In San Antonio, independence has always had a special significance.

The Alamo City is home to Cullen/Frost Bankers Inc., which survived the collapse of the Texas economy in the late 1980s to remain the state's largest independent bank.

But a recently announced reorganization plan has some observers questioning how long the $3.5 billion-asset bank will stand alone among the giants.

As part of the plan, Cullen/ Frost said it will swap its bank in Dallas for one owned by Texas Commerce Bank in Corpus Christi. That transaction, according to analysts, enhances Cullen/Frost's attractiveness as a buyout target.

|A Matter of Short Time'

"The investment community seems convinced it's a matter of short time before Cullen/Frost is acquired," said Thomas Brown an analyst at Donaldson, Lufkin & Jenrette Securities Corp.

A sale could occur within 12 months, Mr. Brown said, though he said the decision ultimately resides with Cullen/ Frost patriarch Tom C. Frost, who might be loath to let go.

Mr. Frost continues to exercise great influence over the board of directors, the analyst said.

Mr. Frost, A ho will soon turn 66, has assumed the title of senior chairman. And to hear him talk, investors shouldn't count on a quick buyout any time soon.

"A sale is not in our plans," Mr. Frost said.

Instead, he touts the reorganization as critical to the bank's plan to build its share in some southern Texas markets where it is not a power. In Houston, for example, it ranks an abysmal No. 15 in deposit share.

With the reorganization announced last month, Cullen/ Frost will leave the Dallas market, where it has $164 million of assets.

|A Very Smart Deal'

In exchange, the bank that it picked up nearly doubles Cullen/Frost's base in the Corpus Christi area to $290 million in deposits. Cullen/Frost thus becomes Corpus Christi's fourth largest bank in terms of deposits.

"That was a very smart deal for them to do," said Sandra J. Flannigan, an analyst at Merrill Lynch & Co.

|Just Damn Good Luck'

The acquisition mirrors in many ways Cullen/Frost's winning bid for the Austin bank of First City Bancorp early this year. That deal moved Cullen/ Frost into fourth place in the Texas capital.

Mr. Frost downplays any talks about a grand scheme.

"You can talk about being intelligent and smart, but in both cases it was really just damn good luck," Mr. Frost said.

For instance, he said the idea of the tax-free, cashless swap of banking operations with Texas Commerce was proposed by Marc Shapiro, chairman of the Chemical Banking Corp. unit.

The decision to refocus Cullen/Frost Bank on south Texas demonstrates a reality that second-tier banks face nationally -- whether to rein in their operations with a close focus or try to diversify into a wider area.

A Dilemma in Houston

Mr. Frost said the bank wrestled with the choice of unloading the Dallas operations or investing up to $77 million in new capital to open 28 offices in the city to make it a formidable player.

Today, with only a toehold in Houston, the bank faces a similar dilemma. It trails Texas Commerce and other out-of-state giants such as NationsBank Corp. and Banc One Corp. A half-dozen aggressive community banks are also fighting for market share in the city.

Mr. Frost said in a recent interview that his company may be leaning toward acquisitions as a way to build in the state's largest city.

"When you need to go up and you are No. 15, the first step is to go to No. 14," he said.

Value Enhanced

The reorganization further enhances the value of the bank which has long been the dominant player in San Antonio, the nation's ninth most populous city.

Cullen/Frost also stands to bea major benefactor from increased trade with Mexico if the North American Free Trade Act takes effect.

Analyst say the most critical issue facing Cullen/Frost -- one that must be weighed by any potential acquirer as well -- is the bank's ability to grow new loans and match the robust financial performances of Texas' large commercial banks.

An Underperformer

In the first quarter, Cullen/ Frost earned a 0.94% return on average assets -- before extraordinary items -- compared to a strong statewide average of 1.99%, according to Ferguson & Co.

"We still think they are going to have difficulty in being a high-performing bank," Merrill's Ms. Flannigan said.

Mr. Frost agreed.

"I'd like to be lucrative enough so we could buy anybody we wanted," he said. "I want to be that, but we're not -- because we are really an underperformer."

But with the reorganization, he added, "that's changing."

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