EXHIBIT 19.1
The Financial Statements for the 1991 Thrift Incentive Stock
Purchase Plan for Employees of Cullen/Frost Bankers, Inc.
1991 Thrift Incentive Stock
Purchase Plan for Employees
of Cullen/Frost Bankers, Inc.
Financial Statements
Years Ended December 31, 1998 and 1997
with Report of Independent Auditors
1991 Thrift Incentive Stock Purchase Plan
for Employees of Cullen/Frost Bankers, Inc.
Financial Statements
Years Ended December 31, 1998 and 1997
Contents
Report of Independent Auditors..........................................1
Financial Statements
Statements of Net Assets Available for Benefits.........................2
Statements of Changes in Net Assets Available for Benefits..............3
Notes to Financial Statements...........................................4
Report of Independent Auditors
Compensation and Benefits Committee of
Cullen/Frost Bankers, Inc.
We have audited the accompanying statements of net assets available for
benefits of the 1991 Thrift Incentive Stock Purchase Plan for Employees of
Cullen/Frost Bankers, Inc. as of December 31, 1998 and 1997, and the related
statements of changes in net assets available for benefits for the years then
ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the 1991 Thrift
Incentive Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. at
December 31, 1998 and 1997, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
/s/ERNST & YOUNG LLP
San Antonio, Texas
April 20, 1999
1
1991 Thrift Incentive Stock Purchase Plan
for Employees of Cullen/Frost Bankers, Inc.
Statements of Net Assets Available for Benefits
December 31
1998 1997
-------------
Assets $ - $ -
Liabilities - -
-------------
Net assets available for benefits $ - $ -
=============
See accompanying notes.
2
1991 Thrift Incentive Stock Purchase Plan
for Employees of Cullen/Frost Bankers, Inc.
Statements of Changes in Net Assets Available for Benefits
Year Ended December 31
1998 1997
----------------------
Additions:
Employer contributions $860,411 $ 745,341
Employee contributions 52,164 36,317
Dividend income 9,561 9,390
Interest income 560 645
Gain on sale of investments 42 815
Appreciation (depreciation) in fair value of investments (5,749) 326,766
---------------------
Total additions 916,989 1,119,274
Deductions:
Benefit payments 916,989 1,119,274
--------------------
Total deductions 916,989 1,119,274
Net assets available for benefits at beginning of year - -
---------------------
Net assets available for benefits at end of year $ - $ -
=====================
See accompanying notes.
3
1991 Thrift Incentive Stock Purchase Plan
for Employees of Cullen/Frost Bankers, Inc.
Notes to Financial Statements
December 31, 1998 and 1997
1. Significant Accounting Policies
The financial statements of the 1991 Thrift Incentive Stock Purchase Plan for
Employees of Cullen/Frost Bankers, Inc. (the Plan) are presented on the accrual
basis of accounting. Participating entities include: Cullen/Frost Bankers,
Inc. (CFBI); Frost National Bank; and United States National Bank, all of which
are referred to herein as "the Company."
The cost of a specific security sold is used to compute gains and losses on the
sale of investments.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
2. Description of the Plan
The Plan, amended and restated on January 1, 1991, is a nonqualified
contributory plan. In addition to the Plan, the Company maintains the 401(k)
Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. and its
Affiliates (the 401(k) Plan). The Plan covers substantially all eligible
employees who have been determined to be highly compensated employees with
respect to the plan year under the provisions of the 401(k) Plan regarding
discretionary matching contributions, and who have been designated by the
Plan's administrative committee as eligible for participation. The Plan was
adopted to offer to eligible employees whose participation in the 401(k) Plan
is limited an alternative means of receiving comparable benefits.
For each plan year, each active participant is eligible to contribute an amount
not to exceed the total of:
i) the amount by which the active participant's 401(k) Plan contributions
have been limited by IRS regulations not to exceed the difference
between
a) six percent of the participant's compensation for the respective
plan year, and
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1991 Thrift Incentive Stock Purchase Plan
for Employees of Cullen/Frost Bankers, Inc.
Notes to Financial Statements (continued)
December 31, 1998 and 1997
2. Description of the Plan (continued)
b) the total before- and after-tax contributions allocated under the
401(k) Plan, and
ii) the amount by which the participant's contributions to the 401(k) Plan
have been limited by IRS regulations.
For each plan year, the Company makes contributions equal to 100% of the
participants' before- and after-tax contributions to the Plan and the 401(k)
Plan, up to six percent of the participants' compensation for the respective
plan year.
Participants are immediately vested 100% in their accounts which are
distributed to them as of the date the distribution is made.
With respect to each plan year, all contributions under the Plan, from both the
participants and the Company, are invested in common stock of CFBI.
All assets of the Plan are distributed on an annual basis by the end of each
plan year. Participants receive stock certificates for their allocated portion
of CFBI common stock (for whole shares), and cash for fractional shares.
3. Transactions With Parties-in-Interest
The Company may pay for certain or all expenses incurred in administering the
provisions of the Plan. During 1998 and 1997, all such expenses were paid by
the Company.
4. Income Tax Status
The Plan is not subject to federal income taxes.
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1991 Thrift Incentive Stock Purchase Plan
for Employees of Cullen/Frost Bankers, Inc.
Notes to Financial Statements (continued)
December 31, 1998 and 1997
5. Impact of Year 2000 (Unaudited)
The Year 2000 issue is the result of computer programs having been written
using two digits rather than four to define the applicable year. Any of the
Plan's computer programs, including programs from outside vendors, that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculations
causing disruptions of operations including, among other things, a temporary
inability to process transactions.
Management of Frost National Bank, trustee, has an extensive program in place
to address the internal and external risks associated with the century date
change to the year 2000. The trustee has completed the renovation, testing,
and installation of 99 percent of technology systems in its owned facilities
and has completed 98 percent of the testing of mission-critical systems. The
trustee is also updating business continuity plans for the date change and
expects to be substantially complete with regard to nonmission-critical systems
in the second quarter of 1999. Costs associated with this program are paid by
the trustee and not by the Plan.
6