Katrina wallops No. 1 black bank in South

Flooded: Liberty Bank & Trust of New Orleans expects deposits to shrink to $250 million from $308 million.

September 17, 2005|By Thomas S. Mulligan | Thomas S. Mulligan,LOS ANGELES TIMES

BATON ROUGE, La. - 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 black bank, whose overwhelmingly African-American clientele is concentrated in districts that were among those hardest hit by Hurricane Katrina.

McDonald, 62, has been spending his days at 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' black 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 particular weight.

With a customer base that reaches through all economic levels of New Orleans' black community, Liberty Bank's future could be a barometer of the resiliency of the city's black middle and working classes.

Most of the bank's eight New Orleans branches were inundated by the storm surge that followed Katrina.

Somewhere about $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.

Broken 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.

Liberty flies below the radar of dominant downtown banks Hibernia National and Whitney National. It serves small savers and borrowers in the low-income neighborhoods of the city's Ninth Ward, well-heeled professionals on the eastern lake front, and the teachers, health care workers and municipal employees who fall in between.

The bank has branches 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 to new headquarters, a six-story, glass-sheathed office building 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 located the tapes, which McDonald said should help the bank's information systems recover.

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.

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."

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.

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.

The Los Angeles Times is a Tribune Publishing newspaper.

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