Cullen/Frost Bankers (CFR) 8-K Cullen/frost Reports Outstanding 3Q Performance, Growth

Exhibit 99.1

Greg Parker

Investor Relations

210/220-5632

or

Renee Sabel

Media Relations

210/220-5416

FOR IMMEDIATE RELEASE

October 22, 2008

CULLEN/FROST REPORTS OUTSTANDING 3Q PERFORMANCE, GROWTH

AMID FINANCIAL CRISIS

Hurricane Ike Costs Biggest Impact on Results

SAN ANTONIO – Cullen/Frost Bankers, Inc. (NYSE: CFR) today reported earnings for the third quarter of 2008 of $49.0 million, compared to the $56.5 million reported for the same period in 2007. On a per-share basis, net income for the quarter was $.82 per diluted common share, compared to the $.95 per diluted common share reported a year earlier. Approximately $10 million of the provision for possible loan losses or $.11 on an after-tax per-share basis was related to the projected impact of Hurricane Ike on the Corporation’s operations in the Houston and Galveston markets. Return on average assets and return on average equity for the third quarter of 2008 were 1.44 percent and 12.39 percent, respectively, compared to 1.72 percent and 16.44 percent for the same quarter in 2007.

For the third quarter of 2008, net interest income on a tax-equivalent basis was $139.7 million, a 3.7 percent increase compared to the $134.7 million for the same quarter of 2007. Average loans for the third quarter of 2008 rose 13.4 percent, to $8.4 billion, compared to the $7.4 billion reported for the third quarter a year earlier. Average deposits for the quarter increased to $10.4 billion, up 1.5 percent over the $10.3 billion reported for the third quarter of 2007.

“Cullen/Frost continues to generate positive results in the midst of a financial storm that has taken many banks with it,” said Dick Evans, chairman and CEO. “But the storm that affected us the most this quarter was Hurricane Ike – a Texas-sized natural disaster that slammed the Texas coast at Galveston and Houston. Thanks to extraordinary planning and execution, most of our Houston locations were up and running within a week, and Galveston locations were operational two weeks later.

“We generated solid growth in non-interest income, including an 11.3 percent increase in trust income. I was pleased to see loans rise by over 13 percent, as deposits were up about 2 percent. It was also good to see the net interest margin up six basis points over the previous quarter to 4.74 percent. In the first few weeks of the fourth quarter, we are seeing an increase in deposits as consumers and businesses alike, considering Frost a safe haven, move money and relationships to our company.

“This quarter we opened new financial centers in Houston and San Antonio, including our first on a college campus at the University of Texas at San Antonio, with additional locations opening in the coming months. We are fortunate to operate only in the state of Texas, in some of the top markets in the country. With a senior management team on board who helped us survive the 1980s, we have a proven track record of managing through challenging financial times. Our exceptional staff continues to perform at a high level, and that was never more evident than during the hurricane, when many employees went above and beyond to make sure we took care of our customers as well as fellow employees. I am deeply grateful for their dedication.”

For the first nine months of 2008, earnings were $154.3 million, or $2.61 per diluted common share, compared to $157.4 million, or $2.62 per diluted common share, for the same period in 2007. Returns on average assets and equity for the first nine months of 2008 were 1.53 percent and 13.23 percent respectively, compared to 1.62 percent and 15.21 percent for the same period a year earlier.

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Noted financial data for the third quarter of 2008 follows.

• Tier 1 and Total Risk-Based Capital Ratios for the Corporation at the end of the third quarter of 2008 were 10.3 percent and 12.7 percent, respectively. These same ratios for Frost Bank were 10.4 percent and 11.9 percent, respectively. These capital ratios for the Corporation and Frost Bank are well in excess of the levels necessary to be considered well-capitalized.

• Net-interest income on a taxable equivalent basis for the third quarter totaled $139.7 million, an increase of 3.7 percent compared to $134.7 million for the same period a year ago. This increase primarily resulted from an increase in the average volume of earning assets and an increase in the net interest margin. The net interest margin was 4.74 percent for the third quarter of 2008, an increase of five basis points compared to 4.69 percent for the third quarter of 2007, and up six basis points from 4.68 percent for the second quarter of 2008.

• Non-interest income for the third quarter of 2008 totaled $77.3 million, a 9.3 percent increase from $70.8 million reported for the third quarter of 2007.

Trust income rose $2.0 million to $19.7 million, an 11.3 percent increase from a year earlier, primarily from increases in oil and gas trust management fees, up $1.3 million, and investment fees, up $629 thousand.

Service charges on deposit accounts were $22.6 million, up $1.9 million or 9.4 percent, compared to $20.7 million for the third quarter of 2007. Impacting this rise was a $2.1 million increase in service charges on commercial accounts, resulting from higher treasury management fees. A drop in the earnings credit rate for commercial accounts, compared to a year earlier, impacted treasury management fees. When interest rates are lower, customers earn less credit for their deposit balances, and this, in turn, increases the amount of service charges to be paid for through fees.

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Other non-interest income was $15.9 million, a 14.6 percent increase over the $13.8 million reported the same quarter a year earlier.

Insurance commissions and fees were $8.3 million, compared to $7.7 million reported the same quarter a year earlier.

• Non-interest expense was $123.0 million for the quarter, up $9.4 million, or 8.3 percent, from the $113.6 million reported a year earlier. Total salaries and wages and related employee benefits rose to $68.5 million, up 7.5 percent, compared to the third quarter of 2007. This increase was impacted by normal annual merit increases, combined with increases in the number of employees and increases in incentive compensation. Net occupancy expense was $10.3 million, an increase of $833 thousand from the third quarter last year due mainly to increases in utilities and building maintenance. Furniture and equipment was $9.7 million, which was up $864 thousand from the same quarter last year. This increase occurred due to increases in service contracts expense, depreciation expense related to furniture and fixtures and software maintenance expense. Other expenses rose $3.2 million, from the third quarter last year. Significant components of this increase included FDIC insurance expense, up $1.6 million, and sundry expense from various miscellaneous items, up $1.4 million. Included in the sundry expense increase was a $1.0 million for costs related to the impact on operations in Houston and Galveston from Hurricane Ike.

• For the third quarter of 2008, the provision for possible loan losses was $18.9 million, compared to net charge-offs of $6.4 million. For the third quarter of 2007, the provision for possible loan losses was $5.8 million, compared to net charge-offs of $9.6 million. Approximately $10 million of the provision for possible loan losses was related to Hurricane Ike, which impacted the Corporation’s operations in Houston and Galveston during the third quarter of 2008. The allowance for possible loan losses as a percentage of total loans was 1.25 percent at September 30, 2008, compared to 1.24 percent at the end of the third quarter last year and 1.13 percent at the end of the second quarter of 2008.

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In light of the national financial crisis and the enactment of the Emergency Economic Stabilization Act of 2008, U.S. government agencies are taking various actions in an attempt to enhance financial stability. These include the U.S. Treasury Department’s Troubled Asset Relief Program Capital Purchase Program, which offers to all U.S. banking organizations the opportunity to issue and sell preferred stock, along with warrants to purchase common stock, to the U.S. Treasury on what may be considered attractive terms. In addition, the FDIC has initiated the Temporary Liquidity Guarantee Program that will provide a 100 percent guarantee for a limited period of time to newly issued senior unsecured debt and non-interest bearing transaction deposits. Coverage under the Temporary Liquidity Guarantee Program is available for 30 days without charge and thereafter at a cost of 75 basis points per annum for senior unsecured debt and 10 basis points per annum for non-interest bearing transaction deposits. Although Cullen/Frost’s and Frost Bank’s capital ratios remain well above the minimum levels required for well capitalized status and have not been adversely affected in any significant respect by the national financial crisis, Cullen/Frost is assessing its participation in both programs but has not yet made a definitive decision as to whether it will participate.

Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, October 22, 2008, 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 1-800-944-6430. Digital playback of the conference call will be available after 2:00 p.m. CT until midnight Sunday, October 26, 2008 at 800-642-1687 with Conference ID # of 68273995. 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 Web site,www.frostbank.com, go to “About Frost” on the top navigation bar, then click on Investor Relations.

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Cullen/Frost Bankers, Inc. (NYSE: CFR) is a financial holding company, headquartered in San Antonio, with assets of $14.1 billion at September 30, 2008. The corporation provides a full range of commercial and consumer banking products, investment and brokerage services, insurance products and investment banking services. Frost operates more than 100 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 the largest Texas-based banking organization that operatesonly in Texas, with a legacy of helping clients with their financial needs during three centuries.

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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 as such. 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 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:

• 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.

• Volatility and disruption in national and international financial markets.

• Government intervention in the U.S. financial system.

• Changes in the level of non-performing assets and charge-offs.

• Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.

• The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.

• Inflation, interest rate, securities market and monetary fluctuations.

• Political instability.

• Acts of God or of war or terrorism.

• The timely development and acceptance of new products and services and perceived overall value of these products and services by users.

• Changes in consumer spending, borrowings and savings habits.

• Changes in the financial performance and/or condition of the Corporation’s borrowers.

• Technological changes.

• Acquisitions and integration of acquired businesses.

• The ability to increase market share and control expenses.

• Changes in the competitive environment among financial holding companies and other financial service providers.

• 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.

• 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.

• Changes in the Corporation’s organization, compensation and benefit plans.

• 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.

• Greater than expected costs or difficulties related to the integration of new products and lines of business.

• 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.

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Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)

	2008									2007
	3rd Qtr			2nd Qtr			1st Qtr			4th Qtr			3rd Qtr
CONDENSED INCOME STATEMENTS
Net interest income	$	134,736		$	131,328		$	129,880		$	130,760		$	130,624
Net interest income(1)		139,655			136,223			134,767			135,269			134,704
Provision for possible loan losses		18,940			6,328			4,005			3,576			5,784
Non-interest income:
Trust fees		19,749			19,040			18,282			18,009			17,749
Service charges on deposit accounts		22,642			21,634			19,593			21,044			20,696
Insurance commissions and fees		8,261			7,015			11,158			5,979			7,695
Other charges, commissions and fees		10,723			9,496			6,931			7,949			10,772
Net gain (loss) on securities transactions		78			(56	)		(48	)		15			—
Other		15,862			13,452			14,312			13,387			13,844
Total non-interest income		77,315			70,581			70,228			66,383			70,756
Non-interest expense:
Salaries and wages		57,803			54,534			55,138			54,069			52,996
Employee benefits		10,677			11,912			14,113			9,945			10,727
Net occupancy		10,342			10,091			9,647			10,198			9,509
Furniture and equipment		9,657			9,182			8,950			8,870			8,793
Intangible amortization		1,976			1,955			2,046			2,162			2,184
Other		32,517			32,416			30,146			28,906			29,358
Total non-interest expense		122,972			120,090			120,040			114,150			113,567
Income before income taxes		70,139			75,491			76,063			79,417			82,029
Income taxes		21,174			22,944			23,283			24,717			25,566
Net income	$	48,965		$	52,547		$	52,780		$	54,700		$	56,463
PER SHARE DATA
Net income - basic	$	0.83		$	0.89		$	0.90		$	0.94		$	0.97
Net income - diluted		0.82			0.89			0.89			0.93			0.95
Cash dividends		0.42			0.42			0.40			0.40			0.40
Book value at end of quarter		27.16			26.11			26.85			25.18			23.74
OUTSTANDING SHARES
Period-end shares		59,299			59,081			58,747			58,662			58,423
Weighted-average shares - basic		58,932			58,733			58,538			58,387			58,439
Dilutive effect of stock compensation		433			483			520			598			731
Weighted-average shares - diluted		59,365			59,216			59,058			58,985			59,170
SELECTED ANNUALIZED RATIOS
Return on average assets		1.44	%		1.56	%		1.59	%		1.65	%		1.72	%
Return on average equity		12.39			13.44			13.89			15.18			16.44
Net interest income to average earning assets(1)		4.74			4.68			4.67			4.70			4.69

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

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Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

	2008									2007
	3rd Qtr			2nd Qtr			1st Qtr			4th Qtr			3rd Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans	$	8,434		$	8,187		$	7,918		$	7,560		$	7,436
Earning assets		11,712			11,717			11,605			11,422			11,340
Total assets		13,486			13,518			13,382			13,169			13,026
Non-interest-bearing demand deposits		3,605			3,531			3,518			3,483			3,567
Interest-bearing deposits		6,797			6,885			6,876			6,765			6,685
Total deposits		10,402			10,416			10,394			10,248			10,252
Shareholders’ equity		1,573			1,573			1,529			1,429			1,363
Period-End Balance:
Loans	$	8,596		$	8,354		$	8,013		$	7,769		$	7,461
Earning assets		11,984			11,608			11,874			11,556			11,492
Goodwill and intangible assets		553			554			556			558			560
Total assets		14,061			13,671			13,794			13,485			13,167
Total deposits		10,618			10,627			10,728			10,530			10,096
Shareholders’ equity		1,611			1,542			1,577			1,477			1,387
Adjusted shareholders’ equity(1)		1,593			1,557			1,513			1,484			1,445
ASSET QUALITY
($ in thousands)
Allowance for possible loan losses	$	107,109		$	94,520		$	92,498		$	92,339		$	92,263
as a percentage of period-end loans		1.25	%		1.13	%		1.15	%		1.19	%		1.24	%
Net charge-offs	$	6,351		$	4,306		$	3,846		$	3,500		$	9,592
Annualized as a percentage of average loans		0.30	%		0.21	%		0.20	%		0.18	%		0.51	%
Non-performing assets:
Non-accrual loans	$	45,475		$	40,485		$	28,642		$	24,443		$	21,356
Foreclosed assets		9,683			9,146			7,944			5,406			5,023
Total	$	55,158		$	49,631		$	36,586		$	29,849		$	26,379
As a percentage of:
Total loans and foreclosed assets		0.64	%		0.59	%		0.46	%		0.38	%		0.35	%
Total assets		0.39			0.36			0.27			0.22			0.20
CONSOLIDATED CAPITAL RATIOS
Tier 1 Risk-Based Capital Ratio		10.33	%		10.15	%		9.98	%		9.96	%		10.07	%
Total Risk-Based Capital Ratio		12.67			12.68			12.55			12.59			12.83
Leverage Ratio		9.04			8.69			8.51			8.37			8.01
Equity to Assets Ratio (period-end)		11.46			11.28			11.43			10.95			10.53
Equity to Assets Ratio (average)		11.66			11.63			11.42			10.85			10.46

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

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Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

(In thousands, except per share amounts)

	Nine Months Ended September 30,
	2008			2007
CONDENSED INCOME STATEMENTS
Net interest income	$	395,944		$	387,977
Net interest income(1)		410,647			398,926
Provision for possible loan losses		29,273			11,084
Non-interest income
Trust fees		57,071			52,350
Service charges on deposit accounts		63,869			59,674
Insurance commissions and fees		26,434			24,868
Other charges, commissions and fees		27,150			24,609
Net gain (loss) on securities transactions		(26	)		—
Other		43,626			40,347
Total non-interest income		218,124			201,848
Non-interest expense
Salaries and wages		167,475			155,913
Employee benefits		36,702			37,150
Net occupancy		30,080			28,626
Furniture and equipment		27,789			23,951
Intangible amortization		5,977			6,698
Other		95,079			95,958
Total non-interest expense		363,102			348,296
Income before income taxes		221,693			230,445
Income taxes		67,401			73,074
Net income	$	154,292		$	157,371
PER SHARE DATA
Net income - basic	$	2.63		$	2.66
Net income - diluted		2.61			2.62
Cash dividends		1.24			1.14
Book value at end of period		27.16			23.74
OUTSTANDING SHARES
Period-end shares		59,299			58,423
Weighted-average shares - basic		58,736			59,142
Dilutive effect of stock compensation		483			820
Weighted-average shares - diluted		59,219			59,962
SELECTED ANNUALIZED RATIOS
Return on average assets		1.53	%		1.62	%
Return on average equity		13.23			15.21
Net interest income to average earning assets(1)		4.69			4.69

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

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Cullen/Frost Bankers, Inc.

CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)

	As of or for the Nine Months Ended September 30,
	2008			2007
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans	$	8,181		$	7,432
Earning assets		11,678			11,312
Total assets		13,463			13,001
Non-interest-bearing demand deposits		3,551			3,538
Interest-bearing deposits		6,853			6,663
Total deposits		10,404			10,201
Shareholders’ equity		1,558			1,383
Period-End Balance:
Loans	$	8,596		$	7,461
Earning assets		11,984			11,492
Goodwill and intangible assets		553			560
Total assets		14,061			13,167
Total deposits		10,618			10,096
Shareholders’ equity		1,611			1,387
Adjusted shareholders’ equity(1)		1,593			1,445
ASSET QUALITY
($ in thousands)
Allowance for possible loan losses	$	107,109		$	92,263
As a percentage of period-end loans		1.25	%		1.24	%
Net charge-offs:	$	14,503		$	14,906
Annualized as a percentage of average loans		0.24	%		0.27	%
Non-performing assets:
Non-accrual loans	$	45,475		$	21,356
Foreclosed assets		9,683			5,023
Total	$	55,158		$	26,379
As a percentage of:
Total loans and foreclosed assets		0.64	%		0.35	%
Total assets		0.39			0.20
CONSOLIDATED CAPITAL RATIOS
Tier 1 Risk-Based Capital Ratio		10.33	%		10.07	%
Total Risk-Based Capital Ratio		12.67			12.83
Leverage Ratio		9.04			8.01
Equity to Assets Ratio (period-end)		11.46			10.53
Equity to Assets Ratio (average)		11.57			10.64

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

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