Community Bank Depends on Clients Who Lost All
Alden J. McDonald Jr. swept his hand across the upper right side of the New Orleans city map, indicating a broad area south of Lake Pontchartrain on the city’s eastern side.
“This is our market,” he said, “and it’s all underwater.”
McDonald is president and chief executive of New Orleans-based Liberty Bank & Trust, the South’s largest African American-owned bank, whose overwhelmingly black clientele is concentrated in districts that were among those hardest hit by Hurricane Katrina.
McDonald, 62, has been spending his days in Liberty Bank’s emergency headquarters -- a branch in Baton Rouge. He alternates between handholding with customers in the crowded lobby and ducking into a small conference room to huddle with a kitchen cabinet of longtime friends and clients, several of whom are part of New Orleans’ African American business elite.
The hardships facing McDonald and his bank are being repeated countless times across southern Louisiana and the Gulf Coast, where businesses are struggling to recover. But in a city where about two-thirds of the residents are black, and many of them are hard-pressed financially, the fate of Liberty Bank carries special weight.
With a customer base that reaches through all economic levels of New Orleans’ African American community, the bank’s future could be a barometer of the resiliency of the city’s black middle and working classes.
Most of Liberty Bank’s eight New Orleans branches were inundated by the storm surge that followed Katrina. Somewhere around $1 million in waterlogged U.S. currency sits in its vaults and cash drawers, McDonald said, minus whatever amount was stolen in two break-ins last week. Safe-deposit boxes with documents, jewelry and other valuables presumably were flooded as well.
Fried communications systems have kept the bank’s computers from talking with its debit cards, so customers fleeing with little more than their clothes had their misery compounded when they couldn’t draw cash from automated teller machines.
“Survive? We haven’t thought that far yet,” McDonald said. “Our concentration is on getting our communications back.”
But survival is at issue -- for Liberty Bank and the community it serves. The bank lost $8 million in deposits in a single day last week as many hundreds of customers closed their accounts. McDonald’s customers are moving -- some permanently, he fears -- to cities where the bank has no branches. Meanwhile, payments on millions of dollars in home, auto and personal loans aren’t being made.
Flying below the radar of dominant downtown banks Hibernia National and Whitney National, Liberty Bank serves small savers and borrowers in the low-income neighborhoods of the city’s 9th Ward, well-heeled professionals on the eastern lakefront, and the teachers, healthcare workers and municipal employees who fall in between on the economic spectrum. The bank has locations in Jackson, Miss., as well as here, but its prime turf remains where it was born: the east side of New Orleans.
Three months ago, the bank moved into new headquarters, a six-story, glass-sheathed office building at the Lake Forest Plaza Mall, within walking distance of affluent black subdivisions where homes sell for $500,000 and up -- big prices in the Crescent City.
Early last week, a few bank employees hired a flat-bottom motorboat and chugged down Lake Forest Boulevard to retrieve crucial software and backup tapes from the headquarters’ state-of-the-art computer center -- providentially located on the third floor, above the waterline.
With the ground floor submerged, the workers pulled the boat up to an outside staircase, smashed in a second-story glass panel and found the tapes, which McDonald said should help jump-start the recovery of the bank’s information systems.
More important for Liberty Bank’s future is what’s happening in the Baton Rouge branch lobby and the other offices that are still open. The bank says it’s crucial to obtain contact information from customers who have to close their accounts because they are moving away.
“Our new growth strategy is to stay in touch with these people,” McDonald said. “We may not have branches where they’re going, but we can assist them with home mortgages, car loans, Visa cards.”
McDonald is confident that Liberty Bank’s overtures will be welcomed. The loyalty runs deep.
When the bank opened in 1972, “it was still pretty hard for African Americans to get credit,” McDonald said. “We filled that void back then, so they remember.”
As a teenager, the man customers call “Mister Mac” envisioned a career as a bricklayer or letter carrier. That changed in 1965 at a private party in New Orleans’ exclusive Boston Club.
Some wealthy entrepreneurs were mapping plans for a new kind of bank. At a time when Louisiana banks operated from 10 a.m. to 2 p.m. on weekdays, this bank -- the International City Bank -- would run from 9 a.m. to 9 p.m., Monday through Saturday. And it would court an underserved market: black consumers. To do that, the men realized, the bank would have to take the almost unheard-of step of hiring African Americans.
The businessmen asked their waiter if he knew of any bright young men in his part of town who might like to try their hand at banking. The waiter, Alden J. McDonald Sr., said, yes, he could think of at least one candidate.
Six years after joining International City, the younger McDonald, then still in his 20s, was recruited by African American community leaders to head their new bank, Liberty Bank & Trust. Much has changed in the three decades since then, as exemplified by McDonald’s being chosen last year as chairman of the New Orleans Chamber of Commerce.
On Friday, McDonald had only a moment to reflect on such matters as he watched depositors in the Baton Rouge branch line up to make withdrawals.
Among the customers the bank president greeted that afternoon was physician Joshua O. Williams Jr., a longtime customer who needed money for a forced relocation.
As Katrina approached, Williams and his wife and son had loaded an SUV with their belongings and helped prepare the doctor’s disabled mother for the flight out of town.
Williams worked out of an office in a New Orleans building. “I had to lock all that up,” he said. “I left my bass boat there. I don’t know what happened to that.”
After making rounds with customers, McDonald -- whose home in New Orleans East was flooded -- rejoined the continuing strategy session in the branch’s small conference room. At the table were Peter J. Hamilton Jr., a lawyer and commercial real estate broker, and Jim Thorns, a real estate appraiser and commercial photographer. A while earlier, Ronnie Burns had dropped by. He owns one of New Orleans’ biggest courier services and some airport parking lots.
The players kept changing throughout the day, but they all had strong ties to McDonald -- as Liberty Bank board members, former schoolmates, major bank customers or all three. From the banter in the room, it was clear that there were no sharp distinctions between friendship and business.
“There’s nothing any one of us wouldn’t do for that man,” Thorns said. For Thorns, a heavyset man of 58, that included braving the toxic floodwaters in a none-too-stable aluminum skiff on several trips to the bank headquarters.
Thorns and Hamilton have been delegated to help Liberty Bank secure property -- houses, trailers, raw land, whatever is available -- in the midst of an unprecedented land rush in Baton Rouge spurred by a huge inflow of hurricane evacuees. In a bidding war, it helps to have trained appraisers around to avoid getting skinned.
Looking ahead, McDonald sees a key role for Liberty Bank in New Orleans’ economic reconstruction. The bank knows its clientele and knows how to work with borrowers who struggle to make each payment.
“We have a little higher default rate than other banks, but that’s our business model,” McDonald said.
To play its role, however, Liberty Bank has to stay in business. McDonald said he wouldn’t be surprised if the bank’s deposits eventually shrank to $250 million from their June 30 level of $308 million. The outflow isn’t just from small customers displaced by the hurricane. Liberty Bank’s largest depositor is the city of New Orleans, which is spending cash at a steady clip but collecting next to nothing in taxes.
No-interest loans or even outright grants would be appropriate ways for the federal government to replenish the depleted capital of institutions such as Liberty Bank, McDonald said.
Such a plan takes time to organize, but McDonald suggested an immediate way to help: Big corporations -- particularly insurers anticipating massive claims payouts to Gulf Coast policyholders -- could simply deposit money in his and other community banks throughout the region.
“A lot of people in America are anxious to help storm victims,” McDonald said. “Get us the money to do our jobs and we’ll help get people back on their feet. It makes sense. If I’m back, you’re going to get taxes from me.”
