The early history of Frost National Bank is rooted in that of Texas. Its founder, Thomas Claiborne Frost, was born in Alabama in 1833 and graduated from Irving College in Tennessee. He then settled in Texas as an assistant professor at Austin College, studied law in Sam Houston's office, and was admitted to the bar in 1856 by Judge R.E.B. Baylor. The young lawyer played an active role in community and state affairs: in 1857 he served with the Texas Rangers to protect citizens against Indian raids and was elected district attorney for Comanche County. In 1861 he was a delegate to the Secession Convention in Austin and, when Texas seceded from the Union, served as a lieutenant colonel in the Confederate Army.

After the Civil War, due to Reconstruction regulations against former Confederate officers, Colonel Frost could not resume his law practice. Thus, he instead established a freight business between San Antonio and the Gulf port of Indianola. Soon afterwards, John Frost (his brother) and J. L. Fitch (John's partner) asked him to join their mercantile and auction business. As a partner of Fitch, Frost and Bro., the Colonel anticipated the needs of post-war Texas and stocked the hard merchandise--such as axes, rifles, pistols, ammunition, boots, harnesses, saddles, and plows--that men would need to finish taming the land. He bought Fitch's share of the business and the store operated as Frost & Bro. until 1881.

Recognizing the difficulty Texas wool producers experienced in getting their goods to market during the poor economy of the postwar period, Colonel Frost formulated a plan to help. He contracted with haulers to collect the wool, built a large warehouse, and stored the wool until market conditions became favorable. The Colonel made loans (based on the wool stocks he was holding) to the producers. Thus began the state's first merchandising, financing, and marketing program. Proceeds of wool shipments made to eastern markets were deposited in New York bank accounts that accumulated increasingly large balances, against which Colonel Frost ordered supplies of silver and gold from mints for his own trade and to supply silver to bankers and merchants in nearby Texas towns. Growers became accustomed to leaving some of their money on deposit with him in order to draw against them during periods between sales.

In 1896 Colonel Frost abandoned his wool-commission business and applied for a national bank charter. In February 1899 the bank's official name became Frost National Bank of San Antonio, with assets of $1.3 million. Upon the death of Colonel Frost in 1903, T.C. Frost, Jr. was named president, a position he held until 1926 when he became chairman and his younger brother, J.H. Frost, was named president.