International Bancshares (IBOC) in Laredo, Texas, posted lower quarterly earnings because of shrinking margins and changes in the regulatory environment.

The $11.6 billion-asset company's second-quarter earnings fell more than 27% from a year earlier, to $21.2 million. Earnings per share of 31 cents fell short of analysts' estimates by 11 cents, according to Thomson Reuters.

For the first half of 2012, net income fell almost 17% from a year earlier, to $49.5 million.

The company was stung by a narrowing net interest margins caused by slow loan demand and declining yields in the bond markets. Net loans fell about 4% from the end of 2011, to $4.8 billion. The company also faced lower levels of revenues on interchange fees and overdraft programs because of regulatory changes.

"Earnings challenges for the industry, especially community banks, have become a significant factor in operating a community bank in today’s uncertain economic and regulatory environment," Dennis E. Nixon, the company's president and chief executive, said in a press release. "Management has taken and will continue to take aggressive steps to improve revenues and control expenses in this difficult period with the goal of improving performance."

Economic conditions continued to improve in International’s markets, creating a "favorable environment to grow earnings, even in the face of the regulatory headwinds facing the entire banking industry," Nixon said.

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