Profile: Liberty Bancorp Inc (LBCP.O)

Liberty Bancorp, Inc. (Liberty Bancorp) is a unitary savings and loan holding company. The Company’s subsidiary Liberty Savings Bank, F.S.B. (the Bank or BankLiberty) is a financial institution serving the financial service needs of consumers and businesses within its market area. The Bank attract deposits from the general public and use these funds to originate loans secured by real estate located in its market area. The Bank’s real estate loans include construction loans, commercial real estate loans, and loans secured by single-family or multi-family properties. To a lesser extent, BankLiberty originates consumer loans and commercial business loans. On November 7, 2008, the Company acquired KLT Bancshares, Inc., the parent company of Farley State Bank.

Lending Activities

The Company’s loans are originated primarily in Clay, Clinton, Platte and Jackson Counties in Missouri, which comprise the northern and eastern portions of the Kansas City, Missouri metropolitan area. At September 30, 2009, its loan portfolio included $69.2 million in loans secured by properties under construction, with such loans representing 22.1% of the total loan portfolio as of September 30, 2009. The Company originates spec loans only to builders with experience building and selling spec single-family residences. The spec residential mortgage construction loans generally provide for the payment of interest only during the construction phase, which is 12 months. At September 30, 2009, loans for the construction of spec sale homes totaled $9.1 million, or 2.9%, of its total loan portfolio and 13.1% of its portfolio of construction loans. It also originates construction loans for customers to have their personal residences custom-built. The Company also makes loans for the construction of non single-family residential properties, including loans for the construction of multi-family residential properties, such as condominiums and planned multi-family communities.

As of September 30, 2009, loans on single-family one- to four-unit, residential properties accounted for $54.6 million, or 17.4%, of the Company’s loan portfolio. It originates fixed-rate fully amortizing loans with maturities ranging between 10 and 30 years. The Company offer fixed-rate and adjustable-rate mortgage loans secured by income-producing multi-family and commercial real estate. The multi-family and commercial real estate loans are secured by improved property, such as office buildings, retail centers, apartment buildings and churches, which are located in its primary market area. Its consumer loans consist primarily of home equity loans and lines of credit, and, to a much lesser extent, automobile loans, loans secured by deposit accounts and other miscellaneous consumer loans. As of September 30, 2009, consumer loans constituted approximately $15.0 million, or 4.8%, of the total loan portfolio. As of September 30, 2009, commercial business loans totaled $22.5 million, or 7.2%, of its total loan portfolio.

Investment Activities

The Company invests in mortgage-backed securities primarily issued or guaranteed by the United States government or an agency thereof. Mortgage-backed securities represent a participation interest in a pool of single-family or multi-family mortgages, the principal and interest payments, on which are passed from the mortgage originators, through intermediaries (generally quasi-governmental agencies) that pool and repackage the participation interests in the form of securities, to investors, such as the Bank. The Company has invested primarily in government and agency securities backed the United States and municipal securities, and mortgage-backed securities and participation certificates issued by Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae).

Sources of Funds

Deposits are a source of funds for lending and other investment purposes. In addition to deposits, the Company derives funds from loan principal repayments, interest payments and maturing investment securities. It attracts principally from within the market area by offering a variety of deposit instruments, including accounts and certificates of deposit ranging in term from 91 days to 60 months, as well as negotiable order of withdrawal (NOW), passbook and money market deposit accounts. Deposit account terms vary, principally on the basis of the minimum balance required the time periods the funds must remain on deposit and the interest rate. The Company also offers individual retirement accounts. The Company uses advances from the Federal Home Loan Bank of Des Moines to supplement its supply of lendable funds and to meet deposit withdrawal requirements. It also borrows funds pursuant to the Federal Home Loan Bank’s Community Investment Program, which funds are used to make loans to low and moderate income borrowers at rates established pursuant to the program.