Liberty Bancorp 10Q 2007 Q3 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to __________

Commission File Number: 000-51992

LIBERTY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Missouri		20-4447023
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

16 West Franklin Street, Liberty, Missouri		64068
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (816) 781-4822

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x. No o .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class		Outstanding August 6, 2007
Common Stock, par value $0.01 per share		4,761,187

LIBERTY BANCORP, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2007

INDEX

	PAGE NO.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements	1

Consolidated Balance Sheets at June 30, 2007
and September 30, 2006 (unaudited)	1

Consolidated Statements of Earnings for the three and nine months ended
June 30, 2007 and 2006 (unaudited)	2

Consolidated Statements of Comprehensive Earnings for the three and nine
months ended June 30, 2007 and 2006 (unaudited)	3

Consolidated Statements of Cash Flows for the nine months ended
June 30, 2007 and 2006 (unaudited)	4

Notes to Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations	12

Item 3. Quantitative and Qualitative Disclosures about Market Risk	23

Item 4. Controls and Procedures	23

PART II – OTHER INFORMATION	24

Item 1. Legal Proceedings	24

Item 1A. Risk Factors	24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3. Defaults Upon Senior Securities	25

Item 4. Submission of Matters to a Vote of Security Holders	25

Item 5. Other Information	25

Item 6. Exhibits	25

Signatures	26

Certifications	27

LIBERTY BANCORP, INC.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets

(Unaudited)

	June 30,			September 30,
Assets	2007			2006
Cash and due from banks	$	6,514,600			6,943,701
Federal funds sold		4,640,000			6,460,000
Total cash and cash equivalents		11,154,600			13,403,701
Securities available for sale - taxable, at market value (amortized cost
of $35,574,178 and $29,710,739, respectively)		35,329,766			29,543,093
Securities available for sale - non-taxable, at market value (amortized cost
of $12,353,769 and $6,435,496, respectively)		12,148,921			6,339,537
Mortgage-backed securities - available for sale, at market value
(amortized cost of $21,040,152 and $24,863,446, respectively)		20,581,661			24,217,321
Stock in Federal Home Loan Bank of Des Moines		1,755,100			1,952,900
Loans receivable, net of allowance for loan losses
of $2,583,066 and $2,144,121, respectively		230,420,880			200,222,378
Loans held for sale		1,400,204			459,201
Premises and equipment, net		7,893,831			6,700,189
Bank-owned life insurance		3,003,984			-
Foreclosed real estate, net		1,381,484			1,579,848
Accrued interest receivable		1,914,877			1,486,355
Other assets		1,794,406			1,656,842
Total assets	$	328,779,714			287,561,365

Liabilities and Stockholders' Equity
Customer and brokered deposits	$	243,145,053			198,470,979
Accrued interest payable		496,795			316,366
Advances from FHLB		31,463,730			34,063,738
Securities sold under agreement to repurchase		2,705,299			3,383,997
Advances from borrowers for taxes and insurance		620,663			843,512
Other liabilities		1,367,847			1,340,470
Accrued income taxes		-			160,727
Total liabilities		279,799,387			238,579,789
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares
authorized; shares issued and outstanding - none		-			-
Common stock, $0.01 par value; 20,000,000 shares authorized;
4,761,187 and 4,760,137 shares issued and outstanding		47,612			47,601
Additional paid-in capital		31,815,651			33,001,965
Common stock acquired by ESOP		(759,280	)		(933,192	)
Common stock acquired by Incentive Plan		-			(18,676	)
Accumulated other comprehensive earnings (loss), net		(571,882	)		(573,130	)
Retained earnings - substantially restricted		18,448,226			17,457,008
Total stockholders' equity		48,980,327			48,981,576
Total liabilities and stockholders' equity	$	328,779,714			287,561,365


See accompanying notes to consolidated financial statements.

LIBERTY BANCORP, INC.

Consolidated Statements of Earnings

(Unaudited)

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Interest income:
Loans receivable	$	4,401,544		3,824,821		12,590,319		10,181,985
Mortgage-backed securities		228,017		239,598		719,685		750,547
Securities - taxable		447,515		239,792		1,253,177		643,089
Securities - non-taxable		80,116		54,733		220,980		166,198
Other interest-earning assets		86,461		57,870		245,780		160,896
Total interest income		5,243,653		4,416,814		15,029,941		11,902,715
Interest expense:
Customer and brokered deposits		2,315,102		1,571,397		6,411,426		4,300,141
Securities sold under agreement to repurchase		20,661		22,629		59,337		47,842
ESOP note payable		-		6,600		-		19,846
Advances from FHLB		356,878		497,553		990,313		1,152,557
Total interest expense		2,692,641		2,098,179		7,461,076		5,520,386
Net interest income		2,551,012		2,318,635		7,568,865		6,382,329
Provision for loan losses		267,105		215,000		465,307		685,000
Net interest income after
provision for loan losses		2,283,907		2,103,635		7,103,558		5,697,329
Noninterest income:
Loan service charges		20,450		14,006		70,173		55,529
Gain on sale of loans		73,875		56,098		180,440		146,236
Change in cash surrender value of BOLI		3,984		-		3,984		-
Deposit account and other service charges		264,918		262,434		748,689		707,165
Total noninterest income		363,227		332,538		1,003,286		908,930
Noninterest expense:
Compensation and benefits		1,147,174		1,006,536		3,319,374		2,829,629
Occupancy expense		145,724		125,878		466,488		370,330
Equipment and data processing expense		195,464		185,188		595,508		534,408
Operations from foreclosed real estate, net		106,292		66,911		275,932		73,324
Federal deposit insurance premiums		6,842		5,914		19,684		17,696
Professional and regulatory services		99,791		74,472		322,954		211,210
Advertising		66,358		117,536		218,035		294,568
Correspondent banking charges		65,183		65,697		192,139		187,507
Supplies		30,955		28,506		97,766		111,839
Other		169,353		156,162		546,884		456,933
Total noninterest expense		2,033,136		1,832,800		6,054,764		5,087,444
Earnings before income taxes		613,998		603,373		2,052,080		1,518,815
Income taxes		208,000		213,000		713,000		524,000
Net earnings	$	405,998		390,373		1,339,080		994,815
Basic and diluted earnings per share	$	0.09		0.08		0.29		0.21
Dividends per share	$	0.025		0.057		0.075		0.171

See accompanying notes to consolidated financial statements.

LIBERTY BANCORP, INC.

Statements of Comprehensive Earnings

(Unaudited)

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007		2006

Net earnings	$	405,998			390,373			1,339,080		994,815
Other comprehensive earnings:
Unrealized gain (loss) on securities and
MBSs available for sale, net:
Unrealized gains (losses) arising
during the period, net of tax		(313,301	)		(237,787	)		1,248		(577,522	)
Comprehensive earnings	$	92,697			152,586			1,340,328		417,293

See accompanying notes to consolidated financial statements.

LIBERTY BANCORP, INC.

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	June 30,
	2007			2006
Cash flows from operating activities:
Net earnings	$	1,339,080			994,815
Adjustments to reconcile net earnings to net
cash provided by (used for) operating activities:
Depreciation expense		343,051			329,094
ESOP expense		249,880			110,871
Stock option and incentive plan expense		147,318			20,997
Amortization of premiums (discounts) on investments, net		(67,956	)		59,366
Amortization of unearned discount on loans
and deferred loan fees, net		(229,213	)		(319,082	)
Provision for loan losses		465,307			685,000
Loans held for sale - originated		(15,557,751	)		(13,377,755	)
Loans held for sale - proceeds from sale		14,797,188			14,295,346
Loss (gain) on foreclosed real estate, net		226,329			54,483
Gain on sale of loans		(180,440	)		(146,236	)
Increase in cash surrender value of bank-owned life insurance		(3,984	)		-
Decrease (increase) in:
Accrued interest receivable		(428,522	)		(419,249	)
Other assets		(138,296	)		(580,046	)
Increase (decrease) in:
Accrued interest on deposits and other liabilities		207,806			100,094
Accrued income taxes		(160,727	)		38,727
Net cash provided by operating activities		1,009,070			1,846,425
Cash flows from investing activities:
Net change in loans receivable		(32,103,953	)		(38,802,931	)
Mortgage-backed securities:
Available for sale - purchased		-			(653,756	)
Available for sale - principal collections		3,811,123			4,579,222
Securities available for sale:
Purchased		(16,051,584	)		(8,507,143	)
Proceeds from maturity or call		4,350,000			3,665,000
Proceeds from foreclosed real estate, net		1,641,392			3,112,340
Purchase of stock in FHLB of Des Moines		(1,300,100	)		(1,018,300	)
Redemption of stock in FHLB of Des Moines		1,497,900			391,000
Purchase of premises and equipment		(1,536,693	)		(1,066,775	)
Purchase of bank-owned life insurance policy		(3,000,000	)		-
Net cash provided by (used for) investing activities	$	(42,691,915	)		(38,301,343	)

LIBERTY BANCORP, INC.

Consolidated Statements of Cash Flows

(Unaudited)

(Continued)

	Nine Months Ended
	June 30,
	2007			2006

Cash flows from financing activities:
Net increase (decrease) in deposits	$	44,674,074			34,805,206
Increase (decrease) in advances from
borrowers for taxes and insurance		(222,849	)		(278,539	)
Proceeds from advances from the FHLB		186,900,000			330,350,000
Repayment of advances from the FHLB		(189,500,008	)		(322,950,008	)
Securities sold under agreement to repurchase:
Proceeds		43,408,840			35,842,284
Repayments		(44,087,538	)		(34,360,062	)
Proceeds from exercise of stock options		8,695			2,400
Repurchase of common stock for stock award plan		(1,399,608	)		-
Cash dividends		(347,862	)		(330,435	)
Net cash provided by (used for)
financing activities		39,433,744			43,080,846
Net increase (decrease) in cash and cash equivalents		(2,249,101	)		6,625,928
Cash and cash equivalents at beginning of period		13,403,701			10,471,038
Cash and cash equivalents at end of period	$	11,154,600			17,096,966


Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest on customer and brokered deposits	$	6,277,461			4,183,592
Interest on ESOP note payable		-			6,646
Interest on securities sold under agreement to repurchase		59,416			47,842
Interest on advances from FHLB of Des Moines		971,463			1,152,557
Federal income taxes		990,578			405,000
State income taxes		19,842			44,631
Real estate acquired in settlement of loans		4,044,067			3,239,145
Loans originated to finance the sale of foreclosed real estate		2,374,710			-

See accompanying notes to consolidated financial statements.

LIBERTY BANCORP, INC.

Notes to Consolidated Financial Statements

(1)

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Such adjustments were of a normal recurring nature. The results of operations for the three- and nine- month periods ended June 30, 2007 are not necessarily indicative of the results that may be expected for the entire year or any other interim period. For additional information, refer to the consolidated financial statements and footnotes thereto of the Company for the year ended September 30, 2006 contained in the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission on December 26, 2006.

In preparing financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for loan losses and the fair values of financial instruments.

(2)

Organization

Liberty Bancorp, Inc. (the “Company” or “Liberty Bancorp”) a Missouri corporation, was formed on February 14, 2006 and became the holding company for BankLiberty (formerly Liberty Savings Bank, F.S.B.) upon completion of the Bank’s conversion from a mutual holding company form to a stock holding company structure on July 21, 2006. A total of 2,807,383 shares of common stock were sold in the stock offering at the price of $10.00 per share. In addition, a total of approximately 1,952,754 shares of common stock were issued to the minority shareholders of the former Liberty Savings Bank, F.S.B. representing an exchange ratio of 3.5004 shares of Company common stock for each share of Liberty Savings Bank, F.S.B. common stock. Fractional shares in the aggregate, or 36 shares, were redeemed for cash. Total shares outstanding after the stock offering and the exchange totaled 4,760,137 shares. Net proceeds of $25.6 million were raised in the stock offering, excluding $1.2 million which was loaned by the Company to a trust for the Employee Stock Ownership Plan (the “ESOP”), enabling it to finance the purchase of 153,263 shares of common stock in the offering and exchange. Direct offering costs totaled approximately $1.3 million. In addition, as part of the second-step conversion and dissolution of Liberty Savings Mutual Holding Company, the Bank received $694,000 previously held by this entity.

LIBERTY BANCORP, INC.

Notes to Consolidated Financial Statements

(3)

Earnings Per Share

Following is a summary of basic and diluted earnings per common share for the Bank for the three and nine months ended June 30, 2007 and 2006:

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Net earnings	$	405,998		390,373		1,339,080		994,815


Weighted-average shares - Basic EPS		4,587,316		4,685,075		4,609,333		4,679,891
Stock options - treasury stock method		46,967		38,890		47,929		38,890
Weighted-average shares - Diluted EPS		4,634,283		4,723,965		4,657,262		4,718,781
Basic and diluted earnings per common share	$	0.09		0.08		0.29		0.21
Anti-dilutive shares		90,753		-		35,955		-

Weighted-average shares outstanding for the three and nine months ended June 30, 2006 have been adjusted by the exchange ratio of 3.5004 to calculate earnings per share and dividends per share.

The following table illustrates the effect on net earnings and earnings per share as if the fair value based method had been applied for the three and nine months ended June 30, 2006.

	Three Months Ended			Nine Months Ended
	June 30,			June 30,
	2006			2006
Net earnings	$	390,373			994,815

Total stock-based employee compensation
expense determined under fair value based
method for stock options, net of related
tax effects		(17,722	)		(78,639	)
Pro-forma net earnings	$	372,651			916,176
Earnings per share:
Basic and diluted - as reported	$	0.08			0.21
Basic - pro forma	$	0.08			0.20
Diluted - pro forma	$	0.08			0.19

LIBERTY BANCORP, INC.

Notes to Consolidated Financial Statements

(4)

Retirement Benefits

The components of the net periodic cost for postretirement medical benefits are summarized as follows:

	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

Service cost	$	1,671			1,671			5,013			5,013
Interest cost		4,576			5,681			13,728			17,043
Amortization of transition obligation		3,134			3,135			9,402			9,405
Amortization of prior service cost		(2,416	)		(2,416	)		(7,248	)		(7,248	)
Amortization of actuarial gain		(3,050	)		(1,080	)		(9,150	)		(3,240	)
Over (under) accrual		(15	)		(3,091	)		(45	)		(9,273	)
Net periodic cost	$	3,900			3,900			11,700			11,700

Directors’ retirement plan expense was $19,800 for the nine months ended June 30, 2007 and 2006. The expense consisted primarily of interest cost.

(5)

Stock Options

As authorized by the 2003 Incentive Equity and Deferred Compensation Plan (the “2003 Plan”), the Board of Directors granted 78,760 options to non-employee directors and 96,260 options to certain officers and employees during fiscal year 2004. The Plan authorizes the award of up to 258,064 shares of common stock, subject to restrictions, to be issued to directors, officers and employees of the Bank. The Plan provides for the grant of stock options, stock appreciation rights, restricted stock and unrestricted stock. Options expire ten years from the date of the grant. Stock options to directors are fully vested on the grant date of June 16, 2004. Options granted to the Bank’s CEO are vested over three years and three months and options granted to certain other officers and employees are vested over a five-year period. On January 27, 2005 the Board of Directors granted an additional 38,504 options to certain officers and employees. Options granted to the CEO are vested over a period of three years and eight months and options granted to certain officers and employees are vested over a five-year period. On November 23, 2005 the Board of Directors granted an additional 42,440 options to directors and officers. Options granted to the board, CEO, and certain officers, were vested over a ten-month period.

In connection with the completion of the Conversion in July 2006, the Company assumed the Plan and all outstanding options and shares were adjusted based upon the 3.5004 exchange ratio. The exercise prices were adjusted to reflect the proportional change in values that resulted from the exchange.

As authorized by the Liberty Bancorp, Inc. 2007 Equity Incentive Plan (the “2007 Plan”), the Board of Directors granted 25,150 options to non-employee directors and 65,500 options to certain officers and employees on February 27, 2007. The 2007 Plan authorizes the award of up to 125,649 shares of common stock, subject to restrictions, to be issued to directors, officers and employees of the Bank. The Plan provides for the grant of stock options, stock appreciation rights, restricted stock and unrestricted stock. Options expire ten years from the date of the grant. All 90,650 options granted are vested over a five-year period.

Prior to October 1, 2006, the Company applied the intrinsic value method of accounting for stock-based compensation expense under APB 25 and adopted the disclosure requirements under SFAS No. 123. Under the intrinsic value method no compensation expense was recognized in the financial statements since the exercise price of the Company’s stock was equal to the market price of the stock at the grant date.

LIBERTY BANCORP, INC.

Notes to Consolidated Financial Statements

Effective October 1, 2006, the Company adopted SFAS No. 123R, “Share-Based Payment,” using the modified prospective method of application. Under this method of application, the Company is required to record stock-based compensation expense equal to the fair value of the unvested portion of previously granted awards that are outstanding as of the effective date over the requisite service period. SFAS No. 123R does not address the accounting for employee stock ownership plans, which is covered by SOP 93-6. SFAS No. 123R supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.”

The Company has estimated the fair value of awards granted during the nine-months ended June 30, 2007 and 2006 under its stock option plan utilizing the Black-Scholes pricing model to be $3.00 and $1.70, respectively. There were no awards granted during the three months ended June 30, 2007 and 2006. The assumptions used in the Black-Scholes pricing model and fair value of awards granted were as follows:

	Nine Months Ended
	June 30,
	2007			2006
Expected dividend yield		2.00	%		3.00	%
Risk-free interest rate		4.53	%		4.23	%
Expected life of options	7.50 years			5.00 years
Expected volatility		21.70	%		25.13	%
Fair value of awards	$	3.00		$	1.70

Stock option compensation expense, as a result of the adoption of SFAS 123R is as follows:

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006

Pretax	$	21,107		-	$	46,446		-

After tax		13,509		-		29,726		-

Basic and diluted earnings per share	$	0.00		-	$	0.01		-

At June 30, 2007, the total unrecognized compensation expense related to nonvested stock options was approximately $240,000 and is expected to be recognized over the weighted-average period of 3.49 years.

LIBERTY BANCORP, INC.

Notes to Consolidated Financial Statements

A summary of the Company’s stock option activity under the Plan for the nine months ended June 30, 2007 is as follows:

						Weighted-
						Average
				Weighted-		Remaining
				Average		Contractual		Aggregate
	Number			Exercise		Term in		Intrinsic
	of Shares			Price		Years		Value
Outstanding at October 1, 2006		234,963		$	7.31		8.07	$	-
Granted		90,650			11.27		-		-
Exercised		(1,050	)		8.28		-		-
Expired		-			-		-		-
Forfeited		(1,500	)		-		-		-
Outstanding at June 30, 2007		323,063			8.42		8.00		863,064
Exercisable at June 30, 2007		180,005			7.24		7.38		682,933
Vested and expected to vest at
June 30, 2007		180,005		$	7.24		7.38	$	682,933

A summary of the total value of options exercised, the amount of cash received from the exercise of stock options, and the total fair value of shares vested is as follows for the periods indicated.

	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006

Intrinsic value of options exercised	$	-		-		2,909		500

Cash received from the exercise of options		-		-		8,695		2,400

Fair value of shares vested		72,685		62,028		119,109		274,514

Restricted Stock Awards

During fiscal year 2004, as authorized by the 2003 Plan, two directors each received a restricted stock award of 6,125 shares as adjusted by the exchange ratio of 3.5004, which vests over three years. On February 27, 2007, as authorized by the 2007 Plan, the Board of Directors granted 31,400 restricted stock awards to non-employee directors and 78,000 awards to certain officers and employees. All awards are vested over a five-year period. A summary of the Company’s restricted stock compensation expense is as follows:

Three Months Ended

Nine Months Ended

June 30,

2007

2006

2007

2006

Restricted Compensation Expense

66,325

6,999

100,872

20,997

At June 30, 2007, the total unrecognized expense was $1.2 million and is expected to be recognized over the next five years.

LIBERTY BANCORP, INC.

Notes to Consolidated Financial Statements

A summary of the Company’s nonvested stock award activity for the nine months ended June 30, 2007 is as follows:

	Number			Weighted-
	of			Average
	Nonvested			Grant Date
	Shares			Fair Value
Nonvested at October 1, 2006		4,080		$	6.86
Granted		109,400			11.27
Vested		(4,080	)		6.86
Forfeited		-			-
Nonvested at June 30, 2007		109,400		$	11.27

(6)

Securities

Securities having a continuous unrealized loss position at June 30, 2007 are summarized as follows:

	Less than 12 Months					12 Months or Longer					Total
	Market		Unrealized			Market		Unrealized			Market		Unrealized
	Value		Loss			Value		Loss			Value		Loss
Available for sale- debt securities:
Federal agency obligations	$	15,104,687		(95,687	)		14,267,378		(170,806	)		29,372,065		(266,493	)
State and municipal obligations		2,346,655		(48,269	)		5,269,448		(156,579	)		7,616,103		(204,848	)
	$	17,451,342		(143,956	)		19,536,826		(327,385	)		36,988,168		(471,341	)

Mortgage-backed securities having a continuous unrealized loss position at June 30, 2007 are summarized as follows:

	Less than 12 Months					12 Months or Longer					Total
	Market		Unrealized			Market		Unrealized			Market		Unrealized
	Value		Loss			Value		Loss			Value		Loss
Available for sale:
FHLMC	$	1,682,268		(9,929	)		10,906,585		(244,825	)		12,588,853		(254,754	)
FNMA		-		-			6,299,556		(184,743	)		6,299,556		(184,743	)
FHLMC - CMO		-		-			71,036		(263	)		71,036		(263	)
FNMA - CMO		-		-			144,896		(9,370	)		144,896		(9,370	)
GNMA - CMO		-		-			440,687		(11,981	)		440,687		(11,981	)
	$	1,682,268		(9,929	)		17,862,760		(451,182	)		19,545,028		(461,111	)

Unrealized losses are related to changes in market interest rates and not the credit quality of the issuers.

LIBERTY BANCORP, INC.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of the Company’s financial condition and results of operations is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the Financial Statements and footnotes appearing in Part I, Item 1 of this document.

Forward-Looking Statements

This quarterly report contains forward-looking statements that are based on assumptions and may describe future plans, strategies and expectations of Liberty Bancorp and the Bank. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project” or similar expressions.

Liberty Bancorp and the Bank’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of Liberty Bancorp and its subsidiary include, but are not limited to, changes in interest rates, national and regional economic conditions, legislative and regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in Liberty Bancorp and the Bank’s market area, changes in real estate market values in the Bank’s market area, changes in relevant accounting principles and guidelines and inability of third party service providers to perform.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, Liberty Bancorp does not undertake, and specifically disclaims any obligation, to release publicly the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events.

General

The Bank is a community-oriented financial institution dedicated to serving the financial service needs of consumers and businesses within its market area. We attract deposits from the general public and use these funds to originate loans secured by real estate located in our market area. Our real estate loans include construction loans, commercial real estate loans and loans secured by single-family or multi-family properties. To a lesser extent, we originate consumer loans and commercial business loans. At June 30, 2007, we operated out of our main office in Liberty, Missouri and five full-service branch offices—two in Kansas City and one each in Plattsburg, Platte City and Independence, Missouri.

The Federal Deposit Insurance Corporation insures the Bank’s savings accounts up to the applicable legal limits. The Bank is a member of the Federal Home Loan Bank System.

Critical Accounting Policies

The accounting and reporting policies were prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) and to general practices within the financial services industry. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Management has identified the accounting policies described below as those that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of our financial statements and management’s discussion and analysis.

LIBERTY BANCORP, INC.

Income Recognition

We recognize interest income by methods conforming to US GAAP that include general accounting practices within the financial services industry. Interest income on loans and investment securities is recognized by methods that result in level rates of return on principal amounts outstanding, including yield adjustments resulting from the amortization of loan costs and premiums on investment securities and accretion of loan fees and discounts on investment securities.

In the event management believes collection of all or a portion of contractual interest on a loan has become doubtful, which generally occurs after the loan is 90 days past due, the accrual of interest is discontinued. In addition, previously accrued interest deemed uncollectible that was recognized in income is reversed. Interest received on nonaccrual loans is included in income only if principal recovery is reasonably assured. A nonaccrual loan is restored to accrual status when it is brought current or has performed in accordance with contractual terms for a reasonable period of time, and the collectibility of the total contractual principal and interest is no longer doubtful.

Allowance for Loan Losses

Valuation allowances are established for impaired loans for the difference between the loan amount and the fair value of collateral less estimated selling costs. We consider a loan to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement on a timely basis. The types of loans for which impairment is measured include nonaccrual income property loans (excluding those loans included in the homogenous portfolio which are collectively reviewed for impairment), large nonaccrual single-family loans and troubled debt restructurings. Such loans are generally placed on nonaccrual status at the point deemed uncollectible. Impairment losses are recognized through an increase in the allowance for loan losses. See also “Asset Quality.”

Allowances for loan losses are available to absorb losses incurred on loans and represent additions charged to expense, less net charge-offs. The allowances are evaluated on a regular basis by management and are based on management’s periodic review of the collectibility of loans, in light of historical experience, fair value of the underlying collateral, changes in the types and mix of loans originated and prevailing economic conditions.

Qualitative Disclosures of Market Risk

Our principal financial objective is to achieve long-term profitability while reducing our exposure to fluctuating interest rates. We have an exposure to interest rate risk. We have employed various strategies intended to minimize the adverse effect of interest rate risk on future operations by providing a better match between the interest rate sensitivity of our assets and liabilities.

In particular, our strategies are intended to stabilize net interest income for the long-term by protecting our interest rate spread against increases in interest rates. Such strategies include originating for portfolio adjustable-rate and short-term loans with greater interest rate sensitivities than long-term, fixed-rate residential mortgage loans. We sell fixed-rate mortgage loans in the secondary market.

Liquidity and Capital Resources

Our principal sources of funds are cash receipts from deposits, loan repayments by borrowers, proceeds from maturing securities, advances from the Federal Home Loan Bank (FHLB) and net earnings. We have an agreement with the FHLB of Des Moines to provide cash advances, should we need additional funds for loan originations or other purposes.

Commitments to originate loans are legally binding agreements to lend to our customers. Letters of credit are conditional commitments issued by us to guarantee the performance of the borrower to a third party.

LIBERTY BANCORP, INC.

The following table sets forth information regarding off-balance sheet financial instruments as of June 30, 2007:

	Fixed-Rate		Adjustable-Rate
Off-balance sheet financial instruments:
Commitments to originate loans	$	10,919,565		4,070,142

Commitments for unused lines of credit	$	181,023		10,084,099

Commitments for undisbursed loans	$	10,201,224		25,270,455

Commitments for letters of credit	$	342,240		-

Financial Condition

Total assets increased from $287.6 million at September 30, 2006 to $328.8 million at June 30, 2007. Cash and cash equivalents decreased $2.2 million from September 30, 2006 to June 30, 2007. Securities available for sale increased from $35.9 million at September 30, 2006 to $47.5 million at June 30, 2007 due to additional purchases of both agency and municipal securities, partially offset by maturities and calls of securities. Mortgage-backed securities available for sale decreased from $24.2 million at September 30, 2006 to $20.6 million at June 30, 2007 due to principal repayments. Loans receivable increased by $30.2 million to $230.4 million at June 30, 2007 primarily due to increased activity in commercial real estate and development lending, partially offset by a decrease in single-family mortgage loans. Loans held for sale increased from $459,000 at September 30, 2006 to $1.4 million at June 30, 2007. Premises and equipment, net increased $1.2 million to $7.9 million at June 30, 2007 primarily due to the purchase of land and expenditures relating to the construction of a new branch. The cash surrender value of bank owned life insurance was $3.0 million as of June 30, 2007 due to the purchase of a bank-owned life insurance policy. The Bank purchased an additional policy for $5.0 million in July 2007. Foreclosed real estate, net at June 30, 2007 totaled $1.4 million, a decrease of $200,000 from $1.6 million at September 30, 2006. Foreclosed real estate, net consists of seven one-to-four family properties and one commercial lot. Accrued interest receivable increased $429,000 due to higher loan and securities portfolio balances and rates.

Total liabilities increased $41.2 million to $279.8 million at June 30, 2007 compared to $238.6 million at September 30, 2006. Customer accounts and brokered deposits increased from $198.5 million at September 30, 2006 to $243.1 million at June 30, 2007 primarily due to an increase in money market, short-term certificate accounts and brokered certificates, partially offset by a decrease in long-term certificates. Brokered certificates totaled $12.0 million as of June 30, 2007. Advances from the FHLB decreased $2.6 million to $31.5 million at June 30, 2007 as a result of maturing advances, which were not renewed. Securities sold under agreement to repurchase decreased by $679,000 due to account balance changes. Advances from borrowers for taxes and insurance decreased by $223,000 due to calendar year-end payment of real estate taxes on behalf of borrowers. Accrued income taxes decreased due to the timing of tax payments.

Stockholders’ equity remained virtually unchanged at $49.0 million at June 30, 2007 due to net earnings of $1.3 million for the nine months ended June 30, 2007 and the amortization of ESOP and stock-based incentive awards, primarily offset by the payment of cash dividends and the purchase of common stock used to fund restricted stock awards pursuant to the Company’s 2007 Plan. 125,469 shares were purchased at a weighted-average price of $11.16 to fund these restricted stock awards. During the three months ended June 30, 2007 and 2006, the Company paid cash dividends of $115,954 and $111,575, respectively.

The Bank is required to maintain certain minimum capital requirements under OTS regulations. Failure by a savings institution to meet minimum capital requirements can result in certain mandatory and possible discretionary actions by regulators, which, if undertaken, could have a direct material effect on the Bank's financial statements. Under the capital adequacy guidelines and regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to judgments by the regulators about components, risk-weightings and other factors.

LIBERTY BANCORP, INC.

The Bank's actual and required capital amounts and ratios at June 30, 2007 were as follows:

							Minimum Required
							for Capital					to be "Well
	Actual						Adequacy					Capitalized"
	Amount			Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in Thousands)
Stockholders' equity	$	34,704
Computer software costs		(48	)
Unrealized loss on securities AFS, net		572
Tangible capital	$	35,228			10.7	%	$	4,947		1.5	%
General valuation allowance		2,583

Total capital to risk-weighted assets	$	37,811			15.0	%	$	20,195		8.0	%	$	25,244		10.0	%

Tier 1 capital to risk-weighted assets	$	35,228			14.0	%	$	10,098		4.0	%	$	15,146		6.0	%

Tier 1 capital to total assets	$	35,228			10.7	%	$	13,192		4.0	%	$	16,490		5.0	%

Asset Quality

The following table sets forth information with respect to the Bank's impaired loans at the dates indicated.

	June 30,		September 30,
	2007		2006

Nonaccrual loans	$	2,146,489		1,481,222
Accruing loans past due 90 days or more		-		58,156
Other impaired loans		-		2,681,561
Total impaired loans	$	2,146,489		4,220,939

Allowance for losses on impaired loans	$	112,899		257,609

Impaired loans with no allowance for loan losses	$	-		58,156

At June 30, 2007, all loans where known information about possible credit problems of borrowers which caused management to have serious concerns as to the ability of the borrowers to comply with present loan repayment terms have been disclosed as non-accrual, 90 days past due, or restructured.

Under our internal review policy, loans classified as substandard decreased from $1.6 million at September 30, 2006 to $1.1 million at June 30, 2007. Special mention loans at June 30, 2007 totaled $3.3 million as compared to $3.0 million at September 30, 2006. The loans listed as special mention at June 30, 2007 consist of eleven spec home loans and a commercial land loan and were identified as special mention in March 2007. Of the special mention loans listed at September 2006, sixteen of the loans totaling $2.3 million, after principal payments, were foreclosed in November 2006.

LIBERTY BANCORP, INC.

Following is a summary of activity in the allowance for loan losses:

Balance at September 30, 2006	$	2,144,121
Charge-offs		(48,442	)
Recoveries		22,080
Provision charged to expense		465,307
Balance at June 30, 2007	$	2,583,066

Results of Operations Overview

Our primary source of pre-tax earnings is net interest income. Net interest income is the difference between interest income, which is the income that we earn on our loans and securities, and interest expense, which is the interest that we pay on our deposits and borrowings. Other significant sources of pre-tax earnings are service charges on deposit accounts.

Results of Operations for the Three Months Ended June 30, 2007 and 2006

Selected Financial Data

	Three Months Ended
	June 30,
	2007			2006				% Change
Net earnings	$	405,998			390,373				4.0	%
Return on assets		0.52	%		0.58	%			(10.3	)
Return on average stockholders' equity		3.31	%		7.34	%			(54.9	)
Stockholders' equity-to-assets ratio		15.61	%		7.88	%			98.1
Dividend payout ratio		28.56	%		28.58	%	(1)		(0.1	)

(1) Represents dividends paid to minority shareholders only as a percent of net earnings.
Does not include dividends waived by Liberty Savings Mutual Holding Company.

Net Earnings

Net earnings increased from $390,000 for the three months ended June 30, 2006 to $406,000 for the three months ended June 30, 2007. Net earnings increased due to higher net interest income and noninterest income, and lower income tax expense, partially offset by a higher provision for loan losses and higher noninterest expense.

Net Interest Income

Net interest income before the provision for loan losses increased from $2.3 million for the three months ended June 30, 2006 to $2.6 million for the three months ended June 30, 2007. This change in net interest income was due primarily to an increase in net interest earning assets, partially offset by a lower interest rate spread. Our interest rate spread was 3.57% for the three months ended June 30, 2006 and 2.95% for the three months ended June 30, 2007. The average yield on interest-earning assets and the average cost of interest-bearing liabilities increased 11 and 73 basis points, respectively, for the three months ended June 30, 2007 as compared to the three months ended June 30, 2006. We have funded loan growth since June 2006 primarily through short-term certificate of deposit and money market accounts and proceeds raised in the stock offering. In addition, a portion of the proceeds from issuance of common stock was invested in Federal agency and municipal obligations.

LIBERTY BANCORP, INC.

Interest income on loans receivable increased from $3.8 million for the three months ended June 30, 2006 to $4.4 million for the comparable period in 2007. The increase is attributable to a higher average balance and average yield. Interest income on mortgage-backed securities decreased due to a lower average balance, partially offset by a higher average yield. Interest income on securities increased from $295,000 to $528,000 for the comparable three month periods due to a higher average balance and average yield.

Interest expense on customer and brokered deposits increased by $744,000 for the three months ended June 30, 2007 compared to the same period in 2006, as a result of a higher average balance and average rate. We attracted certificate and money market accounts through the offering specials and new products. The weighted-average rate on deposits increased from 3.15% for the three months ended June 30, 2006 to 4.05% for the comparable 2007 period. Interest expense on FHLB advances decreased due to a lower average balance, partially offset by a higher average rate for the comparable three months.

Average Balances and Yields

The average balances and yields tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earnings assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. The yields and costs for the periods indicated are derived by dividing annualized income or expense by the average balances of assets or liabilities, respectively, for the periods presented. For purposes of these tables, average balances have been calculated using month-end balances and, to a lesser extent, daily balances, and nonaccrual loans are included in average balances only. Management does not believe that the use of month-end balances instead of daily average balances has caused any material differences in the information presented. No tax equivalent adjustments were made. Nonaccruing loans have been included in the tables as loans carrying a zero yield.

LIBERTY BANCORP, INC.

	Three Months Ended June 30,
	2007								2006
						Average								Average
	Average					Yield/			Average					Yield/
	Balance			Interest		Cost			Balance			Interest		Cost
	(Dollars in thousands)

Interest-earning assets:
Loans receivable	$	221,879			4,402		7.94	%		194,897			3,825		7.85	%
Mortgage-backed securities		21,719			228		4.20	%		24,249			240		3.96	%
Securities		45,103			528		4.68	%		28,461			294		4.13	%
Other interest-earning assets		6,357			86		5.41	%		4,842			58		4.79	%
Total interest-earning assets		295,058			5,244		7.11	%		252,449			4,417		7.00	%

Interest-bearing liabilities:
Deposits		228,802			2,315		4.05	%		199,658			1,571		3.15	%
FHLB advances		28,305			357		5.05	%		42,464			497		4.68	%
Securities sold under agreement
to repurchase		2,016			21		4.10	%		2,440			23		3.71	%
ESOP note payable		-			-		-			412			7		6.40	%
Total interest-bearing
liabilities	$	259,123			2,693		4.16	%		244,974			2,098		3.43	%

Net interest income before
provision for loan losses				$	2,551								2,319

Interest rate spread							2.95	%							3.57	%

Net earning assets	$	35,935								7,475

Net yield on average
interest-earning assets							3.46	%							3.67	%

Ratio of average interest-earning
assets to average interest-
bearing liabilities		113.87	%							103.05	%

Provision for Loan Losses

The provision for loan losses is based upon management’s consideration of current economic conditions, the loan portfolio composition and historical loss experience used to estimate probable losses as well as the level of non-performing assets. Each month, management also reviews individual loans for which full collectibility may not be reasonably assured and considers, among other matters, the estimated fair value of the underlying collateral. The Company and Bank are subject to periodic examination by regulatory agencies, which may require us to record increases in the allowances based on their evaluation.

The provision for loan losses was $267,000 and $215,000 for the three months ended June 30, 2007 and 2006, respectively. The provision for the three months ended June 30, 2007 is primarily due to an increase in loans receivable. For the three months ended June 30, 2006, the provision of $215,000 was also primarily due to an increase in total loans receivable and to a lesser extent loan charge-offs. The allowance for loan losses as a percentage of total loans increased to 1.11% as of June 30, 2007, as compared to 1.10% as of March 31, 2007. In July 2007, we recovered $505,000 on 34 one to four family loans that resulted in losses in 2005 and 2006.

LIBERTY BANCORP, INC.

Noninterest income

	Three Months Ended
	June 30,
	2007		2006		% Change
Loan service charges	$	20,450		14,006		46.0	%
Gain on sale of loans		73,875		56,098		31.7
Change in cash surrender value of BOLI		3,984		-		100.0
Deposit account service charges		264,918		262,434		0.9
	$	363,227		332,538		9.2

Noninterest income increased for 2007 due to increases in gain on sale of loans.

During the three months ended June 30, 2007 and 2006, we originated loans for sale to secondary market investors of $6.0 million and $6.0 million, respectively. We do not anticipate significant gains on sale of loans in the immediate future due to current market conditions.

Noninterest Expense

	Three Months Ended
	June 30,
	2007		2006		% Change
Compensation and benefits	$	1,147,174		1,006,536		14.0	%
Occupancy expense		145,724		125,878		15.8
Equipment and data processing expense		195,464		185,188		5.5
Operations from foreclosed real estate, net		106,292		66,911		58.9
Federal deposit insurance premiums		6,842		5,914		15.7
Professional and regulatory services		99,791		74,472		34.0
Advertising		66,358		117,536		(43.5	)
Correspondent banking charges		65,183		65,697		(0.8	)
Supplies		30,955		28,506		8.6
Other		169,353		156,162		8.4
	$	2,033,136		1,832,800		10.9

Noninterest expense increased from $1.8 million for the three months ended June 30, 2006 to $2.0 million for the comparable period in 2007. Compensation and benefit expense increased primarily due to salary increases, increased ESOP expense, stock option and restricted stock award expense. Occupancy expense increased due to higher real estate taxes on branch offices. Expenses from operations from foreclosed real estate, net increased primarily due to net losses recognized on certain properties. Professional services increased primarily due to higher legal and supervisory exam expenses. Advertising expense decreased primarily due to the renegotiation of direct mail advertising costs, lower promotional expenses and expenses that related to the Bank’s name change that were expensed in the three months ended June 30, 2006, but did not recur in the comparable three month period in 2007. Other expenses increased due primarily to stock registrar costs and charitable contributions, partially offset by lower casualty insurance and data line expense.

LIBERTY BANCORP, INC.

Income Taxes

Income taxes decreased for the three months ended June 30, 2007 due to a lower effective tax rate, partially offset by higher earnings before income taxes. The effective rate for the three months ended June 30, 2007 was 33.9%, compared to 35.3% for the three months ended June 30, 2006, due to an increase in non-taxable municipal bond income.

Results of Operations for the Nine Months Ended June 30, 2007 and 2006

Selected Financial Data

	Nine Months Ended
	June 30,
	2007			2006				% Change
Net earnings	$	1,339,080			994,815				34.6	%
Return on assets		0.59	%		0.52	%			13.5
Return on average stockholders' equity		3.63	%		6.26	%			(42.0	)
Stockholders' equity-to-assets ratio		16.25	%		8.24	%			97.2
Dividend payout ratio		25.98	%		33.22	%	(1)		(21.8	)

(1) Represents dividends paid to minority shareholders only as a percent of net earnings.
Does not include dividends waived by Liberty Savings Mutual Holding Company.

Net Earnings

Net earnings increased from $995,000 for the nine months ended June 30, 2006 to $1.3 million for the nine months ended June 30, 2007. Net earnings increased due primarily to higher net interest income, a lower provision for loan losses, partially offset by higher noninterest expense and higher income tax expense.

Net Interest Income

Net interest income before the provision for loan losses increased from $6.4 million for the nine months ended June 30, 2006 to $7.6 million for the nine months ended June 30, 2007. This change in net interest income was due primarily to an increase in net earning assets, partially offset by a lower interest rate spread. Our interest rate spread was 3.41% for the nine months ended June 30, 2006 and 3.04% for the nine months ended June 30, 2007. The average yield on interest-earning assets and the average cost of interest-bearing liabilities increased 46 and 83 basis points, respectively, for the nine months ended June 30, 2007 as compared to the nine months ended June 30, 2006. We have funded loan growth since March 2006 primarily through short-term certificate of deposit and money market accounts and proceeds raised in the stock offering. In addition, a portion of the proceeds from the issuance of common stock was invested in Federal agency obligations.

Interest income on loans receivable increased from $10.2 million for the nine months ended June 30, 2006 to $12.6 million for the comparable period in 2007. The increase is attributable to a higher average balance and average yield. Interest income on mortgage-backed securities decreased due to a lower average balance, partially offset by a higher average yield. Interest income on securities increased from $809,000 to $1.5 million for the comparable nine month periods due to a higher average balance and average yield. Interest income on other interest-earning assets also increased due to a higher average balance and average yield.

Interest expense on deposits increased by $2.1 million for the nine months ended June 30, 2007 compared to the same period in 2006, as a result of a higher average balance and average rate. We attracted certificate accounts through the offering of specials and money market accounts with the introduction of new money market products. The weighted-average rate on deposits increased from 2.98% for the nine months ended June 30, 2006 to 3.94% for the comparable 2007 period. The average balance on deposits increased from $192.6 million for the nine months ended June 30, 2006 to $216.9 million for the nine months ended June 30, 2007. Interest expense on FHLB advances decreased due to a lower average balance, partially offset by a higher average rate.

LIBERTY BANCORP, INC.

Average Balances and Yields

	Nine Months Ended June 30,
	2007								2006
						Average								Average
	Average					Yield/			Average					Yield/
	Balance			Interest		Cost			Balance			Interest		Cost
	(Dollars in thousands)

Interest-earning assets:
Loans receivable	$	212,213			12,590		7.91	%		182,126			10,182		7.45	%
Mortgage-backed securities		22,874			720		4.20	%		25,485			751		3.93	%
Securities		42,167			1,474		4.66	%		27,222			809		3.96	%
Other interest-earning assets		6,622			246		4.95	%		5,469			161		3.93	%
Total interest-earning assets		283,876			15,030		7.06	%		240,302			11,903		6.60	%

Interest-bearing liabilities:
Deposits		216,901			6,412		3.94	%		192,567			4,300		2.98	%
FHLB advances		28,184			990		4.68	%		35,847			1,153		4.29	%
Securities sold under agreement
to repurchase		2,205			59		3.59	%		2,104			48		3.03	%
ESOP note payable		-			-		-			398			20		6.65	%
Total interest-bearing
liabilities	$	247,290			7,461		4.02	%		230,916			5,521		3.19	%

Net interest income before
provision for loan losses				$	7,569								6,382

Interest rate spread							3.04	%							3.41	%

Net earning assets	$	36,586								9,386

Net yield on average
interest-earning assets							3.56	%							3.54	%

Ratio of average interest-earning
assets to average interest-
bearing liabilities		114.79	%							104.06	%

LIBERTY BANCORP, INC.

Provision for Loan Losses

The provision for loan losses was $465,000 and $685,000 for the nine months ended June 30, 2007 and 2006, respectively. The provision for the nine months ended June 30, 2007 is primarily due to an increase in gross loans. For the nine months ended June 30, 2006, the provision of $685,000 was primarily due to an increase in total loans receivable and to a lesser extent loan charge-offs. The allowance for loan losses as a percentage of total loans increased to 1.11% as of June 30, 2007, as compared to 1.08% as of September 30, 2006. The increase in the ratio of the allowance to total loans was due to the increased allowance for classified loans and the changing composition of the loan portfolio with greater emphasis on loans with higher risk factors, which require higher reserve percentages.

Noninterest income

	Nine Months Ended
	June 30,
	2007		2006		% Change
Loan service charges	$	70,173		55,529		26.4	%
Gain on sale of loans		180,440		146,236		23.4
Change in cash surrender value of BOLI		3,984		-		100.0
Deposit account service charges		748,689		707,165		5.9
	$	1,003,286		908,930		10.4

Noninterest income increased for 2007 due to higher gains on sale of loans and deposit account service charges.

During the nine months ended June 30, 2007 and 2006, we originated loans for sale to secondary market investors of $15.6 million and $13.4 million, respectively. We do not anticipate significant gains on sale of loans in the immediate future due to current market conditions.

Noninterest Expense

	Nine Months Ended
	June 30,
	2007		2006		% Change
Compensation and benefits	$	3,319,374		2,829,629		17.3	%
Occupancy expense		466,488		370,330		26.0
Equipment and data processing expense		595,508		534,408		11.4
Operations from foreclosed real estate, net		275,932		73,324		276.3
Federal deposit insurance premiums		19,684		17,696		11.2
Professional and regulatory services		322,954		211,210		52.9
Advertising		218,035		294,568		(26.0	)
Correspondent banking charges		192,139		187,507		2.5
Supplies		97,766		111,839		(12.6	)
Other		546,884		456,933		19.7
	$	6,054,764		5,087,444		19.0

LIBERTY BANCORP, INC.

Noninterest expense increased from $5.1 million for the nine months ended June 30, 2006 to $6.1 million for the comparable period in 2007. Compensation and benefit expense increased primarily due to the opening of a new branch office in Kansas City, Missouri during January 2006, salary increases, increased ESOP expense and stock option and restricted stock award expense. Occupancy expense increased primarily due to the costs related to the new branch, with the largest of these expenses related to real estate taxes. Equipment and data processing expense increased due to higher depreciation expense due to the new branch, higher data processing and website expense, repairs and maintenance and increased service agreement expense. Expenses from operations from foreclosed real estate, net increased primarily due to net losses recognized on the sale of certain properties. Professional services increased due to higher legal, audit, consulting and supervisory exam expenses. Advertising expense decreased primarily due to the renegotiation of direct mail advertising costs, a general decrease in advertising, and expenses that related to the Bank’s name change that were expensed in the nine months ended June 30, 2006, but did not recur in the comparable nine month period in 2007. No new branches were opened during the nine months ended June 30, 2007, which resulted in lower supplies expense. Other expenses increased due primarily to stock registrar costs, and higher data line expense as a result of new branches and adding increased capacity.

Income Taxes

Income taxes increased for the nine months ended June 30, 2007 due to higher earnings before income taxes and a higher effective tax rate. The effective rate for the nine months ended June 30, 2007 was 34.7% compared to 34.5% for the nine months ended June 30, 2006.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with U.S. generally accepted accounting principles, are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions are used primarily to manage customers’ requests for funding and take the form of loan commitments and lines of credit. We currently have no plans to engage in hedging activities in the future.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Market risk is the possible chance of loss from unfavorable changes in market prices and rates. These changes may result in a reduction of current and future period net interest income, which is the favorable spread earned from the excess of interest income on interest-earning assets over interest expense on interest-bearing liabilities.

The Company considers interest rate risk to be its most significant market risk, which could potentially have the greatest impact on operating earnings. The structure of the Company’s loan and deposit portfolios is such that a significant change in interest rates may adversely impact net market values and net interest income.

Information as of June 30, 2007 concerning the Company’s exposure to market risk has not changed significantly from that disclosed under “Interest Rate Risk Management” in the Company's Form 10-K for the year ended September 30, 2006 filed with the Securities and Exchange Commission on December 26, 2006.

Item 4.

Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective for the purpose of ensuring that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (1) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

LIBERTY BANCORP, INC.

There have been no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II –OTHER INFORMATION

Item 1 - Legal Proceedings

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

Item 1A – Risk Factors

For information regarding the Company’s risk factors see “Risk Factors,” in the Company’s Form 10-K for the fiscal year ended September 30, 2006 filed with the Securities and Exchange Commission on December 26, 2006. As of June 30, 2007, the risk factors of the Company have not changed materially from those reported in the Form 10-K.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding the Company’s purchases of its equity securities during the three months ended June 30, 2007.

(d)

(c)

Maximum Number

Total Number of

(or Approximate

(a)

(b)

Shares (or Units)

Dollar Value) of

Total Number

Average Price

Purchased as

Shares (or Units)

of Shares

Paid per

Part of Publicly

That May Yet Be

(or Units)

Announced Plans

Purchased Under the

Period

Purchased

(or unit)

or Programs

Plans or Programs (1)

April 1, 2007

through April 30, 2007

2,000

10.85

2,000

13,649

May 1, 2007

through May 31, 2007

13,469

10.87

13,469

180

June 1, 2007

through June 30, 2007

180

LIBERTY BANCORP, INC.

(1)	In February 2007, the Company approved the Liberty Bancorp, Inc. 2007 Equity Incentive Plan under which 125,649 shares may be issued as restricted stock through open-market purchases.

Item 3 - Defaults upon Senior Securities

Not applicable.

Item 4 – Submission of Matters to a Vote of Security Holders

None.

Item 5 - Other Information

None.

Item 6 – Exhibits

(a)	Exhibits:
		31.1:	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
		31.2:	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
		32:	Section 1350 Certifications

LIBERTY BANCORP, INC.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		LIBERTY BANCORP, INC.
		(Registrant)


	BY:	/s/ Brent M. Giles
DATE: August 14, 2007		Brent M. Giles, President and Chief Executive Officer
		(Duly Authorized Officer)



	BY:	/s/ Marc J. Weishaar
		Marc J. Weishaar, Senior Vice President and Chief
		Financial Officer
		(Principal Financial Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	8th grade Avg

Liberty Bancorp (LIBC) Inactive 10-Q2007 Q3 Quarterly report

Content analysis