Liberty And Profit For All

By stepping in when other banks gave up, Liberty Bank & Trust has created a profit centera profit center for Louisiana's black community

and unprecedented. In 1972, he was named ICB’s first black vice president. With a growing reputation as a mover and shaker at the ripe old age of 29, McDonald was soon approached by Norman Francis, then president of Xavier University of Louisiana, about heading a start-up bank formed by 10 black and seven white investors. McDonald, believing he still had much to learn before accepting such a responsibility, twice turned down the offer before finally accepting.

McDonald, a robust gentleman with an easy smile and salt-and-pepper hair, has a large binder filled with fraying newspaper clippings of Liberty’s early years. In those days, or the “Trailer Park Years” as they’re referred to by some within the company, Liberty, with $2 million in assets, was headquartered in an abandoned trailer lot. But it didn’t stay there very long. Before McDonald firmly planted his feet on the ground, he signed off on the construction of a new downtown headquarters soon after the trailer doors opened in 1972.

At the same time, he applied for permission to open his first branch. “I don’t know if that was smart or foolish, but I was young,” he says now with some chagrin. “So I had these two major building projects going on in the infancy of the bank. People I knew in the industry thought I was crazy because with those two capital improvements, I was taking money out of the bank in an interest-earning mode and turning it into a fixed asset.”

McDonald’s strategy behind the hasty moves? “To show success early,” he says. “We had to come out of the box swinging and make people know we were serious about business. We had to have facilities that were first class and show that customers could get the same banking service from us that they could get elsewhere,” he explains.

The strategy paid off very well. From 1972-86, the bank posted a steady increase in deposits and assets. In fact, Liberty has been profitable every year since opening with the exception of three. But in 1986, the oil industry went belly up. And Louisiana, extremely dependent on oil revenues, as well as banks like Liberty that received royal
ties from the drilling that occurred along the Gulf of Mexico, went into a financial tailspin. When the drilling stopped, real estate values throughout the state plummeted and loans began to sour. “People lost their jobs. They were losing their homes. They couldn’t pay on loans and it had a domino effect,” says McDonald. “The economy was dead.”

The bank had as many as 22 bankruptcies in one week during 1987. Liberty would lose $ 1.5 million that year. It was at that time McDonald and other Liberty executives activated their survival strategy. Cutting expenses–but not salaries–Liberty eliminated all of its service contracts including maintenance help as employees dug in and cleaned up after themselves. The gardening crew was eliminated and they all took turns cutting the lawns at different branches. The staff even came up with

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