In a state where size is everything, Cullen/Frost Bankers Inc. insists on staying small.

"Size is our enemy," said Thomas C. Frost, senior chairman of the $4.9 billion-asset San Antonio institution and scion of the family that founded Frost Bank in 1868.

That attitude does not rule out acquisitions, however. Cullen/Frost has gobbled up nine rival banks since 1993, increasing its assets by 40% and expanding its branch network to 53 offices.

The bank's senior executives have their eyes on further expansion in the state. They are targeting Brownsville, Laredo, and Victoria, cities where Cullen/Frost does not yet have a branch presence but which fill in market gaps.

Meanwhile, new branches are being added in the border town of McAllen, and the bank continues to look to Mexico to boost its trade finance, corporate lending, and private banking businesses, executives said in a recent interview.

Acquisitions of nonbank companies are also attractive to Cullen/Frost, Mr. Frost said. The company is looking for an asset manager to boost trust and private banking, one of Cullen/Frost's biggest strengths. The bank has $8.5 billion of assets under management.

Cullen/Frost has deliberately chosen to confine its power base to the southern and central regions of Texas. In 1994 the bank initiated that effort by getting out of the Dallas market and into Corpus Christi through a branch swap with Texas Commerce Bancshares.

The strategy supports Mr. Frost's edict to remain small."My view is that you are better off dealing with people you know in places you know," he said.

A lanky, amiable Texan, Mr. Frost, 70, is quick with a joke and prefers tennis to the rodeo. Friends described him as "puckish" and "a classic Texan." He and his family are considered major figures in San Antonio society.

He says he has applied the same business principles as his father and grandfather, who ran the bank before him.

"It's been our heritage to build relationships," he said. "Banking is not a numbers business."

The bank's growing importance, especially in San Antonio, has rivals scrambling. "I admire them, and I respect them," said Charles Cheever Jr., chairman of $1 billion-asset Broadway Bancshares in San Antonio. "And I also worry about them."

But it is hard to dominate what Texas bankers say is a fiercely competitive market.

Non-Texas banks control almost 36% of deposits statewide. NationsBank Corp., based in Charlotte, N.C., has the largest stake, with 15.3%. Chase Manhattan Corp.'s Texas Commerce Bank is second, with 8.3%. Columbus, Ohio- based Banc One Corp. is third, with 8.1%.

Cullen/Frost's influence is largely confined to San Antonio, where it is the top bank, with 21.7% of deposits, according to Sheshunoff Information Services.

"In San Antonio itself, they have a world-class franchise," said Ronald G. Steinhart, chairman and chief executive officer of Banc One's national commercial banking group, based in Dallas. "But outside the city, they don't have a large enough presence to be a major force."

Cullen/Frost, the largest of the 10 native Texas banks to survive the 1980s oil, gas, and real estate bust, continues to be the most successful at fending off encroachers from out of state, said industry observers.

"Frost controls the market here and that is their primary advantage," said Richard Menger, a professor at St. Mary's University in San Antonio and a former Cullen/Frost executive. "The local banks can make decisions faster. At the big banks, relationships take second place to efficiency."

Bankers who run native Texas institutions insist they have a competitive advantage by virtue of their standing in the community.

Indeed, industry insiders said Cullen/Frost's positioning as a hometown bank has actually won it business from NationsBank and Banc One.

"They have very carefully selected markets and market niches," said Robert Harris, president of the Texas Bankers Association. "Their strategy is to be the bank in south and central Texas, and they have done that very efficiently."

Maintaining independence may be an even tougher battle. Analysts said Cullen/Frost is an attractive takeover candidate, and Mr. Frost confirmed that he has been approached by several large banks about a sale.

The Cullen and Frost families, which collectively own 20% of the bank's stock, remain committed to independence, however."We've been doing this for 129 years, and we're not going to stop now," Mr. Frost said.

One sign of this commitment was the bank's listing on the New York Stock Exchange. Earlier this month Cullen/Frost moved from Nasdaq onto the Big Board "to get more stature" with the investing public, he said.

Mr. Frost even commissioned a special branding iron with the bank's new ticker symbol, CFR, which he took to the opening session. "But we didn't need to use it 'cause the stock went up," he said.

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