International Bancshares Corp

“We are pleased with the consistency of our public company industry-leading financial results in the first half of 2026. We have historically been very focused and vigilant on delivering superior customer service, continued execution of our long-standing practices of balance sheet, asset, liability and liquidity management, strong cost controls, and evaluating processes for efficiencies across our organization using, among other things, AI initiatives, and we will continue to do so as we move through the second half of 2026. We know and believe that with continued focus on these established and long-standing practices, we will continue to deliver public company industry-leading financial results,” said Dennis E. Nixon, President and CEO.

“We are pleased with the consistency and sustainability of our industry-leading financial results in the first quarter of 2026. As we move through the rest of 2026, we will remain focused and vigilant on delivering superior customer service, continued execution of our long-standing practices of balance sheet, asset, liability and liquidity management, strong cost controls, and evaluating processes for efficiencies across our organization using, among other things, AI initiatives. We believe that with continued focus on these established and long-standing practices, we will continue to deliver industry-leading financial results,” said Dennis E. Nixon, President and CEO.

“We are extremely pleased and proud to continue our industry-leading financial results in 2025, which has kept us at the top of the rankings compared to other publicly held bank holding companies in America. As we move into 2026, we will remain focused and vigilant on delivering superior customer service, continued execution of our long-standing practices of balance sheet, asset, liability, and liquidity management, strong cost controls, and evaluating processes for efficiencies across our organization using new AI initiatives. We believe that with continued focus on these established practices we will continue to deliver industry-leading financial results,” said Dennis E. Nixon, president and CEO.

In October 2023, President Joe Biden issued an Executive Order (EO) on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI), which set new standards for AI safety and security, established guidelines and processes for the equitable use of AI, called on Congress to pass bipartisan data-privacy legislation, and directed federal agencies to take various actions to advance the safety, security, and trustworthiness of AI systems and to mitigate AI risks. Several of the directives in the EO involved the financial-services industry. For example, the EO directed the Secretary of the Treasury to prepare a public report advising financial institutions on best practices for managing AI-specific cybersecurity risks, and encouraged regulatory agencies to consider rulemaking to address the risks to financial stability and other risks that may result from using AI. Although President Trump ultimately rescinded President Biden’s AI EO on January 20, 2025, the prior EO demonstrates the types of executive actions related to AI that may impact the banking industry in the future. On January 23, 2025, President Trump issued an EO entitled Removing Barriers to American Leadership in Artificial Intelligence, which encourages the development of AI systems that are void of ideological bias or social agendas and promotes American AI innovation. Although the EO does not include specific directives that impact the financial-services industry, the EO may encourage the development of AI technologies within the financial sector and cause financial institutions to evaluate whether existing AI systems adhere to the EO’s directive to be free from ideological bias or engineered social agendas. On December 11, 2025, President Trump issued an EO entitled Ensuring a National Policy Framework for Artificial Intelligence, which directs the development of a national policy framework for AI that is intended to be minimally burdensome, replace state-by-state regulatory regimes, and promote AI innovation and leadership in the United States. While the EO does not specifically impose requirements on financial institutions, it may inform future regulatory actions and policy developments related to the use of AI in the financial services industry, which could affect future compliance obligations.

The CFPB and other federal regulators continue to issue guidance and regulatory updates that affect mortgage lending, including updated guidelines and proposed regulatory revisions that signal an ongoing focus on redlining and discrimination in mortgage lending, revisions to the CRA and greater oversight of property appraisals, and related algorithms and machine learning tools that can be used in the appraisal process. The CFPB recently issued a proposed rule that would remove regulations regarding disparate impact under the Equal Credit Opportunity Act and would instead leave such determinations solely to the courts to interpret and apply. It is unclear whether or to what extent this rule will be implemented.

Failure to successfully invest in, adapt to, integrate, and compete with technological developments, including new services and products that incorporate artificial intelligence (“AI”) into banking services and products, could impair our competitive position and adversely affect our business, revenue, and profitability.

The financial-services industry is experiencing rapid technological change driven by the advancement of AI. We may face a competitive disadvantage if we are unable to adopt and adapt to developing AI-driven technologies as quickly or effectively as our peers, larger financial institutions, and fintech companies, who are becoming increasingly involved in the banking and financial-services sectors. As customers grow to expect greater accessibility to AI banking solutions, including personalized financial-management tools, automated underwriting, and advanced fraud detection, failure to successfully invest in and incorporate AI into our banking offerings may cause us to fall short of meeting customer expectations for modernized, AI-powered financial services. To stay competitively relevant, we must leverage AI to enhance efficiency, risk management, and customer satisfaction. An inability to integrate AI solutions into our business and operations may make us unable to compete with institutions that can offer more sophisticated, technologically advanced financial products and services, which may hinder our rates of retaining and expanding our customer base. Furthermore, our revenue and profitability could be negatively impacted by the costs associated with enhancing our existing systems, upgrading our existing technologies and product offerings, and integrating AI tools into our business and operational structure.

The development, adoption, and integration of AI in our banking services, processes, and products may subject us to increased technological risks, costs, uncertainties, and unpredictable outcomes while increasing our compliance costs and exposing us to new operational challenges.

AI-driven technologies are rapidly evolving and complex, and successfully integrating AI tools requires substantial investment, expertise, and continuous monitoring. Our adoption and implementation of AI tools into our banking services, processes, and products presents significant technological risks, uncertainties, and unpredictable outcomes that could result from errors or biases in AI models, data inconsistencies, compliance violations, unforeseen system failures, or operational disruptions. Flaws in our introduction and use of AI technologies could create unintended consequences, amplify our costs, and inadvertently expose us to security vulnerabilities and technological inefficiencies that could hamper the customer experience, negatively impact transaction processing, and undermine our risk-management processes.

Furthermore, as the use of AI continues to evolve in the banking industry, so too will the AI-related regulations governing the banking and financial-services sectors. Regulators may impose new compliance requirements concerning AI governance, model validation, ethical use of AI, cybersecurity, data privacy, and automated decision-making, which may increase our costs and administrative burdens and restrict our ability to utilize AI for banking services, such as customer engagement, credit underwriting, fraud detection, and other banking functions. Our ability to adopt new forms of technologies and AI may be thwarted by the emergence of complex industry-wide standards, uncertainties in the legislative and regulatory environment governing AI in banking, and difficulties in establishing proper governance and controls related to new AI technologies that are compliant with evolving regulatory requirements. Incorporating AI solutions and complying with emerging regulatory frameworks may require significant resources, time, and technological investment. Additionally, any errors in AI-based models that generate biased or inaccurate results could cause us to make uninformed business decisions based on faulty data, potentially leading to financial losses and operational inefficiencies, and to face regulatory scrutiny, reputational damage, or legal liability. Failure to comply with AI-related regulations or to effectively manage AI-related risks could adversely affect our business, financial condition, and results of operations.

Commensurate with the risks we face and the sensitivity of the data and systems we are protecting, our Information Systems Security Program (ISSP) includes layers of administrative and technical safeguards designed to protect the confidentiality and integrity of sensitive information belonging to us and our employees, partners, and customers, to guard against the unauthorized access, alteration, disclosure, or destruction of that information, and to defend that information from potential, known, emerging, and evolving security risks. Our ISSP also applies to cybersecurity and data protection risks associated with artificial intelligence, including generative artificial intelligence whether those risks arise from our use of AI solutions or from AI-enabled threats and attack techniques used by malicious actors. We have established multiple control points within our security infrastructure to reduce the risks associated with embedded technologies that could fail or be manipulated by nefarious actors, to prevent the intentional and unintentional infiltration of cybersecurity threats, and to maximize their separation from our sensitive information systems and assets. In developing our ISSP, our policies, standards, and procedures were heavily informed by and incorporated provisions from various sources of statutory and regulatory guidance as well as numerous leading industry frameworks, including the NIST Cybersecurity Framework, various NIST special publications, the Fair Information Practice Principles established by the Federal Privacy Council, the Privacy Management Framework developed by the American Institute of Certified Public Accountants, and the Center for Internet Security’s Critical Security Controls.

● Artificial Intelligence Ethics & Governance Policy, which integrates AI-specific security requirements into our ISSP and incident response processes.

Other Committees. In addition to the SCC and Risk Committees, we have established a Technology Committee, a Senior Management Committee, and a Business Continuity and Disaster Recovery (BC/DR) Committee. Each oversees aspects of our ISSP and coordinates with the SCC to implement various cybersecurity procedures. We have also implemented an enterprise AI governance framework, which provides cross-functional oversight of AI solutions across the Company, including the IT and Vendor Management Departments.

“As we move to the last quarter of 2025, we are extremely pleased and proud to continue our industry-leading financial results. We will remain focused and vigilant on delivering superior customer service, and continued execution of our long-standing practices of balance sheet, asset, liability and liquidity management, and strong cost controls. We believe that with continued focus on these established practices supported by new AI initiatives to create efficiencies across our system, we will continue to deliver industry-leading financial results. We believe this focus will continue to keep us at the top of the rankings when compared to other publicly held banks in America,” said Dennis E. Nixon, President and CEO.

In October 2023, President Joe Biden issued an Executive Order (EO) on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI), which set new standards for AI safety and security, established guidelines and processes for the equitable use of AI, called on Congress to pass bipartisan data-privacy legislation, and directed federal agencies to take various actions to advance the safety, security, and trustworthiness of AI systems and to mitigate AI risks. Several of the directives in the EO involved the financial-services industry. For example, the EO directed the Secretary of the Treasury to prepare a public report advising financial institutions on best practices for managing AI-specific cybersecurity risks, and encouraged regulatory agencies to consider rulemaking to address the risks to financial stability and other risks that may result from using AI. Although President Trump ultimately rescinded President Biden’s AI EO on January 20, 2025, the prior EO demonstrates the types of executive actions related to AI that may impact the banking industry in the future. On January 23, 2025, President Trump issued an EO entitled Removing Barriers to American Leadership in Artificial Intelligence, which encourages the development of AI systems that are void of ideological bias or social agendas and promotes American AI innovation. Although the EO does not include specific directives that impact the financial-services industry, the EO may encourage the development of AI technologies within the financial sector and cause financial institutions to evaluate whether existing AI systems adhere to the EO’s directive to be free from ideological bias or engineered social agendas.

The CFPB and other federal regulators continue to issue guidance and regulatory updates that affect mortgage lending, including updated guidelines and proposed regulatory revisions that signal an ongoing focus on redlining and discrimination in mortgage lending, revisions to the CRA and greater oversight of property appraisals, and related algorithms and machine learning tools that can be used in the appraisal process.

Failure to successfully invest in, adapt to, integrate, and compete with technological developments, including new services and products that incorporate artificial intelligence (“AI”) into banking services and products, could impair our competitive position and adversely affect our business, revenue, and profitability.

The financial-services industry is experiencing rapid technological change driven by the advancement of AI. We may face a competitive disadvantage if we are unable to adopt and adapt to developing AI-driven technologies as quickly or effectively as our peers, larger financial institutions, and fintech companies, who are becoming increasingly involved in the banking and financial-services sectors. As customers grow to expect greater accessibility to AI banking solutions, including personalized financial-management tools, automated underwriting, and advanced fraud detection, failure to successfully invest in and incorporate AI into our banking offerings may cause us to fall short of meeting customer expectations for modernized, AI-powered financial services. To stay competitively relevant, we must leverage AI to enhance efficiency, risk management, and customer satisfaction. An inability to integrate AI solutions into our business and operations may make us unable to compete with institutions that can offer more sophisticated, technologically advanced financial products and services, which may hinder our rates of retaining and expanding our customer base. Furthermore, our revenue and profitability could be negatively impacted by the costs associated with enhancing our

existing systems, upgrading our existing technologies and product offerings, and integrating AI tools into our business and operational structure.

The development, adoption, and integration of AI in our banking services, processes, and products may subject us to increased technological risks, costs, uncertainties, and unpredictable outcomes while increasing our compliance costs and exposing us to new operational challenges.

AI-driven technologies are rapidly evolving and complex, and successfully integrating AI tools requires substantial investment, expertise, and continuous monitoring. Our adoption and implementation of AI tools into our banking services, processes, and products presents significant technological risks, uncertainties, and unpredictable outcomes that could result from errors or biases in AI models, data inconsistencies, compliance violations, unforeseen system failures, or operational disruptions. Flaws in our introduction and use of AI technologies could create unintended consequences, amplify our costs, and inadvertently expose us to security vulnerabilities and technological inefficiencies that could hamper the customer experience, negatively impact transaction processing, and undermine our risk-management processes.

Furthermore, as the use of AI continues to evolve in the banking industry, so too will the AI-related regulations governing the banking and financial-services sectors. Regulators may impose new compliance requirements concerning AI governance, model validation, ethical use of AI, cybersecurity, data privacy, and automated decision-making, which may increase our costs and administrative burdens and restrict our ability to utilize AI for banking services, such as customer engagement, credit underwriting, fraud detection, and other banking functions. Our ability to adopt new forms of technologies and AI may be thwarted by the emergence of complex industry-wide standards, uncertainties in the legislative and regulatory environment governing AI in banking, and difficulties in establishing proper governance and controls related to new AI technologies that are compliant with evolving regulatory requirements. Incorporating AI solutions and complying with emerging regulatory frameworks may require significant resources, time, and technological investment. Additionally, any errors in AI-based models that generate biased or inaccurate results could cause us to make uninformed business decisions based on faulty data, potentially leading to financial losses and operational inefficiencies, and to face regulatory scrutiny, reputational damage, or legal liability. Failure to comply with AI-related regulations or to effectively manage AI-related risks could adversely affect our business, financial condition, and results of operations.

In October 2023, President Joe Biden issued an Executive Order (EO) on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence (AI), which sets new standards for AI safety and security, establishes guidelines and processes for the equitable use of AI, calls on Congress to pass bipartisan data-privacy legislation, and directs federal agencies to take various actions to advance the safety, security, and trustworthiness of AI systems and to mitigate AI risks. Several of the directives in the EO involve the financial-services industry. For example, the EO directs the Secretary of the Treasury to prepare a public report advising financial institutions on best practices for managing AI-specific cybersecurity risks, encourages the CFPB director to address how AI tools and automated systems, depending on their use, have the potential to enable unlawful discrimination and biases in the housing and consumer-finance markets or to facilitate compliance with the federal laws that prohibit those discriminatory practices, and encourages regulatory agencies to consider rulemaking to address the risks to financial stability and other risks that may result from using AI.

mortgage lending, including revisions to the CRA and greater oversight of property appraisals, including related algorithms and machine learning tools that can be used in the appraisal process.

The CFPB and other federal regulators, including the Federal Housing Administration, have issued several updated guidelines and proposed regulatory revisions that signal an ongoing focus on redlining and discrimination in mortgage lending, including revisions to the CRA and greater oversight of property appraisals, including related algorithms and machine learning tools that can be used in the appraisal process.