2009-11-18 16:47:08 -

Fitch Ratings has affirmed the long-term Issuer Default Rating (IDR) for Cullen/Frost Bankers Inc. (CFR) and its banking subsidiary Frost National Bank at 'A-' and short-term IDR at 'F1'. The Rating Outlook remains Positive. A list of rating actions follows at the end of this release.

Fitch affirmed the ratings primarily on the relative strength of CFR's earnings performance, strong funding profile, solid capital position, and manageable credit costs with the expectation that these strengths will be maintained. The affirmation also incorporates Fitch's updated views on commercial real estate (CRE) lending. CRE loans, excluding construction and land development loans, comprised 27% of loans at Sept.

30, 2009. Although performance to date has been good, CFR is exposed to potentially higher levels

of credit costs in the future given weak market fundamentals in the CRE market.

CFR's financial performance continues to be good relative to peers, a highlight in an otherwise difficult operating environment. Performance is aided by a strong and stable net interest margin (NIM), good levels of fee income and relatively modest credit costs. Return on assets (ROA) was down from historical averages to 1.10% through Sept. 30, 2009 due to higher provisioning expenses and larger FDIC insurance costs, but remains good during a challenging economic environment.

As is typical for CFR, liquidity is very strong. With a loan-to-deposit ratio below 70%, the company has ample low cost funding to support loan growth. The company's considerable core deposit franchise provides low cost funding and supports the good NIM.

CFR was one of the first companies to decline participation in the TARP Capital Purchase Program. Although CFR never issued preferred stock to the U.S. Treasury, regulatory capital ratios remain solid, and are in line with similarly rated peers. CFR also operates with a strong TCE/TA ratio. Fitch believes the company's strong capital position may lead management to pursue highly opportunistic acquisitions, consistent with its traditional strategy of buying companies with similar balance sheets and a strong cultural affinity with CFR.

Although Texas has yet to experience a dramatic slowdown in real estate and the economy continues to perform better in relative terms to some of the more hard hit states, CFR has not been immune to asset quality deterioration. Nonperforming assets (NPAs) in dollar terms have increased 300% since Sept. 30, 2008 due mainly to weakness in the residential construction industry. Despite the increase in NPAs, CFR's level of net charge-offs (NCOs) has remained quite manageable. CFR reported only 45 basis points (bps) in NCOs in the first nine months of 2009. Fitch expects that credit costs will rise as CFR realizes some of the associated loss content in its problem loan book, but remain manageable in light of CFR's core earnings potential. Fitch's ratings affirmation considers further deterioration in asset quality, but assumes CFR will emerge from the current credit environment considerably stronger than similarly rated peers.

The Positive Outlook reflects Fitch's view that the company's solid financial performance, manageable credit costs and good capital position will likely persist despite the challenges facing the banking industry.

This differentiated performance could lead to an upgrade of the company's ratings.

Fitch has affirmed the following ratings with a Positive Outlook.

Cullen/Frost Bankers, Inc.

-- Long-term Issuer Default Rating (IDR) at 'A-';-- Short-term IDR at 'F1';-- Individual at 'B';-- Subordinated debt at 'BBB+';-- Support at '5';-- Support at floor 'NF'.

Frost National Bank


-- Long-term IDR at 'A-';-- Short-term IDR at 'F1';-- Long-term deposits at 'A';-- Short-term deposits at 'F1';-- Subordinated debt at 'BBB+';-- Individual at 'B';-- Support at '5';-- Support floor 'NF'.

Cullen/Frost Capital Trust II


-- Preferred stock at 'BBB+'.

Additional information is available at www.fitchratings.com : .

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Fitch RatingsBrian Bertsch, +1-212-908-0549 (New York) brian.bertsch@fitchratings.com : mailto:brian.bertsch@fitchratings.com Julie
Solar, +1-312-368-5472 (Chicago)John Mackerey, +1-212-908-0366
(New York)