-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HDxlrCI3qZ7szQZy8Jnik5iGs3sT5in0t3IUBQUZv5P87deMDMhSSSjjxYEDQos/ jWIvF8qMsmJtJLRiRvplfg== 0000039263-99-000015.txt : 19990624 0000039263-99-000015.hdr.sgml : 19990624 ACCESSION NUMBER: 0000039263-99-000015 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990623 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CULLEN FROST BANKERS INC CENTRAL INDEX KEY: 0000039263 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 741751768 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-13221 FILM NUMBER: 99651037 BUSINESS ADDRESS: STREET 1: 100 W HOUSTON ST STREET 2: P O BOX 1600 CITY: SAN ANTONIO STATE: TX ZIP: 78205 BUSINESS PHONE: 2102204841 FORMER COMPANY: FORMER CONFORMED NAME: FROST BANK CORP DATE OF NAME CHANGE: 19770823 10-K/A 1 AMENDED FORM 10-K TO INCLUDE 19.1 AND 23.3 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 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 ___ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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: Common Stock, $.01 Par Value (with attached rights) ---------------------------- (Title of Class) Securities registered pursuant to Section 12(g) of the Act: None. 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 to file 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 $1,250,969,589 based on the closing price of such stock as of March 19, 1999. 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 19, 1999 ---------------------------- -------------- Common Stock, $.01 par value 26,760,687 DOCUMENTS INCORPORATED BY REFERENCE (1) Proxy Statement for Annual Meeting of Shareholders to be held May 26, 1999 (Part III) SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A AMENDMENT TO APPLICATION OR REPORT FILED PURSUANT TO SECTION 12, 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 CULLEN/FROST BANKERS, INC. (Exact name of registrant as specified in its charter) AMENDMENT NO. 2 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Annual Report on Form 10-K for the fiscal year ended December 31, 1998 as set forth in the pages attached hereto: Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 1. Financial Statements--Reference is made to Part II, Item 8 of this Annual Report on Form 10-K. In addition, pursuant to Rule 15d-21 under the Securities Exchange Act of 1934 the financial statements and supplemental schedules required by Form 11-K with respect to the 401(k)Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. and its Affiliates are filed herewith as Exhibit 19.2 to this Annual Report on Form 10-K. 2. Exhibits--The following additional exhibits are filed herewith as a part of this Amendment No. 2 to the registrant's Annual Report on Form 10-K. 19.2 The financial statements and exhibits required by Form 11-K with respect to the 401(k) Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. for the fiscal years ended December 31, 1998 and 1997. 23.4 Consent of Independent Auditors with respect to Form 10-K as amended by this Form 10-K/A for the 401(k) Stock Purchase Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. Cullen/Frost Bankers, Inc. -------------------------- (Registrant) Date: June 23, 1999 /s/PHILLIP D. GREEN ----------------------- Phillip D. Green Senior Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Accounting Officer) 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 ---------- 3.1 Articles of Incorporation, of Cullen/Frost Bankers, Inc. as amended (11) 3.2 Amended By-Laws of Cullen/Frost Bankers, Inc. (8) 4.1 Shareholder Protection Rights Agreement dated as of February 1, 1999 between Cullen/Frost Bankers, Inc. and The Frost National Bank, as Rights Agent (12) 10.1 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)* 10.2 Change-In-Control Agreement with one Executive Officer* 10.3 1983 Non-qualified Stock Option Plan, as amended (1) 10.4 Form of Revised Change-In-Control Agreements with four Executive Officers (3)* 10.5 1988 Non-qualified Stock Option Plan (2)* 10.6 The 401(k) Stock Purchase Plan for employees of Cullen/Frost Bankers, Inc. and its Affiliates (4)* 10.7 1991 Thrift Incentive Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. and its Affiliates (5)* 10.8 Cullen/Frost Bankers, Inc. Restricted Stock Plan (6)* 10.9 Cullen/Frost Bankers, Inc. Supplemental Executive Retirement Plan (7)* 10.10 Form of Revised Change-In-Control Agreements with one Executive Officer (7)* 10.11 Retirement agreement with one Executive Officer (9)* 10.12 Cullen/Frost Bankers, Inc. 1997 Directors Stock Plan (10) 10.13 Cullen/Frost Bankers, Inc. 1992 Stock Plan, as amended (10) 19.1 Annual Report on Form 11-K for the Year Ended December 31, 1998, for the 1991 Thrift Incentive Stock Purchase Plan (filed pursuant to Rule 15d-21 of the Securities and Exchange Act of 1934)(13) 19.2 Annual Report on Form 11-K for the Year Ended December 31, 1998, for the 401(k) Stock Purchase Plan (filed pursuant to Rule 15d-21 of the Securities and Exchange Act of 1934)(14) 21 Subsidiaries of Cullen/Frost 23.1 Consent of Independent Auditors 23.2 Consent of PricewaterhouseCoopers LLP Independent Auditors for Overton Bancshares, Inc. 23.3 Consent of Independent Auditors with respect to Form 10-K/A for the 1991 Thrift Incentive Stock Plan (13) 23.4 Consent of Independent Auditors with respect to Form 10-K/A for the 401(k) Stock Purchase Plan (14) 24 Power of Attorney 27 Financial Date Schedule (EDGAR Version) 99 Report of PricewaterhouseCoopers LLP on Overton Bancshares, Inc. financial statements as of December 31, 1997 and for each of the years in the two year period ended December 31, 1997. * 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 -- No such reports were filed during the quarter ended December 31, 1998. ______________________ (1) 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) (2) 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) (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, 1989 (File No. 0-7275) (4) 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) (5) 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) (6) 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) (7) Incorporated herein by reference to the designated Exhibits to Cullen/Frost's Annual Report on Form 10-K for the Year Ended December 31, 1994 (File No. 0-7275) (8) Incorporated herein by reference to the designated Exhibits to Cullen/Frost's Annual Report on Form 10-K/A for the Year Ended December 31, 1995 (File No. 0-7275) (9) Incorporated herein by reference to the designated Exhibits to Cullen/Frost's Annual Report on Form 10-K for the Year Ended December 31, 1996 (File No. 0-7275) (10) Incorporated herein by reference to the designated Exhibits to Cullen/Frost's Annual Report on Form 10-K for the Year Ended December 31, 1997 (File No. 0-7275) (11) Incorporated herein by reference to the designated Exhibits to Cullen/Frost's Report on Form 8-A12B/A filed on August 31, 1998 (File No. 0-7275) (12) Incorporated herein by reference to the designated Exhibits to Cullen/Frost's Current Report on Form 8-A12G/A dated February 1, 1999 (File No. 0-7275) (13) Incorporated herein by reference to the designated Exhibits to Cullen/Frost's Amendment No. 1 on Form 10-K/A to the Annual Report on Form 10-K for the Year Ended December 31, 1998. (File No. 0-7275) (14) Filed herewith. EXHIBIT INDEX TO FORM 10-K/A Exhibit Number Description of Exhibits - ------------------------------------------ 19.2 The financial statements and exhibits required by Form 11-K with respect to the 401(K) Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. for the fiscal years ended December 31, 1998 and 1997 (filed pursuant to Rule 15d-21 of the Securities and Exchange Act of 1934) 23.4 Consent of Independent Auditors with respect to Form 10-K/A for the 401(K) Stock Purchase Plan. EX-19.2 2 401(K) STOCK PURCHASE PLAN EXHIBIT 19.2 The Financial Statements and Supplemental Schedules for the 401(k) Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. for the years ended December 31, 1998 and 1997 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Financial Statements and Supplemental Schedules Years Ended December 31, 1998 and 1997 with Report of Independent Auditors 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Financial Statements and Supplemental Schedules Years Ended December 31, 1998 and 1997 Contents Report of Independent Auditors........................................ 1 Financial Statements Statements of Net Assets Available for Benefits....................... 3 Statements of Changes in Net Assets Available for Benefits............ 4 Notes to Financial Statements......................................... 5 Supplemental Schedules Item 27a - Schedule of Assets Held for Investment Purposes............ 15 Item 27d - Schedule of Reportable Transactions........................ 16 Report of Independent Auditors Compensation and Benefits Committee of the 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates San Antonio, Texas We have audited the accompanying statements of net assets available for benefits of the 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates 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 Plan 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. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets held for investment purposes as of December 31, 1998 and reportable transactions for the year then ended, are presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of 1 Compensation and Benefits Committee of the 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in our audit of the 1998 financial statements and, in our opinion, are fairly stated in all material respects in relation to the 1998 financial statements taken as a whole. The schedule of assets held for investment purposes and schedule of reportable transactions that accompany the Plan's financial statements do not disclose the historical cost of certain plan investments or the net gain or loss from certain sales transactions. Disclosure of this information is required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. /s/ERNST & YOUNG L.L.P. San Antonio, Texas May 28, 1999 2 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Statements of Net Assets Available for Benefits December 31 1998 1997 ---------------------- Assets Common stock of Cullen/Frost Bankers, Inc. (pending distribution) $ - $ 17,538 Investments, at fair value: Common stock of Cullen/Frost Bankers, Inc. 82,223,198 88,099,682 AIM Short-Term Prime Money Market Fund - 82,917 AIM LTD Maturity Treasury Fund - 921,338 Templeton Growth Fund 3,287,158 2,934,922 Fidelity Advisor Growth Opportunities Fund 8,021,620 4,107,804 Fidelity Money Market Fund 6,396,502 4,953,482 Frost EB Low Duration Fund 661,618 - Optimum Mix/Total Return Portfolio 5,989,919 4,416,454 Optimum Mix/Equities Only Portfolio 1,675,115 - Short-Term Investments Co. Prime Portfolio - 417,283 Participant loans 6,903,667 6,133,895 ------------------------------ Total investments 115,158,797 112,085,315 Receivables: Employer contributions 149,831 102,149 Participants' contributions 234,441 161,607 Interest 267 1,035 Merger asset - 705,496 ----------------------------- Net assets available for benefits $ 115,543,336 $ 113,055,602 ============================= See accompanying notes. 3 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Statements of Changes in Net Assets Available for Benefits Year Ended December 31 1998 1997 --------------------------- Additions to net assets attributed to: Investment activities: Interest $ 328,202 $ 233,798 Dividends 2,668,772 2,389,485 Net appreciation (depreciation) in fair value of investments (3,897,172) 40,750,675 --------------------------- (900,198) 43,373,958 Contributions: Employer 3,024,548 1,961,981 Participants 5,398,984 4,831,873 --------------------------- Total additions 7,523,334 50,167,812 Deductions from net assets attributed to: Benefits paid to participants 5,035,600 2,397,145 Transfer of funds due to plan merger - (705,496) ---------------------------- Net increase 2,487,734 48,476,163 Net assets available for benefits at beginning of year 113,055,602 64,579,439 ---------------------------- Net assets available for benefits at end of year $115,543,336 $113,055,602 ============================ See accompanying notes. 4 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Notes to Financial Statements December 31, 1998 and 1997 1. Significant Accounting Policies The accounting records of the 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates (the Plan) are maintained on the accrual basis of accounting. The Plan's investments are held in common stock of Cullen/Frost Bankers, Inc. (CFBI), Templeton Growth Fund, Fidelity Advisor Growth Opportunities Fund, Frost EB Low Duration Fund, Optimum Mix/Total Return Portfolio, and Optimum Mix/Equities Only Portfolio, which are stated at fair value based on quoted market prices on the valuation date, and in the Fidelity Money Market Fund. Changes in fair market value and gains and losses on the sale of investment securities are reflected in the statements of changes in net assets available for benefits as net appreciation (depreciation) in fair value of investments. Money market investments are valued at cost, which approximates fair value. Administrative expenses of the Plan are paid by CFBI. 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 following is a general description of the Plan. Participants should refer to the plan agreement for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan qualified under Section 401(a) of the Internal Revenue Code (IRC) and covers full-time employees who complete 90 days of service and part-time employees who complete 90 days of service and are scheduled to work more than 1,000 hours in a year. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). 5 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Notes to Financial Statements (continued) December 31, 1998 and 1997 2. Description of the Plan (continued) Contributions and Investment Options Participants may contribute an amount not less than 2% and not exceeding 16% of their compensation, limited by 401(k) regulations, and may direct investments of their accounts in either common stock of CFBI, Templeton Growth Fund, Fidelity Advisor Growth Opportunities Fund, Fidelity Money Market Fund, Frost EB Low Duration Fund, Optimum Mix/Total Return Portfolio, or Optimum Mix/Equities Only Portfolio. Participants are able to invest their contributions in these funds in 1% increments. CFBI matches 100% of the participants' contributions up to 6% of the participants'compensation. The match is invested in the common stock of CFBI. Participant Accounts Each participant's account is credited with the participant's contributions and allocations of (a) CFBI's contributions and (b) plan earnings. Forfeited balances of terminated participants' nonvested accounts are used to restore forfeitures of reemployed participants, pay administrative expenses to the extent not paid by CFBI, or reduce future company contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. Vesting Participants are immediately vested in their voluntary contributions plus actual earnings thereon. Participants employed prior to January 1, 1991 are 100% vested in their employer contributions. Participants employed after December 31, 1990 vest in their employer contributions at 20% per year with 100% vesting occurring after completion of five years of service, upon death or disability, or when the participant reaches age 65. Participant Loans Participants may borrow from their fund accounts a minimum of $500 up to a maximum of $50,000 or 50% of their account balance, reduced by the highest amount of any loan outstanding within the previous twelve months. Loan transactions are treated as a transfer from (to) the investment fund to (from) the loan fund. Loan terms range from 6 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Notes to Financial Statements (continued) December 31, 1998 and 1997 2. Description of the Plan (continued) 1 to 5 years or up to 30 years for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at a rate commensurate with local prevailing rates. Principal and interest are paid ratably through semimonthly payroll deductions. Subject to Internal Revenue Service (IRS) limitations, participants may make hardship withdrawals from a portion of their 401(k) contributions to pay for an immediate and heavy financial need. Participant loans are stated at cost which approximates fair value. Payment of Benefits Upon normal retirement at age 65, or in the event of death or disability, a participant will receive a lump-sum payment of his (her) account in the Plan and all amounts which have been allocated to his (her) plan account. Distribution of a participant's account must occur no later than April of the calendar year after the participant reaches age 70 1/2. In the event of termination of employment with the employer for any other reason, the participant is entitled to the vested portion of his (her) account in the Plan and all vested amounts which have been allocated to his (her) plan account. Plan Termination Although it has not expressed any intent to do so, CFBI has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of plan termination, participants will become 100% vested in their accounts. 3. Benefits Payable to Terminated Participants At December 31, 1998, there were 23 terminated participants in the Plan who had requested a distribution entitled to aggregate vested benefits totaling $102,522 in cash disbursements and 1,533 shares of CFBI common stock, or $84,123, applying the fair market value of the stock of $54.86 per share at December 31, 1998. At December 31, 1997, there were nine terminated participants in the Plan who had requested a distribution entitled to aggregate vested benefits totaling $82,411 in cash distributions and 5,211 shares of CFBI common stock, or $316,256, applying the fair market value of the stock of $60.69 per share at December 31, 1997. 7 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Notes to Financial Statements (continued) December 31, 1998 and 1997 4. Form 5500 The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500: December 31 1998 1997 -------------------------- Net assets available for benefits per the financial statements $115,543,336 $113,055,602 Amounts allocated to withdrawing participants (186,645) (398,667) -------------------------- Net assets available for benefits per the Form 5500 $115,356,691 $112,656,935 ========================== The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500: Year Ended December 31 1998 1997 ------------------------- Benefits paid to participants per the financial statements $ 5,035,600 $ 2,397,145 Add: Amounts allocated to withdrawing participants at the end of the year 186,645 398,667 Less: Amounts allocated to withdrawing participants at the end of the prior year (398,667) (343,138) ------------------------- Benefits paid to participants per the Form 5500 $ 4,823,578 $ 2,452,674 ========================= Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date. 8 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Notes to Financial Statements (continued) December 31, 1998 and 1997 5. Income Tax Status The IRS has determined and informed CFBI by a letter dated October 26, 1996 that the Plan and related trust are designed in accordance with applicable sections of the IRC. The Plan has been amended since receiving the determination letter. However, the plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. 6. 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. 9 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Notes to Financial Statements (continued) December 31, 1998 and 1997 7. Statement of Changes in Net Assets Available for Benefits Segregated by Participant-Directed Investment Type The following represents the changes in net assets available for benefits segregated by participant-directed investment type for the year ended December 31, 1998:
Common Stock of Cullen/Frost AIM Short- Cullen/Frost Bankers, Inc. Term Prime AIM LTD Bankers, Inc. Common Money Maturity Templeton (Pending Stock Market Treasury Growth Distribution) Fund Fund Fund Fund ------------------------------------------------------------- Additions to net assets attributed to: Interest $ - $ - $ - $ - $ - Dividends - 1,723,836 - 14 408,700 Net appreciation (depreciation) in fair value of investments - (5,139,453) - 1,943 (494,226) Investment election transfer (17,538) (6,120,302) (82,917) (923,295) 152,434 Contributions: Employer - 2,874,717 - - - Participants - 2,746,958 - - 479,674 ----------------------------------------------------------- Total additions (deductions) (17,538) (3,914,244) (82,917) (921,338) 546,582 Deductions from net assets attributed to: Benefits paid to participants - 2,932,527 - - 194,346 ----------------------------------------------------------- Total deductions - 2,932,527 - - 194,346 ----------------------------------------------------------- Net increase (decrease) (17,538) (6,846,771) (82,917) (921,338) 352,236 Net assets available for benefits at beginning of year 17,538 89,069,969 82,917 921,338 2,934,922 ----------------------------------------------------------- Net assets available for benefits at end of year $ - $ 82,223,198 $ - $ - $3,287,158 ===========================================================
10
Fidelity Advisor Optimum Growth Fidelity Mix/Total Short-Term Frost EB Opportunities Money Market Return Investments Co. Participant Low Duration Fund Fund Portfolio Prime Portfolio Loans Fund - ----------------------------------------------------------------------------------- $ - $ 327,935 $ - $ - $ - $ - 331,991 - 173,230 - - 20,854 1,036,617 20,269 495,672 - - 9,206 1,995,413 1,763,288 571,544 (417,283) 1,153,356 607,416 - - - - - - 833,209 421,269 480,031 - - 24,555 - --------------------------------------------------------------------------------- 4,197,230 2,532,761 1,720,477 (417,283) 1,153,356 662,031 283,414 1,089,741 147,012 - 383,584 413 - --------------------------------------------------------------------------------- 283,414 1,089,741 147,012 - 383,584 413 - --------------------------------------------------------------------------------- 3,913,816 1,443,020 1,573,465 (417,283) 769,772 661,618 4,107,804 4,953,482 4,416,454 417,283 6,133,895 - - --------------------------------------------------------------------------------- $ 8,021,620 $ 6,396,502 $5,989,919 $ - $ 6,903,667 $ 661,618 =================================================================================
11 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Notes to Financial Statements (continued) December 31, 1998 and 1997 7. Statement of Changes in Net Assets Available for Benefits Segregated by Participant-Directed Investment Type (continued)
Optimum Mix/ PIMCO Equities Only Low Duration Portfolio Fund Other Totals ------------------------------------------------------- Additions to net assets attributed to: Interest $ - $ - $ 267 $ 328,202 Dividends 10,147 - - 2,668,772 Net appreciation (depreciation) in fair value of investments 158,123 14,677 - (3,897,172) Investment election transfer 1,348,020 (30,136) - Contributions: Employer - - 149,831 3,024,548 Participants 163,385 15,462 234,441 5,398,984 ------------------------------------------------------ Total additions (deductions) 1,679,675 3 384,539 7,523,334 Deductions from net assets attributed to: Benefits paid to participants 4,560 3 - 5,035,600 ------------------------------------------------------ Total deductions 4,560 3 - 5,035,600 ------------------------------------------------------ Net increase (decrease) 1,675,115 - 384,539 2,487,734 Net assets available for benefits at beginning of year - - - 113,055,602 ------------------------------------------------------ Net assets available for benefits at end of year $ 1,675,115 $ - $ 384,539 $ 115,543,336 ====================================================== 12 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates Notes to Financial Statements (continued) December 31, 1998 and 1997 7. Statement of Changes in Net Assets Available for Benefits Segregated by Participant-Directed Investment Type (continued) The following represents the changes in net assets available for benefits segregated by participant-directed investment type for the year ended December 31, 1997:
Common Stock of Cullen/Frost Cullen/Frost AIM Short- AIM LTD Fidelity Advisor Bankers, Inc. Bankers, Inc. Term Prime Maturity Growth (Pending Common Stock Money Market Treasury Templeton Opportunities Distribution) Fund Fund Fund Growth Fund Fund -------------------------------------------------------------------------------------- Additions to net assets attributed to: Interest $ - $ - $ 189,040 $ - $ - $ - Dividends - 1,405,212 - 38,450 423,910 340,770 Net appreciation (depreciation) in fair value of investments - 37,733,069 1,587,681 3,766 (95,739) 20,214 Investment election transfer - (2,358,007) (5,372,144) 267,323 474,024 687,196 Contributions: Employer - 1,961,981 - - - - Participants 17,538 2,581,993 200,405 56,442 390,949 645,782 --------------------------------------------------------------------------------- Total additions (deductions) 17,538 41,324,248 (3,395,018) 365,981 1,193,144 1,693,962 Deductions from net assets attributed to: Benefits paid to participants - 1,946,290 160,951 1,820 46,755 78,946 Transfer of funds due to plan merger - (705,496) - - - - --------------------------------------------------------------------------------- Total deductions (additions) - 1,240,794 160,951 1,820 46,755 78,946 --------------------------------------------------------------------------------- Net increase (decrease) 17,538 40,083,454 (3,555,969) 364,161 1,146,389 1,615,016 Net assets available for benefits at beginning of year - 48,986,515 3,638,886 557,177 1,788,533 2,492,788 --------------------------------------------------------------------------------- Net assets available for benefits at end of year $ 17,538 $ 89,069,969 $ 82,917 $921,338 $2,934,922 $4,107,804 =================================================================================
13
Optimun Fidelity Mix/Total Short-Term Money Market Return Investments Co. Participant Fund Portfolio Prime Portfolio Loans Totals - ------------------------------------------------------------------------ $ 44,758 $ - $ - $ - $ 233,798 - 181,143 - - 2,389,485 279,251 1,222,433 - - 40,750,675 4,613,453 151,080 - 1,537,075 - - - - - 1,961,981 20,186 501,295 417,283 - 4,831,873 - ------------------------------------------------------------------------ 4,957,648 2,055,951 417,283 1,537,075 50,167,812 4,166 20,236 - 137,981 2,397,145 - - - - (705,496) - ------------------------------------------------------------------------- 4,166 20,236 - 137,981 1,691,649 - ------------------------------------------------------------------------- 4,953,482 2,035,715 417,283 1,399,094 48,476,163 - 2,380,739 - 4,734,801 64,579,439 - ------------------------------------------------------------------------- $ 4,953,482 $ 4,416,454 $ 417,283 $ 6,133,895 $ 113,055,602 =========================================================================
14 Supplemental Schedules 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates EIN: 74-1751768 Plan No.: 003 Item 27a - Schedule of Assets Held for Investment Purposes December 31, 1998 Description of Investment Including Maturity Date Identity of Issue, Rate of Interest Borrower, Lessor, Collateral, Par or Current or Similar Party Maturity Date Cost Value - ------------------------------------------------------------------------------ *Cullen/Frost Bankers, Inc. Common stock 1,496,017 shares ** $ 82,223,198 Fidelity Money Market Money market deposit Fund account $ 6,396,502 6,396,502 *Participant loans Interest accrued at Frost National Bank prime rate, varying maturity dates, 8.25% - 8.50% charged during 1998 - 6,903,667 Optimum Mix/Total Return Portfolio Mutual fund ** 5,989,919 Optimum Mix/Equities Only Portfolio Mutual fund ** 1,675,115 Templeton Growth Fund Mutual fund 3,789,344 3,287,158 Fidelity Advisor Growth Opportunities Fund Mutual fund 6,528,305 8,021,620 *Frost EB Low Duration Bond Fund Mutual fund ** 661,618 -------------- $ 115,158,797 ============== * Denotes party-in-interest ** Historical cost is not available. 15 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates EIN: 74-1751768 Plan No.: 003 Item 27d - Schedule of Reportable Transactions Year Ended December 31, 1998
Description of Current Value Asset (Including Interest of Asset on Identity of Rate and Maturity Purchase Selling Cost of Transaction Net Gain Party Involved* in Case of a Loan) Price Price Asset Date or (Loss) - ---------------------------------------------------------------------------------------------------------------------- Category (iii) - Series of Securities Transactions AIM Short-Term Prime Money Market Fund $ 11,631,154 $ - $ 11,631,154 $ 11,631,154 $ - AIM Short-Term Prime Money Market Fund - 16,543,419 16,543,419 16,543,419 - Fidelity Money Market Fund 9,185,619 - 9,185,619 9,185,619 - Fidelity Money Market Fund - 2,415,842 2,415,842 2,415,842 - Common stock: Cullen/Frost Bankers, Inc. 12,818,018 - 12,818,018 12,818,018 - Cullen/Frost Bankers, Inc. - 9,002,433 ** 9,002,433 ** Fidelity Advisors Growth Opportunity Fund 4,610,261 - 4,610,261 4,610,261 - Fidelity Advisors Growth Opportunity Fund - 3,380,344 3,380,344 3,380,344 - There were no Category (i), (ii), or (iv) transactions during the year ended December 31, 1998. * All transactions on market. ** Historical information is not available.
16 EX-23.4 3 CONSENT OF INDEPENDENT AUDITOR EXHIBIT 23.4 Consent of Independent Auditors with respect to Form 10-K/A for the 401(k) Stock Purchase Plan. Consent of Independent Auditors We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-30776) pertaining to the Cullen/Frost Bankers, Inc. 1983 Nonqualified Stock Option Plan, the Registration Statement (Form S-8 No. 33-30777) pertaining to the Cullen/Frost Bankers, Inc. 1988 Nonqualified Stock Option Plan, the Registration Statement (Form S-8 No. 33-37500) pertaining to the 401(k) Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. and its Affiliates, the Registration Statement (Form S-8 No. 33-39478) pertaining to the 1991 Thrift Incentive Stock Purchase Plan for Employees of Cullen/Frost Bankers, Inc. and its Affiliates, the Registration Statement (Form S-8 No. 33-53492) pertaining to the Cullen/Frost Bankers, Inc. Restricted Stock Plan, the Registration Statement (Form S-8 No. 33-53622) pertaining to the Cullen/Frost Bankers, Inc. 1992 Stock Plan, the Registration Statement (Form S-4 No. 333-23225 and Form S-4 No. 333-23225-01) pertaining to the registration and exchange of $100,000,000 in capital securities, Series A, and the Registration Statement (Form S-4 No. 333-49317) pertaining to the registration of up to 4,400,000 shares of its common stock, of our report dated May 28, 1999, with respect to the financial statements of the 401(k) Stock Purchase Plan for the Employees of Cullen/Frost Bankers, Inc. and Its Affiliates included in this Annual Report (Form 10-K as amended by this Form 10-K/A) for the year ended December 31, 1998. /s/ERNST & YOUNG LLP San Antonio, Texas June 18, 1999 -----END PRIVACY-ENHANCED MESSAGE-----