New Orleans-based Liberty Bank and Trust Company -- one of the 10 largest African-American owned commercial banks in the United States -- is celebrating Black History Month in February with the announcement of a historic deal. Liberty Financial Services Inc., parent company of Liberty Bank, has inked a deal to acquire First American Bank of Jackson, Miss., the only minority-owned bank in the Magnolia State.
If approved by First American stockholders and regulatory authorities, Liberty Bank will become the first black-owned bank in Louisiana history to expand beyond state lines, says University of New Orleans (UNO) historian Arnold Hirsch. "If you believe that progress and the continuation of the Civil Rights revolution is going to tackle economic issues and bring prosperity to the black community, something like this [agreement] has got to be a logical next step," says Hirsch. "Whether it works or not, we'll see."
Alden J. McDonald Jr., president and CEO of Liberty Financial Services, expressed optimism. Black Enterprise Magazine recently ranked Liberty as the nation's seventh largest black-owned bank -- up from No. 11 just three years ago. "By June 30, we will probably be in the top five," McDonald says, projecting that the merger with the Jackson bank will boost Liberty's total assets from $232 million to more than $250 million. Future plans call for Liberty to branch out into Texas and Alabama.
While there have been other mergers of black-owned banks elsewhere in the nation, the Liberty deal represents a turning point for black banks in Louisiana. The first major financial institution to enjoy widespread support by blacks in Louisiana was the Freedmen's Savings & Trust Co., which was chartered by Congress in 1865, according to historian John Blassingame's book, Black New Orleans: 1860-1880. By mid-1867, the bank reported deposits of $1.9 million. But Freedmen's was crippled by the depression of 1873 and alleged mismanagement. The crash wiped out the reserves of black businesses and the savings of laborers, who were former slaves.
"After Emancipation, the event which had the most far-reaching economic influence on the black community was the collapse of the Freedmen's Bank & Trust in 1874," Blassingame wrote. "The failure of the bank and the general depreciation of property values in New Orleans in the 1860s and '70s prevented the growth of a large, black property-holding class."
After the Freedmen's bank collapsed, savings and loans -- with high interest rates-- became the primary lending institutions for black Louisianians during the first half of the 20th century, McDonald says. The first black-owned bank in Louisiana was First Federal of Baton Rouge, which opened in the 1950s, along with United Federal Savings and Loan in New Orleans. In early 1972, Republic Bank became the first black-owned bank in New Orleans, but it quickly collapsed amid allegations of scandal. On Nov. 2, 1972 -- 100 years after the establishment of the first New Orleans branch of the Freedmen's bank -- Liberty Bank opened its doors.
Xavier University president Dr. Norman Francis, the first and only chair of the bank's board of directors, then tried to recruit Alden McDonald as the bank's first and only president. "I turned it down a couple of times," recalls McDonald. A former part-time quality control worker at the NASA/Michoud Assembly Center, McDonald left the space program in 1966 when the New Orleans banking community finally opened its doors to blacks. McDonald worked at International City Bank (ICB) for six years before joining Liberty Bank, which had assets of only $2 million -- roughly what Freedmen's reported a century earlier.
As president of Liberty, McDonald would acquire First Federal in Baton Rouge when the historic bank faltered during the Louisiana oil bust of the 1980s. Liberty purchased United Federal in the 1990s. During its 30-year history, Liberty Bank has turned a profit in all but four years, three years of which occurred during the oil bust, McDonald says. Presently, Liberty Bank serves more than 40,000 customers at 10 locations; large customers include Aetna Inc., American Express, the City of New Orleans, and the Internal Revenue Service.