From the club site, a good article and some good pics. http://www.liverpoolfc.tv/news/latest-news/pics-liverbird-on-our-chest Taken from the city's coat of arms, it was first adopted by Anfield officials at the turn of the 20th century, when it was used on club correspondence and also on the League Championship medals presented to the players in 1901. It then appeared on a club flag celebrating the team's early title triumphs in 1922, was used on the programme cover from 1935.
