CORPUS CHRISTI BANCSHARES INC, PRER14A, 1996-12-19

CORPUS CHRISTI BANCSHARES INC
PRER14A, 1996-12-19
STATE COMMERCIAL BANKS

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SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

Corpus Christi Bancshares, Inc.
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(Name of Registrant as Specified in its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/ / No fee required.

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

- --------------------------------------------------------------------------------

/X/ Fee paid previously with preliminary materials.

/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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CORPUS CHRISTI BANCSHARES, INC.
POST OFFICE BOX 9664
CORPUS CHRISTI, TEXAS 78469
(512) 887-3000

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 5, 1997

To the Shareholders:

NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of
Corpus Christi Bancshares, Inc. (the "Company") will be held on February 5,
1997 at 3:00 p.m. (Central Standard Time) at Citizens State Bank of Corpus
Christi, 2402 Leopard Street, Corpus Christi, Texas 78469 for the following
purposes (such meeting, including any adjournment or postponement thereof, the
"Special Meeting"):

1. To consider and vote upon a proposal to approve an Agreement
and Plan of Merger (the "Merger Agreement") dated September
30, 1996 among Cullen/Frost Bankers, Inc., a Texas corporation
("Cullen/Frost"), R.E. Holding Corporation, a Texas
corporation ("Merger Sub") and a wholly owned subsidiary of
Cullen/Frost, and the Company pursuant to which (i) Merger Sub
will merge with and into the Company (the "Merger") with the
Company being the surviving corporation, (ii) each issued and
outstanding share of common stock of the Company, par value
$5.00 per share (the "Shares"), other than Shares as to which
the holders thereof have exercised their dissenters' rights
under Texas law, will be converted into the right to receive
$18.84 in cash, without interest ($0.01 of which is
attributable to the redemption price of the associated right
issued under the Rights Agreement, dated as of October 18,
1995, between the Company and ChaseMellon Shareholder Services,
L.L.C., as Rights Agent), and (iii) the issued and outstanding
shares of common stock of Merger Sub will be converted into
shares of common stock of the Company, all as more fully
described in the accompanying Proxy Statement and the Merger
Agreement; and

2. To consider and act on any matters incidental to the foregoing
and to transact such other business as may properly come
before the Special Meeting.

The Board of Directors has fixed the close of business on December 17,
1996 as the record date for the determination of shareholders entitled to
notice of and to vote at the Special Meeting. The stock transfer book of the
Company will not be closed for purposes of determining shareholders of record.

THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE MERGER
AGREEMENT IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.

If the Merger Agreement is approved by the shareholders of the
Company and the Merger is consummated, shareholders will have certain rights to
dissent and demand the appraisal of, and the payment in cash at the "fair
value" of, their Shares pursuant to the Texas Business Corporation Act,
provided that such dissenting holders comply with the appropriate procedures
for appraisal rights required by such Act. In order to exercise those rights,
among other requirements, a shareholder must file, prior to the Special
Meeting, a written objection to the Merger stating that the shareholder's right
to dissent will be exercised and giving the
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shareholder's address to which notice of the approval of the Merger can be
delivered or mailed in such event. For a more complete description of such
rights, duties and procedures, see "THE MERGER -- Rights of Dissenting
Shareholders" in the accompanying Proxy Statement.

Before casting your vote, please carefully read the enclosed Proxy
Statement, which provides you with a summary of the terms of the proposed
Merger, and the Merger Agreement, which is attached to the Proxy Statement as
Annex A.

It is very important that your Shares be represented at the Special
Meeting, regardless of whether you plan to attend in person. The affirmative
vote of holders of at least two-thirds of the outstanding Shares of the Company
entitled to vote thereon present in person or represented by proxy at the
Special Meeting is required to approve the proposed Merger. THEREFORE, I URGE
YOU TO PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED STAMPED
ENVELOPE AS SOON AS POSSIBLE TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE
SPECIAL MEETING. If you attend the Special Meeting and wish to vote, you may
then revoke your proxy and vote in person.

By Order of the Board of Directors

Jace C. Hoffman
Secretary

December ___, 1996

YOUR VOTE IS IMPORTANT

THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS (66 2/3
PERCENT) OF THE OUTSTANDING SHARES ENTITLED TO VOTE THEREON IS REQUIRED TO
APPROVE THE MERGER AGREEMENT. THE BOARD OF DIRECTORS URGES YOU TO DATE, SIGN
AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES MAY BE VOTED IN ACCORDANCE
WITH YOUR WISHES. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE
IN PERSON IN THE EVENT YOU ATTEND THE MEETING.

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CORPUS CHRISTI BANCSHARES, INC.

PROXY STATEMENT

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FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 5, 1997

This Notice of Special Meeting of Shareholders and Proxy Statement is
furnished in connection with the solicitation of proxies by the Board of
Directors of Corpus Christi Bancshares, Inc., a Texas corporation (the
"Company"), for use at a Special Meeting of Shareholders of the Company to be
held on February 5, 1997, at the time and place and for the purposes set forth
in the Notice and at any adjournment or postponement thereof (such meeting,
including any adjournment or postponement thereof, the "Special Meeting").

The purpose of the Special Meeting is to consider and vote upon a
proposal that is unanimously recommended by the Board of Directors to approve
the Agreement and Plan of Merger (the "Merger Agreement"), dated September 30,
1996, among Cullen/Frost Bankers, Inc., a Texas corporation ("Cullen/Frost"),
R.E. Holding Corporation, a Texas corporation ("Merger Sub") and a wholly owned
subsidiary of Cullen/Frost, and the Company pursuant to which (i) Merger Sub
will merge with and into the Company such that the Company will become a wholly
owned subsidiary of Cullen/Frost (the "Merger"), (ii) each issued and
outstanding share of common stock of the Company, par value $5.00 per share
(the "Shares"), other than Shares as to which the holders thereof have
exercised their dissenters' rights under Texas law, will be converted into the
right to receive $18.84 in cash, without interest ($0.01 of which is
attributable to the redemption price of the associated right issued under the
Rights Agreement, dated as of October 18, 1995 (the "Rights Agreement") between
the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent) (the
"Merger Consideration"), and (iii) the issued and outstanding shares of common
stock of Merger Sub will be converted into shares of common stock of the
Company, all on and subject to the terms and conditions contained in the Merger
Agreement. The rights under the Rights Agreement will be redeemed by the
Company immediately prior to the Effective Time. For a more complete
description of the Merger Agreement and the terms of the Merger, see "THE
MERGER -- The Merger Agreement" and the Merger Agreement, which is attached as
Annex A to this Proxy Statement.

Upon the issuance of a Certificate of Merger by the Secretary of State
of the State of Texas in accordance with the Texas Business Corporation Act, as
amended (the "TBCA"), or on such date as may be specified in the Articles of
Merger (the "Effective Time"), each Share, other than Shares as to which the
holders thereof have exercised their dissenters' rights in accordance with the
TBCA will be converted into the right to receive the Merger Consideration. Each
option granted by the Company to directors, officers and employees of the
Company and its subsidiaries to purchase Shares that is outstanding at the
Effective Time and has not been exercised will be converted into the right to
receive an amount in cash computed by multiplying the difference between $18.84
and the exercise price applicable to such option by the number of Shares that
were subject to such option.

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This Proxy Statement is first being sent to shareholders on December __, 1996

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Only holders of record of Shares at the close of business on December
17, 1996 (the "Record Date") will be entitled to notice of and to vote at the
Special Meeting. On such date there were 1,600,200 Shares issued and
outstanding, which were held by approximately shareholders of record.
All issued and outstanding Shares are entitled to one vote per Share on each
matter properly submitted at the Special Meeting. Shareholders have no
cumulative voting rights.

The presence of the holders of at least 50 percent of the issued and
outstanding Shares entitled to vote at the Special Meeting, either in person or
represented by a properly executed proxy, is necessary to constitute a quorum
for the transaction of business at the Special Meeting. Approval of the Merger
Agreement requires the affirmative vote of the holders of at least two-thirds
of the outstanding Shares entitled to vote thereon. On any other matters that
may properly be brought before the Special Meeting, it is intended that the
accompanying proxy will be voted in accordance with the judgment of the
person(s) voting the proxy; provided, however, the holder of a proxy to vote
against the proposal to approve the Merger Agreement will not be entitled to
vote such proxy in favor of a recess, postponement or adjournment of the
Special Meeting to permit further solicitation by the Company.

The obligations of the Company and Cullen/Frost to consummate the
Merger are subject, among other things, to the condition that the shareholders
of the Company approve the Merger Agreement. If a quorum is not obtained, or
if fewer Shares are voted in favor of approval of the Merger Agreement than the
number required for approval, it is expected that the Special Meeting will be
recessed, postponed or adjourned for the purpose of allowing additional time
for the Company to obtain more proxies or votes. At any subsequent reconvening
of the Special Meeting, all proxies will be voted in the same manner as such
proxies would have been voted at the original convening of the Special Meeting
(except for any proxies which have theretofore effectively been revoked or
withdrawn).

Shareholders may vote their Shares for or against the proposal or may
abstain from voting. Shares represented by a properly signed, dated and
returned proxy will be treated as present at the meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting
a vote or abstaining. Proxies relating to "street name" Shares that are voted
by brokers will be counted as Shares present for purposes of determining the
presence of a quorum, but will not be treated as Shares having voted at the
Special Meeting as to the Merger proposal if authority to vote is withheld by
the broker. As indicated above, the affirmative vote of the holders of at
least two-thirds of the Shares entitled to vote thereon is required to approve
the Merger Agreement. ACCORDINGLY, ABSTENTIONS AND BROKER NON- VOTES WILL HAVE
THE SAME EFFECT AS VOTES AGAINST THE APPROVAL OF THE MERGER AGREEMENT.

Votes will be tabulated by Morrow & Co., Inc., the proxy solicitor, and
the results will be certified by ChaseMellon Shareholder Services, L.L.C., the
transfer agent and registrar for the Shares who will act as election inspectors
and will resolve impartially any interpretive questions as to the conduct of
the vote.

Pursuant to Texas law, shareholders of record on the Record Date have
the right to dissent from the Merger and, if the Merger is consummated, to have
an appraisal of the fair value of their shares and payment therefor. In order
to exercise those rights, among other requirements, a shareholder must file,
prior to the Special Meeting, a written objection to the Merger stating that
the shareholder's right to dissent will be exercised and giving the
shareholder's address to which notice of the approval of the Merger can be
delivered or mailed in such event. For information regarding the procedures
which must be followed to exercise and protect such rights, see "THE MERGER --
Rights of Dissenting Shareholders."

The Company encourages the personal attendance of its shareholders at
the Special Meeting and the execution of the accompanying proxy will not affect
a shareholder's right to attend the Special Meeting and vote

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in person. Any shareholder giving a proxy has the right to revoke his or her
proxy by giving written notice of such revocation to the Secretary of the
Company at the Company's principal executive offices at any time before the
proxy is exercised by executing and delivering a later-dated proxy or by
attending the Special Meeting and voting his or her Shares in person. No such
notice of revocation or later-dated proxy, however, will be effective until
received by the Company at or prior to the Special Meeting.

Copies of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995, which includes portions of the Company's 1995 Annual Report
to Shareholders, Amendment of Annual Report on Form 10-KSB/A for the year ended
December 31, 1995, and the Company's Quarterly Report on Form 10-QSB for the
nine months ended September 30, 1996 are being furnished herewith to all
shareholders.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
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<S> <C>
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Date, Time and Place of the Special Meeting . . . . . . . . . . . . . . . . . . 6
Purpose of the Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . 6
The Company, Cullen/Frost and Merger Sub . . . . . . . . . . . . . . . . . . . 6
The Merger; The Merger Consideration . . . . . . . . . . . . . . . . . . . . . 6
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Record Date; Shareholders Entitled to Vote; Quorum; Vote Required; Proxies . . 7
Recommendation of the Board of Directors . . . . . . . . . . . . . . . . . . . 7
Opinions of the Company's Financial Advisors . . . . . . . . . . . . . . . . . 8
Payment of Merger Consideration for the Shares . . . . . . . . . . . . . . . . 8
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . 8
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . 8
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . 9
Price Range of the Shares; Dividends . . . . . . . . . . . . . . . . . . . . . 9
Shareholder Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 9
Selected Consolidated Financial Information . . . . . . . . . . . . . . . . . . 9

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Voting of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Background of and Reasons for the Proposed Merger . . . . . . . . . . . . . . . 12
Recommendation of the Board of Directors . . . . . . . . . . . . . . . . . . . 15
Opinions of the Company's Financial Advisors . . . . . . . . . . . . . . . . . 16
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . 22
Payment of Merger Consideration for the Shares . . . . . . . . . . . . . . . . 23
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
The Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
The Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Treatment of Employees and Employee Benefits . . . . . . . . . . . . . . . . . 29
Rights of Dissenting Shareholders . . . . . . . . . . . . . . . . . . . . . . . 29
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . 31

FINANCING OF THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

BUSINESS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

PRICE RANGE OF THE SHARES; DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . 32

BUSINESS OF CULLEN/FROST BANKERS, INC. . . . . . . . . . . . . . . . . . . . . . 33

SELECTED COMPANY FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . 33

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . 35

INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . 36

SOLICITATION OF PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>

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<TABLE>
<S> <C>
OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING . . . . . . . . . . . . . . . . . . 37

INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Annex A

FinSer Corporation Opinion . . . . . . . . . . . . . . . . . . . . . . . . Annex B

Alex Sheshunoff & Co. Investment Banking Opinion . . . . . . . . . . . . . Annex C

Articles 5.12 and 5.13 of the Texas Business Corporation Act . . . . . . . Annex D
</TABLE>

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SUMMARY

The following is a summary of certain information contained in this
Proxy Statement. This summary does not purport to be complete and is qualified
in its entirety by the more detailed information contained elsewhere in this
Proxy Statement, including the Annexes hereto. Unless defined herein,
capitalized terms used in this summary have the meanings ascribed to them
elsewhere in this Proxy Statement. Shareholders are urged to read this Proxy
Statement, including the Annexes hereto, in its entirety.

DATE, TIME AND PLACE OF THE SPECIAL MEETING

The Special Meeting will be held on Wednesday, February 5, 1997, at
3:00 p.m. (Central Standard Time) at Citizens State Bank of Corpus Christi,
2402 Leopard Street, Corpus Christi, Texas 78469.

PURPOSE OF THE SPECIAL MEETING

The purpose of the Special Meeting is to consider and vote upon a
proposal that is unanimously recommended by the Board of Directors to approve
the Merger Agreement pursuant to which (i) Merger Sub will merge with and into
the Company, with the Company as the surviving corporation (the "Surviving
Corporation") such that the Company will become a wholly owned subsidiary of
Cullen/Frost, (ii) each Share, other than Shares as to which the holders
thereof have exercised their dissenters' rights under Texas law, will be
converted into the right to receive $18.84 in cash, without interest ($0.01 of
which is attributable to the redemption price of the associated right issued
under the Rights Agreement), and (iii) the issued and outstanding shares of
common stock of Merger Sub will be converted into shares of common stock of the
Company, all on and subject to the terms and conditions contained in the Merger
Agreement. The rights under the Rights Agreement will be redeemed by the
Company immediately prior to the Effective Time. See "THE MERGER -- The Merger
Agreement" and the Merger Agreement, which is attached as Annex A to this Proxy
Statement.

THE COMPANY, CULLEN/FROST AND MERGER SUB

The Company is a two-tiered, one-bank holding company, incorporated in
the State of Texas, which functions as the owner of C.S.B.C.C., Inc., which is
the holder of all of the common stock of Citizens State Bank of Corpus Christi
(the "Bank"). The Company's principal role is to assist in the management and
coordination of the financial resources of the Bank by providing capital and
management assistance. The Bank provides a broad range of consumer and
commercial banking services in the Corpus Christi, Texas metropolitan area.
The Company's principal offices are located at 2402 Leopard Street, Corpus
Christi, Texas 78469. The Company's telephone number at that address is (512)
887-3000. See "BUSINESS OF THE COMPANY."

Cullen/Frost, a Texas corporation, is a multi-bank holding company with
assets of $4.5 billion at September 30, 1996. Cullen/Frost has 46 offices in
six Texas banking markets--San Antonio, Austin, Houston/Galveston, Corpus
Christi, San Marcos and McAllen.

Merger Sub is a newly formed Texas corporation that is a wholly owned
subsidiary of Cullen/Frost. To date, Merger Sub has not conducted any business
other than the business conducted in connection with its formation and
capitalization and the transactions contemplated by the Merger Agreement.

The principal executive offices of Cullen/Frost and Merger Sub are
located at 100 West Houston Street, San Antonio, Texas 78205-1457. The
telephone number of Cullen/Frost and Merger Sub at that address is (210)
220-4011. See "BUSINESS OF CULLEN/FROST BANKERS, INC."

THE MERGER; MERGER CONSIDERATION

Upon approval of the Merger Agreement and satisfaction of the other
conditions to the Merger specified therein, Merger Sub will be merged with and
into the Company with the Company being the surviving corporation. At the
Effective Time, each issued and outstanding Share (other than Shares held by
shareholders

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who properly exercise and perfect their dissenters' rights under Texas law)
will be converted into the right to receive $18.84 in cash ($0.01 of which is
attributable to the redemption price of the associated right issued under the
Rights Agreement), without interest, and the holders of such Shares will
thereafter have no remaining equity interest in the Company. Also at the
Effective Time, each issued and outstanding share of common stock of Merger Sub
will be converted into shares of common stock of the Company.

REGULATORY APPROVALS

The Merger will require the filing of an application with and the
approval of the Board of Governors of the Federal Reserve System (the "FRB").
In addition, the Texas Banking Commissioner ("Banking Commissioner") is
required to state in writing her views concerning the application and, if she
disapproves the application, to appear at the hearing to be held by the FRB in
such case and present evidence regarding the reasons the application should be
denied. All of such approvals have been received.

RECORD DATE; SHAREHOLDERS ENTITLED TO VOTE; QUORUM; VOTE REQUIRED; PROXIES

Only shareholders of record at the close of business on December 17,
1996 (the "Record Date"), will be entitled to notice of and to vote at the
Special Meeting. On such date there were 1,600,200 Shares issued and
outstanding, which were held by approximately ________ shareholders of record.
All issued and outstanding Shares are entitled to one vote per Share on each
matter properly submitted at the Special Meeting. Shareholders have no
cumulative voting rights. The presence of the holders of at least 50 percent
of the issued and outstanding Shares entitled to vote, either in person or
represented by a properly executed proxy, is necessary to constitute a quorum
for the transaction of business at the Special Meeting. Approval of the Merger
Agreement will require the affirmative vote of the holders of at least
two-thirds of the outstanding Shares entitled to vote thereon. On any other
matters that may properly be brought before the Special Meeting, it is intended
that the accompanying proxy will be voted in accordance with the judgment of
the person(s) voting the proxy.

Shareholders may vote their Shares for or against the proposal or may
abstain from voting. Shares represented by a properly signed, dated and
returned proxy will be treated as present at the Special Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting
a vote or abstaining. Proxies relating to "street name" Shares that are voted
by brokers will be counted as Shares present for purposes of determining the
presence of a quorum, but will not be treated as Shares having voted at the
Special Meeting as to the Merger proposal if authority to vote is withheld by
the broker. As indicated above, the affirmative vote of the holders of at
least two-thirds of the Shares entitled to vote thereon is required to approve
the Merger Agreement. Accordingly, abstentions and broker non- votes will have
the same effect as votes against the approval of the Merger Agreement.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors approved the Merger Agreement on September 30,
1996 by unanimous vote and recommended that shareholders vote FOR the approval
of the Merger Agreement. The Board of Directors, after careful consideration
of the terms and conditions of the Merger Agreement and many other factors,
determined the Merger to be fair to and in the best interests of the Company's
shareholders. See "THE MERGER -- Recommendation of the Board of Directors."

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OPINIONS OF THE COMPANY'S FINANCIAL ADVISORS

FinSer Corporation ("FinSer") and Alex Sheshunoff & Co. Investment
Banking ("Sheshunoff") acted as financial advisors to the Company in connection
with the Merger and each delivered an oral opinion to the Board of Directors on
September 30, 1996 (which were subsequently confirmed by delivery of written
opinions each dated as of such date) to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
consideration of $18.84 per share to be received by the Company's shareholders
under the Merger Agreement is fair to the shareholders of the Company from a
financial point of view. THE FULL TEXT OF THE WRITTEN OPINIONS OF FINSER AND
SHESHUNOFF, EACH DATED AS OF DECEMBER __, 1996 AND SETTING FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS IN THE REVIEW UNDERTAKEN,
ARE ATTACHED AS ANNEX B AND ANNEX C, RESPECTIVELY, TO THE PROXY STATEMENT AND
SHOULD BE READ CAREFULLY IN THEIR ENTIRETY. See "THE MERGER -- Opinions of the
Company's Financial Advisors."

PAYMENT OF MERGER CONSIDERATION FOR THE SHARES

Promptly after consummation of the Merger, a transmittal letter and
instructions for surrendering certificates formerly representing Shares will be
mailed to each shareholder of record of the Company at the Effective Time. DO
NOT SEND SHARE CERTIFICATES WITH YOUR PROXY. Because no interest will be paid
on the $18.84 in cash payable per Share, it is recommended that certificates
representing the Shares be surrendered promptly after consummation of the
Merger and receipt of a transmittal letter and instructions for surrendering
the certificates are received by the Shareholder in order to obtain payment as
quickly as possible. See "THE MERGER -- Payment of Merger Consideration for
the Shares."

RIGHTS OF DISSENTING SHAREHOLDERS

Pursuant to the TBCA, shareholders of record on the Record Date have
the right to dissent from the Merger and, if the Merger is consummated, to have
an appraisal of the "fair value" of their Shares and receive payment therefor.
Any shareholder desiring to exercise such dissenters' rights will have the
rights and duties and must strictly follow the procedures set forth in Articles
5.12 and 5.13 of the TBCA in order to perfect such rights. IN ORDER TO
EXERCISE THOSE RIGHTS, AMONG OTHER REQUIREMENTS, A SHAREHOLDER MUST FILE, PRIOR
TO THE SPECIAL MEETING, A WRITTEN OBJECTION TO THE MERGER STATING THAT THE
SHAREHOLDER'S RIGHT TO DISSENT WILL BE EXERCISED AND GIVING THE SHAREHOLDER'S
ADDRESS TO WHICH NOTICE OF THE APPROVAL OF THE MERGER CAN BE DELIVERED OR
MAILED IN SUCH EVENT. See "THE MERGER -- Rights of Dissenting Shareholders."
The full text of Articles 5.12 and 5.13 of the TBCA is included herein as Annex
D to the Proxy Statement and should be read in its entirety. SHAREHOLDERS WHO
WISH TO EXERCISE DISSENTERS' RIGHTS MUST STRICTLY FOLLOW THE PROCEDURES
DESCRIBED THEREIN.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

In considering the recommendation of the Board of Directors with
respect to the Merger, shareholders should be aware that certain members of the
Company's management and Board of Directors have the following interests in
connection with the Merger.

Under the terms of the Merger Agreement, at the Effective Time, all
unexercised options to acquire Shares previously granted to directors and
officers of the Company and of the Company's subsidiaries will be terminated
and the holders thereof will receive from the Surviving Corporation as soon as
practicable after the Effective Time, for each Share subject to such options,
the amount in cash equal to the difference between $18.84 and the exercise
price per Share of such options. These payments will amount in the aggregate
to approximately $1,537,458 for all officers and directors, before withholding
any applicable taxes, assuming that no additional options are exercised after
the date of this Proxy Statement and prior to the Effective Time.

Pursuant to the Merger Agreement, Cullen/Frost has agreed to indemnify
each present and former director and officer of the Company or any subsidiary
of the Company determined as of the Effective Time for six years after the
Effective Time. Cullen/Frost has also agreed to use its reasonable best
efforts to cause to be

8
<PAGE> 12
maintained in effect for three years after the Effective Time the current
directors' and officers' liability insurance maintained by the Company (or
reasonable substitutions thereof).

The Bank is a party to Severance Agreements with its executive
officers, R. Jay Phillips, John T. Wright, III and Jace Hoffman, which provide
for the payment of severance compensation upon the termination of the
employment of such persons within one year of an event constituting a change of
control. Consummation at the Merger will result in a change in contgrol under
the Severence Agreements. Upon consummation of the Merger and (i) termination
of employment by the Company within one year other than for death, disability
or "cause," or (ii) termination within one year by such executive officer for
"good reason," Mr. Phillips and Mr. Wright, whose base compensation during
fiscal 1996 is $145,000 and $121,000, respectively, will be entitled to 100
percent of their respective base pay. Mr. Hoffman, whose base compensation
during fiscal year 1996 is $92,383, will be entitled to 50 percent of his base
pay. See "THE MERGER -- Interests of Certain Persons in the Merger."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

In general, the receipt of cash for Shares pursuant to the terms of the
Merger Agreement will be a taxable transaction for federal income tax purposes
and may be a taxable transaction for state, local and other purposes as well.
Shareholders are urged to consult their own tax advisors to consider the
particular tax consequences to them of the Merger. See "THE MERGER -- Certain
Federal Income Tax Consequences."

PRICE RANGE OF THE SHARES; DIVIDENDS

The Shares are traded on the American Stock Exchange under the symbol
"CTZ." On September 30, 1996, the last full trading day prior to the
announcement of the execution of the Merger Agreement, the high and low sales
price per Share on the American Stock Exchange were $16.00 and $16.00,
respectively. On December __, 1996, the last full trading day prior to the date
of this Proxy Statement, the high and low sales price per Share on the American
Stock Exchange were $____________ and $__________, respectively. See "PRICE
RANGE OF THE SHARES; DIVIDENDS." SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT
MARKET QUOTATION FOR THEIR SHARES.

SHAREHOLDER RIGHTS AGREEMENT

In October 1995, the Board of Directors, with the advice of its legal
counsel and FinSer, adopted the Rights Agreement and paid to each shareholder
of record a dividend consisting of one Right, entitling the holder thereof to
purchase securities of the Company under certain circumstances. On September
30, 1996, the Board approved an amendment to the Rights Agreement to exclude
Cullen/Frost and any of its affiliates or associates from the definition of
Acquiring Person as a result of the execution and delivery of the Merger
Agreement. The Board also approved a resolution requiring the redemption of
the Rights at the moment immediately prior to the Effective Time and providing
that all holders of a Right will be entitled to receive a redemption price of
$0.01 for each Right held by that shareholder (which amount is included in the
per Share price of $18.84 to be paid in the Merger). It is a condition to the
consummation of the Merger that no person shall have become an "Acquiring
Person" and no "Distribution Date" has occurred (as such terms are defined in
the Rights Agreement).

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth certain summary consolidated financial
information with respect to the Company and its subsidiaries. More
comprehensive financial information is included in other documents filed by the
Company with the Securities and Exchange Commission (the "Commission"), and the
following summary is qualified in its entirety by reference to such documents
(which may be inspected and obtained as described herein), including the
financial statements and related notes contained therein.

9
<PAGE> 13
CORPUS CHRISTI BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
---------------------------- -------------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------------- ------------- ------------- -------------- -------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:

Interest Income $10,982 $9,016 $12,589 $10,174 $9,530 $9,868 $10,955
Interest Expense 4,228 3,415 4,818 3,310 2,954 3,660 5,898
Net Interest Income 6,754 5,601 7,771 6,864 6,576 6,208 5,057
Provision for Loan Losses --- (400) (600) (300) --- --- (433)
NonInterest Income 2,549 2,260 3,055 2,889 2,586 2,656 2,169
NonInterest Expenses 6,738 6,282 8,453 7,857 6,671 6,546 7,000
Income before Income
Taxes and Extraordinary
Item 2,565 1,979 2,973 2,196 2,491 2,318 659
Applicable Income Taxes 881 683 1,038 380 290 791 244
Income before
Extraordinary Item 1,684 1,296 1,935 1,816 2,201 1,527 415
Extraordinary Item,
Recognition of Income
Tax Loss Carry
Forwards --- --- --- --- --- 753 207
Net Income $ 1,684 $1,296 $ 1,935 $ 1,816 $2,201 $2,280 $ 622
Weighted Average of
Common Stock and
Common Stock
Equivalents Outstanding 1,705 1,685 1,687 1,681 1,600 1,600 1,600

Net Income Per Common
Share:

Income before
Extraordinary Item $0.99 $0.77 $1.15 $1.08 $1.38 $0.95 $0.26
Extraordinary Item --- --- --- --- --- 0.47 0.13
Net Income 0.99 0.77 1.15 1.08 1.38 1.42 0.39
Cash Dividends
Declared 0.225 0.1875 0.25 0.25 0.25 0.25 .025

Balance Sheet and Other Data

Total Assets $240,134 $181,775 $223,867 $171,530 $160,230 $146,551 $143,739
Loans, Net 106,077 99,981 101,991 92,095 77,144 63,556 58,270
Total Deposits 218,683 158,663 200,898 157,659 146,790 134,814 133,817
Total Capital 16,864 15,351 16,055 13,438 13,081 11,280 9,400
Book Value Per Common
Share (1) $10.54 $9.59 $10.03 $8.40 $8.18 $7.05 $5.88
Return on Assets (Avg) .94% 1.00% 1.05% 1.11% 1.48% 1.61% .45%
Return on Equity (Avg) 13.31% 11.25% 12.94% 13.51% 17.66% 21.50% 6.76%
</TABLE>

_______________

(1) The book value stated in the above table from 1991 and 1992 has been
restated to reflect the October 1993 four-for-one stock split.

10
<PAGE> 14
INTRODUCTION

The following information concerning the Merger, insofar as it relates
to matters contained in the Merger Agreement, describes the material aspects of
the Merger but does not purport to be a complete description and is qualified
in its entirety by the Merger Agreement, which is incorporated herein by
reference and attached hereto as Annex A. Shareholders are urged to read the
Merger Agreement carefully.

GENERAL

This Proxy Statement is being furnished to shareholders of the Company
in connection with the solicitation of proxies by the Board of Directors (the
"Board of Directors" or the "Board") of the Company from holders of the
outstanding Shares for use at the Special Meeting. At the Special Meeting,
shareholders will be asked to approve the Merger Agreement, pursuant to which
Merger Sub will merge with and into the Company with the Company being the
surviving corporation, all on and subject to the terms and conditions contained
in the Merger Agreement. The Merger Agreement is attached as Annex A to this
Proxy Statement.

At the Effective Time each issued and outstanding Share, other than
Shares as to which the holders have exercised their dissenters' rights in
accordance with Articles 5.12 and 5.13 of the TBCA, will be converted into the
right to receive $18.84 in cash ($0.01 of which is attributable to the
redemption price of the associated right issued under the Rights Agreement),
with interest. Each option granted by the Company to directors, officers and
employees of the Company and its subsidiaries to purchase Shares will be
converted into the right to receive an amount in cash computed by multiplying
the difference between $18.84 and the exercise price applicable to such option
by the number of Shares that were subject to such option. At the Effective
Time, the stock transfer books of the Company will be closed.

VOTING OF PROXIES

The Board of Directors has fixed the close of business on December 17,
1996 as the Record Date for the determination of shareholders entitled to
notice of and to vote at the Special Meeting. At the close of business on such
date there were 1,600,200 issued and outstanding Shares, which were held by
approximately ___ shareholders of record. Each issued and outstanding Share is
entitled to one vote per share on each matter properly submitted at the Special
Meeting.

The presence of the holders of at least 50 percent of the issued and
outstanding Shares entitled to vote at the Special Meeting, either in person or
represented by a properly executed proxy, is necessary to constitute a quorum
for the transaction of business at the Special Meeting. If there are not
sufficient shares represented in person or by proxy at the Special Meeting to
approve the Merger Agreement, the Special Meeting will be recessed, postponed
or adjourned in order to permit further solicitation by the Company. Approval
of the Merger Agreement requires the affirmative vote of the holders of at
least two-thirds of the outstanding Shares entitled to vote thereon. On any
other matters that may properly be brought before the Special Meeting, it is
intended that the accompanying proxy will be voted in accordance with the
judgment of the person(s) voting the proxy; provided, however, the holder of a
proxy to vote against the proposal to approve the Merger Agreement will not be
entitled to vote such proxy in favor of a recess, postponement or adjournment
of the Special Meeting to permit further solicitation by the Company.

Votes may be cast in favor or against the approval of the Merger
Agreement. Abstentions may be specified on all proposals and will be counted
as present for purposes of the quorum, but will have the effect of a negative
vote on the proposal. A broker non-vote (which results when a broker holding
shares for a beneficial owner has not received timely voting instructions from
such beneficial owner) will have the same effect as a vote against a proposal.
Except as set forth above, or unless otherwise instructed, the enclosed proxy
will be voted FOR the proposal to approve the Merger Agreement.

11
<PAGE> 15
Shares represented by a properly signed, dated and returned proxy will
be treated as present at the meeting for purposes of determining a quorum,
without regard to whether the proxy is marked as casting a vote or abstaining.
Proxies relating to "street name" Shares that are voted by brokers will be
counted as Shares present for purposes of determining the presence of a quorum,
but will not be treated as Shares having voted at the Special Meeting as to the
Merger proposal if authority to vote is withheld by the broker. As indicated
above, the affirmative vote of the holders of at least two-thirds of the Shares
entitled to vote thereon is required to approve the Merger Agreement.
ACCORDINGLY, ABSTENTIONS AND BROKER NON-VOTES WILL HAVE THE SAME EFFECT AS
VOTES AGAINST THE APPROVAL OF THE MERGER AGREEMENT.

In order to vote on the approval of the Merger Agreement at the
Special Meeting, shareholders may attend the Special Meeting or deliver
executed proxies to the following address:

Proxy Services
P.O. Box 5336
New York, New York 10126-1445

Shareholders have the right to dissent from the Merger and to be paid
the fair value of their Shares by strictly following the procedures prescribed
in Articles 5.12 and 5.13 of the TBCA. In order to exercise those rights,
among other requirements, a shareholder must file, prior to the Special
Meeting, a written objection to the Merger stating that the shareholder's right
to dissent will be exercised and giving the shareholder's address to which
notice of the approval of the Merger can be delivered or mailed in such event.
See Annex D and "THE MERGER -- Rights of Dissenting Shareholders."

INSTRUCTIONS WITH REGARD TO THE SURRENDER OF SHARE CERTIFICATES TO THE
EXCHANGE AGENT APPOINTED BY CULLEN/FROST, TOGETHER WITH A LETTER OF TRANSMITTAL
TO BE USED FOR THIS PURPOSE, WILL BE FORWARDED TO THE COMPANY'S SHAREHOLDERS AS
PROMPTLY AS PRACTICABLE FOLLOWING THE EFFECTIVE TIME. SHAREHOLDERS SHOULD
SURRENDER SHARE CERTIFICATES ONLY AFTER RECEIVING A LETTER OF TRANSMITTAL.
SHAREHOLDERS SHOULD NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.

THE MERGER

BACKGROUND OF AND REASONS FOR THE PROPOSED MERGER

In July 1993, the Company publicly stated that its Board of Directors
had unanimously decided that remaining independent at that time was in the best
interests of its shareholders. The decision was made after the Company's
Executive Committee and Board of Directors, assisted by FinSer, its financial
advisor, and legal counsel, reviewed various strategic alternatives to
determine whether shareholder value would be maximized by a sale of the Company
or by remaining independent. Since then, the Board of Directors and management
have actively pursued the Company's strategic plan to increase shareholder
value by growth of the Company's subsidiary Bank through expansion of its
existing banking operations internally and through acquisitions.

12
<PAGE> 16
In May and July 1994, the Company sent letters to its shareholders
that outlined in greater detail the Company's five-year strategic plan to
promote growth of the Company and increase shareholder value. The letters
explained that the strategic plan was designed to accomplish two key
objectives: (i) to increase the Company's franchise value through increased
market share and (ii) to enhance the Company's operating results, thereby
ensuring stronger capital. In order to achieve such objectives, the Company
identified five strategies: to stimulate and expand business by opening
additional banking centers; to complete acquisitions that would enlarge the
Company's assets and market area, primarily targeting institutions within a
100-mile radius of Corpus Christi that are strategically located; to grow the
Bank's loan portfolio through internal growth as well as through acquisitions;
to market the Bank as one of the few banks that is still locally managed and
responsive to customers' needs; and to reduce the level of nonperforming
assets.

As a result of the implementation of the Company's strategic plan in
1994 and 1995, the Company's total assets grew from $160.2 million at December
31, 1993, to $171.5 million at December 31, 1994, to $223.9 million at December
31, 1995 and to $240.1 million at September 30, 1996. Its net interest income
also grew from $6.6 million in 1993, to $6.9 million in 1994, to $7.8 million
in 1995 and $6.8 million for the nine months ended September 30, 1996. These
significant growth rates resulted from the Board implementing the Company's
strategic plan, including creating an indirect lending department, adding new
banking centers, acquiring The First National Bank of Taft in 1995, offering
full-line brokerage services and life insurance products, offering high-tech
banking and trust services and reducing the level of non-performing assets.

The Company's Proxy Statement for its May 1995 Annual Meeting of
Shareholders included a proposal from a shareholder that the Board of Directors
be required to submit to the Company's shareholders for approval any offer to
purchase the Company or substantially all of its assets for a price equal to or
greater than 150 percent of its then current book value. In connection with
such proposal, which was defeated by shareholders, the Company's Proxy
Statement stated that "[w]hile the Board continues to believe that the best way
to maximize shareholders value is to continue to pursue its strategic plan to
build franchise value and allow time for the results of its strategic plan
implementation to be recognized in the market value of the Company's stock, the
Board is not opposed to a sale of the Company. In the event the Company were
to receive an unsolicited acquisition proposal, the Board would fulfill its
fiduciary duties to the Company's shareholders by reviewing and responding
appropriately to such proposal, which would include a decision to agree to a
sale of the Company if that were in the best interests of shareholders."

In August 1995, a regional bank holding company offered to purchase
the Company at an all cash price equal to one and a half times the Company's
June 30, 1995 book value, or approximately $12.79 per share assuming the
exercise of all outstanding options. On September 15, 1995, the Company's
share price closed at $12.875 per share. Thereafter, on September 20, 1995,
after reviewing the offer with management, legal counsel and FinSer, the Board
of Directors unanimously rejected the offer as inadequate.

In January 1996, at the request of the Strategic Planning Committee of
the Board of Directors, a FinSer representative met with representatives of a
large regional bank holding company ("Bank A") that had expressed interest in a
possible acquisition of the Company. Negotiations principally relating to
price then ensued from January through April 1996 between representatives of
the Company and representatives of Bank A. During this period, Bank A initially
expressed an interest in offering stock of Bank A valued at $14.50 per Share,
which amount was increased on three separate occasions to an amount of stock
of Bank A valued at $17.00 per Share. Bank A proposed a pricing formula
pursuant to which each of the Company's Shares would be exchanged for a
fraction of a share of Bank A stock based upon the average closing prices of
Bank A stock during the 20 trading days prior to the meeting of shareholders of
the Company required to vote upon such proposal (the "Pricing Period").
Under such pricing formula each Company Share would be exchanged for a fraction
of a share of Bank A stock valued at approximately $17.00 so long as Bank A's
shares traded within a prescribed range, the high end of which was $4 more per
share than the low end of the range (the "Price Range"). If,

13
<PAGE> 17
during the Pricing Period, the value of Bank A's stock were to exceed the high
end of the Price Range, the Company's shareholders would realize a
correspondingly increased amount, resulting in a price in excess of $17.00 per
Share. If, on the other hand, the value of Bank A's stock were less than the
low end of the Price Range, shareholders would receive a correspondingly
decreased amount, resulting in a price below $17.00 per Share.

In January 1996, National Bancshares Corporation of Texas ("NBT")
filed an application with the Federal Reserve Bank of Dallas ("FRBD") for
approval to acquire up to 20 percent of the Shares, with a resulting ownership
of up to 24.9 percent of the outstanding Shares. In March 1996 the Company
filed with the FRBD a protest against NBT's application.

In April 1996, the FRBD approved the proposed acquisition by NBT of
24.9 percent of the Shares by July 1996, subject to certain detailed conditions
intended to assure that NBT would not "exercise a controlling influence" over
the Company. By July 1996, NBT reported that it then owned approximately 15.51
percent of the Shares.

In April 1996, the Company met with representatives of Bank A to further
discuss its proposal to acquire the Company for stock of Bank A valued at $17.00
per Share, which Bank A presented in the form of a proposed definitive
acquisition agreement. Discussions and negotiations with Bank A, including the
exchange of numerous drafts of the proposed definitive agreement, continued
until August 1996. However, early in July 1996, the Company became concerned
with the falling market price of Bank A's stock, which fell below the low end of
the Price Range proposed by Bank A. As a result, during July and August 1996,
discussions continued with Bank A regarding the relative values of the Company
and Bank A's stock, as well as other terms of the proposed acquisition,
including changing the pricing formula to delete the Price Range so that
regardless of changes in the trading prices of Bank A's shares during the
Pricing Period, the Company's shareholders would receive an amount of Bank A
stock valued at approximately $17.00 per Share.

In mid-August 1996 and while the negotiations with Bank A were
continuing, the Company was contacted by another large regional bank holding
company ("Bank B"), which earlier in the year had expressed interest in a
possible acquisition of the Company. After discussions with FinSer and the
Company's legal advisors, on August 21, 1996, the Company's Strategic Planning
Committee authorized FinSer to contact Bank B and Cullen/Frost, which had also
previously expressed a possible interest in acquiring the Company, to determine
whether either had any interest in an acquisition of the Company. At the
Committee's request, FinSer contacted Bank A to advise it of the Company's
decision to discuss its options with other entities and, on August 23, 1996,
Bank A responded by withdrawing its proposal.

Limited financial information regarding the Company was provided to
each of Bank B and Cullen/Frost in order to allow each to conduct a limited due
diligence review of the Company. After completion of such review, on August
27, 1996 Bank B declined to submit a bid for the Company. On the basis of its
preliminary due diligence, on September 6, 1996, Cullen/Frost indicated that it
was willing to negotiate a merger with the Company, relative to the
Cullen/Frost proposed price, for $17.72 per Share in cash. After negotiations
by the Company relative to the Cullen/Frost proposed price, on September 13,
1996, Cullen/Frost expressed a willingness to proceed with negotiations on the
basis of a cash price of $18.84 per Share, provided that Cullan/Frost be able
to terminate any definitive agreement if it were not satisfied in its sole and
absolute discretion with its due diligence, findings and that Cullen/Frost
receive a termination fee to compensate it for its time, expense and effort if
the Company entered into an agreement to be acquired by or was ascquired by
another party.

With this understanding, on September 18, 1996, the Company's Strategic
Planning Committee directed representatives of the Company, FinSer and the
Company's legal advisors to begin negotiations regarding a definitive merger
agreement with Cullen/Frost. Negotiations with Cullen/Frost began immediately.
On September 27, 1996 the Company's Strategic Planning Committee then requested
a meeting of the Company's Board of Directors for September 30, 1996 to
consider the Cullen/Frost agreement. In addition, the Strategic Planning
Committee requested FinSer to inform Bank A that the Company had received and
was considering a proposal that was superior to Bank A's proposal and inquire
whether Bank A would increase its previously withdrawn proposal. On September
26, 1996, Bank A contacted FinSer to inquire about the status of the Company
and FinSer advised Bank A about the existence of a superior proposal. On
September 27, 1996, Bank A advised FinSer that Bank A declined to make another
proposal for

14
<PAGE> 18
an increased amount. On September 30, 1996, the Board of Directors, with the
advice of its financial advisors, FinSer and Sheshunoff, and its legal counsel,
approved the Merger Agreement with Cullen/Frost, which was then executed. The
Company and Cullen/Frost released a joint press release regarding the proposed
Merger.

RECOMMENDATION OF THE BOARD OF DIRECTORS

On September 30, 1996, the Board of Directors approved the Merger
Agreement and the Merger by unanimous vote and, subject to the on-going
fiduciary duties of the Board, resolved to recommend to the shareholders that
they vote FOR approval of the Merger Agreement. The Board determined that the
Merger was in the best interests of the shareholders of the Company.

In reaching its conclusion, the Board considered a number of factors
including, but not limited to, the following:

1. The current and prospective environment in which the
Company operates, including national and local economic conditions, the
competitive environment for financial institutions generally, the
increased regulatory burden on financial institutions generally, and
the trend toward consolidation in the financial services industry;

2. The terms of the Merger Agreement, including the $18.84
in cash to be paid to the Company's shareholders for each outstanding
Share, as reviewed by the Board with its legal and financial advisors;

3. The fact that the offering price of $18.84 per share
represents a premium of approximately 17.75% over the $16.00 closing
sale price of the Shares on September 27, 1996, the last day on which a
trade of Shares was effected before the announcement of the Merger, and
represents a substantial multiple of the earnings per Share of the
Shares for 1996 and those projected by the Company for 1997, and
constitutes a price equal to 2.25 times the tangible book value at June
30, 1996;

4. The $18.84 per outstanding Share to be received by the
Company's shareholders in the Merger compared to (i) historical and
recent market prices for the Shares preceding the announcement of the
Merger, (ii) market prices for other companies believed to be
comparable to the Company, and (iii) prices paid in other transactions
believed to be comparable;

5. The Board's review with its legal and financial advisors
of alternatives to the Merger (including the alternatives of remaining
independent and growing internally and remaining independent for a
period of time and then selling the Company), the range of possible
values to holders of the Shares obtainable through implementation of
such alternatives and the timing and likelihood of actually receiving
such values;

6. The opinion of FinSer as to the fairness, from a
financial point of view, to the shareholders of the Company of the
$18.84 per outstanding Share to be received by the Company's
shareholders in the Merger;

7. The opinion of Sheshunoff as to the fairness, from a
financial point of view, to the shareholders of the Company of the
$18.84 per outstanding Share to be received by the Company's
shareholders in the Merger;

15
<PAGE> 19
8. The fact that the terms of the Merger Agreement were
determined through arms' length negotiations;

9. The Board's assessment that Cullen/Frost had the
financial capability to acquire the Company for the Merger
Consideration and therefore is likely to consummate the Merger;

10. The failure of any other bidder to submit a proposal
having terms more favorable than the terms proposed by Cullen/Frost;

11. The Board's belief, after consultation with its legal
counsel, that the required regulatory approvals could be obtained for
the Merger;

12. The business, financial condition and recent results of
operations of the Company (see "Selected Consolidated Financial Data")
and management's best estimates of the results of operations of the
Company through the end of 1996 and the Company's strategic plan
expectations for 1997 and following years;

13. The Board's assessment that the Bank would better serve
the convenience and needs of its customers and the communities that it
serves through affiliation with a substantially larger bank holding
company, such as Cullen/Frost, thereby affording its customers an
expanded network of banks; and

14. The compatibility of the respective businesses and
management philosophies of the Company and Cullen/Frost.

The foregoing list of factors considered by the Board is not intended
to be exhaustive. In view of the variety of factors considered in connection
with its evaluation of the Merger, the Board did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the Board may have given different weights to different factors.

OPINIONS OF THE COMPANY'S FINANCIAL ADVISORS

FinSer Opinion

The Company retained FinSer to act as the Company's financial advisor
in connection with the Merger. FinSer has provided and continues to provide
financial advisory services to the Company. In connection with such
engagement, the Company requested that FinSer evaluate the fairness, from a
financial point of view, to the shareholders of the consideration to be
received by such shareholders in the Merger. On September 30, 1996, at a
meeting of the Board of Directors of the Company held to evaluate the proposed
Merger, FinSer rendered its oral opinion (subsequently confirmed by delivery of
a written opinion dated such date) to the Board to the effect that, as of such
date and based upon and subject to certain matters stated in such opinion, the
consideration of $18.84 per Share to be received by the holders of Shares is
fair to such holders from a financial point of view.

The full text of the written opinion of FinSer, dated September 30,
1996, which sets forth, among other matters, the assumptions made, procedures
followed, matters considered and limitations on the review undertaken, is
attached as Annex B to this Proxy Statement. Shareholders are urged to read
this opinion carefully in its entirety. FinSer's opinion is directed only to
the fairness of the cash consideration to be received by the Company's
shareholders in the Merger, from a financial point of view, does not address
any other aspect of the Merger, and does not constitute a recommendation to any
shareholder as to how such shareholder should vote at the Special Meeting. The
summary of FinSer's opinion set forth in this Proxy Statement is qualified in
its entirety by reference to the full text of such opinion.

16
<PAGE> 20

In rendering its written opinion, FinSer, among other procedures: (i)
analyzed certain publicly available financial statements, both audited and
unaudited, and other information of the Company, including Annual Reports to
Shareholders for each of the three years ended December 31, 1993, 1994 and
1995, and the June 30, 1996 Quarterly Report on Form 10-QSB; (ii) analyzed
certain financial forecasts of the Company prepared by management and with
respect to which FinSer advised the Company; (iii) discussed certain aspects of
the business, operations and financial condition of the Company with certain
members of its management; (iv) reviewed reported market prices and historical
trading activity of the Shares; (v) compared the financial performance of the
Company and the prices and trading activity of the Shares with that of certain
other comparable publicly traded companies and their securities; (vi) reviewed
the financial terms, to the extent publicly available, of certain comparable
precedent transactions; (vii) reviewed the Merger Agreement; and (viii)
performed such other analyses as FinSer deemed appropriate.

In rendering its opinion, FinSer relied upon and assumed the accuracy
and completeness of all of the foregoing information provided to it or made
publicly available or otherwise furnished to or reviewed by or discussed with
it, and FinSer has not assumed any responsibility for independent verification
of such information. FinSer did not make an on site due diligence review.
FinSer did not make an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company nor was FinSer furnished
with any such evaluation or appraisal. FinSer did not make any physical
inspection of the properties or assets of the Company, nor has it examined any
individual loan files of the Company.

With respect to Cullen/Frost, FinSer relied solely upon publicly
available data and did not conduct discussions with the management of
Cullen/Frost regarding its financial condition. FinSer's opinion is
necessarily based on economic, market and other conditions as in effect on, and
the information made available to FinSer is as of, the date of the opinion. No
other limitations were imposed by the Company on FinSer with respect to the
investigations made or procedures followed by FinSer in rendering its opinion.
See "-- Background of and Reasons for the Proposed Merger" for a summary of
FinSer's role in contacting Cullen/Frost and certain other interested companies
and participating in negotiations regarding the terms of the Merger Agreement.

In connection with rendering its opinion, FinSer performed a variety of
financial analyses. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to partial analysis
or a summary description. Moreover, the evaluation of the fairness, from a
financial point of view, of the consideration to be received by the
shareholders of the Company was to some extent subjective based on the
experience and judgment of FinSer and not merely the result of mathematical
analysis of financial data. Accordingly, notwithstanding the separate factors
summarized below, FinSer believes that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinion. The ranges of
valuations resulting from any particular analysis described below should not be
taken to be FinSer's view of the actual value of the Company.

In performing its analyses, FinSer made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of the Company. The analyses
performed by FinSer are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
such analyses. The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be sold. In addition, FinSer's
analyses should not be viewed as determinative of the opinion of the Board of
Directors or management with respect to the value of the Company.

The following is a summary of the analyses performed by FinSer in
connection with its opinion delivered to the Company's Board of Directors on
September 30, 1996:

Analysis of Other Texas Transactions. FinSer performed an analysis of
premiums paid in selected pending or recently completed acquisitions of 44
banking organizations in Texas, from January 1, 1995 to

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<PAGE> 21
September 25, 1996. Based on the consideration to be received by the Company's
shareholders under the Merger Agreement, and the Company's financial data as of
June 30, 1996, the analysis yielded ratios of the purchase prices in the
transactions it examined as multiples of: (i) tangible book value ranging from
.98 times to 2.82 times with an average of 1.66 times and a median of 1.53
times (compared to the Merger Consideration, which is 2.25 times the Company's
June 30, 1996 tangible book value and 2.01 times its stated book value as of
such date); (ii) trailing last 12 months earnings ranging from 6.90 times to
38.60 times with an average of 13.75 times and a median of 12.80 times (compared
to the Merger Consideration, which is 14.49 times the Company's annualized June
30, 1996 earnings).

Since the Merger Agreement does not provide for any adjustment to the
Merger Consideration between signing and closing, FinSer projected the
Company's book value and earnings as of an estimated closing date of April 15,
1997 in order to compare the multiples the Merger Consideration would represent
as of such estimated closing date. That analysis yielded ratios of the Merger
Consideration as multiples of: (i) estimated tangible book as of the estimated
closing date equal to 2.04 times (compared to multiples in the transactions
FinSer examined ranging from .98 times to 2.82 times, with an average of 1.66
times and a median of 1.53 times), (ii) estimated trailing 12-months earnings
at the estimated closing date equal to 14.38 times (compared to multiples in
the transactions FinSer examined ranging from 6.90 times to 38.60 times with an
average of 13.75 times and a median of 12.80 times).

FinSer also compared the ratios of the Merger Consideration to total
assets of the Company as of August 31, 1996, which was 15.40%, to such ratios
from the 44 transactions it examined, which ranged from 8.79% to 21.28% with an
average of 14.90% and a median of 14.02%.

Net Present Value of Future Earnings. FinSer estimated the discount
rate applicable to the future earnings stream of after-tax cash flow that the
Company is forecasted to produce through 2000, given the aggregate
consideration to be paid by Cullen/Frost pursuant to the Merger Agreement.
FinSer projected the Company's future earnings on the basis of amounts set
forth in the strategic plan for each of the years from 1996 through 2000, as
adjusted to reflect variances between actual results and the estimates set
forth in the strategic plan. FinSer estimated the terminal value for the
Company at the end of the period by using a dividend discount model that
assumed earnings would continue to grow at a rate of 5% per year after the year
2000. This discounted cash flow analysis indicated that a discount rate of
approximately 15.19 would be required to produce an aggregate consideration
payable in the Merger of $32,944,152.

The Company has agreed to pay FinSer a fee equal to 1.3 percent of the
transaction value in connection with services rendered in a merger transaction
for an aggregate fee in connection with the Merger equal to $430,000, plus a
fee based upon hourly rates ranging from $75.00 to $150.00 per hour depending
on the personnel employed to accomplish the task for FinSer's services. The
Company has also agreed to reimburse FinSer for reasonable travel and other
out-of-pocket expenses incurred by FinSer in performing its services, and to
indemnify FinSer and certain related persons against any liabilities suffered
or sustained by it as a result of the performance of or arising out of the
performance of the services to be rendered by FinSer in connection with the
engagement.

FinSer has provided asset/liability management consulting, financial
forecasting, and other services to the Company, or its subsidiary, Citizens
State Bank of Corpus Christi, for over ten years. As part of this work, FinSer
assisted the Company in the fourth quarter of 1995 in the preparation of a long
term forecast to be used by the Company for strategic planning purposes. This
forecast relied on input from the Company's management and was used in the
analysis in support of the opinion. Although no loan review, review of asset
quality, or operational review was performed in direct connection with its
opinion, FinSer's ongoing work for the Company provided it with additional
information regarding the overall condition of the Company.

FinSer is involved in the financial analysis of community banks in a
number of states with a primary emphasis in Texas. FinSer has performed a
number of special studies over the past several years. These projects have
included stock evaluations, merger and acquisition evaluations, management
studies, strategic

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<PAGE> 22
planning and operational studies. FinSer has been involved in a number of
transactions involving the purchase and sale of banks.

Sheshunoff Opinion

Based upon Sheshunoff's qualifications, expertise and reputation, the
Company retained Sheshunoff solely to render a fairness opinion to the
Company's Board of Directors in connection with the Merger. In connection with
such engagement, the Company requested that Sheshunoff evaluate the fairness,
from a financial point of view, to the shareholders of the consideration to be
received by such shareholders in the Merger. On September 30, 1996, at a
meeting of the Board of Directors of the Company held to evaluate the proposed
Merger, Sheshunoff rendered its oral opinion (subsequently confirmed by
delivery of a written opinion dated such date) to the Board to the effect that,
as of such date and based upon and subject to certain matters stated in such
opinion, the consideration of $18.84 per share to be received by the holders of
Shares is fair to such holders from a financial point of view.

The full text of the written opinion of Sheshunoff, dated September 30,
1996, which sets forth, among other matters, the assumptions made, procedures
followed, matters considered and limitations on the review undertaken, is
attached as Annex C to this Proxy Statement. Shareholders are urged to read
this opinion carefully in its entirety. Sheshunoff's opinion is directed only
to the fairness of the cash consideration to be received by the Company's
shareholders in the Merger, from a financial point of view, does not address
any other aspect of the Merger, and does not constitute a recommendation to any
shareholder as to how such shareholder should vote at the Special Meeting. The
summary of Sheshunoff's opinion set forth in this Proxy Statement is qualified
in its entirety by reference to the full text of such opinion.

In rendering its written opinion, Sheshunoff, among other procedures:
(i) analyzed certain publicly available financial statements, both audited and
unaudited, and other information of the Company, including Annual Reports to
Shareholders for each of the three years ended December 31, 1993, 1994 and
1995, and the June 30, 1996 Quarterly Report on Form 10-QSB; (ii) analyzed
certain financial forecasts of the Company prepared by management and FinSer;
(iii) discussed certain aspects of the business, operations and financial
condition of the Company with certain members of its management; (iv) reviewed
reported market prices and historical trading activity of the Shares; (v)
compared the financial performance of the Company and the prices and trading
activity of the Shares with that of certain other comparable publicly traded
companies and their securities; (vi) reviewed the financial terms, to the
extent publicly available, of certain comparable precedent transactions; (vii)
reviewed the Merger Agreement; and (viii) performed such other analyses as
Sheshunoff deemed appropriate.

In rendering its opinion, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available or otherwise furnished to or reviewed by or discussed
with it, and Sheshunoff has not assumed any responsibility for independent
verification of such information. Sheshunoff did not make an on site due
diligence review. Sheshunoff did not make an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Company
nor was Sheshunoff furnished with any such evaluation or appraisal. Sheshunoff
did not make any physical inspection of the properties or assets of the
Company, nor has it examined any individual loan files of the Company. With
respect to the financial forecasts and projections provided to Sheshunoff,
Sheshunoff assumed that they were reasonably prepared and reflect the best
currently available estimates and judgments of management and FinSer as to the
future financial performance of the Company. Sheshunoff assumed that such
forecasts and projections will be realized in the amounts and at the time
contemplated thereby.

With respect to Cullen/Frost, Sheshunoff relied solely upon publicly
available data and did not conduct discussions with the management of
Cullen/Frost regarding its financial condition. Sheshunoff is not an expert in
the evaluation of loan portfolios for the purposes of assessing the adequacy of
the allowance for losses with respect thereto and has assumed that such
allowances for each of the companies are, in the aggregate, adequate to cover
such losses. Sheshunoff's opinion is necessarily based on economic, market and
other conditions as in effect on, and the information made available to
Sheshunoff is as of, the date of the opinion. Sheshunoff was

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<PAGE> 23
not requested to, and did not, participate in the negotiation or structuring of
the Merger. No other limitations were imposed by the Company on Sheshunoff
with respect to the investigations made or procedures followed by Sheshunoff in
rendering its opinion.

In connection with rendering its opinion, Sheshunoff performed a
variety of financial analyses. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
partial analysis or a summary description. Moreover, the evaluation of the
fairness, from a financial point of view, of the consideration to be received
by the shareholders of the Company was to some extent subjective based on the
experience and judgment of Sheshunoff and not merely the result of mathematical
analysis of financial data. Accordingly, notwithstanding the separate factors
summarized below, Sheshunoff believes that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors considered
by it, without considering all analyses and factors, could create an incomplete
view of the evaluation process underlying its opinion. The ranges of
valuations resulting from any particular analysis described below should not be
taken to be Sheshunoff's view of the actual value of the Company.

In performing its analyses, Sheshunoff made numerous assumptions with
respect to industry performance, business and economic conditions and other
matters, many of which are beyond the control of the Company. The analyses
performed by Sheshunoff are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than
suggested by such analyses. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold. In addition,
Sheshunoff's analyses should not be viewed as determinative of the opinion of
the Board of Directors or management with respect to the value of the Company.

The following is a summary of the analyses performed by Sheshunoff in
connection with its opinion delivered to the Company's Board of Directors on
September 30, 1996:

Analysis of Selected Transactions. Sheshunoff performed an analysis of
premiums paid in selected pending or recently completed acquisitions of banking
organizations in Texas, with comparable characteristics to the Company's
transaction with Cullen/Frost. Two sets of comparable transactions were
analyzed.

Sheshunoff formulated the first set of comparable transactions to
specifically reflect the regional character of the Company. This set of
transactions consisted of 16 mergers and acquisitions of banking organizations
in Texas from October 1, 1995 to September 23, 1996, the sellers in which had
total assets between $100 million and $500 million. Based on the consideration
to be received by the Company's shareholders under the Merger Agreement, and
the Company's financial data as of June 30, 1996, the analysis yielded ratios
of the comparable transactions' purchase prices as multiples of: (i) book
value ranging from 1.26 times to 2.87 times with an average of 1.89 times and a
median of 1.81 times (compared to the Merger Consideration, which is 2.01 times
the Company's June 30, 1996 book value); (ii) trailing last 12 months earnings
ranging from 7.78 times to 23.95 times with an average of 12.69 times and a
median of 10.48 times (compared to the Merger Consideration, which is 14.72
times the Company's annualized June 30, 1996 earnings and 14.46 times the
Company's projected 1996 earnings); and (iii) sellers' average and median
equity to asset ratios of 8.68 percent and 8.52 percent, respectively, compared
to 7.95 percent for the Company.

Sheshunoff formulated the second set of comparable transactions to
reflect specific transactions in Texas in which cash was the consideration
received. These comparable transactions specifically consisted of five mergers
and acquisitions of banking organizations in Texas from October 1, 1995 to
September 23, 1996, the sellers in which had total assets between $100 million
and $500 million. Again, based on the consideration to be received by the
Company's shareholders under the Merger Agreement, and the Company's financial
data as of June 30, 1996, the analysis yielded ratios of the comparable
transactions' purchase prices as multiples of: (i) book value ranging from
1.26 times to 2.51 times with an average of 1.78 times and a median of 1.66
times (compared to the Merger Consideration, which is 2.01 times the Company's
June 30, 1996 book value); (ii) trailing last 12 months earnings ranging from
7.78 times to 11.65 times with an average of 9.30 times and a

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<PAGE> 24
median of 9.22 times (compared to the Merger Consideration, which is 14.72
times the Company's annualized June 30, 1996 earnings and 14.46 times the
Company's projected 1996 earnings); and (iii) sellers' average and median
equity to asset ratios of 9.85 percent and 9.14 percent, respectively, compared
with 7.95 percent for the Company.

Discounted Cash Flow Analysis. Using discounted cash flow analysis,
Sheshunoff estimated the present value of the future stream of after-tax cash
flow that the Company could produce through 2000, under various circumstances,
assuming that the Company performed in accordance with the earnings projections
of management and FinSer. Sheshunoff estimated the terminal value for the
Company at the end of the period by applying multiples of earnings ranging from
8 times to 18 times and then discounting the cash flow streams, dividends paid
to the shareholders (assuming up to 100 percent of earnings are paid out in
dividends while targeting an 8 percent equity to asset ratio, which
approximates the Company's current and projected equity to asset ratio) and
terminal value using differing discount rates ranging from 14 percent to 20
percent chosen to reflect different assumptions regarding the required rates
of return of the Company and the inherent risk surrounding the underlying
projections. This discounted cash flow analysis indicated a range of $10.63
per Share to $25.32 per Share.

Sheshunoff also performed a cash flow analysis using an estimated
terminal value for the Company at the end of the period by applying multiples
of book value ranging from 1.00 times to 2.00 times and then discounting the
cash flow streams, dividends paid to the shareholders (assuming up to 100
percent of earnings are paid out in dividends while targeting an 8 percent
equity to asset ratio, which approximates the Company's current and projected
equity to asset ratio) and terminal value using differing discount rates
ranging from 14 percent to 20 percent chosen to reflect different assumptions
regarding the required rates of return of the Company and the inherent risk
surrounding the underlying projections. This discounted cash flow analysis
indicated a range of $7.99 per Share to $15.51 per Share.

Comparable Company Analysis. Sheshunoff compared selected balance
sheet data, asset quality, capitalization and profitability ratios and market
statistics using financial data at or for the 12 months ended June 30, 1996 and
market data as of September 25, 1996 for the Company to a group of selected
bank holding companies which Sheshunoff deemed to be comparable, including:
First Victoria National Bancshares, Summit Bancshares Inc., First State
Bancorporation, First Banks America Inc., National Bancshares Corporation, New
Iberia Bancorp, Inc., First National Bankshares, Independent Bankshares Inc.,
Union Bankshares, Ltd., Surety Capital Corporation and MidSouth Bancorp, Inc.,
all of which are publicly traded bank holding companies in the Southwest with
assets between $100 million and $500 million (collectively, the "Comparable
Composite"). This comparison, among other things, showed that: (i) the
Company's equity to asset ratio was 7.95 percent, compared to an average of
9.05 percent and a median of 8.45 percent for the Comparable Composite; (ii)
for the 12-month period ended June 30, 1996, the Company's return on average
assets was 1.05 percent, compared to an average of 1.06 percent and a median of
1.06 percent for the Comparable Composite; (iii) for the 12-month period ended
June 30, 1996, the Company's return on average equity was 12.93 percent,
compared to an average of 11.72 percent and a median of 12.81 percent for the
Comparable Composite; (iv) at June 30, 1996, the Company's nonperforming loans
to net loans ratio was 1.40 percent, compared to an average of 0.60 percent and
a median of 0.43 percent for the Comparable Composite; (v) at September 25,
1996, the Company's price per share to book value per Share for the 12 months
ended June 30, 1996 was 1.55 times, compared to an average of 1.53 times and
median of 1.38 times for the Comparable Composite; (vi) at September 25, 1996,
the Company's price per Share to earnings per Share at June 30, 1996 was 11.90
times, compared to an average of 13.80 times and median of 13.50 times for the
Comparable Composite; (vii) at June 30, 1996, the Company's dividend yield was
1.89 percent, compared to an average of 1.31 percent and a median of 1.36
percent for the Comparable Composite and (viii) the consideration to be
received by the Company's shareholders in connection with the Merger reflects a
significant premium of 17.75 percent over the current trading price of the
Shares as of September 27, 1996 and an average premium of 19.36 percent over
the Shares for the trading period of July 31, 1996 to September 27, 1996.

No company or transaction used in the comparable company and comparable
transaction analyses is identical to the Company or the Merger. Accordingly,
an analysis of the results of the foregoing necessarily involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the Company and other factors that could affect the public
trading value of the companies to which it is being

21
<PAGE> 25
compared. Mathematical analysis (such as determining the average or median) is
not in itself a meaningful method of using comparable transaction data or
comparable company data.

Pursuant to the terms of Sheshunoff's engagement, the Company has
agreed to pay Sheshunoff a fee of $20,000 for Sheshunoff's services in
connection with the Merger. In addition, the Company has agreed to pay
Sheshunoff a fee based upon hourly rates ranging from $150 to $300 per hour for
the time spent by Sheshunoff employees in preparing for the defense of its
opinion and from $1,750 to $2,500 per day for time spent by its employees in
court or with other review or regulatory bodies. The Company has also agreed
to reimburse Sheshunoff for reasonable travel and other out-of-pocket expenses
incurred by Sheshunoff in performing its services, not to exceed $2,000, and to
indemnify Sheshunoff and certain related persons against any liabilities
incurred by it arising out of any untrue statement of material fact contained
in material furnished to Sheshunoff by the Company or the failure to state in
such materials a material fact necessary to make such material not misleading,
the act or failure to act by the Company or its employees, the use by the
Company, its employees or agents of the opinion, or otherwise related to or
arising out of such engagement, including any loss related to or arising from
Sheshunoff's negligence.

Sheshunoff is an investment banking firm based in Austin, Texas.
Sheshunoff has been in the business of consulting for the banking industry for
20 years. As part of its investment banking business, Sheshunoff is regularly
engaged in the valuation of securities in connection with mergers and
acquisitions, private placements, and valuations of estate, corporate and other
purposes. The Company's Board of Directors decided to retain Sheshunoff,
solely to render a fairness opinion, based on its experience as a financial
advisor in mergers and acquisitions of financial institutions, and its
knowledge of financial institutions.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

In considering the recommendation of the Board of Directors with
respect to the Merger, shareholders should be aware that certain members of the
Company's management and Board may be deemed to have certain interests in the
Merger in addition to their interests, if any, as shareholders of the Company
generally.

Stock Options

Under the terms of the Merger Agreement and at the Effective Time, each
option granted by the Company to directors and officers of the Company and its
subsidiaries to purchase Shares that is outstanding and exercisable and has not
been exercised immediately prior to the Effective Time shall be terminated and
each holder of such option shall be entitled to receive, in lieu of each Share
that would have otherwise been issued upon the exercise of such option and
without payment of any exercise price, an amount in cash equal to the
difference between $18.84 and the per Share exercise price applicable to such
option. Assuming that no options are exercised between the date of this Proxy
Statement and the Effective Time, the amounts of each payment to the directors
and executive officers of the Company would be as follows: Marvin L. Berry -
$86,998; John C. Brooke - $73,947; J.B. Clark - $59,318; Joe R. DeLeon, Jr. -
$59,318; Roy M. Grassedonio - $86,998; Stephen R. Karp - $147,894; R. Jay
Phillips - $343,620; Jack Powers - $86,998; Roscoe M. Smith - $59,318; L.L.
Woodman, Jr. - $147,894; John T. Wright, Jr. - $59,318; John T. Wright, III -
$325,835; and all directors and executive officers in the aggregate -
$1,537,458, in each case before withholding any applicable taxes. As of
September 30, 1996, options to purchase an aggregate of 104,802 Shares at an
exercise price of $5.00 per Share were held by the foregoing directors and
officers of the Company.

Directors and Officers Indemnification and Insurance

The Merger Agreement provides that, for six years after the Effective
Time, Cullen/Frost will indemnify and hold harmless the present and former
directors and officers of the Company or any subsidiary of the Company (the
foregoing persons and entities, collectively, "Indemnified Parties"), against
all costs or expenses, judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of matters existing or occurring at or prior to the Effective Time
(including with respect to the Merger Agreement or the

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<PAGE> 26
transactions contemplated thereby), to the extent permitted or required under
Texas law and the Company's Amended Articles of Incorporation or Amended Bylaws
in effect on the date of the Merger Agreement. In addition, Cullen/Frost has
agreed to use its reasonable best efforts to cause the current policy of
directors and officers' liability insurance to be maintained in effect for a
period of three years after the Effective Time (provided that Cullen/Frost may
substitute a policy of comparable coverage and provided further that
Cullen/Frost is not obligated to expend in excess of 125 percent of the amount
of the premiums for such policy as of September 30, 1996).

Severance Agreements

R. Jay Phillips, John T. Wright, III and Jace Hoffman, as executive
officers of the Bank, have entered into Severance Agreements with the Bank.
Pursuant to these Severance Agreements, if the executive officer is terminated
within 12 months of a change of control of the Company or the Bank, such as a
merger, such employee is entitled to a severance payment equal to a certain
percentage of his annual base pay. In the event of a change in control,
Messrs. Phillips, Wright and Hoffman are entitled to certain payments in the
event of their termination of employment within 12 months of the change in
control other than upon death or disability or by the Surviving Corporation for
"cause" or a termination by themselves for "good reason" following such change
in control (a "Change in Control Termination"). A "good reason" is considered
to be (i) a change in the scope of the business or activities for which the
executive was responsible causing the executive to suffer a substantial
reduction in his authority, power, function and responsibility in his position
along with a reduction of the executive's base pay or a reduction or
termination of his employee benefits, (ii) the relocation of the Company's
principal executive offices or the relocation of work to a location more than
25 miles from the prior location; or (iii) the material breach of the Severance
Agreement by the Company.

Consummation of the Merger will result in a change in control under the
Severance Agreements. Upon a Change in Control Termination, Mr. Phillips and
Mr. Wright, whose base compensation during fiscal 1996 is $145,000 and
$121,000, respectively, would be entitled to 100 percent of their respective
base pay. Mr. Hoffman, whose base compensation during fiscal 1996 is $92,383,
would be entitled to 50 percent of his base pay.

PAYMENT OF MERGER CONSIDERATION FOR THE SHARES

As soon as practicable after the Effective Time, the exchange agent
selected by Cullen/Frost (the "Exchange Agent") will send a transmittal letter
and instructions to each person that was a record holder of Shares immediately
prior to the Effective Time advising such holder of the procedure for
surrendering such holder's certificate or certificates representing formerly
outstanding Shares (the "Certificate") in exchange for $18.84 in cash
(including $0.01 in respect of the redemption of the associated stock purchase
Right) for each formerly outstanding Share. To receive the payment to which
they are entitled pursuant to the terms of the Merger Agreement, shareholders
must carefully comply with the instructions on such transmittal letter and
return it, along with their Certificate, to the Exchange Agent pursuant to the
terms thereof. DO NOT SEND YOUR CERTIFICATE WITH YOUR PROXY. Interest will
not be paid on the amounts payable upon surrender of Certificate; therefore, it
is recommended that you surrender your Certificate promptly after you receive a
letter of transmittal from the Exchange Agent informing you of the consummation
of the Merger. If, with respect to any Shares, the cash price of $18.84 per
Share (including $0.01 in respect of the redemption of the associated stock
purchase Right) is to be paid to a person who is not the holder of record of
such Shares, the amount of any applicable stock transfer taxes will be required
to be paid by the record holders or such other person prior to the payment of
the $18.84 per Share unless satisfactory evidence of the payment of such taxes,
or exemption therefrom, is submitted to the Exchange Agent. None of the
Exchange Agent, Cullen/Frost, Merger Sub or the Company will be liable to a
holder of Shares for any cash delivered pursuant to the Merger Agreement to any
public official pursuant to applicable abandoned property, escheat and similar
laws.

Six months after the Effective Time, the Exchange Agent will deliver to
Cullen/Frost any cash funds not theretofore disbursed to holders of
Certificates, and thereafter the holders of such Certificates shall look to
Cullen/Frost (subject to applicable abandoned property, escheat or other
similar laws and laws affecting

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<PAGE> 27
creditors' rights generally) for any cash payments due as a result of the
Merger for the Shares formerly represented by such Certificates.

REGULATORY APPROVALS

The Merger requires approval of the FRB and the Banking Commissioner.
All of such approvals have been received. Pursuant to the FRB approval, the
Merger can take place no earlier than December 20, 1996, nor later than March 5,
1997.

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<PAGE> 28

THE MERGER AGREEMENT

All references to and summaries of the Merger Agreement in this Proxy
Statement are qualified in their entirety by reference to the text of the
Merger Agreement, which is attached to the Proxy Statement as Annex A.
Shareholders are urged to carefully read the Merger Agreement.

General

The Merger Agreement provides that, subject to the approval by the
shareholders of the Company and the satisfaction or waiver of certain other
conditions, Merger Sub will be merged with and into the Company with the
Company being the Surviving Corporation. At the Effective Time, each issued
and outstanding Share, other than Shares as to which the holders have exercised
their dissenters' rights in accordance with Articles 5.12 and 5.13 of the TBCA,
will be converted into the right to receive $18.84 in cash ($0.01 of which is
attributable to the redemption price of the associated Right issued under the
Rights Agreement), without interest. Each unexercised option granted by the
Company to directors, officers and employees of the Company and its
subsidiaries to purchase Shares will be converted into the right to receive an
amount in cash computed by multiplying the difference between $18.84 and the
exercise price applicable to such option by the number of Shares that were
subject to such option. See "THE MERGER - Interest of Certain Persons in the
Merger." Shareholders who do not vote in favor of the Merger Agreement and who
comply with Articles 5.12 and 5.13 of the TBCA have the right to seek a
judicial determination of the fair value of their Shares and to be paid such
fair value. See "THE MERGER -- Rights of Dissenting Shareholders." After the
Merger, holders of Shares will possess no interest in or rights as shareholders
of the Surviving Corporation, except for the right to receive payment as above
described.

Effective Time

The Merger will occur at such time as a Certificate of Merger is issued
by the Secretary of State of the State of Texas in accordance with the TBCA or
on such date as may be specified in the Articles of Merger. The required
filing is expected to be made as soon as practicable, but not more than 30
days, after the approval of the Merger Agreement by the Company's shareholders
at the Special Meeting and the satisfaction or waiver of all other conditions
to the consummation of the Merger, including required approvals of governmental
authorities.

Payment for Shares

The Merger Agreement provides that Cullen/Frost will choose a bank or
trust company as the Exchange Agent for the purpose of exchanging the
Certificates for $18.84 to be paid for each of such Shares pursuant to the
Merger. The Merger Agreement further provides the procedure by which such
Certificates will be exchanged for the Merger Consideration by the Exchange
Agent. After the Effective Time and until the shareholder surrenders the
Certificates, each Certificate will represent for all purposes only the right
to receive the cash consideration pursuant to the Merger Agreement and no other
rights with regard to the Company, Cullen/Frost, Merger Sub or the Surviving
Corporation. There will also be no further registration of transfers of
Shares. Further, during such time, there shall be no transfers on the stock
transfer records of the Company of any Shares.

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At the Effective Time, Cullen/Frost will deposit with the Exchange
Agent the Merger Consideration for the benefit of the shareholders of the
Company for exchange. As soon as practicable after the Effective Time, the
Exchange Agent will mail to each shareholder of the Company a letter of
transmittal specifying that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration.

Upon the proper surrender of a Certificate to the Exchange Agent,
together with a properly completed and duly executed letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor a
check representing the Merger Consideration which such holder has the right to
receive in respect of the Certificate surrendered and the Certificate so
surrendered shall be cancelled. If a transfer of ownership of any Shares has
occurred that was not registered in the transfer records of the Company, a
check for the Merger Consideration may be issued to the transferee if the
certificate representing such Shares is presented to the Exchange Agent,
accompanied by documents sufficient to evidence and effect such transfer and to
evidence that all applicable stock transfer taxes have been paid. In the event
any Certificate is lost, stolen or destroyed, the shareholder must provide to
the Exchange Agent an affidavit of that fact and, if required by the Exchange
Agent, post a bond as indemnity against any claim that may be made against the
Exchange Agent with respect to such Certificate in order to receive a check for
the Merger Consideration in exchange for the Shares.

The Merger Agreement provides that any portion of the aggregate Merger
Consideration or the proceeds of any investments thereof that remains unclaimed
by the shareholders of the Company for six months after the Effective Time
shall be repaid by the Exchange Agent to Cullen/Frost. Any shareholder who has
not properly surrendered his or her Certificates to the Exchange Agent shall
thereafter be entitled to look only to Cullen/Frost for payment of the Merger
Consideration. If Certificates are not properly surrendered or the payment for
them is not claimed prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent permitted by applicable law, become the
property of Cullen/Frost. See "THE MERGER -- Payment of Merger Consideration
for the Shares."

SHAREHOLDERS SHOULD NOT SURRENDER THEIR COMMON STOCK CERTIFICATES
BEFORE RECEIVING TRANSMITTAL MATERIALS FROM THE EXCHANGE AGENT AND,
ACCORDINGLY, SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY
CARD.

Certain Policies

At the written request of Cullen/Frost, the Company will, immediately
prior to the Effective Time, change its loan, litigation and real estate
valuation policies and practices, including loan classifications and levels of
reserves, in order to be consistent with those of Cullen/Frost and generally
accepted accounting principles. Such change will not affect the veracity of
the Company's representations, warranties and covenants to Cullen/Frost.

Conditions to Each Party's Obligations.

Under the Merger Agreement, the respective obligations of the Company,
Cullen/Frost and Merger Sub to effect the Merger are subject to the
satisfaction or waiver at or before the Effective Time of certain conditions,
including (i) the receipt of the approval of the shareholders of the Company,
(ii) the expiration of all applicable statutory waiting periods after procuring
the approvals, consent or waivers with respect to the Merger Agreement and the
transactions contemplated thereby (a) by the Banking Commissioner and (b) by
the FRB, (iii) the absence of any order, decree or injunction of a court or
agency of competent jurisdiction which enjoins or prohibits the consummation of
the Merger or any transaction necessary to consummate the Merger, (iv) the
absence of any litigation or proceeding pending against Cullen/Frost or the
Company or any of their subsidiaries brought by any governmental agency seeking
to prevent consummation of the Merger or any transaction necessary to
consummate the Merger, (v) the absence of any statute, rule, regulation, order,

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<PAGE> 30
injunction or decree which prohibits, restricts or makes illegal the
consummation of the Merger or any transaction necessary to consummate the
Merger, and (vi) the satisfaction of all other requirements prescribed by law
which are necessary to the consummation of the Merger and the transactions
necessary to consummate the Merger.

Cullen/Frost Conditions.

The obligations of Cullen/Frost and Merger Sub to effect the Merger
are subject to the satisfaction or waiver at or before the Effective Time of
certain conditions, including (i) Cullen/Frost shall have received comfort
letters from the Company's independent certified public accountants on the date
this Proxy Statement is mailed and on a date shortly prior to the Effective
Date with respect to certain financial information regarding the Company in the
form customarily issued by such accountants in transactions of the type
contemplated by the Merger Agreement, (ii) each of the representations and
warranties of the Company contained in the Merger Agreement shall have been
true in all material respects on the date of the Merger Agreement and on the
Effective Date, (iii) the Company shall have performed in all material respects
its covenants and agreements contained in the Merger Agreement, (iv)
Cullen/Frost shall have received a certificate executed by the Chief Executive
Officer and the Chief Financial Officer of the Company stating that each of the
representations and warranties of the Company contained in the Merger Agreement
are true and correct in all material respects and that the Company has
performed, in all material respects, the covenants and agreements contained in
the Merger Agreement, (v) Cullen/Frost shall have received an opinion from
Jones, Day, Reavis & Pogue, counsel to the Company, dated the Effective Date,
in form and substance satisfactory to Cullen/Frost, (vi) Cullen/Frost shall
have received the written resignation of each director of the Company,
effective as of the Effective Time, (vii) all shares of capital stock of the
Company reserved for issuance, all outstanding options, calls or commitments
relating to shares of capital stock of the Company and all outstanding
securities, obligations or agreements convertible into or exchangeable for, or
giving any person any right to subscribe for or acquire from the Company any
shares of capital stock of the Company, including any rights under the Rights
Agreement, shall have terminated simultaneously with the Effective Time, (viii)
no person becomes an "Acquiring Person" and no "Distribution Date" shall have
occurred (as such terms are defined in the Rights Agreement), and (ix) the
Rights issued under the Rights Agreement shall not have become separable,
distributable, redeemable or exercisable.

The Company Conditions.

The obligations of the Company to effect the Merger are subject to the
satisfaction or waiver at or before the Effective Time of certain conditions,
including (i) each of the representations and warranties of Cullen/Frost and
Merger Sub contained in the Merger Agreement shall have been true in all
material respects on the date of the Merger Agreement and on the Effective
Date, (ii) Cullen/Frost and Merger Sub shall have performed in all material
respects its covenants and agreements contained in the Merger Agreement, and
(iii) the Company shall have received a certificate executed by the Chief
Executive Officer and the Chief Financial Officer of Cullen/Frost stating that
each of the representations and warranties of Cullen/Frost and Merger Sub
contained in the Merger Agreement are true and correct in all material respects
and that Cullen/Frost and Merger Sub have performed in all material respects
each of its covenants and agreements contained in the Merger Agreement.

Conduct of the Company Pending the Merger

The Merger Agreement contains certain restrictions on the conduct of
the Company's business pending consummation of the Merger. In particular,
prior to the Effective Time, the Merger Agreement requires the Company and its
subsidiaries to, among other requirements, (i) conduct its business in the
usual, regular and ordinary course consistent with past practice, (ii) use its
reasonable best efforts to maintain and preserve intact its business
organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (iii)
take no action which would adversely affect or delay the ability of the parties
to obtain any necessary approvals, consents or waivers of any governmental
authority required for the transactions contemplated in the Merger Agreement or
to perform its covenants and agreements on a timely

27
<PAGE> 31
basis under the Merger Agreement, and (iv) take no action which would have a
material adverse effect on the Company.

In addition, pursuant to the terms of the Merger Agreement, without
the prior written consent of Cullen/Frost, the Company and its subsidiaries
shall not (i) other than in the ordinary course of business consistent with
past practice, make any loan or advance or incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other person, (ii) adjust, split,
combine or reclassify any capital stock; make, declare or pay any dividend or
make any other distribution on, or directly or indirectly redeem, purchase or
otherwise acquire, any Shares or any securities or obligations convertible into
or exchangeable for any Shares, or grant any stock appreciation rights or
grant, sell or issue to any individual, corporation or other person any right
or option to acquire, or securities evidencing a right to convert into or
acquire, any shares of its capital stock, except for regular quarterly cash
dividends both (a) at a rate per Share not in excess of $0.075 per Share and
(b) having record dates and payment dates consistent with past practice,
provided however that the Company may not declare any regular quarterly cash
dividends if the amount of such dividend exceeds the amount of the net income
for such quarter or issue any additional shares of capital stock except
pursuant to the exercise of stock options outstanding as of the date of the
Merger Agreement, (iii) other than in the ordinary course of business
consistent with past practice and pursuant to policies currently in effect,
sell, transfer, mortgage, encumber or otherwise dispose of any of its
properties, leases or assets to any person, or cancel, release or assign any
indebtedness of any such person, except pursuant to contracts or agreements in
force as of the date of the Merger Agreement, (iv) make any capital
expenditures, other than capital expenditures made in the ordinary course of
business consistent with past practice in amounts not exceeding $25,000,
individually or in the aggregate, (v) increase in any manner the compensation
or fringe benefits of any of its employees or directors, or create or
institute, or make any payments pursuant to, any severance plan or package, or
pay any pension or retirement allowance not required by any existing plan or
agreement to any such employees or directors, or become a party to, amend or
commit itself to or fund or otherwise establish any trust or account related to
any Employee Plan (as defined in the Merger Agreement), with or for the benefit
of any employee, other than general increases in compensation in the ordinary
course of business consistent with past practice not in excess of six percent
in any 12-month period, or any amendment required by applicable law (provided
that any such amendment shall provide the least increase to cost permitted
under such applicable law), or voluntarily accelerate the vesting of any stock
options or other compensation or benefit, (vi) (a) other than in the ordinary
course of business consistent with past practice in individual amounts not to
exceed $100,000 or in securities transactions as provided in (vi)(b) below,
make any investment either by contributions to capital, property transfers, or
purchase of any property or assets of any person, provided that the Company
shall make no acquisition of business operations without Cullen/Frost's prior
consent; or (b) other than purchases of direct obligations of the United States
of America with a remaining maturity at the time of purchase of two years or
less, purchase or acquire securities of any type, provided, however, that, in
the case of investment securities, the Company may purchase (or permit a any of
its subsidiaries to purchase) investment securities if, within one business day
after the Company requests in writing (which notice shall describe in detail
the investment securities to be purchased and the price thereof) that
Cullen/Frost consents to the making of any such purchase, Cullen/Frost has
approved such request in writing or has not responded in writing to such
request, (vii) enter into or terminate any contract or agreement, or make any
change in any of its leases or contracts, other than with respect to those
involving aggregate payments of less than, or the provision of goods or
services with a market value of less than, $25,000, (viii) settle any claim,
action or proceeding involving any liability of the Company or any of its
subsidiaries for money damages in excess of $25,000 or material restrictions
upon the operations of the Company or any of its subsidiaries, (ix) except in
the ordinary course of business and in amounts less than $100,000, waive or
release any material right or collateral or cancel or compromise any extension
of credit or other debt or claim, provided, however, that the Company may take
(or permit a any of its subsidiaries to take) any such action if, within two
business days after the Company requests in writing (which request shall
include information and analyses sufficient for Cullen/Frost to assess the
proposed action) that Cullen/Frost consents to the taking of such action,
Cullen/Frost has approved such request in writing or has not responded in
writing to such request, (x) make, renegotiate, renew, increase, extend or
purchase any loan, lease (credit equivalent), advance, credit enhancement or
other extension of credit, or make any commitment in respect of any of the
foregoing, except (a) unsecured loans, advances or commitments in amounts less
than $100,000 made in the ordinary course of business consistent with

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<PAGE> 32

past practice and made in conformity with all applicable policies and
procedures, (b) secured loans, advances or commitments in an amount less than
$200,000 and (c) loans or advances as to which the Company has a legally
binding obligation to make such loan or advance as of the date hereof and a
description of which has been provided by the Company in writing to
Cullen/Frost prior to the execution of the Merger Agreement, provided, however,
that the Company may take (or permit any of its subsidiaries to take) any such
action if, within 24 hours after receiving a request from a person to take any
such action that the Company intends to act upon, the Company notifies
Cullen/Frost in writing of such request and within 24 hours after the Company
requests in writing (which request shall include information and analyses
sufficient for Cullen/Frost to assess the proposed action) that Cullen/Frost
consent to the taking of such action, Cullen/Frost has approved such request in
writing or has not responded in writing to such request, (xi) except as
contemplated by Section 4.2 of the Merger Agreement, change its method of
accounting as in effect at December 31, 1995, except as required by changes in
generally accepted accounting principles as concurred in by the Company's
independent auditors, (xii) enter into any new activities or lines of business,
or cease to conduct any activities or lines of business that it conducts on the
date of the Merger Agreement, or conduct any business activity not consistent
with past practice, (xiii) amend its articles of incorporation or its bylaws;
or (xiv) agree to, or make any commitment to, take any of the actions
prohibited by the Merger Agreement.

Termination

The Merger Agreement may be terminated and the Merger abandoned prior
to the Effective Time regardless of whether it has been approved by the
Company's shareholders, by (i) the mutual consent of the Company and
Cullen/Frost, if each Board so determines by a majority vote of its members,
(ii) either the Company or Cullen/Frost, if either Board so determines by a
majority vote of its members, in the event of the failure of the shareholders
of the Company to approve the Merger Agreement at the Special Meeting, or a
material breach by the other party to the Merger Agreement of any
representation, warranty, covenant or agreement which is not cured or not
curable within 30 days after written notice of such breach is given to the
party committing such breach by the other party, (iii) either the Company or
Cullen/Frost if any approval, consent or waiver of a governmental authority
required to permit consummation of the Merger or any transaction necessary to
consummate the Merger is denied or a governmental authority of competent
jurisdiction issues a final, unappealable order enjoining or otherwise
prohibiting consummation of the Merger or any transaction necessary to
consummate the Merger, (iv) the Company or Cullen/Frost if its Board so
determines by a majority vote of its members in the event that the Merger is
not consummated by April 15, 1997, unless the failure to so consummate by such
time is due to the breach of any representation, warranty or covenant contained
in the Merger Agreement by the party seeking to terminate, (v) Cullen/Frost if
the Company takes, causes to be taken or allows to be taken any action that
would constitute an initiation, solicitation or encouragement of any inquiries
or the making of any proposal or offer with respect to a merger, consolidation
or similar transaction involving, or purchase of all or any significant portion
of the assets or any equity securities of, the Company or any of its
subsidiaries, and (vi) the Company (provided that the Company pays a fee of
$1,150,000 to Cullen/Frost and provides Cullen/Frost with written notice of
such a possible determination two business days prior to such determination)
prior to the approval of the Merger Agreement by the shareholders of the
Company if the Company receives a proposal from a third party to merge with or
to acquire the Company on terms and conditions which the Board of Directors
determines, after receiving the written advice of its outside counsel, (a) that
to proceed with the Merger would violate the fiduciary duties of the Board of
Directors owed to the Company's shareholders and (b) to accept such proposal.

If a Purchase Event (as defined in the Merger Agreement and which
relates, among other requirements, to the acquisition by any person of
beneficial ownership of 25 percent or more of the Shares or an offer to acquire
the Company by a third party or certain acquisitions or proposed acquisitions
of the Company's Common Stock) occurs, the Company will be required to pay to
Cullen/Frost a fee of $1,000,000 and the Merger will not be consummated. In
the event of a termination of the Merger Agreement, neither party will have any
liability to the other unless the termination results from a party's material
breach of any representation, warranty, covenant or obligation.

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<PAGE> 33
Offers

The Company has covenanted that neither it or any of its subsidiaries
nor any of the respective officers or directors of the Company or its
subsidiaries will, and the Company will direct and use its reasonable best
efforts to caution its employees, agents and representatives not to, initiate,
solicit or encourage any inquiries or the making of any proposal or offer with
respect to a merger, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or equity securities
of the Company or any of its subsidiaries or, except to the extent legally
required for the discharge by the Board of Directors of its fiduciary duties,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an acquisition
proposal, or otherwise facilitate any effort or attempt to make or implement an
acquisition proposal. As of September 30, 1996, the Merger Agreement required
the Company to immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted prior to and
with respect to any of the foregoing, which the Company has done. The Company
is required to immediately notify Cullen/Frost if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Company.

THE RIGHTS AGREEMENT

In October 1995, the Board of Directors, with the advice of its legal
counsel and FinSer, adopted the Rights Agreement to ensure that all
shareholders would receive a fair price and be treated equally in the event of
an attempted takeover. On September 30, 1996, as required by the Merger
Agreement, the Board approved an amendment to the Rights Agreement to exclude
Cullen/Frost and any of its affiliates or associates from the definition of
Acquiring Person as a result of the execution and delivery of the Merger
Agreement. The Board also approved a resolution requiring the redemption of
the Rights at the moment immediately prior to the Effective Time and providing
that all holders of a Right will be entitled to receive $0.01 for each Right
held by that shareholder (which amount is included in the per Share price of
$18.84 to be paid in the Merger).

TREATMENT OF EMPLOYEES AND EMPLOYEE BENEFITS

Each person employed by the Company or any of its subsidiaries prior
to the Effective Time who remains an employee of the Surviving Corporation or
its subsidiaries following the Effective Time (a "Continued Employee") will be
entitled to participate in whatever employee benefit plans or fringe benefit
programs are in effect generally for employees of Cullen/Frost's subsidiaries
if the employee is eligible for participation therein. Cullen/Frost will,
solely for the purposes of vesting and eligibility to participate in the
benefit programs, recognize credit for the Continued Employee's term of service
with the Company or its subsidiaries. However, no Continued Employee will be
eligible to participate in any defined benefit pension plan maintained by
Cullen/Frost or its subsidiaries until the Continued Employee has completed one
year of full service with Cullen/Frost or its subsidiaries. With regard to its
health and dental plans, Cullen/Frost will waive all pre-existing condition
limitations for the Continued Employees.

RIGHTS OF DISSENTING SHAREHOLDERS

If the Merger is consummated, shareholders of the Company who did not
vote in favor of the Merger will have certain rights to dissent and demand the
appraisal of and payment in cash for the fair value of their Shares pursuant to
the TBCA. Under the TBCA, such rights, if the statutory procedures are
complied with, could lead to a judicial determination of the fair value
(excluding any depreciation or appreciation in anticipation of the Merger)
required to be paid in cash to such dissenting holders for their Shares. The
value so determined could be more or less than the purchase price per Share
pursuant to the Merger Agreement.

ANY SHAREHOLDER CONTEMPLATING THE EXERCISE OF APPRAISAL RIGHTS IS
URGED TO REVIEW CAREFULLY THE PROVISIONS OF ARTICLES 5.12 AND 5.13 OF THE TBCA
(A COPY OF WHICH IS ATTACHED AS ANNEX D TO THIS PROXY STATEMENT), PARTICULARLY
WITH RESPECT TO THE PROCEDURAL STEPS REQUIRED TO PERFECT THE

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RIGHT OF APPRAISAL. IF THE RIGHT OF APPRAISAL IS LOST DUE TO THE SHAREHOLDER'S
FAILURE TO COMPLY WITH THE PROCEDURAL REQUIREMENTS OF ARTICLES 5.12 AND 5.13 OF
THE TBCA, THE SHAREHOLDER WILL RECEIVE THE MERGER CONSIDERATION WITHOUT
INTEREST FOR EACH SHARE OWNED. SET FORTH BELOW IS A SUMMARY OF THE PROCEDURES
RELATING TO THE EXERCISE OF THE RIGHT OF APPRAISAL, WHICH SHOULD BE READ IN
CONJUNCTION WITH THE FULL TEXT OF ARTICLES 5.12 AND 5.13 OF THE TBCA.

Article 5.12 of the TBCA provides that a shareholder wishing to
exercise such shareholder's rights for appraisal with respect to the Merger
must file, prior to the Special Meeting, a written objection to the Merger
stating that its right to dissent will be exercised if the Merger becomes
effective and giving the shareholder's address, to which notice of the approval
of the Merger shall be delivered or mailed in such event. If the Merger is
effected and the shareholder did not vote in favor of the Merger, the Surviving
Corporation will, within ten days after the Effective Time, deliver or mail to
the shareholder written notice that the Merger has been effected. In order to
exercise its right of appraisal, a shareholder must, within ten days from the
delivery or mailing of the notice from the Surviving Corporation, make written
demand ("Demand") on the Surviving Corporation for payment of the fair value of
the shareholder's Shares. The Demand must state the number of Shares owned by
such shareholder, and the shareholder's estimate of the fair value of such
Shares. Any shareholder failing to make Demand within the ten-day period will
be bound by the Merger.

The Demand should be executed by or for such shareholder of record,
fully and correctly, as such shareholder's name appears on the certificate(s)
formerly representing the Shares. If Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the Demand
should be made in such capacity. If Shares are owned of record by more than
one person, as in a joint tenancy or tenancy in common, the Demand should be
executed by or for all joint owners. Any shareholder who has made a Demand may
withdraw the Demand at any time before payment for the Shares is made or before
any petition asking for a determination of the fair value of the Shares is
filed.

Within 20 days after making a Demand, the shareholder must submit the
certificates representing the Shares to the Surviving Corporation for notation
thereon that a Demand has been made. The failure of a shareholder to submit
the certificates will terminate the shareholder's rights of appraisal.

Within 20 days after receipt of a Demand, the Surviving Corporation
must deliver or mail to the shareholder a written notice that either (1)
accepts the amount claimed in the Demand and agrees to pay such amount within
90 days after the Effective Time upon the surrender of the duly endorsed
certificates formerly representing such shareholder's Shares, or (2) contains
an estimate by the Surviving Corporation of the fair value of the Shares
together with an offer to pay such amount within 90 days after the Effective
Time. If the Surviving Corporation responds to the Demand with an estimate of
the fair value of the Shares and the shareholder wishes to accept the Surviving
Corporation's estimate, the Surviving Corporation must receive written notice
from the shareholder accepting such estimate within 60 days after the
shareholder receives the estimate from the Surviving Corporation and
surrendering the duly endorsed certificates formerly representing such
shareholder's Shares. If, within 60 days after the Effective Time, the value
of the Shares is agreed upon between the shareholder and the Surviving
Corporation, payment for the Shares will be made within 90 days after the
Effective Time and upon surrender of the certificates duly endorsed. Upon
payment of the agreed value, the shareholder will cease to have any interest in
the Shares or the Company.

If, within the period of 60 days after the Effective Time, the
shareholder and the Surviving Corporation do not agree on the fair value of the
Shares, then the shareholder or the Surviving Corporation may, within 60 days
following the expiration of such 60 day period, file a petition in any court of
competent jurisdiction in the county in which the principal office of the
Surviving Corporation is located, to obtain a judicial finding and
determination of the fair value of the shareholder's Shares. Upon filing such
petition, the shareholder must serve the Surviving Corporation with a copy of
such petition. Within 10 days after being served with a copy of the petition,
the Surviving Corporation must file with the court a list of shareholders who
have demanded payment for their Shares and with whom agreements as to the value
of their shares have not been reached. All shareholders will be notified as to
the time and place of the hearing of the petition. All shareholders thus
notified and the Surviving Corporation will then be bound by the final
judgement of the court. After the hearing of the petition, the court will
appoint one or more qualified appraisers who will determine the fair value of
the Shares and will file a report of that value with the clerk of the court.
Each party will have reasonable opportunity to submit to the appraisers
pertinent evidence as to the

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<PAGE> 35
value of the Shares. Either party may make exceptions to the appraiser's
report. The court will then determine the fair value of the Shares and will
direct the Surviving Corporation, upon receipt of the duly endorsed
certificates formerly representing such Shares, to pay the value together with
interest thereon beginning on the 91st day after the Effective Time to the date
of the judgment to such shareholders entitled to payment. Upon payment of the
judgment, the dissenting shareholders will cease to have any interest in the
Shares or the Company.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material federal income tax
consequences of the Merger to shareholders whose Shares are converted into the
right to receive the Merger Consideration of $18.84 per Share (including any
cash amounts received by dissenting shareholders pursuant to the exercise of
appraisal rights). This discussion is based upon the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations promulgated and proposed thereunder, judicial authority and
administrative rulings and practice. Legislative, judicial or administrative
rules and interpretations are subject to change, possibly on a retroactive
basis, at any time and therefore could alter or modify the statements and
conclusions set forth below. It is assumed for purposes of this summary that
the Shares are held as capital assets by a United States person (i.e., a
citizen or resident of the United States or a domestic corporation). This
discussion does not address all aspects of federal income taxation that may be
relevant to a particular shareholder in light of such shareholder's personal
investment circumstances, or those shareholders subject to special treatment
under the federal income tax laws (for example, life insurance companies, tax-
exempt organizations, foreign corporations and nonresident alien individuals),
shareholders who hold Shares as part of a conversion transaction (within the
meaning of Section 1258 of the Code) or shareholders who acquired their Shares
through the exercise of employee stock options or other compensation
arrangements. In addition, the discussion does not address any aspect of
foreign, state, local or estate and gift taxation that may be applicable to a
shareholder.

Consequences of the Merger to Shareholders

The receipt of the Merger Consideration of $18.84 per Share (including
any cash amounts received by dissenting shareholders pursuant to the exercise
of appraisal rights) will be a taxable transaction for federal income tax
purposes (and also may be a taxable transaction under applicable state, local
and other income tax laws). In general, for federal income tax purposes, a
shareholder will recognize gain or loss equal to the difference between such
shareholder's adjusted tax basis in the Shares exchanged in the Merger, and the
amount of cash (less $0.01 per Share, as described herein) received therefor.
Such gain or loss will be capital gain or loss, and will be long-term gain or
loss if, on the date of the Merger, the Shares were held for more than one
year.

Backup Tax Withholding

Under the federal income tax backup withholding rules, unless an
exemption applies, the Exchange Agent will be required to withhold, and will
withhold, 31 percent of all payments to which a shareholder or other payee is
entitled pursuant to the Merger, unless the shareholder or other payee provides
a tax identification number (social security number, in the case of an
individual, or employer identification number in the case of other
shareholders) and certifies under penalties of perjury that such number is
correct. Each shareholder and, if applicable, each other payee, should
complete and sign the substitute Form W-9 which will be included as part of the
letter of transmittal to be returned to the Exchange Agent in order to provide
the information and certification necessary to avoid backup withholding, unless
an applicable exception exists and is proved in a manner satisfactory to the
Exchange Agent. The exceptions provide that certain shareholders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. In order for a foreign
individual to qualify as an exempt recipient, however, such shareholder must
submit a signed statement (i.e., Certificate of Foreign Status on Form W-8)
attesting to such individual's exempt status. Any amounts withheld will be
allowed as a credit against the holder's federal income tax liability for such
year.

32
<PAGE> 36
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION PURPOSES ONLY. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS TO DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE MERGER TO THEM IN VIEW OF THEIR OWN PARTICULAR CIRCUMSTANCES.

FINANCING OF THE MERGER

The total funds required to pay the Merger consideration of $18.84 per
Share for each outstanding Share will be approximately $33 million if all
outstanding options are exercised, or approximately $32 million if none of the
outstanding options are exercised and such options are terminated and cash in
lieu thereof is paid by Cullen/Frost (see "THE MERGER -- Interests of Certain
Persons in the Merger -- Stock Options"). Cullen/Frost intends to finance the
Merger Consideration with its existing funds.

BUSINESS OF THE COMPANY

The Company, a Texas corporation, is a two-tiered, one-bank holding
company registered under the BHCA, and functions primarily as the owner of
C.S.B.C.C., Inc., which is the holder of all the Bank's common stock. As a
two-tiered, one-bank holding company, the Company's principal role is to
assist in the management and coordination of the financial resources of the
Bank by providing capital and management assistance. As of September 30,
1996, the Bank had $240.1 million in assets and operates four branches in
Corpus Christi, Texas and one branch in Taft, Texas. The Bank provides a broad
range of retail services to consumers, makes secured installment loans for the
purchase of automobiles and boats and secured and unsecured personal loans for
a variety of other purposes, offers credit cards to its customers, maintains an
indirect lending operation for automobile dealerships offering sales on credit,
furnishes traditional depository and lending services to commercial customers,
offers personal and employee benefit trust services, and offers access to a
full line of brokerage and life insurance products.

PRICE RANGE OF THE SHARES; DIVIDENDS

The Shares are traded on the American Stock Exchange under the symbol
"CTZ." The following table sets forth the high and low sale prices per Share
for the fiscal quarters indicated as reported by the American Stock Exchange:
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal Year Ended December 31, 1994
Quarter ended March 31, 1994 . . . . . . . . . . . . . . . $11.750 $ 9.500
Quarter ended June 30, 1994 . . . . . . . . . . . . . . . 10.250 8.750
Quarter ended September 30, 1994 . . . . . . . . . . . . . 10.500 9.750
Quarter ended December 31, 1994 . . . . . . . . . . . . . 10.500 9.625

Fiscal Year Ended December 31, 1995
Quarter ended March 31, 1995 . . . . . . . . . . . . . . . $10.750 $ 8.625
Quarter ended June 30, 1995 . . . . . . . . . . . . . . . 11.500 9.000
Quarter ended September 30, 1995 . . . . . . . . . . . . . 13.000 11.125
Quarter ended December 31, 1995 . . . . . . . . . . . . . 12.875 10.750
</TABLE>

33
<PAGE> 37

<TABLE>
<S> <C> <C>
Fiscal Year Ended December 31, 1996
Quarter ended March 31, 1996 . . . . . . . . . . . . . . . $16.000 $11.750
Quarter ended June 30, 1996 . . . . . . . . . . . . . . . 16.375 14.750
Quarter ended September 30, 1996 . . . . . . . . . . . . . 16.125 15.750

Period beginning September 30, 1996 to
December __, 1996 . . . . . . . . . . . . . . . . . . . . $ $
</TABLE>

On December __, 1996, the last full trading day prior to the date of
this Proxy Statement, the high and low sale prices for the Shares reported by
the American Stock Exchange, were $___________ and $___________, respectively.

The Company paid dividends of $.0625 per Share on a quarterly basis
during 1994 and 1995. During 1996, the Company paid dividends of $.075 per
Share on a quarterly basis.

SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET PRICES FOR THEIR
SHARES.

BUSINESS OF CULLEN/FROST BANKERS, INC.

Cullen/Frost is a Texas corporation with its headquarters at 100 W.
Houston Street, San Antonio, Texas 78205- 1457. Cullen/Frost is a bank
holding company registered under the BHCA with assets of $4.5 billion at
September 30, 1996. Cullen/Frost's principal assets consist of all of the
capital stock of two national banks -- The Frost National Bank and United
States National Bank of Galveston. Cullen/Frost has 46 offices in six Texas
banking markets with 18 locations in San Antonio, 14 in the Houston/Galveston
area, five in Austin, five in the Corpus Christi area, three in San Marcos and
one in McAllen.

Cullen/Frost is subject to the informational filing requirements of
the Exchange Act and, in accordance therewith, is required to file with the
Commission periodic reports, proxy statements and other informational filings
relating to its business, financial condition and other matters. The Company
is required to disclose in such proxy statements, reports and other
informational filings certain information as of particular dates concerning the
Company's operating results, financial condition, directors and officers, their
remuneration, stock options and other equity based compensation granted to
them, the principal holders of the Company's securities, any material interests
of such persons in transactions with the Company and other matters. Such
reports, proxy statements and other informational filings required by the
Exchange Act are available for inspection at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices in New
York at 7 World Trade Center, 13th Floor, New York, New York 10048 and Chicago
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials may also be obtained by mail, upon payment of
the Commission's customary fees, from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549.

SELECTED COMPANY FINANCIAL DATA

The following table sets forth certain summary consolidated financial
information with respect to the Company and its subsidiaries excerpted or
derived from the audited financial statements contained in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995 and the unaudited
financial information contained in the Company's Quarterly Report on Form
10-QSB for the nine months ended September 30, 1996 and 1995. More
comprehensive financial information is included in such reports and other
documents filed by the Company with the Commission, and the following summary
is qualified in its entirety by reference to such documents (which may be
inspected and obtained as described herein), including the financial statements
and related notes contained therein.

34
<PAGE> 38
CORPUS CHRISTI BANCSHARES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
--------------------------- ---------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------------- ------------- ------------ ------------ ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:

Interest Income $ 10,982 $ 9,016 $ 12,589 $ 10,174 $ 9,530 $ 9,868 $ 10,955
Interest Expense 4,228 3,415 4,818 3,310 2,954 3,660 5,898
Net Interest Income 6,754 5,601 7,771 6,864 6,576 6,208 5,057
Provision for Loan Losses -- (400) (600) (300) -- -- (433)
NonInterest Income 2,549 2,260 3,055 2,889 2,586 2,656 2,169
NonInterest Expenses 6,738 6,282 8,453 7,857 6,671 6,546 7,000
Income before Income
Taxes and Extraordinary
Item 2,565 1,979 2,973 2,196 2,491 2,318 659
Applicable Income Taxes 881 683 1,038 380 290 791 244
Income before
Extraordinary Item 1,684 1,296 1,935 1,816 2,201 1,527 415
Extraordinary Item,
Recognition of Income
Tax Loss Carry
Forwards -- -- -- -- -- 753 207
Net Income $ 1,684 $ 1,296 $ 1,935 $ 1,816 $ 2,201 $ 2,280 $ 622
Weighted Average of
Common Stock and
Common Stock
Equivalents Outstanding 1,705 1,685 1,687 1,681 1,600 1,600 1,600

NET INCOME PER COMMON
SHARE:

Income before
Extraordinary Item $ 0.99 $ 0.77 $ 1.15 $ 1.08 $ 1.38 $ 0.95 $ 0.26
Extraordinary Item -- -- -- -- -- 0.47 0.13
Net Income 0.99 0.77 1.15 1.08 1.38 1.42 0.39
Cash Dividends
Declared 0.225 0.1875 0.25 0.25 0.25 0.25 .025

BALANCE SHEET AND OTHER DATA

Total Assets $ 240,134 $ 181,775 $ 223,867 $ 171,530 $ 160,230 $146,551 $143,739
Loans, Net 106,077 99,981 101,991 92,095 77,144 63,556 58,270
Total Deposits 218,683 158,663 200,898 157,659 146,790 134,814 133,817
Total Capital 16,864 15,351 16,055 13,438 13,081 11,280 9,400
Book Value Per Common
Share(1) $ 10.54 $9.59 $ 10.03 $ 8.40 $ 8.18 $ 7.05 $ 5.88
Retrun on Assets (Avg) .94% 1.00% 1.05% 1.11% 1.48% 1.61% .45%
Retrun on Equity (Avg) 13.31% 11.25% 12.94% 13.51% 17.66% 21.50% 6.76%
</TABLE>
- ------------------------

(1) The book value stated in the above table from 1991 and 1992 has been
restated to reflect the October, 1993 four-for-one stock split.

35
<PAGE> 39
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of December 12, 1996
regarding the beneficial ownership of Shares by each person or entity known by
the Company to beneficially own five percent or more of the outstanding Shares,
each director of the Company, and the directors, advisory directors and
executive officers of the Company as a group. The persons named in the table
have sole voting and investment power with respect to all Shares owned by them,
unless otherwise indicated.

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED (1) PERCENT OF CLASS
<S> <C> <C>
John C. Brooke, Director 34,191 (2) 2.13%

J. B. Clark, Director 8,746 (3) *

Joe R. DeLeon, Jr., Director 9,746 (4) *

Roy M. Grassedonio, Director 11,874 (5) *

Stephen R. Karp, Director 24,706 (6) 1.53%

R. Jay Phillips, Director, 34,528 (7) 2.13%
President and Chief Executive Officer

Jack Powers, Director 30,950 (8) 1.93%

Roscoe M. Smith, Director 32,286 (9) 2.01%

L. L. Woodman, Jr., Director 32,602 (10) 2.02%

John T. Wright, Jr., Director 36,450 (11) 2.27%

John T. Wright, III, Director, 31,815 (12) 1.96%
Chairman of the Board

M. E. Allison and Co., Inc. 93,492 (13) 5.84%
112 East Pecan, Suite 1200
San Antonio, Texas 78205

National Bancshares Corporation of Texas 248,200 (14) 15.51%
104 East Mann Road
Laredo, Texas 78042

All directors, advisory directors and executive 298,948 (15) 17.47%
officers as a group (14 persons)

</TABLE>

- ----------------
* Less than 1%.

(1) The number of Shares stated as being beneficially owned includes
Shares held beneficially by spouses, children and affiliated
corporations of the directors. The inclusion herein of any such
Shares, however, does not constitute an admission by a director that
he is the direct or indirect beneficial owner of such Shares. Unless
otherwise indicated, all directors are record owners of their Shares.

If a person has the right to acquire beneficial ownership of any
Shares by exercise of options within 60 days of the date of this Proxy
Statement, such Shares are deemed beneficially owned by such person
and are deemed to be outstanding solely for the purpose of determining
the percentage of Shares he owns. Such Shares are not included in the
computations for any other purpose.

(2) Includes options to purchase 5,343 Shares.

36
<PAGE> 40
(3) Includes options to purchase 4,286 Shares.

(4) Options to purchase 4,286 Shares, plus 336 Shares owned by Mr.
DeLeon's children, plus 372 Shares over which Mr. DeLeon shares voting
control as one of four independent administrators of the V. DeLeon
estate, plus 752 Shares over which Mr. DeLeon shares voting control
with four beneficiaries of the J. DeLeon Trust.

(5) Includes options to purchase 6,286 Shares, plus 5,588 Shares owned by
a limited partnership of which Mr. Grassedonio is a principal
partner.

(6) Includes options to purchase 10,686 Shares.

(7) Includes options to purchase 24,828 Shares.

(8) Includes options to purchase 6,286 Shares.

(9) Includes options to purchase 4,286 Shares, plus 1,232 Shares owned by
Mr. Smith's wife.

(10) Includes options to purchase 10,686 Shares.

(11) Includes options to purchase 4,286 Shares, plus 5,764 Shares owned by
Mr. Wright's wife.

(12) Includes options to purchase 23,543 Shares, plus 56 Shares owned by
Mr. Wright's children.

(13) Based upon information supplied by M.E. Allison and Co., Inc.;
however, the most recent Schedule 13G filed by M.E. Allison and Co.,
Inc. with the Commission on February 15, 1995 reflects beneficial
ownership of 112,492 Shares constituting 7.03 percent of the class.

(14) Based on the most recent Schedule 13D filed with the Commission, dated
August 7, 1996, National Bancshares Corporation of Texas, a bank
holding company, has the sole power to vote or to direct the vote of
248,200 Shares and the power to dispose or direct the disposition of
248,200 Shares.

(15) Includes options to purchase 111,088 Shares.

INDEPENDENT PUBLIC ACCOUNTANTS

Representatives of KPMG Peat Marwick LLP, the Company's independent
certified public accountants for the fiscal year ended December 31, 1996, are
not expected to be at the Special Meeting.

SOLICITATION OF PROXIES

The solicitation of proxies will be made by mail, telephone or
personal contact by directors or regular employees of the Company or the Bank
without remuneration. Proxies also will be solicited by Morrow & Co., Inc. at
a fixed price of $10,000 plus out-of-pocket expenses. The cost of preparing,
assembling, printing and mailing the proxy material will be borne by the
Company and will include reimbursement paid to Morrow & Co., Inc., brokerage
firms and other custodians, nominees and fiduciaries for their reasonable
expenses incurred in forwarding proxy material to principals and obtaining
their proxies for the Special Meeting.

37
<PAGE> 41
OTHER BUSINESS

Management of the Company does not know of any other matters that are
likely to be brought before the Special Meeting for action. However, if any
matters do properly come before the Special Meeting for action, it is intended
that the accompanying proxy will be voted in accordance with the judgment of
the person(s) voting the proxy.

SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING

It is not now anticipated that there will be an Annual Meeting of
Shareholders in 1997. However, if the Merger is not consummated, an Annual
Meeting of Shareholders is likely to be held sometime in the second or third
quarter of 1997. In order to be considered for inclusion in the Company's
proxy materials for the Company's 1997 Annual Meeting of Shareholders, a
shareholder proposal to take action at such meeting must be received at the
Company's principal executive officers, 2402 Leopard Street, Corpus Christi,
Texas 78408, Attention: Jace C. Hoffman, no later than December 31, 1996.

INCORPORATION BY REFERENCE

The following documents or portions of documents filed by the Company
are hereby incorporated by reference in this Proxy Statement:

1. Annual Report on Form 10-KSB for the year ended
December 31, 1995, which includes portions of the
Company's 1995 Annual Report to Shareholders;

2. Amendment of Annual Repport on Form 10-KSB/A for the
year ended December 31, 1995;

3. Amended and Restated Quarterly Report on Form
10-QSB/A for the three months ended March 31, 1996;

4. Amended and Restated Quarterly Report on Form
10-QSB/A for the six months ended June 30, 1996;

5. Quarterly Report on Form 10-QSB for the nine months
ended September 30, 1996; and

6. Current Report on Form 8-K filed with the Commission
on October 16, 1996.

All documents filed by the Company pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), subsequent to the date hereof and prior to the earlier of the Effective
Time or the termination of the Merger Agreement are hereby incorporated by
reference into this Proxy Statement and shall be deemed a part hereof from the
date of filing of such documents.

THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. A COPY OF THE DOCUMENTS INCORPORATED
HEREIN BY REFERENCE IS AVAILABLE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM A PROXY STATEMENT IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST TO: JACE C. HOFFMAN, CORPORATE SECRETARY, CORPUS CHRISTI BANCSHARES,
INC., POST OFFICE BOX 9664, CORPUS CHRISTI, TEXAS 78469, TELEPHONE NUMBER
(512) 887-3000.

The Company is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is required to file with the
Commission periodic reports, proxy statements and other informational filings
relating to its business, financial condition and other matters. The Company
is required to disclose in such proxy statements, reports and other
informational filings certain information as of particular dates concerning the
Company's operating results, financial condition, directors and officers, their
remuneration, stock options and other equity based compensation granted to
them, the principal holders of the Company's securities, material interests of
such persons in transactions with the Company and other matters. Such reports,
proxy statements and other informational filings required by the Exchange Act
are available for inspection at the public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,

38
<PAGE> 42
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices in New
York at 7 World Trade Center, 13th Floor, New York, New York 10048 and Chicago
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials may also be obtained by mail, upon payment of
the Commission's customary fees, from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Such information is also available for inspection at the American
Stock Exchange, 86 Trinity Place, New York, New York 10006-1881.

DECEMBER __, 1996

JACE C. HOFFMAN
SECRETARY

39
<PAGE> 43
ANNEX A

EXECUTION COPY

================================================================================

AGREEMENT AND PLAN OF MERGER

DATED AS OF THE 30TH DAY OF SEPTEMBER, 1996

BY AND AMONG

CULLEN/FROST BANKERS, INC.

R.E. HOLDING CORPORATION

AND

CORPUS CHRISTI BANCSHARES, INC.

================================================================================
<PAGE> 44
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
Page

RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE I. THE MERGERS

SECTION 1.1. Structure of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.2. Effect on Outstanding Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.3. Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.4. Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.5. Alternative Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.6. Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE II. CONDUCT PENDING THE MERGER

SECTION 2.1. Conduct of the Company's Business Prior to the Effective Time . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.2. Forbearance by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.3. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE III. REPRESENTATIONS AND WARRANTIES

SECTION 3.1. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.2. Representations and Warranties of the Acquiror and Merger Sub . . . . . . . . . . . . . . . . . . . . . 29

ARTICLE IV. COVENANTS

SECTION 4.1. Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.2. Certain Policies of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.3. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4.4. Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.5. Ancillary Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.6. Certain Filings, Consents and Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.7. Indemnification; Directors' and Officers' Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.8. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.9. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.10. Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.11. Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.12. Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.13. No Acquisitions of Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 45

ARTICLE V. CONDITIONS TO CONSUMMATION

<TABLE>
<S> <C>
SECTION 5.1. Conditions to All Parties' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 5.2. Conditions to the Obligations of the Acquiror and Merger Sub . . . . . . . . . . . . . . . . . . . . . 40
SECTION 5.3. Conditions to the Obligation of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

ARTICLE VI. TERMINATION

SECTION 6.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 6.2. Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 6.3. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME

SECTION 7.1. Effective Date and Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

ARTICLE VIII. OTHER MATTERS

SECTION 8.1. Certain Definitions; Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 8.2. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.3. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.6. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.7. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.8. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 8.9. Entire Agreement; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 8.10. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

LIST OF ANNEXES

Annex 1 - Company Rights (Recital D)
Annex 2 - Amendment to Rights Plan (Section 3.1(ll))
Annex 3 - Form of Opinion of Jones, Day, Reavis & Pogue
(Section 5.2(c))
</TABLE>

-ii-
<PAGE> 46
<TABLE>
<CAPTION>
INDEX OF DEFINED TERMS
<S> <C>
Acquiror . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acquiror Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Acquiror Subsidiary Holding Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Acquiror's Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Acquisition Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Alternative Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
beneficial ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
BHC Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Company Subsidiary Holding Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Continued Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Covered Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Dissenters' Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Dissenting Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Environmental Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ERISA Affiliate Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Federal Reserve Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Government Regulators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Hazardous Material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Loan Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Maximum Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
National Bancshares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
OREO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Participation Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>

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<PAGE> 47
<TABLE>
<S> <C>
person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Preliminary Purchase Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Purchase Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Qualified Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Regulatory Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Securities Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SRO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
State Corporation Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
State Regulator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
</TABLE>

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<PAGE> 48
AGREEMENT AND PLAN OF MERGER, dated as of the 30th day of
September, 1996 (this "Plan"), by and among CULLEN/FROST BANKERS, INC. (the
"Acquiror"), R.E. HOLDING CORPORATION ("Merger Sub"), and CORPUS CHRISTI
BANCSHARES, INC. (the "Company").

RECITALS:

A. The Acquiror. The Acquiror is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Texas, with its principal executive offices located in San Antonio, Texas.
The Acquiror is a bank holding company duly registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board") under the
Bank Holding Company Act of 1956, as amended (the "BHC Act").

B. Merger Sub. Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas,
with its principal executive offices located in San Antonio, Texas. All the
outstanding shares of the capital stock of Merger Sub are owned directly by the
Acquiror. By its execution of this Plan, Acquiror, in its capacity as sole
shareholder of Merger Sub, approves this Plan.

C. The Company. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Texas,
with its principal executive offices located in Corpus Christi, Texas. As of
the date hereof, the Company has 4,000,000 authorized shares of common stock,
par value $5.00 per share ("Company Common Stock"), of which no more than
1,600,200 shares were outstanding as of the date hereof (including 200 shares
to be issued upon the completion of the exercise of certain options), and has
no other class of capital stock authorized. The Company is a bank holding
company duly registered with the Federal Reserve Board under the BHC Act.

D. Rights, Etc. The Company does not have any shares of its
capital stock reserved for issuance, any outstanding option, call or commitment
relating to shares of its capital stock or any outstanding securities,
obligations or agreements convertible into or exchangeable for, or giving any
person any right (including, without limitation, preemptive rights) to
subscribe for or acquire from it, any shares of its capital stock
(collectively, "Rights"), except pursuant to the Rights Agreement, dated as of
October 18, 1995 (the "Rights Agreement"), between the Company and Chemical
Mellon Shareholder Services, L.L.C., as Rights Agent, and as set forth on Annex
1 (which includes details on the terms and conditions of any such Rights,
including the grantee, vesting periods and exercise prices of any options).
<PAGE> 49
E. Board Approvals. The respective Boards of Directors of the
Acquiror, Merger Sub and the Company have duly approved this Plan and have duly
authorized its execution and delivery.

In consideration of their mutual promises and obligations
hereunder, the parties hereto adopt and make this Plan and prescribe the terms
and conditions hereof and the manner and basis of carrying it into effect,
which shall be as follows:

ARTICLE I. THE MERGERS

SECTION 1.1. Structure of the Merger. On the Effective Date (as
defined in Section 7.1), Merger Sub will merge (the "Merger") with and into the
Company, with the Company being the surviving corporation (the "Surviving
Corporation"), pursuant to the provisions of, and with the effect provided in
the Texas Business Corporation Act (the "State Corporation Law"). The separate
corporate existence of Merger Sub shall thereupon cease. The Surviving
Corporation shall continue to be governed by the State Corporation Law and its
separate corporate existence with all of its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. At the
Effective Time (as defined in Section 7.1), the articles of incorporation and
by-laws of the Surviving Corporation shall be the articles of incorporation and
by-laws of the Company immediately prior to the Effective Time.

SECTION 1.2. Effect on Outstanding Shares. (a) At the
Effective Time, automatically and without any action on the part of any holder
thereof, each share of Company Common Stock issued and outstanding at the
Effective Time (other than shares held by holders (each, a "Dissenting
Shareholder") who perfect their rights to dissent under applicable state law
(the "Dissenters' Shares")), shall be converted into the right to receive
$18.84 in cash (one cent (1c.) of which is attributable to the redemption price
of the associated right under the Rights Agreement) without interest (the
"Merger Consideration"). At the Effective Time, each share of Company Common
Stock held as treasury stock of the Company shall be cancelled and retired and
shall cease to exist and no exchange or payment shall be made with respect
thereto. Upon the payment by the Surviving Corporation of the "fair value" of
any Dissenters' Shares in accordance with the State Corporation Law, such
Dissenters' Shares shall be cancelled and retired and shall cease to exist, and
no exchange or further payment shall be made with respect thereto.

-2-
<PAGE> 50
(b) At the Effective Time, the shares of common stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into shares of common stock of the Surviving Corporation and shall
thereafter constitute all of the issued and outstanding shares of capital stock
of the Surviving Corporation.

SECTION 1.3. Exchange Procedures. (a) At and after the
Effective Time, each certificate theretofore representing shares of Company
Common Stock (each, a "Certificate") shall represent only the right to receive
the Merger Consideration in cash without interest.

(b) As of the Effective Time, the Acquiror shall deposit, or
shall cause to be deposited, with such bank or trust company as the Acquiror
shall elect (which may be a subsidiary of the Acquiror) (the "Exchange Agent"),
for the benefit of the holders of shares of Company Common Stock, for exchange
in accordance with this Section 1.3, the Merger Consideration to be paid
pursuant to Section 1.2 and deposited pursuant to this Section 1.3 in exchange
for outstanding shares of Company Common Stock.

(c) As soon as practicable after the Effective Time, the
Acquiror shall cause the Exchange Agent to mail to each holder of record of a
Certificate or Certificates the following: (i) a letter of transmittal
specifying that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent, which shall be in a form and contain any other customary provisions as
the Acquiror may determine; and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
the proper surrender of a Certificate to the Exchange Agent, together with a
properly completed and duly executed letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor a check
representing the Merger Consideration which such holder has the right to
receive in respect of the Certificate surrendered pursuant to the provisions
hereof, and the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on the Merger Consideration. In the event of
a transfer of ownership of any shares of Company Common Stock not registered in
the transfer records of the Company, a check for the Merger Consideration may
be issued to the transferee if the Certificate representing such Company Common
Stock is presented to the Exchange Agent, accompanied by documents sufficient,
in the discretion of the Acquiror and the Exchange Agent, (i) to evidence and
effect such transfer and (ii) to evidence that all applicable stock transfer
taxes have been paid.

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<PAGE> 51
(d) From and after the Effective Time, there shall be no
transfers on the stock transfer records of the Company of any shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to the Acquiror or the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration deliverable in respect thereof pursuant to this Plan in
accordance with the procedures set forth in this Section 1.3.

(e) Any portion of the aggregate Merger Consideration or the
proceeds of any investments thereof that remains unclaimed by the shareholders
of the Company for six months after the Effective Time shall be repaid by the
Exchange Agent to the Acquiror. Any shareholder of the Company who has not
theretofore complied with this Section 1.3 shall thereafter be entitled to look
only to the Acquiror for payment of the Merger Consideration deliverable in
respect of each share of Company Common Stock held by such shareholder without
any interest thereon. If outstanding certificates for shares of Company Common
Stock are not surrendered or the payment for them is not claimed prior to the
date on which such payments would otherwise escheat to or become the property
of any governmental unit or agency, the unclaimed items shall, to the extent
permitted by abandoned property and any other applicable law, become the
property of the Acquiror (and to the extent not in its possession shall be paid
over to the Acquiror), free and clear of all claims or interest of any person
previously entitled to such claims. Notwithstanding the foregoing, none of the
Acquiror, the Surviving Corporation, the Exchange Agent or any other person
shall be liable to any former holder of Company Common Stock for any amount
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.

(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Exchange Agent, the posting by such person of a bond in such amount as the
Exchange Agent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate a check for the Merger
Consideration deliverable in exchange therefor.

SECTION 1.4. Dissenters' Rights. Any Dissenting Shareholder who
shall be entitled to be paid the "fair value" of his or her Dissenters' Shares,
as provided in

-4-
<PAGE> 52
Article 5.12 of the State Corporation Law, shall not be entitled to the Merger
Consideration in respect thereof unless and until such Dissenting Shareholder
shall have failed to perfect or shall have effectively withdrawn or lost such
Dissenting Shareholder's right to dissent from the Merger under the State
Corporation Law, and shall be entitled to receive only the payment provided for
by Article 5.12 of the State Corporation Law with respect to such Dissenters'
Shares. If any Dissenting Shareholder shall fail to perfect or shall have
effectively withdrawn or lost such right to dissent, the Dissenters' Shares
held by such Dissenting Shareholder shall thereupon be treated as though such
Dissenters' Shares had been converted into the right to receive the Merger
Consideration pursuant to Section 1.2.

SECTION 1.5. Alternative Structure. Notwithstanding anything in
this Plan to the contrary, the Acquiror may specify that, before or after the
Merger, the Company, the Acquiror, the Company Bank, the Acquiror Bank and any
other subsidiaries of the Acquiror and the Company shall enter into
transactions other than those described in Article I hereof in order to effect
the purposes of this Plan, and the Company and the Acquiror shall take all
action necessary and appropriate to effect, or cause to be effected, such
transactions; provided, however, that no such specification shall materially
and adversely affect the timing of the consummation of the transactions
contemplated herein or the tax effect or economic benefits of the Merger to the
holders of Company Common Stock.

SECTION 1.6. Options. At the Effective Time, each option
granted by the Company to directors, officers and employees of the Company and
its subsidiaries to purchase shares of Company Common Stock which is
outstanding and exercisable immediately prior to the Effective Time and has not
been exercised at the Effective Time shall be terminated and each grantee
thereof shall be entitled to receive, in lieu of each share of Company Common
Stock that would otherwise have been issuable upon the exercise thereof and
without payment of any exercise price therefor, an amount in cash computed by
multiplying (i) the difference between (x) the per share amount of the Merger
Consideration (i.e., $18.84) and (y) the per share exercise price applicable to
such option by (ii) the number of such shares of Company Common Stock subject
to such option. The Company agrees to take or cause to be taken all action
necessary under such options to provide for such termination, including
obtaining any necessary consents from grantees. As soon as practicable after
the Effective Time, the

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<PAGE> 53
Surviving Corporation will make the payments required to be made to grantees of
options under this Section 1.6.

ARTICLE II. CONDUCT PENDING THE MERGER

SECTION 2.1. Conduct of the Company's Business Prior to the
Effective Time. Except as expressly provided in this Plan, during the period
from the date of this Plan to the Effective Time, the Company shall, and shall
cause each of its subsidiaries to, (i) conduct its business in the usual,
regular and ordinary course of business consistent with past practice, (ii) use
its reasonable best efforts to maintain and preserve intact its business
organization, properties, leases, employees and advantageous business
relationships and retain the services of its officers and key employees, (iii)
take no action which would adversely affect or delay the ability of the
Company, the Acquiror, Merger Sub or any subsidiary thereof to obtain any
necessary approvals, consents or waivers of any governmental authority required
for the transactions contemplated hereby or to perform its covenants and
agreements on a timely basis under this Plan and (iv) take no action that is
reasonably likely to have a Material Adverse Effect (as defined in Section 8.1
hereof) on the Company.

SECTION 2.2. Forbearance by the Company. During the period from
the date of this Plan to the Effective Time, the Company shall not, and shall
not permit any of its subsidiaries, without the prior written consent of the
Acquiror, to:

(a) other than in the ordinary course of business consistent
with past practice, make any loan or advance or incur any indebtedness
for borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other
person;

(b) adjust, split, combine or reclassify any capital stock;
make, declare or pay any dividend or make any other distribution on, or
directly or indirectly redeem, purchase or otherwise acquire, any shares
of its capital stock or any securities or obligations convertible into
or exchangeable for any shares of its capital stock, or grant any stock
appreciation rights or grant, sell or issue to any individual,
corporation or other person any right or option to acquire, or
securities evidencing a right to convert into or acquire, any shares of
its capital stock, except for regular quarterly cash dividends both (i)
at

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<PAGE> 54
a rate per share of Company Common Stock not in excess of $0.075 per
share and (ii) having record dates and payment dates consistent with
past practice as described in the letter referred to in the introduction
to Section 3.1 provided, however, that the Company may not declare any
regular quarterly cash dividends in any quarter if with respect to such
quarter the amount of the dividend exceeds the amount of net income for
such quarter; or issue any additional shares of capital stock except
pursuant to the exercise of stock options outstanding as of the date
hereof as set forth on Annex 1 and on the terms in effect on the date
hereof;

(c) other than in the ordinary course of business consistent
with past practice and pursuant to policies currently in effect, sell,
transfer, mortgage, encumber or otherwise dispose of any of its
properties, leases or assets to any person, or cancel, release or assign
any indebtedness of any such person, except pursuant to contracts or
agreements in force as of the date of this Plan;

(d) make any capital expenditures, other than capital
expenditures made in the ordinary course of business consistent with
past practice in amounts not exceeding $25,000, individually or in the
aggregate;

(e) increase in any manner the compensation or fringe benefits
of any of its employees or directors, or create or institute, or make
any payments pursuant to, any severance plan or package, or pay any
pension or retirement allowance not required by any existing plan or
agreement to any such employees or directors, or become a party to,
amend or commit itself to or fund or otherwise establish any trust or
account related to any Employee Plan (as defined in Section 3.1(p)),
with or for the benefit of any employee, other than general increases in
compensation in the ordinary course of business consistent with past
practice not in excess of 6% in any 12-month period or any amendment
required by applicable law (provided that any such amendment shall
provide the least increase to cost permitted under such applicable law),
or voluntarily accelerate the vesting of any stock options or other
compensation or benefit;

(f) (i) other than in the ordinary course of business
consistent with past practice in individual amounts not to exceed
$100,000 or in securities transactions as provided in (f)(ii) below,
make any investment either by contributions to capital, property
transfers, or purchase of any property or assets of any

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person, provided that the Company shall make no acquisition of business
operations without the Acquiror's prior consent; or

(ii) other than purchases of direct obligations of the United
States of America with a remaining maturity at the time of purchase of
two years or less, purchase or acquire securities of any type; provided,
however, that, in the case of investment securities, the Company may
purchase (or permit a Company Subsidiary to purchase) investment
securities if, within one business day after the Company requests in
writing (which notice shall describe in detail the investment securities
to be purchased and the price thereof) that the Acquiror consent to the
making of any such purchase, the Acquiror has approved such request in
writing or has not responded in writing to such request;

(g) enter into or terminate any contract or agreement, or make
any change in any of its leases or contracts, other than with respect to
those involving aggregate payments of less than, or the provision of
goods or services with a market value of less than, $25,000;

(h) settle any claim, action or proceeding involving any
liability of the Company or any of its subsidiaries for money damages in
excess of $25,000 or material restrictions upon the operations of the
Company or any of its subsidiaries;

(i) except in the ordinary course of business and in amounts
less than $100,000, waive or release any material right or collateral or
cancel or compromise any extension of credit or other debt or claim;
provided, however, that the Company may take (or permit a Company
Subsidiary to take) any such action if, within two business days after
the Company requests in writing (which request shall include information
and analyses sufficient for Acquiror to assess the proposed action) that
the Acquiror consent to the taking of such action, the Acquiror has
approved such request in writing or has not responded in writing to such
request;

(j) make, renegotiate, renew, increase, extend or purchase any
loan, lease (credit equivalent), advance, credit enhancement or other
extension of credit, or make any commitment in respect of any of the
foregoing, except (i) unsecured loans, advances or commitments in
amounts less than $100,000 made in the ordinary course

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<PAGE> 56
of business consistent with past practice and made in conformity with
all applicable policies and procedures, (ii) secured loans, advances or
commitments in an amount less than $200,000 and (iii) loans or advances
as to which the Company has a legally binding obligation to make such
loan or advance as of the date hereof and a description of which has
been provided by the Company in writing to the Acquiror prior to the
execution of this Plan; provided, however, that the Company may take (or
permit a Company Subsidiary to take) any such action if, within 24 hours
after receiving a request from a person to take any such action that the
Company intends to act upon, the Company notifies the Acquiror in
writing of such request and within 24 hours after the Company requests
in writing (which request shall include information and analyses
sufficient for Acquiror to assess the proposed action) that the Acquiror
consent to the taking of such action, the Acquiror has approved such
request in writing or has not responded in writing to such request;

(k) except as contemplated by Section 4.2, change its method
of accounting as in effect at December 31, 1995, except as required by
changes in generally accepted accounting principles as concurred in by
the Company's independent auditors;

(l) enter into any new activities or lines of business, or
cease to conduct any activities or lines of business that it conducts
on the date hereof, or conduct any business activity not consistent with
past practice;

(m) amend its articles of incorporation or its by-laws; or

(n) agree to, or make any commitment to, take any of the
actions prohibited by this Section 2.2.

SECTION 2.3. Cooperation. The Company shall, and the Company
shall cause the Company Subsidiary Holding Company and the Company Bank to,
cooperate with Acquiror and Merger Sub in completing the transactions
contemplated hereby and shall not take, cause to be taken or agree or make any
commitment to take any action: (i) that would cause any of the representations
or warranties of it that are set forth in Article III hereof not to be true and
correct, or (ii) that is inconsistent with or prohibited by Section 2.1 or
Section 2.2.

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<PAGE> 57
ARTICLE III. REPRESENTATIONS AND WARRANTIES

SECTION 3.1. Representations and Warranties of the Company. The
Company represents and warrants to the Acquiror and Merger Sub, that, except as
specifically disclosed in a letter of the Company delivered to the Acquiror
prior to the date hereof (and making specific reference to the Section of this
Plan for which an exception is taken):

(a) Recitals True. The facts set forth in the Recitals of this
Plan with respect to the Company are true and correct.

(b) Capital Stock. All outstanding shares of capital stock of
the Company, the Company Subsidiary Holding Company and the Company Bank
have been duly authorized and validly issued, are fully paid and non-
assessable and are not subject to any preemptive rights.

(c) Due Organization. C.S.B.C.C., Inc. (the "Company
Subsidiary Holding Company") is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
Citizens State Bank (the "Company Bank") is a state chartered bank duly
organized, validly existing and in good standing under the laws of the
State of Texas. The Company Subsidiary Holding Company is a bank
holding company duly registered with the Federal Reserve Board under the
BHC Act. The Company Bank is a member of the Bank Insurance Fund
("BIF") of the Federal Deposit Insurance Corporation (the "FDIC") and
all of its deposits are subject to assessment by the BIF.

(d) Authority. Each of the Company and its subsidiaries has
the corporate power and authority, and is duly qualified in all
jurisdictions (except for such qualifications the absence of which, in
the aggregate, would not have a Material Adverse Effect on the Company)
where such qualification is required, to carry on its business as it is
now being conducted and to own all its properties and assets, and it has
all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry
on its business as it is now being conducted.

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<PAGE> 58
(e) Subsidiaries; Significant Investments. The only
subsidiaries of the Company are the Company Subsidiary Holding Company
and the Company Bank. All of the shares of capital stock of the Company
Subsidiary Holding Company are owned directly and of record by the
Company and all of the shares of capital stock of the Company Bank are
owned directly and of record by the Company Subsidiary Holding Company,
in each such case free and clear of all liens, claims, encumbrances and
restrictions on transfer and there are no Rights with respect to any
such capital stock. None of the Company or any of such subsidiaries
owns any equity securities, any security convertible or exchangeable
into an equity security or any rights to acquire any equity security,
except for shares of the Company Subsidiary Holding Company held by the
Company, shares of the Company Bank held by the Company Subsidiary
Holding Company, shares of capital stock of the Federal Home Loan Bank
of Dallas and shares of Texas Independent Bank.

(f) Shareholder Approvals. (i) Subject to the receipt of
required shareholder approval of this Plan, this Plan and the
transactions contemplated herein have been duly authorized by all
necessary corporate action of the Company. In addition, the Company has
received the written opinions of FinSer Corporation and Alex Sheshunoff
& Co. Investment Banking to the effect that the Merger Consideration to
be received by the shareholders of the Company is fair to such
shareholders from a financial point of view and has provided true and
complete copies of such opinions to the Acquiror. Subject to receipt of
(A) such shareholder approval and (B) the required approvals, consents
or waivers of governmental authorities referred to in Section 5.1(b),
this Plan is a valid and binding agreement of the Company enforceable
against it in accordance with its terms, subject as to enforcement to
applicable bankruptcy, insolvency, receivership, conservatorship,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.

(ii) The affirmative vote of two thirds of the
outstanding shares of Company Common Stock entitled to vote on this Plan
is the only shareholder vote required for approval of the Plan and
consummation of the Merger and the other transactions contemplated
hereby.

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<PAGE> 59
(g) No Violations. The execution, delivery and performance of
this Plan by the Company do not, and the consummation of the
transactions contemplated hereby or thereby by the Company, the Company
Subsidiary Holding Company and the Company Bank will not, constitute (i)
a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or
license to which the Company or any of its subsidiaries (or any of their
respective properties) is subject, or enable any person to enjoin the
Merger or the other transactions contemplated hereby, (ii) a breach or
violation of, or a default under, the articles of incorporation or
by-laws or similar organizational documents of the Company or any
subsidiary of the Company or (iii) a breach or violation of, or a
default under (or an event which with due notice or lapse of time or
both would constitute a default under), or result in the termination of,
accelerate the performance required by, or result in the creation of any
lien, pledge, security interest, charge or other encumbrance upon any of
the properties or assets of the Company or any subsidiary of the Company
under, any of the terms, conditions or provisions of any note, bond,
indenture, deed of trust, loan agreement or other agreement, instrument
or obligation to which the Company or any subsidiary of the Company is a
party, or to which any of their respective properties or assets may be
bound or affected; and the consummation of the transactions contemplated
hereby will not require any approval, consent or waiver under any such
law, rule, regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party to any
such agreement, indenture or instrument, other than (i) the required
approvals, consents and waivers of governmental authorities referred to
in Section 5.1(b), (ii) the approval of the shareholders of the Company
referred to in Section 3.1(f) and (iii) such approvals, consents or
waivers as are required under federal securities laws in connection with
the transactions contemplated by this Plan.

(h) Reports. (i) As of their respective dates, neither the
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995, nor any other document filed by the Company
subsequent to December 31, 1995 under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Securities
Exchange Act"), each in the form (including exhibits) filed with the
Securities and Exchange Commission (the "SEC") (collectively, the

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<PAGE> 60
"Reports"), contained or will contain any untrue statement of a material
fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
Each of the consolidated balance sheets contained or incorporated by
reference in the Reports (including in each case any related notes and
schedules) fairly presented in all material respects the financial
position of the entity or entities to which it relates as of its date
and each of the consolidated statements of income, consolidated
statements of shareholders' equity and consolidated statement of cash
flows contained or incorporated by reference in the Reports (including
in each case any related notes and schedules) fairly presented in all
material respects the results of operations, shareholders' equity and
cash flows, as the case may be, of the entity or entities to which it
relates for the periods set forth therein (subject, in the case of
unaudited interim statements, to normal year-end audit adjustments that
are not material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein.

(ii) The Company and each of its subsidiaries have each
timely filed all reports, registrations and statements, together with
any amendments required to be made with respect thereto, if any, that
they were required to file since December 31, 1993 with (i) the SEC,
(ii) the Federal Reserve Board, (iii) the FDIC, (iv) the BIF, (v) any
state banking commission or other regulatory authority (each, a "State
Regulator") (such entities collectively, the "Regulatory Agencies"), and
(vi) the National Association of Securities Dealers, Inc. and any other
self-regulatory organization (an "SRO"), and all other material reports
and statements required to be filed by them since December 31, 1993,
including, without limitation, any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States,
the Federal Reserve Board, the FDIC, the BIF, any State Regulator or any
SRO, and have paid all fees and assessments due and payable in
connection therewith.

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<PAGE> 61
(i) Absence of Undisclosed Liabilities and Certain Changes or
Events. Since December 31, 1995, the Company and its subsidiaries have
not incurred any material liability, except in the ordinary course of
their business consistent with past practice. Since June 30, 1996,
there has not been any change in the condition (financial or other),
properties, business, results of operations or prospects of the Company
or its subsidiaries which, individually or in the aggregate, has had, or
is reasonably likely to have, a Material Adverse Effect on the Company
(other than changes (i) in banking laws or regulations, or
interpretations thereof, that affect the banking industry generally,
(ii) in the general level of interest rates, (iii) in GAAP, or (iv)
which would reasonably be expected to occur as a consequence of the
Merger, including, without limitation, the consequences of employee
resignations, employee relations difficulties and deposit run-offs).

(j) Guarantees; Suretyships; Contingent Liabilities. The
letter referred to in the introduction to Section 3.1 lists and briefly
describes all guarantees, matters of suretyship and similar contingent
liabilities, other than loan commitments, of the Company and its
subsidiaries.

(k) Taxes. All federal, state, local, and foreign tax returns
required to be filed by or on behalf of the Company or any of its
subsidiaries have been timely filed or requests for extensions have been
timely filed and any such extension shall have been granted and not have
expired, and all such filed returns are complete and accurate in all
material respects. All taxes shown on such returns have been paid in
full or adequate provision has been made for any such taxes on the
Company's balance sheet (in accordance with generally accepted
accounting principles). There is no audit examination, deficiency, or
refund litigation with respect to any taxes of the Company or any of its
subsidiaries. All taxes, interest, additions, and penalties due with
respect to completed and settled examinations or concluded litigation
relating to it have been paid in full or adequate provision has been
made for any such taxes on the Company's balance sheet (in accordance
with generally accepted accounting principles). Neither the Company nor
any of its subsidiaries has executed an extension or waiver of any
statute of limitations on the assessment or collection of any tax due
that is currently in effect. For purposes of this

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<PAGE> 62
paragraph (k), "taxes" includes all federal, state, local or foreign
income, gross receipts, windfall profits, severance, property,
production, sales, use, license, excise, franchise, employment,
withholding or similar taxes imposed on the income, properties or
operations of the Company of any of its subsidiaries, together with any
interest additions or penalties with respect thereto and any interest in
respect of such additions or penalties.

(l) Absence of Claims. As of the date hereof and except as
disclosed in the letter referred to in the introduction to Section 3.1,
there is no pending litigation, controversy, claim, action or proceeding
against the Company or any of its subsidiaries before any court or
governmental agency, and, to the best of the Company's knowledge after
reasonable inquiry, no such litigation, proceeding, controversy, claim
or action has been threatened or is contemplated. As of the Effective
Time and except as disclosed in the letter referred to in the
introduction to Section 3.1, there is no pending litigation,
controversy, claim, action or proceeding against the Company or any of
its subsidiaries before any court or governmental agency, which is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company or to hinder or delay consummation of the
transactions contemplated hereby and, to the best of the Company's
knowledge after reasonable inquiry, no such litigation, proceeding,
controversy, claim or action has been threatened or is contemplated.

(m) Absence of Regulatory Actions. Neither the Company nor
any of its subsidiaries is a party to any cease and desist order,
written agreement or memorandum of understanding with, or a party to any
commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory
letter from, or has adopted any board resolutions at the request of,
federal or state governmental authorities charged with the supervision
or regulation of depository institutions or depositary institution
holding companies or engaged in the insurance of bank and/or savings and
loan deposits ("Government Regulators") nor has it been advised by any
Government Regulator that it is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such
order, directive, written agreement, memorandum of understanding,
extraordinary supervisory letter, commitment letter, board resolutions
or similar undertaking.

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(n) Agreements. (i) Except for this Plan and arrangements
made in the ordinary course of business, the Company and its
subsidiaries are not bound by any material contract (as defined in Item
601(b)(10) of Regulation S-K) to be performed after the date hereof that
has not been filed with or incorporated by reference in the Reports.
Except as disclosed in the Reports filed prior to the date of this Plan,
neither the Company nor any of its subsidiaries is a party to an oral or
written (A) consulting agreement (other than data processing, software
programming and licensing contracts entered into in the ordinary course
of business) not terminable on 30 days' or less notice involving the
payment of more than $25,000 per annum, in the case of any such
agreement with an individual, or $50,000 per annum, in the case of any
other such agreement, (B) agreement with any executive officer or other
key employee of the Company or any of its subsidiaries the benefits of
which are contingent, or the terms of which are materially altered, upon
the occurrence of a transaction involving the Company or any of its
subsidiaries of the nature contemplated by this Plan and which provides
for the payment of in excess of $50,000, (C) agreement with respect to
any executive officer of the Company or any of its subsidiaries
providing any term of employment or compensation guarantee extending for
a period longer than one year and for the payment of in excess of
$50,000 per annum, (D) agreement or plan, including any stock option
plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Plan or the value of any
of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Plan or (E) agreement containing
covenants that limit the ability of the Company or any of its
subsidiaries to compete in any line of business or with any person, or
that involve any restriction on the geographic area in which, or method
by which, the Company (including any successor thereof) or any of its
subsidiaries may carry on its business (other than as may be required by
law or any regulatory agency).

(ii) Neither the Company nor any of its subsidiaries is
in default under or in violation of any provision of any note, bond,
indenture, mortgage, deed of trust, loan agreement or other agreement to
which it

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<PAGE> 64
is a party or by which it is bound or to which any of its respective
properties or assets is subject.

(o) Labor Matters. Neither the Company or any of its
subsidiaries is a party to, or is bound by, any collective bargaining
agreement, contract, or other agreement or understanding with a labor
union or labor organization, nor is the Company or any of its
subsidiaries the subject of any proceeding asserting that it has
committed an unfair labor practice or seeking to compel it or any such
subsidiary to bargain with any labor organization as to wages and
conditions of employment, nor is there any strike, other labor dispute
or organizational effort involving the Company or any of its
subsidiaries pending or threatened.

(p) Employee Benefit Plans. The letter referred to in the
introduction to Section 3.1 contains a complete and correct list as of
the date hereof of the names and current annual salary, bonus,
commission and perquisite arrangements, written or unwritten, for each
director, officer and employee of the Company and each of its
subsidiaries. The letter referred to in the introduction to Section 3.1
also contains a complete list of all pension, retirement, stock option,
stock purchase, stock ownership, savings, stock appreciation right,
profit sharing, deferred compensation, consulting, bonus, group
insurance, severance and other benefit plans, contracts, agreements,
arrangements, including, but not limited to, "employee benefit plans",
as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), incentive and welfare policies,
contracts, plans and arrangements and all trust agreements related
thereto in respect to any present or former directors, officers, or
other employees of the Company or any of its subsidiaries (hereinafter
referred to collectively as the "Employee Plans"). (i) All of the
Employee Plans comply in all material respects with all applicable
requirements of ERISA, the Code and other applicable laws; neither the
Company nor any of its subsidiaries has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) with respect to any Employee Plan which could subject the Company
or any subsidiary to a material tax or penalty under Section 4975 of the
Code or Section 502(i) of ERISA; and all contributions required to be
made under the terms of any Employee Plan have been timely made or have
been reflected on the Company's balance sheet; (ii) no liability to the
Pension Benefit Guaranty Corporation (the "PBGC") has

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<PAGE> 65
been or is expected by the Company or any of its subsidiaries to be
incurred with respect to any Employee Plan which is subject to Title IV
of ERISA (a "Pension Plan"), or with respect to any "single-employer
plan" (as defined in Section 4001(a)(15) of ERISA) currently or formerly
maintained by the Company or any entity (an "ERISA Affiliate") which is
considered one employer with the Company under Section 4001 of ERISA or
Section 414 of the Code (an "ERISA Affiliate Plan"); and no proceedings
have been instituted to terminate any Pension Plan or ERISA Affiliate
Plan and no condition exists that presents a material risk of the
institution of such proceedings; (iii) no Pension Plan or ERISA
Affiliate Plan had an "accumulated funding deficiency" (as defined in
Section 302 of ERISA (whether or not waived)) as of the last day of the
end of the most recent plan year ending prior to the date hereof; the
fair market value of the assets of each Pension Plan and ERISA Affiliate
Plan exceeds the present value of the "benefit liabilities" (as defined
in Section 4001(a)(16) of ERISA) under such Pension Plan or ERISA
Affiliate Plan as of the end of the most recent plan year with respect
to the respective Pension Plan or ERISA Affiliate Plan ending prior to
the date hereof, calculated on the basis of the actuarial assumptions
used in the most recent actuarial valuation for such Pension Plan or
ERISA Affiliate Plan prior to the date hereof, and there has been no
material change in the financial condition of any such Pension Plan or
ERISA Affiliate Plan since the last day of the most recent plan year;
and no notice of a "reportable event" (as defined in Section 4043 of
ERISA) for which the 30-day reporting requirement has not been waived
has been required to be filed for any Pension Plan or ERISA Affiliate
Plan within the 12-month period ending on the date hereof; (iv) neither
the Company nor any subsidiary of the Company has provided or is
required to provide, security to any Pension Plan or to any ERISA
Affiliate Plan pursuant to Section 401(a)(29) of the Code; (v) neither
the Company, its subsidiaries, nor any ERISA Affiliate has contributed
to any "multiemployer plan", as defined in Section 3(37) of ERISA, on or
after September 26, 1980; (vi) each Employee Plan of the Company or any
of its subsidiaries which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) has requested within the applicable
remedial amendment period or has received a favorable determination
letter from the Internal Revenue Service deeming such plan (a "Qualified
Plan") to be qualified under Section 401(a) of the Code; and neither the
Company nor its subsidi-

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<PAGE> 66
aries are aware of any circumstances likely to result in revocation of
any such favorable determination letter; (vii) each Qualified Plan which
is an "employee stock ownership plan" (as defined in Section 4975(e)(7)
of the Code) has satisfied all of the applicable requirements of
Sections 409 and 4975(e)(7) of the Code and the regulations thereunder;
all Employee Plans covering foreign participants comply in all material
respects with applicable local law, and there are no material unfunded
liabilities with respect to any Employee Plan which covers foreign
employees; (viii) there is no pending or, to the Company's knowledge,
threatened litigation, administrative action or proceeding relating to
any Employee Plan; (ix) there has been no announcement or commitment by
the Company or any subsidiary of the Company to create an additional
Employee Plan, or to amend an Employee Plan except for amendments
required by applicable law which do not increase the cost of such
Employee Plan; and the Company and its subsidiaries do not have any
obligations for retiree health and life benefits under any Employee Plan
except as set forth in the letter referred to in the introduction to
Section 3.1, and there are no such Employee Plans that cannot be amended
or terminated without incurring any liability thereunder; (x) with
respect to the Company or any of its subsidiaries, except as
specifically identified in the letter referred to in the introduction to
Section 3.1, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in
any payment or series of payments by the Company or any subsidiary of
the Company to any person which is an "excess parachute payment" (as
defined in Section 280G of the Code) under any Employee Plan, increase
or secure (by way of a trust or other vehicle) any benefits payable
under any Employee Plan, or accelerate the time of payment or vesting of
any such benefit, and (xi) with respect to each Employee Plan, the
Company has supplied to the Acquiror a true and correct copy, if
applicable, of (A) the two most recent annual reports on the applicable
form of the Form 5500 series filed with the Internal Revenue Service
(the "IRS"), (B) such Employee Plan, including amendments thereto, (C)
each trust agreement and insurance contract relating to such Employee
Plan, including amendments thereto, (D) the most recent summary plan
description for such Employee Plan, including amendments thereto, if the
Employee Plan is subject to Title I of ERISA, (E) the most recent
actuarial report or valuation if such Employee Plan is a Pension Plan,
(F) the most recent

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<PAGE> 67
determination letter issued by the IRS if such Employee Plan is a
Qualified Plan and (G) the most recent financial statements and
auditor's report.

(q) Real Property. (i) The letter referred to in the
introduction to Section 3.1 contains a complete and correct list of (A)
all real property or premises owned on the date hereof, in whole or in
part by the Company or any of its subsidiaries and all indebtedness
secured by any encumbrance thereon, and (B) all real property or
premises leased in whole or in part by the Company or any of its
subsidiaries, together with a list of all applicable leases, the name of
the lessor and any requirement of consent of the lessor to the
transactions contemplated herein. None of such premises or properties
have been condemned or otherwise taken by any public authority and no
condemnation or taking is threatened or contemplated and none thereof is
subject to any claim, contract or law which might affect its use or
value for the purposes now made of it. None of the premises or
properties of the Company or any of its subsidiaries is subject to any
current or potential interests of third parties or other restrictions or
limitations that would impair or be inconsistent with the current use of
such property by the Company or any of its subsidiaries.

(ii) Each of the leases referred to in such letter is valid and
existing and in full force and effect, and no party thereto is in
default and no notice of a claim of default by any party has been
delivered to the Company or any of its subsidiaries or is now pending,
and there does not exist any event that with notice or the passing of
time, or both, would constitute a default or excuse performance by any
party thereto, provided that with respect to matters relating to any
party other than the Company the foregoing representation is based on
the best knowledge of the Company.

(r) Title. The Company and each of its subsidiaries has good
title to its properties and assets (other than (i) property as to which
it is lessee and (ii) real estate owned as a result of foreclosure,
transfer in lieu of foreclosure or other transfer in satisfaction of a
debtor's obligation previously contracted).

(s) Knowledge as to Conditions. As of the date hereof, the
Company knows of no reason why the approvals, consents and waivers of
governmental

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authorities referred to in Section 5.1(b) should not be obtained without
the imposition of any condition of the type referred to in the provisos
thereto.

(t) Compliance with Laws. Since December 31, 1993, the
Company and each of its subsidiaries have complied in all material
respects with all applicable laws. The Company and each of its
subsidiaries has all permits, licenses, certificates of authority,
orders and approvals of, and has made all filings, applications and
registrations with, federal, state, local and foreign governmental or
regulatory bodies that are required in order to permit it to carry on
its business as it is presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and
effect, and, to the best knowledge of the Company, no suspension or
cancellation of any of them is threatened.

(u) Fees. Other than in respect of financial advisory
services performed for the Company by FinSer Corporation and Alex
Sheshunoff & Company Investment Banking, in amounts and pursuant to
agreements previously disclosed to the Acquiror, neither the Company nor
any of its subsidiaries, nor any of their respective officers,
directors, employees or agents, has employed any broker or finder or
incurred any liability for any financial advisory fees, brokerage fees,
commissions, or finder's fees, and no broker or finder has acted
directly or indirectly for the Company or any subsidiary of the Company,
in connection with the Plan or the transactions contemplated hereby.

(v) Environmental Matters. (i) With respect to the Company
and each of its subsidiaries:

(A) Each of the Company and its subsidiaries, the
Participation Facilities, and the Loan Properties (each as
defined below) are, and have been, in substantial compliance with
all Environmental Laws (as defined below);

(B) Except as disclosed in the letter referred to in the
introduction to Section 3.1, there is no suit, claim, action,
demand, executive or administrative order, directive or
proceeding pending or, to the best of the Company's knowledge,
threatened, before any court, governmental agency or board or
other forum against it or any of its subsidiaries or any
Participation Facility (x) for alleged

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noncompliance (including by any predecessor) with, or liability
under, any Environmental Law or (y) relating to the presence of
or release into the environment of any Hazardous Material (as
defined below) or oil, whether or not occurring at or on a site
owned, leased or operated by it or any of its subsidiaries or any
Participation Facility;

(C) There is no suit, claim, action, demand, executive or
administrative order, directive or proceeding pending or, to the
best of the Company's knowledge, threatened, before any court,
governmental agency or board or other forum relating to or
against any Loan Property (or the Company or any of its
subsidiaries in respect of such Loan Property) (x) relating to
alleged noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (y) relating to the
presence of or release into the environment of any Hazardous
Material or oil whether or not occurring at or on a site owned,
leased or operated by a Loan Property;

(D) To the best of the Company's knowledge, there is no
reasonable basis for any suit, claim, action, demand, executive
or administrative order, directive or proceeding of a type
described in Section 3.1(s)(i)(B) or (C);

(E) To the best of the Company's knowledge, and except as
disclosed in the letter referred to in the introduction to
Section 3.1, the properties currently or formerly owned or
operated by the Company or any of its subsidiaries (including,
without limitation, soil, groundwater or surface water on, under
or adjacent to the properties, and buildings thereon) do not
contain any Hazardous Material (as defined below) other than as
permitted under applicable Environmental Law (provided, however,
that with respect to properties formerly owned or operated by the
Company or any of its subsidiaries, such representation is
limited to the period the Company or any such subsidiary owned or
operated such properties);

(F) To the best of the Company's knowledge, none of it or
any of its subsidiaries has received any notice, demand letter,
executive or administrative order, directive or request for

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information from any Federal, state, local or foreign
governmental entity or any third party indicating that it may be
in violation of, or liable under, any Environmental Law;

(G) Except as disclosed in the letter referred to in the
introduction to Section 3.1, there are no underground storage
tanks on, in or under any properties or Participation Facility
and no underground storage tanks have been closed or removed from
any properties or Participation Facility which are or have been
in the ownership of it or any of its subsidiaries;

(H) During the period of (l) its or any of its
subsidiaries' ownership or operation of any of their respective
current properties, (m) its or any of its subsidiaries'
participation in the management of any Participation Facility, or
(n) its or any of its subsidiaries' holding of a security
interest in a Loan Property, there has been no contamination by
or release of Hazardous Material or oil in, on, under or
affecting such properties, except in compliance with, and as
would not result in liability under, any applicable Environmental
Law. To the best of the Company's knowledge, prior to the period
of (x) its or any of its subsidiaries' ownership or operation of
any of their respective current properties, (y) its or any of its
subsidiaries' participation in the management of any
Participation Facility, or (z) its or any of its subsidiaries'
holding of a security interest in a Loan Property, there was no
contamination by or release of Hazardous Material or oil in, on,
under or affecting any such property, Participation Facility or
Loan Property, except in compliance with, and as would not result
in liability under, any applicable Environmental Law; and

(I) Except as disclosed in the letter referred to in the
introduction to Section 3.1, none of it or its subsidiaries
participates in the management of a Loan Property or
Participation Facility to an extent that it would be deemed an
"owner or operator" as defined in 42 U.S.C. Section 9601 or any
similar Environmental Law.

(ii) The following definitions apply for purposes of this
Section 3.1(s): (w) "Loan Property" means any property in which the
applicable party (or a

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subsidiary of it) holds a security interest, and, where required by the
context, includes the owner or operator of such property, but only with
respect to such property; (x) "Participation Facility" means any
facility in which the applicable party (or a subsidiary of it)
participates in the management (including all property held as trustee
or in any other fiduciary or agency capacity) and, where required by the
context, includes the owner or operator of such property; (y)
"Environmental Law" means (i) any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization,
approval, consent, order, executive or administrative order, judgment,
decree, injunction, requirement or agreement with any governmental
entity, (A) relating to the protection, preservation or restoration of
the environment (which includes, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, structures, soil,
surface land, subsurface land, plant and animal life or any other
natural resource), or to human health or safety, or (B) the exposure to,
or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of,
Hazardous Materials, in each case as amended and as now in effect. The
term Environmental Law includes, without limitation, the Federal
Comprehensive Environmental Response Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the federal Resource Conservation and Recovery
Act of 1976 (including the Hazardous and Solid Waste Amendments
thereto), the Federal Solid Waste Disposal Act and the federal Toxic
Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, the Federal Occupational Safety and Health Act of 1970,
the Federal Hazardous Materials Transportation Act, or any so-called
"Superfund" or "Superlien" law, each as amended and as now in effect,
and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence,
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result
of, the presence of or exposure to any Hazardous Material; and (z)
"Hazardous Material" means any substance in any concentration which is
or could be detrimental to human health or safety or to the environment,
currently listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under

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any Environmental Law, whether by type or by quantity, including any
substance containing any such substance as a component. Hazardous
Material includes, without limitation, any toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste,
special waste, industrial substance, oil or petroleum or any derivative
or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead
and polychlorinated biphenyl.

(w) Allowance. The allowance for possible loan losses shown
on the Company's unaudited balance sheet as of June 30, 1996 was, and
the allowance for possible loan losses shown on the balance sheets in
its Reports for periods ending after the date of this Plan will be,
adequate, as of the date thereof, under generally accepted accounting
principles applicable to banks and bank holding companies. The Company
has disclosed to the Acquiror in writing prior to the date hereof the
amounts of all loans, leases, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets of the
Company and its subsidiaries that have been classified as "Other Assets
Specially Mentioned", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets" or words of similar import. The
Other Real Estate Owned ("OREO") included in any non-performing assets
of the Company or any of its subsidiaries is carried net of reserves at
the lower of cost or market value based on independent appraisals
consistent with applicable regulatory requirements.

(x) Antitakeover Provisions Inapplicable. The provisions of
Article 6 of the Company's articles of incorporation requiring an 80%
shareholder vote do not and will not apply to this Plan or the Merger or
any amendment or revision thereto or the transactions contemplated
hereby or thereby. The Company has taken all actions required to exempt
the Plan and the Merger and any amendment or revision thereto and the
transactions contemplated hereby or thereby from any applicable state
antitakeover laws.

(y) Material Interests of Certain Persons. Except as
disclosed in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995, no officer or director of the Company, or any
"associate" (as such term is defined in Rule 12b-2 under the Securities
Exchange Act) of any such officer or director, has any material interest
in any material

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contract or property (real or personal), tangible or intangible, used in
or pertaining to the business of the Company or any of its subsidiaries.

(z) Insurance. The Company and its subsidiaries are presently
insured, and since December 31, 1993, have been insured, for reasonable
amounts with financially sound and reputable insurance companies,
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. All of
the insurance policies and bonds maintained by the Company and its
subsidiaries are in full force and effect, the Company and its
subsidiaries are not in default thereunder and all material claims
thereunder have been filed in due and timely fashion. Since December
31, 1993, no claim by the Company or any of its subsidiaries on or in
respect of an insurance policy or bond has been declined or refused by
the relevant insurer or insurers. In the best judgment of the Company's
management, such insurance coverage is adequate and will be available in
the future under terms and conditions substantially similar to those in
effect on the date hereof. Between the date hereof and the Effective
Time, the Company and its subsidiaries will maintain the levels of
insurance coverage in effect on the date hereof and will submit all
potential claims existing prior to the Effective Time to its insurance
carrier on or before the Effective Time. The letter referred to in the
introduction to Section 3.1 lists all insurance policies maintained by
or for the benefit of the Company, of its subsidiaries or its directors,
officers, employees or agents, specifying the (i) type of policy, (ii)
policy limits and (iii) self insurance amounts.

(aa) Investment Securities. Except for pledges to secure public
and trust deposits and reverse repurchase agreements entered into in
arm's-length transactions pursuant to normal commercial terms and
conditions and other pledges required by law, none of the investments
reflected in the consolidated balance sheet of the Company included in
the Company's Report on Form 10-QSB for the quarter ended June 30, 1996,
and none of the material investments made by it or any of its
subsidiaries since December 31, 1995, is subject to any restriction
(contractual, statutory or otherwise) that would materially impair the
ability of the entity holding such investment freely to dispose of such
investment at any time.

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(bb) Derivatives. Neither the Company nor any of its
subsidiaries is currently a party to any interest rate swap, cap, floor,
option agreement, other interest rate risk management arrangement or
agreement or derivative-type security or derivative arrangement or
agreement.

(cc) Registration Obligations. Neither the Company nor any of
its subsidiaries is under any obligation, contingent or otherwise, to
register any of its securities under the Securities Act of 1933, as
amended.

(dd) Books and Records. The books and records of the Company
and its subsidiaries have been, and are being, maintained in accordance
with applicable legal and accounting requirements and reflect in all
material respects the substance of events and transactions that should
be included therein.

(ee) Corporate Documents. The Company has delivered to the
Acquiror true and complete copies of (i) its amended articles of
incorporation and amended by-laws and (ii) the charter and by-laws of
the Company Subsidiary Holding Company and the Company Bank.

(ff) Company Action. The Board of Directors of the Company has
adopted resolutions recommending that this Plan be approved by the
shareholders of the Company and directing that this Plan be submitted
for consideration by the Company's shareholders at the Company Meeting.

(gg) Indemnification. Neither the Company nor any Company
Subsidiary is a party to any indemnification agreement with any of its
present or future directors, officers, employees, individual agents or
other individuals who serve or served in any other capacity with any
other enterprise at the request of the Company or a subsidiary of the
Company (a "Covered Person"), and to the best knowledge of the Company,
there are no claims for which any Covered Person would be entitled to
indemnification under Section 4.7 if such provisions were deemed to be
in effect.

(hh) Loans. Each loan, other than loans secured by an
owner-occupied one-to-four family residential property and other loans
the aggregate amount of which does not exceed $500,000, reflected as an
asset on the Company's balance sheet as of December 31, 1995 and

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each balance sheet date subsequent thereto (i) is evidenced by notes,
agreements or other evidences of indebtedness which are true, genuine
and what they purport to be, (ii) is the legal, valid and binding
obligation of the obligor named therein, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles, and (iii) to the knowledge of
the Company and Company Bank, will not be subject to any defenses which
may be asserted against Company Bank. All loans and extensions of
credit that have been made by Company Bank and that are subject to
Sections 22(h), 23A and 23B of the Federal Reserve Act comply therewith.

(ii) Fair Lending; Community Reinvestment Act. As of the date
hereof, with the exception of routine investigation of consumer
complaints, neither the Company nor any of its subsidiaries has been
advised that it is or may be in violation of the Equal Credit
Opportunity Act or the Fair Housing Act or any similar federal or state
statute. The Company Bank received a CRA rating of "outstanding" in its
most recent CRA examination.

(jj) No Omission of Material Fact. No representation or
warranty by the Company in this Plan or under any documents,
instruments, certificates or schedules delivered or to be delivered
pursuant hereto or in connection with the transactions contemplated
hereby contains any untrue statement of material fact, or omits to state
a material fact necessary to make the statements or facts contained
herein or therein not misleading. None of the information regarding the
Company or any of its subsidiaries or the transactions contemplated
hereby supplied or to be supplied by the Company or any of its
subsidiaries for inclusion in any documents or filings to be filed with
any regulatory authority in connection with the transactions
contemplated hereby will contain any untrue statement of material fact,
or omit to state a material fact necessary to make the statements or
facts contained therein not misleading.

(kk) Rights Agreement. (i) The Company has duly adopted an
amendment to the Rights Agreement in the form of Annex 2, as a result of
which neither the Acquiror nor Merger Sub nor any affiliate or associate
will become an "Acquiring Person" and no "Distribution Date" (as such
terms are defined in the Rights

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Agreement) will occur, and the rights issued under the Rights Agreement
will not become separable, distributable, unredeemable or exercisable as
a result of the approval, execution or delivery of this Plan or the
consummation of the transactions contemplated hereby or at any time
thereafter.

(ii) The board of directors of the Company has irrevocably
redeemed all of the rights issued and outstanding under the Rights
Agreement for 1c. per right, such redemption to be effective immediately
prior to the Effective Time, and such redemption price shall be payable
as part of the Merger Consideration as set forth in Article I.

SECTION 3.2. Representations and Warranties of the Acquiror and
Merger Sub. The Acquiror represents and warrants to the Company that:

(a) Recitals True. The facts set forth in the Recitals of this
Plan with respect to the Acquiror and Merger Sub are true and correct.

(b) Corporate Organization and Qualification. The Acquiror
Subsidiary Holding Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
The Acquiror Bank is a national banking association duly organized,
validly existing and in good standing under the laws of the United
States of America. Each of the Acquiror, Merger Sub, the Acquiror
Subsidiary Holding Company and the Acquiror Bank is in good standing as
a foreign corporation in each jurisdiction where the properties owned,
leased or operated, or the business conducted by it, requires such
qualification, except for such failure to qualify or be in such good
standing which, when taken together with all other such failures, would
not have a Material Adverse Effect on the Acquiror. Each of the
Acquiror, Merger Sub, the Acquiror Subsidiary Holding Company and the
Acquiror Bank has the requisite corporate and other power and authority
(including all federal, state, local and foreign government
authorizations) to carry on its respective businesses as they are now
being conducted and to own or lease their respective properties and
assets. The Acquiror owns all of the shares of capital stock of Merger
Sub.

(c) Corporate Authority. Each of the Acquiror and Merger Sub
has the requisite corporate power and authority and has taken all
corporate action necessary

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in order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a valid and binding
agreement of the Acquiror and Merger Sub enforceable against the
Acquiror and Merger Sub in accordance with its terms. This Plan and the
transactions contemplated hereby do not require the approval of the
Acquiror's shareholders.

(d) No Violations. The execution, delivery and performance of
this Agreement by the Acquiror and Merger Sub do not, and the
consummation of the transactions contemplated hereby by the Acquiror and
Merger Sub will not, constitute (i) a breach or violation of, or a
default under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of the Acquiror or Merger Sub or to which the Acquiror or
Merger Sub (or any of their respective properties) is subject, which
breach, violation or default would have a Material Adverse Effect on the
Acquiror, or enable any person to enjoin the Merger, the Second Merger,
the Subsidiary Holding Company Merger or the Bank Merger, (ii) a breach
or violation of, or a default under, the articles of incorporation or
by-laws of the Acquiror or Merger Sub or (iii) a breach or violation of,
or a default under (or an event which with due notice or lapse of time
or both would constitute a default under), or result in the termination
of, accelerate the performance required by, or result in the creation of
any lien, pledge, security interest, charge or other encumbrance upon
any of the properties or assets of the Acquiror or Merger Sub under, any
of the terms, conditions or provisions of any note, bond, indenture,
deed of trust, loan agreement or other agreement, instrument or
obligation to which the Acquiror or Merger Sub is a party, or to which
any of their respective properties or assets may be bound or affected,
except for any of the foregoing that, individually or in the aggregate,
would not have a Material Adverse Effect on the Acquiror; and the
consummation of the transactions contemplated hereby will not require
any approval, consent or waiver under any such law, rule, regulation,
judgment, decree, order, governmental permit or license or the approval,
consent or waiver of any other party to any such agreement, indenture or
instrument, other than (i) the required approvals, consents and waivers
of governmental authorities referred to in Section 5.1(b), (ii) any such
approval, consent or waiver that already has been obtained, and (iii)
any other approvals,

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consents or waivers the absence of which, individually or in the
aggregate, would not result in a Material Adverse Effect on the Acquiror
or enable any person to enjoin the Merger, the Second Company Merger,
the Subsidiary Holding Company Merger or the Bank Merger.

(e) Access to Funds. The Acquiror has, or on the Closing Date
will have, all funds necessary to consummate the Merger and pay the
aggregate Merger Consideration.

(f) Knowledge as to Conditions. As of the date hereto, the
Acquiror knows of no reason why the approvals, consents and waivers of
governmental authorities referred to in Section 5.1(b) should not be
obtained without the imposition of any condition of the type referred to
in the provisos thereto.

(g) Fees. Neither the Acquiror nor any of its subsidiaries,
nor any of their respective officers, directors, employees or agents,
has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions, or finder's fees,
and no broker or finder has acted directly or indirectly for the
Acquiror or any subsidiary of the Acquiror, in connection with the Plan
or the transactions contemplated hereby.

ARTICLE IV. COVENANTS

SECTION 4.1. Acquisition Proposals. The Company agrees that
neither it nor any of its subsidiaries nor any of the respective officers and
directors of the Company or its subsidiaries shall, and the Company shall
direct and use its reasonable best efforts to cause its employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making of
any proposal or offer (including, without limitation, any proposal or offer to
shareholders of the Company) with respect to a merger, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, the Company or any of its subsidiaries (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or, except to the extent legally required for the discharge by the
board of directors of its fiduciary duties as advised in writing by such
board's counsel, engage in any negotiations concerning, or provide any
confidential

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information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. The Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing and
shall make all reasonable efforts to enforce any confidentiality agreements to
which it or any of its subsidiaries is a party. The Company will take the
necessary steps to inform the appropriate individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section 4.1.
The Company will notify the Acquiror immediately if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Company.

SECTION 4.2. Certain Policies of the Company. At the written
request of the Acquiror, the Company shall modify and change its loan,
litigation and real estate valuation policies and practices (including loan
classifications and levels of reserves) immediately prior to the Effective Time
so as to be consistent on a mutually satisfactory basis with those of the
Acquiror and generally accepted accounting principles. The Company's
representations, warranties and covenants contained in this Plan shall not be
deemed to be untrue or breached in any respect for any purpose as a consequence
of any modifications or changes undertaken solely on account of this Section
4.2.

SECTION 4.3. Employees. (a) Each person employed by the
Company or any of its subsidiaries prior to the Effective Time who remains an
employee of the Surviving Corporation or its subsidiaries following the
Effective Time (each a "Continued Employee"), shall be entitled, as an employee
of a subsidiary of the Acquiror, to participate in whatever employee benefit
plans or fringe benefit programs that may be in effect generally for employees
of Acquiror's subsidiaries from time to time (including Acquiror's 401(k)
savings plan, in which the Continued Employees shall be able to participate as
of the first day of the first month following the Effective Time) (all such
plans collectively, the "Acquiror's Plans"), if such Continued Employee shall
be eligible (or, with respect to discretionary Acquiror's Plans, selected) for
participation therein and otherwise shall not be participating in a similar
plan which continues to be maintained by the Surviving Corporation and its
subsidiaries. Continued Employees will be eligible to participate on the same
basis as similarly situated employees of Acquiror or Acquiror's subsidiaries.
All such

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participation shall be subject to such terms of such plans as may be in effect
from time to time.

(b) The Acquiror or Acquiror's subsidiaries shall, solely for
purposes of vesting and eligibility to participate in Acquiror's Plans,
recognize credit for each Continued Employee's term of service with the Company
and the Company's subsidiaries. Notwithstanding the preceding sentence, no
Continued Employee shall participate in any defined benefit pension plan
maintained by the Acquiror or its subsidiaries until such Continued Employee
has completed one year of service with Acquiror and its subsidiaries. The
Acquiror will waive all pre-existing condition limitations for Continued
Employees with respect to its health and dental plans.

(c) Acquiror shall use its reasonable best efforts to determine
the likely role of the individual employees of the Company and its subsidiaries
by November 15, 1996 and to communicate its determination to the Company by
such date. Thereafter, the Acquiror and the Company shall mutually agree on a
method for communicating such determinations to individual employees and shall
do so as promptly as practicable.

SECTION 4.4. Access and Information. Upon reasonable notice,
the Company shall (and shall cause its subsidiaries to) afford to the Acquiror
and its representatives (including, without limitation, directors, officers and
employees of the Acquiror and its affiliates, and counsel, accountants and
other advisors retained by the Acquiror and its affiliates) such access
(including, without limitation, for the purpose of conducting supplemental due
diligence reviews) during normal business hours throughout the period prior to
the Effective Time to the books, records (including, without limitation, loan
and credit files, tax returns and work papers of independent auditors),
properties, personnel and to such other information as the Acquiror may
reasonably request; provided, however, that no investigation pursuant to this
Section 4.4 shall affect or be deemed to modify any representation or warranty
made herein. The Acquiror will not, and will cause its representatives not to,
use any information obtained pursuant to this Section 4.4 for any purpose
unrelated to the consummation of the transactions contemplated by this Plan.
Subject to the requirements of law, the Acquiror will keep confidential, and
will cause its representatives to keep confidential, all information and
documents obtained pursuant to this Section 4.4 unless such information (i) was
already known to the Acquiror or an affiliate of the Acquiror prior to the date
of the confidentiality agreement

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between the Company and the Acquiror in effect prior to the date hereof, (ii)
becomes available to the Acquiror or an affiliate of the Acquiror from other
sources not known by such party to be bound by a confidentiality agreement,
(iii) is disclosed with the prior written approval of the Company or (iv) is or
becomes readily ascertainable from published information or trade sources. In
the event that this Plan is terminated or the transactions contemplated by this
Plan shall otherwise fail to be consummated, each party shall promptly cause
all copies of documents or extracts thereof containing information and data as
to another party hereto (or an affiliate of any party hereto) to be returned to
the party which furnished the same.

SECTION 4.5. Ancillary Transactions. At the request of the
Acquiror, the Company shall take, and shall cause each of its subsidiaries to
take, all actions reasonably necessary (including, without limitation, the
entering into of merger agreements and the filing of any necessary regulatory
applications) to facilitate the occurrence subsequent to the Effective Time of
(i) the merger of the Surviving Corporation and The New Galveston Company, a
Delaware corporation (the "Acquiror Subsidiary Holding Company"), (ii) the
merger of the Company Subsidiary Holding Company and the Acquiror Subsidiary
Holding Company, and (iii) the merger of the Company Bank and Frost National
Bank, a national banking association (the "Acquiror Bank"). The receipt of any
regulatory approvals required to consummate such transactions shall not be a
condition to the Acquiror's and Merger Sub's obligation to consummate the
Merger.

SECTION 4.6. Certain Filings, Consents and Arrangements. The
Acquiror, Merger Sub and the Company shall (a) as soon as practicable make any
filings and applications required to be filed in order to obtain all approvals,
consents and waivers of governmental authorities necessary or appropriate for
the consummation of the transactions contemplated hereby and shall use their
reasonable best efforts to cause the applications for the approvals described
in clauses (i) and (ii) of Section 5.1(b) to be initially filed on or before
October 31, 1996, (b) cooperate with one another (i) in promptly determining
what filings are required to be made or approvals, consents or waivers are
required to be obtained under any relevant federal, state or foreign law or
regulation and (ii) in promptly making any such filings, furnishing information
required in connection therewith and seeking timely to obtain any such
approvals, consents or waivers and (c) deliver to the other copies of the
publicly available

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portions of all such filings and applications promptly after they are filed.

SECTION 4.7. Indemnification; Directors' and Officers'
Insurance. (a) From and after the Effective Time through the sixth
anniversary of the Effective Date, the Acquiror agrees to indemnify and hold
harmless each present and former director and officer of the Company or any
subsidiary of the Company determined as of the Effective Time (the "Indemnified
Parties"), against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of matters existing or occurring at or prior to the Effective Time
(including with respect to this Plan or any of the transactions contemplated
hereby), whether asserted, claimed or arising prior to, at or after the
Effective Time, to the extent to which such Indemnified Parties were entitled
under Texas law and the Company's articles of incorporation or by-laws in
effect on the date hereof, and the Acquiror shall also advance expenses as
incurred to the extent permitted under Texas law and the Company's articles of
incorporation and by-laws.

(b) Any Indemnified Party wishing to claim indemnification under
Section 4.7(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall as promptly as possible notify the Acquiror thereof, but
the failure to so notify shall not relieve the Acquiror of any liability it may
have to such Indemnified Party if such failure does not materially prejudice
the indemnifying party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Acquiror shall have the right to assume the defense thereof and
the Acquiror shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Acquiror elects not to assume such defense or counsel for the Indemnified
Parties advises that there are issues which raise conflicts of interest between
the Acquiror and the Indemnified Parties, the Indemnified Parties may retain
counsel satisfactory to them, and the Acquiror shall pay the reasonable fees
and expenses of one such counsel for the Indemnified Parties in any
jurisdiction promptly as statements thereof are received unless the use of one
counsel for such Indemnified Parties would present such counsel with a conflict
of interest, (ii) the Indemnified Parties will cooperate in the defense of any

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such matter and (iii) the Acquiror shall not be liable for any settlement
effected without its prior written consent; and provided, further, that the
Acquiror shall not have any obligation hereunder to any Indemnified Party when
and if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
not permitted or is prohibited by applicable law.

(c) For a period of three years after the Effective Time, the
Acquiror shall use its reasonable best efforts to cause to be maintained in
effect the current policies of directors' and officers' liability insurance
maintained by the Company (provided that the Acquiror may substitute therefor
policies of comparable coverage with respect to claims arising from facts or
events which occurred before the Effective Time); provided, however, that in no
event shall the Acquiror be obligated to expend, in order to maintain or
provide insurance coverage pursuant to this Subsection 4.7(c), any amount per
annum in excess of 125% of the amount of the annual premiums paid as of the
date hereof by the Company for such insurance (the "Maximum Amount"). If the
amount of the annual premiums necessary to maintain or procure such insurance
coverage exceeds the Maximum Amount, the Acquiror shall use all reasonable
efforts to maintain the most advantageous policies of directors' and officers'
insurance obtainable for an annual premium equal to the Maximum Amount.
Notwithstanding the foregoing, prior to the Effective Time, the Acquiror may
request the Company to, and the Company shall, purchase insurance coverage, on
such terms and conditions as shall be acceptable to the Acquiror, extending for
a period of three years the Company's directors' and officers' liability
insurance coverage in effect as of the date hereof (covering past or future
claims with respect to periods before the Effective Time) and such coverage
shall satisfy the Acquiror's obligations under this Subsection (c).

(d) If Acquiror or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) shall transfer all or substantially all of its properties and
assets to any individual, corporation or other entity, then and in each such
case, proper provision shall be made so that the successors and assigns of
Acquiror shall assume the obligations set forth in this Section 4.7.

(e) The provisions of this Section 4.7 are intended to be for
the benefit of, and shall be enforceable

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by, each Indemnified Party and his or her heirs and representatives.

SECTION 4.8. Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable efforts to take promptly, or cause to be taken promptly, all actions
and to do promptly, or cause to be done promptly, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Plan as soon as practicable,
including using efforts to obtain all necessary actions or non-actions,
extensions, waivers, consents and approvals from all applicable governmental
entities, effecting all necessary registrations, applications and filings
(including, without limitation, filings under any applicable state securities
laws) and obtaining any required contractual consents and regulatory approvals.

SECTION 4.9. Publicity. The initial press release announcing
this Plan shall be a joint press release and thereafter the Company and the
Acquiror shall consult with each other in issuing any press releases or
otherwise making public statements with respect to the other or the
transactions contemplated hereby and in making any filings with any
governmental entity or with any national securities exchange with respect
thereto.

SECTION 4.10. Proxy Statement. As soon as practicable after the
date hereof, the Company shall prepare a proxy statement to take shareholder
action on the Merger and this Plan (the "Proxy Statement"), file the Proxy
Statement with the SEC, respond to comments of the staff of the SEC and
promptly thereafter mail the Proxy Statement to all holders of record (as of
the applicable record date) of shares of Company Common Stock. The Company
represents and covenants that the Proxy Statement and any amendment or
supplement thereto, at the date of mailing to shareholders of the Company and
the date of the meeting of the Company's shareholders to be held in connection
with the Merger, will be in compliance in all material respects with all
relevant rules and regulations of the SEC and will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The Acquiror
and the Company shall cooperate with each other in the preparation of the Proxy
Statement. The Company shall employ Morrow & Company to assist it in
contacting shareholders in connection with the vote on the Merger. The
Acquiror covenants that all information supplied by it in

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writing to the Company expressly for use in the Proxy Statement will be
accurate and complete in all material respects.

SECTION 4.11. Shareholders' Meeting. The Company shall take all
action necessary, in accordance with applicable law and its articles of
incorporation and by-laws, to convene a meeting of the holders of Company
Common Stock (the "Company Meeting") as promptly as practicable for the purpose
of approving this Plan. Except to the extent legally required for the
discharge by the board of directors of its fiduciary duties as advised in
writing by such board's counsel, the board of directors of the Company shall
recommend at the Company Meeting that this Plan be approved by the shareholders
of the Company.

SECTION 4.12. Notification of Certain Matters. Each party shall
give prompt notice to the others of: (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Plan and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses or results of
operations of the Company and its subsidiaries taken as a whole to which the
Company or any subsidiary is a party or is subject; and (b) any material
adverse change in the condition (financial or other), properties, assets,
business, results of operations or prospects of it and its subsidiaries taken
as a whole or the occurrence of any event which, so far as reasonably can be
foreseen at the time of its occurrence, is reasonably likely to result in any
such change. Each of the Company, the Acquiror and Merger Sub shall give
prompt notice to the other party of any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Plan.

SECTION 4.13. No Acquisitions of Company Common Stock. Prior to
the earlier of (i) immediately prior to the Effective Time and (ii) the
termination of this Plan in accordance with Article VI, the Acquiror shall not
and shall cause its affiliates not to, directly or indirectly acquire any
shares of Company Common Stock, other than shares acquired in a fiduciary or
agency capacity or in satisfaction of a debt or debts previously contracted.

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ARTICLE V. CONDITIONS TO CONSUMMATION

SECTION 5.1. Conditions to All Parties' Obligations. The
respective obligations of the Acquiror, Merger Sub and the Company to effect
the Merger shall be subject to the satisfaction or waiver prior to the
Effective Time of the following conditions:

(a) The Plan and the transactions contemplated hereby shall
have been approved by the requisite vote of the shareholders of the
Company.

(b) The Acquiror and the Company shall have procured the
approvals, consents or waivers with respect to the Plan and the
transactions contemplated hereby (i) by the Texas Banking Commissioner
pursuant to Texas law, and (ii) by the Federal Reserve Board, and all
applicable statutory waiting periods shall have expired; and the parties
shall have procured all other regulatory approvals, consents or waivers
of governmental authorities or other persons that, in the opinion of
counsel for the Acquiror, are necessary or appropriate for the
consummation of the transactions contemplated by the Plan; provided,
however, that no approval, consent or waiver referred to in this Section
5.1(b) shall be deemed to have been received if it shall include any
condition or requirement (other than conditions or requirements that
have been imposed on the Acquiror in connection with previous
acquisitions announced since 1990) that, individually or in the
aggregate, (i) would result in a Material Adverse Effect on the Acquiror
or the Acquiror Bank or (ii) would reduce the economic and business
benefits of the transactions contemplated by the Plan to the Acquiror or
the Acquiror Bank in so significant and adverse a manner that the
Acquiror, in its judgment, would not have entered into this Plan had
such condition or requirement been known at the date hereof.

(c) All other requirements prescribed by law which are
necessary to the consummation of the Merger and any transactions
necessary to consummate the Merger shall have been satisfied.

(d) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which enjoins
or prohibits the consummation of the Merger or any transaction necessary
to consummate the Merger, and no litigation or proceeding shall be
pending against the Acquiror or the Company or any of their subsidiaries
brought by any

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governmental agency seeking to prevent consummation of the Merger or any
transaction necessary to consummate the Merger.

(e) No statute, rule, regulation, order, injunction or decree
shall have been enacted, entered, promulgated, interpreted, applied or
enforced by any governmental authority which prohibits, restricts or
makes illegal consummation of the Merger or any other transaction
contemplated by this Plan.

SECTION 5.2. Conditions to the Obligations of the Acquiror and
Merger Sub. The obligations of the Acquiror and Merger Sub to effect the
Merger shall be subject to the satisfaction or waiver prior to the Effective
Time of the following additional conditions:

(a) The Acquiror shall have received from the Company's
independent certified public accountants a "cold comfort" letter or
"specified procedures" letter, dated (i) the date of the mailing of the
Proxy Statement to the Company's shareholders and (ii) shortly prior to
the Effective Date, with respect to certain financial information
regarding the Company in the form customarily issued by "Big Six"
independent auditors in transactions of this type.

(b) Each of the representations and warranties of the Company
contained in this Plan shall have been true and correct on the date
hereof and shall be true and correct at the Effective Time (or on the
date when made in the case of any representation or warranty which
specifically relates to an earlier date or period), provided, however,
that for purposes of this Section 5.2(b) a representation or warranty
shall only fail to be true and correct at the Effective Time if the
failure of any such representation or warranty to be true and correct
has or constitutes, or is likely to have or constitute or relates to,
either individually or in the aggregate with other representations or
warranties, a Material Adverse Effect on the Company or the Company
Bank; the Company shall have performed, or shall have caused to be
performed, in all material respects, each of its covenants and
agreements contained in this Plan required to be performed at or prior
to the Effective Time; and the Acquiror shall have received a
certificate signed by the Chief Executive Officer and the Chief
Financial Officer of the Company, dated the Effective Date, to the
foregoing effect.

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(c) The Acquiror shall have received an opinion, dated the
Effective Date, from Jones, Day, Reavis & Pogue, counsel to the Company,
covering the matters set forth in Annex 3, in form and substance
satisfactory to the Acquiror.

(d) The Acquiror shall have received the written resignation of
each director (in his/her capacity as director) of the Company,
effective as of the Effective Time.

(e) Simultaneously with the Effective Time, all Rights,
including any rights under the Rights Agreement, shall be terminated and
shall thereafter be of no force and effect.

(f) No person shall have become an "Acquiring Person" and no
"Distribution Date" (as such terms are defined in the Rights Agreement)
shall have occurred, and the rights issued under the Rights Agreement
shall not have become separable, distributable, redeemable or
exercisable.

SECTION 5.3. Conditions to the Obligation of the Company. The
obligation of the Company to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Time of the following additional
conditions:

Each of the representations, warranties and covenants of the
Acquiror and Merger Sub contained in this Plan shall have been true on
the date hereof and shall be true in all material respects on the
Effective Date as if made on such date (or on the date when made in the
case of any representation or warranty which specifically relates to an
earlier date or period), provided, however, that for purposes of this
Section 5.3 a representation or warranty shall only fail to be true and
correct at the Effective Time if the failure of any such representation
or warranty to be true and correct has or constitutes or relates to, or
is likely to have or constitute or relate to, either individually or in
the aggregate with other representations or warranties, a Material
Adverse Effect on the Acquiror; the Acquiror and Merger Sub shall have
performed, or shall have caused to be performed, in all material
respects, each of its covenants and agreements contained in this Plan
required to be performed at or prior to the Effective Time; and the
Company shall have received certificates signed by the Chief

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Executive Officer and the Chief Financial Officer of the Acquiror, dated
the Effective Date, to the foregoing effect.

ARTICLE VI. TERMINATION

SECTION 6.1. Termination. This Plan may be terminated, and the
Merger abandoned, prior to the Effective Date, either before or after its
approval by the shareholders of the Company and the Acquiror:

(a) by the mutual consent of the Acquiror and the Company, if
the board of directors of each so determines by vote of a majority of
the members of its entire board;

(b) by the Acquiror or the Company, by written notice to the
other parties, if its board of directors so determines by vote of a
majority of the members of its entire board, in the event of (i) the
failure of the shareholders of the Company to approve the Plan at its
meeting called to consider such approval, or (ii) a material breach by
the other party hereto of any representation, warranty, covenant or
agreement contained herein which is not cured or not curable within 30
days after written notice of such breach is given to the party
committing such breach by the other party;

(c) by the Acquiror or the Company, by written notice to the
other parties, if either (i) any approval, consent or waiver of a
governmental authority required to permit consummation of the Merger or
any transaction necessary to consummate the Merger shall have been
denied or (ii) any governmental authority of competent jurisdiction
shall have issued a final, unappealable order enjoining or otherwise
prohibiting consummation of the Merger or any transaction necessary to
consummate the Merger;

(d) by the Acquiror or the Company, by written notice to the
other parties, if its board of directors so determines by vote of a
majority of the members of its entire board, in the event that the
Merger is not consummated by April 15, 1997, unless the failure to so
consummate by such time is due to the breach of any representation,
warranty or covenant contained in this Plan by the party seeking to
terminate;

(e) by the Acquiror, by written notice to the Company on or
prior to October 15, 1996, if the

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Acquiror shall not be satisfied in its sole and absolute discretion with
the results and findings of a due diligence investigation of the Company
and its subsidiaries conducted by Acquiror by October 15, 1996. In
connection therewith, (i) the Company shall provide Acquiror with such
access to the Company and its subsidiaries as Acquiror shall in its sole
discretion deem appropriate to complete such due diligence prior to
October 15, 1996, and (ii) the Company acknowledges and agrees that no
prior representation or warranty, covenant or agreement or any condition
or investigation by the Acquiror of the Company and its subsidiaries or
other consideration shall affect the Acquiror's right to exercise its
discretion pursuant to the foregoing, which shall be absolute and
unconditional;

(f) by the Acquiror, by written notice to the Company, if the
Company takes, causes to be taken or allows to be taken any action that,
without giving effect to the exception contained in Section 4.1
regarding the exercise by the Company's board of directors of its
fiduciary duties, would otherwise be prohibited under Section 4.1; or

(g) by the Company, by written notice to the Acquiror prior to
the approval by the shareholders of the Company of this Plan, if the
Company receives a proposal to engage in an Acquisition Transaction on
terms and conditions which the board of directors determines, after
receiving the written advice of its outside counsel, (i) that to proceed
with the Merger will violate the fiduciary duties of the board of
directors to the Company's shareholders and (ii) to accept such
proposal; provided, however, that the Company shall not be entitled to
terminate this Plan pursuant to this clause (g) unless it shall have (A)
provided the Acquiror with written notice of such a possible
determination (which written notice will inform the Acquiror of the
material terms and conditions of the proposal, including the identity of
the proponent) two business days prior to such determination and (B)
made the payment of the Alternative Fee to the Acquiror as required by
Section 6.2(a)(ii).

SECTION 6.2. Fee. (a)(i) The Company hereby agrees to pay the
Acquiror, and the Acquiror shall be entitled to payment of, a fee (the "Fee")
of one million dollars ($1,000,000) upon the occurrence of a Purchase Event (as
defined herein) so long as the Purchase Event occurs prior to a Fee Termination
Event (as defined herein). Such

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payment shall be made to the Acquiror in immediately available funds within
five business days after the occurrence of a Purchase Event. A Fee Termination
Event shall be the first to occur of the following: (i) the Effective Time,
(ii) 18 months following the first occurrence of a Preliminary Purchase Event
(as defined herein), (iii) termination of this Plan in accordance with the
terms hereof prior to the occurrence of a Purchase Event or a Preliminary
Purchase Event (other than a termination of this Plan by the Acquiror pursuant
to Section 6.1(b)(ii) as a result of a willful breach of any representation,
warranty, covenant or agreement of the Company or the termination of this Plan
by the Acquiror pursuant to Section 6.1(f)) or (iv) 18 months after the
termination of this Plan by the Acquiror pursuant to Section 6.1(b)(ii) hereof
as a result of a willful breach of any representation, warranty, covenant or
agreement of the Company or the termination of this Plan by the Acquiror
pursuant to Section 6.1(f). Upon payment of the Fee in accordance with the
terms of this Plan, the Company shall have no further or other obligation to
the Acquiror under this Section 6.2 to pay the Alternative Fee referred to in
clause (a)(ii), unless this Plan shall have theretofore been terminated by the
Company pursuant to Section 6.1(g), in which event the Alternative Fee shall be
payable instead of the Fee.

(ii) The Company hereby agrees to pay the Acquiror, and the
Acquiror shall be entitled to receive payment of, an alternative fee (the
"Alternative Fee") of one million one hundred fifty thousand dollars
($1,150,000) upon the termination of this Plan by the Company pursuant to
Section 6.1(g). Such payment shall be made to the Acquiror in immediately
available funds simultaneously with such termination, and the payment of the
Alternative Fee shall be a condition to the effectiveness of any termination
pursuant to Section 6.1(g). Upon payment of the Alternative Fee, the Company
shall have no further or other obligation to the Acquiror under this Section
6.2 to pay the Fee referred to in clause (a)(i).

(b) The term "Preliminary Purchase Event" shall mean any of the
following events or transactions occurring after the date hereof:

(i) The Company or any subsidiary of the Company, without having
received the Acquiror's prior written consent, shall have entered into
an agreement to engage in an Acquisition Transaction (as defined below)
with any person (the term "person" for purposes of this Agreement having
the meaning assigned thereto in

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Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act, and the
rules and regulations thereunder) other than the Acquiror or any
affiliate of the Acquiror (the term "affiliate" for purposes of this
Agreement having the meaning assigned thereto in Rule 405 under the
Securities Act) or the Board of Directors of the Company shall have
recommended that the shareholders of the Company approve or accept any
Acquisition Transaction with any person other than the Acquiror or any
affiliate of the Acquiror. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving the Company or any subsidiary of the Company, (y)
a purchase, lease or other acquisition of all or substantially all of
the assets of the Company or any subsidiary of the Company or (z) a
purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing
15% or more of the voting power of the Company or any subsidiary of the
Company;

(ii) Any person (other than the Acquiror or any affiliate of the
Acquiror and National Bancshares Corp. of Texas ("National Bancshares"),
but only so long as National Bancshares holds not more than the number
of Company Common Shares owned by National Bancshares on the date of
this Plan) shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 15% or more of the outstanding shares of
Company Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of
the Securities Exchange Act, and the rules and regulations thereunder);

(iii) Any person other than the Acquiror or any affiliate of the
Acquiror shall have made a bona fide proposal to the Company or its
shareholders, by public announcement or written communication that is or
becomes the subject of public disclosure, to engage in an Acquisition
Transaction (including, without limitation, any situation in which any
person other than the Acquiror or any affiliate of the Acquiror shall
have commenced (as such term is defined in Rule 14d-2 under the
Securities Exchange Act) a tender offer or shall have filed a
registration statement under the Securities Act with respect to an
exchange offer, to purchase any shares of the Company Common Stock such
that, upon consummation of such offer, such person would own or control
15% or more of the then outstanding shares of the Company Common Stock);

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(iv) After a bona fide proposal is made by any person other than
the Acquiror or any affiliate of the Acquiror to the Company or its
shareholders to engage in an Acquisition Transaction, the Company shall
have breached any covenant or obligation contained in this Plan and such
breach would entitle the Acquiror to terminate this Plan or the holders
of the Company Common Stock shall not have approved this Plan at the
meeting of such shareholders held for the purpose of voting on this
Plan, such meeting shall not have been held or shall have been canceled
prior to termination of the Plan or the Company's Board of Directors
shall have withdrawn or modified in a manner adverse to the Acquiror the
recommendation of the Company's Board of Directors with respect to this
Plan; or

(v) Any person other than the Acquiror or any affiliate of the
Acquiror, other than in connection with a transaction to which the
Acquiror has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board or other
governmental authority or regulatory or administrative agency or
commission for approval to engage in an Acquisition Transaction.

(i) The acquisition by any person other than the Acquiror or any
affiliate of the Acquiror of beneficial ownership of 25% or more of the
then outstanding Common Stock; or

(ii) The occurrence of a Preliminary Purchase Event described in
Section 6.2(b)(i) except that the percentage referred to in clause (z)
shall be 25%.

(d) The Company shall notify the Acquiror promptly in writing of
the occurrence of any Preliminary Purchase Event or Purchase Event.

SECTION 6.3. Effect of Termination. In the event of the
termination of this Plan by either the Acquiror or the Company, as provided
above, this Plan shall thereafter become void and, subject to the provisions of
Section 8.2, there shall be no liability on the part of any party hereto or
their respective officers or directors, except that any such termination shall
be without prejudice to the rights of any party hereto arising out of the
willful breach by any

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other party of any covenant or willful misrepresentation contained in this
Plan.

ARTICLE VII. EFFECTIVE DATE AND EFFECTIVE TIME

SECTION 7.1. Effective Date and Effective Time. On such date as
the Acquiror selects, which shall be within 30 days after the last to occur of
the expiration of all applicable waiting periods in connection with approvals
of governmental authorities occurs and the receipt of all approvals of
governmental authorities and all conditions to the consummation of the Merger
are satisfied or waived, or on such earlier or later date as may be agreed in
writing by the parties, articles of merger shall be executed in accordance with
all appropriate legal requirements and shall be filed as required by law, and
the Merger provided for herein shall become effective upon such filing or on
such date as may be specified in such articles of merger. The date of such
filing or such later effective date is herein called the "Effective Date". The
"Effective Time" of the Merger shall be the time of such filing or as set forth
in such articles of merger.

ARTICLE VIII. OTHER MATTERS

SECTION 8.1. Certain Definitions; Interpretation. As used in
this Plan, the following terms shall have the meanings indicated:

"material" means material to the Acquiror or the Company (as the
case may be) and its respective subsidiaries, taken as a whole.

"Material Adverse Effect", with respect to a person, means any
condition, event, change or occurrence that is reasonably likely to have
a material adverse effect upon (A) the condition (financial or other),
properties, assets, business, results of operations or prospects of such
person and its subsidiaries, taken as a whole, or (B) the ability of
such person to perform its obligations under, and to consummate the
transactions contemplated by, this Plan.

"person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.

"subsidiary", with respect to a person, means any other person
controlled by such person.

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When a reference is made in this Plan to Sections or Annexes, such reference
shall be to a Section of, or Annex to, this Plan unless otherwise indicated.
The table of contents, tie sheet and headings contained in this Plan are for
ease of reference only and shall not affect the meaning or interpretation of
this Plan. Whenever the words "include", "includes", or "including" are used
in this Plan, they shall be deemed followed by the words "without limitation".
Any singular term in this Plan shall be deemed to include the plural, and any
plural term the singular.

SECTION 8.2. Survival. Only those agreements and covenants of
the parties that are by their terms applicable in whole or in part after the
Effective Time shall survive the Effective Time. All other representations,
warranties, agreements and covenants shall be deemed to be conditions of the
Plan and shall not survive the Effective Time. If the Plan shall be
terminated, the agreements of the parties in Section 6.2, Section 8.6, Section
8.7 and the last three sentences of Section 4.4 shall survive such termination.

SECTION 8.3. Waiver. Prior to the Effective Time, any provision
of this Plan may be: (i) waived by the party benefitted by the provision; or
(ii) amended or modified at any time (including the structure of the
transaction) by an agreement in writing between the parties hereto approved by
their respective boards of directors.

SECTION 8.4. Counterparts. This Plan may be executed in
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.

SECTION 8.5. Governing Law. This Plan shall be governed by, and
interpreted in accordance with, the laws of the State of Texas.

SECTION 8.6. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS PLAN OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

SECTION 8.7. Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Plan and the transactions contemplated
hereby.

SECTION 8.8. Notices. All notices, requests, acknowledgements
and other communications hereunder to a party shall be in writing and shall be
deemed to have been duly given when delivered by hand, telecopy, telegram or

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<PAGE> 96
telex (confirmed in writing) to such party at its address set forth below or
such other address as such party may specify by notice to the other party
hereto.

If to the Company, to:

Corpus Christi Bancshares, Inc.
2402 Leopard Street
Corpus Christi, Texas 78408

Telecopier: (512) 887-3017

Attention: R. Jay Phillips

With copies to:

Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201

Telecopier: (214) 969-5100

Attention: Stephen L. Fluckiger, Esq.

If to the Acquiror or Merger Sub, to:

Cullen/Frost Bankers, Inc.
P.O. Box 1600
100 West Houston Street
San Antonio, Texas 78296

Telecopier: (210) 220-4605

Attention: Jerry Salinas, Esq.

With copies to:

Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopier: (212) 558-3588

Attention: Mark J. Menting, Esq.

SECTION 8.9. Entire Agreement; Etc. This Plan represents the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and

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<PAGE> 97
supersedes any and all other oral or written agreements heretofore made. All
terms and provisions of the Plan shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
Except as to Section 4.7, nothing in this Plan is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Plan.

SECTION 8.10. Assignment. This Plan may not be assigned by any
party hereto without the written consent of the other parties.

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<PAGE> 98
IN WITNESS WHEREOF, the parties hereto have caused this Plan to
be executed by their duly authorized officers as of the day and year first
above written.

CULLEN/FROST BANKERS, INC.

By:
------------------------------
Name: Phillip D. Green
Title: Executive Vice President

R.E. HOLDING CORPORATION

By:
------------------------------
Name: Phillip D. Green
Title: Executive Vice President

CORPUS CHRISTI BANCSHARES, INC.

By:
------------------------------
Name: R. Jay Phillips
Title: President and
Chief Executive officer

Attest:

- ------------------------------
Name: Jace C. Hoffman
Title: Secretary

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<PAGE> 99
Annex 2
FIRST AMENDMENT TO RIGHTS AGREEMENT

FIRST AMENDMENT, dated as of September 30, 1996 (this "First
Amendment"), to the Rights Agreement (the "Rights Agreement"), dated as of
October 18, 1995, between Corpus Christi Bancshares, Inc., a Texas corporation
(the "Company"), and ChaseMellon Shareholder Services, L.L.C., as Rights Agent
(the "Rights Agent").

The Company desires to amend the Rights Agreement in accordance
with Section 27 thereof as set forth herein and hereby directs the Rights Agent
to join in such amendment.

NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:

1. Amendment of Section 1

The Rights Agreement is hereby amended to delete in its entirety
the definition of "Acquiring Person" contained in subsection (a) of Section 1
thereof and to substitute the following definition of "Acquiring Person"
therefor:

"'Acquiring Person' shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the Common Shares then outstanding,
but shall not include (i) the Company, any Subsidiary of the Company,
any employee benefit or stock ownership plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for or
pursuant to the terms of any such plan, or (ii) any person who would
otherwise become an Acquiring Person solely as a result of a reduction
in the number of Common Shares outstanding unless and until (A) such
time as such Person or any Affiliate or Associate of such Person shall
thereafter become the Beneficial Owner of any additional Common Shares,
other than
<PAGE> 100
as a result of a stock dividend, stock split or similar transaction
effected by the Company in which all holders of Common Shares are
treated equally, or (B) any other Person who is the Beneficial Owner of
any Common Shares shall thereafter become an Affiliate or Associate of
such Person, or (iii) Cullen/Frost Bankers, Inc., R.E. Holding
Corporation, or any of their respective Affiliates or Associates, for so
long as the Merger Agreement shall be in effect and not terminated.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares
so that such Person would no longer be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph (a), then such
Person shall not be deemed an "Acquiring Person" for any purposes of
this Agreement."

2. Additions to Section 1

Section 1 of the Rights Agreement is hereby further amended to
add the following definition:

"(l) 'Merger Agreement' shall mean the Agreement and Plan of
Merger, dated as of September 30, 1996, among Cullen/Frost Bankers,
Inc., R.E. Holding Corporation, and the Company."

Section 1 of the Rights Agreement is hereby further amended by
adding the following parenthetical phrase after the words "exchange offer" in
clause (ii) of Section 1(g): "(except that the transactions contemplated by the
Merger Agreement shall not be considered a tender or exchange offer for
purposes of this Rights Agreement)."

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<PAGE> 101
3. Revision of subsections of Section 1

Subparagraphs (l), (m), (n), (o), (p), (q), (r) and (s) of
Section 1 of the Rights Agreement are hereby relettered to become subparagraphs
(m), (n), (o), (p), (q), (r), (s) and (t) thereof, respectively.

4. Amendment to Section 3(c)

The legend in Section 3(c) of the Rights Agreement is hereby
amended by adding the following clause immediately following the words "dated
as of October 18, 1995":

", as amended."

5. Governing Law. This First Amendment shall be deemed to be
a contract made under the laws of the State of Texas and for all purposes shall
be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such state.

6. Miscellaneous. Except as expressly set forth herein, this
First Amendment shall not by implication or otherwise alter, modify, amend or
in any way affect any of the terms, conditions, obligations, covenants or
agreements contained in the Rights Agreement, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.

7. Counterparts. This First Amendment may be executed in any
number of counterparts, each of which shall

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<PAGE> 102
for all purposes be deemed an original, and all of which together shall
constitute but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the day and year first above written.

Attest: CORPUS CHRISTI BANCSHARES, INC.

By: By:
--------------------- ---------------------------

Attest: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.,
as Rights Agent

By: By:
--------------------- ---------------------------

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<PAGE> 103
Annex 3
[FORM OF OPINION OF JONES, DAY, REAVIS & POGUE]

(1) The Company is a corporation duly organized, validly
existing and in good standing under laws of the State of Texas.

(2) The Company Subsidiary Holding Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.

(3) The Company Bank is a state chartered bank duly organized,
validly existing and in good standing under the laws of the State of Texas.

(4) The issued and outstanding shares of capital stock of the
Company Subsidiary Holding Company consist of ___ shares of common stock, par
value $___ per share (the "Company Subsidiary Holding Company Shares"). The
issued and outstanding shares of capital stock of the Company Bank consist of
___ shares of common stock, par value $___ per share (the "Company Bank
Shares"). All of the outstanding Company Subsidiary Holding Company Shares and
Company Bank Shares have been duly authorized and validly issued and are fully
paid and nonassessable. All of the authorized Company Subsidiary Holding
Company Shares are owned by the Company free and clear of all liens, pledges,
security interests, claims or other encumbrances, and have not been issued in
violation of any preemptive rights. All of the authorized Company Bank Shares
are owned by the Company Subsidiary Holding Company free and clear of all
liens, pledges, security interests, claims or other encumbrances, and have not
been issued in violation of any preemptive rights.

(5) The Plan has been duly authorized, executed and delivered by
the Company and duly approved by its shareholders, and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, receivership, conservatorship,
insolvency, fraudulent transfer, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors' rights
generally and to general equity principles, regardless of whether considered in
a proceeding in equity or at law.

(6) All regulatory consents, authorizations, approvals and
filings required to be obtained or made by the Company, the Company Subsidiary
Holding Company or the Company Bank under the Federal laws of the United States
or the laws of the State of Texas for the execution and delivery by the Company
of the Plan, and the consummation by the Company of the transactions
contemplated therein, have been obtained or made.
<PAGE> 104
(7) The Merger and the execution and delivery by the Company of
the Plan did not, and the consummation by the Company of the transactions
contemplated therein do not, violate the articles of incorporation or by-laws
of any of the Company, the Company Subsidiary Holding Company or the Company
Bank, or breach or violate any governmental permit or license known to us, or
violate any order, writ, injunction or decree of any court or regulatory body
of the United States or the State of Texas known to us, by which the Company,
the Company Subsidiary Holding Company or the Company Bank are bound or to
which the Company, the Company Subsidiary Holding Company or the Company Bank
are subject, or violate any Federal law or regulation of the United States or
law or regulation of the State of Texas applicable to the Company, the Company
Subsidiary Holding Company or the Company Bank.

(8) The board of directors of the Company has taken all
necessary action to irrevocably redeem all of the rights issued and outstanding
under the Rights Agreement for $0.01 per right, such redemption to be effective
immediately prior to the Effective Time.

(9) As of the date of the Proxy Statement and the date of the
Company Meeting, the Proxy Statement (except for operating statistics,
financial statements, financial schedules and other financial data included
therein, as to which we express no opinion) complied as to form in all material
respects with the Exchange Act and the rules and regulations thereunder.

(10) We have participated in the preparation of the Proxy
Statement and from time to time have had discussions with officers, directors,
and employees of the Company, and the independent accountants who examined
certain of the financial statements of the Company and its subsidiaries
included in the Proxy Statement, concerning the information contained in the
Proxy Statement. Based upon the participation and discussions described above,
as of the date of the Proxy Statement and the date of the Company Meeting, no
facts have come to our attention that cause us to believe that the Proxy
Statement (except for the operating statistics, financial statements, financial
schedules and other financial data included therein) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. However, we
have not independently verified and are not passing upon, and do not assume any
responsibility for, the accuracy, completeness, or fairness of

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<PAGE> 105
the information contained in the Proxy Statement except as it relates to
documents or statutes or laws described therein.

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<PAGE> 106

ANNEX B

September 30, 1996

Board of Directors
Corpus Christi Bancshares, Inc.
2402 Leopard Street
Corpus Christi, Texas 78469

Gentlemen:

In our opinion, the consideration of $18.84 per share to be received
by the shareholders of Corpus Christi Bancshares, Inc., under the agreement and
plan of merger dated the date hereof (the "Merger Agreement"), is fair to the
Shareholders of Corpus Christi Bancshares, Inc. (the "Company") from a
financial point of view. This opinion was requested to assist you, the Board
of Directors of the Company, in considering the Merger Agreement.

Our opinion is based largely on: (1) the current price and recent
price history of the stock of the Company trading on the American Stock
Exchange, (2) a review of the book value multiples, price to earnings
multiples, and average price to asset percentage seen in acquisition of banks
and banking organization, during 1995 and 1996, in Texas, (3) present value
calculations using estimated future earnings, and (4) such other matters as we
deemed appropriate and our perception of the overall condition of the Company.

Further, our perception of the general economic outlook for banking,
of the general economic outlook of the relevant geographic region, and of the
operating history of the Company are incorporated as an integral part of all
the analytical bases discussed above.

This valuation is based on 1,600,200 common shares currently issued
and outstanding and the outstanding options on an additional 148,428 shares at
an exercise price of $5.00 per share. We are not aware of any rights, options,
or conversion privileges on the common shares, nor any other claim or potential
claim on capital.

FinSer Corporation has provided asset/liability management consulting,
financial forecasting, and other services to the Company or its operating
subsidiary, Citizens State Bank, for over ten years. As part of this work, in
the fourth quarter of 1995 FinSer Corporation assisted the Company in the
preparation of a long term forecast to be used by the Company for strategic
planning purposes. This forecast relied on input from Company management and
is used in this evaluation. While no loan review, review of asset quality, or
operational review was performed in direct connection with this evaluation, our
ongoing work for the Company has provided a valuable insight into the overall
condition of the Company.

We have relied on generally available financial information which we
believe to be reliable, but on which we do not guarantee the accuracy. We also
have relied on the accuracy and reliability of the historical financial
statements and other internal data of the Company. We did not audit, compile,
or review these financial statements or the other internal data, and we do not
express an opinion or any form of assurance on them. Our engagement cannot be
relied on to disclose errors, irregularities, regulatory infractions, lack of
compliance with any laws or regulations, or illegal acts. Correspondingly, the
evaluation is based on the assumption that no material errors, irregularities,
regulatory infractions, material lack of compliance with any laws or
regulations, or any illegal acts exist or are undisclosed to us.
<PAGE> 107
FinSer Corporation is involved in financial analysis of community
banks in a number of states with the primary emphasis being Texas. We have
performed a number of special studies over the past several years. This work
has involved the preparation of bank charters, the formation of the bank
holding companies and other special projects. These projects have included
stock evaluations, merger and acquisition evaluations, management studies,
strategic planning and operational studies. FinSer has been involved in a
number of transactions involving the purchase and sale of banks. We will be
happy to furnish detailed qualifications of the senior members of our staff
should it be deemed appropriate.

Sincerely,

Fred L. Baker
Director
<PAGE> 108

ANNEX C

September 30, 1996

Board of Directors
Corpus Christi Bancshares, Inc.
P.O. Box 4007
Corpus Christi, Texas 78469-4007

Members of the Board:

You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock of Corpus
Christi Bancshares, Inc. ("CTZ"), of the consideration (the "Merger
Consideration") to be received by such holders pursuant to the Agreement and
Plan of the Merger, dated as of September 30, 1996 (the "Merger Agreement"),
which provides for the merger (the "Merger") of R.E. Holding Corporation (the
"Merger Sub") with and into CTZ, a wholly owned subsidiary of Cullen/Frost
Bankers, Inc. ("CFBI"). Pursuant to the Merger Agreement, each shareholder of
the outstanding common stock of CTZ, according to Section 1.2 and subject to
limitations and other specifications in subsequent sections of the Merger
Agreement, has a right to receive $18.84 in cash per share. The terms of the
consideration and the conditions related to the delivery thereof, are more
fully set forth in the Merger Agreement.

In connection with our opinion, we have: (i) analyzed certain publicly
available financial statements, both audited and unaudited, and other
information of CTZ, including Annual Reports for the three years ended December
31, 1995, and the June 30, 1996 10-Q Report; (ii) analyzed certain financial
projections of CTZ prepared by management and Finser Inc., CTZ's financial
advisor; (iii) discussed certain aspects of the business operations and
financial condition of CTZ with certain members of its management; (iv)
reviewed reported market prices and historical trading activity of CTZ's common
stock; (v) compared the financial performance of CTZ and the prices and trading
activity of CTZ's common stock with that of certain other comparable publicly
traded companies and their securities; (vi) reviewed the financial terms, to
the extent publicly available, of certain comparable precedent transactions;
(vii) reviewed the Merger Agreement; and (viii) performed such other analyses
as we have deemed appropriate.

We have assumed and relied upon the accuracy and completeness of the
information reviewed by us for the purposes of this opinion. We have not
performed an on site due diligence review. We have not made an independent
evaluation of the assets or liabilities of CTZ, nor have we been furnished with
any such appraisals. With respect to financial forecasts, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgments of management and Finser Inc. as to the future
financial performance of CTZ. We have assumed such forecasts and projections
will be realized in the amounts and at the times contemplated thereby.

Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion.

Our opinion is limited to the fairness, from a financial point of view, to the
holders of CTZ Common Stock of the Merger Consideration received as stated in
the Merger Agreement. Moreover, this letter, and the opinion expressed herein,
does not constitute a recommendation to any shareholder as to any approval of
the Merger or the Merger Agreement. It is understood that this letter is for
the information of the Board of
<PAGE> 109
Directors of CTZ and may not be used for any other purpose without our prior
written consent, except that this opinion may be included in its entirety in
any filing made by CTZ with the Securities and Exchange Commission with respect
to the Merger.

Based on the foregoing and such other matters we have deemed relevant, we are
of the opinion as of the date hereof that the Merger Consideration is fair,
from a financial point of view, to the holders of CTZ Common Stock.

Very truly yours,

ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE> 110

ANNEX D

ART. 5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE
ACTIONS

A. Any shareholder of any domestic corporation who has the right
to dissent from any of the corporate actions referred to in Article 5.11 of
this Act may exercise that right to dissent only by complying with the
following procedures:

(1)(a) With respect to proposed corporate action that is submitted
to a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof shall
be delivered or mailed in that event. If the action is effected and the
shareholder shall not have voted in favor of the action, the corporation, in
the case of action other than a merger, or the surviving or new corporation
(foreign or domestic) or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger, shall, within ten (10)
days after the action is effected, deliver or mail to the shareholder written
notice that the action has been effected, and the shareholder may, within ten
(10) days from the delivery or mailing of the notice, make written demand on
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the shareholder's
shares. The fair value of the shares shall be the value thereof as of the day
immediately preceding the meeting, excluding any appreciation or depreciation
in anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the shares
as estimated by the shareholder. Any shareholder failing to make demand within
the ten (10) day period shall be bound by the action.

(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the case
of action other than a merger, and the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholders right of
dissent, in the case of a merger, shall, within ten (10) days after the date
the action is effected, mail to each shareholder of record as of the effective
date of the action notice of the fact and date of the action and that the
shareholder may exercise the shareholder's right to dissent from the action.
The notice shall be accompanied by a copy of this Article and any articles or
documents filed by the corporation with the Secretary of State to effect the
action. If the shareholder shall not have consented to the taking of the
action, the shareholder may, within twenty (20) days after the mailing of the
notice, make written demand on the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, for payment of the
fair value of the shareholder's shares. The fair value of the shares shall be
the value thereof as of the date the written consent authorizing the action was
delivered to the corporation pursuant to Section A of Article 9.10 of this Act,
excluding any appreciation or depreciation in anticipation of the action. The
demand shall state the number and class of shares owned by the dissenting
shareholder and the fair value of the shares as estimated by the shareholder.
Any shareholder failing to make demand within the twenty (20) day period shall
be bound by the action.

(2) Within twenty (20) days after receipt by the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the
case may be, of a demand for payment made by a dissenting shareholder in
accordance with Subsection (1) of this Section, the corporation (foreign or
domestic) or other entity shall deliver or mail to the shareholder a written
notice that shall either set out that the corporation (foreign or domestic) or
other entity accepts the amount claimed in the demand and agrees to pay that
amount within ninety (90) days after the date on which the action was effected,
and, in the case of shares represented by certificates, upon the surrender of
the certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
<PAGE> 111
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.

(3) If, within sixty (60) days after the date on which the
corporate action was effected, the value of the shares is agreed upon between
the shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares or in the corporation.

B. If, within the period of sixty (60) days after the date on
which the corporate action was effected, the shareholder and the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the
case may be, do not so agree, then the shareholder or the corporation (foreign
or domestic) or other entity may, within sixty (60) days after the expiration
of the sixty (60) day period, file a petition in any court of competent
jurisdiction in the county in which the principal office of the domestic
corporation is located, asking for a finding and determination of the fair
value of the shareholder's shares. Upon the filing of any such petition by the
shareholder, service of a copy thereof shall be made upon the corporation
(foreign or domestic) or other entity, which shall, within ten (10) days after
service, file in the office of the clerk of the court in which the petition was
filed a list containing the names and addresses of all shareholders of the
domestic corporation who have demanded payment for their shares and with whom
agreements as to the value of their shares have not been reached by the
corporation (foreign or domestic) or other entity. If the petition shall be
filed by the corporation (foreign or domestic) or other entity, the petition
shall be accompanied by such a list. The clerk of the court shall give notice
of the time and place fixed for the hearing of the petition by registered mail
to the corporation (foreign or domestic) or other entity and to the
shareholders named on the list at the addresses therein stated. The forms of
the notices by mail shall be approved by the court. All shareholders thus
notified and the corporation (foreign or domestic) or other entity shall
thereafter be bound by the final judgment of the court.

C. After the hearing of the petition, the court shall determine
the shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation, the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall also have such
power and authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.

D. The appraisers shall determine the fair value of the shares of
the shareholders adjudged by the court to be entitled to payment for their
shares and shall file their report of that value in the office of the clerk of
the court. Notice of the filing of the report shall be given by the clerk to
the parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as
court costs, and all court costs shall be allotted between the parties in the
manner that the court determines to be fair and equitable.

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<PAGE> 112
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the
judgment entered for the value of the shares, as in this Article provided,
shall, in the case of a merger, be treated as provided in the plan of merger
and, in all other cases, may be held and disposed of by the corporation as in
the case of other treasury shares.

F. The provisions of this Article shall not apply to a merger if,
on the date of the filing of the articles of merger, the surviving corporation
is the owner of all the outstanding shares of the other corporations, domestic
or foreign, that are parties to the merger.

G. In the absence of fraud in the transaction, the remedy
provided by this Article to a shareholder objecting to any corporate action
referred to in Article 5.11 of this Act is the exclusive remedy for the
recovery of the value of his shares or money damages to the shareholder with
respect to the action. If the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, complies with the
requirements of this Article, any shareholder who fails to comply with the
requirements of this Article shall not be entitled to bring suit for the
recovery of the value of his shares or money damages to the shareholder with
respect to the action.

ART. 5.13 PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS

A. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act shall not thereafter be
entitled to vote or exercise any other rights of a shareholder except the right
to receive payment for his shares pursuant to the provisions of those articles
and the right to maintain an appropriate action to obtain relief on the ground
that the corporate action would be or was fraudulent, and the respective shares
for which payment has been demanded shall not thereafter be considered
outstanding for the purposes of any subsequent vote of shareholders.

B. Upon receiving a demand for payment from any dissenting
shareholder, the corporation shall make an appropriate notation thereof in its
shareholder records. Within twenty (20) days after demanding payment for his
shares in accordance with either Article 5.12 or 5.16 of this Act, each holder
of certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.

C. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act may withdraw such
demand at any time before payment for his shares or before any petition has
been filed pursuant to Article 5.12 or 5.16 of this Act asking for a finding
and determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act,
as the case may be, or if after the hearing of a petition filed pursuant to
Article 5.12 or 5.16, the court shall determine that such shareholder is not
entitled to the relief provided by those articles, then, in any such case, such
shareholder and all persons claiming under him shall be conclusively presumed
to have approved and ratified the

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<PAGE> 113
corporate action from which he dissented and shall be bound thereby, the right
of such shareholder to be paid the fair value of his shares shall cease, and
his status as a shareholder shall be restored without prejudice to any
corporate proceedings which may have been taken during the interim, and such
shareholder shall be entitled to receive any dividends or other distributions
made to shareholders in the interim.

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<PAGE> 114
CORPUS CHRISTI BANCSHARES, INC.

THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY

PROXY

The undersigned, hereby revoking all prior proxies, hereby appoints JOHN T.
WRIGHT, III, R. JAY PHILLIPS and JACE C. HOFFMAN, jointly and severally, with
full power to act alone, as my true and lawful attorneys-in-fact, agents and
proxies, with full and several power of substitution to each, to vote all the
shares of Common Stock of CORPUS CHRISTI BANCSHARES, INC. (the "Company") which
the undersigned would be entitled to vote if personally present at the Special
Meeting of Shareholders of CORPUS CHRISTI BANCSHARES, INC. to be held on
February 5, 1997 and at adjournments thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED, BUT WHERE NO
DIRECTION IS GIVEN, IT WILL BE VOTED "FOR" THE AGREEMENT AND PLAN OF MERGER
REFERRED TO ON THE REVERSE SIDE HEREOF AND IN THE DISCRETION OF THE ABOVE-NAMED
PERSONS ACTING AS PROXIES ON SUCH OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE SPECIAL MEETING.

[ ] To vote for all items AS RECOMMENDED BY THE BOARD OF DIRECTORS, mark this
box, sign, date and return this proxy. (NO ADDITIONAL VOTE IS NECESSARY.)

The undersigned(s) acknowledges receipt of the Notice of the Special Meeting of
Shareholders and the Proxy Statement accompanying the same, each dated
December ___, 1996.

<PAGE> 115
The Board of Directors recommends a vote FOR approval of the Agreement and Plan
of Merger as described in the accompanying proxy statement.

1. Approval of the Agreement and Plan of Merger, dated September 30, 1996,
among Cullen/Frost Bankers, Inc., R.E. Holding Corporation and the Company.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

2. In their discretion, the proxies are authorized to vote upon such business
as may properly come before the meeting; provided, however, the holder of a
proxy to vote against approval of the Agreement and Plan of Merger will not
be entitled to vote such proxy in favor or a recess, postponement or
adjournment of the Special Meeting to permit further solicitation by the
Company.

Please date this proxy and sign your name exactly as it appears hereon. If there
is more than one owner, each should sign. When signing as an agent, attorney,
administrator, executor, guardian or trustee, please indicate your title as
such. If executed by a corporation, this proxy should be signed in the
corporate name by a duly authorized officer who should so indicate his title.

Please mark, sign, date and return the proxy promptly using the enclosed
envelope.

Signature: Date:
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Title:
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