We’ve talked to a lot of entrepreneurs about the challenges they’ve come up against: from companies folding, to co-founders splitting, to painful product evolutions. Rarely are we at a loss for words when entrepreneurs recount their stories to us.
But that’s what happened when we talked to Alden McDonald, co-founder and president of Liberty Bank, the first multi-racial bank in New Orleans, and one of the five largest African-American owned financial institutions in the country.
Since opening its doors in 1972 with a mission to cater to a traditionally underserved community, the company has expanded to include 17 branches in eight states, 175 employees, and over $630 million in assets. Under McDonald’s leadership, Liberty Bank helped establish a large African-American homeownership class for the first time in New Orleans East, a neighborhood that became well known after it was devastated by hurricane Katrina.
McDonald has a long history in business.
A New Orleans native, he has been a long-time champion of the city’s economic development. In the late 80’s, he played a key role in establishing the Black Economic Development Council, which assists minority businesses to secure public and private contracts for goods and services. He later served as the chairman of the New Orleans Chamber of Commerce. In 2004, he became the first chairman of Greater New Orleans, Inc., which was established to boost economic development in the New Orleans region.Today, he is still driven by a passion to help young people own homes, which he believes is essential to establishing personal wealth.
McDonald has weathered his own share of storms as an entrepreneur over the past fifty plus years. From emerging out of the 1980s oil bust, to surviving and thriving after hurricane Katrina obliterated the company’s headquarters.
It’s been a long and colorful journey for McDonald at the helm of Liberty Bank. The stories he shared with us had us on the edge of our seats. That’s why we had to tell you how he and his army managed to come out on top after two of the state’s biggest economic downturns. And why McDonald reminds us that the most seasoned and savvy entrepreneurs always see opportunities in obstacles.
*Editor’s Note: This interview has been edited and condensed.
Can you tell me how you got started with Liberty Bank?
I got started through a part-time job in banking with International City Bank. I didn’t know anything about banking. But I worked long hours, I was always given the stuff that everyone else messed up to clean up.
I was a clean up kid. As a result of that, I became very good at cleaning other people’s mess. Eventually I was put at the beginning of it, so the mess would not be created in the first place. It gave me an opportunity to learn all aspects of banking.
And then there was a new bank that was just started, and they were short on people, just like any new business, you have to do everything. This was a new bank, a new business, a new company. So everybody had to do everything. And by doing everything, you get to learn everything to be done, and you get better knowledge of how it should be done.
And when you came on to help found Liberty Bank, were you an owner at the time?
“I wasn’t an owner, but I became an owner because my philosophy was very simple: If I was going to work long, hard hours, I wanted to own what I was working for.”
When did you found Liberty Bank?
I came on to help found Liberty Bank in 1972. I was 29 years old. I was the youngest bank president in the state of Louisiana. I had been the youngest to enter the marketplace.
How do you found a bank?
You have an idea of what you want it to be, and then you have to put everything in place after that. It’s just like starting a new business. You come up with a product, and then you have to sell it. You have to make money at it, and you have to keep all of the balls in the air at the same time. You have to produce income, offset your expenses. We made money in our first year of operation, which is unheard of in the industry. In banking, and almost any business, it normally takes 4-5 years.
What do you attribute that success to?
Hard work, dedication, and a good staff.
“You have to work as hard as you expect your staff to work.”
Even today, most of the time, I am the last one to leave. Back then, I was the first one to come in, and the last one to leave. I’m not the first one to come in anymore, but I am the last one to leave. And I do jobs to let my staff know that whatever I ask them to do, I’m willing to do it with them.
A lot of times, people in business, if they’re the owner, they think they don’t have to do the dirty work. If there’s paper in the parking lot, I gotta pick it up, because I expect all of my staff to do the same.
Could you share with me one of the toughest experiences in your many years of founding and leading this company?
’87, ‘88, and ’89. There was an oil industry bust in the south. All of the oil companies were down, all of the businesses were down, and the economy was down. We lost a lot of money those three years. It was the first time we lost money.
60% of the financial institutions in the state failed, or either merged with someone else. We had eleven locally owned community banks. Only two of us survived. That hole kept getting deeper and darker every day. We didn’t know if we would make it because so many others in front of us did not. That was the most challenging part of my career.
And then of course Katrina came, and we lost everything. We lost our files. We lost all of our equipment, we lost our customer base, we lost our employees. We had to start all over again without our customer base losing confidence in us, and to ensure that they felt that they could get their money out of the bank.
So those were two challenging times. One was in the late 80s and one was as recent as eleven years ago. So when I talk about obstacles, an obstacle happens every day and it’s the size of the obstacle that you have to prepare for, and look for the opportunity in.
Can we go back to your time in the late 80’s, because one of the reasons we are especially excited to speak with you is because of your long, deep history as an entrepreneur. We’ve heard about the challenges of Katrina, that were no doubt monumental, but we haven’t heard from any entrepreneurs who survived the oil bust. Can you tell me how you came out of it?
I saw it as an opportunity. My bank was having problems like all of the other banks.
There was a credit union that was failing, as well as other financial institutions. I had to get new capital from the bank and I didn’t know where I was going to get it from. The equivalent of the FDIC to the credit union (which insures credit unions) was trying to find a solution to save that credit union. And I said, if you give me the capital that I need, I’ll take that credit union problem off your hand. That’s how I got the capital.
“It was the first time ever that a commercial bank bought a credit union. It was the first time ever that the FDIC permitted a five rated bank (which is the worst rated bank that you can have) to acquire another financial institution.”
I had to go all the way up to Washington to get the approval. Everyone else turned me down, and I went all the way to the chairman of the FDIC and convinced him that’s what he should do.
Wow! So that conversation was pivotal. How did you do it?
Oh I would not have been here today. But I showed the FDIC a solution on how I could help myself get back in, because I stabilized everything. But I still had to raise capital, and nobody was giving me capital at that time. Just like an entrepreneur, I needed more capital to grow the business, and keep me operating. I was mandated to get more capital by the regulators. So I didn’t go the traditional route, I bought something in order to get what I needed. I had somebody pay me to buy their problem.
When you look at it, it’s no different than mergers that take place with smaller companies, it might be better to combine a company to save a company. The combination of two companies might be a way to save both companies to make something larger.
Those obstacles again, you have to look for the opportunity. If you take that philosophy that we have practiced all of these years, and you have hope.
And what about Katrina?
For Katrina, we relocated to Baton Rouge. That’s where our disaster center was. We lost all of our equipment, our communication lines, the vendor did not provide us with enough bandwidth for our communication. We lost all of our employees, and we literally had to start all over again. We literally operated manually and nobody knew we were. We couldn’t tell anyone until we could put a solution together, because they would lost confidence in us.
“We contacted a few banks and had them lend us their machinery after they closed. So instead of starting our work at 4pm, we would start our work at 2am, and use their machinery while their people went home.”
I had to buy new equipment and new software. Between the time I sat down with the salesman, had it installed, and did a conversion, it was a total of ten days. Normally it takes five to six months for that to happen.
That must have been an incredibly stressful time for you.
When exactly was that?
It was a month after Katrina. Maybe two months. Our disaster site failed us.
We were paying for a disaster recovery center and they couldn’t bring the 18 wheelers down with our equipment. So we had a backup plan. Communication was lost. We couldn’t even speak to our employees. We didn’t know where our IT people were. We lost our backup tapes. We had to find another way.
The storm took the power lines down at the FedEx distribution center in Memphis, and we sent two individuals with two backup tapes to go to two different places. We couldn’t get any of the four that we sent down. We finally got it within four days afterwards, and we had to threaten the disaster center to give us something. we finally got a machine at our disposal, but it was in Minneapolis. And then I couldn’t find our IT person, and the person who my IT person had fired happened to come to the bank and said, if you need some help, let me know.
Yes, yes I do.
Right. So I chartered a plane, and I called the president of FedEx, and said you have to find my backup tapes. So they literally put a dozen people looking through trucks looking for my backup tapes, and they found them.
I called a friend of mine in Memphis and said, go pick up my tapes, meet my guy at the airport, fly him up to pick up the tapes, fly him up through the Minneapolis to start the process, and we had to communicate everything through the internet which is against every security rule in the book. And the regulators told me, you can’t do that! And I said, well tell me what else to do? Just get out of my way (laughs).
We became the poster child for the FDIC for disaster planning, and the Federal Reserve developed a video of our story for disaster planning.
“And the first year after Katrina was our most profitable year in the history of the company.”
Wow! That is really is incredible.
Just like the oil bust gave us the opportunity to find capital by acquiring a financial institution, after Katrina, we needed to acquire some additional institutions in other states to diversify what we’re doing. That’s why we’re in 8 states now. It elevated our strategic plan to do it.
When I first went into banking, everything was manual. Every transaction, you had to put a card into a machine and punch in the numbers.
“That experience working 14-16 hours a day gave me the understanding of what needed to happen in great detail, so it permitted me to have a vision for how to do something, with nothing.”
So the obstacle is always an opportunity is the way we’ve lived.
That obstacle turned into a miracle. Is it safe to say that it was the most stressful time in your life as an entrepreneur?
Well, both of those times were stressful times.
The other side of that story is my wife and I and some friends had planned a trip to the Mediterranean a year before Katrina. And I didn’t think I would be able to make it. But we finally got the computers up with the disaster center.
And it was a twelve day cruise. And I decided to go on it, because I needed to retool. I did a lot of work while I was on the cruise. Planning and thinking, and strategizing. And it gave me a new energy.
That’s impressive that you managed to make it on the cruise throughout that time.
I’ll tell you another story. I decided to go at the last minute. and I had to fly to Atlanta to get to Rome. So I had to hustle to get a flight that morning, and my flight to Rome wasn’t until 6pm, and I was dead tired, so I fell asleep at the gate where the connecting flight was supposed to leave. I woke up, and there was no one around.
They changed the gate on me. So I ran to the new gate and they said, sorry, we gave your seat away. So the woman who was in charge, I looked at her name tag, and I said, you know something, you’re the second Katrina in my life. Her name was Katrina. True story.
And I told her about my Katrina story. She said just sit over there and wait for me. She was able to get someone off of the plane and got me a seat.
Oh yeah! We are gunna get you on that flight, sir!
Yup, and they did.
And that was over eleven years ago now. What’s next for Liberty Bank?
We always have new things in the works. We are trying to expand our mortgage division and our mortgage product to go nation wide. There are so many young people who need a mortgage. Young people coming out of school with a large amount of student loan debt that’s hurting their credit and their ability to accumulate money for a down payment, so we’ve gotten good at helping young people buy a house quicker and sooner than the marketplace will allow them to.
We are passionate about helping people buy a home. That’s an equity builder. That’s how people develop wealth, through real estate, and not necessarily through business. A business is basically your job, but you are your own boss. But you don’t make much more than you what you would normally get paid for your services of the business you are in.
What do you enjoy the most about being an entrepreneur?
Making things happen. Helping people. Successful implementation. I get recharged every time we do something new, and we roll it out and make it work.