First Liberty Bank is Digging Deep Into Energy Lending

As customer demand for specialized services grows, community banks are finding that niche lending not only builds customer loyalty but is also good for business. One such bank is $835 million-asset First Liberty Bank in Oklahoma City. Its energy lending program is a prime example of how specialized services can meet specialized market needs while boosting profitability. 

Founded in 2006, First Liberty Bank initially focused on commercial real estate and healthcare financing before expanding into energy lending at the suggestion of several oil and gas professionals on its board of directors. 

“At the time, most commercial lending options for oil and gas in Oklahoma City were provided by larger banks, with relatively high minimum loan thresholds,” says Baird Harper, senior vice president and energy banking division manager. “That left a gap in the market for investors seeking capital at smaller levels.”

Harper joined First Liberty Bank in 2017 with a mission to establish an oil and gas portfolio and ultimately form an energy banking division. 

“Over the past eight years, we have grown that portfolio into a material portion of the overall loan base, focusing on both operated and non-operated working interests,” he says, noting that the bank has some exposure to mineral and royalties.

The community bank’s energy lending program serves independent oil and gas entrepreneurs and non-operated working interest investors with services such as acquisition financing, well participations and mineral financing.

One key benefit of the program is that the bank provides access to affordable capital, which helps customers grow without resorting to costly alternatives. First Liberty’s asset size also allows for flexible financing structures, according to Harper. One example is the bank’s Guidance Line structures, which preapprove borrowers for certain types of oil and gas investments and streamline acquisitions.

“We don’t just do one-off transactions. We focus on building long-term partnerships with our borrowers.”

—Baird Harper, First Liberty Bank

Driving growth and profitability

Energy lending has been a strong contributor to First Liberty’s growth. “Given the complexity and inherent risk of these credits, we are able to charge higher interest rates and origination fees, which have had a material impact on the bottom line,” says Harper.

The program has also brought new faces to the bank in terms of depositors, investors and business partners. 

“Despite the risks associated with the industry, our disciplined approach, which emphasizes rapid amortization, strong guarantor support and reliance on qualified third-party engineers and attorneys, has resulted in no losses to date within the portfolio,” Harper says.

The benefits of the program extend beyond the community bank itself, reflecting positively on the community. “As these smaller companies grow through access to capital, they help drive job creation and strengthen the local economy,” says Harper. He adds that the benefits are felt directly at the community level, because many of the bank’s borrowers live and operate in the same places First Liberty does business. 

The success of the program can be attributed to several factors. “Our success is rooted in industry knowledge, disciplined policies and long-term relationships,” Harper says. To support this, First Liberty Bank has developed a custom oil and gas database and implemented detailed lending policies to ensure the bank maintains full visibility and mitigates risk.

Building long-term relationships

Ultimately, according to Harper, First Liberty’s success comes down to relationships. “We don’t just do one-off transactions,” he says. “We focus on building long-term partnerships with our borrowers.”

First Liberty Bank recently expanded into the Dallas–Fort Worth market, opening its first branch in Frisco, Texas, under the name First Lonestar Bank, to tap into the region’s energy growth potential.

“We are also continuously refining our structures and exploring new opportunities in the energy space,” Harper says. “Our goal is to keep evolving to better serve our customers while driving sustainable growth for the bank.”

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