Written By Hazel Trice Edney
In the fall of 1968, 57 years ago, cities across the nation were still smoldering from the fiery riots that followed the assassination of Dr. Martin Luther King Jr. Some cities never fully recovered.
Despite his life’s work for peace, civil rights, racial equity, and justice for all, it was in Dr. King’s final speech — the night before the April 4, 1968 assassination — that he spoke passionately and pointedly on the economic importance of supporting Black-owned businesses. This included Black-owned banks.
“We want a bank-in movement in Memphis,” Dr. King told the cheering crowd in what is called the “I’ve Been to the Mountaintop” speech at the Mason Temple Church of God in Christ. “We’ve got to strengthen Black institutions,” he said as he encouraged people to redirect their money to support Black banks and other Black-owned businesses.
Decades later, leaders of Black-owned banks say this wise economic movement that never fully came to fruition is still necessary. To support Black banks means to support Black home-ownership, Black business-development, Black neighborhoods, Black families, and the future of Black America, says Alden J. McDonald Jr., chief executive officer of the New Orleans-based Liberty Bank, the largest Black-owned bank in America with holdings surpassing a billion dollars. His son, Todd McDonald, Liberty’s president and chairman of the National Bankers Association, agrees.
At the helm of the 53-year-old institution, with eyes on the future, they both recently sat down to discuss the legacy of Liberty Bank, where Black America must economically go from here, and how Liberty is working to double its deposits from one billion to more than two billion dollars.
Given the economic struggles of Black people and the ebbs and flows of America’s overall economy, how has Liberty Bank amassed more than a billion dollars in deposits?
Alden McDonald: The history of Liberty started in 1972, more than a half century ago. And it started with a concept of having a multi-racial bank to attract business from all parts of the community. As time went on, it became an African-American-owned bank because our mission was to serve the underserved community and we wanted to find different ways of helping people to close the wealth gap and to create equity. So, through the years, we sort of got into a niche and a passion for mortgage loans because we felt homeownership was very important. Homeownership and small business lending was a key to growing the community economically; thereby growing the holdings of our bank.
What is your strategy for serving Black consumers when many other banks have red-lined Black neighborhoods and even discriminate against us and avoid dealing with us?
Alden McDonald: Black consumers represent a market niche. I came up with a poor family. So, we understood the challenges that the community had from day to day. So, when we built a company, the company was built on what we knew. And knowing the challenges of the community helped us in a lot of different ways of finding a way to serve the community, and a way to serve the community to make a profit because you have to make a profit in order to be sustaining. So, we understood the challenges of how to lend to the community.
As a former board chair of the National Bankers Association, the FDIC and other national banking and financial institutions reach out to you for wisdom. Why do they come to you and how do you advise these prestigious institutions on how to deal with Black communities?
Alden McDonald: They’re looking for board members who can add value to their business and help them grow. FDIC, for example, is in the business of managing banks. So, obviously they look for bank talent where they can get feedback and help to design policy. So, all of the boards I sit on, or used to sit on, I like to feel that they were interested in what I could add as far as value is concerned to their entity. And so, you have to know the people you’re lending to in order to be good at it. So, while we live in the community that we serve and we also live in other communities, we have an edge on how to lend and how to do business in the community at large.
How does the Black bank deal with the faith community and houses of worship when something like this happens?
Alden McDonald: We have the largest portfolio of Black church loans than any bank in the country. Churches are not exempt from paying their debts. And so, we deal with it from a business perspective. They owe the debt. We deal with them like we deal with everybody else. They’ve got to pay it. It’s real simple. And that’s the way we handle all of our creditors. We’re not a social organization. We’re a business.
What can the community do to strengthen Black banks?
Alden McDonald: Part of our marketing is that when you deposit money in Liberty, you help the community grow because we need deposits in our banks in order to lend out to borrowers.
Our borrowers, many of them — if not a huge majority — are from the urban communities or Black people. So, when you help us grow by making deposits with us, we then can lend…And so more of your deposits with us are used to build the community in which you live and help create jobs.
Hurricane Katrina hit Louisiana in the summer of 2005, the year that Liberty found itself in the midst of crisis. How did you get through that and back on your feet?
Alden McDonald: We always say wherever there’s an obstacle, there’s an opportunity. So, Hurricane Katrina was an obstacle for us. We’d lost all of our records. We’d lost all of our employees; 70% of our customer base had to relocate. We had to rebuild a company, rebuild a business in a very short period of time in order to survive. It took us a couple of years to sort of get everything back and rolling again. But we did it through hard work, our staff, and friends.
Did other major banks help?
Alden McDonald: No. The banks in our community helped us. The community itself helped us a lot because it had a good understanding that we were helping the community grow again. They needed loans. And so, we were still able to make loans. We just had to get our infrastructure back in place. We still had a lot of deposits from different people. And so, it was just building a bank again.
Your son, Todd McDonald, is now president of Liberty Bank and chairman of the National Bankers Association. How did you pass that passion, that knowledge, and that mantle along to your son?
Alden McDonald: In any business, you have to have a succession plan. My son worked for 20-plus years for the bank. And so, in succession planning, you begin to build individuals to succeed everyone. And he learned the business from bottom up and did a pretty good job at it. And he thought he was capable of taking it to the next level. For example, he told me, “It took you 50 years to get to a billion. It’s not going to take me 50 years to get to the second billion. I’m going to get to the second billion within five years.” I said, “Okay. Go for it.” And so, he earned it to begin with. He went through the same process that we would go through for anybody being a part of the succession plan. It just so happens that he was my son.
How did you come to follow in your father’s footsteps?
Todd McDonald: I was around banking all my life. I’ve been with the bank for more than 22 years. I always knew what my Dad did. But initially, I didn’t really appreciate what he did. I knew he would go to work. He would stay late. He would travel a lot. But then when I graduated from Morehouse College and started spending more time at the bank, that was my first time being a full-time employee. And so, I started realizing, you know, the impact that the bank and that he and all of the bank’s leaders had on the communities that we serve. And so, that was cool.
You’ve told your father that you will bring in another billion dollars. How will you bring in the second billion when other Black banks are still struggling?
Todd McDonald: Typically, we’ve grown through acquisition. So we’ve actually purchased 12 banks over the history of Liberty. So that’s one way to do it. But the second way is to expand geographically. When you expand geographically, you have new states, you have new cities and municipalities, you have new school systems where you can attract the deposits. And so, typically, when you go after deposits, most of those entities want you to have a physical footprint. And so, when you start to expand geographically with physical locations, that should organically start to build up deposits. So, the lending arm will come next. We’re physically in 11 states right now. So that’s kind of the most traditional way to do it.
What can you teach other Black-owned banks about survival and growth?
Todd McDonald: Coming out of several downturns and several disasters over the history of Liberty Bank, we’ve learned how to adjust. Like the first downturn banking experienced was probably in the 80s with the Louisiana oil bust when 60% of banks in Louisiana failed, closed, or sold. And that was a trying time for Liberty as well. And they had to kind of double down on the areas of banking that were not being paid attention to. And they had to adjust and write off a lot of loans. But then they had to make more loans to offset the write-offs. That was kind of their first experience. And then we tried some new things in the 90s that made us kind of readjust our business model. So, again a deflection point, it almost seems like every 10 years.
After that, we lost everything in 2005 — essentially everything to Hurricane Katrina. So, we had to adopt new technology because at that point a lot of our clients had moved to Houston and Atlanta. And so, we took on a lot of new technology to do online banking. And so, again, that was another pivot. That was another disaster or change in the sector that forced us to evolve.
And then you look at the economic downturn of 2008 and 2010. You had a lot of banks that closed. And so, when the banks closed, we purchased them. So that was another pivot. And then we had COVID where everything kind of went out the window; where banks didn’t really know what to do because everyone had stopped receiving income as a business or were laid off. So, then we had to really expedite adoption of technology. So, we adopted the technology that was at our fingertips, but we also adopted new technology. We did a lot of that to expedite those changes. And so, banking is constantly evolving. I guess the secret sauce is to remain committed to banking, committed to our community; and committed to our team members at the bank.
How are the millennials and other younger generations doing? Are they doing business with Black-owned banks?
Todd McDonald: It’s difficult. You have a lot of people in my generation using different technology instead of traditional banks. They use fintech (financial technology) and apps instead of banking in the movement of money. The key to understanding the fintech space is that fintech mechanisms are not banks. They’re just kind of conduits of transaction flow. But they have to have banks behind them. They have to allow banks to transact with each other. And so, while they’re not opening checking accounts like their parents did, they’re opening profiles and the traditional banking network is behind the scenes.
So how do we deal with the check-cashing and the payday lending places that show up in our community? How can we make sure that people know and are educated to the fact that these are not actual banks?
Todd McDonald: That’s something that I’m very passionate about. When you look at people who are paying 500-600% interest rates on emergency loans; that pulls out a lot of cash flow from our communities immediately. A bank like Liberty could refinance that person out of that 500 to 600% interest loan to put them into a more competitive market rate loan. It would automatically save them hundreds of dollars per month. And it puts the money back into their pockets.
As chair of the National Bankers Association, what is the goal for Black banks?
Todd McDonald: The goal is definitely growth. There are a total of 23 Black banks now. But back in the 90s, there were more than a hundred. So, there’s been a ton of contractions in the marketplace. But, the National Bankers Association is not only made up of Black-owned banks; it’s also Asian-owned, Hispanic-owned, Native American-owned, and women-owned that make up membership.
There are 150 Minority Depository Institutions (MDIs) in the country. And there are 4,600 banks in the U. S. alone. So, look at 150 compared to 4600 (3.2%). That’s a very small number. So, how do we grow that base? Let’s say that if the Black-owned banks collectively had $10 billion and the Asian banks had $300 billion collectively, how do we get the Black-owned banks to start thinking at that level? We can. But we just historically have not supported one another.
What is the greatest obstacle to the growth of Black-owned banks?
Todd McDonald: I would say the biggest obstacle is our community not supporting ourselves. We’ve had the history. We’ve had the same products as a lot of our other institutions and for some reason we don’t support each other. I think that goes back to before I was born; before my parents were born. We do not have a sense of community when it comes to us for some reason. You look at the Jewish community; you look at the Hispanic community; you look at the Asian community. You look at all of these other banks, and they do business with themselves.
So, what is that attitude or mentality we will have to break in order to get people to take a second look at Black-owned banks and be intentional about it?
Todd McDonald: Just spreading the word and sharing why it’s important. A lot of people, for some reason a lot of our communities don’t understand that. It’s taken us this long to get to this point. And the playing field is not level.
What would be your dream if we would support one another as Dr. King said, what might we accomplish?
Todd McDonald: I think a very tangible dream is to get back the loans that are being done by the predatory lenders. When you look at the amount of money that has been sucked out of our communities, underserved communities, it’s billions of dollars. And so, I give this very simple example: One refinanced loan that saves a person $300 a month…Let’s just do that by a million people. That’s $300 million dollars per month – times 12. That’s billions of dollars annually.
Is it realistic to expect everyone in the community to switch over to a Black-owned bank?
Todd McDonald: I never tell anybody to just have one bank. Have multiple banks. But at least have an account with one of us because your deposit is going to help us make a loan to somebody that would have gone to a 600% interest rate facility rather than coming to us at a market rate. So, can we all just come into a room and pull out our debit cards with a Black-owned bank? That would be amazing. And it’s not unrealistic. And that would be the dream.
RELATED CONTENT: Liberty Bank Acquires United Bank Branches
HOSTIFI CHEAP HOSTING