Cullen/Frost Bankers (CFR) 8-K Cullen/frost Reports Second Quarter

EXHIBIT 99.1
		Greg Parker
		Investor Relations
		210/220-5632
		or
		Renee Sabel
		Media Relations
		210/220-5416
FOR IMMEDIATE RELEASE
JULY 28, 2004
CULLEN/FROST REPORTS SECOND QUARTER
RESULTS AND TIMING OF EARNINGS CONFERENCE CALL
SAN ANTONIO - Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported second quarter 2004 net income of $34.1 million, or $.65 per diluted share, compared to $34.2 million, or $.65 per diluted share for the same quarter of 2003. Returns on average assets and average equity were 1.43 percent and 18.11 percent, respectively, for the second quarter of 2004, compared to 1.41 percent and 18.72 percent for the same quarter of 2003. "I am pleased with the company's performance for the second quarter. We believe the momentum we've seen in loan growth over last year's second quarter and improvements in credit quality reflect an improving economy, which is a positive for our company as we go forward, " said Dick Evans, chairman and CEO of Cullen/Frost. "Better results in the equities market also contributed to an increase in trust revenue, where we saw double-digit growth in our trust income from last year's second quarter, " Evans added. For the first six months of 2004 net income was $67.0 million, or $1.27 per diluted common share, compared to $65.1 million, or $1.25 per diluted common share, for the same period in 2003. Returns on average assets and average equity for the first six months of 2004 were 1.42 percent and 17.49 percent, respectively, compared to 1.37 percent and 18.19 percent for the first six months last year. Average loans rose 7.6 percent over the same quarter a year earlier and were 3.5 percent higher than the first quarter of 2004. Noted financial data for the second quarter of 2004 follows:
w	Net interest income on a taxable equivalent basis was $82.6 million for the second quarter of 2004, a 3.3 percent increase over the $80.0 million reported for the same quarter last year. Contributing to this increase was growth in both average earning assets and net interest margin. The average earning assets for the quarter rose $136 million to $8.3 billion compared to $8.1 billion for the second quarter last year, while the net interest margin increased seven basis points from 3.95 percent to 4.02 percent for the second quarter 2004. The growth in earning assets was funded by an increase in average deposits of $137 million, mainly in average interest-bearing deposits, which increased $254 million from the second quarter last year.
w	Non-interest income for the second quarter of 2004 totaled $56.3 million compared to $55.3 million reported a year earlier. Contributing to this improvement in fee income were increases in trust fees and service charges on deposits. For the second quarter, income from trust fees was $13.7 million, a 12.3 percent increase over the $12.2 million reported the previous year. Improvements in the equities market and the addition of new trust accounts were the primary drivers for the increase in investment fees. Service charges on deposits for the quarter rose 3.3 percent to $22.5 million, from $21.8 million for the second quarter of 2003, an increase that was primarily related to commercial accounts. Also impacting non-interest income were decreases in insurance commissions and other income. Insurance commissions were down $407,000 to $6.2 million, due in part to the elevated market pressure related to the pricing of insurance policies and commissions. Other inco me was down $1.2 million from the second quarter last year as realized gains on the sale of student loans were down $1.1 million. Fewer student loans were sold in the second quarter of 2004 compared to the same quarter last year.
w	Non-interest expense was $85.2 million, up $5.0 million or a 6.2 percent increase over the $80.2 million reported for the second quarter of 2003. Salaries and wages were up $3.3 million, or 9.4 percent from the same period last year, primarily due to increases in employee base pay - both merit and market-driven - and higher staff levels. Other expenses were up $1.3 million, or 6.2 percent, compared to the second quarter last year. Timing of advertising and promotional campaigns, as well as higher costs of directors' and officers' liability insurance, were the main drivers of this increase.
w	For the second quarter of 2004, the provision for possible loan losses was $2.0 million compared to net charge-offs of $4.1 million. The provision for possible loan losses for the second quarter of 2003 was $3.4 million compared to net charge-offs of $3.4 million. At June 30, 2004, the allowance for possible loan losses as a percentage of period-end loans was 1.67 percent compared to 1.87 percent at the same date last year. Non-performing assets at quarter's end were $46.2 million compared to $50.3 million at the end of last quarter and $43.6 million at June 30, 2003.
Cullen/Frost Bankers, Inc. will host a conference call on July 28, 2004 at 10:00 a.m. Central Daylight Time (CDT) to discuss the results for the second quarter. The media and other interested parties are invited to access the call in a "listen only" mode at 800-944-6430. Digital playback of the conference call will be available after 12:00 p.m. CDT until midnight Sunday, August 1, 2004 at (domestic) 800-642-1687 or (international) 706-645-9291. The call will also be available by webcast at the following URL and available for playback after 2:00 p.m. CDT:www.frostbank.com, go to "About Frost" on the top navigation bar, then click on Investor Relations. Cullen/Frost Bankers, Inc. is a financial holding company, headquartered in San Antonio, with assets of $9.6 billion at June 30, 2004. Frost Bank,operates 79 financial centers across Texas in Austin, Boerne, Corpus Christi, Dallas, Fort Worth, Galveston, Harlingen, Houston, McAllen, New Braunfels, San Antonio and San Marcos. The corporation provides a full range of commercial and consumer banking products, investment and brokerage services, insurance products and investment banking services. Founded in 1868, Frost is the largest national bank based in Texas, helping Texans with their financial needs during three centuries. Cullen/Frost Bankers' stock is traded on the New York Stock Exchange under the symbol CFR.

Forward-Looking Statements and Factors that Could Affect Future Results
Certain statements contained in this Earnings Release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified. In addition, certain statements may be contained in the Corporation's future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Corporation that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans and objectives of Cullen/Frost or its management or Board of Directors, includin g those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", "intends", "targeted" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
w	Local, regional and international economic conditions and the impact they may have on the Corporation and its customers and the Corporation's assessment of that impact.
w	Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.
w	The effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board.
w	Inflation, interest rate, market and monetary fluctuations.
w	Political instability.
w	Acts of war or terrorism.
w	The timely development and acceptance of new products and services and perceived overall value of these products and services by users.
w	Changes in consumer spending, borrowings and savings habits.
w	Technological changes.
w	Acquisitions and the integration of acquired businesses.
w	The ability to increase market share and control expenses.
w	Changes in the competitive environment among financial holding companies.
w	The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Corporation and its subsidiaries must comply.
w	The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as the Financial Accounting Standards Board and other accounting standard setters.
w	Changes in the Corporation's organization, compensation and benefit plans.
w	The costs and effects of litigation and of unexpected or adverse outcomes in such litigation.
w	Greater than expected costs or difficulties related to the integration of new lines of business.
w	The Corporation's success at managing the risks involved in the foregoing items.
Forward-looking statements speak only as of the date on which such statements are made. The Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
		2004								2003
		2nd Qtr				1st Qtr				4th Qtr				3rd Qtr				2nd Qtr
CONDENSED INCOME STATEMENTS
Net interest income	$		81,242		$		78,332		$		79,526		$		77,454		$		78,669
Net interest income(1)			82,576				79,691				80,806				78,756				79,971
Provision for possible loan losses			2,000				500				1,500				1,998				3,446
Non-interest income
Trust fees			13,704				13,107				12,769				11,646				12,206
Service charges on deposit   accounts			22,468				21,683				22,373				22,576				21,752
Insurance commissions and fees			6,234				10,163				5,912				7,276				6,641
Other charges, commissions and   fees			4,952				4,309				4,245				6,334				4,440
Net gain (loss) on securities   transactions			- --				(1,739	)			- --				40				- --
Other			8,978				9,866				7,553				7,339				10,221
Total non-interest income			56,336				57,389				52,852				55,211				55,260
Non-interest expense
Salaries and wages			38,855				38,760				37,194				37,408				35,523
Employee benefits			9,592				11,484				9,176				9,129				9,420
Net occupancy			7,364				7,330				7,040				7,804				7,372
Furniture and equipment			5,661				5,449				5,496				5,418				5,395
Intangible amortization			1,287				1,404				1,409				1,412				1,380
Other			22,440				22,170				22,151				21,111				21,126
Total non-interest expense			85,199				86,597				82,466				82,282				80,216
Income before income taxes			50,379				48,624				48,412				48,385				50,267
Income taxes			16,261				15,719				15,777				15,622				16,034
Net income	$		34,118		$		32,905		$		32,635		$		32,763		$		34,233
PER SHARE DATA
Net income - basic	$		0.67		$		0.64		$		0.63		$		0.64		$		0.67
Net income - diluted			0.65				0.62				0.61				0.62				0.65
Cash dividends			0.265				0.24				0.24				0.24				0.24
Book value at end of quarter			14.41				15.19				14.87				14.69				14.57
OUTSTANDING SHARES
Period-end shares			51,520				51,329				51,776				51,752				51,464
Weighted-average shares - basic			51,281				51,666				51,713				51,503				51,307
Dilutive effect of stock   compensation			1,441				1,525				1,521				1,315				1,046
Weighted-average shares - diluted			52,722				53,191				53,234				52,818				52,353
SELECTED ANNUALIZED RATIOS
Return on average assets			1.43	%			1.42	%			1.37	%			1.33	%			1.41	%
Return on average equity			18.11				16.89				17.02				17.78				18.72
Net interest income to average   earning assets(1)			4.02				4.03				4.01				3.88				3.95

(1) Taxable-equivalent basis assuming a 35% tax rate.

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
		2004						2003
		2nd Qtr			1st Qtr			4th Qtr			3rd Qtr		2nd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans	$	4,792		$	4,630		$	4,543		$	4,457		$	4,455
Earning assets		8,254			7,982			8,029			8,083			8,118
Total assets		9,617			9,313			9,422			9,737			9,755
Non-interest-bearing demand    deposits		2,959			2,860			2,974			3,203			3,076
Interest-bearing deposits		4,743			4,751			4,675			4,545			4,489
Total deposits		7,702			7,611			7,649			7,748			7,565
Shareholders' equity		758			784			761			731			733
Period-End Balance:
Loans	$	4,813		$	4,726		$	4,591		$	4,526		$	4,462
Earning assets		8,132			8,605			8,132			8,018			8,445
Goodwill and intangible    assets		112			113			115			116			118
Total assets		9,570			9,990			9,672			9,655			10,014
Total deposits		7,934			7,773			8,069			7,740			7,902
Shareholders' equity		742			780			770			760			750
Adjusted shareholders'    equity(1)		785			758			762			745			717
ASSET QUALITY
($ in thousands)
Allowance for possible
loan losses	$	80,485		$	82,587		$	83,501		$	83,410		$	83,410
as a percentage of
Period-end loans		1.67	%		1.75	%		1.82	%		1.84	%		1.87	%
Net charge-offs:	$	4,102		$	1,414		$	1,409		$	1,998		$	3,446
As a percentage of
average loans		0.34	%		0.12	%		0.12	%		0.18	%		0.31	%
Non-performing assets:
Non-accrual	$	41,046		$	45,415		$	47,451		$	34,218		$	37,153
Foreclosed assets		5,152			4,875			5,343			6,977			6,403
Total	$	46,198		$	50,290		$	52,794		$	41,195		$	43,556
As a percentage of:
Total assets		0.48	%		0.50	%		0.55	%		0.43	%		0.43	%
Total loans and
foreclosed assets		0.96			1.06			1.15			0.91			0.97
CONSOLIDATED CAPITAL RATIOS
Tier 1 Risk-Based
Capital Ratio		13.08	%		12.76	%		11.41	%		11.36	%		11.11	%
Total Risk-Based
Capital Ratio		16.52			16.26			15.01			15.00			14.79
Leverage Ratio		9.12			9.21			7.83			7.39			7.10
Equity to Assets Ratio
(period-end)		7.76			7.80			7.96			7.87			7.49
Equity to Assets Ratio
(average)		7.88			8.42			8.08			7.51			7.51

(1) Shareholders' equity excluding accumulated other comprehensive income (loss).

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
				Six Months Ended
				June 30,
				2004			2003
CONDENSED INCOME STATEMENTS
Net interest income			$	159,574		$	156,778
Net interest income(1)				162,267			159,383
Provision for possible loan losses				2,500			7,046
Non-interest income
	Trust fees			26,811			23,071
	Service charges on deposit accounts			44,151			42,856
	Insurance commissions and fees			16,397			15,472
	Other charges, commissions and fees			9,261			8,089
	Net gain (loss) securities transactions			(1,739	)		-
	Other			18,844			17,810
	Total non-interest income			113,725			107,298
Non-interest expense
	Salaries and wages			77,615			72,020
	Employee benefits			21,076			20,011
	Net occupancy			14,694			14,442
	Furniture and equipment			11,110			10,854
	Intangible amortization			2,691			3,065
	Other			44,610			40,895
	Total non-interest expense			171,796			161,287
Income before income taxes				99,003			95,743
Income taxes				31,980			30,640
Net income			$	67,023		$	65,103
PER SHARE DATA
Net income - basic			$	1.30		$	1.27
Net income - diluted				1.27			1.25
Cash dividends				0.505			0.46
Book value at end of period				14.41			14.57
OUTSTANDING SHARES
Period-end shares				51,520			51,464
Weighted-average shares - basic				51,474			51,273
Dilutive effect of stock compensation				1,438			1,007
Weighted-average shares - diluted				52,912			52,280
SELECTED ANNUALIZED RATIOS
Return on average assets				1.42			1.37
Return on average equity				17.49			18.19
Net interest income to average earning assets(1)				4.03			4.02
(1)		Taxable-equivalent basis assuming a 35% tax rate.

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
						As of or for the
						Six Months Ended
						June 30,
						2004			2003
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
	Loans				$	4,711		$	4,495
	Earning assets					8,118			7,965
	Total assets					9,470			9,587
	Non-interest-bearing demand deposits					2,910			2,986
	Interest-bearing deposits					4,747			4,468
	Total deposits					7,657			7,455
	Shareholders' equity					771			722
Period-End Balance:
	Loans				$	4,813		$	4,462
	Earning assets					8,132			8,445
	Goodwill and intangible assets					112			118
	Total assets					9,570			10,014
	Total deposits					7,934			7,902
	Shareholders' equity					742			750
	Adjusted shareholders' equity(1)					785			717
ASSET QUALITY
	($ in thousands)
Allowance for possible loan losses					$	80,485		$	83,410
		As a percentage of period-end loans				1.67	%		1.87	%
Net charge-offs:					$	5,516		$	6,220
		As a percentage of average loans				0.23	%		0.28	%
Non-performing assets:
	Non-accrual loans				$	41,046		$	37,153
	Foreclosed assets					5,152			6,403
				Total	$	46,198		$	43,556
	As a percentage of:
				Total assets		0.48	%		0.43	%
				Total loans and foreclosed assets		0.96			0.97
	CONSOLIDATED CAPITAL RATIOS
	Tier 1 Risk-Based Capital Ratio					13.08	%		11.11	%
	Total Risk-Based Capital Ratio					16.52			14.79
	Leverage Ratio					9.12			7.10
	Equity to Assets Ratio (period-end)					7.76			7.49
	Equity to Assets Ratio (average)					8.14			7.53
(1)			Shareholders' equity excluding accumulated other comprehensive income (loss).

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