Western Liberty Bancorp (WLBC) 10-Q 2010 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2010

or

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: 001-33803

WESTERN LIBERTY BANCORP

(Exact name of registrant as specified in its charter)

Delaware	26-0469120
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

8363 W. Sunset Road, Suite 350, Las Vegas, Nevada 89113
(702) 966-7400

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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.Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yeso Noo

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

Large accelerated filero Accelerated filerþ Smaller reporting companyo Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yesþ Noo

As of November 9, 2010, the registrant had 14,982,224 shares of its common stock, par value $0.0001 per share, outstanding.

WESTERN LIBERTY BANCORP

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	1
Condensed Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009	1
Condensed Statements of Operations for the three and nine months ended September 30, 2010 and 2009 (unaudited)	2
Condensed Statement of Changes in Stockholders’ Equity for the nine months ended September 30, 2010 (unaudited)	3
Condensed Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (unaudited)	4
Notes to Condensed Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19
Item 4. Controls and Procedures	20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	20
Item 1A. Risk Factors	20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3. Defaults Upon Senior Securities	20
Item 4. (Removed and Reserved)	20
Item 5. Other Information	20
Item 6. Exhibits	21
Signatures	22
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WESTERN LIBERTY BANCORP

CONDENSED BALANCE SHEETS

	September 30, 2010			December 31, 2009
	(unaudited)
Assets
Cash and cash equivalents	$	84,317,971		$	87,969,242
Prepaid expenses		551,360			551,198
	$	84,869,331		$	88,520,440
Liabilities and Stockholders’ Equity
Liabilities
Accrued expenses	$	379,031		$	628,493
Commitments and contingencies
Stockholders’ Equity
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; None issued or outstanding		—			—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 10,959,169 issued and outstanding		1,096			1,096
Additional paid-in capital		103,142,784			103,730,471
Accumulated deficit		(18,653,580	)		(15,839,620	)
		84,490,300			87,891,947
	$	84,869,331		$	88,520,440

The accompanying notes are an integral part of these condensed financial statements.

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WESTERN LIBERTY BANCORP

CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2010			September 30, 2009			September 30, 2010			September 30, 2009
Revenue	$	—		$	—		$	—		$	—
Operating expenses
General and administrative expenses		1,237,192			4,969,837			3,406,752			8,267,056
Stock based compensation		(1,850,000	)		93,750			(587,687	)		281,249
Income/(Loss) from operations		612,808			(5,063,587	)		(2,819,065	)		(8,548,305	)
Interest income		1,493			5,925			5,105			87,109
Net income (loss)	$	614,301		$	(5,057,662	)	$	(2,813,960	)	$	(8,461,196	)
Earnings per share
Net income (loss)	$	614,301		$	(5,057,662	)	$	(2,813,960	)	$	(8,461,196	)
Deferred interest on investments held in trust relating to common shares subject to possible conversion		—			(95,847	)		—			(95,847	)
Net income (loss) attributable to common stockholders	$	614,301		$	(5,153,509	)	$	(2,813,960	)	$	(8,557,043	)
Weighted average number of common shares subject to possible conversion outstanding					9,584,654						9,584,654
Earnings per share common shares subject to possible conversion				$	0.01					$	0.01
Weighted average number of common shares outstanding — basic		10,959,169			39,936,064			10,959,169			39,936,064
Weighted average number of common shares outstanding — diluted		59,226,927			39,936,064			10,959,169			39,936,064
Basic income (loss) per common share	$	0.06		$	(0.13	)	$	(0.26	)	$	(0.21	)
Diluted income (loss) per common share	$	0.01		$	(0.13	)	$	(0.26	)	$	(0.21	)

The accompanying notes are an integral part of these condensed financial statements.

2

WESTERN LIBERTY BANCORP

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
(Unaudited)

	Common Stock				Additional
	Shares		Amount		paid-in capital			Accumulated deficit			Total stockholders’ equity
Balance at December 31, 2009		10,959,169	$	1,096	$	103,730,471		$	(15,839,620	)	$	87,891,947
Stock based compensation		—		—		(587,687	)		—			(587,687	)
Net loss		—		—		—			(2,813,960	)		(2,813,960	)
Balance at September 30, 2010		10,959,169	$	1,096	$	103,142,784		$	(18,653,580	)	$	84,490,300

The accompanying notes are an integral part of these condensed financial statements.

3

WESTERN LIBERTY BANCORP

CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended			Nine Months Ended
	September 30, 2010			September 30, 2009
Cash flow from operating activities
Net loss	$	(2,813,960	)	$	(8,461,196	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities
Stock based compensation		(587,687	)		281,249
Interest earned on cash held in trust		—			(84,589	)
Changes in operating assets and liabilities
Prepaid expenses		(162	)		225,450
Accrued expenses		(249,462	)		6,638,996
Net cash used in operating activities		(3,651,271	)		(1,400,090	)
Net decrease in cash and equivalents		(3,651,271	)		(1,400,090	)
Cash and cash equivalents, beginning of period		87,969,242			1,445,882
Cash and cash equivalents, end of period	$	84,317,971		$	45,792

The accompanying notes are an integral part of these condensed financial statements.

4

WESTERN LIBERTY BANCORP

NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

Note 1 Interim Financial Information

These unaudited condensed financial statements as of September 30, 2010 and for the three and nine months ended September 30, 2010 and 2009, have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim period presented are not necessarily indicative of the results to be expected for any other interim period or for the full year. These interim unaudited financial statements should be read in conjunction with the financial statements for the year ended December 31, 2009, which are included in Western Liberty Bancorp’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

Note 2 Organization and Business Operations

General

Western Liberty Bancorp (“WLBC,” the “Company,” “us” or “we”) was formerly known as “Global Consumer Acquisition Corp.” and was a special purpose acquisition company, formed under the laws of Delaware on June 28, 2007, to consummate an acquisition, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On October 7, 2009, our stockholders, at a special meeting of the stockholders (the “Special Meeting”), approved our initial acquisition of 1st Commerce Bank, a Nevada-chartered non-member bank (such acquisition was subsequently terminated by mutual agreement of the parties), along with certain amendments to our Amended and Restated Certificate of Incorporation removing certain provisions specific to special purpose acquisition companies, changing our name to “Western Liberty Bancorp” and authorizing the distribution and termination of our trust account. Effective October 7, 2009, the Company began its business operations and exited its development stage.

Stockholder Approval to Become Western Liberty Bancorp

On October 7, 2009, WLBC’s stockholders approved certain proposals to amend its Amended and Restated Certificate of Incorporation (the “COI Amendments”) and its existing Investment Management Trust Agreement and the acquisition of 1st Commerce Bank at the Special Meeting.

Amendment to Trust Agreement

At the Special Meeting, WLBC’s stockholders authorized WLBC and Continental Stock Transfer & Trust Company, as trustee (the “Trustee”) to distribute and terminate WLBC’s trust account pursuant to an Amendment No. 1 to the Investment Management Trust Agreement, dated October 7, 2009 (the “Trust Agreement Amendment”). The Trust Agreement Amendment amends the Trust Agreement, which provided that the Trustee could only liquidate the trust account upon the consummation of WLBC’s initial business combination or on November 27, 2009.

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COI Amendments

The COI Amendments were also approved at the Special Meeting. The COI Amendments amended WLBC’s Amended and Restated Certificate of Incorporation as follows:

• amended the definition of “Business Combination” to remove the requirement that WLBC’s initial acquisition of one or more assets or operating businesses needed to have a fair market value of at least 80% of WLBC’s net assets held in trust (net of taxes and amounts disbursed for working capital purposes and excluding the amount held in the trust account representing a portion of the underwriters’ discount) at the time of acquisition;

• removed the prohibition on the consummation of a business combination if holders of an aggregate of 30% or more in interest of the shares of WLBC’s common stock issued in its initial public offering (“Public Shares”) exercised their conversion rights;

• removed the requirement that only holders of Public Shares who voted against WLBC’s initial business combination could covert their Public Shares into cash;

• changed WLBC’s name from “Global Consumer Acquisition Corp.” to “Western Liberty Bancorp”;

• changed WLBC’s corporate existence to perpetual, so WLBC would not be required to liquidate on November 27, 2009;

• deleted the provision in the Certificate of Incorporation that provided that in the event a business combination was not consummated prior to November 27, 2009, WLBC’s corporate purpose would automatically have been limited to effecting and implementing WLBC’s dissolution and liquidation and that WLBC’s powers would be limited to those set forth in Section 278 of the Delaware General Corporation Law and as otherwise may be necessary to implement the limited purpose; and

• deleted the following restrictions only applicable to special purpose acquisition companies:

• the requirement that a business combination be submitted to WLBC’s stockholders for approval and authorized by the vote of a majority of the Public Shares cast at a meeting of stockholders to approve such business combination;

• the procedures for exercising conversion rights;

• the provision for when funds may be disbursed from WLBC’s trust account established in connection with its initial public offering;

• the provision that no other business combination could be consummated until WLBC initial business combination is consummated; and

• the provision that holders of Public Shares would be entitled to receive distributions from WLBC’s trust account only in the event of WLBC’s liquidation or by demanding conversion.

6

Service1st Acquisition

On October 28, 2010, WLBC consummated its acquisition (the “Acquisition”) of Service1^st Bank of Nevada, a Nevada-chartered non-member bank (“Service1^st”) pursuant to a Merger Agreement (the “Merger Agreement”), dated as of November 6, 2009, as amended by a First Amendment to the Merger Agreement, dated as of June 21, 2010 (“Amendment No. 1” and, together with the Merger Agreement, the “Amended Merger Agreement”), each among WL-S1 Interim Bank, a Nevada corporation and wholly-owned subsidiary of WLBC (“Acquisition Sub”), Service1^st and Curtis W. Anderson, as representative of the former stockholders of Service1^st. Pursuant to the Amended Merger Agreement, Acquisition Sub merged with and into Service1^st, with Service1^st being the surviving entity and becoming WLBC’s wholly-owned subsidiary. WLBC previously received the requisite approvals of certain bank regulatory authorities to complete the Acquisition to become a bank holding company.

The former stockholders of Service1^st received approximately 2,370,878 shares of Common Stock in exchange for all of the outstanding shares of capital stock of Service1^st(the “Base Acquisition Consideration”). In addition, the holders of Service1st’s outstanding options and warrants now hold options and warrants of similar tenor to purchase up to 289,808 shares of Common Stock.

In addition to the Base Acquisition Consideration, each of the former stockholders of Service1^st may be entitled to receive additional consideration (the “Contingent Acquisition Consideration”), payable in Common Stock, if at any time within the first two years after the consummation of the Acquisition, the closing price per share of the Common Stock exceeds $12.75 for 30 consecutive days. The Contingent Acquisition Consideration would be equal to 20% of the tangible book value of Service1^st at the close of business on the last day of the calendar month immediately before the calendar month in which the final regulatory approval necessary for the completion of the Acquisition was obtained. The total number of shares of our common stock issuable to the former Service1^st stockholders would be determined by dividing the Contingent Acquisition Consideration by the average of the daily closing price of the Common Stock on the first 30 trading days on which the closing price of the Common Stock exceeded $12.75.

At the close of business on October 28, 2010, WLBC was a new Nevada financial institution bank holding company by consummating the acquisition of Service1^st and conducting operations through Service1^st. In conjunction with the transaction, WLBC infused $25 million of capital onto the balance sheet of Service1^st. On October 29, 2010, the common shares of WLBC began trading on the Nasdaq Global Market, under the ticker symbol WLBC.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

On October 20, 2009, WLBC received notice from the staff of the NYSE Amex (the “Exchange”) indicating that the Exchange believes that WLBC no longer complied with the Exchange’s continued listing standards due to the amendments to the Certificate of Incorporation approved at WLBC’s stockholder meeting on October 7, 2009 and an insufficient number of public shareholders of WLBC’s common stock, as set forth in Section 1003(c) of the Exchange’s Company Guide, and that its securities were, therefore, subject to being delisted from the Exchange. The Company appealed this determination and was granted the right to a hearing before a committee of the NYSE Amex on February 11, 2010. On February 17, 2010, the Listed Qualification Panel of the NYSE Amex’s Committee on Securities (the “Panel”) affirmed the determination by the staff (the “Staff”) of the Exchange to delist the securities of WLBC from the Exchange. In the Panel’s notice to WLBC, it advised WLBC that the Exchange expected to suspend trading in WLBC’s securities as soon as practicable. On February 22, 2010, the Staff advised WLBC that the Exchange would be suspending WLBC’s securities from trading, effective at the open of business on Thursday, February 25, 2010. In the interim, WLBC filed an application with the Financial Industry Regulation Authority (“FINRA”) to allow its securities to quote on the Over the Counter Bulletin Board (the “OTCBB”). Trading in WLBC’s securities was suspended at the open of business on Thursday, February 25, 2010. Concurrently, however, WLBC’s securities were cleared for quotation on the OTCBB, effective at the open of business on Thursday, February 25, 2010. WLBC expects to be listed on a national exchange upon closing of the previously announced Services1st Bank of Nevada acquisition. As previously noted, WLBC common stock began trading on the Nasdaq Global Market, under the ticker symbol WLBC, on October 29, 2010.

7

Warrant Restructuring

In order to assist WLBC in gaining the requisite approval of certain bank regulatory authorities in connection with the Acquisition, on September 23, 2010, WLBC entered into a Letter Agreement (the “Warrant Restructuring Letter Agreement”) with certain warrant holders who represented to WLBC that they collectively hold at least a majority of its outstanding warrants (the “Consenting Warrant Holders”) confirming the basis and terms upon which the parties have agreed to amend the Amended and restated Warrant Agreement, dated as of July 20, 2009, as amended by the Amendment No. 1, dated as of October 9, 2009, each between WLBC and Continental Stock Transfer & Trust Company, as warrant agent (the “Warrant Agent”) (as amended, the “Warrant Agreement”), previously filed with the Securities and Exchange Commission (the “SEC”). The Warrant Restructuring Letter Agreement serves as the consent and approval of each of the Consenting Warrant Holders to amend and restate the Warrant Agreement.

Pursuant to the Warrant Restructuring Letter Agreement, the Warrant Agreement shall be amended where applicable to provide for the automatic exercise of all of the outstanding warrants of WLBC (the “Warrants”) into one thirty-second (1/32) of one share of WLBC’s common stock, par value $0.0001 (“Common Stock”), which shall occur concurrently with the consummation of the Acquisition (the “Automatic Exercise Date,” or October 28, 2010). Any Warrants that would entitle a holder of such Warrants to a fractional share of Common Stock after taking into account the automatic exercise of the remainder of such holder’s Warrants into full shares of Common Stock shall be cancelled on the Automatic Exercise Date. As of October 27, 2010, there were 48,067,758 Warrants outstanding, each exercisable for one share of Common Stock, which were automatically converted into 1,502,117 shares of Common Stock on October 28, 2010. As a result of the foregoing, there are no Warrants outstanding after October 28, 2010. WLBC also paid a consent fee to the holders of Warrants in an amount equal to $0.06 per Warrant on the Automatic Exercise Date, regardless of whether such holders were party to the Warrant Restructuring Letter Agreement, for a total of $2,844,065.

WLBC has agreed to file a registration statement with the SEC for the registration under the Securities Exchange Act of 1933, as amended, of the shares of Common Stock issuable upon exercise of the Warrants. If such registration statement is not filed within 30 days of the Automatic Exercise Date, WLBC shall make a payment to each holder of Common Stock issued upon exercise of the Warrants in an amount equal to $0.12 per share of Common Stock issuable upon exercise of the Warrants held by such holder. WLBC further agreed to make an additional payment in an amount equal to $0.18 per share of Common Stock issuable upon exercise of the Warrants held by such holder if the registration statement has not been declared effective by the SEC within 180 days of the Automatic Exercise Date.

WLBC filed a Schedule 14C Information Statement on October 7, 2010, in connection with the warrant restructuring. The activities necessary to complete the Warrant Restructuring were commenced by WLBC in conjunction with the closing of the Acquisition on October 28, 2010.

Note 3 Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

WLBC considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost, which approximates fair value.

At September 30, 2010, financial instruments that potentially expose WLBC to credit risk consisted of cash and cash equivalents. WLBC maintains its cash balances in various financial institutions. The Federal Deposit Insurance Corporation insures balances in bank accounts up to $250,000 and the Securities Investor Protection Corporation insures balances up to $500,000 in brokerage accounts. WLBC has not experienced losses on these accounts and management believes WLBC is not exposed to significant risks on such accounts.

As of September 30, 2010, approximately $84,004,833 of the Company’s cash and cash equivalents were invested in the Federated U.S. Treasury Cash Reserve Fund (UTIXX) and the Goldman Sachs Financial Square Funds — Treasury Instruments Fund (FTIXX). Both funds, under normal circumstances, invests their assets exclusively in obligations of the U.S. Treasury, including Treasury bills, bonds and notes and other obligations issued or guaranteed by the U.S. Treasury.

8

Income (loss) Per Common Share

Basic income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares for the period. Diluted income (loss) per share reflects the potential dilution that could occur if derivative securities were to be exercised or converted and would otherwise result in the issuance of common stock.

For the nine months ended September 30, 2010 and the three and nine months ended September 30, 2009, potentially dilutive securities are excluded from the computation of fully diluted earnings per share as their effects are anti-dilutive. The following table depicts the detailed computation of basic and diluted earnings per share for the respective periods.

	Three Month ended September 30,					Nine Months ended September 30,
	2010		2009			2010			2009
Net income (loss) available to common stockholders	$	614,301	$	(5,153,509	)	$	(2,813,960	)	$	(8,557,043	)
Denominator:
Weighted-average common shares outstanding		10,959,169		39,936,064			10,959,169			39,936,064
Dilutive effects of warrants and Restricted Stock Units		48,267,758		—			—			—
Weighted-average common shares outstanding, assuming dilution		59,226,927		39,936,064			10,959,169			39,936,064
Net income (loss) per share
Basic	$	0.06	$	(0.13	)	$	(0.26	)	$	(0.21	)
Diluted	$	0.01

For the three and nine months ended September 30, 2010 and 2009, the Company had potentially dilutive securities in the form of 48,067,758 warrants, including 8,500,000 sponsors’ warrants issued in a private placement, 7,618,908 warrants from shares restructured into warrants and 31,948,850 warrants issued as part of the units in our initial public offering. In addition, for the three and nine months ended September 30, 2010, the Company also had potentially dilutive securities in the form of 200,000 restricted stock units granted to certain members of our board of directors and our president, as discussed further below under “Restricted Stock”. The Company uses the “treasury stock method” to calculate potential dilutive shares, as if they were redeemed for common stock at the beginning of the period.

The statements of operations for the three and nine months ended September 30, 2009 includes a presentation of income (loss) per common share subject to possible redemption in a manner similar to the two class method of income (loss) per common share. Basic and diluted income per common share amount for the maximum number of common shares subject to possible redemption is calculated by dividing the net interest attributable to common shares subject to redemption by the weighted average number of common shares subject to possible redemption. Basic and diluted income per share amount for the common shares outstanding not subject to possible redemption is calculated by dividing the net income exclusive of the net interest income attributable to common shares subject to redemption by the weighted average number of common shares not subject to possible redemption.

Note 4 Stockholders Equity

Preferred Stock

WLBC is authorized to issue 1,000,000 shares of blank check preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors of WLBC (the “Board of Directors”).

Common Stock

On October 7, 2009, 21,357,987 shares of common stock were redeemed and 7,618,908 shares of common stock were restructured into warrants as a result of the shareholder meeting (See Note 1).

At September 30, 2010 and December 31, 2009, there were 48,267,758 shares of common stock reserved for issuance upon exercise of WLBC’s outstanding options and warrants.

Restricted Stock

Pursuant to letter agreements dated December 23, 2008 between WLBC and each of its independent directors, Richard A.C. Coles, Michael B. Frankel and Mark Schulhof, and a letter agreement dated as of April 28, 2009 between WLBC and Daniel B. Silvers, WLBC’s President, WLBC granted each independent director and Mr. Silvers 50,000 restricted stock units with respect to shares of WLBC’s common stock, subject to certain terms and conditions. WLBC incurred compensation expense equal to the grant date fair value of the restricted stock units. Based upon the market price of WLBC common shares at grant date, WLBC determined that the grant date fair value of the restricted stock units was $9.25 per unit, $1,850,000 in the aggregate. WLBC recorded compensation expense of $1,850,000 over the estimated vesting period of 266 days. WLBC estimated the vesting period as the number of days from the grant date to the estimated closing date of the business combination. On completion of the acquisition of Service1st, the requirements of the aforementioned letter agreements were not satisfied, so that the restricted stock units did not, and now cannot, vest according to their terms. Management made this determination on September 30, 2010 upon receipt of the final approval from the applicable regulatory agencies.  As a result of this determination, WLBC reversed the stock compensation expense ($1,850,000) previously recorded for the 200,000 restricted stock units described above.

9

WLBC also provided a one-time grant of restricted stock equal to $250,000 divided by the closing price of WLBC’s common stock on the closing date of the Acquisition to George A. Rosenbaum Jr., WLBC’s Chief Financial Officer, for his future services. In addition, WLBC also issued restricted stock with respect to shares of our common stock to William E. Martin, who became a member of our board of directors and serves as our Chief Executive Officer and as Chief Executive Officer of Service1st. Mr. Martin was issued restricted shares of WLBC common stock equal to $1.0 million divided by the closing price of our common stock on the closing date of the Acquisition in consideration for his future services. Mr. Rosenbaum and Mr. Martin were granted 38,820 and 155,280 shares of restricted stock, respectively, on October 28, 2010, vesting over a five year term. Annual expense associated with these grants is estimated to be approximately $250,000 per year, for the five year term.

On October 28, 2010, WLBC and each of Jason N. Ader, Daniel B. Silvers, Andrew P. Nelson, Michael Tew and Laura Conover-Ferchak entered into Letter Agreements (the “Letter Agreements”), pursuant to which each of the foregoing individuals received a grant of restricted stock units of WLBC (the “Restricted Stock Units”). Mr. Ader, a current director and the former Chairman and Chief Executive Officer of WLBC, received 50,000 Restricted Stock Units; Mr. Silvers, WLBC’s former President, received 100,000 Restricted Stock Units; Mr. Nelson, a former director of WLBC, received 25,000 Restricted Stock Units; Mr. Tew, an outside consultant to WLBC, received 20,000 Restricted Stock Units; and Mrs. Conover-Ferchak, an outside consultant to WLBC, received 5,000 Restricted Stock Units. Each Restricted Stock Unit is immediately and fully vested and shall be settled for one share of common stock, par value $0.0001, of WLBC on the earlier to occur of (i) a Change of Control Event (as such term is defined in the Letter Agreements) and (ii) October 28, 2013 (the “Settlement Date”). Any cash dividends paid with respect to the shares of Common Stock covered by the Restricted Stock Units prior to the Settlement Date shall be credited to a dividend book entry account as if the shares of Common Stock had been issued, provided that such cash dividends shall not be deemed to be reinvested in shares of Common Stock and will be held uninvested and without interest and shall be paid in cash on the Settlement Date. Any stock dividends paid with respect to the shares of Common Stock covered by the Restricted Stock Units prior to the Settlement Date shall be credited to a dividend book entry account as if shares of Common Stock had been issued, provided that such dividends shall be paid on the Settlement Date. These grants were recorded as of October 28, 2010 and resulted in recording expenses of approximately $1,288,000.

Furthermore, in consideration of their substantial service to and support of WLBC during the period in which WLBC sought the requisite regulatory approval to become a bank holding company in connection with the Acquisition, WLBC made a one-time grant of 50,000 shares of Common Stock to each of Michael Frankel, the current Chairman of the Board of Directors of WLBC, Richard A.C. Coles, a current member of the Board of Directors and Mark Schulhof, a former member of the Board of Directors. The issuances of Restricted Stock Units and Common Stock were made in reliance upon an available exemption from registration under the Securities Act. These grants were recorded as of October 28, 2010 and resulted in recording expenses of approximately $966,000.

Note 5 Transaction Costs

For the three and nine months ended September 30, 2010, WLBC incurred transaction costs relating to the proposed business combination with Service1st in the amount of $944,482 and $2,524,974. Such transaction costs were expensed as professional fees.

In addition, on October 28, 2010, in consideration of their substantial service to and support of WLBC during the period in which WLBC sought the requisite regulatory approval to become a bank holding company in connection with the Acquisition, WLBC made a one-time payment of $200,000, $450,000, $50,000 and $50,000 to each of Jason N. Ader, Daniel B. Silvers, Michael B. Frankel and Andrew Nelson, respectively.

10

Note 6 Commitments and Contingencies

There is no material litigation currently pending against WLBC or any members of its management team in their capacity as such.

Note 7 Indemnifications

WLBC has entered into agreements with its officers and directors to provide contractual indemnification in addition to the indemnification provided in its amended and restated certificate of incorporation. WLBC believes that these provisions and agreements are necessary to attract qualified officers and directors. WLBC’s bylaws also will permit it to secure insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit indemnification. WLBC has purchased a policy of directors’ and officers’ liability insurance that insures WLBC’s directors and officers against the cost of defense, settlement or payment of a judgment in some circumstances and insures WLBC against its obligations to indemnify the directors and officers.

11

Note 8. Unaudited Pro Forma Condensed Combined Financial Data

As previously discussed on October 28, 2010, WLBC consummated its transaction with Service1^st. The pro forma condensed combined financial statements reflect the accounting for the transaction under the acquisition method, as such the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values, with any excess of the purchase price acquired over the estimated fair value of the identifiable net assets recorded as goodwill. WLBC is in the process of obtaining third party valuation for the assets acquired and liabilities assumed, and will refine fair value estimates when the valuation is completed using the balances as of the closing date, October 28, 2010

The following is an estimate of the purchase price allocation for Service1^st, using September 30, 2010 and prior estimates of fair value as (in thousands):

Fair value of WLBC common stock consideration exchanged with Service1st Bank common stock	$	15,268
Fair value of WLBC common stock contingent consideration exchanged with Service1st Bank common stock		4,358
Allocated to:
Historical book value of Service1st Bank’s assets and liabilities		19,777
To adjust Service1st Bank’s assets and liabilities to fair value:
Securities, held to maturity		276
Loans		(5,064	)
Other Real Estate Owned		(300	)
Time Deposits		(184	)
Core Deposit Intangible		4,352
Total allocation of purchase price		18,857
Excess of purchase price over allocation to identifiable assets and liabilities	$	769

The following pro forma condensed combined financial statements are not necessarily indicative of the results of operations that would have been achieved had the Acquisition actually taken place at the dates indicated and do not purport to be indicative of future financial condition or operating results.

12

Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 2010

	Historical						Combined			Pro Forma			Combined
	WLBC			Service 1st			Historical			Adjustments			Pro Forma
	(In thousands)
ASSETS
Cash and cash equivalents	$	84,318		$	27,825		$	112,143		$	(1,000	)H	$	108,259
		—			—			—			(2,884	)K
Certificates of deposit		—			32,174			32,174			—			32,174
Investment securities — AFS		—			3,899			3,899			—			3,899
Investment securities — HTM		—			7,584			7,584			276	D		7,860
Loans		—			120,855			120,855			(12,085	)D		108,770
Allowance for loan losses		—			(7,021	)		(7,021	)		7,021	D		—
Premises and equipment, net		—			1,321			1,321			—			1,321
Other real estate owned		—			3,019			3,019			(300	)E		2,719
Core deposit intangible		—			—			—			4,352	C		4,352
Goodwill		—			—			—			769	A		769
Accrued interest receivable and other assets		551			3,534			4,085			—			4,085
TOTAL ASSETS	$	84,869		$	193,190		$	278,059		$	(3,851	)	$	274,208
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing deposits	$	—		$	75,026		$	75,026			—		$	75,026
Interest bearing non-time deposits		—			60,076			60,076			—			60,076
Time Deposits		—			36,773			36,773			184	D		36,957
Total deposits		—			171,875			171,875			184			172,059
Accrued interest on deposits and other liabilities		379			1,538			1,917			4,358	J		6,275
Total liabilities		379			173,413			173,792			4,542			178,334
STOCKHOLDERS’ EQUITY:
Common stock		1			1			2			(1	)B		1
Additional paid-in capital		103,143			52,616			155,759			(52,616	)B		117,969
		—			—			—			2,442	G
		—			—			—			19,626	A
		—			—			—			(4,358	)J
		—			—			—			(2,884	)K		—
Retained-earnings deficit		(18,654	)		(32,065	)		(50,719	)		32,065	B		(22,096	)
		—			—			—			(2,442	)G
		—			—			—			(1,000	)H
Treasury stock		—			(775	)		(775	)		775	B		—
Total stockholders’ equity		84,490			19,777			104,267			(8,393	)		95,874
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	84,869		$	193,190		$	278,059		$	(3,851	)	$	274,208

See accompanying notes to the unaudited pro forma condensed combined financial statements.

13

WESTERN LIBERTY BANCORP

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2010

	Historical						Combined			Pro Forma			Combined
	WLBC			Service1st			Historical			Adjustments			Pro Forma
	(In thousands, except per share data)
Interest Income	$	5		$	6,116		$	6,121		$	(55)	D	$	6,309
											243	D
Interest Expense		—			1,083			1,083			—			1,083
Net interest income		5			5,033			5,038			188			5,226
Provision for loan losses		—			3,938			3,938			—			3,938
Net interest income after provision for loan losses		5			1,095			1,100			188			1,288
Noninterest income		—			466			466			—			466
Noninterest expense		2,819			6,920			9,739			534	C		10,461
											188	G
Loss before federal income tax benefit		(2,814	)		(5,359	)		(8,173	)		(534	)		(8,707	)
Federal income tax benefit		—			—			—			—	I		—
NET LOSS	$	(2,814	)	$	(5,359	)	$	(8,173	)	$	(534	)	$	(8,707	)
Pro forma net income (loss) attributable to common stock	$	(2,814	)	$	(5,359	)	$	(8,173	)	$	(534	)	$	(8,707	)
Pro forma net loss per common share — Basic	$	(0.26	)	$	(107.59	)							$	(0.54	)
Pro forma net loss per common share — Diluted(1)	$	(0.26	)	$	(107.59	)							$	(0.54	)
Weighted Average Number of Share Outstanding — Basic(1)		10,959,169			49,811									16,007,936
Weighted Average Number of Share Outstanding — Diluted(1)		10,959,169			49,811									16,007,936

(1) When an entity has a net loss from continuing operations the inclusion of potential common shares in the computation of diluted per-share amounts is prohibited. Accordingly, we have utilized the basic shares outstanding amount to calculate both basic and diluted loss per share for all periods presented. This pro forma presentation assumes the transaction occurred on January 1, 2009.

See accompanying notes to the unaudited pro forma condensed combined financial statements.

14

WESTERN LIBERTY BANCORP

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2009

	Historical						Combined			Pro Forma			Combined
	WLBC			Service1st			Historical			Adjustments			Pro Forma
	(In thousands, except per share data)
Interest Income	$	87		$	6,751		$	6,838		$	(166)	D	$	6,915
											243	D
Interest Expense		—			2,118			2,118			(138)	D		1,980
Net interest income		87			4,633			4,720			215			4,935
Provision for loan losses		—			4,391			4,391			—			4,391
Net interest income after provision for loan losses		87			242			329			215			544
Noninterest income		—			385			385			—			385
Noninterest expense		8,548			5,651			14,199			593	C		17,234
											2,442	G
Loss before federal income tax benefit		(8,461	)		(5,024	)		(13,485	)		(2,820	)		(16,305	)
Federal income tax benefit		—			—			—			—	I		—
NET LOSS	$	(8,461	)	$	(5,024	)	$	(13,485	)	$	(2,820	)	$	(16,305	)
Pro forma net income (loss) attributable to common stock	$	(8,461	)	$	(5,024	)	$	(13,485	)	$	(2,820	)	$	(16,305	)
Pro forma net loss per common share — Basic	$	(0.21	)	$	(98.92	)							$	(0.36	)
Pro forma net loss per common share — Diluted(1)	$	(0.21	)	$	(98.92	)							$	(0.36	)
Weighted Average Number of Share Outstanding — Basic(1)		39,936,064			50,789									45,031,509
Weighted Average Number of Share Outstanding — Diluted(1)		39,936,064			50,789									45,031,509
DS

(1) When an entity has a net loss from continuing operations the inclusion of potential common shares in the computation of diluted per-share amounts is prohibited. Accordingly, we have utilized the basic shares outstanding amount to calculate both basic and diluted loss per share for all periods presented. This pro forma presentation assumes the transaction occurred on January 1, 2009.

See accompanying notes to the unaudited pro forma condensed combined financial statements.

15

A)	WLBC issued 2,370,878 shares of common stock based on a price of $8.00 per share to exchange for all of the shares of Service1st Bank. Under the terms of the Merger Agreement, WLBC stock has a floor of $8.00 and a ceiling of $9.78 for computing the daily volume weighted average price. For purposes of this pro forma presentation, the fair value of merger consideration shares is approximately $15,268,000 or $6.44 per share based on the closing price of WLBC on October 28, 2010. All other share value components will be calculated using the closing price of $6.44 per share. The total amount of Base Acquisition Consideration for calculation of the number of shares to be issued as of September 30, 2010 is $18,967,000. The Base Acquisition Consideration is based upon a formula detailed in the Merger Agreement, section 3.2. In addition, this section describes the computation of Contingent Acquisition Consideration. In general, the Contingent Acquisition Consideration is calculated as 20% of the tangible book value of Service1st as of the Valuation Date (as defined herein). Using the September 30, 2010 tangible book value of Service1st, the Contingent Acquisition Consideration would be approximately $4,358,000. The Contingent Acquisition Consideration is payable if at any time during the first two years after the Effective Time and WLBC’s common stock closes at a price in excess of $12.75 per share for thirty (30) consecutive trading days. For purposes of this disclosure, the Contingent Acquisition Consideration will be calculated at $12.75 per share to assume maximum dilution of the Contingent Acquisition Consideration. The fair value of the Contingent Acquisition Consideration will be recorded as a liability until the trigger event is met and the shares are issued. The Contingent Acquisition Consideration shall be remeasured to fair value at each reporting date until the contingency is resolved with the changes in fair value recognized in earnings.
B)	Reflects the elimination of Service1st Bank’s historical net equity of approximately $19.8 million as a result of the acquisition.
C)	Reflects the pro forma impact of the core deposit intangible assets of Service1st Bank. The preliminary fair value adjustment and related amortization is as follows (in thousands):

	Core Deposit
	Intangible
Fair Value Adjustment	$	4,352
Amortization Period	10 yrs
Amortization:
For the nine months ended September 30, 2010	$	534
For the nine months ended September 30, 2009	$	593

The core deposit intangible asset will be amortized using the sum-of-the-years digits method.

D)

Reflects the pro forma impact of the Purchase Accounting Adjustments (“PAA”) on the assets and liabilities of Service1st Bank.

For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk including consideration of widening credit spreads. A $974,000 fair value adjustment was due to fixed rate loans related to the acquisition. The fair value was based on discounted cash flows using current market rates applied to the estimated life and credit risk including consideration of widening credit spreads for performing loans. This fair value adjustment will be accreted to income over a weighted average life of 3.0 years. The preliminary fair value adjustment and related amortization is as follows:

	Held to
	Maturity						Time
	Investments			Loans			Deposits
	($ in 000’s)
Fair Value Adjustment	$	276		$	(974	)	$	184
Amortization Period	1.3 yrs			3.0 yrs			1.0 yr
Amortization (Accretion):
Method (level yield)
For the nine months ended September 30, 2010	$	(55	)	$	243		$	—
For the nine months ended September 30, 2009		(166	)	$	243		$	(138	)

In addition to the interest rate differential adjustment on performing credits of $974,000, an additional discount of approximately $11,111,000 is applied to the gross loan balance. This additional discount is related to the removal of the original valuation allowance for loans and approximates the present value of expected cash flows on certain loans which have shown evidence of credit deterioration since origination. Purchased loans are recorded at the allocated fair value, such that there is no carryover of the seller’s allowance for loan losses of approximately $7,021,000. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

16

E)

A fair market adjustment in the amount of $300,000 is recorded to adjust the carrying value of two pieces of other real estate owned for disposition costs, adverse market conditions and expedited disposition.

F)

Pro forma earnings per share (EPS), basic and diluted, are based on the following calculations of the number of shares of common stock. Loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. The Contingent Acquisition Consideration shares will be issued at the 30 day average above $12.75 per share and are reflected as issued and outstanding using a price of $12.75 per share in the below table.

	September 30, 2010
Basic and diluted shares:
WLBC shares outstanding		10,959,169
Shares issued to exchange with Service1ststockholders		2,370,878
Shares issued as Contingent Acquisition Consideration to Service1ststockholders		341,804
Restricted stock units granted to directors, officers and consultants		200,000
Restricted shares issued to CFO per employment agreement		38,820
Restricted shares issued to CEO per employment agreement		155,280
Common stock issued to a director and former directors		150,000
Common stock issued in conjunction with the warrant conversion		1,502,177
Common stock options and warrants exchanged with Service1st holders		289,808
		16,007,936

G)	Reflects the pro forma adjustment to Non-Interest Expense, representing the Employment Contract the Company has entered into with the CFO. As approved at the October 7, 2009 stockholder meeting, the CFO will receive a one-time grant of restricted stock equal to $250,000, divided by the closing price of our common stock on the Effective Date. In addition, the CEO will receive a one-time grant of restricted stock equal to $1,000,000, divided by the closing price of our common stock on the Effective Date. The restricted stock will vest 20% on each of the first, second, third, fourth and fifth anniversaries of the Effective Date. The total grant consideration of $1,250,000 for the one-time grants of restricted stock is considered in common stock outstanding based on the stock price of $6.44 resulting in 194,100 shares outstanding disclosed in Note F. As previously discussed in Note 4 to the Condensed Financial Statements (unaudited), the Company awarded 200,000 restricted stock units and 150,000 shares of common stock to certain directors, officers, and consultants in consideration of their substantial service to and in support of WLBC during the period in which WLBC sought regulatory approval to become a bank holding company. As a result of these awards, for past services, the Company recorded stock compensation expense of $2,254,000 as of October 28, 2010 based on the closing stock price. The stock price is based on the October 28, 2010 closing price.
	Our Board of Directors has approved the award of up to 1,500,000 shares of restricted stock in connection with the Acquisition, which we expect to be awarded to certain members of our management and our consultants, in connection with the Acquisition. As soon as practicable after the closing of the Acquisition, the Compensation Committee will meet to determine which members of our management and our consultants will receive equity grants and the allocation of such grants. As such, the shares have not been included in the pro forma financial statements.
H)	Reflects the estimated payment of $1.0 million of fees yet to be incurred prior to the closing of the transaction. The fees are non-recurring items directly attributable to the closing of the transaction and are not expected to have a continuing impact on operations and therefore are not included in the Unaudited Pro Forma Statement of Operations.
I)	No tax provision or deferred taxes are reflected in the pro forma acquisition adjustments due to the net operating losses previously incurred by Service1st Bank and the uncertainty of realization of deferred taxes in future periods.
J)	Reflects the maximum estimated amount for the contingent consideration. The fair value of the contingent consideration has not been determined as of this filing date.
K)	The conversion of the Company’s warrants took place with the transaction closing on October 28, 2010. The Company paid a consent fee of $0.06, and one thirty-second (1/32) of one share of WLBC common stock for each warrant. This resulted in the issuance of 1,502,117 shares of common stock and disbursement of $2,844,065.

17

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with unaudited condensed financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q and our combined and consolidated financial statements and related notes thereto included in or incorporated into Part II, Item 8 of our Annual Report onForm 10-K and the Risk Factors included in Part I, Item 1A of our Annual Report onForm 10-K, as well as other cautionary statements and risks described elsewhere in this Quarterly Report onForm 10-Q and our Annual Report onForm 10-K.

References to “us”, “we” or “WLBC” refer to Western Liberty Bancorp. The following discussion and analysis of WLBC’s financial condition and results of operations should be read in conjunction with the condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Forward-Looking Statements

All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the Securities and Exchange Commission. We wish to caution you not to place undue reliance on these forward-looking statements, which speak only as of the date made. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

Overview

We are a “new” Nevada financial institution bank holding company and conduct our operations through our wholly-owned subsidiary, Service1^st.

Service1^st provides a full range of traditional community banking services focusing on core commercial business in the form of commercial and commercial real estate lending, small business lending, consumer loans and a broad range of commercial and consumer depository products. We intend to pursue additional acquisitions and to fund the growth of our loan portfolio and deposit base, as and when appropriate, subject to advance regulatory approval.

Contractual Obligations, Commitments and Contingencies

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.

Results of Operations for the Three Months Ended September 30, 2010 and 2009

For the three months ended September 30, 2010, the Company had net income of $614,301 compared to a net loss of $5,057,662 for the same period in 2009. Our general and administrative expenses for the three months ended September 30, 2010 and 2009 were $1,237,192 and $4,969,837, respectively, and consisted primarily of expenses related to insurance costs, legal and accounting professional fees related to pursuing a business combination and due diligence. In September 2010, the Company reversed $1,850,000 of stock based compensation expense previously recorded. This is more fully discussed in Note 4.

Results of Operations for the Nine Months Ended September 30, 2010 and 2009

For the nine months ended September 30, 2010, the Company had a net loss of $2,813,960 compared to a net loss of $8,557,043 for the same period in 2009. Our general and administrative expenses for the nine months ended September 30, 2010 and 2009 were $3,406,752 and $8,267,056, respectively, and consisted primarily of expenses related to insurance costs, legal and accounting professional fees related to pursuing a business combination and due diligence. In September 2010, the Company reversed $1,850,000 of stock based compensation expense previously recorded. On completion of the acquisition of Service1st, the requirements of the aforementioned letter agreements were not satisfied, so that the restricted stock units did not, and now cannot, vest according to their terms. Management made this determination on September 30, 2010 upon receipt of the final approval from the applicable regulatory agencies.  As a result of this determination, WLBC reversed the stock compensation expense ($1,850,000) previously recorded for the 200,000 restricted stock units described above.

18

Liquidity and Capital Resources

On November 27, 2007, we consummated our initial public offering of 31,948,850 units and consummated a private placement of 8,500,000 warrants. A total of $314,158,960 of the net proceeds from the transactions, including $9,584,655 of deferred underwriting discount, were deposited into the trust account established for the benefit of our public stockholders.

On October 7, 2009, our stockholders authorized the Continental Stock Transfer & Trust Company, as trustee, (the “Trustee”) to distribute and terminate our trust account immediately following stockholder approval of the Acquisition. As a result, the Trustee distributed $211,764,441 from our trust account to stockholders who elected to convert their shares into a pro rata portion of the trust account. The Trustee distributed the remaining balance to us from the trust account.

As of September 30, 2010, we had total assets of $84,869,331, including unrestricted cash and cash equivalents of $84,317,971, net of all payments made to underwriters, advisors, consultants in connection with our initial public offering and operations thereafter.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the disclosure of contingent assets and liabilities in the financial statements and the accompanying notes, and the reported amounts of revenue and expenses during the periods presented. Actual amounts and results could differ from those estimates. If we were to effect a business combination, estimates and assumptions would be based on historical factors, current circumstances and the experience and judgment of our management, and we would evaluate these assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. The estimates and assumptions that management believes are the most significant in preparing our financial statements are described below.

Fair value of financial instruments

We do not enter into financial instruments or derivative contracts for trading or speculative purposes. The carrying amounts of financial instruments classified as current assets and liabilities approximate their fair value due to their short maturities.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. Until such time as we consummated the Acquisition, we had not been exposed to risks associated with foreign exchange rates, commodity prices, equity prices or other market-driven rates or prices. Given our limited risk in our exposure to government securities and money market funds, we did not view the interest rate risk to be significant. On October 28, 2010, WLBC completed the acquisition of Service1^st. Management of WLBC reviewed the interest rate risk identified by Service1^st which is deemed to be “low to moderate” on a pre-acquisition basis. On a post-acquisition basis, the risk was deemed not material given the consolidated capital position of WLBC.

We have not engaged in any hedging activities since our inception. We do not currently expect to engage in any hedging activities with respect to the market activities to which we are exposed.

19

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of our management (including our Chief Executive Officer and Chief Financial Officer), our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), were effective as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and (ii) accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially effect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

As of November 9, 2010, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC, except we may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In connection with the restructuring of the Warrants, WLBC has agreed to file a registration statement with the SEC for the registration under the Securities Act of the shares of Common Stock issued upon exercise of Private Warrants. If such registration statement is not filed within 30 days of such exercise, or October 28, 2010, WLBC shall make a payment to each holder of Common Shares issued upon exercise of the Private Warrants in an amount equal to $0.12 per share of Common Stock issued upon exercise of the Private Warrants held by such holder. WLBC further agreed to make an additional payment in an amount equal to $0.18 per share of Common Stock issuable upon exercise of the Private Warrants held by such holder if the registration statement has not been declared effective by the SEC within 180 days of the exercise of the Private Warrants. (See Note 2, Warrant Restructuring).

Additionally, WLBC issued Restricted Stock Units to each of Messrs. Ader, Silvers, Nelson and Tew and to Mrs. Conover — Ferchak, and 50,000 shares of Common Stock to each of Michael Frankel, Richard A.C. Coles and Mark Schulhof (See Note 4, Restricted Stock).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION

None.

20

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Exhibit
Number		Description
	31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

21

SIGNATURES

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

WESTERN LIBERTY BANCORP Date: November 9, 2010
/s/ William E. Martin
Name:	William E. Martin
Title:	Chief Executive Officer (Principal Executive Officer)
WESTERN LIBERTY BANCORP Date: November 9, 2010
/s/ George A. Rosenbaum Jr.
Name:	George A. Rosenbaum Jr.
Title:	Chief Financial Officer (Principal Accounting and Financial Officer)

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