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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

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FORM 10-QSB

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

For the Quarterly Period Ended September 30,
2002

OR

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

For the Transition Period fromto

Commission file number 0-24113

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Liberty National Bancshares, Inc.(Exact name of Small Business Issuer as specified in its charter)

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| | Georgia(State of Incorporation) |  | 58-2292563(I.R.S. Employer Identification No.) | 
| | ------------------------------- |  | ---------------------------------------------- | 

P.O. Box 82030Conyers, Georgia 30013(Address of principal executive offices)

770-785-7880(Issuers Telephone Number, Including Area Code)

State the number of shares outstanding of each of theissuers classes of common equity, as of the latest practicable date:

1,419,000 Shares of Common stock, par value $.50 per shareoutstanding as of November 12, 2002.

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LIBERTY NATIONAL BANCSHARES, INC. AND SUBSIDIARY

INDEX

|         |  |                       |  |                                                                                                                                        | Page No.
|-------- |  | --------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- | --------
|         |  |                       |  |                                                                                                                                        |         
|PART I.  |  | FINANCIAL INFORMATION | 
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 1.               |  | Financial Statements                                                                                                                   |         
|         |  |                       |  |                                                                                                                                        |         
|         |  |                       |  | Consolidated Balance Sheet (Unaudited) at September 30, 2002                                                                           | 2       
|         |  |                       |  |                                                                                                                                        |         
|         |  |                       |  | Consolidated Statements of Earnings (Unaudited) for the Three Months and the Nine Months Ended September 30, 2002 and 2001             | 3       
|         |  |                       |  |                                                                                                                                        |         
|         |  |                       |  | Consolidated Statements of Comprehensive Income (Unaudited) for the Three Months and the Nine Months Ended September 30, 2002 and 2001 | 4       
|         |  |                       |  |                                                                                                                                        |         
|         |  |                       |  | Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2002 and 2001                                | 5       
|         |  |                       |  |                                                                                                                                        |         
|         |  |                       |  | Notes to Consolidated Financial Statements (Unaudited)                                                                                 | 6       
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                  | 8       
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 3.               |  | Controls and Procedures                                                                                                                | 10      
|         |  |                       |  |                                                                                                                                        |         
|PART II. |  | OTHER INFORMATION     | 
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 1.               |  | Legal Proceedings                                                                                                                      | 11      
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 2.               |  | Changes in Securities                                                                                                                  | 11      
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                                                                        | 11      
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                                                                    | 11      
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 5.               |  | Other Information                                                                                                                      | 11      
|         |  |                       |  |                                                                                                                                        |         
|         |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                                                                       | 11      

|                                                     |   
|---------------------------------------------------- | --
|                                                     |   
|SIGNATURES                                           | 12
|                                                     |   
|Certification Pursuant to Sarbanes-Oxley Act of 2002 | 15





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PART I. FINANCIAL INFORMATION

|Item 1. | Financial Statements
|------- | --------------------

LIBERTY NATIONAL BANCSHARES, INC. AND SUBSIDIARY

Consolidated Balance
Sheet

September 30, 2002(Unaudited)

|Assets                                                                                                                        |  |   |             | 
|----------------------------------------------------------------------------------------------------------------------------- |  | - | ----------- | 
|                                                                                                                              |  |   |             | 
|Cash and due from banks                                                                                                       |  | $ | 4,847,200   | 
|Federal funds sold                                                                                                            |  |   | 10,826,000  | 
|                                                                                                                              |  |   |            
|                                                                                                                              |  |   |             | 
|Cash and cash equivalents                                                                                                     |  |   | 15,673,200  | 
|                                                                                                                              |  |   |             | 
|Investment securities available for sale                                                                                      |  |   | 13,780,318  | 
|Other investments                                                                                                             |  |   | 368,568     | 
|Loans, (net of allowance for loan losses of $1,251,299)                                                                       |  |   | 89,154,622  | 
|Premises and equipment, net                                                                                                   |  |   | 3,681,311   | 
|Other assets                                                                                                                  |  |   | 1,078,459   | 
|                                                                                                                              |  |   |            
|                                                                                                                              |  |   |             | 
|Total assets                                                                                                                  |  | $ | 123,736,478 | 
|                                                                                                                              |  |   |            
|                                                                                                                              |  |   |             | 
|Liabilities and Stockholders Equity                                                                                          |  |   |             | 
|                                                                                                                              |  |   |             | 
|Liabilities:                                                                                                                  |  |   |             | 
|Deposits:                                                                                                                     |  |   |             | 
|Demand                                                                                                                        |  | $ | 16,091,187  | 
|Interest-bearing demand                                                                                                       |  |   | 10,391,861  | 
|Savings                                                                                                                       |  |   | 24,924,681  | 
|Time                                                                                                                          |  |   | 59,844,581  | 
|                                                                                                                              |  |   |            
|                                                                                                                              |  |   |             | 
|Total deposits                                                                                                                |  |   | 111,252,310 | 
|                                                                                                                              |  |   |             | 
|Notes Payable                                                                                                                 |  |   | 800,000     | 
|Accrued interest payable and other liabilities                                                                                |  |   | 412,780     | 
|FHLB advances                                                                                                                 |  |   | 2,500,000   | 
|                                                                                                                              |  |   |            
|                                                                                                                              |  |   |             | 
|Total liabilities                                                                                                             |  |   | 114,965,090 | 
|                                                                                                                              |  |   |            
|                                                                                                                              |  |   |             | 
|Stockholders equity: Common stock, $.50 par value; authorized 10,000,000 shares; 1,419,000     shares issued and outstanding |  |   | 709,500     | 
|Additional paid-in capital                                                                                                    |  |   | 6,502,828   | 
|Retained earnings                                                                                                             |  |   | 1,340,636   | 
|Accumulated other comprehensive income                                                                                        |  |   | 218,424     | 
|                                                                                                                              |  |   |            
|                                                                                                                              |  |   |             | 
|Total stockholders equity                                                                                                    |  |   | 8,771,388   | 
|                                                                                                                              |  |   |            
|                                                                                                                              |  |   |             | 
|Total liabilities and stockholders equity                                                                                    |  | $ | 123,736,478 | 
|                                                                                                                              |  |   |            

See accompanying notes to unaudited consolidated financial statements.

2



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LIBERTY NATIONAL BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Earnings

For the Three Months and the Nine Months Ended September
30, 2002 and 2001(Unaudited)

|                                                                |  | Three MonthsEnded |           | Nine MonthsEnded | 
|--------------------------------------------------------------- |  | ----------------- | --------- | ---------------- | 
|                                                                |  |                   |           |                  | 
|                                                                |  | 2002              |           | 2001             | 
|                                                                |  |                   |           |                  | 
|Interest and dividend income:                                   |  |                   |           |                  | 
|Loans                                                           |  | $                 | 1,770,499 |                  | 
|Investment securities:                                          |  |                   |           |                  | 
|Taxable                                                         |  |                   | 108,283   |                  | 
|Tax exempt                                                      |  |                   | 20,118    |                  | 
|Federal funds sold                                              |  |                   | 64,244    |                  | 
|                                                                |  |                   |           |                  | 
|Interest on deposit with other banks                            |  |                   | 374       |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Total interest income                                           |  |                   | 1,963,518 |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Interest expense:                                               |  |                   |           |                  | 
|Deposits                                                        |  |                   | 725,822   |                  | 
|Federal Home Loan Bank advances                                 |  |                   | 42,896    |                  | 
|                                                                |  |                   |           |                  | 
|Notes payable                                                   |  |                   | 8,689     |                  | 
|                                                                |  |                   |           |                  | 
|Federal funds purchased                                         |  |                   |          |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Total interest expense                                          |  |                   | 777,407   |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Net interest income                                             |  |                   | 1,186,111 |                  | 
|                                                                |  |                   |           |                  | 
|Provision for loan losses                                       |  |                   | 64,858    |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Net interest income after provision for loan             losses |  |                   | 1,121,253 |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Other operating income:                                         |  |                   |           |                  | 
|Service charges on deposit accounts                             |  |                   | 293,699   |                  | 
|Securities gains (losses)                                       |  |                   | (1,255    | )                | 
|Other operating income                                          |  |                   | 91,053    |                  | 
|                                                                |  |                   |           |                  | 
|Total other operating income                                    |  |                   | 383,497   |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Other operating expense:                                        |  |                   |           |                  | 
|Salaries and other personnel expense                            |  |                   | 487,848   |                  | 
|Net occupancy and equipment expense                             |  |                   | 150,956   |                  | 
|Other operating expense                                         |  |                   | 311,555   |                  | 
|                                                                |  |                   |           |                  | 
|Total other operating expense                                   |  |                   | 950,359   |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Earnings before income taxes                                    |  |                   | 554,391   |                  | 
|                                                                |  |                   |           |                  | 
|Income tax expense                                              |  |                   | 204,287   |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Net earnings                                                    |  | $                 | 350,104   |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Basic net earnings per share                                    |  | $                 | .25       |                  | 
|                                                                |  |                   |           |                  | 
|                                                                |  |                   |           |                  | 
|Diluted net earnings per share                                  |  | $                 | .24       |                  | 
|                                                                |  |                   |           |                  | 

See accompanying notes to unaudited consolidated financial statements.

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LIBERTY NATIONAL BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

For the Three Months and the Nine Months Ended
September 30, 2002 and 2001(Unaudited)

|                                                                                                               |  | Three MonthsEnded |         | Nine MonthsEnded | 
|-------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ---------------- | 
|                                                                                                               |  |                   |         |                  | 
|                                                                                                               |  | 2002              |         | 2001             | 
|                                                                                                               |  |                   |         |                  | 
|Net earnings                                                                                                   |  | $                 | 350,104 |                  | 
|Other comprehensive income (loss), net of tax:                                                                 |  |                   |         |                  | 
|Unrealized holding gains (losses) on investment securities        available for sale arising during the period |  |                   | 200,554 |                  | 
|Reclassification adjustment for (gains) losses on investment        securities available for sale              |  |                   | 1,255   |                  | 
|                                                                                                               |  |                   |         |                  | 
|                                                                                                               |  |                   |         |                  | 
|Total other comprehensive income (loss), before tax                                                            |  |                   | 201,809 |                  | 
|                                                                                                               |  |                   |         |                  | 
|Income taxes related to other comprehensive income:                                                            |  |                   |         |                  | 
|Unrealized holding gains (losses) on investment securities        available for sale arising during the period |  |                   | (68,188 | )                | 
|Reclassification adjustment for gains (losses) on investment        securities available for sale              |  |                   | (427    | )                | 
|                                                                                                               |  |                   |         |                  | 
|Total income taxes related to other comprehensive income          (loss)                                       |  |                   | (68,615 | )                | 
|                                                                                                               |  |                   |         |                  | 
|Total other comprehensive income, net of tax                                                                   |  |                   | 133,194 |                  | 
|                                                                                                               |  |                   |         |                  | 
|Comprehensive income                                                                                           |  | $                 | 483,298 |                  | 
|                                                                                                               |  |                   |         |                  | 

See accompanying notes to unaudited consolidated financial statements.

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LIBERTY NATIONAL BANCSHARES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2002 and
2001(Unaudited)

|                                                                                              |  | Nine Months EndedSeptember 30, |            
|--------------------------------------------------------------------------------------------- |  | ------------------------------ | -----------
|                                                                                              |  |                                |            
|                                                                                              |  | 2002                           |            
|                                                                                              |  |                                |            
|Cash flows from operating activities:                                                         |  |                                |            
|Net earnings                                                                                  |  | $                              | 671,761    
|Adjustments to reconcile net earnings to net cash provided by operating        activities:    |  |                                |            
|Provision for loan losses                                                                     |  |                                | 271,976    
|(Loss) gain on sale of investment securities                                                  |  |                                | (769       
|Depreciation, amortization and accretion                                                      |  |                                | 239,470    
|Change in assets and liabilities:                                                             |  |                                |            
|Net change in other assets and other liabilities                                              |  |                                | (137,222   
|                                                                                              |  |                                |            
|Net cash provided by operating activities                                                     |  |                                | 1,045,216  
|                                                                                              |  |                                |            
|Cash flows from investing activities:                                                         |  |                                |            
|Proceeds from sales of investment securities                                                  |  |                                | 2,652,001  
|Proceeds from maturities and paydowns of investment securities available for        sale      |  |                                | 925,749    
|Purchases of investment securities available for sale                                         |  |                                | (5,858,945 
|Net change in loans                                                                           |  |                                | (16,521,399
|Purchases of premises and equipment                                                           |  |                                | (45,919    
|                                                                                              |  |                                |            
|Net cash used by investing activities                                                         |  |                                | (18,848,513
|                                                                                              |  |                                |            
|Cash flows from financing activities:                                                         |  |                                |            
|Net change in federal funds purchased                                                         |  |                                |           
|Net change in deposits                                                                        |  |                                | 14,591,249 
|Notes payable advances                                                                        |  |                                | 800,000    
|Proceeds from the sale of common stock                                                        |  |                                | 34,944     
|                                                                                              |  |                                |            
|Net cash provided by financing activities                                                     |  |                                | 15,426,193 
|                                                                                              |  |                                |            
|Net change in cash and cash equivalents                                                       |  |                                | (2,377,104 
|Cash and cash equivalents at beginning of period                                              |  |                                | 18,050,304 
|                                                                                              |  |                                |            
|Cash and cash equivalents at end of period                                                    |  | $                              | 15,673,200 
|                                                                                              |  |                                |            
|Supplemental cash flow information:                                                           |  |                                |            
|Cash paid for income taxes                                                                    |  | $                              | 322,679    
|Cash paid for interest                                                                        |  | $                              | 2,024,754  
|Noncash investing and financing activities:                                                   |  |                                |            
|Change in net unrealized gains on investment securities available for sale, net        of tax |  | $                              | 195,049    

See accompanying notes to unaudited consolidated financial statements.

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LIBERTY NATIONAL BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements(Unaudited)

(1)      Basis of Presentation

| |  | The consolidated financial statements include the accounts of Liberty National Bancshares, Inc. (the Company) and its wholly owned subsidiary, Liberty National Bank (the Bank). All significant
intercompany accounts and transactions have been eliminated in consolidation.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The consolidated financial information furnished herein reflects all adjustments, which are, in the opinion of management, necessary to present a fair statement of the results of operations and financial position for the
periods covered herein. All such adjustments are of a normal recurring nature.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(2)      2-for-1 stock split

| |  | The Board of Directors declared a 2-for-1 stock split for shareholders of record as of July 31, 2002. The distribution of the additional shares was executed August 15, 2002. As a result of the stock split, all share and
per share information has been presented to show the effect of the 2-for-1 stock split.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(3)      Earnings Per Share

| |  | Basic net earnings per share is based on the weighted average number of common shares outstanding during the period. Diluted net earnings per share include the effects of potential common shares outstanding during the
period. The average market price during the period is used to compute equivalent shares.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The reconciliation of the amounts used in the computation of both basic earnings per share and diluted earnings per share for the three-month and nine-month periods ended September 30, 2002 and 2001, are as
follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                               |  | NetEarnings |         | AverageSharesOutstanding |  | PerShareAmount | 
|---------------------------------------------- |  | ----------- | ------- | ------------------------ |  | -------------- | 
|                                               |  |             |         |                          |  |                | 
|For the three months ended September 30, 2002: |  |             |         |                          |  |                | 
|Net earnings  basic                           |  | $           | 350,104 |                          |  | 1,419,000      | 
|                                               |  |             |         |                          |  |                | 
|Effect of dilutive stock options               |  |             |        |                          |  | 70,950         | 
|                                               |  |             |         |                          |  |                | 
|Net earnings  diluted                         |  | $           | 350,104 |                          |  | 1,489,950      | 
|                                               |  |             |         |                          |  |                | 
|For the three months ended September 30, 2001: |  |             |         |                          |  |                | 
|Net earnings  basic                           |  | $           | 229,521 |                          |  | 1,355,636      | 
|                                               |  |             |         |                          |  |                | 
|Effect of dilutive stock options               |  |             |        |                          |  | 51,486         | 
|                                               |  |             |         |                          |  |                | 
|Net earnings  diluted                         |  | $           | 229,521 |                          |  | 1,407,122      | 
|                                               |  |             |         |                          |  |                | 

|                                              |  | NetEarnings |         | AverageSharesOutstanding |  | PerShareAmount | 
|--------------------------------------------- |  | ----------- | ------- | ------------------------ |  | -------------- | 
|                                              |  |             |         |                          |  |                | 
|For the nine months ended September 30, 2002: |  |             |         |                          |  |                | 
|Net earnings  basic                          |  | $           | 671,761 |                          |  | 1,416,185      | 
|                                              |  |             |         |                          |  |                | 
|Effect of dilutive stock options              |  |             |        |                          |  | 64,562         | 
|                                              |  |             |         |                          |  |                | 
|Net earnings  diluted                        |  | $           | 671,761 |                          |  | 1,480,747      | 
|                                              |  |             |         |                          |  |                | 
|For the nine months ended September 30, 2001: |  |             |         |                          |  |                | 
|Net earnings  basic                          |  | $           | 627,250 |                          |  | 1,353,474      | 
|                                              |  |             |         |                          |  |                | 
|Effect of dilutive stock options              |  |             |        |                          |  | 50,850         | 
|                                              |  |             |         |                          |  |                | 
|Net earnings  diluted                        |  | $           | 627,250 |                          |  | 1,404,324      | 
|                                              |  |             |         |                          |  |                | 



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LIBERTY NATIONAL BANCSHARES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements,
continued(Unaudited)

(4)      Other Borrowings

| |  | In March 2002, the Company entered into a credit facility with a correspondent bank that provides for borrowings of up to $2,500,000. The credit facility bears interest at the prime interest rate less 1⁄2% payable
quarterly and matures on March 31, 2004. At maturity, the Company has the option to amortize the balance over ten years. Borrowings under the facility are collateralized by the stock of Liberty National Bank. The Company is subject to certain
covenants that include minimum tangible capital levels and capital ratios, return on asset ratios, non-performing asset limits, and allowance for loan loss levels. At September 30, 2002, outstanding borrowings under this credit facility were
$800,000, with an interest rate of 4.25%.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(5)      Private Placement Offering

| |  | Beginning October 4, 2002, the Company, commenced a private placement of up to 100,000 shares of its Common Stock at $10 per share. As the shares are being offered and sold pursuant to an exemption from the registration
requirements of the applicable federal and state securities laws, none of the offered and sold shares will be registered with the United States Securities and Exchange Commission or any state securities commission. The offering will expire on
January 2, 2003; however, it can be extended for up to three consecutive ninety-day (90) periods.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Proceeds from the offering, net of offering costs, will be contributed to the Bank to support future growth. At November 12, 2002, the Company had accepted subscriptions totaling $15,000 from the
offering.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(6)      Commitments

| |  | The Board of Directors of the Company has approved a proposal from the business interests of one of the Companys Directors to construct the Banks permanent facility in Newton County, Georgia. The contract for
the facility totals $1,230,096. The new building should be ready for occupancy in July 2003. The Company received three bids for the project, and the project was awarded to the bidder submitting the lowest bid for the construction project.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Forward-Looking Statements

This discussion contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Although the Company
believes the assumptions underlying the forward-looking statements contained in the discussion are reasonable, any of the assumptions could be inaccurate, and therefore, no assurance can be made that any of the forward-looking statements included in
this discussion will be accurate. Factors that could cause actual results to differ from results discussed in forward-looking statements include, but are not limited to: economic conditions (both generally and in the markets where the Company
operates); competition from other providers of financial services offered by the Company; government regulation and legislation; changes in interest rates; and material unforeseen changes in the financial stability and liquidity of the
Companys credit customers; all of which are difficult to predict and which may be beyond the control of the Company. The Company undertakes no obligation to revise forward-looking statements to reflect events or changes after the date of this
discussion or to reflect the occurrence of unanticipated events.

Financial Condition

Total assets at September
30, 2002, were $123,736,478 representing a $16,324,038 (15.2%) increase from December 31, 2001. Deposits increased $14,591,249 (15.1%) from December 31, 2001. Loans, net of deferred loan fees, increased $16,441,087 (22.2%) from December 31, 2001.
The allowance for loan losses at September 30, 2002, totaled $1,251,298, representing 1.38% of total loans compared to the December 31, 2001, total of $1,059,635 representing 1.43% of total loans. Cash and cash equivalents decreased $2,377,104 from December 31, 2001 to fund the growth in loans.

There were no nonperforming loans as of September 30, 2002. Nonperforming loans include
non-accruing loans, loans on which foreclosure proceedings have commenced and loans for which payments are more than 90 days past due.

The Company is not aware of any current recommendation by its regulatory
authorities which, if implemented, would have a material effect on the Companys liquidity, capital resources, or results of operations.

Results of Operations

For the nine months ended September 30, 2002, the Company reported net earnings of $671,761 or $.45 per diluted share, compared to $627,250, or $.45 per diluted share, for
the same period in 2001. Net earnings for the three months ended September 30, 2002, increased $120,583 or 52.5%, compared to the same period in 2001. The increase in the net earnings for the three months and nine months ended September 30, 2002,
resulted primarily from increased net earning asset volume, improving earning asset performance, and an increase in non-interest income resulting from an overdraft privilege service introduced in early 2002.

Net interest income increased $521,148 (18.9%) in the first nine months of 2002 compared to the same period for 2001. Interest income for the first nine months of 2002 was
$5,358,706, representing an increase of $370,326 (7.4%) over the same period in 2001. Interest expense for the first nine months of 2002 decreased $150,822 (6.7%) compared to the same period in 2001. The primary reason for the increase in net
interest income for the nine-month period ended September 30, 2002, versus the same period in 2001 was the increase in volume of net interest bearing assets. Loans, net of the allowance for loan losses, increased by 30.62% from $68,254,518 for the period ended September 30, 2001 to $89,154,622 for the period ended September 30, 2002. The net interest margin decreased by 45 basis points from 4.73% in the first nine months of 2001 to 4.28% in the same period in 2002.
The net interest margin decreased as the general interest rate environment dropped rapidly and the Banks variable rate loans repriced faster than the Banks deposits. Additionally, the Bank remained competitive for time deposits to
preserve liquidity and to provide stable funding sources for anticipated loan growth.

The provision for loan losses for the first nine months of 2002 was
$271,976 compared to $248,459 for the same period for 2001. Net loan charge-offs for the nine months ended September 30, 2002, were $80,390, compared to $4,341 for the same period in 2001. The higher net loan charge-offs in the nine months
ended September 30, 2002 involved primarily the charge off of two loans of approximately $21,300 and $32,300 respectively. Although there was a significant increase in the amount of charge-offs for the nine-month period ended September 30, 2002, it
is managements belief that the allowance for loan losses is adequate to absorb probable losses in the portfolio.



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##### Table of Contents

Other operating income increased for the nine months ended September 30, 2002, by $383,507
or 65.3%, compared to the same period in 2001, primarily due to the introduction in early 2002 of a new overdraft protection service which provided an additional $257,041 in service charges over the same period in 2001. Additional increases in
business activity generated increases in service charge revenue. Mortgage origination income increased by 65.58% from $93,634 for the first nine months of 2001 to $155,035 during the same period in 2002. The Banks mortgage origination
department has become more established in the Banks trade area throughout this second year of operation. Mortgage loan refinancing volumes continued to increase as mortgage rates hit 40-year lows. The following table details the changes in
other operating income for the first nine months of 2002 compared to the first nine months of 2001:

|                                    |  | 2002 |         | 2001 |   | Change  |  | % Change |        
|----------------------------------- |  | ---- | ------- | ---- | - | ------- |  | -------- | -------
|                                    |  |      |         |      |   |         |  |          |        
|Service charges on deposit accounts |  | $    | 64,109  |      | $ | 34,773  |  | $        | 29,336 
|NSF charges                         |  |      | 583,195 |      |   | 326,154 |  |          | 257,041
|Mortgage origination income         |  |      | 155,035 |      |   | 93,634  |  |          | 61,401 
|Miscellaneous                       |  |      | 168,660 |      |   | 132,931 |  |          | 35,729 
|                                    |  |      |         |      |   |         |  |          |        
|                                    |  | $    | 970,999 |      | $ | 587,492 |  | $        | 383,507
|                                    |  |      |         |      |   |         |  |          |        

Other operating expenses for the first nine months of 2002 increased $817,912 (38.4%) compared to the first
nine months in 2001. The increase is primarily attributable to the opening of a branch of the Bank in Covington, Georgia, in November 2001, as well as a general increase in operating expenses associated with business volume increases. Additionally,
in July of 2001, the Banks Operations Center moved from the Companys main office to another location which is leased at an annual cost of $30,000. The following table details the changes in other operating expenses for the first nine
months of 2002 compared to the first nine months of 2001:

|                                     |  | 2002 |           | 2001 |   | Change    |  | % Change |        
|------------------------------------ |  | ---- | --------- | ---- | - | --------- |  | -------- | -------
|                                     |  |      |           |      |   |           |  |          |        
|Salaries and other personnel expense |  | $    | 1,467,240 |      | $ | 1,072,775 |  | $        | 394,465
|Net occupancy and equipment expense  |  |      | 457,213   |      |   | 339,498   |  |          | 117,715
|Data processing expense              |  |      | 216,858   |      |   | 178,702   |  |          | 38,156 
|Telecommunications                   |  |      | 66,363    |      |   | 33,849    |  |          | 32,514 
|Debit card expense                   |  |      | 29,496    |      |   | 9,839     |  |          | 19,657 
|Postage, freight, and supplies       |  |      | 145,330   |      |   | 87,810    |  |          | 57,520 
|Miscellaneous                        |  |      | 566,210   |      |   | 408,325   |  |          | 157,885
|                                     |  |      |           |      |   |           |  |          |        
|                                     |  | $    | 2,948,710 |      | $ | 2,130,798 |  | $        | 817,912
|                                     |  |      |           |      |   |           |  |          |        

Most of the expenses noted in the table above increased primarily due to the addition of two new locations, an increased customer
base with more accounts, and marketing and signage costs associated with the change in the Companys name. Debit card expenses increased due to a change in pricing by the vendor associated with lost or stolen debit cards.

Liquidity and Sources of Capital

Liquidity is the Banks ability to meet all deposit withdrawals immediately, while also
providing for the credit needs of customers. Management believes that the financial statements, as of September 30, 2002, evidence a satisfactory liquidity position as total cash and cash equivalents amounted to $15,673,200, representing 12.7% of
total assets. Investment securities amounted to $13,780,318, representing 11.1% of total assets as of September 30, 2002. Investment securities provide a secondary source of liquidity for the Bank since they can be converted into cash in a timely
manner. The Banks ability to maintain and expand its deposit base and borrowing capabilities is an additional source of liquidity. The Bank maintains federal funds lines totaling $6,800,000 with four regional banks in an effort to support
short-term liquidity. The Bank is a member of the Federal Home Loan Bank and is eligible to apply for term advances. Management closely monitors and maintains appropriate levels of interest earning assets and interest bearing liabilities so that
maturities of assets are such that adequate funds are provided to meet customer withdrawals and loan demands.

Management is committed to maintaining capital
at a level sufficient to protect depositors, provide for reasonable growth, and fully comply with all regulatory requirements.

9



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##### Table of Contents

The table below illustrates the Banks and the Companys regulatory capital ratios at September 30,
2002:

|                               |  | September 30,2002 |        | MinimumRegulatoryRequirement | 
|------------------------------ |  | ----------------- | ------ | ---------------------------- | 
|                               |  |                   |        |                              | 
|Consolidated                   |  |                   |        |                              | 
|Tier 1 Capital                 |  |                   | 8.49%  |                              | 
|Tier 2 Capital                 |  |                   | 1.24%  |                              | 
|                               |  |                   |        |                              | 
|Total risk-based capital ratio |  |                   | 9.73%  |                              | 
|                               |  |                   |        |                              | 
|Leverage ratio                 |  |                   | 7.02%  |                              | 
|                               |  |                   |        |                              | 
|Bank                           |  |                   |        |                              | 
|Tier 1 Capital                 |  |                   | 8.85%  |                              | 
|Tier 2 Capital                 |  |                   | 1.24%  |                              | 
|                               |  |                   |        |                              | 
|Total risk-based capital ratio |  |                   | 10.09% |                              | 
|                               |  |                   |        |                              | 
|Leverage ratio                 |  |                   | 7.34%  |                              | 
|                               |  |                   |        |                              | 

The Company has entered into a credit facility with a correspondent bank that provides for borrowings up to $2,500,000. The credit
facility bears interest at the prime interest rate less 1⁄2% payable quarterly and matures on March 31, 2004. At maturity, the Company has the option to amortize the balance over ten years. Borrowings under the facility are collateralized by the
stock of the Bank. The Company is subject to certain covenants that include minimum tangible capital levels and capital ratios, return on asset ratios, non-performing asset limits, and allowance for loan loss levels. At September 30, 2002,
outstanding borrowings under this credit facility were $800,000 and the interest rate was 4.25%.

|Item 3. | Controls and Procedures
|------- | -----------------------

Management of the Company has reviewed the disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) of the Company as of a date within 90 days prior to this quarterly report (the Evaluation Date). Management believes that such disclosure controls and procedures as of the Evaluation Date
are adequate to ensure that material information relating to the Company, including its consolidated subsidiary, required to be disclosed in the Companys reports filed or submitted under the Exchange Act is made known to management by others
within the company and its consolidated subsidiary so that such information may be recorded and reported within the time periods specified in the Securities and Exchange Commission rules and Forms.

There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the Evaluation
Date.



10



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##### Table of Contents

PART II.  OTHER INFORMATION

|Item 1. | Legal Proceedings
|------- | -----------------

| | None | 
| | ---- | 

|Item 2. | Changes in Securities
|------- | ---------------------

| | None | 
| | ---- | 

|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

| | None | 
| | ---- | 

|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

| | None | 
| | ---- | 

|Item 5. | Other Information
|------- | -----------------

| | None | 
| | ---- | 

|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------

| | a) |  | Exhibits. The following exhibit is filed with this report.
| | -- |  | ----------------------------------------------------------

|Exhibit No. | Description                                                            
|----------- | -----------------------------------------------------------------------
|            |                                                                        
|99.1        | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

| | b) |  | Reports on Form 8-K. On July 17, 2002, the Company filed a Report on Form 8-K with respect to its press release regarding (i) financial results for the three and six months ending June 30, 2002,
and (ii) its 2-for-1 stock split.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11



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##### Table of Contents

LIBERTY NATIONAL BANCSHARES, 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 NATIONAL BANCSHARES, INC.
| |  | ---------------------------------
| |  | By:                              
| |  |                                  
| |  |                                  
| |  | Date: November 12, 2002          

| |  |                        
| |  | -----------------------
| |  | By:                    
| |  |                        
| |  |                        
| |  | Date: November 12, 2002

12



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##### Table of Contents

CERTIFICATION

I, William L. Daniel, President and Chief Executive Officer of the registrant, certify that:

|(1) |  | I have reviewed this quarterly report on Form 10-QSB;                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                               
|(2) |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this quarterly report;
|    |  |                                                                                                                                                                                                                                                                                                                               
|(3) |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;                   
|    |  |                                                                                                                                                                                                                                                                                                                               
|(4) |  | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                         

| | (a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which the report was being prepared;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | 
| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and                                                                                        
| |     | 
| | (c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                              

|(5) |  | The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent function):
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | 
| | (b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and                                                                                                                                        

|(6) |  | The registrants other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the Evaluation Date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|November 12, 2002                                      |  |  | 
|------------------------------------------------------ |  |  | 
|/s/  WILLIAML.DANIEL                                   |  |  | 
|                                                       |  |  | 
|William L. DanielPresident and Chief Executive Officer |  |  | 



13



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##### Table of Contents

CERTIFICATION

I, Jesse R. Cheatham, Chief Financial Officer of the registrant, certify that:

|(1) |  | I have reviewed this quarterly report on Form 10-QSB;                                                                                                                                                                                                                                                                         
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                               
|(2) |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this quarterly report;
|    |  |                                                                                                                                                                                                                                                                                                                               
|(3) |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report;                   
|    |  |                                                                                                                                                                                                                                                                                                                               
|(4) |  | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:                                                                                                         

| | (a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which the report was being prepared;
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | 
| | (b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and                                                                                        
| |     | 
| | (c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                              

|(5) |  | The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of the registrants board of directors (or persons
performing the equivalent function):
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | 
| | (b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and                                                                                                                                        

|(6) |  | The registrants other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the Evaluation Date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|November 12, 2002                        |  |  | 
|---------------------------------------- |  |  | 
|/s/ JESSER.CHEATHAM                      |  |  | 
|                                         |  |  | 
|Jesse R. CheathamChief Financial Officer |  |  | 

14



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EXHIBIT INDEX

|Exhibit No. | Description                                                                                                          
|----------- | ---------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                      
|99.1        | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002