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

EXHIBIT 99.1
		Greg Parker
		Investor Relations
		210/220-5632
		or
		Renee Sabel
		Media Relations
		210/220-5416
FOR IMMEDIATE RELEASE
October 25, 2006
CULLEN/FROST REPORTS THIRD QUARTER
RESULTS AND TIMING OF EARNINGS CONFERENCE CALL
SAN ANTONIO - Cullen/Frost Bankers, Inc.(NYSE: CFR)today reported record earnings for the third quarter of 2006 of $50.0 million, a 17.8 percent increase, compared to the $42.5 million reported for the same period in 2005. On a per-share basis, net income for the quarter was $.88 per diluted common share, up 11.4 percent over the $.79 per diluted common share reported a year earlier. For the quarter, return on average assets and return on average equity were 1.72 percent and 18.56 percent, respectively, up from 1.68 percent and down from 18.98 percent for the same quarter in 2005. For thethird quarter of 2006, net interest income on a tax-equivalent basis rose 19.6 percent to $121.1 million, from the $101.3 million reported for the same quarter of 2005. Average loans increased 17.4 percent, to $6.6 billion, compared to the $5.6 billion reported for the third quarter a year earlier. Average deposits for the quarter increased to $9.1 billion, up 14.0 percent over the $8.0 billion reported for the third quarter of 2005. Excluding the impact of three acquisitions completed during the fourth quarter of 2005 and the first quarter of 2006, average loans rose 6.4 percent, and average deposits were up 5.3 percent, compared to the third quarter a year ago. "I am pleased to report third quarter results for our company." said Dick Evans, chairman and CEO. "Although average loan growth was up 17.4 percent over the same quarter a year earlier it was primarily impacted by recent acquisitions. To combat a highly competitive environment, combined with interest rate challenges, it is especially important that we continue to execute the sales disciplines we developed several years ago. Average loan volumes were flat from the second quarter, which combined with flat market rates over the same time period, contributed to a slight contraction in our net interest margin to 4.69 percent. " I was pleased to see deposit growth of 5.3 percent without recent acquisitions, and a 10.4 percent increase in trust fees from the third quarter a year ago. We are moving ahead with plans to finalize the acquisition of Summit Bank during the fourth quarter of this year and look forward to welcoming this Fort Worth-based bank into the Frost banking organization. "From job growth to a business-friendly environment and well-diversified economic base, I continue to feel positive about the Texas economy. The markets we serve are some of the best in the country, and we look forward to the opportunities that will come. As always, I am grateful to our outstanding staff for their dedication and support in serving the needs of our customers." For the first nine months of 2006, earnings were $145.2 million, or $2.58 per diluted common share, up 20.5 percent compared to $120.5 million, or $2.26 per diluted common share, for the same period in 2005. Returns on average assets and equity for the first nine months of 2006 were 1.70 percent and 18.81 percent respectively, compared to 1.63 percent and 18.88 percent for the same period a year earlier. Noted financial data for the third quarter of 2006 follows:
w	Net interest income on a taxable equivalent basis for the third quarter totaled $121.1 million, up 19.6 percent compared to $101.3 million for the same period a year ago. Impacting net interest income was a $1.3 billion increase in the average volume of earning assets, combined with an improvement in the earning asset mix, as average loans increased $1.0 billion from the third quarter last year. The increase in rates and volumes also led to a 17-basis-point increase in the net interest margin, which was 4.69 percent for the quarter, compared to 4.52 percent for the third quarter of 2005. The net interest margin for the third quarter, when compared to the second quarter of 2006, contracted one basis point from 4.70 percent and was impacted by flat loan volumes and the leveling off of market rates.
w	Non-interest incomefor the third quarter of 2006 totaled $59.9 million, up 3.2 percent from $58.1 million for the third quarter of 2005. Trust income was $16.0 million, up 10.4 percent from a year ago, mainly from investment fees that have benefited from both new accounts and improvements in the equities market compared to last year. Oil and gas trust management fees also contributed to the increase from last year as they increased $344 thousand. Other non-interest income was $10.9 million, a 9.9 percent increase over the $9.9 million reported the same quarter a year earlier. The primary reason for the increase was higher income from Visa checkcard usage. Service charges on deposit accounts were $19.3 million, compared to $20.2 million for the third quarter of 2005. The decrease was primarily due to the rising interest rate environment over the past year, in which commercial treasury management customers earn more credit for their deposit balances, resulting in a reduction of the amount of fees paid for these services.
w	Non-interest expensewas $102.9 million for the quarter, up $10.9 million, or 11.9 percent, from the $92.0 million reported a year earlier. Total salaries and wages and related employee benefits rose to $59.6 million, up 15.1 percent, compared to the third quarter of 2005, and were impacted by the acquisitions during late 2005 and early 2006, as well as normal annual merit increases, combined with an increase in the number of employees. Other expenses rose $1.7 million, or 6.7 percent from the third quarter last year, due to the acquisitions and conversion-related expenses. Also impacting the rise was a $900 thousand write-down on other real estate owned.
w	For thethird quarter of 2006, the provision for possible loan losses was $1.7 million, compared to net charge-offs of $1.6 million. For the third quarter of 2005, the provision for possible loan losses was $2.7 million, compared to net charge-offs of $2.7 million. The allowance for possible loan losses as a percentage of total loans was 1.31 percent at September 30, 2006, compared to 1.35 percent for the third quarter last year and 1.30 percent for the second quarter of 2006.
Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, October 25, 2006 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 conference call will be available after 2:00 p.m. CT until midnight Sunday, October 29, 2006 at 800-642-1687, with a Conference ID # of 8503485. The call will also be available by webcast at the URL listed below and available for playback after 2:00 p.m. CT; www.frostbank.com, go to "About Frost" on the top navigation bar, then click on Investor Relations. Cullen/Frost Bankers, Inc. (NYSE:CFR) is a financial holding company, headquartered in San Antonio, with assets of $11.6 billion at September 30, 2006. 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 93 financial centers across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Rio Grande Valley and San Antonio regions. Founded in 1868, Frost is one of the largest banks headquartered in Texas, with a legacy of helping Texans with their financial needs during three centuries.

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, objectives and expectations of Cullen/Frost or its management or Board of Directors, including those relating to products or servic es; (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 integration of acquired businesses. See the Corporation's current reports on Form 8-K filed with the SEC on July 3, 2006 and July 7, 2006 and the registration statements on Form S-4 and Form S-4/A filed with the SEC on August 15, 2006 and September 14, 2006.
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 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)
		2006												2005
		3rd Qtr				2nd Qtr				1st Qtr				4th Qtr				3rd Qtr
CONDENSED INCOME STATEMENTS
Net interest income	$		118,526		$		116,968		$		112,440		$		107,800		$		99,285
Net interest income(1)			121,093				119,309				114,719				109,968				101,255
Provision for possible loan losses			1,711				5,105				3,934				2,950				2,725
Non-interest income:
Trust fees			15,962				15,744				15,754				15,059				14,463
Service charges on deposit   accounts			19,301				19,566				19,107				19,749				20,173
Insurance commissions and fees			7,204				6,144				8,975				5,539				7,389
Other charges, commissions and   fees			6,558				8,196				5,914				6,117				6,135
Net gain (loss) on securities   transactions			- --				- --				(1	)			19				- --
Other			10,871				10,615				11,009				10,070				9,894
Total non-interest income			59,896				60,265				60,758				56,553				58,054
Non-interest expense:
Salaries and wages			48,743				47,463				46,106				43,787				41,818
Employee benefits			10,882				11,434				13,176				9,252				9,973
Net occupancy			8,964				8,512				8,433				8,244				8,111
Furniture and equipment			6,553				6,357				6,302				5,983				6,202
Intangible amortization			1,293				1,358				1,306				1,160				1,050
Other			26,505				25,070				24,873				26,652				24,838
Total non-interest expense			102,940				100,194				100,196				95,078				91,992
Income before income taxes			73,771				71,934				69,068				66,325				62,622
Income taxes			23,769				23,384				22,391				21,408				20,167
Net income	$		50,002		$		48,550		$		46,677		$		44,917		$		42,455
PER SHARE DATA
Net income - basic	$		0.90		$		0.88		$		0.86		$		0.83		$		0.81
Net income - diluted			0.88				0.86				0.83				0.81				0.79
Cash dividends			0.34				0.34				0.30				0.30				0.30
Book value at end of quarter			20.08				18.51				18.34				18.03				17.03
OUTSTANDING SHARES
Period-end shares			55,821				55,542				55,106				54,483				52,657
Weighted-average shares - basic			55,440				55,105				54,574				54,015				52,345
Dilutive effect of stock   compensation			1,147				1,198				1,353				1,346				1,285
Weighted-average shares - diluted			56,587				56,303				55,927				55,361				53,630
SELECTED ANNUALIZED RATIOS
Return on average assets			1.72	%			1.70	%			1.68	%			1.63	%			1.68	%
Return on average equity			18.56				19.02				18.86				18.52				18.98
Net interest income to average earning assets(1)			4.69				4.70				4.66				4.54				4.52

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

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
		2006									2005
		3rd Qtr			2nd Qtr			1st Qtr			4th Qtr		3rd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans	$	6,565		$	6,539		$	6,307		$	6,008		$	5,593
Earning assets		10,181			10,090			9,906			9,587			8,916
Total assets		11,522			11,450			11,286			10,901			10,037
Non-interest-bearing demand    deposits		3,309			3,300			3,305			3,302			2,964
Interest-bearing deposits		5,829			5,769			5,691			5,378			5,052
Total deposits		9,138			9,069			8,996			8,680			8,016
Shareholders' equity		1,069			1,024			1,004			962			887
Period-End Balance:
Loans	$	6,516		$	6,577		$	6,511		$	6,085		$	5,710
Earning assets		10,324			10,076			10,300			10,203			9,185
Goodwill and intangible    assets		268			268			269			184			111
Total assets		11,647			11,403			11,579			11,741			10,280
Total deposits		9,270			9,078			9,292			9,146			8,283
Shareholders' equity		1,121			1,028			1,011			982			897
Adjusted shareholders'    equity(1)		1,179			1,135			1,086			1,033			928
ASSET QUALITY
($ in thousands)
Allowance for possible
loan losses	$	85,667		$	85,552		$	84,142		$	80,325		$	77,117
as a percentage of
period-end loans		1.31	%		1.30	%		1.29	%		1.32	%		1.35	%
Net charge-offs	$	1,596		$	3,695		$	2,490		$	2,928		$	2,711
Annualized as a percentage
of average loans		0.10	%		0.23	%		0.16	%		0.19	%		0.19	%
Non-performing assets:
Non-accrual loans	$	30,045		$	30,824		$	34,027		$	33,179		$	34,432
Foreclosed assets		4,971			6,461			6,766			5,748			6,394
Total	$	35,016		$	37,285		$	40,793		$	38,927		$	40,826
As a percentage of:
Total loans and
foreclosed assets		0.54	%		0.57	%		0.63	%		0.64	%		0.71	%
Total assets		0.30			0.33			0.35			0.33			0.40
CONSOLIDATED CAPITAL RATIOS
Tier 1 Risk-Based
Capital Ratio		12.39	%		12.00	%		11.55	%		12.24	%		13.01	%
Total Risk-Based
Capital Ratio		14.68			14.65			14.21			14.94			15.92
Leverage Ratio		9.76			9.39			9.12			9.62			10.16
Equity to Assets Ratio
(period-end)		9.63			9.01			8.73			8.37			8.72
Equity to Assets Ratio
(average)		9.28			8.94			8.89			8.82			8.84

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

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
			Nine Months Ended
			September 30,
			2006			2005
CONDENSED INCOME STATEMENTS
Net interest income		$	347,934		$	283,466
Net interest income(1)			355,119			288,971
Provision for possible loan losses			10,750			7,300
Non-interest income
	Trust fees		47,460			43,294
	Service charges on deposit accounts		57,974			59,002
	Insurance commissions and fees		22,323			22,192
	Other charges, commissions and fees		20,668			17,008
	Net gain (loss) securities transactions		(1	)		--
	Other		32,495			32,330
	Total non-interest income	$	180,919		$	173,826
Non-interest expense
	Salaries and wages		142,312			122,272
	Employee benefits		35,492			32,325
	Net occupancy		25,909			22,863
	Furniture and equipment		19,212			17,929
	Intangible amortization		3,957			3,699
	Other		76,448			72,841
	Total non-interest expense	$	303,330		$	271,929
Income before income taxes			214,773			178,063
Income taxes			69,544			57,557
Net income		$	145,229		$	120,506
PER SHARE DATA
Net income - basic		$	2.64		$	2.32
Net income - diluted			2.58			2.26
Cash dividends			0.98			0.865
Book value at end of period			20.08			17.03
OUTSTANDING SHARES
Period-end shares			55,821			52,657
Weighted-average shares - basic			55,043			51,963
Dilutive effect of stock compensation			1,233			1,315
Weighted-average shares - diluted			56,276			53,278
SELECTED ANNUALIZED RATIOS
Return on average assets			1.70	%		1.63	%
Return on average equity			18.81			18.88
Net interest income to average earning assets(1)			4.68			4.41

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

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
				As of or for the
				Nine Months Ended
				September 30,
				2006			2005
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
	Loans		$	6,471		$	5,455
	Earning assets			10,059			8,761
	Total assets			11,416			9,887
	Non-interest-bearing demand deposits			3,305			2,910
	Interest-bearing deposits			5,763			5,038
	Total deposits			9,068			7,948
	Shareholders' equity			1,032			853
Period-End Balance:
	Loans		$	6,516		$	5,710
	Earning assets			10,324			9,185
	Goodwill and intangible assets			268			111
	Total assets			11,647			10,280
	Total deposits			9,270			8,283
	Shareholders' equity			1,121			897
	Adjusted shareholders' equity(1)			1,179			928
ASSET QUALITY
	($ in thousands)
Allowance for possible loan losses			$	85,667		$	77,117
		As a percentage of period-end loans		1.31	%		1.35	%
Net charge-offs:			$	7,781		$	5,993
		Annualized as a percentage of average loans		0.16	%		0.15	%
Non-performing assets:
	Non-accrual loans		$	30,045		$	34,432
	Foreclosed assets			4,971			6,394
	Total		$	35,016		$	40,826
	As a percentage of:
	Total loans and foreclosed assets			0.54	%		0.71	%
	Total assets			0.30			0.40
CONSOLIDATED CAPITAL RATIOS
Tier 1 Risk-Based Capital Ratio				12.39	%		13.01	%
Total Risk-Based Capital Ratio				14.68			15.92
Leverage Ratio				9.76			10.16
Equity to Assets Ratio (period-end)				9.63			8.72
Equity to Assets Ratio (average)				9.04			8.63

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