricultural                      502         735         795         270         305
  Real estate mortgage                     69          89          18         382          51
  Consumer                                327         564         531         250         755
  Foreign                                   2           1           5          95           5
                                   ----------  ----------  ----------  ----------  ----------
Total recoveries                          900       1,389       1,349         997       1,116
                                   ----------  ----------  ----------  ----------  ----------

Net loans charged-off:                 (2,782)     (5,160)     (7,536)     (5,339)     (4,049)
                                   ----------  ----------  ----------  ----------  ----------
Allowance acquired in purchase
  transactions                            -           -           -         1,079         -
                                   ----------  ----------  ----------  ----------  ----------
Balance of allowance
  at December 31,                    $ 30,812    $ 26,770    $ 25,551    $ 24,516    $ 21,036
                                   ==========  ==========  ==========  ==========  ==========

Ratio of net loans charged-off
  during the year to average
  loans outstanding during
  the year (Note 1)                       .13%       .30%        .50%        .42%        .34%
                                   ==========  ==========  ==========  ==========  ==========
Ratio of allowance to loans, net
  of unearned discounts, out-
  standing at December 31,               1.37%      1.41%       1.58%       1.70%       1.70%
                                   ==========  ==========  ==========  ==========  ==========
</TABLE>

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


                                       20
<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 1.37% and 1.41% of total loans of bank subsidiaries, net of
unearned income, for December 31, 2000 and 1999, respectively.

         The amount charged against 2000 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,
---------------------------------------------------------------------------------------------------------------------------------
                           2000                    1999                   1998                  1997                 1996
                    -------------------     -------------------    -------------------   -------------------  -------------------
                                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       $ 18,904    57.2%      $ 16,745    58.4%      $ 15,022    55.2%      $ 14,149    55.2%  $ 12,981    58.3%
REAL ESTATE
  MORTGAGE              4,222    12.8          4,185    14.6          3,616    13.3          3,323     12.9     3,467    15.6
REAL ESTATE
  CONSTRUCTION          3,418    10.3          1,949     6.8          1,582     5.8          1,047      4.1       586     2.6
CONSUMER                2,437     7.4          2,569     8.9          4,207    15.5          4,813     18.8     2,901    13.1
FOREIGN                 1,831    12.3          1,322    11.3          1,124    10.2          1,184      9.0     1,101    10.4
                     --------   -----       --------   -----       --------   -----       --------   ------  --------   -----
                     $ 30,812   100.0%      $ 26,770   100.0%      $ 25,551   100.0%      $ 24,516   100.0%  $ 21,036   100.0%
                     ========   =====       ========   =====       ========   =====       ========   =====   ========   =====
</TABLE>

                                       21
<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,
                                             ------------------------------------------
                                                 2000           1999           1998
                                                 ----           ----           ----
                                                       (DOLLARS IN THOUSANDS)
<S>                                          <C>            <C>            <C>
   Deposits:
          Demand - non-interest bearing
                 Domestic                    $ 463,964      $ 402,738      $ 377,084
                 Foreign                        68,470         59,772         56,779
                                             ---------      ---------      ---------
                 Total demand non-interest
                   bearing                     532,434        462,510        433,863
                                             ---------      ---------      ---------
          Savings and interest bearing demand
                 Domestic                      683,636        724,321        660,870
                 Foreign                       223,766        213,001        206,724
                                             ---------      ---------      ---------
                 Total savings and interest
                   bearing demand              907,402        937,322        867,594
                                             ---------      ---------      ---------

          Time certificates of deposit $100,000 or more:

                 Domestic                      506,929        466,384        465,789
                 Foreign                       919,050        840,059        713,060

            Less than $100,000:
                 Domestic                      459,741        463,243        543,211
                 Foreign                       309,395        294,425        251,399
                                             ---------      ---------      ---------
          Total time, certificates of
              deposit                        2,195,115      2,064,111      1,973,459
                                             ---------      ---------      ---------

          Total deposits                   $ 3,634,951    $ 3,463,943    $ 3,274,916
                                           ===========    ===========    ===========
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                             ------------------------------------------
                                                 2000           1999           1998
                                                 ----           ----           ----
                                                       (DOLLARS IN THOUSANDS)
<S>                                          <C>            <C>            <C>
       Interest Expense:
          Savings and interest bearing demand
                 Domestic                     $ 21,756       $ 21,678       $ 21,580
                 Foreign                         6,189          5,504          4,839
                                             ---------      ---------      ---------
          Total savings and interest
            bearing demand                    $ 27,945       $ 27,182       $ 26,419
                                             ---------      ---------      ---------

          Time, certificates of deposit
            $100,000 or more
                 Domestic                     $ 28,359       $ 22,790       $ 24,484
                 Foreign                        51,675         38,497         36,865
            Less than $100,000
                 Domestic                       24,756         24,158         28,746
                 Foreign                        15,953         12,181         11,728
                                             ---------      ---------      ---------
          Total time, certificates
                   of deposit                 $120,743       $ 97,626       $101,823
                                             ---------      ---------      ---------

          Total interest expense on deposits  $148,688       $124,808       $128,242
                                             =========      =========      =========
</TABLE>

                                       22
<PAGE>

     Maturities of time certificates of deposit outstanding at December 31, 2000
are summarized as follows:
<TABLE>
<CAPTION>
                                                    DECEMBER 31, 2000
                                                    ------------------
                                         $100,000 OR MORE       LESS THAN $100,000
                                         ----------------       ------------------
                                                  (DOLLARS IN THOUSANDS)
<S>                                      <C>                    <C>
      3 months or less                    $   724,615             $   402,956
      Over 3 but through 12 months            646,585                 308,273
      Over 12 months                           95,831                  78,763
                                          -----------             -----------

           Total                          $ 1,467,031             $   789,992
                                          ===========             ===========
</TABLE>

                           RETURN ON EQUITY AND ASSETS

     Certain key ratios for the Company for the years ended December 31, 2000,
1999 and 1998 follows (Note 1):
<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                                            -------------------------------
                                             2000         1999        1998
                                             ----         ----        ----
<S>                                         <C>          <C>         <C>
Percentage of net income to:
   Average shareholders' equity             20.92%       17.88%      15.48%
   Average total assets                      1.33         1.31        1.15
Percentage of average shareholders'
   equity to average total assets            6.36         7.34        7.43
Percentage of cash dividends per share
   to net income per share                  31.23        28.63       23.65
</TABLE>

(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 2000 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 over 100 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.

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

                                       23
<PAGE>

of proceedings and further developments could cause management to revise its
assessment of these matters. Further information regarding legal proceedings
has been provided in Note 14 of the notes to consolidated financial statements
located on page 31 of the 2000 Annual Report to Shareholders which is
incorporated herein by reference.

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

     Since the 2000 Annual Meeting of Shareholders of the Company held on May
18, 2000, 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 2000 Annual Meeting of shareholders and until his successor is duly
elected and qualified.
<TABLE>
<CAPTION>
                                                               OFFICER OF THE
     NAME             AGE     POSITION OF OFFICE                COMPANY SINCE
     ----             ---     ------------------                -------------
<S>                   <C>     <C>                              <C>
Dennis E. Nixon        58     Chairman of the Board and             1979
                              President of the Company,
                              Chief Executive Officer of IBC

Leonardo Salinas       67     Vice President of the Company         1982 (Note 1)

R. David Guerra        48     Vice President of the Company         1986
                              and President of IBC McAllen
                              Branch

Imelda Navarro         43     Treasurer of the Company              1982
                              and Senior Executive Vice
                              President of IBC
</TABLE>
------------------
(Note 1) Retired as an Officer of the Company and IBC in June 2000 however he
         still serves as a Director.

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.

                                     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 9 of Registrant's 2000 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 2000 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 2000 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 6 through 8 of the Registrant's 2000 Annual Report
is incorporated herein by reference.

                                       24
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements located on pages 12 through 40 of
Registrant's 2000 Annual Report are incorporated herein by reference.

     The condensed quarterly income statements located on page 41 of
Registrant's 2000 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 16, 2001 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 16, 2001 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.

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 16, 2001 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 16, 2001 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 2000 Annual Report to Shareholders filed as an
              exhibit hereto and they include:

              Independent Auditors' Report

              Consolidated:
              Statements of Condition as of December 31, 2000 and 1999
              Statements of Income for the years ended December 31, 2000, 1999
                and 1998
              Statements of Comprehensive Income for the years ended December
                31, 2000, 1999 and 1998
              Statements of Shareholders' Equity for the years ended December
                31, 2000, 1999 and 1998
              Statements of Cash Flows for the years ended December 31, 2000,
               1999 and 1998
              Notes to Financial Statements


                                       25
<PAGE>

     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.

      (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 108 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.


                                       26
<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 2000 Annual Report

      (21)   -List of Subsidiaries of International Bancshares Corporation
              as of March 30, 2001

      (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


                                       27
<PAGE>

(b)  REPORTS ON FORM 8-K

     Registrant filed a current report on Form 8-K on December 21, 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 February 22, 2001,
     covering Item 5 - Other Events and Item 7 - Financial Statements and
     Exhibits in connection with the announcement of the acquisition of First
     Equity Corporation, an Austin based mortgage banker.

     Registrant filed a current report on Form 8-K on March 2, 2001, covering
     Item 5 - Other Events and Item 7 - Financial Statements and Exhibits in
     connection with the announcement of the Company's Annual 2000 Earnings.

     Registrant filed a current report on Form 8-K on March 2, 2001, covering
     Item 5 - Other Events and Item 7 - Financial Statements and Exhibits in
     connection with the announcement of a cash dividend by the Company.


                                       28
<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 28, 2001
                                            --------------------------------


     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 28, 2001
---------------------------    (Principal Executive Officer)  ----------------
 Dennis E. Nixon

 /s/ IMELDA NAVARRO            Treasurer                       March 28, 2001
---------------------------    (Principal Financial Officer)  ----------------
 Imelda Navarro

 /s/ LEONARDO SALINAS          Director                        March 28, 2001
---------------------------                                   ----------------
 Leonardo Salinas

 /s/ LESTER AVIGAEL            Director                        March 28, 2001
---------------------------                                   ----------------
 Lester Avigael

 /s/ IRVING GREENBLUM          Director                        March 28, 2001
---------------------------                                   ----------------
 Irving Greenblum

 /s/ R. DAVID GUERRA           Director                        March 28, 2001
---------------------------                                   ----------------
 R. David Guerra

 /s/ RICHARD E. HAYNES         Director                        March 28, 2001
---------------------------                                   ----------------
 Richard E. Haynes

                               Director
---------------------------
 Sioma Neiman

 /s/ ANTONIO R. SANCHEZ, JR.   Director                        March 28, 2001
---------------------------                                   ----------------
 Antonio R. Sanchez Jr.

 /s/ PEGGY J. NEWMAN           Director                        March 28, 2001
---------------------------                                   ----------------
 Peggy J. Newman

/s/ DANIEL B. HASTINGS, JR.    Director                        March 28, 2001
---------------------------                                   ----------------
 Daniel B. Hastings, Jr.


                                       29
<PAGE>

                                  EXHIBIT INDEX

Exhibit 13 -  International Bancshares Corporation 2000 Annual Report, Exhibit
              13, page 1

Exhibit 21 -  List of Subsidiaries of International Bancshares Corporation as of
              March 30, 2001

Exhibit 23 -  Accountants' Consent


                                       30