A Bank Rebuilds - Tellers Are on the Front Line of the Recovery in New Orleans

By Gary Rivlin

NEW ORLEANS, Nov. 2 - One afternoon last week, Barbara and Robert Emelle, lifelong residents of New Orleans who have spent most of the last two months in Los Angeles, experienced a small touch of the familiar in a world otherwise turned upside down and inside out.

They took care of some business at a New Orleans branch of Liberty Bank and Trust, a black-owned financial institution whose operations center and seven of its eight branches were damaged in the aftermath of Hurricane Katrina. The Emelles had waited more than an hour for help at this branch in the Uptown area, 10 minutes from the central business district. The day before, they had their first glimpse of their home in New Orleans East, a predominantly black, largely middle-class neighborhood devastated by flooding, and, they said, it was "totaled."

But when asked about Liberty, their smiles were wide and bright.

"We've been Liberty customers since the early '70s," Ms. Emelle said. "It feels good to see them up and running."

Alden J. McDonald Jr., Liberty's president and chief executive, smiles broadly, too, when assessing his bank's health two months after the storm. Perched in makeshift offices in Baton Rouge, 70 miles from New Orleans, Mr. McDonald has labored to restore basic banking functions to his customers.

He has devised an ambitious program to draw deposits from institutions and individuals around the country that should provide the bank the cash it needs to start lending again, once businesses and residents return to New Orleans. Since the second week after the storm, the bank has been connected to the national A.T.M. network and after weeks of delays, Liberty customers are once again able to have access to their bank records and pay bills via the Internet.

And Liberty is now operating a pair of bank branches in New Orleans, though six remain closed.

"We have lots of hard work in front of us, but I have no doubt we're going to make it," Mr. McDonald said.

Mr. McDonald, who has agreed to allow a reporter to chronicle his efforts to rebuild in New Orleans, was able to speak without distraction for 45 minutes, a significant change from the first weeks after the storm when he was constantly interrupted by calls or employees' questions.

So confident is Mr. McDonald that the bank has regained its footing that he granted himself a week of vacation with his wife, who has been living in Atlanta with friends.

"I wouldn't take time off if I were worried about the longevity of the bank, if things hadn't stabilized," he said.

Towering issues still loom for Liberty, of course, just as they weigh on the profit and loss statements of all banks, large and small, affected by the storm. The biggest concern is the stiff losses expected from bad loans, followed closely by the fate of branches in those parts of the city whose future is uncertain.

J. P. Morgan Chase, for instance, has still not reopened 13 of 20 branches in New Orleans.

"All of them had water, and all of them are in areas of the city that just aren't inhabited right now," said John Kallenborn, president of the New Orleans region for J. P. Morgan Chase. "The question now for us is, How quick do you go back in?" The earliest date, he said, is January.

Mr. McDonald is not setting any timetable for opening Liberty's six closed New Orleans branches. His strategy for the foreseeable future, he said, is to focus on rebuilding his business in the sections of the city that are beginning to repopulate, including the French Quarter, the Garden District, Uptown and the West Bank. The bank opened its Uptown branch on Oct. 11, and the West Bank branch opened on Monday.

"I don't know when, or if, I'm going to open up those other six branches," Mr. McDonald said - and he will not know for some time, given the questions preoccupying almost every area business.

"Where will the jobs come from?" Mr. McDonald asked. "Will people be coming back?" Fueling his worries are conversations he has had in recent days with friends in other professions - doctors, dentists, lawyers and corporate executives - who tell him they are not certain they will ever move back.

The bank's payroll is less than half the size it was before the hurricane - in part because operating fewer branches requires fewer employees, and in part because more than half of the people who once worked at the bank are still scattered across the country. That means Mr. McDonald is saving $200,000 each month in personnel costs. The money will help Liberty, a modest-size bank with $350 million in pre-Katrina assets, in the near term as well as help offset bad loans and other losses.

Like every other bank executive in the Gulf Coast region, Mr. McDonald is currently analyzing his loan portfolio "to try to determine the anticipated losses." That number is sure to be sizable. In October, J. P. Morgan Chase announced that it was setting aside a $400 million reserve for problem loans and bad debt. The bank estimated mortgages and home equity loans on decimated homes would cost the bank $140 million, while defaulted small-business loans could cost $90 million and bad credit card debt another $100 million.

Liberty, which is privately held and therefore does not have to publicly report its anticipated losses, specializes in commercial and home loans. But while Mr. McDonald said bad debt would be a blow to the bank's bottom line, it would hardly be fatal.

"Even if the government does nothing about those bad loans - though I'm convinced they'll at least do something for us and every other community bank - I've still got a business model in place that lets me earn enough money to offset my anticipated losses," Mr. McDonald said.

"I feel bullish about Liberty," said William Michael Cunningham, who runs Creative Investment Research, which evaluates the financial health of minority-owned financial institutions on behalf of investors. "There's a great deal of loyalty to some of the black banks, and I'd include Liberty in that group. This is a bank with tight links to the community they serve."

That loyalty was in evidence last week at Liberty's Uptown branch, where a skeletal crew of five was working. All day, 10 or more people were in line waiting to see one of the bank's two tellers, said security guard, Anderson Williams, while others were forced to wait an hour or longer to see one of two customer service representatives. They were there to talk about everything from changing their addresses to a need for new checks to a desire to see their monthly statements.

"There have been crowds ever since we opened," said Donna Walker, who has worked at Liberty for 13 years and is temporarily staying with relatives 20 minutes away. "The more word spreads that Liberty is back and running, the more they pour in."

The opening of the West Bank branch, across the Mississippi River, Ms. Walker said, should help relieve the pressure.

Still, there are people like the Emelles, the couple who recently returned from Los Angeles. Both longtime employees of the public schools, they are retirees who say they do not have it in them to rebuild their lives in New Orleans East. They have decided instead to relocate to Atlanta.

"It's all very sad," Barbara Emelle said. "Katrina caused everything."

Portions of this article, Copyright 2005 The New York Times Company