Stan McCormick is no stranger to crises in the banking industry.
He started his career with Frost National Bank as an independent contractor during the Texas commercial real estate crash of the late 1980s.
“I went over to Frost to start a real estate marketing department,” he says. “The idea was to get somebody to handle all this foreclosed real estate and get it sold. Of course, being a lawyer helped me a lot, because so much law is involved in commercial real estate transactions.”
Due to the bank’s history of conservative lending policies, it was able to remain solvent through the crisis, he says.
“Banks were so overextended they either went out of business or were purchased by out-of-state banks,” McCormick says. “Frost was one of the few that survived without requiring federal or outside buyers.”
McCormick is now executive vice president, corporate counsel and secretary for San Antonio-based financial holding company Cullen/Frost Bankers Inc. and its subsidiary Frost National Bank. Cullen/Frost has $17.2 billion in assets and about 4,000 employees. Frost National Bank operates 112 locations statewide.
When the bottom fell out of the credit markets in late 2008, many banks accepted federal bailout funds, known as the Troubled Assets Relief Program (TARP), to survive the expected losses due to loans for subprime mortgages.
“In October 2008, we [Cullen/Frost], of course, had the opportunity to take TARP money and turned that down because we felt we didn’t need it,” McCormick says. “We were well capitalized, and if that was medicine, we felt healthy and didn’t think we needed the medicine.”
Frost National Bank had stopped making residential mortgage loans in 2000, when it determined that the loans were a commodity rather than the basis for a continuing business relationship, McCormick says.
Frost “saw in 2000 that there really weren’t a lot of relationships in the residential mortgage business, and that [exiting the business] ended up allowing us to avoid the huge problem that hurt a lot of banks” in 2008, he says.
East Coast Stint
Born in San Antonio, McCormick grew up in Houston. He graduated in 1971 from the University of Texas School of Law in Austin, where he had been a member of the Reserve Officers’ Training Corps. As a law school graduate, he was commissioned as a U.S. Army first lieutenant and served two years of active duty in the quartermaster corps at Fort Lee, Va. He was a captain when honorably discharged following four additional years of reserve duty.
After completing his active duty, he became an associate and practiced regulatory law with the now-defunct Washington, D.C., firm Rice, Carpenter & Carraway.
“I was dealing with regulatory agencies, which is why I’m comfortable in a company that is heavily regulated,” McCormick says. He was a partner when he left the firm in 1981 to return to Texas, where he and his wife have family. He then spent about 10 years as a real estate lawyer for Coldwell Banker Commercial in San Antonio before joining Frost.
He initially thought his tenure at Frost would be short term.
“I was going to work for one year, that year led into the next and the next, and I looked up and had been there five years as an independent contractor.”
He became a full-time employee with the bank in the mid-1990s, supervising its real estate marketing and legal affairs departments. By the late 1990s, as corporate governance became more complex, McCormick was asked to serve as secretary to the boards of directors for Cullen/Frost and Frost National Bank.
“So I became the executive vice president, corporate counsel and secretary to the board for the holding company and Frost National Bank,” he says. “I really wear those two hats.”
McCormick says the board members for both entities are the same and both boards hold joint meetings. As board members of the federally chartered Frost National Bank, the board members pass on motions dealing with banking matters, and as board members of the publicly traded Cullen/Frost, board members vote on other issues, such as compliance with the Sarbanes-Oxley Act of 2002, he says.
McCormick manages legal services for the bank and primarily is involved in corporate governance issues for the holding company. He has one lawyer working for him in-house, who also works for both entities.
Jeff McDaniel, a partner in the intellectual property boutique Daffer McDaniel in Austin, has been an outside counsel for McCormick for 17 years . He says that a guiding principle for McCormick is the golden rule: Do unto others as you would have them do unto you.
“One, it’s the only way he would live, and two, he uses it as a great tool for himself in discharging his legal duties,” McDaniel says.
When McCormick is in an adversarial situation, McDaniel says McCormick will stop and walk in the adversaries’ shoes for a moment and ask them to do the same.
“He breaks through barriers in a fashion that is good,” McDaniel says.
For employment matters, McCormick says he turns to Philip J. Pfeiffer, of counsel at Fulbright & Jaworski in San Antonio.
Pfeiffer says he has worked with McCormick for 15 to 20 years and talks with him at least every other week. McCormick is respectful of internal clients across the bank’s departments, Pfeiffer says.
“If the matter involves the trust department, he’ll make sure appropriate leaders of the trust department are involved in discussions, strategies and the ultimate actions,” Pfeiffer says.
He also says McCormick is value-minded.
“He appropriately talks to us about opportunities where we might save some money,” Pfeiffer says.
McCormick says he and bank staff members are reviewing the financial regulation reforms, adopted in July by Congress, called The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. McCormick predicts the new regulation will have a far-reaching impact on the financial industry but says it is too early to predict its specific impact on Frost.
“So much of it is subject to the creation of new agencies, which haven’t been created yet, and subject to comments regarding rule-making, so it’s a work in progress,” he says.
McCormick says that his move to Frost was the best professional decision of his life. “It was one of those sea changes that happen to you in your career,” he says. “I didn’t fully appreciate it until later.”
Jeanne Graham is on Twitter at www.twitter.com/jeannegraham.
A Matter of Trust
Stan McCormick has spent decades at Frost National Bank. He is now the executive vice president, corporate counsel and secretary of San Antonio-based Cullen/Frost Bankers Inc. and Frost National Bank. Below are McCormick’s e-mailed answers to a few GC best-practices questions, edited for length and style.
Jeanne Graham, research editor, Texas Lawyer: What are the most important factors you consider when hiring outside counsel?
Stan McCormick, executive vice president, corporate counsel and secretary, Cullen/Frost Bankers Inc. and Frost National Bank: Competence and trust. The law has become so complex and specialized that I first seek the expert who has plowed similar ground, which lowers the cost and speeds up the resolution of the issue. With competence established, I next seek trust, as trust greatly assists in a speedy resolution consistent with Frost’s culture. Outside counsel often becomes the face of Frost, so I have to be able to trust that our reputation will be protected at every step of the journey toward resolution. This approach is wholly consistent with our core values of integrity, caring and excellence.
Graham: Under what circumstances do you expect outside counsel to offer alternative billing?
McCormick: Outside counsel provide our company with nonroutine, nonre-occurring legal services, such that alternative billing is rarely practical. We prefer using a blended hourly rate with an agreed-upon budget at the outset. We have such a close working relationship with our team of outside counsel that we receive excellent legal services at a very reasonable cost — all based upon a relationship of trust.
Graham: Do you pay for the work of first-year associates?
McCormick: Because we price outside legal services on a blended-rate basis, we will pay for first-year associates if the fee is reasonably set and the hours billed are likewise reasonable and appropriate. This allows the more senior attorneys to achieve a more attractive blended rate if a first-year associate is able to do legal work at a much reduced rate.
Graham: What percentage of your company’s legal work is done in-house, and what areas of work does that include?
McCormick: Because the corporate counsel department has two lawyers, we have developed a team of outside attorneys serving as an extension of the corporate counsel department. The team assists with contracts, intellectual property issues, litigation, corporate governance, and matters related to the duties and responsibilities of board secretary. Many varied issues are handled in-house, and even the matters requiring the expertise of outside specialists require close monitoring by in-house counsel. Our legal department taps into some 30 attorneys, providing us with a vast array of expertise. Each of these attorneys has a deep understanding of the Frost philosophy, share our core values and understand they become the face of Frost when dealing with vendors, other attorneys, judges and our customers.
Graham: Which one thing from your previous legal experience is helping you most on the job today?
McCormick: Over a 10-year span in private law practice, I developed the ability to engage in hard thinking and tough, intensive legal research, brief writing and litigation before administrative law judges. My job is like that of a medical doctor in a hospital emergency room, and the hard-thinking skills learned in my previous legal experience have been immensely helpful as I almost hourly engage in legal triage. I think of it as one ambulance after another, delivering legal issues all day long.
— JEANNE GRAHAM