Cullen-Frost Bankers, Inc.

Investment Analysis

Cullen-Frost Bankers, Inc.Overview

$3.3 billion Texas “multibank” holding company

Cullen-Frost survived the 1987 oil industry crash

The company thwarted acquisition threats

Cullen-Frost successfully captured the San Antonio banking market

Company historically shows stock growth

Cullen-Frost Bankers, Inc.Concerns

Standard & Poors rates this stock a “C”

Stock is trading below book value

Stock is volatile 49% of company assets are in

Texas real estate

Cullen-Frost Bankers, Inc.Closing prices to DJIA Closing Prices

CFR Closing Prices to DJIA Closing Prices

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$5

$10

$15

$20

$25

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3/26/90 6/26/90 9/26/90 12/26/90 3/26/91 6/26/91 9/26/91 12/26/91

1990-1991

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Close DJIA Close

Cullen-Frost Bankers, Inc.Time Series Chart: Closing Stock Prices

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$2

$4

$6

$8

$10

$12

$14

1/27/90 5/7/90 8/15/90 11/23/90 3/3/91 6/11/91 9/19/91 12/28/91 4/6/92

1990 - 1991

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Close Regression

Cullen Frost Bankers, Inc.Residual Plot

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1/27/90 5/7/90 8/15/90 11/23/90 3/3/91 6/11/91 9/19/91 12/28/91 4/6/92

1990 - 1991

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Residual Plot shows a clear curved pattern, suggesting a poor linear correlation

r = .381, r2 = .145, suggesting a weak relationship of time and price

A transformed model would be a better fit for use with this data.

Cullen-Frost Bankers, Inc.Investment Recommendation

Company has successfully survived difficult times in banking and has grown when competitors have not

Stock shows steady trend upward, yet is trading below book value

Bears Stearns placed stock on recommended list, due to high chance of acquisition

Recommend buying in the short term