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 27, 2005
CULLEN/FROST REPORTS SECOND QUARTER
RESULTS AND TIMING OF EARNINGS CONFERENCE CALL
SAN ANTONIO - Cullen/Frost Bankers, Inc.(NYSE: CFR) today reported a 19 percent increase in second quarter 2005 net income of $40.7 million, or $.77 per diluted share, compared to $34.1 million, or $.65 per diluted share for the same quarter of 2004. Returns on average assets and average equity were 1.67 percent and 19.35 percent, respectively, for the second quarter of 2005, compared to 1.43 percent and 18.11 percent for the same quarter of 2004. Earnings for the second quarter of 2005 included pre-tax income of $2.4 million related to net proceeds received from the settlement of legal claims arising from the departure of certain revenue-producing employees in the benefits area of our Austin insurance operations. The gross settlement proceeds of $4.5 million were reduced by a $2.1 million write-down of related intangible assets. "It is a pleasure for me to report record quarterly earnings for the company," said Dick Evans, chairman and CEO of Cullen/Frost. "Our net interest margin increased to 4.42 percent - a level we haven't seen in more than two years - and net interest income grew by 16 percent from last year. Thiswas due, in part, to our asset sensitive balance sheet, which was positively impacted by the rising rate environment. It was great to see a solid increase of 14 percent in average loans compared to the prior year. Asset quality continues to be manageable, with both non-performing assets and net charge-offs down from a year ago." Evans continued, "I am pleased to have the settlement of legal claims from. the employee benefits area in the Austin insurance operations behind us. And, I am grateful to our dedicated staff for their continued outstanding effort, which makes it possible for us to deliver this strong performance." Average loans for the second quarter rose 14.4 percent over the same quarter of 2004, increasing from $4.8 billion to $5.5 billion. Average deposits for the quarter were $7.9 billion, compared to $7.7 billion a year earlier." For the first six months of 2005 net income was $78.1 million, or $1.47 per diluted common share, compared to $67.0 million, or $1.27 per diluted common share, for the same period in 2004. Returns on average assets and average equity for the first six months of 2005 were 1.60 percent and 18.83 percent, respectively, compared to 1.42 percent and 17.49 percent for the first six months last year. Noted financial data for the second quarter of 2005 follows:
w	Net interest income on a taxable-equivalent basis was $95.9 million for the second quarter of 2005, a 16.2 percent increase over the $82.6 million reported for the same quarter a year earlier. The net interest margin rose by 40 basis points, from 4.02 percent to 4.42 percent. Contributing to these increases was a rise in general market rates - influenced by periodic increases in the Fed Funds rate, which rose from 1.25 percent on June 30, 2004 to 3.25 percent on June 30, 2005 - along with a 5.4 percent growth in earning assets, with a larger proportion of these assets being in higher yielding loans.
w	Non-interest income for the second quarter of 2005 totaled $57.7 million, compared to $56.3 million reported a year earlier, a 2.5 percent increase.    For the second quarter, income from trust fees was $14.5 million, a 6.1 percent increase over the $13.7 million reported the previous year. Driving this growth in investment fees were improvements in the equities market when compared to a year earlier, and the addition of new trust accounts.    Other income was up $3.7 million from the second quarter last year, as the Corporation recognized income of $2.4 million related to net proceeds from the settlement of legal claims relating to the departure of certain revenue producing employees in the benefits area of our Austin insurance operations.    Service charges on deposits for the quarter were $19.5 million, compared to $22.5 million for the second quarter of 2004. This decrease was primarily related to a drop in treasury management fees from commercial accounts impacted by an increase in the earnings credit rate compared to a year earlier. During a rising interest rate environment, customers earn more credit for their deposit balances, which in turn reduces the amount of fees paid for these services.
w	Non-interest expense was $89.5 million, up $4.3 million, or 5.0 percent over the $85.2 million reported for the same period last year. Salaries and wages, combined with employee benefits, were up $2.3 million, or 4.8 percent from the same quarter of 2004, primarily due to normal annual merit increases and higher staff levels. Other expenses were up $1.6 million, or 7.3 percent, compared to the second quarter last year, and were impacted by increases in charitable donations and professional services expense.
w	For the second quarter of 2005, the provision for possible loan losses was $2.2 million, compared to net charge-offs of $1.6 million. The provision for possible loan losses for the second quarter of 2004 was $2.0 million, compared to net charge-offs of $4.1 million. At the end of the second quarter, the allowance for possible loan losses as a percentage of period-end loans was 1.38 percent, compared to 1.67 percent at the same date last year. Non-performing assets at June 30, 2005 were $41.3 million compared to $46.2 million for the second quarter of 2004.
Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, July 27, 2005 at 10:00 a.m. Central Time (CT) to discuss the results for the 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 conferencecall will be available after 12:00 p.m. CT until midnight Sunday, July 31, 2005 at (800) 642-1687 with Conference ID # of 7522259. The call will also be available by webcast at the URL listed below and available for playback after 2:00 p.m. CT. After entering the website, 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 $10 billion at June 30, 2005. The corporation provides a full range of commercial and consumer banking products, investment and brokerage services, insurance products and investment banking services. Its subsidiary, Frost Bank, operates 78 financial centers across Texas in Austin, Boerne, Corpus Christi, Dallas, Fort Worth, Galveston, Harlingen, Houston, McAllen, New Braunfels, San Antonio and San Marcos. 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, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of Cullen/Frost or its management or Board of Directors, including 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", "continue", "remain", "will", "should", "may" and other 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, national 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 the level of non-performing assets and charge-offs.
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 and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.
w	Inflation, interest rate, securities 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	Changes in the financial performance and/or condition of the Corporation's borrowers.
w	Technological changes.
w	Acquisitions and the integration of acquired businesses. See the Corporation's Current Report on Form 8-K filed with the SEC on April 22, 2005.
w	The ability to increase market share and control expenses.
w	Changes in the competitive environment among financial services 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 Public Company Accounting Oversight Board, 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 legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews.
w	Greater than expected costs or difficulties related to the integration of new products and 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)
		2005								2004
		2nd Qtr				1st Qtr				4th Qtr				3rd Qtr				2nd Qtr
CONDENSED INCOME STATEMENTS
Net interest income	$		94,078		$		90,103		$		87,888		$		83,976		$		81,242
Net interest income(1)			95,926				91,789				89,416				85,419				82,576
Provision for possible loan losses			2,175				2,400				- --				- --				2,000
Non-interest income:
Trust fees			14,541				14,290				13,886				13,213				13,704
Service charges on deposit   accounts			19,462				19,367				20,855				22,409				22,468
Insurance commissions and fees			6,193				8,610				6,536				8,048				6,234
Other charges, commissions and   fees			4,821				4,288				5,709				4,383				4,952
Net gain (loss) on securities   transactions			- --				- --				- --				(1,638	)			- --
Other			12,716				11,484				8,765				9,219				8,978
Total non-interest income			57,733				58,039				55,751				55,634				56,336
Non-interest expense:
Salaries and wages			40,454				40,000				40,588				39,836				38,855
Employee benefits			10,315				12,037				9,568				9,532				9,592
Net occupancy			7,408				7,344				7,157				7,524				7,364
Furniture and equipment			5,925				5,802				5,999				5,662				5,661
Intangible amortization			1,278				1,371				1,370				1,285				1,287
Other			24,070				23,933				22,053				22,660				22,440
Total non-interest expense			89,450				90,487				86,735				86,499				85,199
Income before income taxes			60,186				55,255				56,904				53,111				50,379
Income taxes			19,502				17,888				18,573				17,140				16,261
Net income	$		40,684		$		37,367		$		38,331		$		35,971		$		34,118
PER SHARE DATA
Net income - basic	$		0.78		$		0.72		$		0.74		$		0.70		$		0.67
Net income - diluted			0.77				0.70				0.71				0.68				0.65
Cash dividends			0.30				0.265				0.265				0.265				0.265
Book value at end of quarter			16.81				15.59				15.84				15.89				14.41
OUTSTANDING SHARES
Period-end shares			52,308				51,817				51,924				51,988				51,520
Weighted-average shares - basic			51,884				51,653				52,083				51,568				51,281
Dilutive effect of stock   compensation			1,246				1,416				1,555				1,562				1,441
Weighted-average shares - diluted			53,130				53,069				53,638				53,130				52,722
SELECTED ANNUALIZED RATIOS
Return on average assets			1.67	%			1.54	%			1.52	%			1.50	%			1.43	%
Return on average equity			19.35				18.31				18.18				18.45				18.11
Net interest income to average earning assets(1)			4.42				4.29				4.04				4.09				4.02

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

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
		2005						2004
		2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2nd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans	$	5,483		$	5,286		$	5,023		$	4,844		$	4,792
Earning assets		8,697			8,666			8,851			8,317			8,254
Total assets		9,786			9,840			10,028			9,515			9,617
Non-interest-bearing demand    deposits		2,869			2,897			2,947			2,891			2,959
Interest-bearing deposits		5,005			5,058			5,035			4,878			4,743
Total deposits		7,874			7,955			7,982			7,769			7,702
Shareholders' equity		844			828			839			776			758
Period-End Balance:
Loans	$	5,589		$	5,403		$	5,165		$	4,948		$	4,813
Earning assets		8,903			8,768			8,892			8,544			8,132
Goodwill and intangible    assets		112			115			117			118			112
Total assets		9,951			9,849			9,953			9,825			9,570
Total deposits		8,011			8,003			8,106			7,822			7,934
Shareholders' equity		879			808			822			826			742
Adjusted shareholders'    equity(1)		890			849			833			822			785
ASSET QUALITY
($ in thousands)
Allowance for possible
loan losses	$	77,103		$	76,538		$	75,810		$	77,114		$	80,485
As a percentage of
period-end loans		1.38	%		1.42	%		1.47	%		1.56	%		1.67	%
Net charge-offs	$	1,610		$	1,672		$	1,304		$	3,371		$	4,102
Annualized as a percentage
of average loans		0.12	%		0.13	%		0.10	%		0.28	%		0.34	%
Non-performing assets:
Non-accrual loans	$	34,205		$	32,884		$	30,443		$	42,701		$	41,046
Foreclosed assets		7,130			8,189			8,673			7,734			5,152
Total	$	41,335		$	41,073		$	39,116		$	50,435		$	46,198
As a percentage of:
Total loans and
foreclosed assets		0.74	%		0.76	%		0.76	%		1.02	%		0.96	%
Total assets		0.42			0.42			0.39			0.51			0.48
CONSOLIDATED CAPITAL RATIOS
Tier 1 Risk-Based
Capital Ratio		12.84	%		12.73	%		12.83	%		13.18	%		13.08	%
Total Risk-Based
Capital Ratio		15.82			15.82			15.99			16.48			16.52
Leverage Ratio		10.06			9.51			9.18			9.62			9.12
Equity to Assets Ratio
(period-end)		8.84			8.20			8.26			8.41			7.76
Equity to Assets Ratio
(average)		8.62			8.41			8.37			8.15			7.88

(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,
				2005		2004
CONDENSED INCOME STATEMENTS
Net interest income			$	184,181	$	159,574
Net interest income(1)				187,672		162,267
Provision for possible loan losses				4,575		2,500
Non-interest income
	Trust fees			28,831		26,811
	Service charges on deposit accounts			38,829		44,151
	Insurance commissions and fees			14,803		16,397
	Other charges, commissions and fees			9,109		9,261
	Net gain (loss) securities transactions			-		(1,739	)
	Other			24,200		18,844
	Total non-interest income			115,772		113,725
Non-interest expense
	Salaries and wages			80,454		77,615
	Employee benefits			22,352		21,076
	Net occupancy			14,752		14,694
	Furniture and equipment			11,727		11,110
	Intangible amortization			2,649		2,691
	Other			48,003		44,610
	Total non-interest expense			179,937		171,796
Income before income taxes				115,441		99,003
Income taxes				37,390		31,980
Net income			$	78,051	$	67,023
PER SHARE DATA
Net income - basic			$	1.51	$	1.30
Net income - diluted				1.47		1.27
Cash dividends				0.565		0.505
Book value at end of period				16.81		14.41
OUTSTANDING SHARES
Period-end shares				52,308		51,520
Weighted-average shares - basic				51,769		51,474
Dilutive effect of stock compensation				1,331		1,438
Weighted-average shares - diluted				53,100		52,912
SELECTED ANNUALIZED RATIOS
Return on average assets				1.60		1.42
Return on average equity				18.83		17.49
Net interest income to average earning assets(1)				4.35		4.03
(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,
					2005			2004
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
	Loans			$	5,385		$	4,711
	Earning assets				8,682			8,118
	Total assets				9,810			9,470
	Non-interest-bearing demand deposits				2,882			2,910
	Interest-bearing deposits				5,032			4,747
	Total deposits				7,914			7,657
	Shareholders' equity				836			771
Period-End Balance:
	Loans			$	5,589		$	4,813
	Earning assets				8,903			8,132
	Goodwill and intangible assets				112			112
	Total assets				9,951			9,570
	Total deposits				8,011			7,934
	Shareholders' equity				879			742
	Adjusted shareholders' equity(1)				890			785
ASSET QUALITY
	($ in thousands)
Allowance for possible loan losses				$	77,103		$	80,485
		As a percentage of period-end loans			1.38	%		1.67	%
Net charge-offs:				$	3,282		$	5,516
		Annualized as a percentage of average loans			0.12	%		0.23	%
Non-performing assets:
	Non-accrual loans			$	34,205		$	41,046
	Foreclosed assets				7,130			5,152
	Total			$	41,335		$	46,198
	As a percentage of:
	Total loans and foreclosed assets				0.74	%		0.96	%
	Total assets				0.42			0.48
	CONSOLIDATED CAPITAL RATIOS
	Tier 1 Risk-Based Capital Ratio				12.84	%		13.08	%
	Total Risk-Based Capital Ratio				15.82			16.52
	Leverage Ratio				10.06			9.12
	Equity to Assets Ratio (period-end)				8.84			7.76
	Equity to Assets Ratio (average)				8.52			8.14
(1)			Shareholders' equity excluding accumulated other comprehensive income (loss).