8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 23, 2008
CULLEN/FROST BANKERS, INC.
(Exact name of issuer as specified in its charter)
Texas	0-7275		74-1751768
(State or other jurisdiction	(Commission		(IRS Employer
of incorporation)	File Number)		Identification No.)
100 West Houston Street, San Antonio, Texas		78205
(Address of principal executive offices)		(Zip Code)
(210) 220-4011
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act      (17 CFR 240.14d-2(b))
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act      (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition
Attached as Exhibit 99.1 and incorporated into this item by reference is a press release issued by the Registrant on January 23, 2008 regarding its financial results for the quarter and year ended December 31, 2007. The information furnished by the Registrant pursuant to this item shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits
(c)   Exhibits:
	99.1	Press Release dated January 23, 2008 with respect to the Registrant's financial results for the quarter and year ended December 31, 2007

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
	CULLEN/FROST BANKERS, INC.
By:	/s/ Phillip D. Green
	Phillip D. Green
	Group Executive Vice President
	and Chief Financial Officer
Dated:	January 23, 2008

EXHIBIT INDEX
Exhibit
Number	Description
99.1	Press Release dated January 23, 2008 with respect to the Registrant's financial results for the
	quarter and year ended December 31, 2007

EX-99

EXHIBIT 99.1
		Greg Parker
		Investor Relations
		210/220-5632
		or
		Renee Sabel
		Media Relations
		210/220-5416
FOR IMMEDIATE RELEASE
January 23, 2008
CULLEN/FROST REPORTS 4th QUARTER RESULTS, RECORD ANNUAL EARNINGS FOR
2007 AND TIMING OF EARNINGS CONFERENCE CALL
SAN ANTONIO - Cullen/Frost Bankers, Inc. today reported net income for the fourth quarter of 2007 of $54.7 million, or $.93 per diluted common share, a 13.1 percent increase over fourth quarter 2006 earnings of $48.4 million, or $.84 per diluted common share. For the fourth quarter of 2007, returns on average assets and equity were 1.65 percent and 15.18 percent respectively, compared to 1.59 percent and 16.04 percent for the same period of 2006. Included in the fourth quarter of 2006 results were $2.0 million in conversion expenses relating to the December acquisition of Summit Bancshares, Inc. The company also reported record annual earnings for 2007 of $212.1 million, or $3.55 per diluted common share, up 9.5 percent from 2006 earnings of $193.6 million, or $3.42 per diluted common share. For the year, returns on average assets and equity were 1.63 percent and 15.20 percent respectively, compared to the 1.67 percent and 18.03 percent reported in 2006. "It is a pleasure for me to report another record year for our company," said Dick Evans, Cullen/Frost chairman and CEO. "As we navigate this challenging banking environment, our performance affirms the benefit of several strategic decisions that have positioned us well. In 2000, we got out of the residential mortgage business because we believed the industry had lost its relationship focus and had become a commoditized business with insufficient profitability. We also exited the indirect lending and credit card businesses in the past for the same reason. Credit quality continues to be good, and we have no direct exposure to the sub-prime lending crisis that has impacted the financial services industry since last summer. "In addition, last quarter we took steps to reduce the potential negative impact on our net interest income of a declining rate environment by entering into a seven-year $1.2 billion interest rate swap that has moved us to a more interest rate-neutral position. It was good to see our net interest margin for the year increase to 4.69 percent, despite the Fed cutting the prime rate 100 basis points during the second half of the year. For the year, average loans reached $7.5 billion and average deposits were $10.2 billion, both all-time high numbers. I was also pleased to see non-interest income rise 11.4 percent, to $268.2 million. "Continuing our commitment to expand in the Texas markets we serve, we added another new financial center to the growing Austin market and relocated our NASA financial center in the Houston area to a new building during the fourth quarter. In addition, in December, we announced the acquisition of Prime Benefits, an Austin-based independent insurance agency, which will complement our insurance team in Austin. Building on our strong base, we will continue to focus on growing Cullen/Frost and meeting the competitive challenges of other financial institutions that are scrambling to stake a claim in this great state that we have called home for 140 years. "As always, it is our outstanding employees who made these strong results for 2007 possible. I thank them for their dedication to taking good care of our customers and their commitment to teamwork." For the year ended December 31, 2007, average annual total loans were $7.5 billion, up 14.4 percent compared to $6.5 billion for the previous year. Average annual total deposits for 2007 rose to $10.2 billion, an increase of 11.2 percent over the $9.2 billion reported in 2006. Net interest income on a taxable-equivalent basis grew to $534.2 million, an 11.5 percent increase over the $479.1 million reported a year earlier, reflecting increasing volumes as a result of our acquisitions and organic growth. For 2007, non-interest income increased to $268.2 million, up 11.4 percent over the $240.7 million reported for 2006, while non-interest expenses increased 12.7 percent over the previous year to $462.4 million. Noted financial data for the fourth quarter:
All of the following comparisons to the fourth quarter of last year were impacted, in part, by the acquisition of Summit Bancshares, Inc on December 8, 2006.
w	Net interest income on a taxable-equivalent basis for the fourth quarter totaled $135.3 million a 9.1 percent increase from the $124.0 million reported for the fourth quarter of 2006. Impacting this rise in net interest income, in part, was a 7.5 percent increase in average deposits from the fourth quarter of 2006 to $10.2 billion. This increase contributed to a $793 million increase in the average volume of earning assets, compared to the fourth quarter of 2006, to $11.4 billion. The earning asset mix has improved from the same period a year earlier, with average loans for the quarter rising to $7.6 billion, 13.2 percent higher than the $6.7 billion reported for the same period last year. The company purchased a seven-year $1.2 billion interest rate swap in October of 2007, moving its balance sheet to a more interest rate neutral position in order to reduce some of the potential negative earnings impact of a declining rate environment. The net interest margin was 4.70 percent for the fou rth quarter, compared to 4.62 percent for the fourth quarter of 2006 and up one basis point from 4.69 percent for the third quarter of 2007.
w	Non-interest income for the fourth quarter of 2007 was $66.4 million, compared to the $58.4 million reported a year earlier.    Trust income rose 12.5 percent to $18.0 million, compared to $16.0 million for the fourth quarter of 2006, primarily from higher investment fees resulting from improvements in the equities market and new accounts.    Service charges on deposit were $21.0 million, a rise of $1.9 million, compared to $19.1 million reported for the previous year's fourth quarter. This increase was due to higher retail and commercial overdrafts.    Other charges, commissions and fees were $7.9 million, compared to $6.0 million reported for the fourth quarter of 2006. This increase was impacted by $700,000 in investment banking fees earned during the quarter.    Other non-interest income was $13.4 million, an 18.1 percent increase over the $11.3 million reported a year earlier. The largest factor contributing to this increase was higher income from Visa checkcard usage.
w	Non-interest expense for the fourth quarter of 2007 was $114.2 million, up $8.6 million or 8.1 percent from the $105.6 million for the fourth quarter of 2006. Combined, salaries and wages and employee benefits were up $4.8 million over the same quarter a year earlier, as a result of normal annual merit and market increases, along with an increase in the number of employees. Net occupancy expense was up $1.4 million to $10.2 million, primarily the result of higher lease expenses associated with the additional locations from the acquisitions made during 2006 and new locations opened in 2007. Expenses for furniture and equipment were up $1.8 million to $8.9 million, due mainly to higher depreciation expense for furniture and equipment and higher software maintenance costs. Both of these expenses were impacted, in part, by the company's decision to bring certain data processing functions in-house, as well as the acquisitions. The additional ex pense that resulted from bringing certain data processing functions in-house was more than offset in other expense by a decrease in outside computer service costs. Other expense was $28.9 million, flat, when compared to the fourth quarter of 2006, which included $2.0 million in conversion related expenses relating to the Summit acquisition.
w	For the fourth quarter of 2007, the provision for possible loan losses was $3.6 million, compared to net charge-offs of $3.5 million. For the fourth quarter of 2006, the provision for possible loan losses was $3.4 million, compared to net charge offs of $3.3 million. The allowance for possible loan losses as a percentage of total loans was 1.19 percent at December 31, 2007, compared to 1.30 percent at year-end 2006. Non-performing assets were $29.8 million at year-end, compared to $26.4 million the previous quarter and $57.7 million at year-end 2006.
Cullen/Frost Bankers, Inc. will host a conference call on Wednesday, January 23, 2008, at 10:00 a.m. Central Time (CT) to discuss the results for the quarter and the year. The media and other interested parties are invited to access the call in a "listen only" mode at 800-944-6430. Digital playback of the conference call will be available after 12:00 p.m. CT until midnight Sunday, January 27, 2008 at 800-642-1687 with the Conference ID # of 30604147. The call will also be available by webcast at the URL listed below and available for playback after 2:00 p.m. CT. After entering the website, www.frostbank.com, go to "About Frost" on the top navigation bar, then click on Investor Relations. Cullen/Frost Bankers, Inc. (NYSE:CFR) is a financial holding company, headquartered in San Antonio, with assets of $13.5 billion at December 31, 2007. The corporation provides a full range of commercial and consumer banking products, investment and brokerage services, insurance products and investment banking services. Its subsidiary, Frost Bank, operates more than 100 financial centers across Texas in the Austin, Corpus Christi, Dallas, Fort Worth, Houston, Rio Grande Valley and San Antonio regions. Founded in 1868, Frost is one of the largest banking organizations headquartered in Texas, with a legacy of helping Texans with their financial needs during three centuries.

Forward-Looking Statements and Factors that Could Affect Future Results
Certain statements contained in this Earnings Release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"), notwithstanding that such statements are not specifically identified as such. In addition, certain statements may be contained in the Corporation's future filings with the SEC, in press releases, and in oral and written statements made by or with the approval of the Corporation that are not statements of historical fact and constitute forward-looking statements within the meaning of the Act. Examples of forward-looking statements include, but are not limited to: (i) projections of revenues, expenses, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; (ii) statements of plans, objectives and expectations of Cullen/Frost or its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as "believes", "anticipates", "expects", "intends", "targeted", "continue", "remain", "will", "should", "may" and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:
w	Local, regional, national and international economic conditions and the impact they may have on the Corporation and its customers and the Corporation's assessment of that impact.
w	Changes in the level of non-performing assets and charge-offs.
w	Changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements.
w	The effects of and changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board.
w	Inflation, interest rate, securities market and monetary fluctuations.
w	Political instability.
w	Acts of God or of war or terrorism.
w	The timely development and acceptance of new products and services and perceived overall value of these products and services by users.
w	Changes in consumer spending, borrowings and savings habits.
w	Changes in the financial performance and/or condition of the Corporation's borrowers.
w	Technological changes.
w	Acquisitions and integration of acquired businesses.
w	The ability to increase market share and control expenses.
w	Changes in the competitive environment among financial holding companies and other financial service providers.
w	The effect of changes in laws and regulations (including laws and regulations concerning taxes, banking, securities and insurance) with which the Corporation and its subsidiaries must comply.
w	The effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard setters.
w	Changes in the Corporation's organization, compensation and benefit plans.
w	The costs and effects of legal and regulatory developments including the resolution of legal proceedings or regulatory or other governmental inquiries and the results of regulatory examinations or reviews.
w	Greater than expected costs or difficulties related to the integration of new products and lines of business.
w	The Corporation's success at managing the risks involved in the foregoing items.
Forward-looking statements speak only as of the date on which such statements are made. The Corporation undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events.

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
		2007															2006
		4th Qtr				3rd Qtr				2nd Qtr				1st Qtr				4th Qtr
CONDENSED INCOME STATEMENTS
Net interest income	$		130,760		$		130,624		$		129,520		$		127,833		$		121,229
Net interest income(1)			135,269				134,704				133,095				131,127				124,017
Provision for possible loan losses			3,576				5,784				2,650				2,650				3,400
Non-interest income:
Trust fees			18,009				17,749				17,694				16,907				16,009
Service charges on deposit   accounts			21,044				20,696				20,147				18,831				19,142
Insurance commissions and fees			5,979				7,695				6,545				10,628				5,907
Other charges, commissions and fees			7,949				10,772				6,979				6,858				6,009
Net gain (loss) on securities transactions			15				- --				- --				- --				- --
Other			13,387				13,844				12,655				13,848				11,333
Total non-interest income			66,383				70,756				64,020				67,072				58,400
Non-interest expense:
Salaries and wages			54,069				52,996				51,203				51,714				48,472
Employee benefits			9,945				10,727				11,997				14,426				10,739
Net occupancy			10,198				9,509				9,483				9,634				8,786
Furniture and equipment			8,870				8,793				8,230				6,928				7,081
Intangible amortization			2,162				2,184				2,188				2,326				1,671
Other			28,906				29,358				29,541				37,059				28,846
Total non-interest expense			114,150				113,567				112,642				122,087				105,595
Income before income taxes			79,417				82,029				78,248				70,168				70,634
Income taxes			24,717				25,566				24,619				22,889				22,272
Net income	$		54,700		$		56,463		$		53,629		$		47,279		$		48,362
PER SHARE DATA
Net income - basic	$		0.94		$		0.97		$		0.90		$		0.79		$		0.85
Net income - diluted			0.93				0.95				0.89				0.78				0.84
Cash dividends			0.40				0.40				0.40				0.34				0.34
Book value at end of quarter			25.18				23.74				22.99				23.64				23.01
OUTSTANDING SHARES
Period-end shares			58,662				58,423				59,074				59,972				59,839
Weighted-average shares - basic			58,387				58,439				59,324				59,676				56,726
Dilutive effect of stock   compensation			598				731				810				919				1,007
Weighted-average shares - diluted			58,985				59,170				60,134				60,595				57,733
SELECTED ANNUALIZED RATIOS
Return on average assets			1.65	%			1.72	%			1.66	%			1.47	%			1.59	%
Return on average equity			15.18				16.44				15.40				13.78				16.04
Net interest income to average  earning assets(1)			4.70				4.69				4.72				4.65				4.62

(1) Taxable-equivalent basis assuming a 35% tax rate.

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
		2007																2006
		4th Qtr				3rd Qtr				2nd Qtr				1st Qtr				4th Qtr
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
Loans	$		7,560		$		7,436		$		7,455		$		7,404		$		6,681
Earning assets			11,422				11,340				11,248				11,349				10,629
Total assets			13,169				13,026				12,923				13,058				12,071
Non-interest-bearing demand   deposits			3,483				3,567				3,505				3,541				3,423
Interest-bearing deposits			6,765				6,685				6,593				6,711				6,107
Total deposits			10,248				10,252				10,098				10,252				9,530
Shareholders' equity			1,429				1,363				1,396				1,392				1,196
Period-End Balance:
Loans	$		7,769		$		7,461		$		7,412		$		7,459		$		7,373
Earning assets			11,556				11,492				11,257				11,405				11,461
Goodwill and intangible    assets			558				560				562				564				563
Total assets			13,485				13,167				12,949				13,176				13,224
Total deposits			10,530				10,096				10,177				10,280				10,388
Shareholders' equity			1,477				1,387				1,358				1,418				1,377
Adjusted shareholders'    equity(1)			1,484				1,445				1,445				1,466				1,432
ASSET QUALITY
($ in thousands)
Allowance for possible
loan losses	$		92,339		$		92,263		$		96,071		$		96,144		$		96,085
as a percentage of
period-end loans			1.19	%			1.24	%			1.30	%			1.29	%			1.30	%
Net charge-offs	$		3,500		$		9,592		$		2,723		$		2,591		$		3,329
Annualized as a percentage
of average loans			0.18	%			0.51	%			0.15	%			0.14	%			0.20	%
Non-performing assets:
Non-accrual loans	$		24,443		$		21,356		$		45,503		$		46,769		$		52,204
Foreclosed assets			5,406				5,023				4,222				3,715				5,545
Total	$		29,849		$		26,379		$		49,725		$		50,484		$		57,749
As a percentage of:
Total loans and
foreclosed assets			0.38	%			0.35	%			0.67	%			0.68	%			0.78	%
Total assets			0.22				0.20				0.38				0.38				0.44
CONSOLIDATED CAPITAL RATIOS
Tier 1 Risk-Based
Capital Ratio			9.96	%			10.07	%			10.14	%			10.41	%			11.25	%
Total Risk-Based
Capital Ratio			12.59				12.83				13.25				13.54				13.43
Leverage Ratio			8.37				8.01				8.10				8.31				9.56
Equity to Assets Ratio   (period-end)			10.95				10.53				10.49				10.76				10.41
Equity to Assets Ratio   (average)			10.85				10.46				10.80				10.66				9.91

(1) Shareholders' equity excluding accumulated other comprehensive income (loss).

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
(In thousands, except per share amounts)
			Year Ended December 31
				2007			2006			2005			2004			2003
CONDENSED INCOME STATEMENTS
Net interest income			$	518,737		$	469,163		$	391,266		$	331,438		$	313,758
Net interest income(1)				534,195			479,138			398,938			337,102			318,945
Provision for possible loan losses				14,660			14,150			10,250			2,500			10,544
Non-interest income:
	Trust fees			70,359			63,469			58,353			53,910			47,486
	Service charges on deposit   accounts			80,718			77,116			78,751			87,415			87,805
	Insurance commissions and fees			30,847			28,230			27,731			30,981			28,660
	Other charges, commissions and   fees			32,558			28,105			23,125			22,877			22,522
	Net gain(loss) on securities   transactions			15			(1	)		19			(3,377	)		40
	Other			53,734			43,828			42,400			33,304			28,848
	Total non-interest income			268,231			240,747			230,379			225,110			215,361
Non-interest expense:
	Salaries and wages			209,982			190,784			166,059			158,039			146,622
	Employee benefits			47,095			46,231			41,577			40,176			38,316
	Net occupancy			38,824			34,695			31,107			29,375			29,286
	Furniture and equipment			32,821			26,293			23,912			22,771			21,768
	Intangible amortization			8,860			5,628			4,859			5,346			5,886
	Other			124,864			106,722			99,493			89,323			84,157
	Total non-interest expense			462,446			410,353			367,007			345,030			326,035
Income before income taxes				309,862			285,407			244,388			209,018			192,540
Income taxes				97,791			91,816			78,965			67,693			62,039
Net income			$	212,071		$	193,591		$	165,423		$	141,325		$	130,501
PER SHARE DATA
Net income - basic			$	3.60		$	3.49		$	3.15		$	2.74		$	2.54
Net income - diluted				3.55			3.42			3.07			2.66			2.48
Cash dividends				1.54			1.32			1.165			1.035			0.94
Book value				25.18			23.01			18.03			15.84			14.87
OUTSTANDING SHARES
Period-end shares				58,662			59,839			54,483			51,924			51,776
Weighted-average shares - basic				58,952			55,467			52,481			51,651			51,442
Dilutive effect of stock
	compensation			761			1,175			1,322			1,489			1,216
Weighted-average shares - diluted				59,713			56,642			53,803			53,140			52,658
SELECTED ANNUALIZED RATIOS
Return on average assets				1.63	%		1.67	%		1.63	%		1.47	%		1.36	%
Return on average equity				15.20			18.03			18.78			17.91			17.78
Net interest income to average
	earning assets(1)			4.69			4.67			4.45			4.05			3.98
(1)		Taxable-equivalent basis assuming a 35% tax rate.

Cullen/Frost Bankers, Inc.
CONSOLIDATED FINANCIAL SUMMARY (UNAUDITED)
				Year Ended December 31
					2007			2006			2005			2004			2003
BALANCE SHEET SUMMARY
($ in millions)
Average Balance:
	Loans			$	7,464		$	6,524		$	5,594		$	4,823		$	4,497
	Earning assets				11,340			10,203			8,969			8,352			8,011
	Total assets				13,042			11,581			10,143			9,619			9,584
	Non-interest-bearing demand  deposits				3,524			3,334			3,009			2,915			3,038
	Interest bearing deposits				6,689			5,850			5,124			4,852			4,540
	Total deposits				10,213			9,184			8,133			7,767			7,577
	Shareholders' equity				1,395			1,074			881			789			734
Period-End Balance:
	Loans			$	7,769		$	7,373		$	6,085		$	5,165		$	4,591
	Earning assets				11,556			11,461			10,197			8,892			8,132
	Goodwill and intangible assets				558			563			184			117			115
	Total assets				13,485			13,224			11,741			9,953			9,672
	Total deposits				10,530			10,388			9,146			8,106			8,069
	Shareholders' equity				1,477			1,377			982			822			770
	Adjusted shareholders' equity(1)				1,484			1,432			1,033			833			762
ASSET QUALITY
	($ in thousands)
Allowance for possible loan   losses				$	92,339		$	96,085		$	80,325		$	75,810		$	83,501
	As a percentage of period-end  loans				1.19	%		1.30	%		1.32	%		1.47	%		1.82	%
Net charge-offs:				$	18,406		$	11,110		$	8,921		$	10,191		$	9,627
	As a percentage of average loans				0.25	%		0.17	%		0.16	%		0.20	%		0.21	%
Non-performing assets:
	Non-accrual loans			$	24,443		$	52,204		$	33,179		$	30,443		$	47,451
	Foreclosed assets				5,406			5,545			5,748			8,673			5,343
		Total		$	29,849		$	57,749		$	38,927		$	39,116		$	52,794
	As a percentage of:
		Total loans and foreclosed
			assets		0.38	%		0.78	%		0.64	%		0.76	%		1.15	%
		Total assets			0.22			0.44			0.33			0.39			0.55
(1)		Shareholders' equity excluding accumulated other comprehensive income (loss).