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Capital Requirements

12 Months Ended

Dec. 31, 2024

(18) Capital Requirements

Bank regulatory agencies limit the amount of dividends, which the Subsidiary Banks can pay, without obtaining prior approval from such agencies. At December 31, 2024, the Subsidiary Banks could pay dividends of up to $1,440,000,000 without prior regulatory approval and without adversely affecting their “well-capitalized” status under regulatory capital rules in effect at December 31, 2024. In addition to legal requirements, regulatory authorities also consider the adequacy of the Subsidiary Banks’ total capital in relation to their deposits and other factors. These capital

adequacy considerations also limit amounts available for payment of dividends. We historically have not allowed any Subsidiary Bank to pay dividends in such a manner as to impair its capital adequacy.

We and the Subsidiary Banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities, and certain off-statement of condition items as calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Current quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios (set forth in the table on the following page) of Total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of December 31, 2024, that we met all capital adequacy requirements to which we are subject.

In July 2013, the FDIC and other regulatory bodies established a new, comprehensive capital framework for U.S. banking organizations, consisting of minimum requirements that increase both the quantity and quality of capital held by banking organizations. The final rules are a result of the implementation of the Basel III capital reforms and various related capital provisions of the Dodd-Frank Act. Consistent with the Basel international framework, the rules include a new minimum ratio of Common Equity Tier 1 (“CET1”) capital to risk-weighted assets of 4.5% and a CET1 capital conservation buffer of 2.5% of risk-weighted assets, effectively resulting in a minimum ratio of CET1 capital to risk-weighted assets of at least 7% upon full implementation. The capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of CET1 capital to risk-weighted assets above the minimum but below the conservation buffer will face constraints on dividends, equity repurchases, and compensation based on the amount of the shortfall. The rules also raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4% to 6% and include a minimum leverage ratio of 4% for all banking organizations. Regarding the quality of capital, the rules emphasize CET1 capital and implements strict eligibility criteria for regulatory capital instruments. The rules also improve the methodology for calculating risk-weighted assets to enhance risk sensitivity. The rules were subject to a four-year phase-in period for mandatory compliance, and we were required to begin to phase-in the new rules beginning on January 1, 2015. We believe that as of December 31, 2024, we meet all fully phased-in capital adequacy requirements.

In November 2017, the OCC, the FRB and the FDIC finalized a proposed rule that extends the current treatment under the regulatory capital rules for certain regulatory capital deductions and risk weights and certain minority interest requirements, as they apply to banking organizations that are not subject to the advanced approaches capital rules. Effective January 1, 2018, the rule also paused the full transition to the Basel III treatment of mortgage servicing assets, certain deferred tax assets, investments in the capital of unconsolidated financial institutions and minority interests. The agencies are also considering whether to make adjustments to the capital rules in response to CECL (the FASB Standard relating to current expected credit loss) and its potential impact on regulatory capital. Pursuant to rules issued by the federal bank regulatory agencies in February 2019 and March 2020, banking organizations were given options to phase in the adoption of CECL over a three-year transition period through December 31, 2022 or over a five-year transition period through December 31, 2024. Rather than electing to make one of the phase-in options, we immediately recognized the capital impact upon adopting CECL accounting standards on January 1, 2020, which resulted in an increase in our allowance for probable loan losses and a one-time cumulative-effect adjustment to retained earnings upon adoption.

In December 2017, the Basel Committee on Banking Supervision unveiled its final set of standards and reforms to its Basel III regulatory capital framework, commonly called “Basel III Endgame” or “Basel IV.” The Basel IV framework makes changes to the capital framework first introduced as “Basel III” in 2010 and aim to reduce excessive variability in banks’ calculations of risk-weighted capital ratios. Implementation of Basel IV began on January 1, 2023 and will continue over a five-year transition period by regulators in individual countries, including the U.S. federal bank regulatory agencies. The U.S. has targeted implementation of Basel IV to begin on July 1, 2025, subject to a three-year transition period with full compliance expected by July 1, 2028.

As of December 31, 2024, our capital levels continue to exceed all capital adequacy requirements under the Basel III Capital Rules as currently applicable to us.

On May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 (“EGRRCPA”) was enacted, and, among other things, it includes a simplified capital rule change which effectively exempts banks with assets of less than $10 billion that exceed the “community bank leverage ratio,” from all risk-based capital requirements, including Basel III and its predecessors. The federal banking agencies must establish the “community bank leverage ratio” (a ratio of tangible equity to average consolidated assets) between 8% and 10% before community banks can begin to take advantage of this regulatory relief provision. Some of the Subsidiary Banks, with assets of less than $10 billion, may qualify for this exemption. Additionally, under the EGRRCPA, qualified bank holding companies with assets of up to $3 billion (currently $1 billion) will be eligible for the Federal Reserve’s Small Bank Holding Company Policy Statement, which eases limitations on the issuance of debt by holding companies. On August 28, 2018, the Federal Reserve issued an interim final rule expanding the applicability of its Small Bank Holding Company Policy Statement. While holding companies that meet the conditions of the policy statement are excluded from consolidated capital requirements, their depository institutions continue to be subject to minimum capital requirements. Finally, for banks that continue to be subject to the risk-based capital rules of Basel III (e.g., 150%), certain commercial real estate loans that were formally classified as high volatility commercial real estate 31 (“HVCRE”) will not be subject to heightened risk weights if they meet certain criteria. Also, while acquisition, development, and construction loans will generally be subject to heightened risk weights, certain exceptions will apply. On September 18, 2018, the federal banking agencies issued a proposed rule modifying the agencies’ capital rules for HVCRE.

As of December 31, 2024, the most recent notification from the FDIC categorized all the Subsidiary Banks as well-capitalized under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” we must maintain minimum Total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed our categorization as well-capitalized.

Our actual capital amounts and ratios for 2024 under current guidelines are presented in the following table:



					For Capital Adequacy				To Be Well-Capitalized
					Purposes				Under Prompt Corrective
	Actual				Phase In Schedule				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio
					(greater than		(greater than		(greater than		(greater than
					or equal to)		or equal to)		or equal to)		or equal to)
	(Dollars in Thousands)
As of December 31, 2024:
Common Equity Tier 1 (to Risk Weighted Assets):
Consolidated	$	2,893,228	22.42	%	$	903,203	7.000	%		N/A	N/A
International Bank of Commerce, Laredo		1,638,720	19.46			589,359	7.000		$	547,262	6.50	%
International Bank of Commerce, Brownsville		554,879	26.11			148,761	7.000			138,136	6.50
International Bank of Commerce, Oklahoma		240,023	20.57			81,679	7.000			75,845	6.50
Commerce Bank		102,200	37.50			19,077	7.000			17,714	6.50
International Bank of Commerce, Zapata		66,932	32.74			14,310	7.000			13,287	6.50
Total Capital (to Risk Weighted Assets):
Consolidated	$	3,136,215	24.31	%	$	1,354,805	10.500	%		N/A	N/A
International Bank of Commerce, Laredo		1,744,057	20.71			884,039	10.500		$	841,942	10.00	%
International Bank of Commerce, Brownsville		578,515	27.22			223,142	10.500			212,516	10.00
International Bank of Commerce, Oklahoma		254,659	21.82			122,519	10.500			116,685	10.00
Commerce Bank		105,090	38.56			28,616	10.500			27,253	10.00
International Bank of Commerce, Zapata		69,278	33.89			21,464	10.500			20,442	10.00
Tier 1 Capital (to Risk Weighted Assets):
Consolidated	$	2,974,881	23.06	%	$	1,096,747	8.500	%		N/A	N/A
International Bank of Commerce, Laredo		1,638,720	19.46			715,651	8.500		$	673,554	8.00	%
International Bank of Commerce, Brownsville		554,879	26.11			180,639	8.500			170,013	8.00
International Bank of Commerce, Oklahoma		240,023	20.57			99,182	8.500			93,348	8.00
Commerce Bank		102,200	37.50			23,165	8.500			21,802	8.00
International Bank of Commerce, Zapata		66,932	32.74			17,376	8.500			16,354	8.00
Tier 1 Capital (to Average Assets):
Consolidated	$	2,974,881	18.84	%	$	631,755	4.00	%	$	N/A	N/A
International Bank of Commerce, Laredo		1,638,720	17.67			370,911	4.00			463,639	5.00	%
International Bank of Commerce, Brownsville		554,879	13.08			169,680	4.00			212,100	5.00
International Bank of Commerce, Oklahoma		240,023	14.47			66,341	4.00			82,926	5.00
Commerce Bank		102,200	13.53			30,219	4.00			37,774	5.00
International Bank of Commerce, Zapata		66,932	13.44			19,917	4.00			24,896	5.00

Our actual capital amounts and ratios for 2023 are also presented in the following table:


										To Be Well-Capitalized
					For Capital Adequacy					Under Prompt Corrective
	Actual				Purposes					Action Provisions
	Amount		Ratio		Amount		Ratio			Amount	Ratio
					(greater than		(greater than		(greater than		(greater than
					or equal to)		or equal to)		or equal to)		or equal to)
	(Dollars in Thousands)
As of December 31, 2023:
Common Equity Tier 1 (to Risk Weighted Assets):
Consolidated	$	2,563,130	21.72	%	$	825,968	7.000	%		N/A	N/A
International Bank of Commerce, Laredo		1,444,775	18.54			545,611	7.000		$	506,639	6.50	%
International Bank of Commerce, Oklahoma		477,390	24.41			136,883	7.000			127,106	6.50
International Bank of Commerce, Brownsville		232,965	20.72			78,718	7.000			73,095	6.50
International Bank of Commerce, Zapata		97,334	36.57			18,628	7.000			17,298	6.50
Commerce Bank		64,110	31.18			14,394	7.000			13,366	6.50
Total Capital (to Risk Weighted Assets):
Consolidated	$	2,790,171	23.65	%	$	1,238,952	10.500	%		N/A	N/A	%
International Bank of Commerce, Laredo		1,542,462	19.79			818,416	10.500		$	779,444	10.00
International Bank of Commerce, Oklahoma		500,268	25.58			205,325	10.500			195,547	10.00
International Bank of Commerce, Brownsville		247,031	21.97			118,076	10.500			112,454	10.00
International Bank of Commerce, Zapata		100,660	37.82			27,943	10.500			26,612	10.00
Commerce Bank		66,680	32.43			21,591	10.500			20,563	10.00
Tier 1 Capital (to Risk Weighted Assets):												%
Consolidated	$	2,642,492	22.39	%	$	1,002,961	8.500	%		N/A	N/A
International Bank of Commerce, Laredo		1,444,775	18.54			662,527	8.500		$	623,555	8.00
International Bank of Commerce, Oklahoma		477,390	24.41			166,215	8.500			156,438	8.00
International Bank of Commerce, Brownsville		232,965	20.72			95,586	8.500			89,963	8.00
International Bank of Commerce, Zapata		97,334	36.57			22,620	8.500			21,290	8.00
Commerce Bank		64,110	31.18			17,478	8.500			16,450	8.00	%
Tier 1 Capital (to Average Assets):
Consolidated	$	2,642,492	17.46	%	$	605,262	4.00	%	$	N/A	N/A
International Bank of Commerce, Laredo		1,444,775	16.40			352,412	4.00			440,515	5.00
International Bank of Commerce, Oklahoma		477,390	11.79			161,919	4.00			202,398	5.00
International Bank of Commerce, Brownsville		232,965	14.72			63,294	4.00			79,117	5.00
International Bank of Commerce, Zapata		97,334	14.50			26,858	4.00			33,572	5.00
Commerce Bank		64,110	13.26			19,338	4.00			24,172	5.00

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

+ References + Details