EXHIBIT 19.2
The Financial Statements for the 401(k) Stock Purchase Plan
for Employees of Cullen/Frost Bankers, Inc.
<PAGE>
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, 1999 and 1998 with Report of Independent Auditors
<PAGE>
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, 1999 and 1998
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
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year...........................................................12
Schedule H, Line 4j - Schedule of Reportable Transactions...................14
<PAGE>
Supplemental Schedules
<PAGE>
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, 1999 and 1998, 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 auditing standards generally
accepted in the United States. 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, 1999 and 1998, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
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 at end of year as of December 31, 1999, 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
<PAGE>
Compensation and Benefits Committee of the
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
the Department of 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 audits
of the financial statements and, in our opinion, are fairly stated in all
material respects in relation to the financial statements taken as a whole.
/s/ERNST & YOUNG LLP
San Antonio, Texas
June 7, 2000
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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
1999 1998
------------------------------------
Assets
Investments, at fair value $ 122,722,872 $ 115,158,797
Cash equivalents 15,041 -
Receivables:
Employer contributions 208,794 149,831
Participants' contributions 272,256 234,441
Interest 997 267
---------------------------------------
Net assets available for benefits $ 123,219,960 $ 115,543,336
=====================================
See accompanying notes
<PAGE>
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
1999 1998
------------------------------
Additions to net assets attributed to:
Investment activities:
Interest $ 304,440 $ 328,202
Dividends 4,364,761 2,668,772
Net depreciation in
fair value of investments (3,651,850) (3,897,172)
------------------------------
1,017,351 (900,198)
Contributions:
Employer 5,049,351 3,024,548
Participants 8,350,077 5,398,984
------------------------------
Total additions 14,416,779 7,523,334
Deductions from net assets attributed to:
Benefits paid to participants 9,350,058 5,035,600
------------------------------
Net increase 5,066,721 2,487,734
Transfer of funds due to plan merger 2,609,903 -
Net assets available for benefits at
beginning of year 115,543,336 113,055,602
------------------------------
Net assets available for benefits at
end of year $123,219,960 $115,543,336
==============================
See accompanying notes.
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
Notes to Financial Statements
December 31, 1999 and 1998
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) and several mutual fund options, which are stated at fair value based on
quoted market prices on the valuation date. 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 and loans
to participants 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 in the United States 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.
Reclassifications
Certain prior year balances have been reclassified to conform to the current
year presentation.
During the second quarter of 1999, CFBI declared and distributed a two-for-one
stock split. As such, the number of shares outstanding at December 31, 1998
have been restated.
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.
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
Notes to Financial Statements (continued)
December 31, 1999 and 1998
2. Description of the Plan (continued)
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).
Plan Amendment
Effective January 1, 1999, the Plan was amended to reflect the adoption of the
safe harbor methods for satisfying the nondiscrimination tests required by the
IRC. As such, full vesting was provided for all accounts, and the CFBI match is
no longer discretionary.
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 into various investment options offered by the Plan.
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.
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
Notes to Financial Statements (continued)
December 31, 1999 and 1998
2. Description of the Plan (continued)
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. Effective January 1,
1999, participants are fully vested in all contributions in their participant
accounts. Participants who terminated employment prior to January 1, 1999
remain subject to the five years of service for 100% vesting.
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 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.
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
Notes to Financial Statements (continued)
December 31, 1999 and 1998
2. Description of the Plan (continued)
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, 1999, there were 5 terminated participants in the Plan who had
requested a distribution entitled to aggregate vested benefits totaling $25,223
in cash disbursements and 390 shares of CFBI common stock, or $10,045, applying
the fair market value of the stock of $25.75 per share at December 31, 1999. 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 distributions and 3,066 shares of CFBI common stock, or
$84,123, applying the fair market value of the stock of $27.43 per share at
December 31, 1998.
4. Form 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
December 31
1999 1998
----------------------------------
Net assets available for benefits per the
financial statements $ 123,219,960 $ 115,543,336
Amounts allocated to withdrawing
participants (35,268) (186,645)
----------------------------------
Net assets available for benefits per the
Form 5500 $ 123,184,692 $ 115,356,691
==================================
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
Notes to Financial Statements (continued)
December 31, 1999 and 1998
4. Form 5500 (continued)
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year Ended December 31
1999 1998
-----------------------------------
Benefits paid to participants per the
financial statements $ 9,350,058 $ 5,035,600
Add: Amounts allocated to withdrawing
participants at the end of the year 35,268 186,645
Less: Amounts allocated to withdrawing
participants at the end of the prior year (186,645) (398,667)
-----------------------------------
Benefits paid to participants per the
Form 5500 $ 9,198,681 $ 4,823,578
===================================
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.
5. Income Tax Status
The Plan has received a determination letter from the IRS dated October 26,
1996, stating that the Plan is qualified under Section 401(a) of the IRC and,
therefore, the related trust is exempt from taxation. Once qualified, the Plan
is required to operate in conformity with the IRC to maintain its qualification.
The plan administrator believes the Plan is being operated in compliance with
the applicable requirements of the IRC and, therefore, believes the Plan is
qualified and the related trust is tax-exempt.
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
Notes to Financial Statements (continued)
December 31, 1999 and 1998
6. Investments
The following presents investments that represent 5% or more of the Plan's
net assets:
December 31
1999 1998
--------------------------------
Cullen/Frost Bankers, Inc. common stock,
3,170,890 shares and 2,992,034 shares,
respectively $ 81,650,418* $ 82,223,198*
Fidelity Money Market 6,473,812 6,396,502
Fidelity Advisor Growth Opportunities Fund 10,701,636 8,021,620
Optimum Mix/Total Return Portfolio - 5,989,919
Participant loans 7,913,782 6,903,667
* Includes both participant-directed and nonparticipant-directed.
During 1999, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) depreciated in value by
$3,651,850, as follows:
Mutual funds $ 2,781,999
Common stock (6,433,849)
-------------
$ (3,651,850)
=============
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
Notes to Financial Statements (continued)
December 31, 1999 and 1998
7. CFBI Stock Fund
Information about the net assets and the significant components of the changes
in net assets relating to the CFBI Stock Fund is as follows:
December 31
1999 1998
---------------------------------
Net assets:
Cullen/Frost Bankers, Inc. common stock $ 81,650,418 $ 82,223,198
Year Ended
December 31
1999
-------------
Changes in net assets:
Contributions $ 5,049,351
Dividends 2,106,204
Net depreciation (6,433,849)
Benefits paid to participants (3,494,292)
Transfers from participant-directed investments 2,199,806
--------------
$ (572,780)
==============
8. Plan Merger
During 1998, CFBI acquired Harrisburg Bank. As a result of this acquisition,
assets from the Harrisburg Bank Thrift Plan were merged into the Plan during
1999.
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
EIN: 74-1751768 Plan No.: 003
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year
December 31, 1999
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
3,170,890 shares $ 53,842,402 $ 81,650,418
Fidelity Money Market Money market deposit
Fund account ** 6,473,812
*Participant loans Interest accrued at Frost
National Bank prime
rate, varying maturity
dates, 8.25% - 8.50%
charged during 1999 ** 7,913,782
Templeton Growth Fund Mutual fund ** 5,124,614
Fidelity Advisor Growth
Opportunities Fund Mutual fund ** 10,701,636
*Frost EB Low Duration
Bond Fund Mutual fund ** 793,514
*Frost EB Fixed Income
Fund Mutual fund ** 3,748,362
*CFBI Liquidity Fund Mutual fund ** 31,571
*Frost EB Large Cap Core
Fund Mutual fund ** 3,981,300
Lord Abbett Dev. Growth
Fund Mutual fund ** 427,294
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
EIN: 74-1751768 Plan No.: 003
Schedule H, Line 4i - Schedule of Assets Held for Investment Purposes
at End of Year (continued)
December 31, 1999
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
-------------------------------------------------------------------------------
Fidelity Advisor Equity
Income Fund Mutual fund ** $ 761,838
*Frost EB Small Cap
Value Fund Mutual fund ** 378,155
Invesco Blue Chip Fund Mutual fund ** 736,576
------------
$122,722,872
============
* Denotes party-in-interest
**Historical cost is not required, participant-directed investment.
<PAGE>
401(k) Stock Purchase Plan for the Employees of
Cullen/Frost Bankers, Inc. and Its Affiliates
EIN: 74-1751768 Plan No.: 003
Schedule H, Line 4j - Schedule of Reportable Transactions
Year Ended December 31, 1999
<TABLE>
<CAPTION>
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)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Category (iii) - Series of
Securities Transactions
**Common stock:
Cullen/Frost Bankers, Inc. $14,916,799 $ - $14,916,799 $14,916,799 $ -
Cullen/Frost Bankers, Inc. - 11,108,000 18,408,096 11,108,000 (7,300,096)
There were no Category (i),
(ii), or (iv) transactions
during the year ended
December 31, 1999.
* All transactions on market.
**Includes both participant-directed and nonparticipant-directed.
</TABLE>
