NEW ORLEANS —
To reach the executive suite of the Liberty Bank and Trust Company here, you first have to navigate a stretch of town that still lacks street signs. Finding an entrance to the bank's headquarters is another challenge. You have to circle behind the building, a six-story glass box that is still missing several windows, and — as if there to work on the plumbing — walk up a set of corrugated steel steps sandwiched between a Dumpster and an oversized air-conditioning unit.
After traversing a bare room that smells of mildew and walking past three disabled elevators, you trudge up five more flights of steel stairs to reach the office of Alden J. McDonald Jr., the chief executive of this institution, which was the country's third-largest black-owned bank until Hurricane Katrina and floodwaters roared through New Orleans one year ago.
Mr. McDonald and his staff count themselves among the fortunate, despite the general state of disrepair inside and outside their building. While their neighborhood wants for many basic amenities, including mail delivery and phone service, their company is one of the few enterprises back in business in the vast northeastern quadrant of New Orleans. And in a city where an estimated two in three businesses remain shuttered, Liberty is not only open but also turning a profit.
Floodwaters still covered much of New Orleans last September when Mr. McDonald first agreed to allow a reporter to chronicle his efforts and those of his staff to resuscitate their battered bank. Working out of a beachhead that Mr. McDonald established in Baton Rouge just after the storm, Liberty seemed on the edge of ruin. Its long-term survival seemed in doubt.
Liberty's most impressive accomplishment, like that of New Orleans itself, may simply be that it has regained some semblance of its old self in only 12 months. But Liberty is also like New Orleans and its ravaged economy in another crucial way: its recovery has a long way to go.
Liberty faces enormous hurdles, chief among them the lingering doubts about the viability of large stretches of the drowned-out, predominantly black eastern half of the city, where Liberty's customers were concentrated and which is still largely in ruin. Liberty's success in helping black professionals and others settle the east established a large African-American homeownership class for the first time in the city's history. But that legacy, combined with the bank's backing of the city's small but growing ranks of black entrepreneurs, prompts concern among experts contemplating how well Liberty will fare if its carefully cultivated customers never return. Liberty's very success, it seems, presents the bank with its greatest challenge.
Hurricane Katrina delivered body blows to virtually every business along the Gulf Coast, but few were more devastated than Liberty. One year after the storm, only half of the bank's eight New Orleans branches are open, and one of those has limited hours. Flooding badly damaged five branches and looters stole $700,000 from several branches, according to Mr. McDonald. Floodwaters overwhelmed a one-story operations center, which housed its paper records, and putrid water sat for weeks on the ground floor of its headquarters in New Orleans East, destroying the building's electrical system and elevators. Wind damage and rain destroyed sections of the building's top floors.
Insurance will offset some of those losses, but there is no compensating Liberty for the miseries visited upon its customers. Jobs disappeared as businesses closed and flooding destroyed or badly damaged the homes of roughly three-quarters of Liberty's customers — and of most of the bank's staff, including Mr. McDonald.
By some measurements, Liberty is doing astonishingly well. After posting losses of $3.4 million in 2005, its worst performance since opening its doors 34 years ago, Liberty reported a $2 million profit in the first half of 2006. "We're feeling very hopeful about the future," Mr. McDonald said recently. Even so, Liberty has already slipped to fifth in a ranking of the country's largest black-owned banks, according to Creative Investment Research, a firm that tracks minority-owned financial institutions.
"Liberty seems to have done a remarkable job in a trying situation, certainly better than I ever thought possible," said William Michael Cunningham, an African-American who runs Creative Investment Research in Minneapolis. "But my concern is with the health of the bank two years, three years out, especially with so many questions around the rebuilding."
Will New Orleans truly come back, or is it destined to stand as a paler, less diverse version of its former self? There may be no better stand-in for addressing that question than this homegrown bank that, until Katrina, sparkled as a success tale, a black-owned institution in a predominantly African-American city that offered crucial service to sections of town historically underserved by mainstream banks.
Alden McDonald awoke early on the Sunday before Katrina hit New Orleans last year. He planned to check on Liberty's various properties, ensuring that they had been properly secured, and then to join his wife inside the concrete fortress of the Hyatt hotel in the central business district, to ride out the storm. But Mr. McDonald, a native New Orleanian, changed his mind about staying as he toured the city. Listening to his car radio, he began to appreciate the might of Katrina. He phoned his wife, who checked them out of the Hyatt one hour after checking them in. The pair decided to retreat to the home of good friends in Atlanta.
Then Mr. McDonald, like much of the world, hunkered down helplessly as he watched television coverage of his flooded city and tried hard to think about something other than retiring. "My entire operation was under water," Mr. McDonald, 63, said. "Which meant I had to go back and rebuild everything. I had to rebuild all systems. I had to rebuild all files. I didn't know how many of my customers would stay with me."
He also did not know the fate of tens of millions of dollars that Liberty had lent to homeowners and entrepreneurs in the part of the city that locals referred to simply as "the east."
"The only thing I could think of is, 'All of these people lost their real estate, which I had as collateral,' " Mr. McDonald said. "I knew I had insurance on a lot of it, but I still didn't know how much at the time." Sitting in his friend's home, he wondered if his bank's days as an independent institution were over.
This bout of pessimism lasted two or three days, Mr. McDonald said, and over the coming months he was careful never to betray even a hint of doubt about the bank's future. He had been Liberty's chief executive since its founding in 1972, when its sole facility was a trailer in a sketchy part of town. He knew about hard times. After a few days in Atlanta, he started working on a survival plan that would quickly bring him to Baton Rouge.
"There were a lot of people depending on me to make this thing come back," he said. "My staff. The community."
Liberty had three outposts in Baton Rouge, 80 miles northwest of New Orleans, and two in Jackson, Miss., 160 miles due north. Those branches would prove crucial in the coming months, providing both ballast in unstable times and a base from which to operate. For the next six months, one of the Baton Rouge branches, a homely, spacious brick building missing a corner of its corrugated tin roof, served as the command post for Mr. McDonald and about 20 employees. Two of them, seated on beat-up borrowed chairs behind a pair of folding tables, served as Liberty's loan department. Four tables pushed together in the middle of a room accommodated a makeshift call center — after BellSouth installed extra phone lines, nine days after the hurricane.
Even after the bank set up a dozen phone lines to field calls, customers preferred driving to Baton Rouge from as far away as Houston and northern Louisiana, in order to meet in person with a bank employee. "Basically it's everyone's job to deal with customers right now," Mr. McDonald said at the time, "including mine."