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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
___ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
FOR THE TRANSITION PERIOD FROM _______ to _______
Commission File Number 0-7275
CULLEN/FROST BANKERS, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1751768
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 W. Houston Street
San Antonio, Texas 78205
- ------------------------------- -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (210) 220-4011
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $5 Par Value
--------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
--- ----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. __
The aggregate market value of the voting stock held by non-affiliates
of the registrant was $384,304,372 based on the closing price of such stock
as of March 25, 1994.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Outstanding at
Class March 25, 1994
-------------------------- --------------
Common Stock, $5 par value 11,031,723
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the Year Ended December 31, 1993
(Parts I & II)
(2) Proxy Statement for Annual Meeting of Shareholders to be held May 17,1994
(Part III)
TABLE OF CONTENTS
PART I Page
- ------ ----
ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 8
ITEM 3. LEGAL PROCEEDINGS 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS *
PART II
- -------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS 9
ITEM 6. SELECTED FINANCIAL DATA 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 9
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 9
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE *
PART III
- --------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 10
ITEM 11. EXECUTIVE COMPENSATION 10
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 10
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 10
PART IV
- -------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K 11
* Not Applicable
PART I
Item 1. BUSINESS
- ------------------
General
Cullen/Frost Bankers, Inc. ("Cullen/Frost" or "Company"), a Texas
business corporation incorporated in 1977 and headquartered in San Antonio,
Texas, is a bank holding company within the meaning of the Bank Holding
Company Act of 1956 ("the Bank Holding Company Act") and as such is
registered with the Board of Governors of the Federal Reserve System
("Federal Reserve Board"). The New Galveston Company, incorporated under
the laws of Delaware, is a wholly owned second tier bank holding company
subsidiary which owns all banking and non-banking subsidiaries.
Cullen/Frost's principal assets consist of all the capital stock of three
national banks. At year end 1993, Cullen/Frost had 27 offices in five major
Texas banking markets with 16 locations in San Antonio, four in the
Houston/Galveston area, three in the Corpus Christi area, three in the Austin
area and one in Dallas.
At December 31, 1993, Cullen/Frost had consolidated total assets of
$3,639,047,000 and total deposits of $3,149,428,000. Based on information
from the Federal Reserve Board, as of September 30, 1993, Cullen/Frost was
the second largest of the 81 bank holding companies in Texas and the
seventh largest of 928 banking organizations in Texas.
Cullen/Frost provides policy direction to the Cullen/Frost subsidiary
banks in the following areas: (i) lending policies and techniques, loan
participation and credit administration; (ii) asset and liability
management; (iii) trust services; (iv) personnel management and
compensation; (v) accounting, budgeting, planning, operations, insurance
and auditing; (vi) capitalization; (vii) marketing programs and (viii)
regulatory compliance.
Cullen/Frost Subsidiary Banks
- -----------------------------
Each of the Cullen/Frost subsidiary banks is a separate entity which
operates under the day-to-day management of its own board of directors and
officers. The largest of these banks is The Frost National Bank of San
Antonio ("Frost Bank"), the origin of which can be traced to a mercantile
partnership organized in 1868. Frost Bank was chartered as a national
banking association in 1899. At December 31, 1993, Frost Bank, which
accounted for approximately 92 percent of consolidated assets, 91 percent
of consolidated loans, and 92 percent of consolidated deposits of
Cullen/Frost, was the largest bank headquartered in San Antonio and South
Texas.
The following table provides information as of December 31, 1993, as
to total assets, total loans and total deposits of each of the Cullen/Frost
subsidiary banks:
Name of Bank and Location Total Assets Total Loans Total Deposits
- ------------------------- ------------ ----------- --------------
The Frost National Bank,
San Antonio, Corpus Christi,
Austin, and Houston, Texas $3,344,678,000 $1,138,655,000 $2,894,302,000
Cullen/Frost Bank of Dallas, N.A.,
Dallas, Texas 178,167,000 58,252,000 155,436,000
United States National Bank of Galveston
Galveston, Texas 136,220,000 50,206,000 121,589,000
During 1993, Cullen/Frost converted its Houston subsidiary bank, which
had three offices, into branches of Frost Bank. Early during 1994,
Cullen/Frost is expected to acquire Texas Commerce Bank in Corpus Christi
as a branch of Frost Bank in exchange for Cullen/Frost Bank of Dallas, N.A.
("Cullen/Frost Bank"). The banks being exchanged are comparable in asset
size.
1
Services Offered by the Cullen/Frost Subsidiary Banks
- -----------------------------------------------------
Commercial Banking
The subsidiary banks provide commercial services for corporations and
other business clients. Loans are made for a wide variety of purposes,
including interim construction financing on industrial and commercial
properties and financing on equipment, inventories and accounts receivable.
Frost Bank and Cullen/Frost Bank provide financial services to business
clients on both a national and international basis.
Consumer Services
The subsidiary banks provide a full range of consumer banking
services, including checking accounts, savings programs, automated teller
machines, installment and real estate loans, drive-in and night deposit
services, safe deposit facilities, credit card services and discount
brokerage services.
International Banking
Frost Bank and Cullen/Frost Bank provide international banking
services to customers residing in or dealing with businesses located in
Mexico. Such services consist of accepting deposits (in United States
dollars only), making loans (in United States dollars only), issuing
letters of credit, handling foreign collections, transmitting funds and, to
a limited extent, dealing in foreign exchange. Reference is made to pages
16 and 21 of the Cullen/Frost Annual Report to Shareholders for the Year
Ended December 31, 1993, which pages are incorporated herein by reference.
Trust Services
The subsidiary banks provide a wide range of trust, investment, agency
and custodial services for individual and corporate clients. These
services include the administration of estates and personal trusts and the
management of investment accounts for individuals, employee benefit plans
and charitable foundations. At December 31, 1993, trust assets with a
market value of approximately $11.1 billion were being administered by
these subsidiary banks. In addition, Frost Bank and United States National
Bank of Galveston ("U.S. National Bank") serve as transfer agents or
registrars for securities, as trustees of bond issues and as paying agents
for dividends and interest.
Correspondent Banking
Frost Bank and Cullen/Frost Bank act as correspondents for
approximately 299 financial institutions, primarily banks in Texas. These
banks maintain deposits with the subsidiary banks, which offer to the
correspondents a full range of services including check clearing, transfer
of funds, loan participations, and securities custody and clearance.
Discount Brokerage
Cullen/Frost Discount Brokers, Inc. was formed in March 1986 to
provide discount brokerage services and perform other transactions or
operations related to the sale and purchase of securities of all types.
Cullen/Frost Discount Brokers, Inc. is a subsidiary of Frost Bank.
Services Offered by the Cullen/Frost Non-Banking Subsidiaries
- -------------------------------------------------------------
Main Plaza Corporation ("Main Plaza") is a wholly owned non-banking
subsidiary. Main Plaza holds real estate for future expansion of certain of
the subsidiary banks and occasionally makes loans to qualified borrowers.
Loans are funded with borrowings against Cullen/Frost's current cash or
borrowings against credit lines.
In April 1981, Cullen/Frost acquired the capital stock of Daltex
General Agency, Inc. ("Daltex"), a wholly owned non-banking subsidiary. As
a managing general insurance agency, Daltex provides vendor's single
interest insurance for the subsidiary banks.
Competition
- -----------
The subsidiary banks encounter intense competition in their commercial
banking businesses, primarily from other banks located in their respective
service areas. The subsidiary bank also compete with insurance, finance
and mortgage companies, savings and loan institutions, credit unions, money
market funds, ans other financial institutions.
2
In the case of some larger customers, competition exists with institutions
in other major metropolitan areas in Texas and in the remainder of the
United States, some of which are larger than the Cullen/Frost subsidiary
banks in terms of capital, resources and personnel.
Supervision and Regulation
- --------------------------
Cullen/Frost
Cullen/Frost is a legal entity separate and distinct from its bank
subsidiaries and is a registered bank holding company under the Bank
Holding Company Act (the "BHC Act"). The Bank Holding Company Act generally
prohibits Cullen/Frost from engaging in any business activity other than bank-
ing, managing and controlling banks, furnishing services to a bank which it
owns and controls or engaging in non-banking activities closely related to
banking.
As a bank holding company, Cullen/Frost is primarily regulated by the
Federal Reserve Board which has established guidelines with respect to the
maintenance of appropriate levels of capital and payment of dividends by
bank holding companies. Cullen/Frost is required to obtain prior approval
of the Federal Reserve Board for the acquisition of more than five percent
of the voting shares or substantially all of the assets of any company
(including a bank) or to merge or consolidate with another bank holding comp-
any. During 1986 the Texas Banking Code was amended by the Texas Legislature
authorizing the acquisition of Texas banks or bank holding companies by certain
out-of-state registered bank holding companies. A Texas bank holding company
would likewise be permitted to acquire a bank or bank holding company in
other states if the acquisition is permitted by the laws of the other
states.
The Federal Reserve Act and the Federal Deposit Insurance Act ("FDIA")
impose restrictions on loans by the subsidiary banks to Cullen/Frost and certain
of its subsidiaries, on investments in securities thereof and on the taking
of such securities as collateral for loans. Such restrictions generally
prevent Cullen/Frost from borrowing from the subsidiary banks unless the
loans are secured by marketable obligations. Also, such restrictions
prevent Cullen/Frost and certain other subsidiaries from borrowing from
Cullen/ Frost's bank subsidiaries unless the loans are secured. Further,
such secured loans, other transactions, and investments by each of such
bank subsidiaries are limited in amount as to Cullen/Frost or to certain
other subsidiaries to ten percent of the lending bank subsidiary's capital
and surplus and as to Cullen/Frost and all such subsidiaries to an
aggregate of 20 percent of the lending bank subsidiary's capital and
surplus.
Subsidiary Banks
The three subsidiary national banks are organized as national banking
associations under the National Bank Act and are subject to regulation and
examination by the Office of the Comptroller of the Currency (the
"Comptroller of the Currency").
Federal and state laws and regulations of general application to banks
have the effect, among others, of regulating the scope of the business of
the subsidiary banks, their investments, cash reserves, the purpose and
nature of loans, collateral for loans, the maximum interest rates
chargeable on loans, the amount of dividends that may be declared and
required capitalization ratios. Federal law imposes restrictions on
extensions of credit to, and certain other transactions with, Cullen/Frost
and other subsidiaries, on investments in stock or other securities thereof
and on the taking of such securities as collateral for loans to other
borrowers.
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, Frost Bank and U.S. National Bank have registered with the
Comptroller of the Currency as transfer agents and are subject to certain
reporting requirements of and regulatory control by the Comptroller of the
Currency. The bond department of Frost Bank is subject to regulation under
the Texas Securities Act.
The Comptroller of the Currency with respect to Cullen/Frost's
national bank subsidiaries has authority under the Financial Institutions
Supervisory Act to prohibit a bank from engaging in what, in such agency's
opinion, constitutes an unsafe or unsound practice in conducting its
business. It is possible, depending upon the financial condition of the
bank in question and other factors, that such agency could claim that the
payment of dividends or other payments might, under some circumstances, be
such an unsafe or unsound practice.
3
The principal source of Cullen/Frost's cash revenues is dividends from
its bank subsidiaries, and there are certain limitations on the payment of
dividends to Cullen/Frost by such bank subsidiaries. The prior approval of
the Comptroller of the Currency is required if the total of all dividends
declared by a national bank in any calendar year would exceed the bank's
net profits, as defined, for that year combined with its retained net
profits for the preceding two calendar years less any required transfers to
surplus. Although not necessarily indicative of amounts available to be
paid in future periods, under the most restrictive possible interpretation
of these requirements, Cullen/Frost's subsidiary banks had approximately
$23,951,000 available for payment of dividends at December 31, 1993.
Capital Adequacy
Bank regulators have adopted risk-based capital guidelines for bank holding
companies and banks. The minimum ratio of qualifying total capital to risk-
weighted assets (including certain off-balance sheet items) is 8%. At least
half of the total capital is to be comprised of common stock, retained earnings,
noncumulative perpetual preferred stocks minority interests and for bank holding
companies, a limited amount of qualifying cumulative perpetual preferred stock,
less certain intangibles including goodwill ("Tier 1 capital"). The remainder
("Tier 2 capital") may consist of other preferred stock, certain other instru-
ments, and limited amounts of subordinated debt and the loan and lease loss
allowance.
In addition, the Federal Reserve Board has established minimum Leverage
Ratio (Tier 1 capital to average total assets) guidelines for bank holding
companies and banks. These guidelines provide for a minimum leverage ratio
of 3% for bank holding companies and banks that meet certain specified
criteria, including that they have the highest regulatory rating. All other
banking organizations will be required to maintain a leverage ratio of 3%
plus an additional cushion of at least 100 to 200 basis points. The guidelines
also provide that banking organizations experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels, without significant reliance on intangible
assets. Futhermore, the guidelines indicate that the Federal Reserve Board will
continue to consider a "Tangible Tier 1 Leverage Ratio" in evaluating proposals
for expansion or new activities. The Tangible Tier 1 Leverage Ratio is the
ratio of Tier 1 capital, less intangibles not deducted from Tier 1 capital,
to average total assets. The Federal Reserve Board has not advised Cullen/Frost
of any specific minimum leverage ratio applicable to it. For information
concerning Cullen/Frost's capital ratios, see the discussion under the caption
"Capital" on page 22 of the Cullen/Frost Annual Report to Shareholders for
the Year Ended December 31, 1993, which discussion is incorporated herein
by reference.
Federal banking agencies have proposed regulations that would modify exist-
ing rules related to risk-based and leverage capital ratios. Cullen/Frost does
not believe that the aggregate impact of these modifications would have a sig-
nificant impact on its capital position.
Bank regulators contiue to indicate their desire to raise capital require-
ments applicable to banking organizations beyond their current levels. However,
management is unable to predict whether and when higher capital requirements
would be imposed and, if so, at what level and on what schedule.
FDICIA
In December 1991, the Federal Deposit Insurance Corporation
Improvements Act of 1991 ("FDICIA") was enacted, which substantially
revises the bank regulatory and funding provisions of the Federal Deposit
Insurance Act and makes revisions to several other Federal banking
statutes. Among other things, FDICIA requires the Federal banking agencies
to take "prompt corrective action" in respect of depository institutions
that do not meet minimum capital requirements. FDICIA establishes five
capital tiers: "well capitalized", "adequately capitalized",
"undercapitalized", "significantly undercapitalized" and "critically
undercapitalized". Federal banking agencies have adopted final rules,
effective December 16, 1992, relating to these capital tiers.
Under the final rules, an institution will be deemed to be: well
capitalized if the institution has a total risk-based capital ratio of 10.0
percent or greater, a Tier 1 risk-based capital ratio of 6.0 percent or
greater, and a leverage ratio of 5.0 percent or greater, and the
institution is not subject to an order, written agreement, capital
directive, or prompt corrective action directive to meet and maintain a
specific capital level for any capital measure; adequately capitalized if
the institution has a total risk-based capital ratio of 8.0 percent or
greater, a Tier 1 risk-based capital ratio of 4.0 percent or greater, and a
4
leverage ratio of 4.0 percent or greater (or a leverage ratio of 3.0
percent for bank holding companies which meet certain specified criteria,
including having the highest regulatory rating); undercapitalized if the
institution has a total risk-based capital ratio that is less than 8.0
percent, a Tier 1 risk-based capital ratio less than 4.0 percent or a
leverage ratio less than 4.0 percent (or a leverage ratio less than 3.0
percent if the institution is rated composite 1 in its most recent report
of examination, subject to appropriate Federal banking agency guidelines);
significantly undercapitalized if the institution has a total risk-based
capital ratio less than 6.0 percent, a Tier 1 risk-based capital ratio less
than 3.0 percent, or a leverage ratio less than 3.0 percent; and critically
undercapitalized if the institution has a ratio of tangible equity to total
assets equal to or less than 2.0 percent.
At December 31, 1993, all three subsidiaries of Cullen/Frost that are
insured depository institutions -- Frost Bank, Cullen/Frost Bank and U.S.
National Bank -- were considered "well capitalized". At December 31, 1993,
the subsidiary banks capital ratios were as follows:
Tier 1 Capital Total Capital Leverage
Ratio Ratio Ratio
-------------- ------------- ----------
Frost Bank 13.11% 14.85% 5.76%
Cullen/Frost Bank 23.52 24.36 10.25
U.S. National Bank 13.84 14.85 9.26
FDICIA generally prohibits a depository institution from making any
capital distributions (including payment of a dividend) or paying any
management fee to its holding company if the depository institution would
thereafter be undercapitalized. Federal banking agencies subject
undercapitalized institutions to growth limitations and require such
institutions to submit a capital restoration plan. The agencies may not
accept such a plan without determining, among other things, that the plan
is based on realistic assumptions and is likely to succeed in restoring the
depository institution's capital. In addition, for a capital restoration
plan to be acceptable, the depository institution's parent holding company
must guarantee that the institution will comply with such capital
restoration plan. The aggregate liability of the parent holding company is
limited to the lesser of (i) an amount equal to 5 percent of the depository
institution's total assets at the time it became undercapitalized and (ii)
the amount which is necessary (or would have been necessary) to bring the
institution into compliance with all capital standards applicable with
respect to such institution as of the time it fails to comply with the
plan. If a depository institution fails to submit an acceptable plan, it
is treated as if it is significantly undercapitalized.
FDICIA also contains a variety of other provisions that may affect the
operations of Cullen/Frost, including new reporting requirements, regulatory
standards for real estate lending, "truth in savings" provisions, and the
requirement that a depository institution give 90 days' prior notice to
customers and regulatory authorities before closing any branch. The
Federal regulatory agencies issued a final rule on real estate lending
standards which became effective March 19, 1993. These standards establish
loan-to-value ("LTV") limitations on real estate lending. The LTV limitations
range from 50 percent for raw land loans to 95 percent for loans on one to four
family residential properties, subject to certain exceptions and limitations.
These new standards will not have a significant effect on Cullen/Frost.
Deposit Insurance
- -----------------
Cullen/Frost's subsidiary banks are subject to FDIC deposit insurance
assessments and to certain other statutory and regulatory provisions applicable
to FDIC-insured depository institutions. The FDIC adopted in 1993 a risk-based
assessment system to replace the previous flat-rate system. The new system
imposes insurance premiums based upon a matrix that takes into account a bank's
capital level and supervisory rating. Under this risk-based system, the assess-
ment rate imposed on banks ranges from 23 cents for each $100 of domestic
deposits (for well capitalized banks in the highest of three supervisory rating
categories) to 31 cents (for inadequately capitalized banks in the lowest
of the three supervisory rating categories.) Cullen/Frost's rate is 23
cents for each $100 of domestic deposits as compared to a rate of 29 cents
for $100 of domestic deposits under the flat-rate system; this change in
rates did not have a material impact on the results of operations.
5
A depository institution insured by the FDIC can be held liable for
any loss incurred by, or reasonably expected to be incurred by, the FDIC
after August 9, 1989, in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance
provided by the FDIC to a commonly controlled, FDIC-insured depository
institution in danger of default. "Default" is defined generally as the
appointment of a conservator or receiver, and "in danger of default" is
defined generally as the existence of certain conditions indicating that a
"default" is likely to occur in the absence of regulatory assistance.
Acquisitions
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The BHC Act generally limits acquisitions by Cullen/Frost to commercial
banks and companies engaged in activities that the Federal Reserve Board has
determined to be so closely related to banking as to be a proper incident
thereto. Cullen/Frost's direct activities are generally limited to furnishing
to its subsidiaries services that qualify under the "closely related" and
"proper incident" tests. Prior Federal Reserve Board approval is required
under the BHC Act for new activities and acquisitions of most nonbanking
companies.
The BHC Act, the Federal Bank Merger Act, and the Texas Banking Code
regulate the acquisition of commercial banks. The BHC Act requires the
prior approval of the Federal Reserve Board for the direct or indirect
acquisition of more than five percent of the voting shares of a commercial
bank. The BHC Act generally prohibits the acquisition of a domestic bank
located outside Cullen/Frost's state of principal operations, Texas, unless
authorized by the law of the state of the target bank. With respect to
Cullen/Frost's subsidiary banks, the approval of the Comptroller of the
Currency is required for branching, purchasing the assets of other banks
and for bank mergers in which the continuing bank is a national bank.
In reviewing bank acquisition and merger applications, the bank re-
gulatory authorities will consider, among other things, the competitive
effect and public benefits of the transactions, the capital position of
the combined organization, and the applicant's record under the Community
Reinvestment Act.
Under Federal Reserve Board policy, Cullen/Frost is expected to act as a
source of financial strength to its banks and to commit resources to support
such banks in circumstances where it might not do so absent such policy.
In addition, any loans by Cullen/Frost to its banks would be subordinate in
right of payment to deposits and to certain other indebtedness of its banks.
Economic Environment
- --------------------
The earnings of the subsidiary banks are affected not only by general
economic conditions but also by the policies of various governmental
regulatory authorities. The Federal Reserve Board regulates the supply of
credit in order to influence general economic conditions, primarily through
open market operations in United States government obligations, varying the
discount rate on financial institution borrowings, varying reserve
requirements against financial institution deposits and restricting certain
borrowings by such financial institutions and their subsidiaries. The
deregulation of interest rates has had and is expected to continue to have
an impact on the competitive environment in which the subsidiary banks
operate.
Governmental policies have had a significant effect on the operating
results of commercial banks in the past and are expected to continue to do
so in the future. However, Cullen/Frost cannot accurately predict the
nature or extent of any effect such policies may have on its future
business and earnings.
Statistical Information
- -----------------------
Statistical and other information is included on pages 9 through 23,
pages 43 and 44 and pages 46 through 49 of the Cullen/Frost Annual Report
to Shareholders for the year ended December 31, 1993, which information is
incorporated herein by reference.
Employees
- ---------
At December 31, 1993, Cullen/Frost employed 1,877 persons. Employees
of Cullen/ Frost enjoy a variety of employee benefit programs, including a
retirement plan, stock purchase plans, various comprehensive medical,
accident and group life insurance plans and paid vacations. Cullen/Frost
considers its employee relations to be good.
6
Executive Officers of the Registrant
- ------------------------------------
The names, ages, recent business experience and positions or offices
held by each of the principal executive officers during 1993 of
Cullen/Frost are as follows:
Age as of
Name and Positions or Offices 12/31/93 Recent Business Experience
- ----------------------------- ---------- --------------------------
T.C. Frost 66 Officer and/or director of various
Chairman of the Board subsidiary banks, including Frost
and Chief Executive Officer, Bank, and Cullen/Frost Bank of
Director, and Member of the Dallas, since 1950. Chairman of
Executive Committee the Board and Member of the Exec-
utive Committee of Cullen/Frost
from 1973 to present.
Robert S. McClane 54 Officer of Frost Bank since 1962.
President and Chief Senior Vice President of Cullen/
Administrative Officer, Frost from November 1973 to April
Director and Member of the 1978, Secretary from May 1973 to
Executive Committee April 1985. Executive Vice Pres-
ident from April 1978 to April
1985. President, Director and
Member of the Executive Committee
of Cullen/Frost from April 1985
to present.
Richard W. Evans, Jr. 47 Officer of Frost Bank since 1973.
Chief Banking Officer of Executive Vice President of Frost
Cullen/Frost, Chairman of the Bank from 1978 to April 1985.
Board and Chief Executive President of Frost Bank from April
Officer of Frost Bank, Director, 1985 to August 1993. Chairman of
and Member of the Executive the Board of Frost Bank, Director,
Committee of Cullen/Frost and Member of the Executive Com-
mittee from August 1993 to
present.
J. Gordon Muir, Jr. 52 President of Cullen/Frost Bank
Vice Chairman, Director, and from September 1978 to June 1983.
Member of the Executive Committee Director of Cullen/Frost and
Member of the Executive Committee
since 1979. Chairman of the Board
and Chief Executive Officer of
Cullen Bank from June 1983 to
August 1993. Vice Chairman of
Cullen/Frost from November 1993
to present.
Kenneth A. Trapp 52 Officer of Frost Bank since
Executive Vice President, 1968. Executive Vice President
Retail Banking of Frost of Frost Bank from 1978 to July
Bank of 1985. Executive Vice President
of Cullen/Frost from April 1985 to
August 1993. Executive Vice
President of Frost Bank from
August 1993 to present.
Phillip D. Green 39 Officer of Frost Bank since July
Executive Vice President 1980. Vice President and Control-
and Treasurer ler of Frost Bank from January
1981 to January 1983. Senior Vice
President and Controller of Frost
Bank from January 1983 to July
1985. Senior Vice President and
Treasurer of Cullen/Frost from
July 1985 to April 1989.
Executive Vice President and
Treasurer of Cullen/Frost from May
1989 to present.
Diane Jack, age 45, has been an officer of Frost Bank since 1984; Secretary
of Cullen/Frost from October 1993 to present.
7
There are no arrangements or understandings between any executive officer
of Cullen/Frost and any other person pursuant to which he was or is to be
selected as an officer.
Item 2. PROPERTIES
- -------------------
The executive offices of Cullen/Frost, as well as the principal
banking quarters of Frost Bank, are housed in a 21-story office tower
located on approximately two acres of land in downtown San Antonio.
Cullen/Frost and Frost Bank lease approximately 50 percent of the office
tower. Frost Bank also leases space in a seven-story parking garage and a
nine-story office building adjacent to the banking quarters.
In June 1987 Frost Bank consummated the sale of its office tower and
leased back a portion of the premises under a 13-year primary lease term
with options allowing for occupancy up to 50 years. The Bank also sold its
related parking garage facility and leased back space in that structure
under a 12-year primary lease term with options allowing for occupancy up
to 50 years.
The principal offices of Frost Bank in Houston are located in downtown
Houston with leased facilities in three buildings within the Cullen Center
complex. The remainder of the subsidiary banks located in Dallas and
Galveston are housed in modern facilities which, together with tracts of
adjacent land used for parking and drive-in facilities, are either owned or
leased by the particular subsidiary bank.
Item 3. LEGAL PROCEEDINGS
- --------------------------
Certain subsidiaries of Cullen/Frost are defendants in various matters
in litigation which have arisen in the ordinary course of conducting a
commercial banking business. In the opinion of management, the judicial
disposition of such pending litigation will not have a material effect on
Cullen/Frost's consolidated financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
8
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
- -----------------------------------------------------------------------------
The information called for by Item 5 is incorporated herein by
reference to "Common Stock Market Prices and Dividends" on page 45 and
"Note K-Dividends" on page 34 of the Cullen/Frost Annual Report to
Shareholders for the Year Ended December 31, 1993.
Item 6. SELECTED FINANCIAL DATA
- --------------------------------
The information called for by Item 6 is incorporated herein by
reference to "Selected Financial Data" on page 46 and "Consolidated
Statements of Operations" and "Consolidated Average Balance Sheets" on
pages 47 through 49 of the Cullen/Frost Annual Report to Shareholders for
the Year Ended December 31, 1993.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -------------------------------
The information called for by Item 7 is incorporated herein by
reference to "Financial Review" on pages 9 through 23, "Consolidated
Statements of Operations" and "Consolidated Average Balance Sheets" on
pages 47 through 49 of the Cullen/Frost Annual Report to Shareholders for
the Year Ended December 31, 1993.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The information called for by Item 8 is incorporated herein by
reference to the consolidated financial statements and report of
independent auditors included on pages 24 through 42 and "Quarterly Results
of Operations" on page 45, of the Cullen/Frost Annual Report to
Shareholders for the Year Ended December 31, 1993.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- -------------------------------
None.
9
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information regarding directors and executive officers called for
by Item 10 is incorporated herein by reference to Cullen/Frost's Proxy
Statement for its Annual Meeting of Shareholders to be held May 17, 1994.
The additional information regarding executive officers called for by
Item 10 is included in Part I, Item 1 of this document under the heading
"Executive Officers of the Registrant".
Item 11. EXECUTIVE COMPENSATION
- --------------------------------
The information called for by Item 11 is incorporated herein by
reference to Cullen/Frost's Proxy Statement for its Annual Meeting of
Shareholders to be held May 17, 1994.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information called for by Item 12 is incorporated herein by
reference to Cullen/Frost's Proxy Statement for its Annual Meeting of
Shareholders to be held May 17, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information called for by Item 13 is incorporated herein by
reference to Cullen/Frost's Proxy Statement for its Annual Meeting of
Shareholders to be held May 17, 1994.
10
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Financial Statements -- Reference is made to Part II, Item 8, of this
Annual Report on Form 10-K.
2. The Financial Statement Schedules are omitted, as the required
information is not applicable.
3. Exhibits -- The following exhibits are filed as a part of this Annual
Report on Form 10-K:
Exhibit
Number
-------
2.1 Purchase and Assumption Agreement dated as of February 13, 1993
among the FDIC - receiver of New First City, Texas - Austin, N.A.,
the FDIC and Frost Bank. (1993 Form 8-K, Exhibit 2.1)(14)
2.2 Purchase and Assumption Agreement dated as of February 13, 1993
among the FDIC - receiver of New First City, Texas - San Antonio,
N.A., the FDIC and Frost Bank. (1993 Form 8-K, Exhibit 2.2)(14)
2.3 Agreement and Plan of Merger among Texas Commerce Bancshares,
Inc., Texas Commerce Equity Holdings, Inc., Texas Commerce Bank,
N.A., Texas Commerce Bank - Corpus Christi, N.A., Cullen/Frost
Bankers, Inc., The New Galveston Company, The Frost National Bank of
San Antonio and Cullen/Frost Bank of Dallas, N.A. dated August
26, 1993. (1993 Form 8-K, Exhibit 10)(15)
3.1 Restated Articles of Incorporation, as amended (1988 Form S-8,
Exhibit 4(a))(4)
3.2 Amended By-Laws of Cullen/Frost Bankers, Inc.
4.1 Guaranty, dated April 27, 1981, by Cullen/Frost Bankers, Inc. to
Colonial/Citizens Associates (1985 Form S-8, Exhibit 4(e))(2)
4.2 Shareholder Protection Rights Agreement dated as of July 25, 1989
between Cullen/Frost Bankers, Inc. and The Bank of New York, as
Rights Agent (1989 Form 8-K, Exhibit 1)(6)
10.1 1983 Non-qualified Stock Option Plan, as amended (1989 Form S-8,
Exhibit 4(g))(7)
10.2 Restoration of Retirement Income Plan for Participants in the
Retirement Plan for Employees of Cullen/Frost Bankers, Inc. and its
Affiliates (as amended and restated)(1988 Form 10-K, Exhibit 10.4)
(5)*
10.3 Pension Benefit Contract (1984 Form 10-K, Exhibit 10.8)(1)*
10.4 Contract of Sale, dated June 9, 1987, between The Frost National
Bank of San Antonio and Tower Investors, Ltd. for the sale of the
Frost Bank Tower (1987 Form 10-K, Exhibit 10.10)(3)
10.5 Master Lease, dated June 9, 1987, between The Frost National Bank
of San Antonio and Tower Investments, Ltd. for the lease of the
Frost Bank Tower (1987 Form 10-K, Exhibit 10.11)(3)
10.6 Agreement dated September 30, 1988, among Electronic Data Systems
Corporation, The Frost National Bank of San Antonio and Cullen/Frost
Bankers, Inc. for the sale of rights to revenues of data processing
services (1988 Form 10-K, Exhibit 10.12)(5)
10.7(a) Form of Revised Change-In-Control Agreements with six Executive
Officers (1989 Form 10-K, Exhibit 10.13(a))(9)*
10.7(b) Form of Revised Change-in-Control Agreement with one Executive
Officer (1989 Form 10-K, Exhibit 10.13(b))(9)*
10.8 1988 Non-qualified Stock Option Plan (1989 Form S-8, Exhibit
4(g))(8)
10.9 The 401(k) Stock Purchase Plan for employees of Cullen/Frost
Bankers, Inc. and its Affiliates (1990 Form S-8, Exhibit 4(g))(10)*
10.10 1991 Thrift Incentive Stock Purchase Plan for Employees of
Cullen/Frost Bankers, Inc. and its Affiliates (1991 Form S-8,
Exhibit 4(g))(11)*
10.11 Cullen/Frost Bankers, Inc. Restricted Stock Plan (1992 Form S-8,
Exhibit 4(d))(12)*
10.12 Cullen/Frost Bankers, Inc. 1992 Stock Plan (1992 Form S-8,
Exhibit 4(d))(13)
11 Statement re: computation of earnings per share
11
13 The Cullen/Frost 1993 Annual Report to Shareholders for the Year
Ended December 31, 1993, (furnished for the information of the
Commission and not deemed to be "filed" except for the portion
expressly incorporated by reference)
21 Subsidiaries of Cullen/Frost
23 Consent of Independent Auditors
24 Power of Attorney
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 601 of Regulation S-K.
(b) Reports on Form 8-K -- During the quarter ended December 31, 1993, a
Report on Form 8-K dated October 27, 1993, was filed in respect of the
Cullen/Frost Bankers, Inc. press release dated October 26, 1993 announcing
Registrant's declaration of a cash dividend.
___________________
(1) Incorporated herein by reference to the designated Exhibits to the
Cullen/Frost Annual Report on Form 10-K for the Year Ended December 31,
1984 (File No. 0-7275)
(2) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Report on Form S-8 filed December 18, 1985
(File No. 33-2271)
(3) Incorporated herein by reference to the designated Exhibits to the
Cullen/Frost Annual Report on Form 10-K for the Year Ended December 31,
1987 (File No. 0-7275)
(4) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Report on Form S-8 filed June 24, 1988
(File No. 33-22758)
(5) Incorporated herein by reference to the designated Exhibits to the
Cullen/Frost Annual Report on Form 10-K for the Year Ended December 31,
1988 (File No. 0-7275)
(6) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Current Report on Form 8-K dated July 25, 1989
(File No. 0-7275)
(7) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Report on Form S-8 filed September 5, 1989
(File No. 33-30776)
(8) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Report on Form S-8 filed September 5, 1989
(File No. 33-30777)
(9) Incorporated herein by reference to the designated Exhibits to the
Cullen/Frost Annual Report on Form 10-K for the Year Ended December 31,
1989 (File No. 0-7275)
(10) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Report on Form S-8 filed October 31, 1990
(File No. 33-37500)
(11) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Report on Form S-8 filed March 18, 1991
(File No. 33-39478)
(12) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Report on Form S-8 filed October 20, 1992
(File No. 33-53492)
(13) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Report on Form S-8 filed October 23, 1992
(File No. 33-53622)
(14) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Current Report on Form 8-K dated February 13, 1993
(File No. 0-7275)
(15) Incorporated herein by reference to the designated Exhibits to
Cullen/Frost's Current Report on Form 8-K dated August 26, 1993
(File No. 0-7275)
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 29, 1994 CULLEN/FROST BANKERS, INC.
(Registrant)
By: /s/ ROBERT S. McCLANE
Robert S. McClane
President and Chief Administrative
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 29, 1994.
Signatures Title Date
---------- ----- -----
Chairman of the Board
and Director (Principal Executive
T.C. FROST* Officer)
- ------------------------
(T.C. Frost)
Executive Vice President and
Treasurer (Principal Accounting
/s/ PHILLIP D. GREEN Officer) March 29, 1994
- ------------------------
(Phillip D. Green)
ISAAC ARNOLD, JR.* Director
- ------------------------
(Isaac Arnold, Jr.)
HENRY E. CATTO* Director
- ------------------------
(Henry E. Catto)
HARRY H. CULLEN* Director
- ------------------------
(Harry H. Cullen)
ROY H. CULLEN* Director
- ------------------------
(Roy H. Cullen)
RICHARD W. EVANS, JR.* Director
- ------------------------
(Richard W. Evans, Jr.)
W.N. FINNEGAN III* Director
- ------------------------
(W.N. Finnegan III)
13
Signatures Title Date
---------- ----- -----
JOSEPH H. FROST* Director
- ------------------------
(Joseph H. Frost)
JAMES W. GORMAN, JR.* Director
- ------------------------
(James W. Gorman, Jr.)
JAMES L. HAYNE* Director
- ------------------------
(James L. Hayne)
HARRIS L. KEMPNER, JR.* Director
- ------------------------
(Harris L. Kempner, Jr.)
RICHARD M. KLEBERG, III* Director
- ------------------------
(Richard M. Kleberg, III)
QUINCY LEE* Director
- ------------------------
(Quincy Lee)
ROBERT S. McCLANE * Director
- ------------------------
(Robert S. McClane)
J. GORDON MUIR, JR.* Director
- ------------------------
(J. Gordon Muir, Jr.)
W.B. OSBORN, JR.* Director
- ------------------------
(W.B. Osborn, Jr.)
ROBERT G. POPE* Director
- ------------------------
(Robert G. Pope)
HERMAN J. RICHTER* Director
- ------------------------
(Herman J. Richter)
14
Signatures Title Date
---------- ----- -----
A. FRANK SMITH, JR.* Director
- ------------------------
(A. Frank Smith, Jr.)
CURTIS VAUGHAN, JR.* Director
- ------------------------
(Curtis Vaughan, Jr.)
*By: /s/ ROBERT S. McCLANE March 29, 1994
- ------------------------
(Robert S. McClane)
[as Attorney-in-Fact for
the persons indicated]
15
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- ------------------------------------------
3.2 Amended By-Laws of Cullen/Frost Bankers, Inc.
11 Statement re: computation of earnings per share
13 The Cullen/Frost 1993 Annual Report to Shareholders for the Year
Ended December 31, 1993 (furnished for the information of the Commission
and not deemed to be "filed" except for the portion expressly
incorporated by reference)
21 Subsidiaries of Cullen/Frost
23 Consent of Independent Auditors
24 Power of Attorney