International Bancshares (IBOC) 8-K/A Acquisition or disposition of assets

EXHIBIT 99.2

International Bancshares Corporation and Subsidiaries
Unaudited Pro Forma Combined Consolidated Financial Statements

     The following Unaudited Pro Forma Combined Consolidated Financial Statements have been prepared under the purchase method and are based on the historical consolidated financial statements of International Bancshares Corporation and subsidiaries (IBC) and the historical consolidated financial statements of Local Financial Corporation and subsidiaries (Local), which have been adjusted to reflect the historical cost of Local’s assets and liabilities at their fair value and to give effect to the IBC stock dividend declared on April 1, 2004. In addition, pro forma adjustments have been included to give effect to events that are directly attributable to the transaction and expected to have a continuing impact on IBC. Pro forma adjustments for the Unaudited Pro Forma Combined Consolidated Statements of Income include amortization of core deposit intangible and other adjustments based on the allocated purchase price of net assets acquired.

     The following Unaudited Pro Forma Combined Consolidated Statement of Condition combines the historical Consolidated Statement of Condition of IBC and the historical Consolidated Statement of Financial Condition of Local giving effect to the consummation of the merger on March 31, 2004, using the purchase method of accounting and giving effect to the related pro forma adjustments described in the accompanying Notes to the Unaudited Pro Forma Combined Consolidated Financial Statements.

     The following Unaudited Pro Forma Combined Consolidated Statement of Income for the three months ended March 31, 2004, and the year ended December 31, 2003 combine the historical consolidated statements of income of IBC and the historical consolidated statements of income of Local giving effect to the merger as if the merger had become effective at January 1, 2003, using the purchase method of accounting and giving effect to the related pro forma adjustments described in the accompanying Notes to the Unaudited Pro Forma Combined Consolidated Financial Statements.

     Although pro forma financial information is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States of America, IBC believes that pro forma financial information is important because it gives effect to the merger as if the merger had become effective at the beginning of the periods presented. The manner in which IBC calculates pro forma financial information may differ from similarly titled measures reported by other companies.

     The Unaudited Pro Forma Combined Consolidated Financial Statements included herein are presented for informational purposes only. This information includes various estimates and may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the periods indicated or which may be obtained in the future. The unaudited pro forma combined consolidated financial statements and accompanying notes should be read in conjunction with and are qualified in their entirety by reference to the historical consolidated financial statements and related notes thereto of IBC and Local.

     The Unaudited Pro Forma Combined Consolidated Financial Statements included herein do not include the effects of any potential cost savings that management believes will result from operating the Local banking business as branches and combining certain operating functions. They also do not necessarily reflect what the historical results of IBC would have been had the companies been combined during these periods.

INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF CONDITION
March 31, 2004

	Historical						Pro Forma			Pro Forma
	IBC			Local			Adjustments			Balance
	(Dollars in Thousands)
Cash and due from banks	$	134,918		$	49,716		$	—		$	184,634
Federal funds sold		240,500			—			—			240,500
Total cash and cash equivalents		375,418			49,716			—			425,134
Time deposits with banks		100			47,200			—			47,300
Investment securities:
Held to maturity		2,160			264,526			(11,230	)(1)		255,456
Available for sale		2,886,049			118,923			(926	)(1)		3,004,046
Total investment securities		2,888,209			383,449			(12,156	)		3,259,502
Loans:
Commercial, financial and agricultural		1,426,933			1,233,313			4,845	(1)		2,665,091
Real estate — residential mortgage		510,523			854,767			—			1,365,290
Real estate — construction		487,120			71,896			—			559,016
Consumer		143,113			73,229			—			216,342
Foreign		227,316			—			—			227,316
Total loans		2,795,005			2,233,205			4,845			5,033,055
Less unearned discounts		(1,148	)		(1,163	)		—			(2,311	)
Loans, net of unearned discounts		2,793,857			2,232,042			4,845			5,030,744
Less allowance for possible loan losses		(49,846	)		(31,980	)		—			(81,826	)
Net loans		2,744,011			2,200,062			4,845			4,948,918
Bank premises and equipment, net		224,378			43,636			10,000	(1)
								(2,727	)(1)		275,287
Accrued interest receivable		27,461			10,347			—			37,808
Other investments		203,146			40,126			—			243,272
Goodwill		67,442			18,132			22,449	(2)
								6,802	(3)
								20,975	(1)
								141,119	(4)		276,919
Identified intangible asset		5,646			1,171			42,188	(4)		49,005
Other assets		51,761			64,809			12,087	(2)
								540	(3)
								17,012	(1)		146,209
Total Assets	$	6,587,572		$	2,858,648		$	263,134		$	9,709,354
Liabilities:
Deposits
Demand noninterest bearing	$	834,827		$	212,386		$	—		$	1,047,213
Savings and interest bearing demand		1,387,065			802,338			—			2,189,403
Time		2,266,349			907,069			8,991	(1)		3,182,409
Total deposits		4,488,241			1,921,793			8,991			6,419,025
Federal funds purchased and securities sold under repurchase agreements		503,936			53,646			19,666	(2)
								276,562	(4)		853,810
Other borrowed funds		750,208			621,314			24,363	(1)		1,395,885
Junior subordinated deferrable interest debentures		172,510			62,115			—			234,625
Other liabilities		62,080			15,941			14,871	(2)
								7,342	(3)
								5,196	(1)		105,430
Total Liabilities		5,976,975			2,674,809			356,991			9,008,775
Shareholders’ equity:
Common stock		52,876			211			1,904	(4)		54,991
Surplus		39,133			211,096			(123,229	)(4)		127,000
Retained earnings		666,125			186,741			(186,741	)(4)		666,125
Accumulated other comprehensive income		18,411			602			(602	)(1)		18,411
Less cost of shares in treasury		(165,948	)		(214,811	)		214,811	(4)		(165,948	)
Total shareholders’ equity		610,597			183,839			(93,857	)		700,579
Total liabilities and shareholders’ equity	$	6,587,572		$	2,858,648		$	263,134		$	9,709,354

The accompanying Notes to the Unaudited Pro Forma Combined Consolidated Statement of Condition are an
integral part of the pro forma financial statements.

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2003

	Historical						Pro Forma			Pro Forma
	IBC			Local			Adjustments			Balance
	(Dollars in Thousands, Except Per Share Amounts)
Interest income:
Loans, including fees	$	176,800		$	131,610		$	(969	)(1)	$	307,441
Time deposits with banks		9			—			—			9
Federal funds sold		594			—			—			594
Investment securities		140,278			17,292			(17,292	)(2)		140,278
Other interest income		370			1,902			—			2,272
Total interest income		318,051			150,804			(18,261	)		450,594
Interest expense:
Savings Deposits		10,168			7,097			—			17,265
Time Deposits		41,013			25,843			(4,496	)(1)		62,360
Federal funds purchased and securities sold under repurchase agreements		18,770			356			3,041	(3)		22,167
Other borrowings and junior subordinated deferrable interest debentures		24,774			33,011			(24,098	)(2)		33,687
Total interest expense		94,725			66,307			(25,553	)		135,479
Net interest income		223,326			84,497			7,292			315,115
Provision for possible loan losses		(8,291	)		(6,600	)		—			(14,891	)
Net interest income after provision for possible loan losses		215,035			77,897			7,292			300,224
Noninterest income:
Service charges on deposit accounts		60,022			21,815			—			81,837
Other service charges, commissions and fees		25,905			3,983			—			29,888
Investment securities, net		23,390			319			—			23,709
Other investments, net		8,606			—			—			8,606
Other income		9,350			7,657			—			17,007
Total noninterest income		127,273			33,774			—			161,047
Noninterest expenses:
Compensation and benefits		72,860			44,137			—			116,997
Expenses of premises and fixed assets		30,155			5,091			(631	)(4)		34,615
Professional Fees		7,545			1,600			—			9,145
Stationary and supplies		3,855			1,065			—			4,920
Amortization of identified intangible asset		1,276			320			(320	)(5)		6,170
								4,894	(6)
Advertising		7,011			685			—			7,696
Other noninterest expenses		37,052			19,649			—			56,701
Total noninterest expenses		159,754			72,547			3,943			236,244
Income before income taxes		182,554			39,124			3,349			225,027
Provision for income taxes		60,426			11,029			1,172	(7)		72,627
Net income	$	122,128		$	28,095		$	2,177		$	152,400
Basic earnings per common share:
Weighted average number of shares outstanding		48,362,449						2,114,558			50,477,007
Net income	$	2.53						—		$	3.02
Fully diluted earnings per common share:
Weighted average number of shares outstanding		49,336,609						2,114,558			51,451,167
Net income	$	2.47						—		$	2.96

The accompanying Notes to the Unaudited Pro Forma Combined Consolidated Statement of Income are an integral
part of the pro forma financial statements.

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INTERNATIONAL BANCSHARES CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2004

	Historical						Pro Forma			Pro Forma
	IBC			Local			Adjustments			Balance
	(Dollars in Thousands, Except Per Share Amounts)
Interest income:
Loans, including fees	$	43,426		$	31,643		$	(242	)(1)	$	74,827
Time deposits with banks		6			108			—			114
Federal funds sold		469			—			—			469
Investment securities		26,907			3,625			(3,625	)(2)		26,907
Other interest income		162			508			—			670
Total interest income		70,970			35,884			(3,867	)		102,987
Interest expense:
Savings Deposits		2,217			1,710			—			3,927
Time Deposits		9,051			5,360			(1,124	)(1)		13,287
Federal funds purchased and securities sold under repurchase agreements		4,757			104			864	(3)		5,725
Other borrowings and junior subordinated deferrable interest debentures		4,694			6,947			(5,506	)(2)		6,135
Total interest expense		20,719			14,121			(5,766	)		29,074
Net interest income		50,251			21,763			1,899			73,913
Provision for possible loan losses		(1,342	)		(2,000	)		—			(3,342	)
Net interest income after provision for possible loan losses		48,909			19,763			1,899			70,571
Noninterest income:
Service charges on deposit accounts		14,409			5,644			—			20,053
Other service charges, commissions and fees		4,739			1,141			—			5,880
Investment securities, net		4,772			—			—			4,772
Other investments, net		2,512			—			—			2,512
Other income		1,881			1,641			—			3,522
Total noninterest income		28,313			8,426			—			36,739
Noninterest expenses:
Compensation and benefits		16,441			7,924			—			24,365
Expenses of premises and fixed assets		7,324			3,012			(158	)(4)		10,178
Professional fees		1,574			1,531			—			3,105
Stationary and supplies		979			242			—			1,221
Amortization of identified intangible asset		246			71			(71	)(5)
								1,099	(6)		1,345
Advertising		1,856			105			—			1,961
Other noninterest expenses		9,268			4,630			—			13,898
Total noninterest expenses		37,688			17,515			870			56,073
Income before income taxes		39,534			10,674			1,029			51,237
Provision for income taxes		13,015			3,523			360	(7)		16,898
Net income	$	26,519		$	7,151		$	669		$	34,339
Basic earnings per common share:
Weighted average number of shares outstanding		48,433,898						2,114,558			50,548,456
Net income	$	0.55						—		$	0.68
Fully diluted earnings per common share:
Weighted average number of shares outstanding		49,527,370						2,114,558			51,641,928
Net income	$	0.54						—		$	0.66

The accompanying Notes to the Unaudited Pro Forma Combined Consolidated Statement of Income are an integral
part of the pro forma financial statements.

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INTERNATIONAL BANCSHARES CORPORATION

NOTES TO THE UNAUDITED PRO FORMA COMBINED

CONSOLIDATED FINANCIAL STATEMENTS

Notes to Unaudited Pro Forma Combined Consolidated Statement of Condition

     The accompanying unaudited pro forma combined consolidated statement of condition was derived from the historical consolidated financial records of IBC and Local and should be read in conjunction with their historical consolidated financial statements.

     The following is a summary of the pro forma adjustments:

          (1) Record estimated fair market value adjustments, including write off of existing goodwill and core deposit intangibles on Local’s books, net of taxes.

          (2) Record Local’s payment of change of control contracts and outstanding stock options, net of related tax benefit.

          (3) Record transaction costs, net of related tax benefits.

          (4) Record payment to Local stockholders for 75% of their outstanding shares of Local common stock, the issuance of 2,114,558 shares of IBC common stock valued at $89,981,197 (based on an IBC common stock value of $42.5518 per share) to Local’s stockholders for the remaining 25% of their shares of Local common stock, the elimination of all of Local’s equity accounts and the recording of goodwill and core deposit intangible.

Notes to Unaudited Pro Forma Combined Consolidated Statements of Income

     The accompanying unaudited pro forma combined consolidated statements of income were derived from the historical consolidated financial records of IBC and Local and should be read in conjunction with their historical consolidated financial statements.

     The following is a summary of the pro forma adjustments:

     (1) Record interest income/expense effect during the first year after consummation of the merger of the purchase adjustments set forth below. The aggregate amount of such effects for the second through fifth years post-consummation are also set forth below.

				Years 2-5
	Year 1			(Aggregate)
	(In thousands)
Interest income — loans	$	(969	)	$	(3,876	)
Interest expense — time deposits	$	(4,496	)	$	(4,495	)

     (2) Record decline in interest income and interest expense due to the sale of securities and the payoff of the FHLB of Topeka advances shortly after consummation of the merger for the year ended December 31, 2003 and the three months ended March 31, 2004.

     (3) Record interest expense on the $276,562,000 increase in Federal Funds purchased to fund payment to Local stockholders for 75% of their outstanding shares of Local common stock for the year ended December 31, 2003 and three months ended March 31, 2004.

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INTERNATIONAL BANCSHARES CORPORATION

NOTES TO THE UNAUDITED PRO FORMA COMBINED

CONSOLIDATED FINANCIAL STATEMENTS — (CONTINUED)

Notes to Unaudited Pro Forma Combined Consolidated Statements of Income — (Continued)

          (4) Record net decrease in depreciation expenses due to purchase adjustments recorded.

				Years 2-5
	Year 1			Aggregated
	(In Thousands)
Building	$	253		$	1,012
FF&E and Software		(884	)		(2,143	)
Net Adjustment	$	(631	)	$	(1,131	)

          (5) Reverse amortization of existing intangibles on Local’s books which will be written off at acquisition.

          (6) Record amortization of the estimated $42,000,000 core deposit premium. Amortization is based on an estimated deposit runoff of 15% during the first year of the estimated 10 year life.

          (7) Record income tax benefit of the pro forma adjustments using IBC’s federal income tax rate.

          (8) Weighted average shares outstanding and resulting per share information has been adjusted to reflect the 25% IBC stock dividend declared on April 1, 2004 and payable to stockholders of record on May 3, 2004.

     The above unaudited pro forma combined consolidated statements of income are based on the cash payment to Local stockholders for 75% of their outstanding shares of Local common stock and the issuance of 2,114,558 shares of IBC common stock valued at $89,981,197 for the remaining 25% of their shares of Local common stock ($42.5518 per share of IBC common stock). IBC expects that the merger will result in certain merger, integration and restructuring expenses. The pro forma income data does not reflect any anticipated merger, integration and restructuring expenses resulting from the merger. It is also anticipated that the merger will provide IBC with certain financial benefits that include reduced operating expenses. The pro forma information does not reflect any of these anticipated cost savings or benefits.

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