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<SEC-DOCUMENT>0001047469-05-010446.txt : 20050418
<SEC-HEADER>0001047469-05-010446.hdr.sgml : 20050418
<ACCEPTANCE-DATETIME>20050418090246
ACCESSION NUMBER:		0001047469-05-010446
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		2
CONFORMED PERIOD OF REPORT:	20050516
FILED AS OF DATE:		20050418
DATE AS OF CHANGE:		20050418
EFFECTIVENESS DATE:		20050418

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INTERNATIONAL BANCSHARES CORP
		CENTRAL INDEX KEY:			0000315709
		STANDARD INDUSTRIAL CLASSIFICATION:	STATE COMMERCIAL BANKS [6022]
		IRS NUMBER:				742157138
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-09439
		FILM NUMBER:		05755411

	BUSINESS ADDRESS:	
		STREET 1:		12OO SAN BERNARDO AVE
		STREET 2:		PO BOX 1359
		CITY:			LAREDO
		STATE:			TX
		ZIP:			78040-1359
		BUSINESS PHONE:		9567227611

	MAIL ADDRESS:	
		STREET 1:		P O BOX 1359
		STREET 2:		1200 SAN BERNARDO
		CITY:			LAREDO
		STATE:			TX
		ZIP:			78040
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>a2156054zdef14a.htm
<DESCRIPTION>DEF 14A
<TEXT>
<HTML>
<HEAD>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<BR>
<FONT SIZE=3 ><A HREF="#05HOU1197_1">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 14A<BR>
INFORMATION REQUIRED IN PROXY STATEMENT</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>SCHEDULE 14A INFORMATION  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Proxy Statement Pursuant to Section 14(a) of the Securities<BR>
Exchange Act of 1934 (Amendment No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="79%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Filed by the Registrant <FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><BR><FONT SIZE=2>Filed by a Party other than the Registrant <FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Check the appropriate box:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Preliminary Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Confidential, for Use of the Commission Only (as permitted by Rule&nbsp;14a-6(e)(2))</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Definitive Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Definitive Additional Materials</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Soliciting Material Pursuant to 240.14a-12<BR></FONT>
</TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

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<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2><B>INTERNATIONAL BANCSHARES CORPORATION</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Registrant as Specified In Its Charter)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Person(s) Filing Proxy Statement, if other than the Registrant)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>Payment of Filing Fee (Check the appropriate box):</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
No fee required</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and&nbsp;0-11</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Title of each class of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Aggregate number of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Proposed maximum aggregate value of transaction:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Total fee paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Fee paid previously with preliminary materials.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2><BR>
Amount Previously Paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Form, Schedule or Registration Statement No.:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Filing Party:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Date Filed:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=1,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=179610,FOLIO='blank',FILE='DISK033:[05HOU7.05HOU1197]BA1197A.;6',USER='CKASTNE',CD='17-APR-2005;18:45' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><B>INTERNATIONAL BANCSHARES CORPORATION<BR>
Post Office Drawer 1359<BR>
Laredo, Texas 78042-1359  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="be1197_notice_of_annual_meeting_of_sh__not02133"> </A>
<A NAME="toc_be1197_1"> </A>
<BR></FONT><FONT SIZE=2><B>NOTICE OF ANNUAL MEETING OF SHAREHOLDERS<BR>  TO BE HELD MAY&nbsp;16, 2005    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of International Bancshares Corporation (the "Company") will be held at the </FONT> <FONT SIZE=2><B>LAREDO COUNTRY CLUB,
1415&nbsp;Country Club Drive, Laredo, Texas, on Monday, May&nbsp;16, 2005 at 7:00&nbsp;p.m.</B></FONT><FONT SIZE=2> for the following purposes: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>To
elect eleven (11)&nbsp;directors of the Company to serve until the next Annual Meeting of Shareholders and until their successors shall have been duly elected and qualified;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>To
ratify the appointment of KPMG LLP as independent auditors for the 2005 fiscal year;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>To
consider and vote on a proposal to amend the Articles of Incorporation of the Company to increase the number of authorized shares of Common Stock of the Company.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>To
consider and vote on a proposal to approve the 2005 International Bancshares Corporation Stock Option Plan adopted by the Board of Directors on April&nbsp;1, 2005; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>To
transact such other business as may lawfully come before the meeting or any adjournment thereof. </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders
of record at the close of business on April&nbsp;1, 2005 are entitled to notice of and to vote at the annual meeting and any postponements or adjournments thereof. The
Company's 2004 Annual Report is being furnished with this Proxy Statement to shareholders of record as of the close of business on April&nbsp;1, 2005. The Annual Report does not constitute a part of
this Proxy Statement or proxy solicitation material. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to ensure the representation of a quorum at the meeting, shareholders who do not expect to attend the meeting in person are urged to sign the enclosed proxy and return it
promptly to the Trust Division, International Bank of Commerce, P.&nbsp;O.&nbsp;Drawer&nbsp;1359, Laredo, Texas 78042-1359. A return envelope is enclosed for that purpose. </FONT></P>

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<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>INTERNATIONAL BANCSHARES CORPORATION</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2><BR>
Dennis E. Nixon<BR></FONT> <FONT SIZE=2><I>President</I></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
Dated: April&nbsp;18, 2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=2,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=873826,FOLIO='blank',FILE='DISK033:[05HOU7.05HOU1197]BE1197A.;3',USER='LWALKERC',CD=';1-APR-2005;13:02' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_de1197_1_1"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><B>INTERNATIONAL BANCSHARES CORPORATION<BR>
1200 San Bernardo Avenue<BR>
Laredo, Texas 78040  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1197_proxy_statement"> </A>
<A NAME="toc_de1197_1"> </A>
<BR></FONT><FONT SIZE=2><B>PROXY STATEMENT    <BR>    </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1197_solicitation_and_revocation_of_proxies"> </A>
<A NAME="toc_de1197_2"> </A>
<BR></FONT><FONT SIZE=2><B><I>SOLICITATION AND REVOCATION OF PROXIES    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of International Bancshares Corporation, a Texas corporation (the "Company") is soliciting proxies to be used at the Annual Meeting of
Shareholders to be held on Monday, May&nbsp;16, 2005 at 7:00&nbsp;p.m., local time, at the </FONT><FONT SIZE=2><B>Laredo Country Club, 1415&nbsp;Country Club Drive, Laredo,
Texas</B></FONT><FONT SIZE=2>. The Company will pay for the cost of the proxy preparation and solicitation, including the reasonable charges and expenses of brokerage firms, banks or other nominees
for forwarding proxy materials to street name holders. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It
is expected that the solicitation of proxies will be primarily by mail. Proxies may be solicited personally by regular employees of the Company at a nominal cost. Any shareholder
giving a proxy has the power to revoke it at any time prior to the voting of the proxy by giving notice in person or in writing to the Secretary of the Company or by appearing at the Annual Meeting,
giving notice of revocation of the proxy and voting in person. The approximate date on which this proxy statement and the accompanying form of proxy are first sent or given to security holders is
April&nbsp;18, 2005. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1197_voting_at_meeting"> </A>
<A NAME="toc_de1197_3"> </A>
<BR></FONT><FONT SIZE=2><B><I>VOTING AT MEETING    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only holders of record of common stock, par value $1.00 per share ("Common Stock"), of the Company at the close of business on April&nbsp;1, 2005, shall be
entitled to vote at the meeting. There were 50,942,382&nbsp;shares of Common Stock issued and outstanding on the record date held of record by approximately 2,440 shareholders. Each share of Common
Stock is entitled to one vote. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
shares entitled to vote represented by a properly executed and unrevoked proxy received in time for the meeting will be voted at the meeting in accordance with the instructions
given, but in the absence of instructions to the contrary, such shares will be voted affirmatively. Persons empowered as Proxies will also be empowered to vote in their discretion upon such other
matters as may properly come before the meeting or any adjournment thereof. If any nominee for director shall be unable to serve, which is not now contemplated, the proxies will be voted for such
substitute nominee(s) as the Board of Directors recommends. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
quorum for the transaction of business at the Annual Meeting requires representation, in person or by proxy, of the holders of a majority of the issued and outstanding shares of Common
Stock. The judges of election will treat abstentions and broker non-votes as shares that are present for purposes of determining the presence of a quorum for the transaction of business at
the meeting. A quorum with respect to any specific proposal to be voted on at the Annual Meeting requires representation, in person or by proxy, of the holders of a majority of the issued and
outstanding shares of Common Stock entitled to vote on the proposal. Abstentions will be treated as present and entitled to vote with respect to any proposal submitted to the shareholders for a vote
for purposes of determining both the presence of a quorum with respect to such proposal and the approval of such proposal. If a broker indicates on a proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, the holder(s) of such shares will not be considered as present and entitled to vote with respect to such matter for purposes of
determining either the presence of a quorum with respect to such matter or the approval of such matter. With respect to any proposal other than the election of directors and the amendment of the
Company's Articles of Incorporation, such proposal shall be determined by the affirmative vote of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=3,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=687275,FOLIO='1',FILE='DISK033:[05HOU7.05HOU1197]DE1197A.;10',USER='DCUSHIN',CD=';1-APR-2005;15:27' -->
<A NAME="page_de1197_1_2"> </A>
<BR>

<P><FONT SIZE=2>holders
of a majority of the shares of Common Stock represented, in person or by proxy, at the meeting and entitled to vote thereon. Thus, abstention with respect to any such matter will have the same
legal effect as a vote against such matter, while broker non-votes will not affect the outcome of such matter. With respect to the election of directors, the directors shall be elected by
a plurality vote of the holders of shares of Common Stock present at the meeting and entitled to vote thereon. With respect to the proposal to amend the Company's Articles of Incorporation, such
proposal requires the affirmative vote of the holders of a majority of the issued and outstanding shares of Common Stock as of the record date for the Annual Meeting. Thus, abstentions and broker
non-votes will have the same legal effect as a vote against such proposal. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1197_proposal_#151;1_election_of_directors"> </A>
<A NAME="toc_de1197_4"> </A>
<BR></FONT><FONT SIZE=2><B><I>PROPOSAL&#151;1    <BR>    <BR>    ELECTION OF DIRECTORS    <BR>    </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eleven directors, constituting the entire Board of Directors, are to be elected at the Annual Meeting. Each director is to hold office until the next Annual
Meeting and until his/her successor is elected and qualified. The Proxies named in the accompanying proxy, who have been designated by the Board of Directors of the Company, intend to vote for the
following nominees, unless otherwise instructed in such proxy. Certain information concerning each nominee is set forth below, including information regarding each nominee's positions with
International Bank of Commerce, the Company's lead bank subsidiary ("IBC"): </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="26%" ALIGN="LEFT"><FONT SIZE=1><B>Nominee for Director<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="CENTER"><FONT SIZE=1><B>Served as<BR>
Director<BR>
Since&nbsp;(1)(3)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="4%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><B>Principal Occupation&nbsp;(2)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2>Lester Avigael</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>1966</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2>78</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2>Retail Merchant and Director of IBC</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Irving Greenblum</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1981</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Investments</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
R. David Guerra</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1993</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
52</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Vice President of the Company since 1986 and President of the IBC Branch in McAllen, Texas and Director of IBC</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Daniel B. Hastings Jr.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
57</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Licensed U.S. Custom Broker and Director of IBC since 2000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Richard E. Haynes</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1977</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
62</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Attorney at Law; Real Estate Investments; and Director of IBC</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Imelda Navarro</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
47</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Treasurer of the Company since 1982 and Senior Executive Vice President of IBC and Director of IBC since 2002</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Sioma Neiman</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1981</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
77</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
International entrepreneur</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Peggy J. Newman</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1997</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
73</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Real Estate Investments; President of Newman Poultry Co. and Director of IBC</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Dennis E. Nixon</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1975</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
62</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Chairman of the Board of the Company since May&nbsp;1992 and President of the Company since 1979; President, Chief Executive Officer and Director of IBC</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Leonardo Salinas</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1976</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
71</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Real Estate Investments and Director of IBC</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="26%"><FONT SIZE=2><BR>
Antonio R. Sanchez,&nbsp;Jr.</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1995</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="RIGHT"><FONT SIZE=2><BR>
62</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=2><BR>
Chairman of the Board of Sanchez Oil&nbsp;&amp; Gas Corporation; Investments; and Director of IBC</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Includes
time served as director of IBC prior to July&nbsp;28, 1980 when the Company became the successor issuer to IBC. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=4,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=840671,FOLIO='2',FILE='DISK033:[05HOU7.05HOU1197]DE1197A.;10',USER='DCUSHIN',CD=';1-APR-2005;15:27' -->
<A NAME="page_de1197_1_3"> </A>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Except
as otherwise noted, each nominee has held the office indicated or other offices in the same company for the last five years.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Leonardo
Salinas, who had served as Vice President of the Company and Senior Executive Vice President of IBC, retired as of June&nbsp;30, 2000. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of the nominees for director and none of the executive officers of the Company have a family relationship with any of the other nominees for director or executive
officers. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of the above nominees is a director of any other company which has a class of securities registered under, or is required to file reports under, the Securities Exchange Act of 1934
or of any company registered under the Investment Company Act of 1940. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>The Board of Directors recommends a vote "FOR" each named nominee.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B> <A NAME="de1197_executive_officers"> </A>
<A NAME="toc_de1197_5"> </A>
<BR>    </B></FONT><FONT SIZE=2><B><I>EXECUTIVE OFFICERS    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The executive officers of the Company are Dennis&nbsp;E. Nixon, President and Chairman of the Board; R.&nbsp;David Guerra, Vice President; and Imelda Navarro,
Treasurer, all of whom are nominees for director. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1197_meetings_and_committees_of_the_board_of_directors"> </A>
<A NAME="toc_de1197_6"> </A>
<BR></FONT><FONT SIZE=2><B><I>MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS    <BR>    </I></B></FONT></P>

<UL>

<P><FONT SIZE=2><I> Audit Committee  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee of the Board of Directors during 2004 consisted of Lester Avigael, Irving Greenblum and Richard E. Haynes. The Committee met six times during
the 2004 fiscal year. Each member of the Committee attended all six meetings. The primary functions of the Audit Committee are to recommend the appointment of the independent auditors; to review
annual and quarterly financial reports and to review the results of audits by the internal auditor and the independent auditors. Under applicable law, the Audit Committee is required to review with
management and the independent auditors the basis for all financial reports. The Board of Directors has adopted a separate Audit Committee Charter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's Board of Directors has determined that none of the Audit Committee members meets the audit committee financial expert criteria as defined by Item&nbsp;401(h) of
Regulation&nbsp;S-K of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). While it might be possible to recruit a person who qualifies, the Board has determined that
in order to fulfill all of the functions of the Board and Audit Committee, each member of the Board and the Audit Committee should meet all the criteria that have been established by the Board, and it
is not in the best interest of the Company to nominate as a director someone who does not have all the experience, attributes and qualifications that we seek to further the interests of the Company.
The Audit Committee consists of three directors, all of whom are independent within the meaning of Item&nbsp;7(d)(3)(iv) of Schedule&nbsp;14A of the Exchange Act, and each of whom has been
selected for the Audit Committee by the Board based on the Board's determination that they are fully qualified to (i)&nbsp;review and understand the Company's financial statements,
(ii)&nbsp;monitor the performance of management, (iii)&nbsp;monitor the Company's internal accounting operations, (iv)&nbsp;monitor the independent auditors, and (v)&nbsp;monitor the
disclosures of the Company to the end that they fairly present the Company's financial condition and results of operations. In addition, the Audit Committee has the ability, on its own, to retain
independent accountants or other consultants whenever it deems appropriate. The Board of Directors believes that this is fully equivalent to having a </FONT><FONT SIZE=2><I>financial
expert</I></FONT><FONT SIZE=2> on the Audit Committee. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Stock Option Plan Committee  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Stock Option Plan Committee of the Board of Directors during 2004 consisted of Lester Avigael, Irving Greenblum and Richard E. Haynes. The Committee met three
times during the 2004 fiscal year. Each member of the Committee attended all three meetings. The primary function of the Stock Option Plan Committee is the administration of the 1996 International
Bancshares Corporation Stock Option Plan. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=5,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=316589,FOLIO='3',FILE='DISK033:[05HOU7.05HOU1197]DE1197A.;10',USER='DCUSHIN',CD=';1-APR-2005;15:27' -->
<A NAME="page_de1197_1_4"> </A>
<UL>

<P><FONT SIZE=2><I> Salary and Steering Committee of IBC  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's Board of Directors does not have a compensation committee or a committee performing similar functions. Since all cash compensation paid to executive
officers of the Company is paid by the Company's lead bank subsidiary, IBC, the Salary and Steering Committee of IBC's Board of Directors is responsible for making recommendations to the IBC Board of
Directors regarding each executive officer's compensation. The Salary and Steering Committee of IBC's Board of Directors during 2004 consisted of Lester Avigael and Richard E. Haynes. The Committee
met once during the 2004 fiscal year. Each member of the Committee attended the meeting. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Board Nominations  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's Board of Directors does not have a standing nominating committee or any other committee performing similar functions. The Company's Board of
Directors has adopted a resolution setting forth certain Guidelines Regarding Nomination of Directors. The Company has not established a separate nominating committee because it desires active
participation of all Board members in the analysis and process of making nominations. In addition, nominees are recommended, for selection by the whole Board of Directors, by a majority of the
Company's directors who are "independent" as determined pursuant to the listing standards of the Nasdaq National Market. The Board believes that these measures maintain the integrity of the nomination
process in the same manner that establishing a nominating committee would. The Guidelines are available on the Company's website at www.ibc.com. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the Guidelines, the independent directors seek to recommend individuals as director nominees who have the highest personal and professional integrity, who have demonstrated
exceptional ability and judgment and who will be most effective, in conjunction with the other nominees to the board, in collectively serving the long-term interests of shareholders. The
independent directors utilize a variety of methods for identifying and evaluating director nominees. The independent directors will consider director candidates recommended by shareholders if provided
with the following: (i)&nbsp;evidence in accordance with Rule&nbsp;14a-8 under the Exchange Act of compliance with shareholder eligibility requirements; (ii)&nbsp;the written consent
of the candidate(s) for nomination as a director and verification as to the accuracy of the biographical and other information submitted in support of the candidate; (iii)&nbsp;a resume or other
written statement of the qualifications of the candidate(s) for nomination as a director; and, (iv)&nbsp;all information regarding the candidate(s) and the submitting shareholder that would be
required to be disclosed in a proxy statement filed with the SEC if the candidate(s) were nominated for election to the Board of Directors. Any recommendations received from shareholders will be
evaluated in the same manner that other potential nominees are evaluated. Any shareholder that wishes to present a director candidate for consideration should submit the information identified above
pursuant to the procedures set forth below under "Communication with the Board of Directors." </FONT></P>

<UL>

<P><FONT SIZE=2><I> Attendance at Board Meetings  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, the Board of Directors held ten meetings. All of the directors attended at least 75% of the aggregate of the total number of meetings of the
Company's Board of Directors, except for Sioma Neiman, Peggy&nbsp;J. Newman and Antonio&nbsp;R. Sanchez,&nbsp;Jr. who attended fewer than 75% of such meetings. </FONT></P>

<UL>

<P><FONT SIZE=2><I> Executive Sessions of Board of Directors  </I></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to Board meetings, non-employee directors meet periodically in executive session without members of management present. The
non-employee directors met in executive session once during 2004. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=6,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=215956,FOLIO='4',FILE='DISK033:[05HOU7.05HOU1197]DE1197A.;10',USER='DCUSHIN',CD=';1-APR-2005;15:27' -->
<A NAME="page_de1197_1_5"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1197_annual_meeting_attendance"> </A>
<A NAME="toc_de1197_7"> </A>
<BR></FONT><FONT SIZE=2><B><I>ANNUAL MEETING ATTENDANCE    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company encourages all members of its Board of Directors to attend the annual meetings of shareholders, but it has not adopted a formal policy requiring
attendance. All of the members of the Board of Directors of the Company who were directors at the time of the 2004 annual meeting of shareholders attended such meeting. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1197_principal_shareholders"> </A>
<A NAME="toc_de1197_8"> </A>
<BR></FONT><FONT SIZE=2><B><I>PRINCIPAL SHAREHOLDERS    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as is known to the Company, no person beneficially owned, as of April&nbsp;1, 2005, more than five percent of the outstanding Common Stock of the
Company, except as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="67%" ALIGN="LEFT"><FONT SIZE=1><B>Name and Address<BR>
of Beneficial Owner<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Shares of Common Stock<BR>
Beneficially Owned as<BR>
of April&nbsp;1, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Percent<BR>
of Class</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="67%" VALIGN="TOP"><FONT SIZE=2>A. R. Sanchez Jr.&nbsp;(1)<BR>
P.O.&nbsp;Box&nbsp;2986<BR>
Laredo, Texas 78040</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=2>10,348,415</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>20.26</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Sanchez
owns directly and has the sole power to vote and to dispose of 2,145,136 shares owned by him. The shares shown for Mr.&nbsp;A.&nbsp;R. Sanchez&nbsp;Jr.
include 1,720,688 shares owned by the Estate of Alicia&nbsp;M. Sanchez. Mr.&nbsp;Sanchez serves as Executor of the Estate and has the power to vote and dispose of those shares. Mr.&nbsp;Sanchez
also controls the disposition of 4,363,069 shares as trustee for trusts in which various family members, including his children, have a vested interest in the income and corpus of such trusts. The
4,363,069 shares held through such trusts include 395,981 shares held indirectly through a limited partnership, of which the general partner is a limited liability company for which Mr.&nbsp;Sanchez
serves as a manager. Sanchez Management Corporation, of which Mr.&nbsp;Sanchez is President and 100% owner, is the managing general partner for SANTIG,&nbsp;Ltd., a family limited partnership,
which owns 1,861,991 shares. Mr.&nbsp;Sanchez also has the power to vote and dispose of 257,531 shares held by the Sanchez Family Foundation. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1197_security_ownership_of_management"> </A>
<A NAME="toc_de1197_9"> </A>
<BR></FONT><FONT SIZE=2><B><I>SECURITY OWNERSHIP OF MANAGEMENT    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based upon information received from the persons concerned, each of whom is a director and nominee for director, the following individuals and all directors and
executive officers of the Company as a group owned beneficially as of April&nbsp;1, 2005, the number and percentage of outstanding shares of Common Stock of the Company indicated in the following
table: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="66%" ALIGN="LEFT"><FONT SIZE=1><B>Name of Individual<BR>
or Identity of Group<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>Shares Beneficially Owned<BR>
as of April&nbsp;1, 2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Percent<BR>
of Class</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Lester Avigael&nbsp;(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>384,774</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Irving Greenblum&nbsp;(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>476,762</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>R. David Guerra&nbsp;(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>311,432</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>+</FONT></TD>
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Daniel B. Hastings,&nbsp;Jr.</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>74,190</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Richard E. Haynes</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>39,003</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Imelda Navarro&nbsp;(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>229,444</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>+</FONT></TD>
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Sioma Neiman&nbsp;(5)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>740,618</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>1.45</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Peggy J. Newman</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>12,356</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Dennis E. Nixon&nbsp;(6)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1,741,941</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>+</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>3.41</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>Leonardo Salinas</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>114,241</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>A. R. Sanchez Jr.&nbsp;(7)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>10,348,415</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>20.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="66%"><FONT SIZE=2>All Directors and Executive Officers as a group (11&nbsp;persons)&nbsp;(8)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>14,473,176</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>28.08</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Ownership
of less than one percent </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=7,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=827199,FOLIO='5',FILE='DISK033:[05HOU7.05HOU1197]DE1197A.;10',USER='DCUSHIN',CD=';1-APR-2005;15:27' -->
<A NAME="page_de1197_1_6"> </A>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>+</FONT></DT><DD><FONT SIZE=2>Includes
shares which are issuable upon the exercise of options exercisable on or prior to June&nbsp;1, 2005 ("currently exercisable options").
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>The
holdings shown for Mr.&nbsp;Avigael include 298,925 shares held in the name of Avigael Investments and 23,010 shares which he holds as trustee for the benefit of his
grandchildren which he has the power to dispose of and to vote.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>The
holdings shown for Mr.&nbsp;Greenblum include 64,241 shares held in a family limited partnership, which he has the power to dispose of and to vote. The holdings for
Mr.&nbsp;Greenblum include 56,333 shares held in his wife's name.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>The
holdings shown for Mr.&nbsp;Guerra include 4,101 shares issuable upon the exercise of currently exercisable options. The holdings shown for Mr.&nbsp;Guerra include 307,331
shares held jointly with his wife.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>The
holdings shown for Ms.&nbsp;Imelda Navarro include 44,317 shares issuable upon the exercise of currently exercisable options.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>The
holdings shown for Mr.&nbsp;Neiman are in the name of Inar Investments, Corp., of which he is the Managing Director.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>The
holdings shown for Mr.&nbsp;Nixon include 85,072 shares issuable upon the exercise of currently exercisable options. The holdings shown for Mr.&nbsp;Nixon also include 11,153
shares held in his wife's name.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Sanchez
owns directly and has the sole power to vote and to dispose of 2,145,136 shares owned by him. The shares shown for Mr.&nbsp;A.&nbsp;R. Sanchez&nbsp;Jr.
include 1,720,688 shares owned by the Estate of Alicia&nbsp;M. Sanchez. Mr.&nbsp;Sanchez serves as Executor of the Estate and has the power to vote and dispose of those shares. Mr.&nbsp;Sanchez
also controls the disposition of 4,363,069 shares as trustee for trusts in which various family members, including his children, have a vested interest in the income and corpus of such trusts. The
4,363,069 shares held through such trusts include 395,981 shares held indirectly through a limited partnership, of which the general partner is a limited liability company for which Mr.&nbsp;Sanchez
serves as a manager. Sanchez Management Corporation, of which Mr.&nbsp;Sanchez is President and 100% owner, is the managing general partner for SANTIG,&nbsp;Ltd., a family limited partnership,
which owns 1,861,991 shares. Mr.&nbsp;Sanchez also has the power to vote and dispose of 257,531 shares held by the Sanchez Family Foundation.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD><FONT SIZE=2>The
holdings shown for all directors and executive officers as a group include 133,490 shares issuable upon the exercise of currently exercisable options. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as reflected in the notes to the preceding table, each of the individuals listed in the table owns directly the number of shares indicated in the table and has the
sole power to vote and to dispose of such shares. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=8,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=720565,FOLIO='6',FILE='DISK033:[05HOU7.05HOU1197]DE1197A.;10',USER='DCUSHIN',CD=';1-APR-2005;15:27' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dg1197_1_7"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_executive_compensation"> </A>
<A NAME="toc_dg1197_1"> </A>
<BR></FONT><FONT SIZE=2><B><I>EXECUTIVE COMPENSATION    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>Summary </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table contains information concerning the compensation awarded during each of the last three years for the Chief Executive Officer of the Company and the other most highly
compensated executive officers of the Company whose total annual salary and bonus exceeded $100,000 in 2004. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_summary_compensation_table"> </A>
<A NAME="toc_dg1197_2"> </A>
<BR></FONT><FONT SIZE=2><B><I>SUMMARY COMPENSATION TABLE    <BR>    </I></B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="31%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Annual Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=3><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ROWSPAN=3 ALIGN="CENTER"><FONT SIZE=1><B>Long Term<BR>
Compensation<BR>
Securities<BR>
Underlying Options</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="31%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name and<BR>
Principal Position<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="13%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other&nbsp;(3)<BR>
Compensation</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Salary&nbsp;(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Bonus&nbsp;(2)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2>Dennis E. Nixon<BR>
Chairman of the Board, President and Director of the Company; President, CEO and Director of IBC</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR><BR></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>480,794<BR>
462,375<BR>
444,992</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>1,100,000<BR>
1,100,000<BR>
1,100,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>16,002<BR>
15,436<BR>
15,178</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
R. David Guerra<BR>
Vice President and Director of the Company; President of IBC branch in McAllen, Texas and Director of IBC</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR><BR></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
239,431<BR>
231,907<BR>
217,904</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
60,648<BR>
61,308<BR>
58,621</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
14,632<BR>
14,203<BR>
13,441</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="31%"><FONT SIZE=2><BR>
Imelda Navarro<BR>
Treasurer and Director of the Company, Senior Executive Vice President and Director of IBC</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2004<BR>
2003<BR>
2002</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR><BR></FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2><BR>
173,125<BR>
174,085<BR>
145,195</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2><BR>
50,818<BR>
47,938<BR>
39,882</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11,492<BR>
11,158<BR>
10,386</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>These
amounts do not include certain perquisites and other personal benefits, securities or property received by the officers which did not exceed the lesser of $50,000 or 10% of such
executive officer's total salary and bonus set forth in the table; however, such amounts include directors fees as well as certain expense allowances. All cash compensation paid to the named officers
was paid by IBC. The Company does not pay any cash compensation to any officer.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>All
amounts shown in this column are discretionary cash bonuses except $550,000 paid to Mr.&nbsp;Nixon for services rendered in 2004, $550,000 in 2003 and $500,000 in 2002 pursuant
to the Executive Incentive Compensation Plan.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>All
amounts shown in this column consist of funds contributed or allocated by the Company pursuant to the Company's Employee Profit Sharing Plan and Trust, a deferred profit sharing
plan for employees with one year of continual employment. </FONT></DD></DL>

<P><FONT SIZE=2><B>Compensation of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each director of the Company and each director of IBC receives compensation for his services as a director in the amount of $900 for each board meeting of the
Company or IBC he attends and $300 for each meeting of a board committee he attends. Salaried officers who are directors are not compensated for committee meetings. No stock options or other
equity-based awards are granted to non-executive board members. The director fees paid to the named executive officers are included in the salary totals set forth in the Summary
Compensation Table. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=9,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=359956,FOLIO='7',FILE='DISK033:[05HOU7.05HOU1197]DG1197A.;8',USER='DCUSHIN',CD=';1-APR-2005;15:28' -->
<A NAME="page_dg1197_1_8"> </A>
<BR>

<P><FONT SIZE=2><B>Equity Compensation Plan Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information as of December&nbsp;31, 2004, with respect to the Company's compensation plans under which equity securities are
authorized for issuance: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>(A)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>(B)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>(C)<BR> </B></FONT><BR></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="34%" ALIGN="LEFT"><FONT SIZE=1><B>Plan Category<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>Number of securities to<BR>
be issued upon exercise<BR>
of outstanding options,<BR>
warrants and rights</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted average<BR>
exercise price of<BR>
outstanding options,<BR>
warrants and rights</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>Number of securities<BR>
remaining available for<BR>
future issuance under<BR>
equity compensation<BR>
plans (excluding<BR>
securities reflected<BR>
in column&nbsp;A)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Equity Compensation plans approved by security holders</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>1,298,745</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>14.90</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>388,157</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Equity Compensation plans not approved by security holders&nbsp;(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>139,160</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>13.32</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="34%"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>1,437,905</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>14.75</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>388,157</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="34%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>The
Company granted non-qualified stock options exercisable for a total of 292,960 shares, adjusted for stock dividends, of Common Stock to certain employees of the
GulfStar Group. The grants were not made under any of the approved Stock Option Plans. The options are exercisable for a period of seven years and vest in equal annual increments over a period of five
years. All options granted to the GulfStar Group employees had an option price of not less than the fair market value of the Common Stock on or about the date of grant. </FONT></DD></DL>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
above table does not include the 380,000 shares of Common Stock proposed to be reserved for issuance under the 2005 International Bancshares Corporation Stock Option Plan. </FONT></P>

<P><FONT SIZE=2><B>Stock Options  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2004, the Company did not grant any options to the named executive officers of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table reflects certain information regarding individual exercises of stock options with respect to the Common Stock during 2004 by each of the named executive officers of
the Company. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_aggregated_option_exerc__dg102204"> </A>
<A NAME="toc_dg1197_3"> </A>
<BR></FONT><FONT SIZE=2><B>AGGREGATED OPTION EXERCISES IN 2004<BR>  AND FY-END OPTION VALUES    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Acquired on<BR>
Exercise<BR>
(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized<BR>
($)&nbsp;(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="22%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares<BR>
Underlying Unexercised<BR>
Options at 12/31/04<BR>
Exercisable/Unexercisable<BR>
(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="22%" ALIGN="CENTER"><FONT SIZE=1><B>Value of Unexercised<BR>
In-the-Money Options<BR>
at 12/31/04<BR>
Exercisable/Unexercisable<BR>
($)&nbsp;(1)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Dennis E. Nixon</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE=2>85,072/&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE=2>2,507,910/&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>R. David Guerra</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>18,022</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>436,770</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE=2>4,101/2,734</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE=2>90,097/60,065</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Imelda Navarro</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE=2>44,317/1,954</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" ALIGN="RIGHT"><FONT SIZE=2>1,219,553/42,949</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Based
on market value of underlying shares minus aggregate exercise price. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=10,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=539556,FOLIO='8',FILE='DISK033:[05HOU7.05HOU1197]DG1197A.;8',USER='DCUSHIN',CD=';1-APR-2005;15:28' -->
<A NAME="page_dg1197_1_9"> </A>

<P><FONT SIZE=2><B>Treasury Stock:  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share repurchases are only conducted under publicly announced repurchase programs approved by the Board of Directors. The following table includes information
about share repurchases for the quarter ended December&nbsp;31, 2004. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Total<BR>
Number of<BR>
Shares<BR>
Purchased</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Average Price<BR>
Paid Per Share</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="CENTER"><FONT SIZE=1><B>Shares Purchased as<BR>
Part of a Publicly-<BR>
Announced Program</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Approximate<BR>
Dollar Value<BR>
of Shares<BR>
Available for<BR>
Repurchase&nbsp;(1)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>October&nbsp;1&#151;October&nbsp;31, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>29,675,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>November&nbsp;1&#151;November&nbsp;30, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>29,675,000</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>December&nbsp;1&#151;December&nbsp;31, 2004</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,324</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>39.90</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>29,383,000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>7,324</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=2>39.90</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>The
formal stock repurchase program was initiated in 1999 and has been expanded periodically through 2005. The current program allows for the repurchase of up to $175,000,000 of
treasury stock through December&nbsp;2005 of which $29,383,000 remains. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_report_of_the_salary_and_steering_committee"> </A>
<A NAME="toc_dg1197_4"> </A>
<BR></FONT><FONT SIZE=2><B>REPORT OF THE SALARY AND STEERING COMMITTEE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's compensation package for each of its executive officers consists of base salary, annual discretionary bonus and a discretionary incentive stock
option grant. Also, certain executive officer(s) may receive compensation pursuant to the Company's Executive Incentive Compensation Plan. Stock option grants are determined by the Company's Stock
Option Plan Committee and are discussed under the Committee's separate report below. All cash compensation paid to executive officers of the Company is paid by IBC. Base salary levels and annual
bonuses are recommended by the Salary and Steering Committee of IBC (the "Committee"). The Committee during 2004 consisted of Lester Avigael and Richard&nbsp;E. Haynes. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Committee reviews, discusses and analyzes the proposed compensation for each of the Company's executive officers. Before a vote is taken, members have an opportunity to ask for
additional information, to raise and discuss further questions and to consult outside consultants and/or separate legal counsel. The Committee's recommendations regarding each executive officer's
compensation is subjective with regard to both the base salary and bonus. Although the annual financial performance of IBC is the most important factor in the subjective analysis,
non-financial goals are also considered by the Committee. Further, the Committee considers the aggregate amounts and mix of all the components of compensation when determining any single
component thereof. The bonus program is intended to compensate each executive officer for the officer's contribution to IBC's financial performance during the previous year. At the end of each year
based on the financial performance of IBC as well as the perceived non-financial contribution by each executive officer, a base salary recommendation for the next year and a bonus
recommendation for the previous year is made for each executive officer by the Committee. The overall bonus pool for executive officers is affected by the earnings performance of IBC for the previous
year. All base salary and bonus recommendations of the Committee are subject to final approval of the Board of Directors of IBC. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
respect to the compensation of Mr.&nbsp;Nixon, the CEO of the Company, the Committee members recommend to the Board of Directors of IBC the CEO's salary and bonus based on its
subjective determination. In determining the CEO compensation, the Committee reviews the objectives of the Company for the previous year and the attainment thereof, including, but not limited to, the
Company's financial performance. For services rendered to IBC in 2004, Mr.&nbsp;Nixon received a cash bonus under IBC's discretionary cash bonus program of $550,000. During 2004, the Company met
both the return on average total assets and the return on average total shareholders' equity targets established pursuant to the 1998 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=11,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=450318,FOLIO='9',FILE='DISK033:[05HOU7.05HOU1197]DG1197A.;8',USER='DCUSHIN',CD=';1-APR-2005;15:28' -->
<A NAME="page_dg1197_1_10"> </A>
<BR>

<P><FONT SIZE=2>Executive
Incentive Compensation Plan (the "EICP") by the Committee. Accordingly, Mr.&nbsp;Nixon received an incentive award under the EICP of $550,000 for services rendered to the Company during
2004. The amounts of the cash bonus and the incentive award were largely affected by the strong financial results of the Company during 2004, which included (i)&nbsp;net income of
$119&nbsp;million, or $2.39 per share-basic, an amount which represents a 5.5% decrease in earnings per share compared to the previous year, (ii)&nbsp;the Company's return on average total assets
of 1.46% and (iii)&nbsp;the Company's return on average total shareholders' equity of 18.16%. Based on this review, the Committee finds Mr.&nbsp;Nixon's total compensation in the aggregate to be
reasonable and not excessive. The Company's compensation package for each of its executive officers consists of base salary, annual discretionary bonus and a discretionary incentive stock option
grant. Also, certain executive officer(s) may receive compensation pursuant to the Company's Executive Incentive Compensation Plan. Stock option grants are determined by the Company's Stock Option
Plan Committee and are discussed under the Committee's separate report below. All cash compensation paid to executive officers of the Company is paid by IBC. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Salary and Steering Committee has considered the limitations on deductibility of compensation of the named executive officers under Section&nbsp;162(m) of the Internal Revenue
Code. The Steering Committee's current policy is to seek to ensure that substantially all such compensation is deductible under Section&nbsp;162(m) when paid. Nevertheless, there can be no assurance
that all compensation will be deductible under Section&nbsp;162(m). In addition, the Salary and Steering Committee reserves the right to use its judgment to authorize compensation payments that may
not be deductible under Section&nbsp;162(m) when the Committee believes such payments are appropriate and in the best interests of the Company and its shareholders. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Lester
Avigael&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard E. Haynes </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_report_of_the_stock_option_plan_committee"> </A>
<A NAME="toc_dg1197_5"> </A>
<BR></FONT><FONT SIZE=2><B>REPORT OF THE STOCK OPTION PLAN COMMITTEE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Stock Option Plan Committee of the Board of Directors determines the stock option grants to executive officers and key salaried employees of the Company. The
Company did not award any options to the Executive Officers of the Company during the 2004 fiscal year. The Stock Option Plan Committee met three times during the 2004 fiscal year. The primary purpose
of the Company's Stock Option Plan is to increase the interest of the executive and key salaried employees of the Company, the subsidiary banks and non- bank subsidiaries in its future
growth and success through the added incentive created by the opportunity afforded for stock ownership under the Plan. The size of the option grants were determined by the Stock Option Plan Committee
based upon a subjective assessment of the respective employee's performance, compensation level and other factors. The exercise price of each option equaled the fair market value of the Common Stock
as of the date of grant. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Lester
Avigael&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Irving Greenblum&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard E. Haynes </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=12,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=385059,FOLIO='10',FILE='DISK033:[05HOU7.05HOU1197]DG1197A.;8',USER='DCUSHIN',CD=';1-APR-2005;15:28' -->
<A NAME="page_dg1197_1_11"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_report_of_the_audit_committee"> </A>
<A NAME="toc_dg1197_6"> </A>
<BR></FONT><FONT SIZE=2><B>REPORT OF THE AUDIT COMMITTEE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's Audit Committee is responsible for providing objective and independent oversight of the Company's accounting functions and internal controls. Such
oversight responsibility includes, but is not limited to, making recommendations concerning the engagement of independent auditors, reviewing the consolidated financial statements and the scope of the
independent annual audit, reviewing and reassessing the adequacy of the Audit Committee's charter, reviewing with the independent auditors the results of their audit, considering the range of audit
and non-audit fees, monitoring internal financial and accounting controls and performing such other oversight functions as may be requested from time to time by the Board of Directors. The
Audit Committee reviewed internal controls independently of management and corporate staff and reviewed the audited consolidated financial statements of the Company as of and for the fiscal year ended
December&nbsp;31, 2004, with management and the independent auditors. Management has the responsibility for the preparation, presentation and integrity of the Company's consolidated financial
statements and the independent auditors have the responsibility for auditing the Company's consolidated financial statements and expressing an opinion as to their conformity with accounting principles
generally accepted in the United States of America. </FONT></P>

<P><FONT SIZE=2>REPORT: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee has: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;reviewed
and discussed the audited consolidated financial statements with management; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;discussed
with the independent auditors the matters required to be discussed by SAS&nbsp;61; and </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;received
the required information and communications from the independent auditors required by Independence Standards Board Standard No.&nbsp;1, and discussed with the
auditors the auditors' independence. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
on the review and discussions with management and the Company's independent auditors referenced above, the Audit Committee has recommended to the Board of Directors that the
audited consolidated financial statements be included in the Company's Annual Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2004 filed with the SEC. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors has determined that the members of the Audit Committee are "independent" as defined in Rule&nbsp;4200(a)(15) of the National Association of Securities Dealers
listing standards. The Audit Committee has adopted a written charter. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
report is submitted on behalf of the Audit Committee. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Lester
Avigael&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Irving Greenblum&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard E. Haynes </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
report by the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934 except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed
under such acts. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=13,EFW="2156054",CP="INTERNATIONAL BANCSHARES CORP.",DN="1",CHK=717365,FOLIO='11',FILE='DISK033:[05HOU7.05HOU1197]DG1197A.;8',USER='DCUSHIN',CD=';1-APR-2005;15:28' -->
<A NAME="page_dg1197_1_12"> </A>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_principal_accounting_fees_and_services"> </A>
<A NAME="toc_dg1197_7"> </A>
<BR></FONT><FONT SIZE=2><B>PRINCIPAL ACCOUNTING FEES AND SERVICES    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the aggregate fees billed to International Bancshares Corporation for each of the years ended December&nbsp;31, 2004 and 2003 by
the Company's principal accounting firm, KPMG LLP. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1><B>December&nbsp;31,</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><B>Audit fees</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>903,958</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>267,120</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><B>Audit-related fees&nbsp;(1)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>132,488</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>58,467</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2><FONT SIZE=2><B>Audit and audit related fees</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>1,036,446</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>325,587</B></FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><B>Tax fees&nbsp;(2)</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>134,145</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>162,804</B></FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><B>All other fees</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>&#151;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="65%"><FONT SIZE=2><B>Total fees</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2><B>1,170,591</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><B>$</B></FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><B>488,391</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Audit
related fees consisted principally of fees for due diligence services and audits of financial statements of certain employee benefit plans.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Tax
fees consisted of fees for tax consultation and tax compliance services. </FONT></DD></DL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None
of the audit related fees or tax fees billed in 2004 or 2003 were provided under the </FONT><FONT SIZE=2><I>de minimis</I></FONT><FONT SIZE=2> exception to the Audit Committee
pre-approval requirements </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee has considered whether the provision of services covered in billings included under the "All Other Fees" category listed above is compatible with maintaining the
principal auditors' independence. The Audit Committee has concluded that the provisions of such services would not jeopardize the independence of KPMG LLP as the Company's principal auditors. The
Audit Committee's Charter requires that the Audit Committee pre-approve all audit and non-audit services to be provided to the Company by the independent accountants; provided,
however, that the Audit Committee may specifically authorize its Chairman to pre-approve the provision of any non-audit service to the Company. Pre-approval is
detailed as to the particular service and is subject to specific engagement authorization from the Audit Committee. These services may include audit services, audit related services, tax services and
other services. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Representatives
from KPMG, LLP are expected to be present at the Annual Meeting. They will be given an opportunity to make a statement if they desire to do so and will also be available
to respond to appropriate questions from shareholders. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_salary_and_steering_committee___sal04017"> </A>
<A NAME="toc_dg1197_8"> </A>
<BR></FONT><FONT SIZE=2><B>SALARY AND STEERING COMMITTEE AND STOCK OPTION<BR>  PLAN COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of IBC's Salary and Steering Committee during 2004 were Lester Avigael and Richard&nbsp;E. Haynes. The Committee members are "independent directors
within the meaning of Rule&nbsp;4200(a)(15) of the National Association of Securities Dealers ("Nasdaq Independence Requirements.") </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock
Option grants are determined by the Stock Option Plan Committee whose members were Lester Avigael, Irving Greenblum and Richard&nbsp;E. Haynes who are independent and meet the
Nasdaq Independence Requirements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard&nbsp;E.
Haynes has total indebtedness outstanding with the subsidiary banks of the Company in an amount which exceeds $60,000, which indebtedness is fully performing and
complies with Federal lending restrictions included in section&nbsp;22(h) of the Federal Reserve Act (12&nbsp;U.S.C.&nbsp;375b). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dg1197_1_13"> </A>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_director_independence"> </A>
<A NAME="toc_dg1197_9"> </A>
<BR></FONT><FONT SIZE=2><B>DIRECTOR INDEPENDENCE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company's Board of Directors has determined that a majority of its members are "independent" as determined pursuant to the Nasdaq Independence Requirements.
As of April&nbsp;1, 2005, the following members of the Board of Directors are not independent: Imelda Navarro, Dennis&nbsp;E. Nixon, R.&nbsp;David Guerra, and Antonio&nbsp;R.
Sanchez,&nbsp;Jr. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_communications_with_the_board_of_directors"> </A>
<A NAME="toc_dg1197_10"> </A>
<BR></FONT><FONT SIZE=2><B>COMMUNICATIONS WITH THE BOARD OF DIRECTORS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders may communicate directly with the Board of Directors. All communications should be in writing and directed to the Company's corporate secretary at
the address below and should prominently indicate on the outside of the envelope that it is intended for the Board of Directors. The Company's Corporate Secretary has the authority to disregard any
inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications. If deemed appropriate, the Company's corporate secretary will forward
correspondence to the Chairman of the Board or any specific director to whom the correspondence is directed. In general, communications relating to corporate governance and long-term
corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which the Company tends to receive repetitive or
duplicative communications. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Luisa
Benavides<BR>
Corporate Secretary<BR>
International Bancshares Corporation<BR>
P. O. Box&nbsp;1359<BR>
Laredo, Texas 78042 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1197_code_of_ethics"> </A>
<A NAME="toc_dg1197_11"> </A>
<BR></FONT><FONT SIZE=2><B>CODE OF ETHICS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has adopted a code of business conduct and ethics for executive officers (including the Company's Chief Executive Officer and Chief Financial
Officer), known as the International Bancshares Code of Ethics for Financial Professionals. The Company also maintains a code of ethics for all employees and directors, known as the International
Bancshares Code of Ethics. The International Bancshares Code of Ethics for Financial Professionals and the International Bancshares Code of Ethics are available on the Company's website at
www.ibc.com. Any amendment to, or waiver of, the Code of Ethics for Financial Professionals will be disclosed on such Company website. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2><A
NAME="page_di1197_1_14"> </A> </FONT></P>

<!-- TOC_END -->

<P><FONT SIZE=2>Financial Performance </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following graph illustrates the cumulative return experienced by the Company's shareholders for the period commencing on December&nbsp;31, 1999 and ending at year end 2004 as
compared with the cumulative total returns of the other companies included within the Standard&nbsp;&amp; Poor's 500 Stock Index and Standard&nbsp;&amp; Poors 500 Bank Index. The calculations were
prepared on a dividends-reinvestment basis. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1197_total_return_analysis"> </A>
<A NAME="toc_di1197_1"> </A>
<BR></FONT><FONT SIZE=2><B>TOTAL RETURN ANALYSIS    <BR>    </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>INTERNATIONAL BANCSHARES CORPORATION<BR>
VS. MARKET INDICES<BR>
YEAR END: 12/31/99 TO 12/31/04 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g677283.jpg" ALT="GRAPHIC" WIDTH="631" HEIGHT="441">
  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="42%" ALIGN="LEFT"><FONT SIZE=1><B>Company / Index<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Dec99</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Dec00</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Dec01</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Dec02</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Dec03</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1><B>Dec04</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>INTERNATIONAL BANCSHARES CORP</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>99.42</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>157.13</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>187.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>286.26</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>304.93</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>S&amp;P&nbsp;500 INDEX</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>90.90</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>80.09</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>62.39</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>80.29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>89.03</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="42%"><FONT SIZE=2>S&amp;P&nbsp;500 BANKS</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>119.06</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>119.08</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>117.86</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>149.29</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>170.81</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_di1197_1_15"> </A>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1197_interest_of_management_in_certain_transactions"> </A>
<A NAME="toc_di1197_2"> </A>
<BR></FONT><FONT SIZE=2><B><I>INTEREST OF MANAGEMENT IN<BR>  CERTAIN TRANSACTIONS    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of the directors, executive officers and nominees for directors of the Company and principal shareholders of the Company and their immediate families and the
companies with which they are
associated were customers of, and had banking transactions with, the Company's subsidiary banks in the ordinary course of the subsidiary banks' business during 2004, and the Company anticipates that
such banking transactions will continue in the future. All loans and commitments to loan included in such banking transactions were made in the ordinary course of business, on substantially the same
terms, including interest rates and collateral, as those prevailing in the industry at the time for comparable transactions with other persons, which indebtedness is fully performing and complies with
Federal lending restrictions included in section&nbsp;22(h) of the Federal Reserve Act (12&nbsp;U.S.C.&nbsp;375b). The indebtedness, in the opinion of management of the Company, did not involve
more than a normal risk of collectibility or present other unfavorable features. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IBC
and Sanchez Oil&nbsp;&amp; Gas Corporation, a related interest of Antonio&nbsp;R. Sanchez,&nbsp;Jr., who is a director and principal shareholder of the Company, jointly own, in
varying percentages, certain aircraft used for business purposes by IBC, the other bank subsidiaries and Sanchez Oil and Gas Corporation. The net book value of IBC's aggregate interest in such
aircraft as of April&nbsp;1, 2005 was approximately $9.4&nbsp;million. Each bank subsidiary and Sanchez Oil and Gas Corporation pay the pro rata expense related to their actual use of the
aircraft. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1197_section_16(a)_beneficia__di102047"> </A>
<A NAME="toc_di1197_3"> </A>
<BR></FONT><FONT SIZE=2><B><I>Section&nbsp;16(a) Beneficial Ownership Reporting Compliance    <BR>    </I></B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the securities laws of the United States, the Company's directors, its executive officers and any persons holding more than ten percent of the Company's
Common Stock are required to report their initial ownership of the Company's Common Stock and any subsequent changes in that ownership to the Securities and Exchange Commission. Specific due dates for
these reports have been established and the Company is required to disclose in this proxy statement any failure to file such reports by the applicable dates during 2004. The Company believes that all
of these filing requirements were timely satisfied. In making these disclosures, the Company has relied solely on written representations of its directors, executive officers and ten percent
shareholders and copies of the reports that they have filed with the Commission. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1197_proposal_#151;2_ratification_o__pro02428"> </A>
<A NAME="toc_di1197_4"> </A>
<BR></FONT><FONT SIZE=2><B><I>PROPOSAL&#151;2    <BR>    <BR>    RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of the Company has appointed the firm of KPMG LLP to audit the accounts of the Company for the 2005 fiscal year. The firm has audited the
books of the Company and its predecessor, IBC, annually since 1979. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit
services rendered by KPMG LLP for the fiscal year ended December&nbsp;31, 2004 included the annual audit of the Company's consolidated financial statements, which are included in
reports to shareholders and the Securities and Exchange Commission; and consultation on accounting and related matters and services performed in connection with other regulatory filings. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Representatives
of KPMG LLP are expected to be present at the annual meeting of shareholders with the opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ratification
of the appointment of independent auditors is not a matter which is required to be submitted to a vote of shareholders, but the Board of Directors considers it appropriate
for the shareholders to express whether they ratify the appointment. If shareholder ratification is not obtained, the Board of Directors would consider an alternative appointment for the succeeding
fiscal year. The Board of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_di1197_1_16"> </A>
<BR>

<P><FONT SIZE=2>Directors
of the Company recommends that the shareholders ratify the appointment of KPMG LLP as the independent auditors. The affirmative vote of a majority of the shares present and entitled to vote
thereon will constitute approval. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1197_proposal_#151;3_increas__di101961"> </A>
<A NAME="toc_di1197_5"> </A>
<BR></FONT><FONT SIZE=2><B><I>PROPOSAL&#151;3    <BR>    <BR>    INCREASE IN AUTHORIZED SHARES PROPOSAL    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2><B>INTRODUCTION  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is proposing to amend its Articles of Incorporation to increase the authorized number of shares of Common Stock, $1.00 par value per share, from
105,000,000 to 275,000,000 (the "Increase in Authorized Share Proposal"). The Company is requesting its shareholders to approve the proposed increase in the number of authorized shares of Common
Stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
the reasons set forth below, the Board of directors believes that the best interests of the Company and its shareholders will be served if the Company's Articles of Incorporation are
amended to increase the authorized number of shares of Common Stock, $1.00 par value per share, from 105,000,000 to 275,000,000 shares. The Board of Directors has unanimously approved and recommends a
vote </FONT><FONT SIZE=2><B>"FOR"</B></FONT><FONT SIZE=2> the Increase in Authorized Shares Proposal. </FONT></P>

<P><FONT SIZE=2><B>AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has approved for submission to the shareholders a proposal relating to the amendment of Article&nbsp;IV of the Articles of Incorporation
of the Company to increase the number of authorized shares of Common Stock, par value $1.00 per share, from 105,000,000 to 275,000,000. The additional 170,000,000 shares of Common Stock, which will be
authorized if this proposal is approved, will increase the number of authorized, unissued and unreserved shares of Common Stock of the Company. Currently, before the proposed increase, the number of
authorized, unissued, and non-treasury shares of Common Stock of the Company is 36,185,048. Of this amount, 388,157 shares are reserved for issuance pursuant to the exercise of certain
stock options of the Company. The newly authorized shares would, if and when issued, have the same rights and privileges as the shares of Common Stock presently outstanding. The holders of Common
Stock have no preemptive rights to acquire any of the Company's Common Stock under the existing Articles of Incorporation and will not have any such rights if this proposal is approved. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors believes that it is desirable to have the additional authorized shares of Common Stock available for stock dividends or splits, stock options, future financing and
acquisition transactions, or other general corporate purposes as well as to enable the Company to take advantage of favorable opportunities which may arise in the future. The additional shares of
Common Stock would be available for issuance without further action by the shareholders and without the accompanying delay and expense involved in calling a special meeting of shareholders, except as
may otherwise be required by law. The issuance of any additional shares of Common Stock may result in a dilution of the voting power of the shareholders, as well as their respective equity interests
in the Company. At the date of this Proxy Statement, the Company has no arrangements, commitments or plans with respect to the sale or issuance of any of the additional shares of Common Stock as to
which authorization is sought. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the Board could use the authorized but unissued shares of Common Stock to create impediments to a takeover or a change of control of the Company. Under certain
circumstances, such shares could be used to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control of the Company. For example, the Company might seek
to frustrate a takeover attempt by making a private sale of a large block of shares to a third party who was opposed to such an attempt. The increase in authorized stock might also be considered as
having the effect of discouraging an attempt by a third party to acquire control of the Company, through the acquisition of a substantial </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_di1197_1_17"> </A>
<BR>

<P><FONT SIZE=2>number
of shares, since the issuance of any shares could be used to dilute the stock ownership of shares of the Company's voting stock held by such third party. Accordingly, an effect of the increase
in the number of authorized shares of Common Stock may be to deter a future takeover attempt. The Board is not presently aware of any plans to acquire control of the Company and has not proposed the
amendment to the Articles of Incorporation as an anti-takeover measure. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
proposed amendment to the Company's Articles of Incorporation would cause Article&nbsp;IV thereof to read in its entirety as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
aggregate number of shares which the corporation shall have the authority to issue is Two Hundred Seventy-Five Million (275,000,000) shares of Common Stock of the par
value of One Dollar ($1.00) per share. </FONT></P>

</UL>

<P><FONT SIZE=2><B>VOTE REQUIRED FOR APPROVAL  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approval of the Amendment to Article&nbsp;IV requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on such
matter. </FONT><FONT SIZE=2><B>THE BOARD OF DIRECTORS HAS APPROVED AND RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED AMENDMENT TO ARTICLE&nbsp;IV OF THE COMPANY'S ARTICLES OF
INCORPORATION.</B></FONT><FONT SIZE=2> Unless otherwise specified, all properly executed proxies received by the Company will be voted in favor of the approval of the amendment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1197_proposal_#151;4_proposal_to_ap__pro03564"> </A>
<A NAME="toc_di1197_6"> </A>
<BR></FONT><FONT SIZE=2><B><I>PROPOSAL&#151;4    <BR>    <BR>    PROPOSAL TO APPROVE THE 2005 INTERNATIONAL BANCSHARES CORPORATION<BR>  STOCK OPTION PLAN    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2><B>THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING RESOLUTION:  </B></FONT></P>

<UL>

<P><FONT SIZE=2>"RESOLVED:
That the 2005 International Bancshares Corporation's Stock Option Plan adopted by the Board of Directors on April&nbsp;1, 2005, be and hereby is approved, ratified and confirmed." </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
April&nbsp;1, 2005, the Board of Directors of the Company adopted the 2005 International Bancshares Corporation Stock Option Plan (the "Plan"). The Plan became effective upon such
approval, subject to the approval of the Plan by the shareholders of the Company. Approval of the Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled
to vote on this matter and present, in person or by proxy, at the Annual Meeting. The Plan will replace the 1996 International Bancshares Corporation Stock Option Plan (the "1996 Plan"), which will be
terminated, for purposes of granting further options, upon shareholder approval of the Plan. The 1996 Plan would otherwise expire according to its terms on April&nbsp;3, 2006. As of April&nbsp;1,
2005, options for up approximately 383,400 shares of stock remained eligible for grant under the 1996 Plan. The adoption of the Plan will not affect the terms of any outstanding options under the 1996
Plan, and such outstanding options will continue to be governed by the terms of the 1996 Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purpose of the Plan is to increase the interest of officers, employees, consultants and advisors of the Company (the "Eligible Persons") in its future growth and success through the
added incentive created by the opportunity afforded for stock ownership under the Plan. The Company, through the Plan, seeks to motivate officers, employees, consultants and advisors and to attract
highly competent individuals whose judgment, initiative and continuing effort will contribute to the success of the Company. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Approval
of the Plan by shareholders will also constitute approval of (i)&nbsp;the performance criteria upon which performance-based awards that are intended to be deductible by the
Company may be based, and (ii)&nbsp;the limits on the amount of cash and shares that may be awarded to any individual participant to comply with the requirements of Section&nbsp;162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The complete text of the Plan is set forth in Exhibit&nbsp;A to this Proxy Statement, which is </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<P><FONT SIZE=2>incorporated
herein by reference. The following summary of the material features of the Plan does not purport to be complete and is qualified in its entirety by reference to Exhibit&nbsp;A. </FONT></P>

<P><FONT SIZE=2><B>General Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Stock Option Plan Committee of the Board of Directors administers the Plan (the "Committee") and determines the terms and conditions under which options
("Options") to purchase shares of Common Stock may be awarded. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the adjustment provisions described below, the maximum number of shares of Common Stock which may be made subject to Options granted under the Plan is 380,000. Subject to the
adjustment provisions described below, the maximum number of shares of Common Stock covered by Options which may be granted to any Eligible Person in any fiscal year is 75,000 shares. The shares to be
issued under the Plan may be either treasury shares or newly issued shares. Any shares subject to Options granted under the Plan that lapse or are terminated or forfeited for any reason prior to
exercise may be made subject to subsequent grants under the Plan. </FONT></P>

<P><FONT SIZE=2><B>Options  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee has full and final authority to select those Eligible Persons who will be granted Options. Options granted under the Plan may be Incentive Stock
Options ("ISOs"), as defined in Section&nbsp;422 of the Code, or options not qualifying for treatment as ISOs ("Nonstatutory Stock Options"). Subject to applicable provisions of the Code, the
Committee determines the recipients of Options and the terms of the Options, including the type of Option, the number of shares for which an Option is granted, the term of the Option and the time(s)
when the Option can be exercised. Restrictions on the exercise of an Option may, at the discretion of the Committee, be contained in the agreement with the participant or in the Committee's
procedures. Each ISO must comply with all the requirements of Section&nbsp;422 of the Code. The Committee may in its discretion waive any condition or restriction on the exercise of an Option and
may accelerate the time at which any Option is exercisable. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
price per share of Common Stock subject to an Option (the "Option Price") is set by the Committee. In the case of ISOs, the Option Price may not be less than the fair market value of
Common Stock (as determined in accordance with the Plan) on the date of the grant of the ISOs; provided, however, the Option Price of an ISO granted to an Eligible Person that owns 10% or more of the
Common Stock may not be less than 110% of the fair market value of the Common Stock on the date of grant of the ISOs. In the case of Nonstatutory Stock Options, there are no restrictions with respect
to the Option Price. The Committee also determines the manner in which the Option Price of an Option may be paid, which may include the tender of cash or securities or the withholding of Common Stock
or any other arrangement satisfactory to the Committee. The fair market value of the Common Stock on April&nbsp;1, 2005 is believed to be $35.00 per share based on the recent trade of shares of
Common Stock at that price on April&nbsp;1, 2005. The stock trades under the NASDAQ market under the ticker symbol "IBOC." </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options
granted under the Plan may be exercisable for a period of up to 10&nbsp;years from the date of grant, excluding ISOs granted to 10% shareholders which may be exercisable for a
period of up to only 5&nbsp;years. Within these limitation periods, the Committee will determine the expiration dates of Options. Options may be exercised at any time or from time to time, within
their terms, in whole or in part, or otherwise as shall be determined by the Committee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except
as specifically provided by a duly executed Stock Option Agreement (as hereinafter defined) or unless approved by the Committee, an Option or any of the rights thereunder may be
exercised by such Participant only, and may not be transferred or assigned, voluntarily, involuntarily or by operation of law (including, without limitation, the laws of bankruptcy, intestacy, descent
and distribution and succession). </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P><FONT SIZE=2><B>New Plan Benefits  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All Options granted under the Plan are subject to the approval of the Plan by the shareholders of the Company at the 2005 Annual Meeting of Shareholders. The
number and type of Options that may be granted under the Plan, the number of employees who may be granted such Options and the allocation of such Options among such employees have not been determined
at this time. </FONT></P>

<P><FONT SIZE=2><B>Administration of the Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee will administer the Plan and will consist of members of the Board of Directors who are "non-employee directors" (as that term is defined
in Rule&nbsp;16b-3 promulgated under Section&nbsp;16 of the Exchange Act) and "outside directors" (as that term is defined in the regulations promulgated under Section&nbsp;162(m) of
the Code, as may be modified or amended). The Committee may designate employees of the Company and its subsidiaries and professional advisors to assist the Committee in the administration of the Plan
and may employ and rely upon the advice of such legal counsel, consultants, and agents as it may deem desirable for the administration of the Plan. The Committee determines the amounts, times, forms,
terms and conditions of grants under the Plan. Participation in the Plan is determined by the Committee and may include any officer, employee, consultant or advisor selected by the Committee. There
are approximately 2,604 full time employees of the Company and its subsidiaries and currently approximately 285 of said employees participate in the 1996 Plan. The cost of administering the Plan shall
be borne solely by the Company. Generally, no member of the Board of Directors or the Committee shall be liable for any action or determination taken or made with respect to the Plan. In addition, the
Company will indemnify the Board of Directors and the Committee against any losses in connection with administration of the Plan. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a condition to any grant under the Plan, each participant must enter into a stock option agreement (the "Stock Option Agreement") containing such terms and conditions relating to such
grant as shall be determined by the Committee consistent with the terms of the Plan. In addition, the Committee may from time to time establish procedures governing the administration of the Plan and
terms and conditions related to the grant of awards under the Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors may at any time amend, suspend or terminate the Plan without shareholder approval or approval of participants, except that shareholder approval is required if any
action may increase the total number of shares of Common Stock subject to the Plan (other than pursuant to the adjustment provisions of the Plan). In the event that the outstanding shares of Common
Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company or another corporation by reason of merger, consolidation, other reorganization,
recapitalization, reclassification, combination of shares, stock split-up, or stock dividend, corresponding adjustments shall be made to the number and kind of shares which may be granted
under this Plan, as well as the number, the Option Price, and the kind of shares or property subject to each outstanding Option, unless otherwise determined by the Committee. The 380,000 maximum
number of shares of Common Stock which may be made subject to Options granted under the Plan does not reflect any adjustment for the 25% stock dividend declared by the Board of Directors on
April&nbsp;1, 2005 and payable to shareholders of record as of May&nbsp;2, 2005. Upon the effectiveness of such stock dividend, such maximum number of shares available under the Plan will be
automatically increased accordingly. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan contains a self-operative provision that modifies any term of the Plan that varies from or conflicts with any applicable Federal or state securities laws and
regulations in effect from time to time so that such term conforms to and complies with such laws. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan contains provisions to enable the Company to satisfy its tax withholding obligations pursuant to such arrangements as are satisfactory to the Committee. The Committee may permit
participants to pay such taxes through the tender of cash or securities or the withholding of Common Stock or any other arrangement satisfactory to the Committee. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

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<P><FONT SIZE=2><B>Change of Control Provisions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the Committee otherwise expressly sets forth in the Stock Option Agreement, upon certain events effectively constituting a Change of Control (as defined in
the Plan) of the Company, some or all of the Options granted under the Plan that are otherwise subject to vesting over a period of time can, under certain circumstances, may, in the discretion of the
Committee, become fully and immediately exercisable and/or terminated; provided, that if any Options are terminated, Participants may be granted the right to exercise any vested Option prior to the
Change of Control or the right to receive a cash payment (as more fully described in the Plan). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Change of Control provisions in the Plan may cause a possible merger, takeover of the Company, acquisition of control of the Company by a principal shareholder or change in
management to be more expensive than it would be in the absence of such provisions. The Plan is not being proposed in response to any present actions known to the Board of Directors. The Board of
Directors believes that on balance the Plan will be of significant benefit to the Company, its shareholders and its employees. </FONT></P>

<P><FONT SIZE=2><B>Federal Income Tax Consequences  </B></FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Code Section&nbsp;162(m).</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A publicly-held corporation may not, subject to limited exceptions, deduct for
Federal income tax purposes certain compensation paid to an executive officer who is the chief executive officer or one of the four other highest paid executive officers in excess of $1&nbsp;million
in any taxable year (the "$1&nbsp;million cap"). In general, compensation received on account of the exercise of options that were granted on or prior to February&nbsp;17, 1993 will not be subject
to the $1&nbsp;million cap. Also, certain other performance based compensation may not be subject to the $1&nbsp;million cap. Compensation attributable to the exercise of options and other awards
granted after February&nbsp;17, 1993, however, may be counted in determining whether the $1&nbsp;million cap has been exceeded in any taxable year if such compensation does not qualify as
performance based compensation. The Company believes that any Options to be granted under the Plan with an exercise price at or above the fair market value
of the Common Stock on the date of grant will qualify as performance based compensation and will not be subject to the $1&nbsp;million cap. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonstatutory Stock Options.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Under the Code, a participant receiving a Nonstatutory Stock Option generally does not recognize
taxable income upon the grant of the Option. A participant does, however, recognize ordinary income upon the exercise of a Nonstatutory Stock Option to the extent that the fair market value of Common
Stock on the date of exercise exceeds the Option Price. Upon the subsequent sale of the shares acquired pursuant to a Nonstatutory Stock Option, any gain or loss should be capital gain or loss,
assuming the shares represent a capital asset in the hands of the participant. Generally, the applicable long-term capital gains rate under current law is more favorable to individuals
than the current tax rate applicable to short-term capital gains and ordinary income. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incentive Stock Options.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The grant of an ISO does not result in taxable income to a participant. The exercise of an ISO also
does not result in taxable income, provided that the employment requirements specified in the Code are satisfied, although such exercise may give rise to alternative minimum taxable income for the
participant. In addition, if the participant does not dispose of Common Stock acquired upon exercise of an ISO during the statutory holding period, then any gain or loss upon the subsequent sale of
Common Stock should be a long-term capital gain or loss, assuming the shares represent a capital asset in the participant's hands. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
statutory holding period for Common Stock acquired pursuant to the exercise of an ISO is the later of two years from the date the ISO is granted or one year from the date the Common
Stock is transferred to the participant pursuant to the exercise of the ISO. If the employment and statutory holding period requirements are satisfied, the Company may not claim any Federal income tax
deduction upon the grant of the ISO, the exercise of the ISO or the subsequent sale of Common Stock received upon exercise of the ISO. If these requirements are not satisfied, the amount of ordinary
income taxable to the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<P><FONT SIZE=2>participant
is the lesser of (i)&nbsp;the fair market value of Common Stock on the date of exercise minus the Option Price, and (ii)&nbsp;the amount realized on disposition minus the Option Price. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the exercisability of an Option is accelerated as a result of a Change of Control or for any reason, an ISO may be deemed to be a Nonstatutory Stock Option and all or a portion of the
value of the relevant award at that time may be a "parachute payment" for purposes of determining whether a 20% excise tax is payable by the participant as a result of the receipt of an "excess
parachute payment" pursuant to Section&nbsp;4999 of the Code. Also, the Company will not be entitled to an income tax deduction for the portion of any parachute payment which is subject to the
excise tax. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax Consequences Regarding "Deferred Compensation."</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Grants of Options under the Plan could constitute "deferred compensation"
within the meaning of recently enacted provisions of the Code governing "non-qualified deferred compensation plans." Failure to comply with these new rules regarding participant elections
and the timing of distributions could force certain participants to recognize ordinary income for federal income tax purposes earlier than they would otherwise be required to do so as described above
as well as pay substantial penalties. The Plan incorporates the requirements of these new deferred compensation rules, as they are currently in effect or as they may be subsequently modified or
interpreted by the Internal Revenue Service or by case law, into the terms of all Option grants in order to avoid such unfavorable tax consequences to participants. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax Consequences to the Company.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Generally, the Company may deduct for Federal income tax purposes only the amount that would
be included in a participant's ordinary income (if any) upon the participant's exercise of a Nonstatutory Stock Option, subject to applicable withholding and reporting requirements and subject to
possible limitations on deductibility, including (but not limited to) Sections&nbsp;280G and 162(m) of the Code and the general rules regarding reasonable compensation. The Company's deduction is
allowed in the taxable year that such amount is includible in the participant's gross taxable income. Generally, the Company will not be entitled to an income tax deduction with regard to the exercise
of an ISO. However, in the case of a disposition of shares acquired under an ISO before the applicable ISO holding periods have been satisfied, the Company may be entitled to a deduction. </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Requirements and Tax Consequences.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The above discussion is only a summary of the current federal income tax treatment
of certain stock option grants. It does not cover all of the special rules and tax consequences, including provisions to allow participants under certain circumstances to electively recognize ordinary
income upon the grant of an Option (and the related tax consequences), rules relating to participants subject to Section&nbsp;16(b) of the Securities Exchange Act of 1934, or the state, local,
foreign or other federal tax consequences (i.e. gift or estate) involving the grant of stock options. </FONT><FONT SIZE=2><B>A participant should consult his or her own tax advisor with respect to
the specific federal, state, local and other tax consequences of participation in the Plan.</B></FONT></P>

<P><FONT SIZE=2><B>Approval  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the opinion of the Board of Directors, the Plan will be of significant benefit to the Company in providing an incentive for officers and employees to remain in
the employ of the Company and in stimulating the active interest of such persons in the development and financial success of the Company. The Board of Directors recommends that the shareholders vote
"FOR" the adoption of the Plan. The persons named in the accompanying proxy will vote in accordance with the choice specified thereon, or, if no choice is properly indicated, in favor of the adoption
of the Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
affirmative vote of the holders of a majority of the shares entitled to vote on this matter and represented in person or by proxy is required to approve the Plan. Brokers do not have
discretionary voting power with respect to this proposal. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1197_shareholder_proposals_for_2006_annual_meeting"> </A>
<A NAME="toc_di1197_7"> </A>
<BR></FONT><FONT SIZE=2><B><I>SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2006 Annual Meeting of Shareholders will be held on May&nbsp;15, 2006. In connection with the Company's next annual meeting, shareholder proposals which are
not submitted for inclusion in the Company's proxy materials pursuant to Rule&nbsp;14a-8 under the Exchange Act may be brought before an annual meeting pursuant to Article&nbsp;II,
Section&nbsp;12 of the Company's Bylaws, which provides that business at an annual meeting of shareholders must be (a)&nbsp;pursuant to the Company's notice of meeting, (b)&nbsp;by or at the
direction of the Board of Directors or(c)&nbsp;by any shareholder of the Company who was a shareholder of record at the time of giving of notice provided for in Section&nbsp;12 of the Bylaws, who
is entitled to vote at the meeting and who complies with the notice procedures set forth in Section&nbsp;12. For business to be properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Corporate Secretary. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
be timely, a shareholder's notice shall be delivered to the Secretary of the Company at 1200 San Bernardo Avenue, Laredo, Texas 78042 not later than the close of business on the 60th
day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual
meeting is more than 30&nbsp;days before or more than 60&nbsp;days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business
on the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the Company. Such shareholder's notice is required to set forth as to each matter the shareholder proposes to bring before an annual meeting
certain information specified in the Bylaws. A copy of the Bylaws of the Company may be obtained from the Secretary of the Company at the address set forth above. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proposals
from shareholders which are intended to be included in the proxy statement relating to the Company's 2006 Annual Meeting of Shareholders must comply with
Rule&nbsp;14a-8 under the Exchange Act and must be received in writing by the Company at its principal executive offices at the address set forth above no later than December&nbsp;20,
2005. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1197_other_matters"> </A>
<A NAME="toc_di1197_8"> </A>
<BR></FONT><FONT SIZE=2><B><I>OTHER MATTERS    <BR>    </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No business other than the matters set forth in this proxy statement is expected to come before the meeting, but should any other matters requiring a vote of
shareholders arise, including a question of adjourning the meeting, the persons named in the accompanying proxy will vote thereon according to their best judgment in the interest of the Company. In
the event that any of the nominees for director should withdraw or otherwise become unavailable for reasons not presently known, the persons named as Proxies will vote for such substitute nominee(s)
as the Board of Directors recommends, or in the absence of such recommendation, such other persons as they consider to be in the best interests of the Company. </FONT></P>

<!-- User-specified TAGGED TABLE -->
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<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2>INTERNATIONAL BANCSHARES CORPORATION</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2><BR>
Dennis E. Nixon<BR></FONT> <FONT SIZE=2><I>President</I></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%"><FONT SIZE=2><BR>
Dated: April&nbsp;18, 2005</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="50%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P><FONT SIZE=2><B>THE COMPANY WILL PROVIDE SHAREHOLDERS WITH A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM&nbsp;10-K, FOR THE PERIOD ENDED DECEMBER&nbsp;31, 2004, WITHOUT CHARGE,
UPON WRITTEN REQUEST ADDRESSED TO THE TREASURER OF THE COMPANY, MS.&nbsp;IMELDA NAVARRO AT:</B></FONT></P>

<P><FONT SIZE=2><B>INTERNATIONAL BANCSHARES CORPORATION<BR>
P. O. Box&nbsp;1359<BR>
Laredo, Texas 78042-1359<BR>
(956)&nbsp;722-7611 Extension 6222  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_exhibit_a_2005_international_b__exh02610"> </A>
<A NAME="toc_ha1197_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT&nbsp;A    <BR>    <BR>    2005 INTERNATIONAL BANCSHARES CORPORATION<BR>  STOCK OPTION PLAN    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
2005 INTERNATIONAL BANCSHARES CORPORATION STOCK OPTION PLAN (the "Plan") is intended to advance the interests of the Company and its shareholders by affording officers, employees,
consultants and advisors of the Company and its Subsidiaries an opportunity to increase their proprietary equity interest in the Company by the grant of Options to them under the terms set forth
herein. The Company seeks to motivate and retain present officers, employees, consultants and advisors of the Company and its Subsidiaries as well as attract highly competent individuals whose
judgment, initiative, leadership, and continued effort will contribute to the success of the Company and its Subsidiaries. The Company believes that this Plan will contribute to that end. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_i_definitions"> </A>
<A NAME="toc_ha1197_2"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE I<BR>  <BR>    DEFINITIONS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this Plan: </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Board of Directors</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Board" or "Board of Directors" shall mean the Board
of Directors of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Change of Control</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Change of Control" shall mean the occurrence of any of
the following events: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) other than the Company, any affiliate (as defined in Rule&nbsp;144 under the
Securities Act) of the Company as of the Effective Date, any Sanchez Shareholder, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned,
directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of the Stock of the Company, is or becomes the "beneficial owner" (as defined in
Rule&nbsp;13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired
directly from the Company) representing more than 20% of the combined voting power of the Company's then outstanding voting securities; provided, however, a Change of Control shall not be deemed to
occur solely because such person acquired beneficial ownership of more than 20% of the combined voting power of the Company's then outstanding voting securities as a result of the acquisition of
voting securities by the Company, which by reducing the number of voting securities outstanding, increases the proportional number of shares beneficially owned by such person, provided that if a
Change of Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition by the Company, such person
becomes the beneficial owner of any additional voting securities which increases the percentage of the then outstanding voting securities beneficially owned by such person, then a Change of Control
shall occur; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;during
any period of 24 consecutive months (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in subsection (i), (iii)&nbsp;or
(iv)&nbsp;of this Section&nbsp;1.02) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds
(<SUP>2</SUP>/<SMALL>3</SMALL>) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for
any reason to constitute a majority of the Board; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;the
shareholders of the Company approve a merger, consolidation or reorganization of the Company with any other corporation, other than a merger, consolidation or
reorganization which </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-1</FONT></P>

<HR NOSHADE>
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<A NAME="page_ha1197_1_2"> </A>
<UL>
<BR>

<P><FONT SIZE=2>would
result in the shareholders of the Company immediately before such merger, consolidation or reorganization, owning, directly or indirectly immediately following such merger, consolidation or
reorganization, at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger, consolidation or
reorganization in substantially the same proportion as their ownership of the voting securities immediately before such merger, consolidation, or reorganization; or </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;the
shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.03</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Change in Control Price</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Change in Control Price" shall mean the price
per share of Stock paid in any transaction related to a Change in Control. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.04</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Code</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor statute, provided that any specific reference herein to a particular section of the Code will, to the extent applicable, refer to the corresponding section or provision of any such
successor statute. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.05</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Committee</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Committee" shall mean a committee of the Board appointed by
the Board from time to time consisting of at least two (2)&nbsp;members of the Board, each of whom is both a Non-Employee Director and an Outside Director. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.06</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Company</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Company" shall mean INTERNATIONAL BANCSHARES CORPORATION, a
Texas corporation, and any successor thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.07</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Effective Date</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Effective Date" shall mean that term as defined in
Section&nbsp;11.01 hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.08</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Eligible Person</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Eligible Person" shall mean any officer, employee,
consultant or advisor of the Company or any Subsidiary, as may be designated from time to time by the Committee as eligible to receive an Option subject to the conditions set forth herein. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.09</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Exchange Act</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.10</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Fair Market Value</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Fair Market Value" shall mean, unless otherwise
required by the Code, as of any date, the last sales price reported for the Stock on the applicable date, (i)&nbsp;as reported by the national securities exchange in the United States on which it is
then traded or The Nasdaq Stock Market,&nbsp;Inc. or (ii)&nbsp;if not traded on any such national securities exchange or The Nasdaq Stock Market,&nbsp;Inc., as quoted on an automated quotation
system sponsored by the National Association of Securities Dealers,&nbsp;Inc., or if the Stock shall not have been reported or quoted on such date, on the first day prior thereto on which the Stock
was reported or quoted; </FONT><FONT SIZE=2><I>provided, however,</I></FONT><FONT SIZE=2> that the Committee may modify the definition of Fair Market Value to reflect any changes in the trading
practices of any exchange or automated system sponsored by the National Association of Securities Dealers,&nbsp;Inc. on which the Stock is listed or traded. If the Stock is not readily traded on a
national securities exchange, The Nasdaq Stock Market,&nbsp;Inc. or any system sponsored by the National Association of Securities Dealers,&nbsp;Inc., the Fair Market Value shall be determined in
good faith by the Committee. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.11</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Incentive Stock Option</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Incentive Stock Option" shall have the meaning
given to it by Section&nbsp;422 of the Code and as further defined in Article&nbsp;VI hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.12</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Non-Employee Director</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Non-Employee Director"
shall have the meaning given to it by Rule&nbsp;16b-3 promulgated under the Exchange Act. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.13</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Nonstatutory Stock Option</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Nonstatutory Stock Option" shall mean any
Option granted by the Company pursuant to this Plan which is not an Incentive Stock option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.14</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Option</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Option" shall mean an option granted by the Company to purchase
Stock pursuant to the provisions of this Plan and the related Stock Option Agreement executed pursuant hereto. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-2</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ha1197_1_3"> </A>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.15</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Option Price</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Option Price" shall mean the price per share of Stock
purchasable under an Option. The Option Price of an Option shall be determined by the Committee at the time of grant and, in the case of an Incentive Stock Option or a Nonstatutory Stock Option, shall
not be less than the Fair Market Value on the date of grant, unless, in the case of a Participant who is granted an Incentive Stock Option, such Participant owns more than ten percent (10%) of the
Stock or more than ten percent (10%) of the voting stock of any Subsidiary, in which case the Option Price shall not be less than one hundred ten percent (110%) of the Fair Market Value on the date of
grant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.16</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Outside Director</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Outside Director" shall have the meaning given to it in
the Regulations promulgated under Section&nbsp;162(m) of the Code, as may be amended from time to time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.17</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Participant</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Participant" shall mean an Eligible Person who has been
granted an Option hereunder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.18</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Plan</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Plan" shall mean the 2005 International Bancshares Corporation
Stock Option Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.19</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Regulations</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Regulations" shall mean the regulations promulgated under
the Code. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.20</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Sanchez Family</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Sanchez Family" shall mean the Estate of Alicia M.
Sanchez, deceased, and Alicia M. Sanchez's children, grandchildren and great-grandchildren. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.21</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Sanchez Shareholder</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Sanchez Shareholder" shall mean a shareholder of the
Company who is a member of the Sanchez Family or a corporation, partnership, or other entity in which one or more of the members of the Sanchez Family beneficially own a majority of the ownership
interest, or a trust in which all of the beneficial interests are held by or for one or more members of the Sanchez Family; provided, however, a trustee of such trust must be a member of the Sanchez
Family. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.22</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Securities Act</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.23</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Stock</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Stock" shall mean common stock, par value $1.00 per share, issued
by the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.24</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Stock Option Agreement</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Stock Option Agreement" shall mean the agreement
as described in Section&nbsp;3.04 of this Plan between the Company and the Participant under which such Participant receives an Option pursuant to this Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>1.25</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Subsidiary</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The term "Subsidiary" shall mean any subsidiary corporation, as defined
in Section&nbsp;424(f) of the Code, to which the Committee has determined to extend the application of this Plan. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_ii_participation"> </A>
<A NAME="toc_ha1197_3"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE II<BR>  <BR>    PARTICIPATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>2.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Participation</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;A grant of an Option under this Plan may be made by the Committee to
any Eligible Person. In determining the eligibility of an individual to be granted an Option, as well as in determining the number of shares to be issuable pursuant to Options granted to any
individual, the Committee shall take into account the position and responsibilities of the individual being considered, the nature and value to the Company or its Subsidiaries of his or her service
and accomplishments, his or her present and potential contribution to the success of the Company or its subsidiaries, and such other factors as the Committee may deem relevant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>2.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Limitations on Grants to Individual Participant</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Subject to adjustments pursuant to
the provisions of Section&nbsp;3.03 hereof, the number of shares of Stock which may be covered by Options granted hereunder to any Participant during any fiscal </FONT> <FONT SIZE=2><I>year</I></FONT><FONT SIZE=2> shall not exceed 75,000 shares. If
an Option is cancelled, the cancelled Option shall continue to be counted toward such 75,000 share limit for the
year granted. An </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-3</FONT></P>

<HR NOSHADE>
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<A NAME="page_ha1197_1_4"> </A>

<P><FONT SIZE=2>Option
that is re-priced during any fiscal year shall be treated as the cancellation of such Option and a grant of a new Option for purposes of the 75,000 share limit for that fiscal year. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_iii_shares_of_stock_subject_to_plan"> </A>
<A NAME="toc_ha1197_4"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE III<BR>  <BR>    SHARES OF STOCK SUBJECT TO PLAN    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Limitations</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Subject to Section&nbsp;3.02 and the adjustments pursuant to the
provisions of Section&nbsp;3.03 hereof, the number of shares of Stock covered by Options which may be granted hereunder to Participants under all Options shall not exceed Three Hundred Eighty
Thousand (380,000) shares. The shares of Stock which may be issued by the Company upon exercise of an option may be issued out of the Company's authorized and unissued shares of Stock or reaquired
shares of Stock (treasury stock). </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Availability Of Shares Once Issued Under Plan</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Once an Option has lapsed,
terminated or been forfeited, the Committee shall have the sole discretion to issue a new Option to any Eligible Person, covering the number of shares to which such lapsed, terminated or forfeited
Option related. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.03</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Adjustments To Options Once Issued</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;In the event that the outstanding shares of
Stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation or other entity by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares, or dividends payable in capital stock, appropriate adjustment shall be
made (i)&nbsp;in the number and kind of shares as to which Options may be granted under the Plan, (ii)&nbsp;the number and kind of shares which may be granted to an Eligible Person in any one
taxable year of the Company, (iii)&nbsp;the number and kind of shares as to which outstanding Options or portions thereof then unexercised shall be exercisable, to the end that securities issuable
upon exercise of any Option after such event shall be equivalent to the securities which would have been issuable upon exercise of such Option had such exercise been completed prior to such event, and
(iv)&nbsp;a corresponding adjustment in the Option Price shall be made to each outstanding Option. Such adjustment shall be made by the Committee, whose determination in that respect shall be final,
binding and conclusive on all persons. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number, type or price of Stock subject to an Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.04</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Grants and Agreement</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Each grant of an Option under this Plan shall be evidenced by
a written Stock Option Agreement dated as of the date of the grant and executed by the Company and the Participant. The rights of a grantee in and to an Option shall become effective only upon
execution and delivery by the Company of the Stock Option Agreement. Such Stock Option Agreement shall set forth the terms and conditions of such Option, as may be determined by the Committee
consistent with this Plan, and shall indicate whether the Option that it evidences is intended to be an Incentive Stock Option or a Nonstatutory Stock Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>3.05</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Restrictions on Stock</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Stock issuable upon exercise of an Option granted under the
Plan may be subject to such restrictions on transfer, repurchase rights or other restrictions as shall be determined by the Committee, consistent with the Code and Regulations. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_iv_options"> </A>
<A NAME="toc_ha1197_5"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE IV<BR>  <BR>    OPTIONS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Options; Grant and Exercise</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Committee shall have full and final authority to
select those Eligible Persons who will be granted Options and whether such options shall be Incentive Stock Options or Nonstatutory Stock Options. Subject to Federal and state statutes then applicable
and the express terms of this Plan, the terms and procedures by which an Option may be exercised shall be set forth in the Participant's Stock Option Agreement or in procedures established by the
Committee. Certain of the </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-4</FONT></P>

<HR NOSHADE>
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<A NAME="page_ha1197_1_5"> </A>
<BR>

<P><FONT SIZE=2>procedures
for the notice of the grant of an Option, the execution of the Stock Option Agreement, and the exercise of an Option, are as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;As
soon as practicable after a determination is made by the Committee to grant an Option to an Eligible Person, as set forth in this Article&nbsp;IV, the appropriate
officer or officers of the Company shall give notice (written or oral) to such effect to each such Eligible Person, which notice shall be accompanied by a copy or copies of the Stock Option Agreement
to be executed by such Eligible
Person. The Stock Option Agreement shall designate whether it is an Incentive Stock Option or Nonstatutory Stock Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Upon
the due execution by such Eligible Person and the Company of a Stock Option Agreement (on such terms as the Committee shall determine) within such number of days
from the giving of such notice as shall be specified in such notice (unless waived by the Company), such Option shall be granted and such Eligible Person shall become and be a Participant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Each
Option granted under the Plan shall, subject to this Section, be exercisable at such time or times and during such period as shall be set forth in the Stock Option
Agreement and as set forth herein; </FONT><FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that no Option granted under the Plan shall have a term in excess of ten (10)&nbsp;years from
the date of grant, and shall be exercisable only if compliance with all applicable Federal and state securities laws can be effected. The Committee may permit payment of the Option Price to be made
through the tender of cash or securities, the withholding of Stock, or any other arrangement satisfactory to the Committee. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>4.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Vesting of Options</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Stock Option Agreement shall specify the date or dates on
which the Stock subject to such Stock Option Agreement shall vest and the date or dates on which the Participant may begin to exercise all or a portion of such Option. To the extent not exercised, the
vested portion of the option shall be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the Option terminates. Notwithstanding the terms of any
Stock Option Agreement, the Committee at any time may accelerate such date or dates and otherwise waive or amend any conditions of the Option in a manner that is not adverse to the Option holder. A
Participant's subsequent transfer or disposition of any Stock obtained through the exercise of an option shall be subject to any Federal and state laws then applicable, specifically including
securities laws. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_v_nonstatutory_stock_option"> </A>
<A NAME="toc_ha1197_6"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE V<BR>  <BR>    NONSTATUTORY STOCK OPTION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>5.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;General</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Committee may grant Nonstatutory Stock Options to Eligible Persons
under this Plan. The grant of Nonstatutory Stock Options shall be designated as such in a Participant's Stock Option Agreement. Such Nonstatutory Stock Options must comply with all requirements of
this Plan except for those contained in Article&nbsp;VI hereof. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_vi_incentive_stock_options"> </A>
<A NAME="toc_ha1197_7"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE VI<BR>  <BR>    INCENTIVE STOCK OPTIONS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;General</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Committee may only grant Incentive Stock Options under this Plan to
Eligible Persons who are employees (including officers) of the Company or any Subsidiary. All Incentive Stock Options shall comply with all of the restrictions and limitations set forth in
Section&nbsp;422 of the Code and Regulations issued thereunder, and this Article. To the extent that any Option does not qualify as an Incentive Stock Option, it shall constitute a Nonstatutory
Stock Option. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-5</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Terms and Conditions of Incentive Stock Options</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding any other
provision of this Plan, Incentive Stock Options shall be subject to such terms and conditions as shall be determined by the Committee, which shall include the following: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Option Price shall be an amount determined by the Committee in accordance with the provision of Section&nbsp;1.14 hereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;No
Incentive Stock Option shall be exercisable after the lapse of ten (10)&nbsp;years from the date such Incentive Stock Option is granted; provided, however, if the
Participant owns more than ten percent (10%) of the Stock or of the voting stock of any Subsidiary, such Participant's Incentive Stock Option shall not be exercisable after the lapse of five
(5)&nbsp;years from the date such Incentive Stock Option is granted. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Except
as provided in this Subsection 6.02(c) and Subsections 6.02 (d)&nbsp;and (e), all Incentive Stock Options granted to a Participant shall terminate no later than
three (3)&nbsp;months from the date the Participant's service with the Company terminates; provided, however, if the Participant's service with the Company terminates as a result of the
Participant's permanent disability, such Incentive Stock Options shall terminate no later than twelve (12)&nbsp;months from the date that the Participant's service with the Company terminates as a
result of such disability. Notwithstanding the foregoing, the Committee may, in its sole discretion, provide in the Stock Option Agreement for the termination of the Option upon the Participant's
termination of service with the Company prior to such three (3)&nbsp;month period or twelve (12)&nbsp;month period, as the case may be. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;An
Incentive Stock Option or any of the rights thereunder may be exercised by such Participant only, and may not be transferred or assigned, voluntarily, involuntarily
or by operation of law (including, without limitation, the laws of bankruptcy, intestacy, descent and distribution and succession); provided, however, that the Committee may approve a transfer of an
Incentive Stock Option, or a Stock Option Agreement relating thereto may provide for a transfer by will or the laws of descent and distribution. During the lifetime of the Participant, such Incentive
Stock Option shall be exercisable or perfected only by the Participant in accordance with the terms of this Plan and the Stock Option Agreement. If such transfer by will or the laws of descent and
distribution is provided for in a Stock Option Agreement or such transfer is approved by the Committee, upon the death of a Participant who has been granted an Incentive Stock Option, such Incentive
Stock Option exercisable on the date of death may be exercised by the Participant's estate or by a person who acquires the right to exercise such Incentive Stock Option pursuant to the Participant's
will or by the laws of descent and distribution, provided that, subject to any additional restrictions in the Stock Option Agreement or imposed by the Committee, the exercise of the Incentive Stock
Option must occur within both the remaining term of the Incentive Stock Option and twelve (12)&nbsp;months after the Eligible Person's death. The provisions of this Section&nbsp;6.02(d) shall
apply notwithstanding that the Participant's employment may have terminated prior to death, but only to the extent that such Incentive Stock Option is exercisable on the date of death. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;An
Incentive Stock Option may provide, in the Committee's discretion, that if the provisions of this Article&nbsp;VI are not satisfied, the Option granted shall not
lapse and the option shall be classified as a Nonstatutory Stock Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Stock
issued to a Participant pursuant to an Incentive Stock Option may not be disposed of in any fashion, voluntarily, involuntarily or by operation of law (including,
without limitation, the laws of bankruptcy, intestacy, descent and distribution and succession) to any person within two (2)&nbsp;years from the date of the granting of the Incentive Stock Option
nor within one (1)&nbsp;year after the transfer of such Stock to him; provided, however, that if an insolvent Participant holds Stock acquired pursuant to his exercise of an Incentive Stock option,
and if such stock is transferred to a trustee, receiver, or other similar fiduciary in any proceeding under Title 11 of the United States Code or any other similar insolvency proceeding, neither such
transfer, nor any other transfer of such Stock for the benefit of his </FONT></P>

</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-6</FONT></P>

<HR NOSHADE>
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<A NAME="page_ha1197_1_7"> </A>
<UL>
<BR>

<P><FONT SIZE=2>creditors
in such proceeding, shall constitute a disposition of such Stock for purposes of this Plan and the Stock Option Agreements. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>6.03</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Limitations on Grants of Incentive Stock Options</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Committee may not grant an
Incentive Stock Option hereunder to an Eligible Person if such grant could result in the aggregate Fair Market Value (determined at the time each incentive stock option is granted) of Stock with
respect to which incentive stock options are exercisable for the first time by such Eligible Person during any calendar year (under all incentive stock option plans of the Company or its parent or
subsidiaries, if any, as defined in Section&nbsp;424(e) and (f)&nbsp;of the Code) exceeding one hundred thousand dollars ($100,000) or such other maximum amount which is permissible under the
Code, as it may be amended, on the date of such
grant; provided, however, for purposes of determining whether a proposed grant of an Incentive Stock Option is permissible under this Section&nbsp;6.03, the Committee shall not consider the possible
accelerated vesting upon (i)&nbsp;a Change of Control under Article&nbsp;X hereof unless the Committee has received notice of such Change of Control or (ii)&nbsp;the occurrence of any other
event as may be provided in a Stock Option Agreement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_vii_stock_certificates"> </A>
<A NAME="toc_ha1197_8"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE VII<BR>  <BR>    STOCK CERTIFICATES    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>7.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Stock Certificates</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Company shall not be required to issue or deliver any
certificate for shares of Stock upon the exercise of any option or of any portion thereof prior to fulfillment of all of the following conditions: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
admission of such shares to listing or quotation on all stock exchanges or automated quotation systems on which the Stock is then listed or quoted, if any; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
completion of any registration or other qualification of such shares under any Federal or state law, under the rulings or regulations of the Securities and Exchange
Commission, or under any other governmental regulatory agency which the Committee shall in its sole discretion determine to be necessary or advisable; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
obtaining of any approval or other clearance from any Federal or state governmental agency which the Committee shall in its sole discretion determine to be necessary
or advisable; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;The
lapse of such reasonable period of time following the exercise of the Option as the Committee from time to time may establish for reasons of administrative
convenience. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
these conditions are not satisfied the Participant may lose his rights to such Stock as determined by the Committee. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_viii_plan_administration"> </A>
<A NAME="toc_ha1197_9"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE VIII<BR>  <BR>    PLAN ADMINISTRATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8</FONT><FONT SIZE=2><B>.01 </B></FONT><FONT SIZE=2><I>Plan Administration</I></FONT><FONT SIZE=2>. </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;This
Plan and all Stock Option Agreements shall be administered, and all grants of Options under this Plan shall be granted, by the Committee. The Committee shall have
full authority and absolute sole discretion: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;To
determine, consistent with the provisions of this Plan, which of the Eligible Persons shall be granted Options; the form and terms of such Options; the timing of such
grants; the number of shares subject to each option and the option Price of Stock covered by each option; the restrictions, if any, applicable to the shares of Stock issuable upon the exercise of each
Option; and the period over which the Option shall vest and become and remain exercisable; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;To
construe and interpret this Plan and the Stock Option Agreements; </FONT></P>

</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>A-7</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;To
determine the terms and provisions of each respective Stock Option Agreement, which need not be identical. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;To
make all other determinations and take all other actions deemed necessary or advisable for the proper administration of this Plan; </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;To
modify and amend outstanding Options unilaterally in any manner that is not adverse to the Option holder; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;To
adopt, alter, and repeal such rules, guidelines, and practices for administration of this Plan and for its own acts and proceedings as it shall deem advisable; to
interpret the terms and provisions of this Plan and any Option (including related Stock Option Agreements); to make all determinations it deems advisable for the administration of this Plan; to decide
all disputes arising in connection with this Plan; and to otherwise supervise the administration of this Plan. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
decision of the Committee as to all questions of interpretation and application of the Plan and the Stock Option Agreements shall be final, binding and conclusive on
all persons. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Stock Option Agreement granted hereunder in the manner and to the extent
it shall deem expedient to carry the Plan into effect and shall be the sole and final judge of such expediency. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Advisors to Committee</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Committee may designate employees of the Company and its
Subsidiaries and professional advisors to assist the Committee in the administration of the Plan and may grant authority to employees of the Company to execute agreements or other documents on behalf
of the Committee in connection with the administration of the Plan. The Committee may employ such legal counsel, consultants, and agents as it may deem desirable for the administration of the Plan and
may rely upon any advice and any computation received from any such counsel, consultant, or agent. The Company shall pay all expenses and costs incurred by the Committee for the engagement of any such
counsel, consultant, or agent. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>8.03</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Participants Outside the U.S.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In order to conform with the provisions of local laws
and regulations in foreign countries in which the Company operates, the Committee shall have the sole discretion to (i)&nbsp;modify the terms and conditions of the Options granted under the Plan to
Eligible Individuals located outside the United States; (ii)&nbsp;establish subplans with such modifications as may be necessary or advisable under the circumstances present by local laws and
regulations; and (iii)&nbsp;take any action which it deems advisable to comply with or otherwise reflect any necessary governmental regulatory procedures, or to obtain any exemptions or approvals
necessary with respect to the Plan or any subplan established hereunder. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_ix_miscellaneous_provisions"> </A>
<A NAME="toc_ha1197_10"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE IX<BR>  <BR>    MISCELLANEOUS PROVISIONS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Applicable Law</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;To the extent that state law shall not have been preempted by any
laws of the United States, this Plan shall be construed, regulated, interpreted and administered according to the laws of the State of Texas, without regard to conflicts of law principles. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Expenses</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The cost of benefit payments from this Plan and the expenses of
administering this Plan shall be borne by the Company; provided, however, that except as otherwise specifically provided in this Plan or the applicable Stock Option Agreement between the Company and a
Participant, the Company shall not be obligated to pay any costs or expenses (including legal fees) incurred by any Participant in connection with any Stock Option Agreement, this Plan or option or
Company Stock held by any Participant. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-8</FONT></P>

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<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.03</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Gender and Number</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Unless the context clearly requires otherwise, the masculine
pronoun whenever used shall include the feminine and neuter pronoun, the singular shall include the plural, and vice versa. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.04</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Headings Not Part Of Plan</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Headings of Articles and Sections are inserted for
convenience and reference; they constitute no part of this Plan. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.05</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Indemnification</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;No member of the Board of Directors or the Committee shall be
liable for any action or determination taken or made in good faith with respect to this Plan nor shall any member of the Board of Directors or the Committee be liable for any Stock Option Agreement
issued pursuant to this Plan or any grants under it. Without limiting any other rights to indemnification, each member of the Board of Directors and of the Committee shall be indemnified by the
Company against any losses incurred in such administration of this Plan to the fullest extent permitted by the Texas Business Corporation Act, as amended. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.06</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Limitation of Rights</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Neither
the adoption and maintenance of this Plan or Stock Option Agreement nor anything contained herein, shall with respect to any Participant, be deemed to: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;limit
the right of the Company or any Subsidiary to discharge or discipline any such person, or otherwise terminate or modify the terms of his employment, or </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;create
any contract or other right or interest under this Plan other than as specifically provided in this Plan and a Stock Option Agreement. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;A
Participant shall not be deemed for any purpose to be a shareholder of the Company with respect to any of the Options except to the extent that the Option shall have
been exercised with respect thereto, the Option Price therefor shall have been paid in full, and the issuance and delivery of a certificate or certificates evidencing the Stock purchased pursuant to
such exercise, and the Participant shall have complied with all applicable provisions of the Plan and the Stock Option Agreement pursuant to which such Options were granted. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.07</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Distribution, Compliance With Legal Requirements</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Unless
the shares to be issued upon exercise of an Option granted under the Plan have been effectively registered under the Securities Act, the Person who exercises such
Option, in whole or in part, shall give a written representation and undertaking to the Company which is satisfactory in form and scope to counsel for the Company and upon which, in the opinion of
such counsel, the Company may reasonably rely, that he or she is acquiring the shares issued pursuant to such exercise of the Option for his or her own account as an investment and not with a view to,
or for sale in connection with, the distribution of any such shares, and that he or she will make no transfer of the same except in compliance with any rules and regulations in force at the time of
such transfer under the Securities Act, or any other applicable law, and that if shares are issued without such registration, a legend to this effect may be endorsed upon the securities so issued. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;In
the event that the Company shall, nevertheless, deem it necessary or desirable to register such shares, including any shares with respect to which an Option shall
have been exercised, under the Securities Act, or other applicable statutes, or to qualify any such shares for exemption from registration requirements of the Securities Act, or other applicable
statutes, then the Company may take such action and may require from each Participant such information in writing for use in any registration statement, supplementary registration statement,
prospectus, preliminary prospectus or offering circular as is reasonably necessary for such purpose and may require reasonable indemnity to the Company and its officers and directors and controlling
persons from such holder against all losses, claims, damages and liabilities arising from such use of the information so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made,
and each Participant by his or her acceptance of an Option agrees to provide such information </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-9</FONT></P>

<HR NOSHADE>
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<BR>

<P><FONT SIZE=2>and
indemnity and to execute all documents reasonably requested by the Company to evidence the Participant's indemnity obligation. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;The
Committee may require the placing of such stop-orders and restrictive legends on certificates for Stock and Options as it deems appropriate. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.08</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Timing of Grants</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;All Options granted under this Plan shall be granted prior to the
tenth (10<SUP>th</SUP>) anniversary of the Effective Date. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.09</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Non-Assignability</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Except as otherwise set forth herein, a
Participant's interest under this Plan shall not be subject at any time or in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment or encumbrance of any kind and any
attempt to deliver, sell, transfer, assign, pledge, attach, garnish or otherwise encumber such interest shall be null and void and any interest so encumbered will terminate. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.10</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Nontransferability</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Except as specifically provided by a duly executed Stock Option
Agreement or unless approved by the Committee, an Option or any of the rights thereunder may be exercised by such Participant only, and may not be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether voluntarily, involuntarily or by operation of law, including, without limitation, the laws of bankruptcy, intestacy, descent and distribution and
succession) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any Option, such Option and
all rights thereunder shall immediately become null and void. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.11</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Other Compensation Plans</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The adoption of this Plan shall not affect any other
existing or future incentive or compensation plans for directors, officers or employees of the Company or its Subsidiaries. Moreover, the adoption of this Plan shall not preclude the Company or its
Subsidiaries from: </FONT></P>

<UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Establishing
any other forms of incentive or other compensation for officers, employees, consultants or advisors or directors of the Company or its Subsidiaries; or </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;Assuming
any forms of incentives or other compensation of any person or entity in connection with the acquisition or the business or assets, in whole or in part, of any
person or entity. </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.12</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Plan Binding on Successors</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;This Plan shall be binding upon the successors and
assigns of the Company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.13</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Tax Withholding</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Each Participant shall, no later than the date as of which the
value of an Option or of any Stock or other amount received thereunder first becomes includable in the gross income of the Participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Committee regarding payment of any Federal, state, or local taxes of any kind required by law, or deemed advisable by the Company, to be withheld with respect to such
income. The Committee may permit payment of such taxes to be made through the tender of cash or securities, the withholding of Stock or any other arrangement satisfactory to the Committee. The Company
and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.14</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Non-Contravention of Securities Laws</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything to the
contrary expressed in this Plan, any provisions hereof that vary from or conflict with any applicable Federal or state securities laws (including any regulations promulgated thereunder) shall be
deemed to be modified to conform to and comply with such laws. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>9.15</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Unenforceability of a Particular Provision</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The unenforceability of any particular
provision of this document shall not affect the other provisions, and this document shall be construed in all respects as if such unenforceable provision were omitted. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-10</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_ha1197_1_11"> </A>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_x_change_of_con__ha102246"> </A>
<A NAME="toc_ha1197_11"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE X<BR>  <BR>    CHANGE OF CONTROL AND OTHER CORPORATE EVENTS    <BR>    </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Change in Control</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise provided in a Stock Option Agreement, upon the
occurrence of a Change in Control, the Committee may in its sole and absolute discretion, provide on a case by case basis that (i)&nbsp;some or all outstanding Options may become immediately
exercisable or vested, without regard to any limitation imposed pursuant to this Plan, (ii)&nbsp;that Options shall terminate, provided however, that Participants shall have the right, immediately
prior to the occurrence of such Change in Control and during such reasonable period as the Committee in its sole discretion shall determine and designate, to exercise any vested Option in whole or in
part, and/or (iii)&nbsp;that Options shall terminate provided that Participants shall be entitled to a cash payment equal to the excess of the aggregate Change in Control Price with respect to
shares subject to the vested portion of the Option over the aggregate Exercise Price of the shares subject to the vested portion of the Option. In the event that the Committee does not terminate an
Option upon a Change in Control then each outstanding Option shall upon exercise thereafter entitle the holder thereof to such number of shares of Stock or other securities or property to which a
holder of shares of Stock would have been entitled to upon such Change in Control. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>10.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Change in Status of Subsidiary</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise provided in a Stock Option
Agreement or otherwise determined by the Committee, in the event that an entity which was previously a Subsidiary is no longer a Subsidiary, as determined by the Committee in its sole discretion, the
Committee may, in its sole and absolute discretion (i)&nbsp;provide on a case by case basis that some or all outstanding Options held by a Participant employed by or performing service for such
entity may become immediately exercisable or vested, without regard to any limitation imposed pursuant to this Plan and/or (ii)&nbsp;treat the
employment or other services of a Participant employed by such entity as terminated if such Participant is not employed by the Company or any Subsidiary immediately after such event. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ha1197_article_xi_permanency_o__ha102283"> </A>
<A NAME="toc_ha1197_12"> </A>
<BR></FONT><FONT SIZE=2><B>ARTICLE XI<BR>  <BR>    PERMANENCY OF THIS PLAN AND PLAN TERMINATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>11.01</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Effective Date</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;This Plan shall become effective upon its adoption by the Board of
Directors of the Company (the "Effective Date"); provided, however, that the shareholders of the Company shall approve this Plan within twelve (12)&nbsp;months of the date of adoption by the Board
of this Plan. Notwithstanding any terms or provisions to the contrary, this Plan, and all Options granted hereunder, are subject to the approval of the Plan by the shareholders of the Company not
later than twelve (12)&nbsp;months from the date of adoption by the Board of Directors and no Option may be exercised prior to such shareholder approval. In the event the preceding condition is not
satisfied, Options granted under this Plan shall be null and void. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>11.02</B></FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Termination, Amendment, and Modification of Plan</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors may at
any time terminate or suspend, and may at any time and from time to time and in any respect amend or modify, this Plan; provided, however, that no such action of the Board of Directors without
approval of the shareholders of the Company may increase the total number of shares of Stock subject to this Plan except as contemplated in Section&nbsp;3.03 hereof. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER"><FONT SIZE=1><B>INTERNATIONAL BANCSHARES CORPORATION<BR>
For the Annual Meeting of Shareholders<BR>
Called for May&nbsp;16, 2005  </B></FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned shareholder(s) of International Bancshares Corporation, a Texas corporation (the "Company"), hereby appoints Lester Avigael, Irving Greenblum, and
Richard E. Haynes, and each of them, as Proxies, each with power to appoint his substitute, and hereby authorizes them to vote, as designated below, all the shares of Company's Common Stock which the
undersigned may be entitled to vote at the Annual Meeting of Shareholders of the Company, to be held on Monday, May&nbsp;16, 2005 at 7:00&nbsp;P.M., local time, and at any adjournment of such
meeting, with all powers which the undersigned would possess if personally present: </FONT></P>

<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1>1.</FONT></DT><DD><FONT SIZE=1>ELECTION
OF DIRECTORS. Nominees: L. Avigael, I. Greenblum, R.D. Guerra, R.E. Haynes, D. B. Hastings, Jr., I. Navarro, S. Neiman, P. J. Newman, D.E. Nixon, L. Salinas, A. R. Sanchez,
Jr. </FONT></DD></DL>
<BR>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=1><B>FOR</B></FONT><FONT SIZE=1>, all nominees listed above&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=1><B>FOR,</B></FONT><FONT SIZE=1> all nominees listed above, except for the nominee(s) set forth on the line below&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=1><B>WITHHOLD AUTHORITY,</B></FONT><FONT SIZE=1> to vote for all nominees listed above&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P><FONT SIZE=1>(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write that nominee's name on the line provided below.)   </FONT></P>

<HR NOSHADE>

<P><FONT SIZE=1>The
Board of Directors recommends a vote </FONT><FONT SIZE=1><B>FOR</B></FONT><FONT SIZE=1> all nominees. </FONT></P>

<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1>2.</FONT></DT><DD><FONT SIZE=1>PROPOSAL
TO RATIFY THE APPOINTMENT OF KPMG LLP as the independent auditors of the Company for the 2005 fiscal year. </FONT>
<BR>
<P ALIGN="CENTER"><FONT SIZE=1><B>FOR&nbsp;&nbsp;&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AGAINST&nbsp;&nbsp;&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABSTAIN
&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1>The
Board of Directors recommends a vote </FONT><FONT SIZE=1><B>FOR</B></FONT><FONT SIZE=1> the above ratification. </FONT></P>

<P ALIGN="RIGHT"><FONT SIZE=1><I>(Continued on reverse side)  </I></FONT></P>

</DD></DL>
<HR NOSHADE>
<P style='page-break-before:always'></p>
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<DL compact>
<DT style='margin-bottom:-9pt;'><FONT SIZE=1>3.</FONT></DT><DD><FONT SIZE=1>PROPOSAL
TO AMEND THE ARTICLES OF INCORPORATION of the Company to increase the number of authorized shares of Common Stock of the Company. </FONT>
<BR>
<P ALIGN="CENTER"><FONT SIZE=1><B>FOR&nbsp;&nbsp;&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AGAINST&nbsp;&nbsp;&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABSTAIN
&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1>The
Board of Directors recommends a vote </FONT><FONT SIZE=1><B>FOR</B></FONT><FONT SIZE=1> the above proposal. </FONT></P>

</DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1>4.</FONT></DT><DD><FONT SIZE=1>PROPOSAL
TO APPROVE THE 2005 International Bancshares Corporation Stock Option Plan adopted by the Board of Directors on April&nbsp;1, 2005. </FONT>
<BR>
<P ALIGN="CENTER"><FONT SIZE=1><B>FOR&nbsp;&nbsp;&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AGAINST&nbsp;&nbsp;&nbsp;&nbsp;<FONT
FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ABSTAIN
&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1>The
Board of Directors recommends a vote </FONT><FONT SIZE=1><B>FOR</B></FONT><FONT SIZE=1> the above proposal </FONT></P>

</DD><DT style='margin-bottom:-9pt;'><FONT SIZE=1>5.</FONT></DT><DD><FONT SIZE=1>In
their discretion, the Proxies are authorized to vote upon such other matters as may properly come before the meeting. </FONT></DD></DL>

<P><FONT SIZE=1><B>EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE THEREON. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR"
ALL THE NOMINEES AND "FOR" PROPOSALS 2 THROUGH 4 ABOVE.</B></FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement of the Company dated April&nbsp;18, 2005. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="80%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=1><BR>
Dated:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2005</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><BR><HR NOSHADE><FONT SIZE=1> Signature(s)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%"><BR><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=1>(Signature should agree with name of stock Certificate as stenciled thereon. Executors, Administrators, Trustees, etc. should so indicate when signing).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER"><FONT SIZE=1><BR>
THIS PROXY IS SOLICITED ON BEHALF<BR>
OF THE BOARD OF DIRECTORS<BR></FONT>
</TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER"><FONT SIZE=1><B>YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO ITS EXERCISE  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><B> I <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> do <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> do not plan to attend the
Meeting.  </B></FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<BR>
<P><br><A NAME="05HOU1197_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_be1197_1">NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 16, 2005</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de1197_1">PROXY STATEMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1197_2">SOLICITATION AND REVOCATION OF PROXIES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1197_3">VOTING AT MEETING</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1197_4">PROPOSAL&#151;1 ELECTION OF DIRECTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1197_5">EXECUTIVE OFFICERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1197_6">MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1197_7">ANNUAL MEETING ATTENDANCE</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1197_8">PRINCIPAL SHAREHOLDERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1197_9">SECURITY OWNERSHIP OF MANAGEMENT</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dg1197_1">EXECUTIVE COMPENSATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_2">SUMMARY COMPENSATION TABLE</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_3">AGGREGATED OPTION EXERCISES IN 2004 AND FY-END OPTION VALUES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_4">REPORT OF THE SALARY AND STEERING COMMITTEE</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_5">REPORT OF THE STOCK OPTION PLAN COMMITTEE</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_6">REPORT OF THE AUDIT COMMITTEE</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_7">PRINCIPAL ACCOUNTING FEES AND SERVICES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_8">SALARY AND STEERING COMMITTEE AND STOCK OPTION PLAN COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_9">DIRECTOR INDEPENDENCE</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_10">COMMUNICATIONS WITH THE BOARD OF DIRECTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1197_11">CODE OF ETHICS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_di1197_1">TOTAL RETURN ANALYSIS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1197_2">INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1197_3">Section 16(a) Beneficial Ownership Reporting Compliance</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1197_4">PROPOSAL&#151;2 RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1197_5">PROPOSAL&#151;3 INCREASE IN AUTHORIZED SHARES PROPOSAL</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1197_6">PROPOSAL&#151;4 PROPOSAL TO APPROVE THE 2005 INTERNATIONAL BANCSHARES CORPORATION STOCK OPTION PLAN</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1197_7">SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_di1197_8">OTHER MATTERS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ha1197_1">EXHIBIT A 2005 INTERNATIONAL BANCSHARES CORPORATION STOCK OPTION PLAN</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_2">ARTICLE I DEFINITIONS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_3">ARTICLE II PARTICIPATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_4">ARTICLE III SHARES OF STOCK SUBJECT TO PLAN</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_5">ARTICLE IV OPTIONS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_6">ARTICLE V NONSTATUTORY STOCK OPTION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_7">ARTICLE VI INCENTIVE STOCK OPTIONS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_8">ARTICLE VII STOCK CERTIFICATES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_9">ARTICLE VIII PLAN ADMINISTRATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_10">ARTICLE IX MISCELLANEOUS PROVISIONS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_11">ARTICLE X CHANGE OF CONTROL AND OTHER CORPORATE EVENTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_ha1197_12">ARTICLE XI PERMANENCY OF THIS PLAN AND PLAN TERMINATION</A></FONT><BR>

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end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
