<Page>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

 X     Annual Report Pursuant to Section 13 or 15 (d) of the Securities
---    Exchange Act of 1934

                  For the fiscal year ended: December 31, 2001
                                       or
       Transition Report Pursuant to Section 13 or 15 (d) of the Securities
---    Exchange Act of 1934

                         Commission File Number: 1-13949

                           LOCAL FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)

             Delaware                                         65-0424192
  (State or other jurisdiction of                          (I.R.S. Employer
  incorporation or organization)                        Identification Number)

          3601 N. W. 63rd
         Oklahoma City, OK                                      73116
       (Address of Principal                                  (Zip Code)
        Executive Offices)

       Registrant's telephone number, including area code: (405) 841-2100

           Securities registered pursuant to Section 12(b) of the Act:
                    Common Stock (par value $0.01 per share)
                              Senior Notes Due 2004
                   Trust Preferred Securities at $25 per share
                                (Title of Class)

        Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X

There were 19,204,925 shares of the Registrant's Common Stock outstanding as of
the close of business on March 4, 2002. The aggregate market value of the
Registrant's Common Stock held by non-affiliates was approximately $276.0
million (based upon the closing price of $16.01 on March 4, 2002, as reported
on the NASDAQ National Market System).

                       DOCUMENTS INCORPORATED BY REFERENCE


Part III of this Form 10-K incorporates by reference certain information from
the Registrant's definitive proxy statement for the 2002 Annual Meeting of
Stockholders.



<PAGE>


                           LOCAL FINANCIAL CORPORATION
                                      INDEX

<Table>
<Caption>
<S>               <C>

Part I.
      Item 1.     Business
      Item 2.     Properties
      Item 3.     Legal Proceedings
      Item 4.     Submission of Matters to a Vote of Security Holders
      Item 4A.    Executive Officers of the Registrant

Part II.
      Item 5.     Market for Registrant's Common Equity and Related Stockholder Matters
      Item 6.     Selected Financial Data
      Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations
      Item 7A.    Quantitative and Qualitative Disclosures About Market Risk
      Item 8.     Financial Statements and Supplementary Data
      Item 9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Part III.
      Item 10.    Directors and Executive Officers of the Registrant
      Item 11.    Executive Compensation
      Item 12.    Security Ownership of Certain Beneficial Owners and Management
      Item 13.    Certain Relationships and Related Transactions

Part IV.
      Item 14.    Exhibits, Financial Statements, Schedules and Reports on Form 8-K

                  Signatures

                  Index to Financial Statements

                  Index of Exhibits

</Table>



                                       2

<PAGE>


                                     PART I

ITEM 1. BUSINESS


THE COMPANY

               GENERAL. Local Financial Corporation ("Local Financial" or the
"Company") is the holding company for Local Oklahoma Bank, National Association,
("Local" or the "Bank"). The Company was chartered in 1992 as a Delaware
corporation. Local Financial and the Bank are headquartered in Oklahoma City,
Oklahoma. In order to accommodate its strategy for growth, the Company converted
the Bank from a savings bank to a national banking association on May 11, 1999,
and the Company was registered as a bank holding company on that same day.
References to "Local" or the "Bank" refer to Local and its subsidiaries on a
consolidated basis, as the context requires.

         At December 31, 2001, the Company had consolidated assets of $2.8
billion, substantially all of which is comprised of its 100% ownership interest
in the Bank, including consolidated deposits of $1.8 billion and consolidated
stockholders' equity of $163.5 million.

         As of November 16, 2001, the Bank is the third largest Oklahoma-based
bank based on deposits. Its deposits of $1.8 billion at December 31, 2001,
represent approximately five percent of the Oklahoma market. The Company and/or
Local are presently regulated and examined by the Office of the Comptroller of
the Currency (the "OCC"), the Board of Governors of the Federal Reserve System
(the "FRB"), and the Federal Deposit Insurance Corporation ("FDIC") and Local's
deposit accounts are insured up to applicable limits by the FDIC.

         The Company's executive offices are located at 3601 NW 63rd Street,
Oklahoma City, Oklahoma 73116-2087.

         In September 1997, a group led by Mr. Edward A. Townsend, the current
Chairman of the Board and Chief Executive Officer, negotiated the purchase of
the Company from its prior owners. Following the purchase of the Company,
management restructured the consolidated statement of financial condition and
began a number of initiatives in order to shift the operations to those of a
commercial bank and execute the Company's business strategy. In 1998, the
Company formed a corporate lending unit to focus on the origination of
commercial loans within the state of Oklahoma and has since continually enhanced
its infrastructure and payment systems in order to accommodate the expected
growth in commercial transactions. In 1999, the Bank converted from a federal
savings bank to a national banking association and the Company registered with
the Federal Reserve as a bank holding company. The Company is focused on
increasing its demand deposits while decreasing its reliance on higher-paying,
longer-term certificates of deposit. The Company has increased and continues to
increase its generation of noninterest income through expanded product offerings
and increased cross-selling opportunities while it controls the growth of its
operating expenses.

BUSINESS STRATEGY

         Local's business strategy is to provide its customers with the range of
banking products and services of a regional bank while retaining the appeal and
level of individualized service of a community bank. Management feels that the
Company is well positioned to attract new customers and increase its market
share. The key components of its strategy are:

         -    FOCUS ON COMMERCIAL LENDING AND COMMUNITY PRESENCE OF THE
              COMMERCIAL LENDING OFFICERS. During 1998, Local formed its
              corporate lending unit which is focused on commercial lending
              within Oklahoma. The Bank has added experienced lending officers

                                       3

<Page>

              with strong community ties and banking relationships, many of whom
              have left regional or national banks as a result of the
              attractiveness of the Bank's relationship-oriented approach and
              the growing consolidation within the banking industry. At December
              31, 2001, the Bank's corporate lending unit had 27 senior lending
              officers who had an average of 20 years of banking experience.
              Although Local continues to originate commercial loans throughout
              the United States through a network of mortgage bankers and
              correspondent banks, it has increased its emphasis on the
              origination of commercial loans within Oklahoma.

         -    STRONG COMMITMENT TO HIGHLY-PERSONALIZED, RELATIONSHIP-ORIENTED
              CUSTOMER SERVICE. Management believes that the consolidation among
              financial institutions in Oklahoma has created significant
              opportunities for the Bank due to the perceived lack of attention
              being paid by many large regional and national banks to certain
              customers, primarily our Bank's targeted customer base of small to
              medium-sized businesses (up to $100 million in annual sales),
              professionals and other individuals. Local emphasizes personalized
              client relationships and provides its customers with customized
              financial services that address their particular needs. In
              addition, the Company has streamlined its credit approval process
              which management believes permits it to process loan requests more
              efficiently than many of its larger competitors.

         -    EXPANDED PRODUCE OFFERING. The Company provides its customers with
              a full range of consumer and commercial products and services. The
              consumer services include checking and savings accounts,
              certificates of deposit, IRAs, various loans, safe deposit boxes,
              professional financial planning and online banking. Also offered
              are commercial services including online commercial banking,
              commercial checking, commercial lending, cash management and
              investment services and real estate loans. The Company continues
              to explore the addition of financial services that it does not
              currently offer in an effort to diversify and increase its fee
              income, strengthen its customer relationships and broaden its
              product lines. In 1998, the Company acquired and expanded Local
              Securities Corporation, a registered broker-dealer that offers
              retail investment products to its customers through the branch
              offices.

         -    STRATEGIC BRANCH LOCATIONS. The Bank currently has 51 branch
              offices located primarily in the major metropolitan areas of
              Oklahoma City, Tulsa and Lawton, which are more densely populated
              and have a higher number of businesses as compared to other areas
              in Oklahoma. The Bank is working to expand the market presence of
              its existing offices in these metropolitan areas while continuing
              to explore other markets within Oklahoma that present
              opportunities for growth.

         -    SELECTIVE ACQUISITIONS. Since 1998, the Company has expanded its
              franchise through strategic acquisitions designed to increase its
              deposits and branch office locations. In February 1998, the
              Company acquired Green Country Bank which had three branch offices
              in northeastern Oklahoma. In October 1998, the Company acquired
              Citizens Bank, with five offices in Lawton and one in Norman,
              Oklahoma. These two acquisitions contributed $281.5 million in
              assets and $238.7 million in deposits as of the respective
              acquisition dates. In October 1999, the Local Financial acquired
              Guthrie Federal Savings Bank with one office north of Oklahoma
              City. Through this acquisition, the Company acquired $45.0 million
              of assets and $36.7 million of deposits. The Company intends to
              continue to evaluate financial information about companies which
              may lead to the acquisition of such companies. Local Financial
              currently has no agreements or understandings, however, to acquire
              all or part of any other company.

                                       4

<Page>
LENDING ACTIVITIES

         GENERAL. With the conversion of the Bank from a savings and loan to a
national bank and a shift in its lending activities, it has focused increasingly
on the origination of commercial business loans within the Oklahoma market. The
Bank has pursued this market by adding experienced lending officers with strong
community ties and banking relationships, many of whom have left regional or
national banks in the growing industry consolidation and are attracted by the
Bank's relationship-oriented approach. The Bank will continue its historical
patterns of originating residential and consumer loans through its own branch
network and, in the case of commercial real estate loans, through a network of
real estate brokers, mortgage bankers and unaffiliated financial institutions.

        The following table presents information on the Bank's consolidated loan
portfolio as of the dates indicated (dollars in thousands):

<Table>
<Caption>

                                                                        DECEMBER 31,
                                             -------------------------------------------------------------------
                                                2001          2000            1999          1998          1997
                                             ----------    ----------      ----------    ----------    ---------
          <S>                                <C>           <C>             <C>           <C>           <C>
          Commercial(1)                      $1,593,432    $1,425,382      $1,183,368    $  927,682    $ 646,539
          Residential real estate               215,408       250,487         362,351       344,565      281,565
          Consumer                              184,663       195,430         161,327       101,738       38,717
          Held for sale                           6,263         5,922           6,801        16,188        7,133
                                             ----------    ----------      ----------    ----------    ---------

               Total loans                    1,999,766     1,877,221       1,713,847     1,390,173      973,954
          Less:
               Allowance for loan losses        (27,621)      (28,345)        (28,297)      (27,901)     (20,484)
                                             ----------    ----------      ----------    ----------    ---------

                 Loans receivable, net       $1,972,145    $1,848,876      $1,685,550    $1,362,272    $ 953,470
                                             ==========    ==========      ==========    ==========    =========

</Table>

-------------------------

(1)      Commercial loans are composed of business loans and commercial real
         estate loans (which includes loans secured by multi-family residential
         properties).

         LOAN ORIGINATION AND REVIEW. The lending activities of the Bank are
subject to the written, non-discriminatory underwriting standards and loan
origination procedures established by the Bank's Board of Directors and
management. Loan originations are obtained by a variety of sources, including
direct customer solicitations, referrals from real estate brokers, mortgage
bankers, unaffiliated financial institutions, existing customers, walk-in
customers and advertising. In its present marketing efforts, the Bank emphasizes
its customized personal service, competitive rates, and an efficient
underwriting and approval process.

         The Bank has revised its underwriting procedures to streamline the
credit approval process. It historically utilized a loan committee review
procedure, which could take several weeks to approve a credit application. The
Bank's increasing emphasis on commercial and consumer loans and its desire to
meet customer needs require quicker response times. The Bank has implemented
procedures that rely, in the case of residential real estate and consumer loans,
on a credit scoring system and, in the case of commercial loans, on a peer or
senior officer approval process, depending on the size of the loan. The Bank has
also revised its credit review procedures to ensure the overall integrity of its
loan portfolio. Management believes its credit approval and review processes are
comparable to those used by other regional and national banks.

         COMMERCIAL BUSINESS LOANS. At December 31, 2001 and 2000, the Bank's
commercial business loans, excluding those secured by real estate, amounted to
$507.9 million and $437.2 million or 25.4% and 23.3%, respectively, of the total
loan portfolio. Management believes this lending unit affords the Bank the
greatest opportunity for market growth. The portfolio increase results from the
Bank's creation in 1998 of a new corporate lending unit, focused on commercial
business lending within the state of Oklahoma. The added lending officers have
many years experience in the banking industry and most have strong community
ties and banking relationships.

                                       5
<Page>

         Local's corporate lending activities are generally directed towards
small to medium size Oklahoma companies with annual sales up to $100 million.
Local's corporate lending division makes both secured and unsecured loans,
although the majority of such lending is done on a secured basis. The average
loan amount for new commercial business loans ranges from $1 to $3 million. Such
loans are generally secured by the receivables, inventory, equipment, and/or
general corporate assets of the borrowers. These loans are originated on both a
one year line of credit basis and on a fixed-term basis generally ranging from
one to five years. Commercial business loans generally have annual maturities
and prime-based interest rates.

         The Bank imposes an in-house lending limit which is below the statutory
lending limit. While the OCC statutory limit is 15% of an institution's
unimpaired capital and surplus (or with respect to the Bank, approximately $34.0
million at December 31, 2001), management of the Bank generally restricts single
loans to $15 million in size, but may have exposure to any single borrower up to
the legal lending limit.

         Commercial lending entails different and significant risks when
compared to traditional thrift residential lending. These loans typically
involve large loan balances to single borrowers and payment is typically
dependent on the successful operation of the project or the borrower's business.
These loans are also more likely to be adversely affected by unfavorable
economic conditions. The Bank attempts to minimize its risk exposure by imposing
stringent underwriting standards and continually monitoring the operation and
physical condition of the collateral.

         COMMERCIAL REAL ESTATE LOANS. Under prior management, the Bank
originated and purchased commercial real estate loans secured by properties
located throughout the United States. Management expects to continue the
origination and purchase of commercial real estate and multi-family residential
loans throughout the United States; however, the current focus is the
origination of commercial loans secured by multi-family and other real estate
located within the state of Oklahoma and surrounding states.

         As of December 31, 2001 and 2000, commercial real estate loans (which
include multi-family residential loans) amounted to $1.1 billion and $988.2
million or 54.3% and 52.6%, respectively, of the Bank's total loan portfolio.
The Bank originates loans directly and through a network of mortgage bankers and
correspondent banks throughout the country with whom the Bank has relationships.
All originations and purchases undergo a three-step underwriting and evaluation
process. First, an initial review of the loan is conducted by the originator to
determine conformity to guidelines and consistency with the Bank's lending
philosophy. An indication of pricing and terms may be issued in the case of
loans which have already been originated. Second, once the indication is
accepted by the borrower and a completed application submitted, a detailed
underwriting is conducted in which both the originator and the Bank's in-house
appraiser conduct an onsite inspection and analysis. Property valuations are
performed by the Bank's staff as well as by independent outside appraisers
approved by the Bank's Board of Directors. The Bank generally requires title,
hazard and, to the extent applicable, flood insurance on its security property.
Rent rates are analyzed and compared to market rents, reported occupancy is
checked against evidence onsite, environmental issues are identified and the
appropriate level of investigation is conducted and a final credit write-up is
prepared. Finally, the Bank's closing department reviews the totality of work,
including completeness of analysis and documentation, title searches, borrower
background checks, appraisal and environmental reports and other pertinent data.
Only after these three broad steps is a final approval and disbursement made.

         The Bank originates both fixed-rate and adjustable-rate commercial real
estate loans. Fixed-rate commercial real estate loans generally have terms to
maturity of between five and ten years and amortize over a period of up to 30
years. Adjustable-rate commercial real estate loans have similar terms and
interest rates which generally adjust every six months, one-year, three years
and five years in accordance with a designated index (either the London
Interbank Offer Rate, the prime rate quoted in the WALL STREET JOURNAL or U.S.
Treasury rates).

                                       6

<Page>

         Loan-to-value ratios on commercial real estate loans are generally
limited to a maximum of 80% for apartments and manufactured housing communities
(loans on real estate as distinguished from manufactured homes) and 75% on all
other commercial real estate properties.

         SINGLE-FAMILY RESIDENTIAL REAL ESTATE LOANS. At December 31, 2001 and
2000, the Bank's single-family residential mortgage loan portfolio amounted to
$215.4 million and $250.5 million or 10.8% and 13.3%, respectively, of the total
loan portfolio. Most of the Bank's single-family residential mortgage loans are
secured by properties located in the state of Oklahoma. The majority of the
single-family residential loan portfolio consists of conforming loans (i.e., not
insured or guaranteed by a federal agency) with an average balance of below
$100,000 per loan. The single-family residential loan portfolio was originated
through a centralized residential loan origination center. The Bank intends to
sell virtually all of its new single-family loan originations.

         The loan-to-value ratio, maturity and other provisions of the loans
made by the Bank generally have reflected the policy of making less than the
maximum loan permissible under applicable regulations, in accordance with market
conditions and underwriting standards established by the Bank. The Bank's
lending policies on single-family residential mortgage loans generally limit the
maximum loan-to-value ratio to 95% of the lesser of the appraised value or
purchase price of the property and generally all single-family residential loans
in excess of an 80% loan-to-value ratio require private mortgage insurance.

         The Bank's current single-family loan portfolio consists of fixed-rate
and adjustable-rate loans with terms of 15 to 30 years. Such loans are amortized
on a monthly basis with principal and interest due each month and customarily
include "due-on-sale" clauses, which are provisions giving the Bank the right to
declare a loan immediately due and payable in the event the borrower sells or
otherwise disposes of the real property subject to the mortgage and the loan is
not repaid.

         CONSUMER LOANS. Consumer loans totaled $190.9 million and $201.4
million or 9.5% and 10.7% of the total loan portfolio as of December 31, 2001
and 2000, respectively, and consisted of home equity loans, deposit secured
loans, automobile loans, property improvement loans, overdrafts, and personal
loans. Also included were $6.3 million and $5.9 million, respectively, in
guaranteed student loans held as available for sale. Local originates consumer
loans bearing both fixed and prime-based interest rates, primarily with terms of
up to five years, other than second mortgage loans which may have longer terms.
Under the Bank's home equity underwriting guidelines, loans are restricted to
not more than $100,000, and the loan-to-value may not exceed 90% at origination
(although this is not typical of most loans). Loans are originated directly
through the branch network.

ASSET QUALITY

         LOAN DELINQUENCIES. When a borrower fails to make a required payment on
a loan, the Bank attempts to cure the deficiency by contacting the borrower and
seeking payment. Contacts are generally made following the 15th day after a
payment is due (30th day in the case of commercial loans), at which time a late
payment is assessed. In most cases, deficiencies are cured promptly. If a
delinquency extends beyond 15 days (30 days in the case of commercial loans),
the loan and payment history are reviewed and efforts are made to collect the
loan. While the Bank generally prefers to work with borrowers to resolve such
problems, when it appears no other alternatives are available, legal action is
instituted.

         NONPERFORMING ASSETS. All loans are reviewed on a regular basis and are
placed on non-accrual status when, in the opinion of management, the collection
of additional interest is deemed insufficient to warrant further accrual. As a
matter of policy, the Bank does not accrue interest on loans past due 90 days or
more except when the estimated value of the collateral and collection efforts
are deemed sufficient to ensure full recovery. Consumer loans generally are
charged off when the loan becomes over 120 days delinquent. Interest accrued and
unpaid at the time a loan is placed on non-accrual status is charged against
interest income. Subsequent payments are either applied to the outstanding
principal balance or recorded as interest income, depending on the assessment of
the ultimate collectibility of the

                                       7

<Page>

loan. See Item 7 hereof, "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Nonperforming Assets and Allowances for
Loan Losses".

         Assets acquired through foreclosure and repossession are recorded at
estimated fair value, net of estimated selling costs at the date of foreclosure
or repossession. The values of assets acquired through foreclosure and
repossession are monitored by the Bank continually through sales and rental
activities, and by updated appraisals and other valuation methods when needed.
The allowance for losses on assets acquired through foreclosure and repossession
represents an amount which management believes will be adequate to absorb losses
from the disposition and/or revaluation of these assets. Additions or reversals
of the allowance for losses on assets acquired through foreclosure and
repossession are provided as an expense or a benefit, respectively, through
other expense in the accompanying Consolidated Statements of Operations.

         CLASSIFIED ASSETS. The Bank adheres to internal procedures and controls
to review and classify its assets. All assets are reviewed on a periodic basis.
If warranted, all or a portion of any assets exhibiting the characteristics of
risk associated with specific classifications are assigned those
classifications. To monitor loans and to establish loss reserves, the Bank
classifies its assets into the following five categories: pass, special mention,
substandard, doubtful, and loss. Under federal regulations, each insured
institution must classify its assets on a regular basis. In connection with
examinations of insured institutions, federal examiners have authority to
identify problem assets and, if appropriate, classify them. Special mention
assets is a category established and maintained for assets which do not
currently expose an insured institution to a sufficient degree of risk to
warrant classification as substandard, doubtful or loss. Substandard assets have
one or more defined weaknesses and are characterized by the distinct possibility
that the insured institution will sustain some loss if the deficiencies are not
corrected. Doubtful assets have the weaknesses of substandard assets, with the
additional characteristic that the weaknesses make collection or liquidation in
full on the basis of currently existing facts, conditions and values
questionable, and there is a high possibility of loss. An asset classified loss
is considered uncollectible and of such little value that continuance as an
asset of the institution is not warranted. If an asset or portion thereof is
classified loss, the insured institution must either establish specific
allowances for loan losses in the amount of 100% of the portion of the asset
classified loss, or charge-off such amount. Federal examiners may disagree with
an insured institution's classifications and amounts reserved.

         ALLOWANCE FOR LOAN LOSSES. The Bank has established valuation
allowances for estimated inherent losses in its loan portfolio by charging
earnings for estimated losses on loans, including the related accrued interest,
using a specific and percentage reserve method. The allowance for loan losses is
established and maintained through a periodic review and evaluation of various
elements which affect the loans' collectibility and any additional allowances
required result in provisions for loan losses.

         The Bank's allowance for loan loss is assessed on a loan-by-loan basis
for all commercial loans and on a portfolio basis for residential and consumer
loans based on delinquency status. As described above, each individual
commercial loan is assigned a risk classification by the responsible loan
manager. Depending upon their risk classification, these loans are placed on a
review cycle either annually or quarterly. All loans with risk classifications
of special mention, substandard or doubtful are reviewed quarterly and all large
loans are reviewed at least annually by officers of the loan review department.
These officers are independent of the loan origination and underwriting process.
During this review, the appropriateness of the assigned risk classification is
assessed, giving consideration to numerous factors, including a review of
individual borrowers' financial status, credit standing, available collateral
and other relevant factors. On a quarterly basis, loss factors are applied to
the basic risk classifications to determine the allowance for loan loss. The
loss factors are established by management through consideration of historical
loss experience and regulatory guidance, as well as other elements likely to
cause estimated credit losses to differ from historical losses. Although the
risk classification and loss factor process set forth above is used as a
discipline in the establishment of the minimum allowance required, it is not a

                                       8

<Page>

substitute for sound judgment. Prevailing and anticipated economic conditions,
portfolio trends and other relevant factors are considered in management's
assessment of the overall adequacy of the allowance. These other relevant
factors include (i) change in lending policies and procedures, including
underwriting standards and collection, charge-off and recovery practices, (ii)
changes in the nature and volume of the portfolio, (iii) changes in the
experience, ability and depth of lending management and staff, (iv) change in
the quality of the Bank's loan review system and the degree of oversight by the
institution's Board of Directors, (v) the existence and effect of any
concentration of credit and changes in the level of such concentration and (vi)
the effect of external factors such as competition on the Bank's current
portfolio.

INVESTMENT ACTIVITIES

         The Bank's securities portfolio is managed in accordance with a written
investment policy adopted by the Board of Directors and administered by the
Bank's Asset/Liability Committee. All transactions must be approved by the
Asset/Liability Committee and reported to the Board of Directors.

         The Bank is authorized to invest in obligations issued or fully
guaranteed by the U.S. Government, certain federal agency obligations, certain
time deposits, negotiable certificates of deposit issued by commercial banks and
other insured financial institutions, investment grade corporate debt securities
and other specified investments such as mortgage-backed and related securities.

         The Bank invests in mortgage-backed and related securities, including
collateralized mortgage participation certificates, which are insured or
guaranteed by U.S. Government agencies and government sponsored enterprises.
Mortgage-backed securities (which also are known as mortgage participation
certificates or pass-through certificates) represent a participation interest in
a pool of single-family or multi-family mortgages, the principal and interest
payments on which are passed from the mortgage originators, through
intermediaries (generally U.S. Government agencies and government sponsored
enterprises) that pool and repackage the participation interests in the form of
securities, to investors such as the Bank. Such U.S. Government agencies and
government sponsored enterprises, which guarantee the payment of principal and
interest to investors, primarily include the Federal Home Loan Mortgage
Corporation ("FHLMC"), the Federal National Mortgage Association ("FNMA") and
the Government National Mortgage Association ("GNMA").

         Mortgage-backed securities typically are issued with stated principal
amounts, and the securities are backed by pools of mortgages that have loans
with interest rates that are within a range and have varying maturities. The
characteristics of the underlying pool of mortgages, i.e., fixed-rate or
adjustable-rate, as well as prepayment risk, are passed on to the certificate
holder. The term of a mortgage-backed pass-through security thus approximates
the term of the underlying mortgages.

         The Bank's mortgage-backed and related securities include CMOs, which
include securities issued by entities which have qualified under the Internal
Revenue Code of 1986, as amended (the "Code"), as real estate mortgage
investment conduits.

SOURCES OF FUNDS

         GENERAL. Deposits are the primary source of the Bank's funds for
lending and other investment purposes. In addition to deposits, the Bank derives
funds from loan principal repayments, advances from the Federal Home Loan Bank
of Topeka ("FHLB") and securities sold under agreements to repurchase. Loan
repayments are a relatively stable source of funds, while deposit inflows and
outflows as well as securities sold under agreements to repurchase are
significantly influenced by general interest rates and money market conditions.
Borrowings may be used on a short-term basis to compensate for reductions in the
availability of funds from other sources. They may also be used on a longer-term
basis for general business purposes.

         DEPOSITS. As of December 31, 2001, the Bank accepted deposits through
its 51 branch offices. Deposits are solicited on a regular basis directly
through the Bank's customer base and through various

                                       9

<Page>

advertising media within its market. The Bank offers several savings account
and checking account plans to its customers. Among savings account plans, the
Bank offers basic savings, short-term and long-term certificates of deposit,
a variable rate IRA/Keogh and regular IRAs and Keoghs. The Bank offers
checking account plans that range from a no-fee, no-interest plan to a
variable-fee, bundled product plan that includes services or products such as
personalized checks, ATM cards, overdraft protection, no annual fee
Visa/MasterCard membership, safe deposit box discounts, cash management, lock
box services and assistance with travelers checks.

         Interest rates paid, maturity terms, service fees and withdrawal
penalties are established by the Bank on a periodic basis. Determination of
rates and terms are predicated on funds acquisition and liquidity requirements,
rates paid by competitors, growth goals and federal regulations.

         As of December 31, 2001, the aggregate amount of outstanding time
certificates of deposit in amounts greater than or equal to $100,000 was
approximately $263.2 million. The following table presents the maturity of these
time certificates of deposit at such date (dollars in thousands):

<Table>
<Caption>

                                                    December 31, 2001
                                                    -----------------
              <S>                                   <C>

              3 months or less                      $       137,215
              Over 3 months through 6 months                 43,121
              Over 6 months through 12 months                61,868
              Over 12 months                                 20,972
                                                    -----------------
                                                    $       263,176
                                                    -----------------

</Table>

         BORROWINGS. The Bank is a member of the Federal Home Loan Bank System
and is authorized to apply for secured advances from the FHLB. The Bank uses
advances from the Federal Home Loan Bank System to meet short-term liquidity
needs and investment activities.

         In a 1997 private placement, the Company issued $80.0 million of senior
notes which are due in September 2004 and which bear interest at the rate of
11.0%, payable semi-annually. During 2001 and 2000, the Company purchased and
retired $19.6 million and $34.1 million of senior notes resulting in a $1.6
million and $922,000 extraordinary loss, net of tax, respectively. At December
31, 2001, there were $21.5 million of senior notes outstanding. Unamortized
deferred issuance costs were approximately $468,000 at December 31, 2001 and are
included in other assets as of such date. For additional information, see Note 9
of the Notes to Consolidated Financial Statements in Item 8 hereof.

         During 2000, the Bank implemented commercial deposit cash management
services to accommodate the needs of large commercial borrowers. As part of this
program, commercial customers are offered a cash sweep account service which
consists of the sale of unpledged securities at a guaranteed rate with the
Bank's agreement to repurchase those securities the next day. These cash sweep
accounts grew from $0 to $38.2 million during 2000 and totaled $38.7 million at
December 31, 2001 and are shown on the consolidated statements of financial
condition as "Securities sold under agreements to repurchase".

         CAPITAL ISSUANCES. On September 20, 2001, Local Financial Capital Trust
I (a newly formed Delaware business trust and wholly-owned finance subsidiary of
Local Financial Corporation) issued 1,400,000 shares of 9.00% cumulative trust
preferred securities (the "Trust Preferred Securities") at $25 per share, for
gross proceeds of $35 million. Another 210,000 shares were issued on October 3,
2001 for $5.25 million to cover over-allotments in the original underwriting.
The proceeds from the sale of the Trust Preferred Securities and the issuance of
$1.2 million in common securities to Local Financial were used by the Trust to
purchase approximately $41.5 million of 9% junior subordinated debentures (the
"Debentures") of Local Financial which have the same payment terms as the Trust
Preferred Securities. The Debentures will pay interest to the Trust, which will
in turn pay dividends on the Trust Preferred Securities and the common stock.
Interest on the Debentures is tax deductible. Unamortized deferred issuance
costs of

                                       10

<Page>

approximately $1.9 million were capitalized and are included in other assets
as of December 31, 2001. For additional information, see Note 10 of the Notes
to Consolidated Financial Statements in Item 8 hereof.

         SEGMENTS. The Company operates as one segment. It uses primarily the
consolidated financial statements presented herein for purposes of assessing
performance and making operating decisions about the Company. The Trust does not
qualify as an operating segment under SFAS No. 131 and has no independent
operations and no function other than the issuance of its securities and the
related purchase of the Debentures from the Company and to distribute payments
thereon to the holders of its securities. Local has one active operating
subsidiary, Local Securities Corporation ("Local Securities"), a registered
broker-dealer under the Securities Exchange Act of 1934, which provides retail
investment products to customers of Local. While Local Securities qualifies as a
separate operating segment, it is not considered material to the consolidated
financial statements for the purposes of making operating decisions and does not
meet the 10% threshold for disclosure under Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosure About Segments of an Enterprise and
Related Information".

COMPETITION AND THE COMPANY

         As reported by an independent statistical reporting service on November
16, 2001, Local is currently the third largest Oklahoma-based bank based on
deposits. Its deposits represent approximately five percent of the state's
deposit market share. Local's operating goal is to provide a broad range of
financial services with a strong emphasis on customer service.

         Local has substantial competition in lending funds and attracting and
retaining deposits. The primary factors in competing for loans are the range and
quality of lending services offered, interest rates and loan origination fees.
In competing for commercial loans (a targeted growth segment), Local believes
that the personal relationships between lending officers and commercial
borrowers is a primary factor. Competition for the origination of real estate
loans normally comes from other commercial banks, savings and loans, mortgage
bankers, finance and insurance companies. The primary factors in competing for
deposits are the range and quality of financial services offered, the ability to
offer attractive rates and the availability of convenient locations. There is
direct competition for deposits from commercial banks, credit unions and savings
and loans. Additional significant competition for savings deposits comes from
other investment alternatives, such as money market funds, credit unions, and
corporate and government securities.

         Local expects increased competition. For a variety of reasons including
legislative developments relating to interstate branching and the ownership of
financial institutions, the consolidation within the financial services industry
will likely continue. For Local, this trend means that the number of
locally-owned financial institutions will decrease and that the Bank will
increasingly compete against larger regional and national banks. While these
larger regional and national banks will likely attract the largest Oklahoma
businesses (sales over $100 million), Local believes that these large banks are
unable to provide the relationship-oriented, customer service that Local
provides its target customer base of small and medium-sized businesses,
professionals and other individuals. Although the Bank has been able to compete
effectively in its market areas to date, it can offer no assurance that the Bank
will continue to do so in the future, especially with the rapid changes
occurring within the financial services industry.

REGULATION AND SUPERVISION

         The following discussion sets forth the material elements of the
regulatory framework applicable to bank holding companies and their
subsidiaries, and provides certain specific information relevant to Local
Financial. This regulatory framework primarily is intended for the protection of
depositors and the deposit insurance funds that insure deposits of banks, and
not for the protection of security holders. To the extent that the following
information describes statutory and regulatory provisions, it is qualified in
its entirety by reference to those provisions. A change in the statutes,
regulations or regulatory policies applicable to Local Financial or its
subsidiaries may have a material effect on its business.

                                       11

<Page>

         GENERAL. As a bank holding company, Local Financial is subject to
regulation under the Bank Holding Company Act of 1956, as amended, and to
inspection, examination and supervision by the FRB. Under the Bank Holding
Company Act, bank holding companies generally may not acquire ownership or
control of any company, including a bank, without the prior approval of the FRB.
In addition, bank holding companies generally may engage, directly or
indirectly, only in banking and those other activities as are determined by the
FRB to be closely related to banking. Under legislation adopted in 1999, certain
bank holding companies can elect to become financial holding companies and
engage in broader financial activities. See "The Gramm-Leach-Bliley Act" below.

         Various governmental requirements, including Sections 23A and 23B of
the Federal Reserve Act, as amended, limit borrowings by Local Financial and its
non-bank subsidiaries from Local (its affiliate insured depository institution),
and also limit various other transactions between Local Financial and its
non-bank subsidiaries, on the one hand, and Local, on the other. Section 23A of
the Federal Reserve Act also generally requires that an insured depository
institution's loans to its non-bank affiliates be secured, and Section 23B of
the Federal Reserve Act generally requires that an insured depository
institution's transactions with its non-bank affiliates be on arm's-length
terms.

         Local, as a bank, is subject to extensive supervision, examination and
regulation by Federal bank regulatory authorities. Local Financial and its
subsidiaries are also affected by the fiscal and monetary policies of the
Federal government and the FRB, and by various other governmental requirements
and regulations.

         LIABILITY FOR LOCAL. Under current FRB policy, a bank holding company
is expected to act as a source of financial and managerial strength to a
subsidiary bank and to maintain resources adequate to support the subsidiary
bank. This support may be required at times when the bank holding company may
not have the resources to provide it. In addition, Section 55 of the National
Bank Act permits the OCC to order the pro rata assessment of stockholders of a
national bank whose capital has become impaired. If a stockholder fails, within
three months, to pay that assessment, the board of directors has a duty to sell
the stockholder's stock to cover the deficiency. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a Federal
bank regulatory agency to maintain the capital of a subsidiary bank would be
assumed by the bankruptcy trustee and entitled to priority of payment.

         Any depository institution insured by the FDIC can be held liable for
any loss incurred, or reasonably expected to be incurred, by the FDIC in
connection with:

         -   the default of a commonly controlled FDIC-insured depository
             institution; or

         -   any assistance provided by the FDIC to a commonly controlled
             FDIC-insured depository institution in danger of default.

         "Default" generally is defined as the appointment of a conservator or
receiver and "in danger of default" generally is defined as the existence of
certain conditions indicating that a default is likely to occur in the absence
of regulatory assistance. Also, if a default occurred with respect to a bank,
any capital loans to the bank from its parent holding company would be
subordinate in right of payment to payment of the bank's depositors and certain
of its other obligations.

         CAPITAL REQUIREMENTS. Local Financial is subject to risk-based capital
requirements and guidelines imposed by the FRB, which are substantially similar
to the capital requirements and guidelines imposed by the OCC and the FDIC on
Local. For this purpose, a depository institution's or holding company's assets
and certain specified off-balance sheet commitments are assigned to four risk
categories, each weighted differently based on the level of credit risk that is
ascribed to those assets or commitments. In addition, risk-weighted assets are
adjusted for low-level recourse and market-risk equivalent assets. A depository
institution's or holding company's capital, in turn, is divided into three
tiers:

                                       12

<Page>

         -   core, or "Tier 1", capital, which consists primarily of
             stockholders' equity less certain identifiable intangible assets
             and certain other assets;

         -   supplementary, or "Tier 2", capital, which includes, among other
             items, certain other debt and equity investments that do not
             qualify as Tier 1 capital; and

         -   market risk, or "Tier 3", capital, which includes qualifying
             unsecured subordinated debt.

         Like other bank holding companies, Local Financial currently is
required to maintain Tier 1 and "Total Capital" (the sum of Tier 1, Tier 2 and
Tier 3 capital) equal to at least 4% and 8% of its total risk-weighted assets
(including certain off-balance-sheet items, such as unused lending commitments
and standby letters of credit), respectively. At December 31, 2001, Local
Financial met both requirements, with Tier 1 and Total Capital equal to 9.24%
and 10.49%, respectively, of its total risk-weighted assets.

         The FRB also requires bank holding companies to maintain a minimum
"Leverage Ratio", defined as Tier 1 capital to average adjusted total assets, of
3%, if the bank holding company has the highest regulatory rating and meets
certain other requirements, or of 3% plus an additional cushion of at least 1%
to 2%, if the bank holding company does not meet these requirements. At December
31, 2001, Local Financial's leverage ratio was 6.63%, which exceeded the minimum
leverage ratio to which it was subject.

         The FRB may set capital requirements higher than the minimums noted
above for holding companies whose circumstances warrant it. For example, bank
holding companies experiencing or anticipating significant growth may be
expected to maintain strong capital positions substantially above the minimum
supervisory levels without significant reliance on intangible assets.
Furthermore, the FRB has indicated that it will consider a "Tangible Tier 1
Capital Leverage Ratio", which would deduct all intangibles and other indicia of
capital strength in evaluating proposals for expansion or new activities.

         The Bank is subject to similar risk-based and leverage capital
requirements adopted by the OCC. Local was in compliance with the applicable
minimum capital requirements as of December 31, 2001.

         Failure to meet capital requirements could subject Local to a variety
of enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business, which are described
immediately below.

         FDICIA. The Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"), among other things, identifies five capital categories for
insured depository institutions - well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically undercapitalized
- and requires Federal bank regulatory agencies to implement systems for "prompt
corrective action" for insured depository institutions that do not meet minimum
capital requirements based on these categories. FDICIA imposes progressively
more restrictive constraints on operations, management and capital
distributions, depending on the category in which an institution is classified.
Unless a bank is well-capitalized, it is subject to restrictions on its ability
to offer brokered deposits and on certain other aspects of its operations. An
undercapitalized bank must develop a capital restoration plan and its parent
bank holding company must guarantee the bank's compliance with the plan up to
the lesser of 5% of a bank's assets at the time it became undercapitalized and
the amount needed to comply with the plan.

         As of December 31, 2001, Local was well-capitalized, based on the
prompt corrective action ratios and guidelines described above. It should be
noted, however, that a bank's capital category is determined solely for the
purpose of applying the OCC's, or the FDIC's, prompt corrective action
regulations and that the capital category may not constitute an accurate
representation of the bank's overall financial condition or prospects.

         DIVIDEND RESTRICTIONS. Federal and state statutory provisions limit the
amount of dividends that Local can pay to Local Financial without regulatory
approval. Dividend payments by national banks are limited to the lesser of:

                                       13

<Page>

         -   the level of undivided profits; and

         -   absent regulatory approval, an amount not in excess of net income
             for the current year combined with retained net income for the
             preceding two years.

         At the beginning of the calendar year 2002, approximately $17.2 million
of the total stockholders' equity of Local was available for payment of
dividends to Local Financial without regulatory approval.

         In addition, Federal bank regulatory authorities have authority to
prohibit Local from engaging in an unsafe or unsound practice in conducting
business. The payment of dividends, depending upon Local's financial condition
at the time of the proposed dividend payment, could be deemed to constitute an
unsafe or unsound practice. Local's ability to pay dividends in the future is
currently, and could be further, influenced by bank regulatory policies and
capital guidelines.

         DEPOSIT INSURANCE ASSESSMENTS. The deposits of Local are insured up to
regulatory limits by the FDIC, and, accordingly, are subject to deposit
insurance assessments to maintain the Bank Insurance Fund (the "BIF"), which is
administered by the FDIC. The FDIC has adopted regulations establishing a
permanent risk-related deposit insurance assessment system. Under this system,
the FDIC places each insured bank in one of nine risk categories based on (1)
the bank's capitalization and (2) supervisory evaluations provided to the FDIC
by the institution's primary Federal regulator. Each insured bank's insurance
assessment rate is then determined by the risk category in which it is
classified by the FDIC. The annual insurance premiums on bank deposits insured
by the BIF currently vary between $0.00 per $100 of deposits for banks
classified in the highest capital and supervisory evaluation categories to $0.27
per $100 of deposits for banks classified in the lowest capital and supervisory
evaluation categories.

         INTERSTATE BANKING AND BRANCHING. Under the Riegle-Neal Interstate
Banking and Branching Efficiency Act ("Interstate Act"), subject to certain
concentration limits and other requirements:

         -   bank holding companies, such as Local Financial, are permitted to
             acquire banks and bank holding companies located in any state;

         -   any bank that is a subsidiary of a bank holding company is
             permitted to receive deposits, renew time deposits, close loans,
             service loans and receive loan payments as an agent for any other
             bank subsidiary of that bank holding company; and

         -   banks are permitted to acquire branch offices outside their home
             states by merging with out-of-state banks, purchasing branches in
             other states and establishing de novo branch offices in other
             states. The ability of banks to acquire branch offices through
             purchase or opening of other branches is contingent, however, on
             the host state having adopted legislation "opting in" to those
             provisions of the Interstate Act. In addition, the ability of a
             bank to merge with a bank located in another state is contingent on
             the host state not having adopted legislation "opting out" of that
             provision of the Interstate Act.

         CONTROL ACQUISITIONS. The Change in Bank Control Act prohibits a person
or group of persons from acquiring "control" of a bank holding company, unless
the FRB has been notified and has not objected to the transaction. Under a
rebuttable presumption established by the FRB, the acquisition of 10% or more of
a class of voting stock of a bank holding company with a class of securities
registered under Section 12 of the Exchange Act, such as Local Financial, would,
under the circumstances set forth in the presumption, constitute acquisition of
control of the bank holding company.

         In addition, a company is required to obtain the approval of the FRB
under the Bank Holding Company Act before acquiring 25% (5% in the case of an
acquiror that is a bank holding company) or more of any class of outstanding
common stock of a bank holding company, or otherwise obtaining control or a
"controlling influence" over that bank holding company.

                                       14

<Page>

         THE GRAMM-LEACH-BLILEY ACT. In November 1999, the Gramm-Leach-Bliley
Financial Modernization Act of 1999 (the "GLBA") was signed into law, which
allows bank holding companies to engage in a wider range of nonbanking
activities, including greater authority to engage in securities and insurance
activities. Under the GLBA, a bank holding company that elects to become a
financial holding company may engage in any activity that the FRB, in
consultation with the Secretary of the Treasury, determines by regulation or
order is (1) financial in nature, (2) incidental to any such financial activity,
or (3) complementary to any such financial activity and does not pose a
substantial risk to the safety or soundness of depository institutions or the
financial system generally. The GLBA makes significant changes in U.S. banking
law, principally by repealing the restrictive provisions of the 1933
Glass-Steagall Act. The GLBA specifies certain activities that are deemed to be
financial in nature, including lending, exchanging, transferring, investing for
others, or safeguarding money or securities; underwriting and selling insurance;
providing financial, investment, or economic advisory services; underwriting,
dealing in or making a market in, securities; and any activity currently
permitted for bank holding companies by the FRB under section 4(c)(8) of the
Bank Holding Company Act. The GLBA does not authorize banks or their affiliates
to engage in commercial activities that are not financial in nature. A bank
holding company may elect to be treated as a financial holding company only if
all depository institution subsidiaries of the holding company are
well-capitalized, well-managed and have at least a satisfactory rating under the
Community Reinvestment Act.

         National banks are also authorized by the GLBA to engage, through
"financial subsidiaries", in any activity that is permissible for a financial
holding company (as described above) and any activity that the Secretary of the
Treasury, in consultation with the FRB, determines is financial in nature or
incidental to any such financial activity, except (1) insurance underwriting,
(2) real estate development or real estate investment activities (unless
otherwise permitted by law), (3) insurance company portfolio investments and (4)
merchant banking. The authority of a national bank to invest in a financial
subsidiary is subject to a number of conditions, including, among other things,
requirements that the bank must be well-managed and well-capitalized (after
deducting from the bank's capital outstanding investments in financial
subsidiaries). The GLBA provides that state banks may invest in financial
subsidiaries (assuming they have the requisite investment authority under
applicable state law) subject to the same conditions that apply to national bank
investments in financial subsidiaries.

         The GLBA also contains a number of other provisions that will affect
Local Financial's operations and the operations of all financial institutions.
One of the new provisions relates to the financial privacy of consumers,
authorizing federal banking regulators to adopt rules that will limit the
ability of banks and other financial entities to disclose non-public information
about consumers to non-affiliated entities. These limitations will likely
require more disclosure to consumers, and in some circumstances will require
consent by the consumer before information is allowed to be provided to a third
party.

         The FRB and the OCC are expected to adopt additional regulations for
implementation of the GLBA.

         FUTURE LEGISLATION. Changes in U.S. or state laws and regulations
relating to banks and other financial institutions can affect the operating
environment of bank holding companies and their subsidiaries in substantial and
unpredictable ways. Local Financial cannot accurately predict whether
legislation will ultimately be enacted, and, if enacted, the ultimate effect
that it, or implementing regulations, would have upon Local Financial's
financial condition or results of operations.

TAXATION-FEDERAL

         GENERAL. The Company and the Bank are subject to federal income
taxation under the Code in the same general manner as other corporations with
some exceptions discussed below. The following discussion of federal taxation is
intended only to summarize certain pertinent federal income tax matters and is
not a comprehensive description of the tax rules applicable to the Bank. The
Company's and its

                                       15

<Page>

subsidiaries' consolidated federal income tax returns have been audited or
closed without audit by the Internal Revenue Service ("IRS") through tax year
1993.

         METHOD OF ACCOUNTING. For federal income tax purposes, the Company and
the Bank currently report income and expenses on the accrual method of
accounting and use a tax year ending December 31 for filing consolidated federal
income tax returns.

         BAD DEBT RESERVES. Prior to the Small Business Protection Act of 1996
(the "1996 Act"), the Bank was permitted to establish a reserve for bad debts
and to make annual additions to the reserve. These additions could, within
specified formula limits, be deducted in arriving at the Bank's taxable income.
As a result of the 1996 Act, the Bank must use the specific chargeoff method in
computing its bad debt deduction beginning with its 1996 Federal tax return. In
addition, the 1996 Act requires the recapture (over a six year period) of the
excess of tax bad debt reserves at June 30, 1996 over those established as of
June 30, 1988. The amount of the Bank's reserves subject to recapture as of
December 31, 2001 amounted to approximately $3.3 million.

         TAXABLE DISTRIBUTIONS AND RECAPTURE. Prior to the 1996 Act, bad debt
reserves created prior to July 1, 1988 were subject to recapture into taxable
income should the Bank fail to meet certain thrift asset and definitional tests.
Federal legislation eliminated these thrift related recapture rules. However,
under current law, pre-1988 reserves remain subject to recapture should the Bank
make certain non-dividend distributions or cease to maintain a bank charter.

         At December 31, 2001, the Bank's total federal pre-1988 reserves was
approximately $15.9 million. This reserve reflects the cumulative effects of
federal tax deductions by the Bank for which no Federal income tax provision has
been made.

         MINIMUM TAX. The Code imposes an alternative minimum tax ("AMT") at a
rate of 20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The AMT is payable to the
extent such AMTI is in excess of an exemption amount. Net operating losses can
offset no more than 90% of AMTI. Certain payments of alternative minimum tax may
be used as credits against regular tax liabilities in future years. At December
31, 2001, the Company and the Bank had no alternative minimum tax credits
available for carryover.

         CORPORATE DIVIDENDS-RECEIVED DEDUCTION. The Company may exclude from
its income 100% of dividends received from the Bank, as a member of the same
affiliated group of corporations. The corporate dividends-received deduction is
80% in the case of dividends received from corporations with which a corporate
recipient does not file a consolidated tax return, and corporations which own
less than 20% of the stock of a corporation distributing a dividend may deduct
only 70% of dividends received or accrued on their behalf.

TAXATION-STATE AND LOCAL

         OKLAHOMA STATE TAXATION. The Company and the Bank are subject to an
annual Oklahoma corporate income tax of 6% of their federal taxable income as
computed under the Code, subject to certain prescribed adjustments. In addition
to the Oklahoma corporate income tax, the Company and the Bank are subject to an
annual Oklahoma franchise tax, which is imposed at a rate of 0.125% on the
capital used, invested or employed in Oklahoma, with a maximum franchise tax
equal to $20,000 per annum. At December 31, 2001, the Company had approximately
$82.0 million of net operating loss carryforwards available for Oklahoma state
income tax purposes. The state net operating loss carryforwards expire in
varying amounts between 2011 and 2014.

         DELAWARE STATE TAXATION. As a Delaware holding company not earning
income in Delaware, the Company is exempt from Delaware corporate income tax but
is required to file an annual report with and pay an annual franchise tax to the
state of Delaware. The Delaware franchise tax is based on the Company's
authorized capital stock or on its assumed par and no-par capital, whichever
yields a lower

                                       16

<Page>

result. Under the authorized capital method, each share is taxed at a
graduated rate based on the number of authorized shares with a maximum
aggregate tax of $150,000 per year. Under the assumed par value capital
method, Delaware taxes each $1,000,000 of assumed par-capital at the rate of
$200.

PERSONNEL

         As of December 31, 2001, the Company (on a consolidated basis) has 768
full-time employees and 99 part-time employees. The employees are not
represented by a collective bargaining agreement and the Company believes that
it has good relations with its employees.

FORWARD LOOKING STATEMENTS

         Certain statements contained in this Annual Report on Form 10-K which
are not statements of historical fact constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act (the "Act"),
including, without limitation, the statements specifically identified as
forward-looking statements within this document. In addition, certain statements
in future filings by the Company with the SEC, in press releases, and in oral
and written statements made by or with the approval of the Company which are not
statements of historical fact constitute forward-looking statements within the
meaning of the Act. Examples of forward-looking statements include, but are not
limited to: (i) projections of revenues, income or loss, earnings or loss per
share, the payment or nonpayment of dividends, capital structure and other
financial items, (ii) statements of plans and objectives of the Company or its
management or Board of Directors, including those relating to products or
services, (iii) statements of future economic performance and (iv) statements of
assumptions underlying such statements. Words such as "believes," "anticipates,"
"expects," "intends," "targeted" and similar expressions are intended to
identify forward-looking statements but are not the exclusive means of
identifying such statements.

         In particular, this Annual Report on Form 10-K contains forward-looking
statements which include but are not limited to: management's efforts to direct
the Company's operations and implement new initiatives; the adequacy of the
allowance for credit losses; interest rate risk management; and the effect of
legal proceedings on the Company's consolidated financial position, liquidity or
results of operations.

         Forward-looking statements involve risks and uncertainties which may
cause actual results to differ materially from those in such statements. Factors
that could cause actual results to differ from those discussed in the
forward-looking statements include, but are not limited to: (i) the strength of
the U.S. economy in general and the strength of the local economies in which
operations are conducted; (ii) the effects of and changes in trade, monetary and
fiscal policies and laws, including interest rate policies of the FRB; (iii)
inflation, interest rate, market and monetary fluctuations; (iv) the timely
development of and acceptance of new products and services and perceived overall
value of these products and services by users; (v) the effects of competition
from other commercial banks, thrifts, mortgage banking firms, consumer finance
companies, credit unions, securities brokerage firms, insurance companies, money
market and other mutual funds and other financial institutions operating in the
Company's market area and elsewhere, including institutions operating locally,
regionally, nationally and internationally, together with such competitors
offering banking products and services by mail, telephone, computer and the
internet; (vi) changes in consumer spending, borrowing and savings habits; (vii)
technological changes; (viii) acquisitions and integration of acquired
businesses; (ix) the ability to increase market share and control expenses; (x)
the effect of changes in laws and regulations (including laws and regulations
concerning taxes, banking, securities and insurance) with which the Company and
its subsidiaries must comply; (xi) the effect of changes in accounting policies
and practices, as may be adopted by the regulatory agencies as well as the
Financial Accounting Standards Board; (xii) changes in the Company's
organization, compensation and benefit plans; (xiii) the costs and effects of
litigation and of unexpected or adverse outcomes in such litigation; and (xiv)
the success of the Company at managing the risks involved in the foregoing.

                                       17

<Page>

         Such forward-looking statements speak only as of the date on which such
statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.





















                                       18

<Page>

ITEM 2.  PROPERTIES

OFFICES AND OTHER MATERIAL PROPERTIES

         The following table provides information on the Company's consolidated
branch network as of December 31, 2001:

<Table>
<Caption>
<S>                               <C>                            <C>                                 <C>

OKLAHOMA CITY METRO:              Portland Office                Broken Arrow Office                 Lawton Mall Office
                                  1924 North Portland Avenue     3359 South Elm Place                #10 Central Mall
Bethany Office                    Oklahoma City, OK 73107        Broken Arrow, OK 74012              Lawton, OK 73501
7723 N.W. 23rd Street             Owned                          Leased                              Leased
Bethany, OK 73008
Owned                             Quail Creek Office             Chandler Office                     Lawton Financial Centre
                                  12241 North May Avenue         1804 East First Street              6425 N.W. Cache Road
Corporate Headquarters            Oklahoma City, OK 73120        Chandler, OK 74834                  Lawton, OK 73505
3601 N.W. 63rd Street             Owned                          Owned                               Owned
Oklahoma City, OK 73116
Owned                             Springbrook Office             Chickasha Office                    Lawton Lee Blvd.
                                  6233 N.W. Expressway           628 Grand Avenue                    1420 West Lee Blvd.
Crown Heights Office              Oklahoma City, OK 73132        Chickasha, OK 73018                 Lawton, OK 73501
4716 North Western Avenue         Owned                          Owned                               Owned
Oklahoma City, OK 73118
Owned                             Yukon Office                   Claremore Office                    Lawton Cache Road Office
                                  1203 Cornwell                  1050 N. Lynn Riggs Blvd.            2601 Cache Road
Downtown Office                   Yukon, OK 73099                Claremore, OK 74017                 Lawton, OK 73505
100 West Park Avenue              Leased                         Owned                               Leased
Oklahoma City, OK 73102
Leased                            TULSA:                         Clinton Office                      Lindsay Office
                                                                 1002 West Frisco                    420 South Main
Edmond Office                     Downtown Office                Clinton, OK 73601                   Lindsay, OK 73052
301 South Bryant #A100            111 West 5th Street            Owned                               Owned
Edmond, OK 73034                  Tulsa, OK 74103
Leased                            Leased                         Commerce Office                     Miami Office
                                                                 101 N. Mickey Mantle Blvd.          123 East Central
Santa Fe Office                   Harvard Office                 Commerce, OK 74339                  Miami, OK 74354
412 South Santa Fe                3332 East 51st Street #100     Owned                               Owned
Edmond, OK 73003                  Tulsa, OK 74135
Owned                             Leased                         Duncan Downtown Office              Monkey Island Office
                                                                 1006 West Main Street               56371 E. Hwy 125, Suite 1
May Avenue Office                 Hudson Office                  Duncan, OK 73533                    Afton, OK 74331
5701 North May Avenue             5801 East 41st Street #300     Owned                               Leased
Oklahoma City, OK 73112           Tulsa, OK 74135
Owned                             Leased                         Duncan North Office                 Muskogee Office
                                                                 2210 North Highway 81               2401 East Chandler
Midwest City Office               Lewis Office                   Duncan, OK 73533                    Muskogee, OK 74403
414 North Air Depot               2250 East 73rd Street #120     Owned                               Leased
Midwest City, OK 73110            Tulsa, OK 74136
Owned                             Owned                          Elk City Office                     Owasso Office
                                                                 200 East Broadway Avenue            201 East 2nd Street
Moore Office                      Memorial Office                Elk City, OK 73644                  Owasso, OK 74055
513 N.E. 12th Street              8202 East 71st Street          Owned                               Owned
Moore, OK 73160                   Tulsa, OK 74133
Owned                             Leased                         Grove Office                        Pauls Valley Office
                                                                 100 East Third                      700 West Grant
Norman Office                     Yale Office(1)                 Grove, OK 74344                     Pauls Valley, OK 73075
2403 West Main Street             1951 South Yale                Owned                               Owned
Norman, OK 73069-6499             Tulsa, OK 74114
Leased                            Leased                         Guthrie Office                      Purcell Office
                                                                 120 North Division Street           430 West Lincoln Street
Penn South Office                 OTHER LOCATIONS:               Guthrie, OK 73044                   Purcell, OK 73080
8700 South Pennsylvania                                          Owned                               Owned
Oklahoma City, OK 73159           Ardmore Office
Owned                             313 W. Broadway                Lawton Downtown Office              Sand Springs Office
                                  Ardmore, OK 73401              1 S.W. 11th Street                  800 East Charles Page Blvd.
                                  Owned                          Lawton, OK 73501                    Sand Springs, OK 74063
                                                                 Leased                              Leased

                                       19

<Page>

Sapulpa Office                    Springs Village Office         Shawnee Office                      Sulphur Office
911 East Taft                     3973 South Highway 97          2512 North Harrison                 2009 West Broadway
Sapulpa, OK 74066                 Sand Springs, OK 74063         Shawnee, OK 74801                   Sulphur Office
Owned                             Leased                         Owned                               Owned

Weatherford, OK 73096
109 East Franklin
Weatherford, OK 73096
Owned

</Table>

------------------------

(1)      The Bank owns the building and leases the land for this facility.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is involved in litigation with the U. S. Government. The
litigation relates to an assistance agreement entered into by the Company with
the FDIC in connection with our acquisition of a federal savings bank in 1988.
The FDIC estimated the Company's liability under the assistance agreement to be
approximately $23 million as of December 31, 2000 and such amount continues to
accrue interest. Prior to the purchase of the Company in 1997 from its two prior
owners, a reserve account was established relating to amounts that may be owed
under the assistance agreement. This reserve account has a current balance of
approximately $7.7 million. As part of the purchase of the Company in 1997, $10
million of the purchase price was deposited by the Company into an escrow
account, which remains on deposit. Any amounts the Company may ultimately owe to
the U. S. Government will be paid first from these two accounts. If the amounts
in these two accounts are not sufficient to satisfy the Company's obligations to
the U. S. Government, the prior owners have contractually agreed to pay the
difference. Under the agreement with the prior owners, they may not settle the
litigation with the U. S. Government unless, at the same time, they deliver
sufficient funds to pay any difference owed to the U. S. Government. The U. S.
Government rejected a settlement offer the Company made in 1999. A subsequent
settlement offer was communicated by the Company to the U.S. Government in
December of 2001. The U.S. Government responded with a request for more
information. The Company complied with their additional requests and is waiting
for the U.S. Government to accept or reject the new settlement offer. If the
case is not settled and the U. S. Government obtains a final non-appealable
judgment, the prior owners are contractually obligated to pay any difference
owed to the U. S. Government within 30 days of the judgment. No trial date has
been set.

         In the ordinary course of business, the Company is subject to other
legal actions and complaints. Management, after consultation with legal counsel,
and based on available facts and proceedings to date, believes the ultimate
liability, if any, arising from such legal actions or complaints, will not have
a material adverse effect on the Company's consolidated financial position or
future results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted during the fourth quarter of the fiscal year
covered by this annual Report to a vote of the Company's security holders.




                                       20

<Page>


ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth the name and age of each executive
officer, his principal position with the Company, and the year he became an
officer.

<Table>
<Caption>
                                                        Officer
                         Name                Age         Since                    Position
                         ----                ---         -----                    --------
               <S>                           <C>        <C>        <C>

               Edward A. Townsend             59          1997     Chief Executive Officer
               Jan A. Norton                  55          1997     President
               Robert L. Vanden               54          1990     Executive Vice President of the Bank
               Richard L. Park                70          1997     Executive Vice President,
                                                                     Chief Financial Officer
               Christopher C. Turner          43          1983     Executive Vice President of the Bank
               James N. Young                 53          1998     Executive Vice President,
                                                                     President Tulsa Region, Manager of
                                                                     Commercial Lending of the Bank
               Harold A. Bowers               58          1998     Executive Vice President,
                                                                     Chief Credit Officer of the Bank
               William C. Lee                 62          1998     Executive Vice President
                                                                     Operations Division of the Bank
               Kenneth K. McIlhaney           58          2000     Executive Vice President of the Bank
               K. Randy Roper                 42          1998     Executive Vice President,
                                                                     President Oklahoma City Region
                                                                     of the Bank

</Table>

         Biographical information regarding Messrs. Edward A. Townsend and Jan
A. Norton are incorporated herein by reference to the Company's proxy statement
to be filed with the Securities and Exchange Commission pursuant to Regulation
14A, not later than 120 days after the end of the fiscal year covered by this
report. Biographical information regarding Messrs. Robert L. Vanden, Richard L.
Park, Christopher C. Turner, James N. Young, Harold A. Bowers, William C. Lee,
Kenneth K. McIlhaney and K. Randy Roper are set forth below.

         The executive officers serve until their successors are elected and
qualified. No executive officer is related to any director or other executive
officer of the Company by blood, marriage or adoption. There are no arrangements
or understandings between any director of the Company and any other person
pursuant to which such person was elected an executive officer.

         ROBERT L. VANDEN. Mr. Vanden was elected as a director of the Bank
immediately following consummation of the private placement. In addition, Mr.
Vanden began serving as Executive Vice President of the Bank upon consummation
of the private placement. In June 2000, he assumed the duties as director of
Central Oklahoma Habitat for Humanity, a non-profit organization. From January
1997 until September 1997, Mr. Vanden served as President and Chief Executive
Officer of the Bank. Since February 1990 through December 1996, Mr. Vanden
served as Executive Vice President of the Bank in charge of wholesale commercial
lending. Prior to joining the Bank in February 1990, Mr. Vanden served as
Executive Vice President of the Richard Gill Company and Gill Savings.

         RICHARD L. PARK. Mr. Park began serving as Executive Vice President and
Chief Financial Officer of the Company and the Bank in charge of finance
following consummation of the private placement in September 1997. Mr. Park
served as Chief Financial Officer of Green Country Bank from October 1996 until
it was acquired by the Company. From January 1991 through May 1996, Mr. Park was
Chief Financial Officer of Western Farm Credit Bank in Sacramento, California,
the Eleventh District Bank in the Federal Farm Credit System. Mr. Park is a
Certified Public Accountant.

                                       21

<Page>

         CHRISTOPHER C. TURNER. Mr. Turner has served as Executive Vice
President of the Bank in charge of residential and consumer lending, branch
administration and marketing since October 1996. Prior to October 1996, Mr.
Turner held various positions in the bank including Internal Audit Director,
Marketing Director and Director of Branch Administration. Mr. Turner joined
Local in November 1980.

         JAMES N. YOUNG. Mr. Young serves as President, Tulsa Region and Manager
of Commercial Lending for the Tulsa and Oklahoma City markets. From 1973 to
1994, Mr. Young served in various commercial lending capacities with Bank of
Oklahoma in both Tulsa and Oklahoma City, his last assignment being President,
Oklahoma City. From 1994 to January 1998, he served as Senior Commercial Lending
Manager for BankIV and its successors, Boatmen's Bank and NationsBank in
Oklahoma City. His last position with NationsBank was President, Oklahoma City,
and Senior Commercial Lending Manager for the state of Oklahoma. Mr. Young
joined Local in February 1998.

         HAROLD A. BOWERS. Mr. Bowers serves as Executive Vice President and
Chief Credit Officer. After serving four years as an officer in the United
States Air Force, Mr. Bowers started his banking career with Liberty National
Bank, Oklahoma City, Oklahoma. From 1970 to 1980 he served in various credit
capacities ultimately serving six years as Manager of Loan Administration. In
1980 and 1981, he managed the Credit Department for Bank of Oklahoma, Tulsa,
Oklahoma. From 1981 to 1998, Mr. Bowers served with NationsBank and its
predecessor banks with both senior credit and commercial lending management
responsibilities. Mr. Bowers joined Local in May 1998.

         WILLIAM C. LEE. Mr. Lee serves as Executive Vice President and is the
Bank's principal Operations Officer. Prior to joining the Bank, he was Executive
Vice President and Chief Financial Officer of the Annuity Board of the Southern
Baptist Convention, a pension and insurance management company, joining that
institution in July 1991. Mr. Lee is a Certified Public Accountant. Mr. Lee
joined Local in May 1998.

         KENNETH K. MCILHANEY. Mr. McIlhaney serves as Executive Vice President
in charge of Community Banking. Mr. McIlhaney began his banking career in 1972,
serving as Executive Vice President of United Oklahoma Bank and later serving as
President of First Bank and Trust Company of Duncan, and City National Bank and
Trust Company of Oklahoma City, Oklahoma. Mr. McIlhaney served in various
executive officer positions at Union Bank and Trust Company of Oklahoma City,
Oklahoma, from 1979 to 2000, including serving as President and Chief Executive
Officer for ten years immediately prior to joining Local in February 2000.

         K. RANDY ROPER. Mr. Roper serves as President of the Oklahoma City
Region. From 1982 to 1998, Mr. Roper served in various capacities for First
National Bank of Oklahoma City and its successors, First Interstate Bank of
Oklahoma, N.A., Boatmen's First National Bank of Oklahoma and NationsBank
specializing in energy and commercial finance. Mr. Roper completed his tenure at
NationsBank as President, Oklahoma City. Mr. Roper joined Local in December
1998.




                                       22

<Page>

                                    PART II


ITEM 5.       MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
              STOCKHOLDER MATTERS

         The following table sets forth the range of high and low closing prices
for the period indicated:

<Table>
<Caption>

                                                              Years Ended December 31,
                                             -----------------------------------------------------------
                                                         2001                          2000
                                             ----------------------------- -----------------------------
                                                 High            Low           High            Low
                                             -------------- -------------- -------------- --------------
                   <S>                       <C>            <C>            <C>            <C>

                   First quarter               $   13.63      $   12.25      $   10.63      $    7.50
                   Second quarter                  14.65          12.12           9.63           7.44
                   Third quarter                   15.60          12.00          11.19           8.06
                   Fourth quarter                  14.12          12.06          13.13          10.13

</Table>

         The Company's Common Stock began trading on April 22, 1998. It trades
on the Nasdaq National Market System under the symbol "LFIN". On February 27,
2002, there were approximately 32 holders of record of the Company's Common
Stock.

         The Company has not paid and does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future. The Company's principal
source of funds to pay cash dividends on its Common Stock would be cash
dividends from the Bank. There are certain statutory limitations on the payment
of dividends by national banks. At the beginning of the calendar year 2002,
approximately $17.2 million was available for payment of dividends by the Bank
to the Company under these restrictions without regulatory approval. See "Item
1. Business - Regulation and Supervision".


ITEM 6.       SELECTED FINANCIAL DATA

                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

         The selected consolidated financial data of the Company set forth below
should be read in conjunction with, and is qualified in its entirety by, the
Consolidated Financial Statements of the Company, including the related Notes,
included elsewhere in this report.

<Table>
<Caption>

                                                                        December 31,
                                         ---------------------------------------------------------------------------
                                             2001           2000           1999           1998            1997
                                         -------------- -------------- -------------- -------------- ---------------
<S>                                      <C>            <C>            <C>            <C>            <C>
STATEMENT OF FINANCIAL CONDITION
   AND OTHER DATA:
Total assets                               $2,820,051     $2,377,011     $2,381,607     $2,128,979     $1,881,365
Cash and due from banks                        50,791         39,571         48,122         27,180         34,152
Loans receivable, net                       1,972,145      1,848,876      1,685,550      1,362,272        953,470
Securities available for sale                 193,736        354,048        529,230        570,964        518,107
Securities held to maturity                   430,956              -              -              -              -
Nonperforming assets(1)                         9,627         10,903          7,536          4,270            921
Deposits                                    1,809,362      1,931,793      1,848,340      1,668,074      1,602,533
Securities sold under agreements to
   repurchase                                  38,694         38,214              -              -              -
Senior notes payable                           21,545         41,160         75,250         80,000         80,000
FHLB advances                                 728,205        190,028        302,035        220,033         80,136
Trust preferred securities                     40,250              -              -              -              -
Stockholders' equity                          163,536        156,271        128,294        118,806         82,625
Number of full service customer                    51             51             51             50             41
facilities
Approximate number of full-time
   equivalent employees                           818            810            777            694            525

</Table>


                                       23

<Page>

<Table>
<Caption>

                                                          For the Years Ended December 31,
                                      --------------------------------------------------------------------------
                                          2001           2000           1999           1998           1997
                                      -------------- -------------- -------------- -------------- --------------
                                                                                                   (unaudited)  (13)
<S>                                   <C>            <C>            <C>            <C>            <C>
OPERATIONS DATA:
Interest and dividend income           $   193,138     $  190,202     $  168,298     $  147,204     $  188,768
Interest expense                           104,644        111,852         94,787         92,438        137,022
                                       -----------    -----------    -----------    -----------    -----------
Net interest and dividend income            88,494         78,350         73,511         54,766         51,746
Provision for loan losses                   (5,400)        (2,700)        (2,000)        (1,450)       (44,272) (2)
                                       -----------    -----------    -----------    -----------    -----------
Net interest income after provision
for
   loan losses                              83,094         75,650         71,511         53,316          7,474
Noninterest income (loss)                   21,100         17,933         18,542         14,782       (126,458) (3)
Noninterest expense                         61,720         54,516         55,177         39,407         42,569
                                       -----------    -----------    -----------    -----------    -----------
Income (loss) before provision
   (benefit) for income taxes and
   extraordinary item                       42,474         39,067         34,876         28,691       (161,553)
Provision (benefit) for income taxes        14,367         14,331         12,627         10,254        (52,362)
                                       -----------    -----------    -----------    -----------    -----------
Income (loss) before extraordinary          28,107         24,736         22,249         18,437       (109,191)
item
Extraordinary item, net of tax              (1,630)          (922)          (257)             -              -
                                       -----------    -----------    -----------    -----------    -----------
Net income (loss)                      $    26,477    $    23,814    $    21,992    $    18,437    $  (109,191)
                                       ===========    ===========    ===========    ===========    ===========
Earnings (loss) per share:
   Income (loss) before extraordinary item:
       Basic (4)                       $      1.38    $      1.20    $      1.08    $      0.90    $     (6.52)
                                       ===========    ===========    ===========    ===========    ===========
       Diluted (4)                     $      1.34    $      1.20    $      1.08    $      0.89    $     (6.52)
                                       ===========    ===========    ===========    ===========    ===========
   Net income (loss):
       Basic (4)                       $      1.30    $      1.16    $      1.07    $      0.90    $     (6.52)
                                       ===========    ===========    ===========    ===========    ===========
       Diluted (4)                     $      1.26    $      1.16    $      1.07    $      0.89    $     (6.52)
                                       ===========    ===========    ===========    ===========    ===========

<Caption>

                                                       At or For the Years Ended December 31,
                                      --------------------------------------------------------------------------
                                          2001           2000           1999           1998           1997
                                      -------------- -------------- -------------- -------------- --------------
                                                                                                   (unaudited)  (13)
<S>                                   <C>            <C>            <C>            <C>            <C>
PERFORMANCE RATIOS(5):
   Return on assets                           1.01%          1.00%          0.99%          0.93%         (4.35)%
   Return on common equity                   15.65          17.18          17.65          17.73        (117.17)
   Dividend payout ratio(6)                   -              -              -              -              -
   Net interest spread(7)                     3.11           2.95           3.02           2.57           1.91
   Net interest margin(8)                     3.53           3.44           3.46           2.91           2.13
   Noninterest expense to average
     assets(9)                                2.30           2.24           2.41           1.90           1.64
   Efficiency ratio(10)                      55.41          55.60          58.76          54.61          64.46
CAPITAL RATIOS OF THE COMPANY (11):
   Leverage capital                           6.63           5.61           4.71         N/A            N/A
   Core capital                               9.24           7.74           6.81         N/A            N/A
   Total capital                             10.49           9.00           8.07         N/A            N/A
CAPITAL RATIOS OF THE BANK (12):
   Leverage or tangible                       7.28           7.30           7.93           7.61           6.89
   Core                                      10.16          10.08          11.48           7.63           6.98
   Total or risk-based                       11.41          11.34          12.74          13.08          14.14
ASSET QUALITY RATIOS:
   Nonperforming assets to total assets
     at end of period(1)                      0.34           0.46           0.32           0.20           0.05
   Nonperforming loans to total loans
     at end of period(1)                      0.39           0.53           0.40           0.26           0.06
   Allowance for loan losses to total
     loans at end of period                   1.38           1.51           1.65           2.00           2.09
   Allowance for loan losses to
     nonperforming loans at
     end of period(1)                         3.58x          2.83x          4.15x          7.80x         32.72x

</Table>

-------------------------

                                       24

<Page>

(1)      Nonperforming loans consist of nonaccrual loans and loans delinquent 90
         days or more but still accruing interest, and nonperforming assets
         consist of nonperforming loans, real estate acquired through
         foreclosure or deed-in-lieu thereof and repossessions, net of
         writedowns and reserves.
(2)      Primarily reflects provisions established by management to cover
         realized and inherent losses with respect to the Company's portfolio of
         indirect automobile receivables which were sold as of December 31,
         1997.
(3)      Primarily reflects losses incurred by the Company relating to the
         liquidation or disposition of certain hedging contracts and the
         disposition of investment securities and adjustments to reflect market
         values.
(4)      Net income per share and dividends per share are based upon the
         weighted average number of shares outstanding during the period. For
         the years ended December 31, 2001, 2000, 1999, 1998 and 1997, the
         weighted average number of shares for basic net income per share are
         20,368,028, 20,537,209, 20,537,209, 20,431,698 and 16,754,795,
         respectively. Basic and diluted shares are the same for each year
         except 2001 wherein diluted shares are 20,966,531. See also Note 1 of
         the Notes to Consolidated Financial Statements in Item 8 hereof.
(5)      With the exception of end of period ratios, all ratios are based on
         average monthly balances during the periods presented.
(6)      The dividend payout ratio represents dividends declared per share
         divided by net income per share. The Company does not presently pay
         dividends.
(7)      Net interest spread represents the difference between the weighted
         average yield on interest-earning assets less the weighted average cost
         of interest-bearing liabilities.
(8)      Net interest margin represents net interest income divided by average
         interest-earning assets.
(9)      Noninterest expense excludes the amortization of intangibles.
(10)     Represents noninterest expense (exclusive of amortization of
         intangibles) divided by the aggregate of net interest income before
         provision for loan losses and noninterest income (exclusive of gains
         and losses on sales of assets).
(11)     Prior to the Company becoming a bank holding company during the year
         ended December 31, 1999, the Company was not subject to capital
         requirements as a savings and loan holding company.
(12)     The Bank became subject to Office of the Comptroller of the Currency
         ("OCC") regulatory authority in May 1999. Data presented as of December
         31, 2001, 2000 and 1999 is based on OCC regulatory requirements while
         data as of prior periods is based on Office of Thrift Supervision
         ("OTS") regulatory requirements. In calculating leverage capital, the
         OCC uses total average assets while the OTS uses tangible assets. In
         calculating core capital, the OCC uses risk-weighted assets while the
         OTS uses adjusted tangible assets. See "Business-Regulation and
         Supervision" in Item 1 hereof for information with respect to the
         Bank's regulatory capital requirements.
(13)     In June 1998, the Company changed its fiscal year end from June 30 to
         December 31.

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

         THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO, INCLUDED
IN ITEM 8 HEREOF.

CHANGES IN FINANCIAL CONDITION

GENERAL

         Local Financial's primary asset is the capital stock of the Bank. In
pursuit of management's growth strategy, the Bank has shifted its activities
from those of a traditional savings and loan to those generally associated with
a commercial bank. On May 11, 1999, the Bank converted from a savings bank to a
national banking association. The Bank has increased its commercial and consumer
lending and expects further increases in those areas. The Bank also has targeted
increases in non-interest income and increases in direct consumer lending.
During the fourth quarter of 2001, the Company took steps to strengthen its
regulatory capital position through the issuance of 1.6 million shares of 9.00%
Trust Preferred Securities. See Note 10 of the Notes to Consolidated Financial
Statements in Item 8 hereof and "Business - Sources of Funds - Capital
Issuances" in Item 1 hereof. The Trust Preferred Securities qualify for Tier I
capital treatment from the Federal Reserve.

         The Bank's business strategy is to provide its customers with a range
of banking products and services of a regional bank while retaining the appeal
and level of individualized service of a community bank. Management believes
that as a result of the Company's strong commitment to highly personalized
relationship-oriented customer service, its varied products, its strategic
branch locations and the long-standing community presence of its managers,
lending officers and branch personnel, it is well positioned to attract new
customers and to increase its market share of loans and deposits.

                                       25

<Page>

CHANGES IN FINANCIAL CONDITION FROM DECEMBER 31, 2000 TO DECEMBER 31, 2001

         CASH AND CASH EQUIVALENTS. Cash and cash equivalents (consisting of
cash, cash due from banks and interest-bearing deposits with other banks)
amounted to $60.5 million and $44.0 million at December 31, 2001 and December
31, 2000, respectively. The Company manages its cash and cash equivalents based
upon the Company's operating, investing and financing activities. See
"-Liquidity and Capital Resources".

         SECURITIES. The Company views the securities available for sale as a
source of asset liquidity. Liquidity is derived from this source by receipt of
interest and principal payments and prepayments; by the ability to sell these
securities at market prices; and by utilizing unpledged securities as collateral
for borrowings. Securities are identified as either held for maturity or
available for sale, based on various factors including asset/liability
management strategies, liquidity and profitability objectives, and regulatory
requirements. Held for maturity securities are carried at cost, adjusted for
amortization of premiums or accretion of discounts. Amortization or accretion of
mortgage-backed securities is periodically adjusted for estimated prepayments.
Available for sale securities are those that may be sold prior to maturity based
upon asset/liability management decisions. Securities identified as available
for sale are carried at fair value. Unrealized gains or losses on available for
sale securities, less applicable deferred taxes, are recorded as accumulated
other comprehensive income in stockholders' equity.

         During 2001, Local Financial Corporation's securities portfolio
increased by $270.6 million. In December 2001, the Company reclassified $431.0
million or 69.0% of its total securities portfolio as held for maturity
including some of its single family loans which were securitized during 2000.
The Company had a net unrealized gain, net of tax, of $4.1 million in its
available for sale securities portfolio at December 31, 2001 compared to a net
unrealized gain, net of tax, of $4.6 million at December 31, 2000.

         The following table sets forth information regarding the carrying and
market value of the Company's securities at the dates indicated (dollars in
thousands):

<Table>
<Caption>

                                                                  December 31,
                            -----------------------------------------------------------------------------------------
                                        2001                          2000                          1999
                            ----------------------------- ----------------------------- -----------------------------
                              Carrying        Market        Carrying        Market        Carrying        Market
                                Value          Value          Value          Value          Value         Value
                            -------------- -------------- -------------- -------------- ------------- ---------------
<S>                         <C>            <C>            <C>            <C>            <C>           <C>

Available for sale:

  Collateralized mortgage
     obligations              $  193,736     $  193,736     $  224,254     $  224,254     $  494,747    $  494,747
  Mortgage pass-through
     securities                        -              -         95,676         95,676         12,410        12,410
  U.S. Government and
     agency securities                 -              -         33,663         33,663         21,533        21,533
  Municipal securities                 -              -            455            455            540           540
                              ----------     ----------     ----------     ----------     ----------    ----------
                              $  193,736     $  193,736     $  354,048     $  354,048     $  529,230    $  529,230
Held to maturity:

  Collateralized mortgage
     obligations              $  355,637     $  355,769     $        -     $        -     $        -    $        -
  Mortgage pass-through
     securities                   75,140         77,030              -              -              -             -
  Municipal securities               179            179              -              -              -             -
                              ----------     ----------     ----------     ----------     ----------    ----------
                                 430,956        432,978              -              -              -             -
                              ----------     ----------     ----------     ----------     ----------    ----------

                              $  624,692     $  626,714     $  354,048     $  354,048     $  529,230    $  529,230
                              ==========     ==========     ==========     ==========     ==========    ==========

</Table>

                                       26

<Page>

         LOANS RECEIVABLE. Net loans receivable amounted to $2.0 billion and
$1.8 billion at December 31, 2001 and 2000, respectively. Net loans receivable
increased by $123.3 million or 6.7% during the year ended December 31, 2001. In
keeping with its strategy, the Bank grew its commercial lending portfolio but at
a slower rate than prior years. The total commercial lending portfolio grew from
$1.4 billion at December 31, 2000 to $1.6 billion at December 31, 2001.
Management intends to continue its controlled growth in lending with the primary
focus being on commercial lending activities that enable the Bank to provide
other banking services to the customers. For additional information, see
"Business-Lending Activities" in Item 1 hereof and Note 4 of the Notes to
Consolidated Financial Statements in Item 8 hereof.

         CONTRACTUAL PRINCIPAL REPAYMENTS AND INTEREST RATES. The following
table sets forth scheduled contractual amortization of the Company's total loan
portfolio at December 31, 2001, as well as the dollar amount of such loans which
are scheduled to mature after one year which have fixed or adjustable interest
rates. Demand loans, loans having no schedule of repayments and no stated
maturity and overdraft loans are reported as due in one year or less (dollars in
thousands):

<Table>
<Caption>

                                                         Principal Repayments Contractually due
                         Total at                              In Years Ended December 31,
                       December 31,  --------------------------------------------------------------------------------
                         2001(1)        2002          2003         2004          2005         2006       Thereafter
                      -------------- ------------ ------------- ------------  ------------ ------------  ------------
<S>                   <C>            <C>          <C>           <C>           <C>          <C>           <C>

Residential real        $  215,408     $ 31,269     $ 12,623      $ 12,422      $ 12,381     $ 14,702      $132,011
estate

Commercial               1,593,432      387,893      229,196       152,155       142,118      156,823       525,247

Consumer                   190,926       48,329       28,410        24,833        20,148       16,413        52,793
                        ----------     --------     --------      --------      --------     --------      --------

      Total(1)          $1,999,766     $467,491     $270,229      $189,410      $174,647     $187,938      $710,051
                        ==========     ========     ========      ========      ========     ========      ========
</Table>

-------------------------

(1)      Of the $1.5 billion of loan principal repayments contractually due
         after December 31, 2002, $763.7 million have fixed rates of interest
         and $768.5 million have adjustable rates of interest. All are presented
         net of undistributed loan proceeds.

         Scheduled contractual principal repayments do not reflect the actual
maturities of loans. The average maturity of loans is substantially less than
their contractual terms because of prepayments and, in the case of conventional
mortgage loans, due-on-sale clauses, which generally give the Bank the right to
declare a loan immediately due and payable in the event, among other things,
that the borrower sells the real property subject to the mortgage and the loan
is not repaid. The average life of mortgage loans tends to increase when current
mortgage loan rates are substantially higher than rates on existing mortgage
loans and, conversely, decrease when rates on existing mortgages are
substantially lower than current mortgage loan rates (due to refinancings of
adjustable-rate and fixed-rate loans at lower rates).

         NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES. Nonperforming
assets (consisting of non-accruing loans, accruing loans greater than 90 days
delinquent and foreclosed assets) at December 31, 2001 continued at a relatively
low rate totaling $9.6 million or .34% of total assets, as compared to $10.9
million or .46% at December 31, 2000. Although the Bank is currently
experiencing lower nonperforming asset rates than most of its peers, it
anticipates these rates to increase as the slower national economy may have an
impact on the Bank's middle-market commercial borrowers who typically have less
ability to withstand economic downturns.




                                       27

<Page>

         The following table presents information on the Company's nonperforming
assets at the dates indicated (dollars in thousands):

<Table>
<Caption>

                                                                         December 31,
                                             ----------------------------------------------------------------------
                                                 2001          2000           1999          1998          1997
                                             ------------- -------------- ------------- ------------- -------------
<S>                                          <C>           <C>            <C>           <C>           <C>

Non-accruing loans                             $   7,687     $   9,297      $   5,730     $   2,203     $     626

Accruing loans greater than 90 days
   delinquent:                                        30           725          1,083         1,374             -

Foreclosed assets                                  1,910           881            723           693           295
                                               ---------     ---------      ---------     ---------     ---------

Total nonperforming assets                     $   9,627     $  10,903      $   7,536     $   4,270     $     921
                                               =========     =========      =========     =========     =========

Total nonperforming assets as a percentage
of total assets                                     0.34%         0.46%          0.32%         0.20%         0.05%
                                               =========     =========      =========     =========     =========
</Table>

         As of December 31, 2001, the Company's allowance for loan loss totaled
$27.6 million or 1.38% of total loans. During the fiscal year ended December 31,
2001, the Company's net charge-offs totaled $6.1 million as compared with $2.7
million for the year ended December 31, 2000. The increase in charge-offs was
attributable to the affects of the weakening economy on borrower's ability to
repay their loans.

         The Company's process for determining the adequacy of the allowance is
based on a comprehensive analysis of the institution's loan portfolio that
considers all significant factors that affect the collectibility. The allowance
is maintained at a level that is adequate to absorb all estimated inherent
losses in the portfolio as of this date. In addition to historical loss
experience, the Company also considers other factors likely to cause estimated
credit losses to differ from historical loss experience.

         The following table provides information on the Company's allowance for
loan losses as of the dates indicated (dollars in thousands):

<Table>
<Caption>

                                                                 Years Ended December 31,
                                     ----------------------------------------------------------------------------------
                                          2001             2000            1999             1998             1997
                                     ---------------  --------------- ---------------  ---------------  ---------------
                                                                                                         (unaudited)
<S>                                  <C>              <C>             <C>              <C>              <C>

Balance at beginning of period         $  28,345        $  28,297       $  27,901        $  20,484        $    5,475
   Loans charged off:
     Residential real estate                (805)            (164)           (314)             (31)               (8)
     Commercial                           (3,606)          (1,725)         (2,397)            (545)              (14)
     Consumer                             (2,178)          (1,818)         (1,142)            (928)          (29,298)
   Recoveries                                465            1,055           1,909              187                57
                                       ---------        ---------       ---------        ---------        ----------
       Net loans charged off              (6,124)          (2,652)         (1,944)          (1,317)          (29,263)
Allowances acquired                            -                -             340            7,284                 -
Provision for loan losses                  5,400            2,700           2,000            1,450            44,272
                                       ---------        ---------       ---------        ---------        ----------
Balance at end of period               $  27,621        $  28,345       $  28,297        $  27,901        $   20,484
                                       =========        =========       =========        =========        ==========
Allowance for loan losses to total
   nonperforming loans at end of
   period                                    3.58x            2.83x           4.15x            7.80x           32.72x
                                       ==========       ==========      ==========       ==========       ==========
Allowance for loan losses to total
loans at end of period                       1.38%            1.51%           1.65%            2.00%            2.09%
                                       ==========       ==========      ==========       ==========       ==========

</Table>



                                       28

<Page>

         The Bank utilizes a consistent systematic process for allocation of
reserve dollars within its total loan portfolio. The reserve rates vary based on
the perceived risks inherent within the various loan types. Reserve rates are
established based on historical portfolio performance as well as specific credit
performance.

         The following table sets forth information concerning the allocation of
the Company's allowance for loan losses by loan category at the dates indicated
(dollars in thousands):

<Table>
<Caption>

                                                                                       December 31,
                                 --------------------------------------------------------------------------
                                          2001                    2000                     1999
                                 -----------------------  ----------------------  -----------------------
                                                                       Percent                  Percent
                                             Percent to                  to                       to
                                               Total                    Total                    Total
                                   Amount    Allowance     Amount     Allowance     Amount     Allowance
                                 ----------- -----------  ----------  ----------  -----------  ----------
<S>                              <C>         <C>          <C>         <C>         <C>          <C>

          Residential real       $  2,313        8.37%    $  2,777        9.80%     $3,332        11.78%
          estate

          Commercial               22,021       79.73       21,125       74.53      18,963        67.01

          Consumer                  3,287       11.90        4,443       15.67       6,002        21.21

          General unallocated           -           -            -           -           -            -
                                 --------    --------     --------    --------    --------     --------
               Total             $ 27,621      100.00%    $ 28,345      100.00%   $ 28,297       100.00%
                                 ========    ========     ========    ========    ========     ========

<Caption>

                                 -------------------------------------------------
                                            1998                    1997
                                 ------------------------- -----------------------
                                                                        Percent
                                               Percent to                  to
                                                 Total                    Total
                                    Amount     Allowance     Amount     Allowance
                                 ------------  ----------- -----------  ----------
<S>                              <C>           <C>         <C>          <C>

          Residential real       $    3,311       11.87%   $    412         2.01%
          estate

          Commercial                 18,798       67.37      10,459        51.06

          Consumer                    5,792       20.76       6,203        30.28

          General unallocated             -           -       3,410        16.65
                                 ----------    --------    --------     --------
               Total             $   27,901      100.00%   $ 20,484       100.00%
                                 ==========    ========    ========     ========

</Table>





                                       29

<Page>

         OTHER ASSETS. Other assets rose by $8.8 million from December 31, 2000
to December 31, 2001. The cash value of bank-owned life insurance policies was
approximately $37.3 million at December 31, 2001 compared with a balance of
approximately $25.3 million at December 31, 2000. This increase resulted from
the purchase of $10.0 million as well as a $2.0 million increase in cash
surrender value on these policies.

         DEPOSITS. At December 31, 2001, deposits totaled $1.8 billion, as
compared to $1.9 billion at December 31, 2000. The Bank offers a broad range of
products and services to its customers and relies on the quality of those
services as well as advertising and competitive pricing policies to attract and
retain deposits. The average cost of deposits declined from 5.08% in 2000 to
4.54% in 2001. This decline was attributable to the lower overall rate
environment as well as management's decision to further utilize FHLB borrowings
as a funding source.











                                       30

<Page>


         The following table presents the average balance of each deposit type
and the average rate paid on each deposit type of the Company for the periods
indicated (dollars in thousands):

<Table>
<Caption>
                                                                   Years Ended December 31,
                                     ----------------------------------------------------------------------------------
                                                      2001                                      2000
                                     --------------------------------------    --------------------------------------
                                                                  Average                                    Average
                                      Average                       Rate         Average                      Rate
                                      Balance       Interest        Paid         Balance       Interest       Paid
                                     ----------     ---------    ----------    -----------    ----------    --------
<S>                                  <C>            <C>          <C>           <C>            <C>           <C>
Noninterest-bearing deposits         $  155,598     $       -           -%     $   140,004    $       -           -%
Passbook accounts                        66,715         1,754        2.63           69,635        1,994        2.86
NOW and money market accounts           452,971        12,778        2.82          359,831       13,203        3.67
Term certificates                     1,145,288        61,094        5.33        1,309,327       73,220        5.59
                                     ----------     ---------    --------      -----------   ----------     -------
      Total deposits                 $1,820,572     $  75,626        4.15%     $ 1,878,797    $  88,417        4.71%
                                     ==========     =========    ========      ===========   ==========     =======

<Caption>

                                              Years Ended December 31,
                                      --------------------------------------
                                                       1999
                                      --------------------------------------
                                                                   Average
                                        Average                     Rate
                                        Balance      Interest       Paid
                                      ----------    -----------  -----------
<S>                                   <C>           <C>          <C>
Noninterest-bearing deposits          $  122,729    $        -           -%
Passbook accounts                         75,849         2,219        2.93
NOW and money market accounts            282,386         7,941        2.81
Term certificates                      1,204,661        60,416        5.02
                                      ----------    ----------    --------
     Total deposits                   $1,685,625    $   70,576        4.19%
                                      ==========    ==========    ========
</Table>


                                               31
<Page>


         BORROWINGS. Other than deposits, the Company utilizes advances from the
FHLB, and to a lesser extent, securities sold under agreements to repurchase to
fund its operations. During 2001, the Company's average balance of advances
outstanding at the FHLB were $521.6 million compared with $262.9 million in
2000, as the Company further utilized FHLB borrowings to fund investment
securities.

         The following table sets forth certain information regarding the
borrowings of the Company at or for the dates indicated (dollars in thousands):

<Table>
<Caption>

                                                                             At or For the Years
                                                                             Ended December 31,
                                                               -------------------------------------------
                                                                  2001             2000           1999
                                                               -----------      -----------    -----------
          <S>                                                  <C>              <C>            <C>
          FHLB OF TOPEKA ADVANCES:
             Average balance outstanding                       $   521,628      $   262,885    $   292,758
             Maximum amount outstanding at any
               month-end during the year                           753,036          326,217        497,178
             Balance outstanding at end of year                    728,205          190,028        302,035
             Average interest rate during the year                    4.23%            6.11%          5.09%
             Average interest rate at end of year                     3.75%            6.44%          5.78%

          SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE:
             Average balance outstanding                       $    42,987      $    18,352    $         -
             Maximum amount outstanding at any
               month-end during the year                            53,622           38,214              -
             Balance outstanding at end of year                     38,694           38,214              -
             Average interest rate during the year                    3.39%            5.85%             -%
             Average interest rate at end of year                     1.29%            5.92%             -%
</Table>


         Pursuant to the private placement in September 1997, the Company issued
$80.0 million of senior notes which are due in September 2004 and which bear
interest at the rate of 11.0%, payable semi-annually. During 2001, 2000 and
1999, the Company purchased and retired $19.6 million, $34.1 million and $4.7
million of senior notes, resulting in a $1.6 million, $922,000 and $257,000
extraordinary loss, net of tax, respectively. At December 31, 2001, there were
$21.5 million senior notes outstanding. Deferred issuance costs were capitalized
and the unamortized balance of $468,000 is reflected in other assets in the
Consolidated Statement of Financial Condition. The Company funds the semiannual
interest payments through dividends paid to the Company from the Bank. For
additional information, see "Business-Sources of Funds-Borrowings" in Item 1
hereof and Note 9 of the Notes to Consolidated Financial Statements in Item 8
hereof.

         STOCKHOLDERS' EQUITY. Stockholders' equity increased from $156.3
million at December 31, 2000 to $163.5 million at December 31, 2001. The
increase in stockholders' equity came primarily as a result of earnings during
the period offset by an increase in treasury shares. The Company increased its
shares of treasury stock during 2001 as part of a stock repurchase program in
which the Company repurchased 1.3 million shares of its common stock at a cost
of $17.8 million. The net decline in additional paid-in capital during 2001 of
$985,000 was the result of an exercise of 2,000 warrants which were part of the
original 591,000 warrants issued in conjunction with the private placement and
the repurchase of 335,667 of those warrants by the Company at fair market value
during 2001. Accumulated other comprehensive income declined $470,000 during
fiscal 2001. At December 31, 2001, the Company and the Bank exceeded all
regulatory requirements for capital adequacy. See "-Liquidity and Capital
Resources".

RESULTS OF OPERATIONS

         GENERAL. The Company's results of operations depend substantially on
its net interest and dividend income, which is the difference between interest
and dividend income on interest-earning assets, consisting primarily of loans
receivable, mortgage-backed and investment securities and various other
short-term


                                      32
<Page>


investments, and interest expense on interest-bearing liabilities, consisting
primarily of deposits, FHLB advances, senior notes and trust preferred
borrowings. On an ongoing basis, the Company's results of operations will be
affected by the level of its noninterest income including deposit related
income; loan fees and service charges; net gains (losses) on sales of assets;
the level of its noninterest expense, such as compensation and employee
benefits, equipment and data processing expense, occupancy expense,
advertising expense and professional fees; its provisions for losses on loans
resulting from the Company's assessment of the adequacy of its allowance for
losses on loans; and provisions for income taxes.

         NET INCOME. The Company reported net income of $26.5 million, $23.8
million and $22.0 million during the years ended December 31, 2001, 2000 and
1999, respectively. Net income increased by $2.7 million or 11.2% during the
year ended December 31, 2001, as compared to the year ended December 31, 2000,
primarily due to the increase in the net interest and dividend income which came
as a result of income earned on the Company's available for sale securities
portfolio as well as declining interest expense on interest-bearing liabilities.
The extraordinary loss of $1.6 million, $922,000 and $257,000, net of tax,
charged to income during the years ended December 31, 2001, 2000 and 1999,
respectively, occurred as a result of the Company's purchase and retirement of
$19.6 million, $34.1 million and $4.7 million of senior notes.

         NET INTEREST AND DIVIDEND INCOME. Net interest and dividend income is
determined by the Company's net interest spread (i.e., the difference between
the yields earned on its interest-earning assets and the rates paid on its
interest-bearing liabilities) and the relative amounts of interest-earning
assets and interest-bearing liabilities.

         Net interest and dividend income rose in all comparative periods
presented as the Company continued to increase its net interest earnings assets
(interest-earning assets less interest-bearing liabilities). Average
interest-earning assets increased by $230.3 million or 10.1% during 2001 with
average loans being the highest yielding asset. Average interest-bearing
liabilities also increased by $210.8 million or 10.2% during 2001; however the
average cost of those liabilities decreased 81 basis points during 2001.
Accordingly, the Company's net interest spread increased from 2.95% for 2000 to
3.11% for 2001. In addition, the Company's net interest margin, which is the
ratio of net interest income to average earning assets, increased from 3.44% for
2000 to 3.53% for 2001.


                                      33
<Page>

AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID

  The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income of the Company from
interest-earning assets and the resultant average yields, (ii) the total
dollar amount of interest expense on interest-bearing liabilities and the
resultant average rates, (iii) net interest income, (iv) interest rate
spread, and (v) net interest margin. Information is based on average daily
balances during the indicated periods (dollars in thousands):

<Table>
<Caption>
                                                                      Years Ended December 31,
                                   --------------------------------------------------------------------------------------------
                                                       2001                                             2000
                                   ---------------------------------------------    -------------------------------------------
                                      Average                         Average          Average                       Average
                                      Balance        Interest        Yield/Cost        Balance         Interest     Yield/Cost
                                   ------------    ------------     ------------    -------------    ------------  ------------
<S>                                <C>             <C>              <C>             <C>              <C>           <C>
ASSETS
  Loans receivable(1)              $  1,914,373    $    151,950           7.94%     $  1,817,414      $   157,648         8.67%
  Securities(2)                         522,406          36,952           7.07           418,280           29,811         7.13
  Other earning assets(3)                70,004           4,236           6.05            40,794            2,743         6.72
                                   ------------    ------------                     ------------      -----------         8.35%
     Total interest-earning           2,506,783         193,138           7.70%        2,276,488          190,202   ==========
                                                   ------------      =========                        -----------
  Noninterest-earning assets            120,098                                           96,288
                                   ------------                                     ------------
      Total assets                 $  2,626,881                                     $  2,372,776
                                   ============                                     ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
  Deposits:
   Transaction accounts(4)         $    519,686          14,532           2.80%     $    429,466           15,197         3.54%
   Term certificates of deposit       1,145,288          61,094           5.33         1,309,327           73,220         5.59
                                   ------------    ------------                     ------------      -----------
      Total deposits                  1,664,974          75,626           4.54         1,738,793           88,417         5.08
  FHLB advances                         521,628          22,045           4.23           262,885           16,329         6.11
  Securities sold under
    agreements to repurchase
    and other borrowings                 46,600           1,640           3.52            18,352            1,073         5.85
  Senior notes                           36,353           4,298          11.81            50,113            6,033        11.81
  Mandatorily redeemable trust
    preferred securities                 11,358           1,035           9.11                 -                -            -
                                   ------------    ------------                     ------------      -----------
      Total interest-bearing          2,280,913         104,644           4.59%        2,070,143          111,852         5.40%
                                                   ------------      =========           164,045      -----------   ==========
  Noninterest-bearing liabilities       176,754                                          138,588
  Stockholders' equity                  169,214                                     ------------
                                   ------------
      Total liabilities and
        stockholders' equity       $  2,626,881                                     $  2,372,776
                                   ============                                     ============
Net interest-earning assets        $    225,870                                     $    206,345
                                   ============                                     ============
Net interest income/interest
  rate spread                                      $     88,494           3.11%                       $    78,350         2.95%
                                                   ============      =========                        ===========   ==========
Net interest margin                                                       3.53%                                           3.44%
                                                                     =========                                      ==========
Ratio of average interest-earning
  to average interest-bearing                                           109.90%                                         109.97%
                                                                     =========                                      ==========

<Caption>

                                               Years Ended December 31,
                                   ----------------------------------------------
                                                       1999
                                   ----------------------------------------------
                                      Average                         Average
                                      Balance        Interest        Yield/Cost
                                   ------------    ------------    --------------
<S>                                <C>             <C>             <C>
ASSETS
  Loans receivable(1)              $  1,577,869    $    130,869           8.29%
  Securities(2)                         501,781          34,141           6.80
  Other earning assets(3)                46,423           3,288           7.08
                                   ------------    ------------
      Total interest-earning          2,126,073         168,298           7.92%
                                                   ------------      =========
  Noninterest-earning assets             93,673
                                   ------------
      Total assets                 $  2,219,746
                                   ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
  Deposits:
   Transaction accounts(4)         $    358,235          10,160           2.84%
   Term certificates of deposit       1,204,661          60,416           5.02
                                   ------------    ------------
      Total deposits                  1,562,896          70,576           4.52
  FHLB advances                         292,758          14,901           5.09
  Securities sold under
    agreements to repurchase
    and other borrowings                      -               -              -
  Senior notes                           78,442           9,310          11.81
  Mandatorily redeemable trust
    preferred securities                      -               -              -
                                   ------------    ------------
      Total interest-bearing          1,934,096          94,787           4.90%
                                                   ------------      =========
  Noninterest-bearing liabilities       161,059
  Stockholders' equity                  124,591
                                   ------------
      Total liabilities and
        stockholders' equity       $  2,219,746
                                   ============
Net interest-earning assets        $    191,977
                                   ============
Net interest income/interest
  rate spread                                      $     73,511           3.02%
                                                   ============      =========
Net interest margin                                                       3.46%
                                                                     =========
Ratio of average interest-earning
  to average interest-bearing                                           109.93%
                                                                     =========
</Table>

-------------------------
(1)      The average balance of loans receivable includes nonperforming loans,
         interest on which is recognized on a cash basis, and excludes the
         allowance for loan losses which is included in noninterest-earning
         assets.
(2)      Includes all securities including the market valuation accounts.
(3)      Includes interest bearing deposits, Federal Home Loan Bank of Topeka
         stock and Federal Reserve Bank stock.
(4)      Includes passbook, NOW, and money market accounts.


                                       34
<Page>

RATE/VOLUME ANALYSIS

    The following table sets forth the effects of changing rates and volumes on
    net interest income of the Company. Information is provided with respect to
    (i) effects on interest income attributable to changes in volume (changes in
    volume multiplied by prior rate); (ii) effects on interest income
    attributable to changes in rate (changes in rate multiplied by prior
    volume); and (iii) changes in rate/volume (change in rate multiplied by
    change in volume) (dollars in thousands):

<Table>
<Caption>
                                      Year Ended December 31, 2001 compared to 2000  Year Ended December 31, 2000 compared to 1999
                                     ----------------------------------------------  ---------------------------------------------
                                         Increase (Decrease) due to                     Increase (Decrease) due to
                                     ----------------------------------              ---------------------------------
                                                                          Total Net                                      Total Net
                                                                          Increase                                       Increase
                                       Rate       Volume    Rate/Volume  (Decrease)    Rate      Volume    Rate/Volume  (Decrease)
                                     --------    --------   -----------  ----------  --------   --------   -----------  ----------
<S>                                  <C>         <C>        <C>          <C>         <C>        <C>        <C>          <C>
Interest-earning:
   Loans receivable                  $(13,394)   $  8,411    $   (715)   $ (5,698)   $  6,000   $ 19,868    $    911     $ 26,779
   Securities                            (224)      7,421         (56)      7,141       1,621     (5,681)       (270)      (4,330)
   Securities purchased under
     agreements to resell                   -           -           -           -           -          -           -            -
   Other earning assets                  (275)      1,964        (196)      1,493        (166)      (399)         20         (545)
                                     --------    --------    --------    --------    --------   --------    --------     --------
       Total net change in income
         on interest-earning          (13,893)     17,796        (967)      2,936       7,455     13,788         661       21,904
                                     --------    --------    --------    --------    --------   --------    --------     --------
Interest-bearing:
   Deposits:
     Transaction accounts              (3,188)      3,193        (670)       (665)      2,517      2,020         500        5,037
     Term certificates of deposit      (3,376)     (9,173)        423     (12,126)      6,951      5,249         604       12,804
                                     --------    --------    --------    --------    --------   --------    --------     --------
       Total deposits                  (6,564)     (5,980)       (247)    (12,791)      9,468      7,269       1,104       17,841

   FHLB advances                       (5,219)     16,072      (5,137)      5,716       3,283     (1,520)       (335)       1,428
   Securities sold under
     agreements to repurchase            (427)      1,652        (658)        567           -          -       1,073        1,073
   Promissory note payable                  -           -           -           -           -          -           -            -
   Senior notes                          (265)     (1,730)        260      (1,735)         (4)    (3,347)         74       (3,277)
   Mandatorily redeemable trust
     preferred securities                   -           -       1,035       1,035           -          -           -            -
                                     --------    --------    --------    --------    --------   --------    --------     --------
       Total net change in expense
         on interest-bearing          (12,475)     10,014      (4,747)     (7,208)     12,747      2,402       1,916       17,065
                                     --------    --------    --------    --------    --------   --------    --------     --------
Change in net interest and
   dividend income                   $ (1,418)   $  7,782    $  3,780    $ 10,144    $ (5,292)  $ 11,386    $ (1,255)    $  4,839
                                     ========    ========    ========    ========    ========   ========    ========     ========

<Caption>

                                            Year Ended December 31, 1999 compared to 1998
                                           -----------------------------------------------
                                                Increase (Decrease) due to
                                           -----------------------------------
                                                                                Total Net
                                                                                 Increase
                                             Rate       Volume     Rate/Volume  (Decrease)
                                           --------    --------    -----------  ----------
<S>                                        <C>         <C>         <C>          <C>
Interest-earning:
   Loans receivable                        $   (432)   $ 34,604     $   (154)    $ 34,018
   Securities                                (2,567)     (5,490)         336       (7,721)
   Securities purchased under
     agreements to resell                    (3,947)     (3,947)       3,947       (3,947)
   Other earning assets                         627      (1,655)        (228)      (1,256)
                                           --------    --------     --------     --------
       Total net change in income
         on interest-earning                 (6,319)     23,512        3,901       21,094
                                           --------    --------     --------     --------
Interest-bearing:
   Deposits:
     Transaction accounts                     1,473       1,392          293        3,158
     Term certificates of deposit            (4,877)     (2,638)         190       (7,325)
                                           --------    --------     --------     --------
       Total deposits                        (3,404)     (1,246)         483       (4,167)
   FHLB advances                               (795)      9,108         (959)       7,354
   Securities sold under agreements
     to repurchase                                -           -            -            -
   Promissory note payable                        -           -         (678)        (678)
   Senior notes                                   5        (184)          19         (160)
   Mandatorily redeemable trust
     preferred securities                         -           -            -            -
                                           --------    --------     --------     --------
       Total net change in expense
         on interest-bearing                 (4,194)      7,678       (1,135)       2,349
                                           --------    --------     --------     --------
Change in net interest and
   dividend income                         $ (2,125)   $ 15,834     $  5,036     $ 18,745
                                           ========    ========     ========     ========
</Table>

                                                     35

<Page>


         INTEREST INCOME. Total interest and dividend income increased by $2.9
million or 1.5% during the year ended December 31, 2001 as compared to the year
ended December 31, 2000. Total interest and dividend income increased by $21.9
million or 13.0% during the year ended December 31, 2000 as compared to the year
ended December 31, 1999. Interest income grew at a slower rate in 2001 than in
prior periods primarily due to the overall decline in economic growth rates
which led to slower growth in the Company's commercial loan portfolios.
Additionally, market driven rate declines caused a decline in the average yields
on loans from 8.67% for 2000 to 7.94% for 2001. Conversely, during the year
ended 2000, the Company's average balance of loans receivable increased while
rate changes were steady or increasing. Correspondingly, during this period
interest income on loans receivable increased as compared to the prior period.

         Interest income on securities and other interest-earning assets (which
includes mortgage-backed and related securities, including CMOs, U.S. Government
and agency securities, FHLB stock and FRB stock) increased by $8.6 million or
26.5% in 2001 as compared with 2000. The increase in interest income on such
investments during the year 2001 was attributable to the increase in average
balance of such investments as the Company sought to offset the lack of growth
in the loan portfolio. During 2000, interest income on securities had declined
in comparison to 1999 as a result of the lower average balance of securities
during that period.

         INTEREST EXPENSE. Interest expense on deposits, which is the largest
component of the Company's interest-bearing liabilities, declined $12.8 million
or 14.5% during the year ended December 31, 2001. The decreased expense was a
result of both rate and volume declines in the deposit base. As the U.S. economy
slowed and rates dropped, the Company's average cost of deposits fell from 5.08%
to 4.54%. This coupled with a modest decline in average balance of deposits from
$1.74 billion to $1.66 billion was attributable for the overall decline in
interest expense. During the year ended December 31, 2000, the Company's
interest expense on deposits rose $17.8 million or 25.3% as compared to the same
period in 1999. The increase during this period was associated with the
corresponding increase in average balance of deposits as well as a 56 basis
point increase in the costs of those deposits during 2000.

         Interest expense on FHLB advances increased $5.7 million or 35.0% and
$1.4 million or 9.6% during the years ended December 31, 2001 and 2000,
respectively. The increase in interest expense on FHLB advances during 2001 was
attributable to increased borrowings from the FHLB as the Company utilized
borrowings as a lower cost source of funds. The average cost of advances during
2001 was 4.23% as compared with 6.11% in the prior year. The $1.4 million
increase in interest expense on FHLB advances for the year ended December 31,
2000 was primarily attributable to the 102 basis point increase in the cost of
those funds during the year.

         Interest expense on securities sold under agreements to repurchase
increased $567,000 during 2001 as the Company continues to experience solid
growth in its commercial cash sweep account services which it began offering in
2000.

         During the periods presented, interest expense on notes payable
consisted of interest accrued with respect to the senior notes issued in
connection with the 1997 purchase and recapitalization of the Company. During
the past three years, the Company has successfully purchased and retired $58.5
million of the original $80.0 million 11% senior notes resulting in the
continued decrease in interest expense.

         PROVISION FOR LOAN LOSSES. The provision for loan losses is charged to
earnings to bring the total allowance for loan losses to a level considered
appropriate by management based on (i) an estimate by management of loan losses
that occurred during the current period and (ii) an ongoing adjustment of prior
estimates of losses occurring in prior periods. To serve as a basis for making
this provision each quarter, the Company maintains an extensive credit risk
monitoring process that considers several factors, including among other things,
current economic conditions affecting the Company's customers, the payment
performance of individual large loans and pools of homogeneous small loans,
portfolio


                                      36
<Page>


seasoning, changes in collateral values, and detailed reviews of specific
large loan relationships. For large loans deemed to be impaired due to an
expectation that all contractual payments will probably not be received,
impairment is measured by comparing the Company's recorded investment in the
loan to the present value of expected cash flows discounted at the loan's
effective interest rate, the fair value of the collateral or the loan's
observable market price. While management endeavors to use the best
information available in making its evaluations, future adjustments to the
allowance for loan losses may be necessary if economic conditions change
substantially from the assumptions used in making the evaluations. In
addition, regulatory examiners may require the Bank to recognize additions to
its allowance based upon their judgments about information available to them
at the time of their examination.

         The Company established provisions for loan losses of $5.4 million,
$2.7 million and $2.0 million during the years ended December 31, 2001, 2000 and
1999, respectively. During such respective periods, loan charge-offs (net of
recoveries) amounted to $6.1 million, $2.7 million and $1.9 million.

         NONINTEREST INCOME. Total noninterest income amounted to $21.1 million,
$17.9 million and $18.5 million during the years ended December 31, 2001, 2000
and 1999, respectively. The components of noninterest income consist of
deposit-related income, loan fees and loan service charges, net gains on sale of
assets, the increase in the cash surrender value of the bank owned life
insurance and other miscellaneous income. The $3.2 million increase in
noninterest income in 2001 was due to increases in deposit-related service
charges as well as increases in the cash surrender value of bank owned life
insurance. During the year ended December 31, 2000, total noninterest income
decreased $609,000 or 3.3% as compared to the same period in 1999 as the Bank
began to sell its residential loans upon origination.

         NONINTEREST EXPENSE. Total noninterest expense increased $7.2 million
or 13.2% during the year ended December 31, 2001. This increase was attributable
to increases in compensation and benefits as the Company added personnel to
support its growth strategy as well as start-up costs related to new market
initiatives. During 2000, total noninterest expense decreased $661,000 or 1.2%
as compared to the same period in 1999 due to reductions in advertising and
professional fees and, to a lesser extent, a reduction in occupancy costs as the
Bank determined it was cost effective to purchase previously leased space as the
opportunity became available.

         PROVISION FOR INCOME TAXES. During the years ended December 31, 2001,
2000 and 1999, the Company recognized $14.4 million, $14.3 million and $12.6
million, respectively, of provisions for income taxes. At December 31, 2001, the
Company had approximately $82.0 million of net operating loss carryforwards
available for state income tax purposes. The state net operating loss
carryforwards expire in varying amounts between 2011 and 2014. At December 31,
2001, 2000 and 1999, a valuation allowance for all available state net operating
loss carryforwards was established as it was determined to be more likely than
not that the benefit of the deferred tax asset would not be realized.
Historically, the Company has generated income for federal income tax purposes.
Based on the Company's current strategy, no valuation allowance for other
deferred tax assets has been established as the Company believes it is more
likely than not that sufficient income for federal income tax purposes will be
realized. See "Business-Taxation-Federal" in Item 1 hereof and Note 12 of the
Notes to Consolidated Financial Statements in Item 8 hereof.

LIQUIDITY AND CAPITAL RESOURCES

         LIQUIDITY. Liquidity refers to the Company's ability to generate
sufficient cash to meet the funding needs of current loan demand, savings
deposit withdrawals, principal and interest payments with respect to outstanding
borrowings and to pay operating expenses. It is management's policy to maintain
greater liquidity than required in order to be in a position to fund loan
originations, to meet withdrawals from deposit accounts, to make principal and
interest payments with respect to outstanding borrowings and to make investments
that take advantage of interest rate spreads. The Company monitors its liquidity
in accordance with guidelines established by the Company and applicable
regulatory requirements. The


                                      37
<Page>


Company's need for liquidity is affected by loan demand, net changes in
deposit levels and the scheduled maturities of its borrowings. The Company
can minimize the cash required during the times of heavy loan demand by
modifying its credit policies or reducing its marketing effort. Liquidity
demand caused by net reductions in deposits are usually caused by factors
over which the Company has limited control. The Company derives its liquidity
from both its assets and liabilities. Liquidity is derived from assets by
receipt of interest and principal payments and prepayments, by the ability to
sell assets at market prices and by utilizing unpledged assets as collateral
for borrowings. Liquidity is derived from liabilities by maintaining a variety
of funding sources, including deposits, advances from the FHLB, securities sold
under agreements to repurchase and other short and long-term borrowings.

         The Company's liquidity management is both a daily and long-term
function of funds management. Liquid assets are generally invested in short-term
investments such as overnight money funds and short-term government agency
securities. If the Company requires funds beyond its ability to generate them
internally, various forms of both short and long-term borrowings provide an
additional source of funds. At December 31, 2001, the Company had $371.9 million
in available borrowing capacity with the FHLB.

         At December 31, 2001, the Company had outstanding loan commitments
(including unused lines of credit) for commercial real estate and commercial
business loans of $292.5 million. Certificates of deposit which are scheduled to
mature or reprice within one year totaled $958.7 million at December 31, 2001,
and borrowings that are scheduled to mature within the same period totaled
$166.9 million. The Company anticipates that it will have sufficient funds
available to meet its current loan commitments and that, based upon past
experience and current pricing policies, it can adjust the rates of certificates
of deposit to retain a substantial portion of its maturing certificates and
also, to the extent deemed necessary, refinance any maturing borrowings.

         During the years ended December 31, 2001 and 2000, the Company made
interest payments on the senior notes funded through dividends from the Bank.
During the years ended December 31, 2001, 2000 and 1999, the Company purchased
and retired $19.6 million, $34.1 million and $4.8 million, respectively, of the
senior notes which had been issued in connection with the Company's
recapitalization in 1997. This move will reduce future interest costs associated
with those notes. The senior notes have an annual interest debt service
requirement of $2.4 million. During the year ending December 31, 2002, the
Company intends to fund the interest payments scheduled to be made on March 1,
2002 and September 1, 2002 through dividends from the Bank.

         On December 31, 2001, the Trust began quarterly interest payments on
its 9.00% Trust Preferred Securities which had been issued earlier in the year.
See "Business - Sources of Funds - Capital Issuances" in Item 1 hereof and Note
10 of the Notes to Consolidated Financial Statements in Item 8 hereof. The Trust
Preferred Securities have an annual interest debt service requirement of $3.6
million. During the year ending December 31, 2002, the Company intends to fund
the quarterly interest payments through dividends from the Bank.

         CAPITAL RESOURCES. During the fourth quarter of 2001, the Trust issued
1,610,000 shares of 9.00% Trust Preferred Securities for an aggregate price of
approximately $40.3 million. See "--Liquidity and Capital Resources". The Trust
Preferred Securities receive Tier I Capital treatment from the Federal Reserve.


                                      38
<Page>


         Federally insured institutions such as the Company and the Bank are
required to maintain minimum levels of regulatory capital. See
"Business-Regulation and Supervision-Capital Requirements" in Item 1 hereof. The
following table reflects the Company's and the Bank's actual levels of
regulatory capital and applicable regulatory capital requirements at December
31, 2001 (dollars in thousands):

<Table>
<Caption>
                                       Minimum Required               Actual                     Excess
                                   -----------------------   ------------------------   -----------------------
                                     Percent      Amount       Percent       Amount       Percent      Amount
                                   -----------  ----------   -----------   ----------   -----------  ----------
          <S>                      <C>          <C>          <C>           <C>          <C>          <C>
          The Company:
             Leverage                  4.00%    $ 111,053        6.63%     $ 184,105        2.63%    $  73,052
             Core capital              4.00        79,680        9.24        184,105        5.24       104,425
             Total capital             8.00       159,359       10.49        209,038        2.49        49,679

          The Bank:
             Leverage                  4.00%    $ 110,990        7.28%     $ 201,915        3.28%    $  90,925
             Core capital              4.00        79,503       10.16        201,915        6.16       122,412
             Total capital             8.00       159,006       11.41        226,794        3.41        67,788
</Table>

INFLATION AND CHANGING PRICES

         The Consolidated Financial Statements and related data presented in
Item 8 hereof have been prepared in accordance with accounting principles
generally accepted in the United States of America, which require the
measurement of financial position and operating results in terms of historical
dollars (except with respect to available for sale securities which are carried
at market value), without considering changes in the relative purchasing power
of money over time due to inflation. Unlike most industrial companies,
substantially all of the assets and liabilities of the Company are monetary in
nature. As a result, interest rates have a more significant impact on the
Company's performance than the effects of general levels of inflation. Interest
rates do not necessarily move in the same direction or in the same magnitude as
the prices of goods and services.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

         The following tables present contractual cash obligations and
commercial commitments of the Company as of December 31, 2001. See Notes 8, 9,
10 and 13 of the Notes to the Consolidated Financial Statements (dollars in
thousands):

<Table>
<Caption>
                                                                          Payments due by Period
                                                  ------------------------------------------------------------------
                                                                 Less than       One to      Four to        After
       Contractual Cash Obligations                  Total       One Year    Three Years    Five Years    Five Years
------------------------------------------        ----------    ----------   -----------    ----------    ----------
<S>                                               <C>           <C>          <C>            <C>           <C>
FHLB advances                                     $  728,205    $  128,180    $        -    $  100,000    $  500,025
Senior notes                                          21,545             -        21,545             -             -
Mandatorily redeemable trust preferred
securities                                            40,250             -             -             -        40,250
Operating leases                                       7,953         1,054         1,585           938         4,376
Unconditional purchase obligations:
   Data processing maintenance obligation              1,325           265           530           530             -
   Data processing hardware obligation                 1,700         1,700             -             -             -
                                                  ----------    ----------    ----------    ----------    ----------
       Total contractual cash obligations         $  800,978    $  131,199    $   23,660    $  101,468    $  544,651
                                                  ==========    ==========    ==========    ==========    ==========
</Table>


In order to support strategic objectives, during 2001, management initiated a
project to return its mainframe operations to an internally supported function.
The Company's mainframe processing has been operated in a data center operated
by a third-party servicer. During the first quarter of 2002, the Company plans
to bring its mainframe processing in-house. The Company does not anticipate this
action will have a material impact on its consolidated financial condition and
the contractual obligations are reflected above.


                                      39
<Page>

<Table>
<Caption>
                                                                  Amount of Commitment Expiration Per Period
                                                            ------------------------------------------------------
                                               Unfunded      Less than      One to       Four to        After
        Commercial Commitments               Commitments     One Year     Three Years    Five Years    Five Years
-------------------------------------       -------------   -----------   -----------   ------------  ------------
<S>                                         <C>             <C>           <C>           <C>           <C>
Lines of credit                              $  206,715     $   50,016    $  115,229     $   28,824    $   12,646
Standby letters of credit                         7,228          3,485         3,140            603             -
Other commercial commitments                     84,184          3,314         9,645          9,249        61,976
                                             ----------     ----------    ----------     ----------    ----------
       Total commercial commitments          $  298,127     $   56,815    $  128,014     $   38,676    $   74,622
                                             ==========     ==========    ==========     ==========    ==========
</Table>


CRITICAL ACCOUNTING POLICIES

         The Company considers its Allowance for Loan Losses policy as a policy
critical to the sound operations of the Bank. The Company provides for loan
losses each period by an amount resulting from both (a) an estimate by
management of loan losses that occurred during the period and (b) the ongoing
adjustment of prior estimates of losses occurring in prior periods. The
provision for loan losses increases the allowance for loan losses which is
netted against loans on the consolidated statements of financial condition. As
losses are confirmed, the loan is written down, reducing the allowance for loan
losses. See "Business-Asset Quality" contained in Item 1 herein and Note 1 of
the Notes to Consolidated Financial Statements in Item 8 hereof for further
information regarding the Company's provision and allowance for loan losses
policy.

RECENT ACCOUNTING PRONOUNCEMENTS

         In August 2001, the FASB issued FASB Statement No. 144, ACCOUNTING
FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, which addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets. While Statement No. 144 supersedes FASB Statement No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS
TO BE DISPOSED OF, it retains many of the fundamental provisions of that
statement. Statement No. 144 also supersedes the accounting and reporting
provisions of Accounting Principles Board ("APB") Opinion No. 30, REPORTING
THE RESULTS OF OPERATIONS-REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A
BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND
TRANSACTIONS, for the disposal of a segment of a business. However, it
retains the requirement in Opinion No. 30 to report separately discontinued
operations and extends that reporting to a component of an entity that either
has been disposed of by sale, abandonment, or in a distribution to owners or
is classified as held for sale. Statement No. 144 is effective for fiscal
years beginning after December 15, 2001. The Company has determined that
Statement No. 144 will not have an impact on the Company's consolidated
financial condition and results of operations.

         In June 2001, the FASB issued Statement No. 141, BUSINESS COMBINATIONS,
and Statement No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. Statement No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement No. 141 also
specifies criteria intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill, noting
that any purchase price allocable to an assembled workforce may not be accounted
for separately. Statement No. 142 will require that goodwill and intangible
assets with indefinite useful lives no long be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement No.
142. Statement No. 142 will also require that intangible assets with definite
useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF or Statement No. 144 upon adoption.

         The Company is required to adopt the provisions of Statement No. 141
immediately and Statement No. 142 effective January 1, 2002. Furthermore, any
goodwill and any intangible asset determined to have an indefinite useful life
that are acquired in a purchase business combination


                                      40
<Page>


completed after June 30, 2001 will not be amortized, but will continue to be
evaluated for impairment in accordance with the appropriate pre-Statement No.
142 accounting literature. Goodwill and intangible assets acquired in
business combinations completed before July 1, 2001 will continue to be
amortized prior to the adoption of Statement No. 142.

         In connection with the transitional goodwill impairment evaluation,
Statement No. 142 will require the Company to perform an assessment of whether
there is an indication that goodwill is impaired as of the date of adoption. To
accomplish this, the Company must identify its reporting units and determine the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption. The Company will then have up to six months from the
date of adoption to determine the fair value of each reporting unit and compare
it to the reporting unit's carrying amount. To the extent a reporting unit's
carrying amount exceeds its fair value, an indication exists that the reporting
unit's goodwill may be impaired and the Company must perform the second step of
the transitional impairment test. In the second step, the Company must compare
the implied fair value of the reporting unit's goodwill, determined by
allocating the reporting unit's fair value to all of it assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with Statement No. 141, to its carrying amount, both of which
would be measured as of the date of adoption. This second step is required to be
completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's consolidated
statements of operations.

         The Company adopted Statement No. 142 as of January 1, 2002 and will no
longer amortize goodwill. As of the date of adoption, the Company has
unamortized goodwill in the amount of approximately $15.5 million, which will be
subject to the transition provisions of Statement Nos. 141 and 142. None of the
unamortized goodwill relates to FASB Statement No. 72, ACCOUNTING FOR CERTAIN
ACQUISITIONS OF BANKING OR THRIFT INSTITUTIONS-AN AMENDMENT OF APB OPINION NO.
17, AN INTERPRETATION OF APB OPINIONS 16 AND 17, AND AN AMENDMENT OF FASB
INTERPRETATION NO. 9. Amortization expense totaled approximately $1,340,000,
$1,339,000 and $1,654,000 for the years ended December 31, 2001, 2000 and 1999,
respectively. Because of the extensive effort needed to comply with adopting
Statement Nos. 141 and 142, it is not practicable to reasonably estimate the
impact of adopting these statements on the Company's consolidated financial
statements at the date of this report, including whether any transitional
impairment losses will be required to be recognized as the cumulative effect of
a change in accounting principle; however, management does not anticipate an
impairment loss at January 1, 2002.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET AND LIABILITY MANAGEMENT

         Asset and liability management is concerned with the timing and
magnitude of the repricing of assets and liabilities. It is the objective of the
Company to attempt to control risks associated with interest rate movements. In
general, management's strategy is to match asset and liability balances within
maturity categories to limit the Company's exposure to earnings variations and
variations in the value of assets and liabilities as interest rates change over
time. The Company's asset and liability management strategy is formulated and
monitored by the Asset/Liability Management Committee, which is comprised of the
Chief Executive Officer, the President, the Chief Financial Officer, the
Director of Retail Operations and the Portfolio Manager of the Company, in
accordance with policies approved by the Board of Directors of the Company. The
Asset/Liability Management Committee meets monthly or as needed to review, among
other things, the sensitivity of the Company's assets and liabilities to
interest rate changes, the book and market values of assets and liabilities,
unrealized gains and losses, including those attributable to hedging
transactions, purchase and sale activity, and maturities and prepayments of
loans, investments and borrowings. The Asset/Liability Management Committee also
approves and


                                      41
<Page>


establishes pricing and funding decisions with respect to overall asset and
liability composition and reports to the Board of Directors.

         One of the primary goals of the Company's Asset/Liability Management
Committee is to effectively increase the duration of the Company's liabilities
and/or effectively contract the duration of the Company's assets so that the
respective durations are matched as closely as possible. This duration
adjustment can be accomplished either internally by restructuring the Company's
statement of financial condition, or externally by adjusting the duration of the
Company's assets and/or liabilities through the use of hedging contracts, such
as interest rate swaps, caps and floors. The Company's current strategy is to
hedge internally through the use of core transaction deposit accounts which are
not as rate sensitive as other deposit instruments and FHLB advances, together
with an emphasis on investing in shorter-term or adjustable rate assets which
are more responsive to changes in interest rates, such as U.S. Government agency
mortgage-backed securities with variable maturities, short-term U.S. Government
agency securities and commercial and consumer loans. The foregoing strategies
are more fully described below.

         A commonly used method for evaluating interest rate risk includes an
analysis of the interest rate sensitivity "gap", which is defined as the
difference between interest-earning assets and interest-bearing liabilities
maturing or repricing within a given time period. A gap is considered positive
when the amount of interest-rate sensitive assets exceeds the amount of
interest-rate sensitive liabilities. A gap is considered negative when the
amount of interest-rate sensitive liabilities exceeds interest-rate sensitive
assets. Normally, during a period of falling interest rates, a negative gap
would tend to result in an increase in net interest income, while a positive gap
would tend to affect net interest income adversely. Due to differences between
institutions' statements of financial condition, these variances may affect
institutions differently. Because different types of assets and liabilities with
the same or similar maturities may react differently to changes in overall
market rates or conditions, changes in interest rates may affect net interest
income positively or negatively even if an institution were perfectly matched in
each maturity category.





                                      42
<Page>


         The following table summarizes the anticipated maturities or repricing
of the Company's interest-earning assets and interest-bearing liabilities as of
December 31, 2001, based on the information and assumptions set forth in the
notes below (dollars in thousands):

<Table>
<Caption>
                                                                                        More Than
                                                        Three to        More Than      Three Years
                                       Within Three      Twelve        One Year to       to Five        Over Five
                                           Months        Months        Three Years        Years           Years         Total
                                      -------------   -------------   -------------   -------------   -------------  -----------
<S>                                   <C>             <C>             <C>             <C>             <C>            <C>
Interest-earning assets (1):
   Loans receivable (2)                $   819,868     $   298,311     $   518,301     $   210,587     $   145,012   $ 1,992,079
   Securities (3)                           83,550         181,208         159,958         124,483          69,172       618,371
   Other interest-earning assets (4)        98,921           3,783               -               -               -       102,704
                                       -----------     -----------     -----------     -----------     -----------   -----------
       Total                           $ 1,002,339     $   483,302     $   678,259     $   335,070     $   214,184   $ 2,713,154
                                       ===========     ===========     ===========     ===========     ===========   ===========

Interest-bearing liabilities:
   Deposits (5):
     Money market and NOW accounts     $   190,962     $    48,376     $    88,906     $    53,807     $    84,697    $  466,748
     Passbook accounts                       3,907          11,720          21,684          13,182          20,439        70,932
     Certificates of deposit               424,874         533,818         119,428          23,262             733     1,102,115
   FHLB advances                           128,180               -               -         100,000         500,025       728,205
   Securities sold under agreements
     to repurchase                          38,694               -               -               -               -        38,694
   Senior notes                                  -               -          21,545               -               -        21,545
   Mandatorily redeemable trust
     preferred securities                        -               -               -               -          40,250        40,250
                                       -----------     -----------     -----------     -----------     -----------   -----------
       Total                           $   786,617     $   593,914     $   251,563     $   190,251     $   646,144   $ 2,468,489
                                       ===========     ===========     ===========     ===========     ===========   ===========
Excess (deficiency) of
   interest-earning assets over
   interest-bearing liabilities        $   215,722     $  (110,612)    $   426,696     $   144,819     $  (431,960)  $   244,665
                                       ===========     ===========     ===========     ===========     ===========   ===========
Cumulative excess of
   interest-earning assets over
   interest-bearing liabilities        $   215,722     $   105,110     $   531,806     $   676,625     $   244,665   $   244,665
                                       ===========     ===========     ===========     ===========     ===========   ===========
Cumulative excess of
   interest-earning assets over
   interest-bearing liabilities
   as a percent of total assets               7.65%           3.73%          18.86%          23.99%           8.68%         8.68%
                                       ===========     ===========     ===========     ===========     ===========   ===========
</Table>

----------------
(1)      Adjustable-rate loans and securities are included in the period in
         which interest rates are next scheduled to adjust rather than in the
         period in which they mature and fixed-rate loans and securities are
         included in the periods in which they are scheduled to be repaid, based
         on scheduled amortization, in each case as adjusted to take into
         account estimated prepayments based on, among other things, historical
         performance.
(2)      Balances have been reduced for nonaccrual loans.
(3)      Does not include unrealized gain on securities classified as available
         for sale.
(4)      Comprised of cash and due from banks, deposits with other banks, FHLB
         stock and FRB stock.
(5)      Adjusted to take into account assumed annual decay rates which were
         applied against money market, NOW and passbook accounts.


         Although interest rate sensitivity gap is a useful measurement and
contributes toward effective asset and liability management, it is difficult to
predict the effect of changing interest rates based solely on that measure. As a
result, the Asset/Liability Management Committee also regularly reviews interest
rate risk by forecasting the impact of alternative interest rate environments on
net interest income and economic value of equity ("EVE"), which is defined as
the net present value of an institution's existing assets, liabilities and
off-balance sheet instruments, and evaluating such impacts against the maximum
potential changes in net interest income and EVE that is authorized by the Board
of Directors of the Company.


                                      43
<Page>

         The following tables set forth for the indicated dates the estimated
dollar and percentage change in the Company's net interest income over a four
quarter period and EVE based on the indicated changes in interest rates.

<Table>
<Caption>

                                              December 31, 2001                     December 31, 2000
                                             Net Interest Income                   Net Interest Income
                                            (next four quarters)                  (next four quarters)
               --------------------- ------------------------------------  ------------------------------------

                 Change (in Basis    Estimated Change                      Estimated Change
               Points) in Interest       from Base          % Change           from Base          % Change
                    Rates (1)             (000's)          from Base            (000's)          from Base
               --------------------- -----------------  -----------------  ------------------ -----------------
               <S>                   <C>                <C>                <C>                <C>

                       +200                 5,853                 7                 591                 1

                       +100                 6,201                 7                 330                 -

                        0                  89,608 (2)             -              81,960 (2)             -


                       -100               (1,915)                (2)              2,394                 3

                       -200               (6,343)                (7)             (1,041)               (1)

<Caption>
                                              December 31, 2001                     December 31, 2000
                                                     EVE                                   EVE
               --------------------- ------------------------------------  ------------------------------------

                 Change (in Basis    Estimated Change                      Estimated Change
               Points) in Interest       from Base          % Change           from Base          % Change
                    Rates (1)             (000's)          from Base            (000's)          from Base
               --------------------- -----------------  -----------------  ------------------ -----------------
               <S>                   <C>                <C>                <C>                <C>

                       +200               (38,731)              (17)           (33,635)               (16)

                       +100               (15,096)               (7)           (14,166)                (7)

                        0                 228,509                -             215,360                  -

                       -100                (9,447)               (4)             3,735                  2

                       -200               (55,229)              (24)                38                  -

</Table>

-------------------------

(1)      Assumes an instantaneous uniform change in interest rates at all
         maturities.
(2)      The base net interest income is an estimate made by utilizing yields
         and rates on assets and liabilities in the existing statement of
         financial condition as of the dates shown adjusted for assumptions
         based on, among other things, future loan and deposit changes and
         estimated loan prepayment speeds.


         The increase in net interest income ("NII") from December 31, 2000 to
December 31, 2001 in the base case is mainly due to an increase in interest
earning assets and an increase in net interest margin while the increase in
sensitivity in both the up and down change in interest rates ("shocks") is
attributable in part to an increase in fixed rate borrowings. The additional
drop in NII in the down shocks at December 31, 2001 is caused by less discount
accretion due to higher prepayments in 2001 on the

                                       44

<Page>

discounted mortgage securities. The additional increase in NII at December
31, 2001 in the up shocks is partly because of an increase in securities.

         The change in EVE from December 31, 2000 to December 31, 2001 in the
base case results from earnings for 2001, the overall level of interest rates
and the use of convertible fixed rate FHLB advances to fund securities. The
increase in sensitivity in the down shocks at December 31, 2001 is primarily a
result of the duration extension of the convertible fixed rate advances in down
shocks which take interest rates to zero. The increase in sensitivity in the up
shocks is caused by a larger securities portfolio whose market value declines as
rates rise.

         The model reflects only the effects of assumptions made by management
while running the different interest rate shocks. The only variables between the
different rate shocks are the interest rates and the prepayment speeds.

         The prepayment assumptions used in the model are based on historical
and market estimates. Standard present value calculation methodology is used to
discount the estimated future cash flows of assets and liabilities at
appropriate discount rates.

         Management of the Company believes that the assumptions used by it to
evaluate the vulnerability of the Company's operations to changes in interest
rates are reasonable; however, the interest rate sensitivity of the Company's
assets and liabilities and the estimated effects of changes in interest rates on
the Company's net interest income and EVE could vary substantially if different
assumptions were used or actual experience differs from the historical
experience on which they are based.

         The preceding discussion about the Company's risk management activities
includes "forward-looking statements" that involve risks and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See Consolidated Financial Statements at F-1.


ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE

         There were no changes in and/or disagreements with accountants on
accounting and financial disclosure during the years ended December 31, 2001 and
2000.

                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required in response to this Item is incorporated
herein by reference from the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year covered by this report.


ITEM 11.      EXECUTIVE COMPENSATION

         The information required in response to this Item is incorporated
herein by reference from the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year covered by this report.


                                       45

<Page>

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required in response to this Item is incorporated
herein by reference from the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year covered by this report.


ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required in response to this Item is incorporated
herein by reference from the Company's proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A, not later than
120 days after the end of the fiscal year covered by this report.


                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
              FORM 8-K

(a)(1) FINANCIAL STATEMENTS. The following financial statements for the Years
Ended December 31, 2001, 2000 and 1999 are filed as part of this report:


         Independent Auditors' Report

         Consolidated Statements of Financial Condition as of December 31, 2001
         and 2000.

         Consolidated Statements of Operations for the Years Ended December 31,
         2001, 2000 and 1999.

         Consolidated Statements of Stockholders' Equity for the Years Ended
         December 31, 2001, 2000 and 1999.

         Consolidated Statements of Cash Flows for the Years Ended December 31,
         2001, 2000 and 1999.

         Notes to Consolidated Financial Statements

(a)(2)   FINANCIAL STATEMENT SCHEDULES.

         No financial statement schedules are included because they are not
         required, not applicable, or the required information is contained
         elsewhere.

(a)(3)   MANAGEMENT CONTRACTS OR COMPENSATORY PLAN ARRANGEMENTS

         See exhibits marked with an asterisk in Item 14(c) below.

(b)      REPORTS ON FORM 8-K

         On September 14, 2001, Local Financial Corporation issued a press
         release announcing its stock repurchase program.

         On September 20, 2001, the Company issued a press release announcing
         the issuance of 1,400,000 shares of 9.00% Trust Preferred Securities,
         $25 liquidation amount, by its trust, Local Financial Capital Trust I.

         On October 17, 2001, Local Financial Corporation issued a press release
         announcing its third quarter earnings.

(c)      LIST OF EXHIBITS.


                                       46

<Page>

<Table>
<Caption>

Exhibit
Number            Description of Exhibit
------            ----------------------
<S>               <C>

3.1               Certificate of Incorporation of Local Financial Corporation ("Local Financial")(1)
3.2               Certificate of Amendment of Local Financial(1)
3.3               Bylaws of Local Financial(1)
4.3               Indenture between Local Financial and The Bank of New York ("BONY"), as Trustee, dated September 8, 1997(1)
4.4               Form of Common Stock certificate of Local Financial(1)
4.5               Form of Senior Note (included in Exhibit 4.3)(1)
4.6               Indenture between Local Financial and BONY, dated September 20, 2001
4.7               Form of Debenture (included in Exhibit 4.6)
10.10             Local Financial Stock Option Agreement between Local Financial and Edward A. Townsend, dated September 8,
                  1997(1)*
10.11             Local Financial Corporation 1998 Stock Option Plan, as amended July 26, 2000*
10.12             Form of Severance Agreement, dated January 1, 1999(2)*
10.13             Amended and Restated Employment Agreement between Local Financial and Edward A. Townsend, effective
                  October 1, 2000*
10.14             Amended and Restated Employment Agreement between Local Financial and Jan A. Norton, effective
                  October 1, 2000*
10.15             1998 Non-qualified Stock Option Agreement between Local Financial and Edward A. Townsend dated
                  September 23, 1998(2)
10.16             1998 Non-qualified Stock Option Agreement between Local Financial and Jan A. Norton dated
                  September 23, 1998(2)
10.17             Change of Control, Non-Competition/Non-Solicitation Agreement between Local Financial Corporation and Local
                  Oklahoma Bank, N.A., and Edward A. Townsend dated January 30, 2001.*
10.18             Change of Control, Non-Competition/Non-Solicitation Agreement between Local Financial Corporation and Local
                  Oklahoma Bank, N.A., and Jan A. Norton dated January 30, 2001.*
10.19             Amended and Restated Declaration between Local Financial, BONY and the Administrative Trustees of the Local
                  Financial Capital Trust 1, dated September 20, 2001
10.20             Form of Common Securities (included in Exhibit 10.19)
                  Form of Trust Preferred Securities (included in Exhibit 10.19)
10.21             Preferred Securities Guarantee Agreement between Local Financial and BONY, dated as of September 20, 2001
21.0              Subsidiaries of the Registrant(3)
23.0              Consent of KPMG LLP

</Table>
-------------------------

(1)     These exhibits were filed with the Company's Registration Statement
        Form S-1, Registration No. 333-43727 (effective April 21, 1998) and are
        incorporated by reference herein.
(2)     These exhibits were filed with the Company's Annual Report on Form 10-K
        for the year ended December 31, 1998 and are incorporated by reference
        herein.
(3)     This exhibit was filed with the Company's Post-Effective Amendment
        No. 1 to its Registration Statement on form S-1, Registration No.
        333-43727 (effective April 21, 1999) and is incorporated by reference
        herein.

*Exhibits identified with an asterisk are management contracts or are
compensatory plans or arrangements.




                                       47

<Page>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.

                                       LOCAL FINANCIAL CORPORATION

Date     March 4, 2002                 By:  /s/ Edward A. Townsend
                                            ------------------------------------
                                            Chairman and Chief Executive Officer

Date     March 4, 2002                 By:  /s/ Richard L. Park
                                            ------------------------------------
                                            Executive Vice President and
                                            Chief Financial Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Date     March 4, 2002                 By:  /s/ Robert A. Kotecki*
                                            ------------------------------------
                                            Robert A. Kotecki, Director

Date     March 4, 2002                 By:  /s/ Joseph A. Leone*
                                            ------------------------------------
                                            Joseph A. Leone, Director

Date     March 4, 2002                 By:  /s/ George Nigh*
                                            ------------------------------------
                                            George Nigh, Director

Date     March 4, 2002                 By:  /s/ Jan A. Norton
                                            ------------------------------------
                                            Jan A. Norton, Director

Date     March 4, 2002                 By:  /s/ Edward A. Townsend
                                            ------------------------------------
                                            Edward A. Townsend, Director

Date     March 4, 2002                 By:  /s/ William D. Breedlove*
                                            ------------------------------------
                                            William D. Breedlove, Director

Date     March 4, 2002                 By:  /s/ J. David Rosenberg*
                                            ------------------------------------
                                            J. David Rosenberg, Director

Date     March 4, 2002                 By:  /s/ Andrew M. Coats*
                                            ------------------------------------
                                            Andrew M. Coats, Director

-----------------------

* By: /s/ Richard L. Park
      ---------------------------------
      Richard L. Park, Attorney in fact


                                       48

<Page>

                     LOCAL FINANCIAL CORPORATION AND SUBSIDIARY

                     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<Table>

<S>                                                                                       <C>
Independent Auditors' Report..............................................................F-1

Audited Consolidated Financial Statements:

Consolidated Statements of Financial Condition
   as of December 31, 2001 and 2000.......................................................F-2

Consolidated Statements of Operations
   for the Years Ended December 31, 2001, 2000 and 1999...................................F-3

Consolidated Statements of Stockholders' Equity
   for the Years Ended December 31, 2001, 2000 and 1999...................................F-4

Consolidated Statements of Cash Flows
   for the Years Ended December 31, 2001, 2000 and 1999...................................F-5

Notes to Consolidated Financial Statements
   for December 31, 2001, 2000 and 1999...................................................F-7

</Table>




















                                             49

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Local Financial Corporation:


We have audited the accompanying consolidated statements of financial condition
of Local Financial Corporation and subsidiaries (the Company) as of December 31,
2001 and 2000, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Local Financial
Corporation and subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.




Oklahoma City, Oklahoma                                                 KPMG LLP
February 1, 2002








                                     F-1

<PAGE>

                              LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                             Consolidated Statements of Financial Condition

                                       December 31, 2001 and 2000
                               (dollars in thousands, except share data)


<Table>
<Caption>

                                        ASSETS                                         2001                2000
                                                                                   ------------       ------------
<S>                                                                                <C>                <C>
Cash and due from banks                                                            $     50,791             39,571
Interest bearing deposits with other banks                                                9,700              4,400
Securities available for sale                                                           193,736            354,048
Securities held to maturity                                                             430,956                  -
Loans receivable, net of allowance for loan losses of $27,621 at
   December 31, 2001 and $28,345 at December 31, 2000                                 1,972,145          1,848,876
Federal Home Loan Bank of Topeka and Federal Reserve Bank stock, at cost                 42,213             19,417
Premises and equipment, net                                                              38,751             37,865
Assets acquired through foreclosure and repossession, net                                 1,910                881
Intangible assets, net                                                                   15,548             16,888
Current and deferred taxes, net                                                           7,408              6,976
Other assets                                                                             56,893             48,089
                                                                                   ------------       ------------

       Total assets                                                                $  2,820,051          2,377,011
                                                                                   ============       ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
   Demand                                                                          $    636,315            606,752
   Savings                                                                               70,932             62,907
   Time                                                                               1,102,115          1,262,134
                                                                                   ------------       ------------

       Total deposits                                                                 1,809,362          1,931,793

Advances from the Federal Home Loan Bank of Topeka                                      728,205            190,028
Securities sold under agreements to repurchase                                           38,694             38,214
Senior notes                                                                             21,545             41,160
Other liabilities                                                                        18,459             19,545

Mandatorily redeemable trust preferred securities                                        40,250                  -

Commitments and contingencies

Stockholders' equity:
   Common stock, $0.01 par value, 25,000,000 shares authorized; 20,539,269
     shares issued and 19,199,925 shares outstanding at December 31, 2001
     and 20,537,269 shares issued and 20,537,209 shares outstanding at
     December 31, 2000                                                                      205                205
   Preferred stock, $0.01 par value, 5,000,000 shares authorized; none
     outstanding                                                                              -                  -
   Additional paid-in capital                                                           205,773            206,758
   Retained earnings                                                                    122,480             96,003
   Treasury stock, 1,339,344 shares at December 31, 2001 and 60 shares at
     December 31, 2000, at cost                                                        (169,031)          (151,274)
   Accumulated other comprehensive income, net of tax                                     4,109              4,579
                                                                                   ------------       ------------

       Total stockholders' equity                                                       163,536            156,271
                                                                                   ------------       ------------

       Total liabilities and stockholders' equity                                  $  2,820,051          2,377,011
                                                                                   ============       ============


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

</Table>

                                               F-2
<PAGE>

                               LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                                   Consolidated Statements of Operations

                            For the Years Ended December 31, 2001, 2000 and 1999
                                 (dollars in thousands, except share data)


<Table>
<Caption>

                                                                             YEARS ENDED DECEMBER 31,
                                                                 ------------------------------------------------
                                                                     2001              2000              1999
                                                                 ------------      ------------      ------------
<S>                                                              <C>               <C>               <C>
Interest and dividend income:
   Loans                                                         $    151,950           157,648           130,869
   Securities available for sale                                       36,952            29,811            34,141
   Federal Home Loan Bank of Topeka and Federal Reserve Bank
     stock                                                              1,989             1,523             2,215
   Other investments                                                    2,247             1,220             1,073
                                                                 ------------      ------------      ------------
         Total interest and dividend income                           193,138           190,202           168,298
Interest expense:
   Deposit accounts                                                    75,626            88,417            70,576
   Advances from the Federal Home Loan Bank of Topeka                  22,045            16,329            14,901
   Securities sold under agreements to repurchase and other
     borrowings                                                         1,640             1,073                 -
   Notes payable                                                        4,298             6,033             9,310
   Trust preferred securities                                           1,035                 -                 -
                                                                 ------------      ------------      ------------
         Total interest expense                                       104,644           111,852            94,787
Net interest and dividend income                                       88,494            78,350            73,511
   Provision for loan losses                                           (5,400)           (2,700)           (2,000)
                                                                 ------------      ------------      ------------
         Net interest and dividend income after provision
           for loan losses                                             83,094            75,650            71,511
Noninterest income:
   Deposit related income                                              15,015            13,304            13,606
   Loan fees and loan service charges                                   2,083             1,811             2,679
   Net gains on sale of assets                                            628               646             1,201
   Other                                                                3,374             2,172             1,056
                                                                 ------------      ------------      ------------
         Total noninterest income                                      21,100            17,933            18,542
                                                                 ------------      ------------      ------------
Noninterest expense:
   Compensation and employee benefits                                  34,490            31,883            28,193
   Equipment and data processing                                        6,561             6,452             5,942
   Occupancy                                                            3,978             3,645             4,033
   Advertising                                                            539               633             1,498
   Professional fees                                                    1,486             1,061             2,587
   Other                                                               14,666            10,842            12,924
                                                                 ------------      ------------      ------------
         Total noninterest expense                                     61,720            54,516            55,177
                                                                 ------------      ------------      ------------
Income before provision for income taxes and extraordinary
   item                                                                42,474            39,067            34,876
Provision for income taxes                                             14,367            14,331            12,627
                                                                 ------------      ------------      ------------
         Income before extraordinary item                              28,107            24,736            22,249
Extraordinary item--purchase and retirement of senior notes,
   net of tax                                                          (1,630)             (922)             (257)
                                                                 ------------      ------------      ------------
         Net income                                              $     26,477            23,814            21,992
                                                                 ============      ============      ============
Earnings per share:
   Income before extraordinary item:
     Basic                                                       $       1.38              1.20              1.08
                                                                 ============      ============      ============
     Diluted                                                     $       1.34              1.20              1.08
                                                                 ============      ============      ============
   Net income:
     Basic                                                       $       1.30              1.16              1.07
                                                                 ============      ============      ============
     Diluted                                                     $       1.26              1.16              1.07
                                                                 ============      ============      ============

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

</Table>

                                               F-3

<Page>



                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

              For the Years Ended December 31, 2001, 2000 and 1999
                             (dollars in thousands)

<Table>
<Caption>
                                                                                                   ACCUMULATED
                                                                ADDITIONAL                            OTHER          TOTAL
                                                        COMMON   PAID-IN    RETAINED    TREASURY  COMPREHENSIVE  STOCKHOLDERS'
                                                        STOCK    CAPITAL    EARNINGS     STOCK    INCOME (LOSS)     EQUITY
                                                        ------  ----------  ----------  --------  -------------  -------------
<S>                                                     <C>     <C>         <C>         <C>       <C>            <C>

Balance, December 31, 1998                               $205     206,758     50,197    (149,436)      11,082        118,806
   Comprehensive income:
     Net income                                             -           -     21,992           -            -         21,992
     Net change in unrealized gains on securities
       available for sale, net of reclassification
       adjustment                                           -           -          -           -      (10,666)       (10,666)
                                                                                                                 -------------
     Comprehensive income                                                                                             11,326
   Settlement of the Redemption Agreement (note 13)         -           -          -      (1,838)           -         (1,838)
                                                        ------  ----------  ----------  --------  -------------  -------------

Balance, December 31, 1999                                205     206,758     72,189    (151,274)         416        128,294
   Comprehensive income:
     Net income                                             -           -     23,814           -            -         23,814
     Net change in unrealized gains on securities
       available for sale, net of reclassification
       adjustment                                           -           -          -           -        4,163          4,163
                                                                                                                 -------------
     Comprehensive income                                                                                             27,977
                                                        ------  ----------  ----------  --------  -------------  -------------

Balance, December 31, 2000                                205     206,758     96,003    (151,274)       4,579        156,271
   Comprehensive income:
     Net income                                             -           -     26,477           -            -         26,477
     Net change in unrealized gains on securities
       available for sale, net of reclassification
       adjustment                                           -           -          -           -         (470)          (470)
                                                                                                                 -------------
     Comprehensive income                                                                                             26,007

   Purchase of treasury stock                               -           -          -     (17,757)           -        (17,757)
   Issuance of common stock - warrants exercised            -          19          -           -            -             19
   Purchase of stock warrants                               -      (1,004)         -           -            -         (1,004)
                                                        ------  ----------  ----------  --------  -------------  -------------

Balance, December 31, 2001                               $205     205,773    122,480    (169,031)       4,109        163,536
                                                        ======  ==========  ==========  ========  =============  =============

</Table>

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


                                                             F-4
<PAGE>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

              For the Years Ended December 31, 2001, 2000 and 1999
                             (dollars in thousands)

<Table>
<Caption>

                                                                               YEARS ENDED DECEMBER 31,
                                                                 -------------------------------------------------------
                                                                       2001               2000              1999
                                                                 ------------------ ----------------- ------------------
<S>                                                              <C>                <C>               <C>
Cash provided (absorbed) by operating activities:
   Net income                                                      $     26,477             23,814            21,992
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Provisions for loan losses                                         5,400              2,700             2,000
       Deferred income tax expense                                        1,829              5,579             7,941
       Accretion of discounts and amortization of deferred fees
         on loans acquired and securities available for sale,
         net                                                             (4,619)            (3,882)           (5,106)
       Depreciation and amortization                                      5,315              4,972             3,959
       Net change in loans held for sale                                   (341)               879             9,387
       Net gains on sale of assets                                         (628)              (646)           (1,201)
       Stock dividends received from Federal Home Loan Bank                   -                  -            (2,070)
       Change in other assets                                             1,138               (959)           10,308
       Change in other liabilities                                       (1,086)            (8,772)           (9,009)
                                                                   ------------       ------------      ------------

            Net cash provided by operating activities                    33,485             23,685            38,201
                                                                   ------------       ------------      ------------

Cash provided (absorbed) by investing activities:
   Proceeds from sales of securities available for sale                  19,813            283,910           160,174
   Proceeds from principal collections on securities
     available for sale                                                 264,017             58,570           246,140
   Purchase of securities available for sale                           (551,999)           (73,178)         (367,496)
   Purchases of Federal Home Loan Bank and
     Federal Reserve Bank stock                                         (22,796)            (6,632)           (4,659)
   Proceeds from the sale of Federal Home Loan Bank and
     Federal Reserve Bank stock                                               -             12,035            24,602
   Purchase of bank owned life insurance                                (10,000)           (25,000)                -
   Change in loans receivable, net                                     (129,219)          (252,767)         (308,612)
   Proceeds from disposal of assets acquired through
     foreclosure and repossession                                         1,910              1,647             1,757
   Purchases of premises and equipment                                   (4,869)            (9,762)           (9,933)
   Proceeds from sales of premises and equipment                              8                 71             1,313
   Cash paid in acquisition of Guthrie Savings, Inc., net of
     cash and cash equivalents received                                       -                  -              (840)
                                                                   ------------       ------------      ------------

            Net cash absorbed by investing activities                  (433,135)           (11,106)         (257,554)
                                                                   ------------       ------------      ------------

</Table>




                                       F-5                           (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

              For the Years Ended December 31, 2001, 2000 and 1999
                             (dollars in thousands)

<Table>
<Caption>

                                                                                  YEARS ENDED DECEMBER 31,
                                                                   --------------------------------------------------------
                                                                         2001               2000               1999
                                                                   -----------------  -----------------  ------------------
<S>                                                                <C>                <C>                <C>

Cash provided (absorbed) by financing activities:
   Change in transaction accounts                                    $     37,588            137,289             62,793
   Change in time deposits                                               (160,019)           (53,836)            80,250
   Change in securities sold under agreements to repurchase                   480             38,214                  -
   Proceeds from advances from the Federal Home Loan Bank               2,637,818          5,980,763            655,237
   Repayments of advances from the Federal Home Loan Bank              (2,099,641)        (6,092,770)          (573,235)
   Proceeds from the issuance of common stock                                  19                  -                  -
   Proceeds from the issuance of trust preferred securities                40,250                  -                  -
   Payments of trust preferred securities issuance costs                   (1,949)                 -                  -
   Purchase of senior notes                                               (19,615)           (34,090)            (4,750)
   Purchase of treasury stock                                             (17,757)                 -                  -
   Purchase of stock warrants                                              (1,004)                 -                  -
                                                                     ------------       ------------       ------------

            Net cash provided (absorbed) by
              financing activities                                        416,170            (24,430)           220,295
                                                                     ------------       ------------       ------------

Net change in cash and cash equivalents                                    16,520            (11,851)               942

Cash and cash equivalents at beginning of year                             43,971             55,822             54,880
                                                                     ------------       ------------       ------------

Cash and cash equivalents at end of year                             $     60,491             43,971             55,822
                                                                     ============       ============       ============

Supplemental disclosures of cash flow information:
   Cash paid (received) during the year for:
     Interest                                                        $    104,300            113,209             94,003
                                                                     ============       ============       ============

     Income taxes                                                    $     13,083              9,088             (8,890)
                                                                     ============       ============       ============

Supplemental schedule of noncash investing and financing activities:
     Transfers of loans to assets acquired through
       foreclosure and repossession                                  $      2,996              1,805              1,787
                                                                     ============       ============       ============

     Transfer of loans securitized to investments available for
       sale and servicing rights                                     $          -             87,587                  -
                                                                     ============       ============       ============

     Transfer of investments from available for sale
       to held to maturity                                           $    430,956                  -                  -
                                                                     ============       ============       ============

</Table>

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


                                       F-6

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999



(1)      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Local Financial Corporation (Local Financial) is a bank holding company
         which owns 100% of the outstanding common stock of Local Oklahoma Bank,
         N.A. (Local or the Bank). On March 31, 1999, Local Financial completed
         its merger of Local America Bank of Tulsa (LAB) into LAB's parent
         company, Local Federal Bank, with the merged entity operating under the
         name Local Oklahoma Bank. The merger was accounted for at historical
         cost as a combination of entities under common control similar to a
         pooling of interests. During 1999, Local filed an application with the
         Office of the Comptroller to convert to a national banking association.
         Concurrent with Local's charter conversion, Local Financial filed an
         application with the Federal Reserve Board to become registered as a
         bank holding company. Both applications were subsequently approved and
         Local converted to a national banking association on May 11, 1999. In
         September 2001, Local Financial formed Local Financial Capital Trust I
         (the Trust) as a wholly-owned subsidiary. The Trust was formed to
         facilitate the issuance of 1,610,000 shares of 9.00% cumulative trust
         preferred securities (Trust Preferred Securities) at $25 per share. The
         accounting and reporting practices of Local Financial and its
         subsidiaries reflect industry practices and are in accordance with
         accounting principles generally accepted in the United States of
         America. The more significant policies are described below.

         (a)      PRINCIPLES OF CONSOLIDATION

                  The accompanying consolidated financial statements include the
                  accounts of Local Financial and its wholly owned subsidiaries,
                  the Trust and Local, as well as Local's subsidiaries, Local
                  Acceptance Company (Local Acceptance), Local Mortgage
                  Corporation (Local Mortgage) and Local Securities Corporation
                  (Local Securities). Local is an insured depository institution
                  which obtains deposit funds primarily through retail branches
                  throughout the State of Oklahoma and lends those funds
                  throughout the United States. Local Acceptance and Local
                  Mortgage are currently inactive. Local Securities is a
                  registered broker-dealer under the Securities Exchange Act of
                  1934 and provides retail investment products to customers of
                  Local. Local Financial and its subsidiaries, the Trust and
                  Local, are collectively referred to as the Company. All
                  significant intercompany accounts and transactions have been
                  eliminated in the accompanying consolidated financial
                  statements.

                  In preparing the consolidated financial statements, management
                  is required to make estimates and assumptions. Those estimates
                  and assumptions relate principally to the determination of the
                  allowance for loan losses, income taxes, the valuation of
                  assets acquired through foreclosure and repossession and the
                  fair value of financial instruments. Actual results could
                  differ from those estimates. The accounting policies for these
                  items and other significant accounting policies are presented
                  below.


                                          F-7                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         (b)      STATEMENTS OF CASH FLOWS

                  For the purpose of the consolidated statements of cash flows,
                  the Company defines cash and cash equivalents as cash and due
                  from banks and interest bearing deposits with other banks.

         (c)      SECURITIES

                  The Company's investment portfolio consists primarily of
                  mortgage-backed securities. Mortgage-backed securities consist
                  of mortgage-backed pass-through certificates (MBS) and
                  mortgage-derivative securities (MDS) such as collateralized
                  mortgage obligations and real estate mortgage investment
                  conduits. Local does not own any principal only, interest only
                  or residual tranches mortgage-backed securities. The Company
                  classifies its securities as held to maturity, available for
                  sale or held for trading. Trading securities are bought and
                  held principally for the purpose of selling them in the near
                  term. Held to maturity securities are those securities for
                  which the Company has the ability and intent to hold until
                  maturity. Securities are classified as available for sale when
                  such securities may be sold at a future date or if there are
                  foreseeable circumstances under which the Company would sell
                  such securities prior to maturity. Effective December 31,
                  2001, the Company reclassified a portion of its investment
                  securities from available for sale to held to maturity. At
                  December 31, 2000, the Company had classified all of its
                  securities as available for sale. No investment securities
                  within the portfolio were held for trading purposes at
                  December 31, 2001 and 2000.

                  Securities classified as available for sale are recorded at
                  their estimated market value. Changes in the estimated market
                  value of securities available for sale are included in
                  stockholders' equity, net of deferred taxes, as accumulated
                  other comprehensive income. Unrealized losses on available for
                  sale securities, which are judged to be other than temporary,
                  are charged to earnings in the consolidated statements of
                  operations. Securities held to maturity are recorded at
                  amortized cost, adjusted for the amortization or accretion of
                  premiums or discounts. Gains and losses on available for sale
                  securities are computed on a specific identification basis.
                  Premiums and discounts are amortized or accreted in the
                  consolidated statements of operations to approximate a level
                  yield over the life of the related security.

                  Investment in Federal Reserve Bank (FRB) and Federal Home Loan
                  Bank of Topeka (FHLB) stock are required investments and are
                  carried at cost.

         (d)      LOANS RECEIVABLE

                  Loans receivable are recorded at the contractual amounts owed
                  by borrowers, less deferred fees, unearned interest, the
                  allowance for loan losses, nondisbursed funds, and discounts
                  on loans acquired or originated. Interest on loans is credited
                  to income as earned, to the extent deemed collectible.
                  Discounts on loans and unearned interest on consumer loans are
                  accreted into interest income to approximate a level yield
                  over the contractual lives of the loans, adjusted for actual
                  prepayments.


                                          F-8                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


                  Loans are generally placed on nonaccrual status when they
                  become 90 days past due. Previously accrued but uncollected
                  interest on loans placed on nonaccrual status is reversed
                  unless determined to be fully collectible. Payments received
                  on nonaccrual loans are generally applied to principal as they
                  are received. Upon full collection of the principal balance or
                  determination that future collection of principal is probable,
                  interest income is recognized as received.

         (e)      PROVISION AND ALLOWANCE FOR LOAN LOSSES

                  Each period the provision for loan losses in the consolidated
                  statements of operations results from the combination of a) an
                  estimate by management of loan losses that occurred during the
                  current period and b) the ongoing adjustment of prior
                  estimates of losses occurring in prior periods.

                  To serve as a basis for making this provision each quarter,
                  the Company maintains an extensive credit risk monitoring
                  process that considers several factors including: current
                  economic conditions affecting the Company's customers, the
                  payment performance of individual large loans and pools of
                  homogeneous small loans, portfolio seasoning, changes in
                  collateral values, and detailed reviews of specific large loan
                  relationships. For large loans deemed to be impaired due to an
                  expectation that all contractual payments will probably not be
                  received, impairment is measured by comparing the Company's
                  recorded investment in the loan to the present value of
                  expected cash flows discounted at the loan's effective
                  interest rate, the fair value of the collateral or the loan's
                  observable market price.

                  The provision for loan losses increases the allowance for loan
                  losses, a valuation account which is netted against loans on
                  the consolidated statements of financial condition. As the
                  specific customer and amount of a loan loss is confirmed by
                  gathering additional information, taking collateral in full or
                  partial settlement of the loan, bankruptcy of the borrower,
                  etc., the loan is written down, reducing the allowance for
                  loan losses. If, subsequent to a writedown, the Company is
                  able to collect additional amounts from the customer or obtain
                  control of collateral worth more than previously estimated, a
                  recovery is recorded, thus increasing the allowance for loan
                  losses.

         (f)      LOAN ORIGINATION FEES, LOAN COMMITMENT FEES AND RELATED COSTS

                  The Company defers loan origination fees, loan commitment fees
                  and the incremental direct costs (principally compensation and
                  benefits relating to successful underwriting efforts) relative
                  to loans originated. These deferred fees and costs are
                  amortized into interest income to approximate a level yield
                  over the life of the related loans, adjusted for actual
                  prepayments.

                  Other loan fees such as loan servicing fees and late payment
                  fees are included as a component of noninterest income in the
                  accompanying consolidated statements of operations.


                                          F-9                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         (g)      LOANS HELD FOR SALE AND GAINS AND LOSSES FROM THE SALE OF
                  LOANS

                  Loans originated and intended for sale are carried at the
                  lower of cost or estimated market value in the aggregate. Net
                  unrealized losses are recognized through a valuation allowance
                  by charges to income. There were no loans other than student
                  loans held for sale at December 31, 2001 and 2000.

                  Gains and losses resulting from the sale of loans are
                  determined by the specific identification method and reflect
                  the extent that sales proceeds exceed or are less than the
                  carrying value of the loans sold. In some cases, the Company
                  sells loans and continues to service such loans for the
                  investor. In these cases, the Company recognizes either a
                  servicing asset, at its allocated previous carrying amount
                  based on relative fair value, or a servicing liability at fair
                  value. Any servicing assets recognized as part of the sale are
                  amortized as a deduction from servicing income in proportion
                  to and over the period of estimated net servicing income. To
                  the extent sales of loans involve the sale of part of a loan
                  or a pool of loans, the cost basis is allocated based upon the
                  relative fair value of the portion sold and the portion
                  retained. Impairment of servicing assets is assessed based on
                  the fair value of those assets. Fair values are estimated
                  using discounted cash flows based on a current market interest
                  rate. At December 31, 2001 and 2000, the carrying value of
                  servicing assets was not impaired.

                  Periodically, the Company will securitize residential real
                  estate loans held for investment with the Federal National
                  Mortgage Association (FNMA) and retain all of the interest in
                  the FNMA security. No gain or loss is recognized as the
                  securitization does not qualify as a sale. The Company's
                  current carrying value is allocated between securities held to
                  maturity and a servicing asset based on the relative fair
                  values.

         (h)      LOAN SERVICING

                  Loans serviced by the Company for others are primarily the
                  result of the Company selling loans while retaining the
                  servicing of those loans. These loans are not included with
                  loans receivable or any other asset in the accompanying
                  consolidated statements of financial condition. Fees earned
                  for servicing loans owned by investors are reported as income
                  when the related loan payments are collected. Loan servicing
                  costs are charged to expense as incurred. Loans serviced for
                  others totaled approximately $150,343,000 and $192,556,000, at
                  December 31, 2001 and 2000, respectively. Net servicing fees
                  earned totaled approximately $550,000, $566,000 and $423,000
                  for the years ended December 31, 2001, 2000 and 1999,
                  respectively, and are included as a component of loan fees and
                  loan service charges in the accompanying consolidated
                  statements of operations.

                  At December 31, 2001 and 2000, unamortized servicing assets
                  were approximately $1,567,000 and $1,966,000, respectively,
                  and are included in other assets. Amortization of these assets
                  totaling approximately $400,000, $285,000 and $706,000 was
                  charged against loan servicing income for the years ended
                  December 31, 2001, 2000 and 1999, respectively.


                                         F-10                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         (i)      BANK OWNED LIFE INSURANCE

                  The Company has purchased life insurance on its key managers.
                  The balance was approximately $37.3 million and $25.3 million,
                  respectively, at December 31, 2001 and 2000, and is included
                  in other assets in the consolidated statements of financial
                  condition. The increase in the cash surrender value is
                  included in other noninterest income in the consolidated
                  statements of operations and amounted to approximately
                  $2,000,000 and $261,000, respectively, for the years ended
                  December 31, 2001 and 2000.

         (j)      PREMISES AND EQUIPMENT

                  Buildings, building improvements, furniture, fixtures and
                  equipment are stated at cost, less accumulated depreciation
                  and amortization. Depreciation and amortization is computed
                  using the straight-line method over the estimated useful lives
                  of the related assets. Estimated lives range from 25 to 30
                  years for buildings and building improvements and 3 to 10
                  years for furniture, fixtures and equipment.

                  Maintenance and repairs are charged to expense as incurred and
                  building improvements are capitalized. The costs and
                  accumulated depreciation relating to premises and equipment
                  retired or otherwise disposed of are eliminated from the
                  accounts and any resulting gains or losses are credited or
                  charged to income.

         (k)      ASSETS ACQUIRED THROUGH FORECLOSURE AND REPOSSESSION

                  Assets acquired through foreclosure and repossession are
                  recorded at estimated fair value, net of estimated selling
                  costs at the date of foreclosure or repossession. The values
                  of assets acquired through foreclosure and repossession are
                  monitored by the Company continually through sales and rental
                  activities and by updated appraisals and other valuation
                  methods when needed. The allowance for losses on assets
                  acquired through foreclosure and repossession is an amount
                  which management believes will be adequate to absorb losses
                  from the disposition and/or revaluation of these assets.
                  Additions or reversals of the allowance for losses on assets
                  acquired through foreclosure and repossession are provided as
                  an expense or a benefit, respectively, through other expense
                  in the accompanying consolidated statements of operations. The
                  Company records the net expense and income from assets
                  acquired through foreclosure and repossessions in other
                  noninterest expense.

         (l)      DEFERRED ISSUANCE COSTS

                  The Company capitalizes all costs related to the issuance of
                  Senior Notes and Trust Preferred Securities. The unamortized
                  issuance costs on the Senior Notes at December 31, 2001 and
                  2000 of approximately $468,000 and $1,230,000, respectively,
                  and the Trust Preferred Securities at December 31, 2001 of
                  approximately $1,931,000 are included in other assets in the
                  consolidated statements of financial condition. Deferred
                  issuance costs are amortized over the life of the Senior Notes
                  as a yield adjustment to notes payable and Trust Preferred
                  Securities interest expense in the consolidated statements of
                  operations.


                                         F-11                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         (m)      INTANGIBLE ASSETS

                  Intangible assets consist of goodwill. Goodwill represents the
                  excess cost over fair value of net assets acquired and is
                  being amortized on a straight-line basis over a 15-year
                  period. The Company evaluates the recoverability of goodwill
                  by assessing whether the amortization of the asset balances
                  over their remaining lives can be recovered through projected
                  cash flows. The amount of impairment, if any, is measured
                  based on projected discounted cash flows. No impairment was
                  recognized at December 31, 2001, 2000 and 1999.

                  Amortization expense totaled approximately $1,340,000,
                  $1,339,000 and $1,654,000 for the years ended December 31,
                  2001, 2000 and 1999, respectively. Accumulated amortization of
                  goodwill at December 31, 2001, 2000 and 1999, totaled
                  approximately $4,488,000, $3,148,000 and $4,527,000,
                  respectively.

         (n)      INCOME TAXES

                  Deferred tax assets and liabilities are reflected at currently
                  enacted income tax rates applicable to the period in which the
                  deferred tax assets or liabilities are expected to be realized
                  or settled. As changes in tax laws or rates are enacted,
                  deferred tax assets and liabilities are adjusted through the
                  provision for income taxes.

         (o)      EARNINGS PER SHARE

                  Basic net income per share is based upon the weighted average
                  number of shares outstanding during the period. Stock options
                  and warrants to purchase common stock are considered in
                  diluted income per share calculations, if dilutive, and are
                  computed using the treasury stock method.











                                         F-12                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


                  The following table reconciles the net income and weighted
                  average shares outstanding used in the calculation of basic
                  and diluted net income per share for the year ended December
                  31, 2001.


<Table>
<Caption>

                                                                                 WEIGHTED
                                                                                  AVERAGE
                                                                                  SHARES             PER SHARE
                                                            NET INCOME          OUTSTANDING            AMOUNT
                                                         ----------------    -----------------  -------------------
                   <S>                                   <C>                 <C>                <C>
                   Basic net income per share              $  26,477,000          20,368,028       $        1.30
                                                                                                   =============
                   Effect of dilutive securities:
                        Warrants                                       -              64,841
                        Options                                        -             533,662
                                                           -------------       -------------

                   Diluted net income per share            $  26,477,000          20,966,531       $        1.26
                                                           =============       =============       -------------

</Table>

                  For each of the years ended December 31, 2000 and 1999, the
                  weighted average number of shares is 20,537,209. Stock
                  options and warrants to purchase common stock discussed in
                  Note 15 were outstanding during the years ended December 31,
                  2000 and 1999, but were not included in the computation of
                  diluted income per share because the average share price was
                  below the exercise price during the years ended December 31,
                  2000 and 1999.

         (p)      SEGMENTS

                  The Company operates as one segment. The operating information
                  used by the Company's chief operating decision-maker for
                  purposes of assessing performance and making operating
                  decisions about the Company is the consolidated financial
                  statements presented herein. The Company has one active
                  operating subsidiary, namely, Local Oklahoma Bank, National
                  Association, a national banking association. The Bank, in
                  turn, has one active operating subsidiary, Local Securities
                  Corporation, which is a registered broker-dealer under the
                  Securities Exchange Act of 1934 and provides retail investment
                  products to customers of the Bank. While Local Securities
                  qualifies as a separate operating segment, it is not
                  considered material to the consolidated financial statements
                  for the purposes of making operating decisions and does not
                  meet the 10% threshold for disclosure under Statement of
                  Financial Accounting Standards (SFAS) No. 131, DISCLOSURE
                  ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.

                  In September 2001, the Company formed Local Financial Capital
                  Trust I, a wholly-owned finance subsidiary. The Trust does
                  not qualify as an operating segment under SFAS No. 131 and has
                  no independent operations and no other function other than the
                  issuance of its securities and the related purchase of the
                  junior subordinated debentures from Local Financial and to
                  distribute payments referred thereon to the holders of its
                  securities.


                                         F-13                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         (q)      NEW ACCOUNTING PRONOUNCEMENTS

                  In August 2001, the FASB issued FASB Statement No. 144,
                  ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED
                  ASSETS, which addresses financial accounting and reporting for
                  the impairment or disposal of long-lived assets. While
                  Statement No. 144 supersedes FASB Statement No. 121,
                  ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
                  LONG-LIVED ASSETS TO BE DISPOSED OF, it retains many of the
                  fundamental provisions of that Statement. Statement No. 144
                  also supersedes the accounting and reporting provisions of
                  Accounting Principles Board (APB) Opinion No. 30, REPORTING
                  THE RESULTS OF OPERATIONS-REPORTING THE EFFECTS OF DISPOSAL OF
                  A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND
                  INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS, for the
                  disposal of a segment of a business. However, it retains the
                  requirement in Opinion No. 30 to report separately
                  discontinued operations and extends that reporting to a
                  component of an entity that either has been disposed of by
                  sale, abandonment, or in a distribution to owners or is
                  classified as held for sale. Statement No. 144 is effective
                  for fiscal year beginning after December 15, 2001. Management
                  has determined the impact of this statement will not have a
                  material impact on the consolidated financial position or the
                  future results of operations of the Company.

                  In June 2001, the FASB issued Statement No. 141, BUSINESS
                  COMBINATIONS, and Statement No. 142, GOODWILL AND OTHER
                  INTANGIBLE ASSETS. Statement No. 141 requires that the
                  purchase method of accounting be used for all business
                  combinations initiated after June 30, 2001 as well as all
                  purchase method business combinations completed after June 30,
                  2001. Statement No. 141 also specifies criteria intangible
                  assets acquired in a purchase method business combination must
                  meet to be recognized and reported apart from goodwill, noting
                  that any purchase price allocable to an assembled workforce
                  may not be accounted for separately. Statement No. 142 will
                  require that goodwill and intangible assets with indefinite
                  useful lives no long be amortized, but instead tested for
                  impairment at least annually in accordance with the provisions
                  of Statement No. 142. Statement No. 142 will also require that
                  intangible assets with definite useful lives be amortized over
                  their respective estimated useful lives to their estimated
                  residual values, and reviewed for impairment in accordance
                  with SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
                  ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF or
                  Statement No. 144 upon adoption.

                  The Company is required to adopt the provisions of Statement
                  No. 141 immediately and Statement No. 142 effective January 1,
                  2002. Furthermore, any goodwill and any intangible asset
                  determined to have an indefinite useful life that are acquired
                  in a purchase business combination completed after June 30,
                  2001 will not be amortized, but will continue to be evaluated
                  for impairment in accordance with the appropriate
                  pre-Statement No. 142 accounting literature. Goodwill and
                  intangible assets acquired in business combinations completed
                  before July 1, 2001 will continue to be amortized prior to the
                  adoption of Statement No. 142.

                  In connection with the transitional goodwill impairment
                  evaluation, Statement No. 142 will require the Company to
                  perform an assessment of whether there is an indication that


                                         F-14                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


                  goodwill is impaired as of the date of adoption. To accomplish
                  this, the Company must identify its reporting units and
                  determine the carrying value of each reporting unit by
                  assigning the assets and liabilities, including the existing
                  goodwill and intangible assets, to those reporting units as of
                  the date of adoption. The Company will then have up to six
                  months from the date of adoption to determine the fair value
                  of each reporting unit and compare it to the reporting unit's
                  carrying amount. To the extent a reporting unit's carrying
                  amount exceeds its fair value, an indication exists that the
                  reporting unit's goodwill may be impaired and the Company must
                  perform the second step of the transitional impairment test.
                  In the second step, the Company must compare the implied fair
                  value of the reporting unit's goodwill, determined by
                  allocating the reporting unit's fair value to all of it assets
                  (recognized and unrecognized) and liabilities in a manner
                  similar to a purchase price allocation in accordance with
                  Statement No. 141, to its carrying amount, both of which would
                  be measured as of the date of adoption. This second step is
                  required to be completed as soon as possible, but no later
                  than the end of the year of adoption. Any transitional
                  impairment loss will be recognized as the cumulative effect of
                  a change in accounting principle in the Company's consolidated
                  statements of operations.

                  The Company adopted Statement No. 142 as of January 1, 2002
                  and will no longer amortize goodwill. As of the date of
                  adoption, the Company has unamortized goodwill in the amount
                  of approximately $15.5 million, which will be subject to the
                  transition provisions of Statement Nos. 141 and 142. None of
                  the unamortized goodwill relates to FASB Statement No. 72,
                  ACCOUNTING FOR CERTAIN ACQUISITIONS OF BANKING OR THRIFT
                  INSTITUTIONS--AN AMENDMENT OF APB OPINION NO. 17, AN
                  INTERPRETATION OF APB OPINIONS 16 AND 17, AND AN AMENDMENT OF
                  FASB INTERPRETATION NO. 9. Amortization expense totaled
                  approximately $1,340,000, $1,339,000 and $1,654,000 for the
                  years ended December 31, 2001, 2000 and 1999, respectively.
                  Because of the extensive effort needed to comply with adopting
                  Statement Nos. 141 and 142, it is not practicable to
                  reasonably estimate the impact of adopting these statements on
                  the Company's consolidated financial statements at the date of
                  this report, including whether any transitional impairment
                  losses will be required to be recognized as the cumulative
                  effect of a change in accounting principle; however,
                  management does not anticipate an impairment loss at January
                  1, 2002.

         (r)      Certain reclassifications were made to the 2000 and 1999
                  consolidated financial statements to conform to the 2001
                  presentation.

(2)      ACQUISITIONS

         On October 15, 1999, Local acquired Guthrie Savings, Inc. (Guthrie) and
         its subsidiary, Guthrie Federal Savings Bank, F.S.B. for approximately
         $9,340,000 in cash. This acquisition was accounted for under the
         purchase method of accounting in which the purchase price was allocated
         to the net assets acquired based upon their fair market values at the
         date of acquisition.

         The excess of the Guthrie purchase price of approximately $9,340,000
         over the net assets acquired of approximately $7,302,000 was allocated
         to goodwill. The resulting goodwill of


                                         F-15                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         approximately $2,038,000 was being amortized on a straight-line basis
         over 15 years (see Note 1(q)).

         The following unaudited pro forma information presents the combined
         results of operations as if the acquisition of Guthrie had occurred as
         of January 1, 1999, after giving effect to amortization of goodwill.
         The pro forma financial information does not necessarily reflect the
         results of operations that would have occurred had the companies been
         combined during such period.


<Table>
<Caption>

                                                                    YEAR ENDED DECEMBER 31,
                                                                              1999
                                                                   -------------------------
                                                                          (unaudited)
                   <S>                                             <C>
                   Net interest and dividend income                  $       74,829,000
                   Income before extraordinary item                          22,506,000
                   Net income                                                22,249,000

                   Earnings per share:
                       Income before extraordinary item
                          Basic                                      $             1.10
                          Diluted                                                  1.10

                       Net income
                          Basic                                      $             1.08
                          Diluted                                                  1.08

</Table>

(3)      SECURITIES

         Actual maturities of collateralized mortgage obligations and mortgage
         pass-through securities will differ from contractual maturities because
         borrowers may have the right to call or prepay obligations with or
         without call or prepayment penalties. Municipal securities generally
         mature within five years.












                                         F-16                        (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


          (a)     SECURITIES AVAILABLE FOR SALE

                  A comparative summary of securities available for sale is
                  as follows (dollars in thousands):

<Table>
<Caption>
                                                                   GROSS           GROSS        ESTIMATED
                                                 AMORTIZED       UNREALIZED     UNREALIZED        MARKET
                                                    COST           GAINS          LOSSES          VALUE
                                               --------------- --------------- -------------- ---------------
                  <S>                          <C>             <C>             <C>            <C>

                  December 31, 2001:
                     Collateralized mortgage
                        obligations              $    187,415           6,321              -         193,736
                                                 ============    ============    ===========    ============


                  December 31, 2000:
                     Collateralized mortgage
                        obligations              $    218,243           6,257            246         224,254
                     Mortgage pass-through
                        securities                     94,815             920             59          95,676
                     U.S. Government and
                        agency securities              33,494             212             43          33,663
                     Municipal securities                 452               3              -             455
                                                 ------------    ------------    -----------    ------------

                                                 $    347,004           7,392            348         354,048
                                                 ============    ============    ===========    ============

</Table>

                  The weighted average rate was 6.66% and 6.94% at December 31,
                  2001 and 2000, respectively.


                  At December 31, 2001 and 2000, securities with a total par
                  amount of $156,478,000 and $104,120,000, respectively, were
                  pledged to secure various deposits and borrowings. Accrued
                  interest receivable on securities available for sale of
                  approximately $1,048,000 and $2,558,000 was included in other
                  assets at December 31, 2001 and 2000, respectively.


                  Proceeds from sales of securities available for sale for the
                  years ended December 31, 2001, 2000 and 1999 were
                  approximately $19,813,000, $283,910,000 and $160,174,000,
                  respectively. Gross gains of approximately $151,000,
                  $3,852,000 and $809,000 were realized for the years ended
                  December 31, 2001, 2000 and 1999, respectively. Gross losses
                  of $3,549,000 and $685,000 were realized for the years ended
                  December 31, 2000 and 1999, respectively. These gains and
                  losses are included in net gains on sale of assets in the
                  accompanying consolidated statements of operations.





                                       F-17                          (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


          (b)     SECURITIES HELD TO MATURITY


                  Effective December 31, 2001, the Company reclassified a
                  portion of its investment securities portfolio from available
                  for sale to held to maturity. The investment securities were
                  transferred at amortized cost and the difference between
                  amortized cost and estimated market value was considered to be
                  immaterial to the consolidated financial statements. The
                  amortized cost of securities at the date of transfer was
                  approximately $430,956,000 with a weighted average rate of
                  6.39%.


                  A summary of securities held to maturity is as follows
                  (dollars in thousands):

<Table>
<Caption>

                                                                         GROSS           GROSS          ESTIMATED
                                                      AMORTIZED       UNREALIZED       UNREALIZED        MARKET
                                                        COST             GAINS           LOSSES           VALUE
                                                   ---------------- ---------------- --------------- ----------------
                  <S>                              <C>              <C>              <C>             <C>

                  December 31, 2001:
                       Collateralized mortgage
                         obligations                 $    355,637            2,611            2,479         355,769
                       Mortgage pass-through
                         securities                        75,140            1,894                4          77,030
                       Municipal securities                   179                -                -             179
                                                     ------------     ------------     ------------    ------------

                                                     $    430,956            4,505            2,483         432,978
                                                     ============     ============     ============    ============

</Table>

                  There were no securities held to maturity at December 31,
                  2000.


                  At December 31, 2001, securities held to maturity with a total
                  par amount of $109,808,000, were pledged to secure various
                  deposits and borrowings. Accrued interest receivable on
                  securities held to maturity of approximately $2,292,000 was
                  included in other assets at December 31, 2001.




                                       F-18                          (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(4)      LOANS RECEIVABLE

         Loans receivable are summarized below at amortized cost (dollars in
         thousands):

<Table>
<Caption>
                                                                               DECEMBER 31,
                                                                   -------------------------------------
                                                                         2001                2000
                                                                   ------------------  -----------------
                   <S>                                             <C>                 <C>

                   Residential real estate loans                     $    215,408             250,487
                   Commercial                                           1,593,432           1,425,382
                   Held for sale                                            6,263               5,922
                   Consumer loans                                         184,663             195,430
                                                                     ------------        ------------

                          Total loans                                   1,999,766           1,877,221
                   Less:
                        Allowance for loan losses                         (27,621)            (28,345)
                                                                     ------------        ------------

                          Loans receivable, net                      $  1,972,145           1,848,876
                                                                     ============        ============

</Table>

         Accrued interest receivable on loans of approximately $9,061,000 and
         $12,500,000 was included in other assets at December 31, 2001 and 2000,
         respectively.


         An analysis of the allowance for loan losses is as follows (dollars in
         thousands):

<Table>
<Caption>
                                                                          YEARS ENDED DECEMBER 31,
                                                           --------------------------------------------------------
                                                                 2001               2000               1999
                                                           -----------------  -----------------  ------------------
          <S>                                              <C>                <C>                <C>

          Balance at beginning of year                       $     28,345             28,297             27,901
               Allowance acquired                                       -                  -                340
               Loans charged off                                   (6,589)            (3,707)            (3,853)
               Recoveries                                             465              1,055              1,909
                                                             ------------       ------------       ------------

                   Net loans charged off                           (6,124)            (2,652)            (1,944)

               Provision for loan losses                            5,400              2,700              2,000
                                                             ------------       ------------       ------------

          Balance at end of year                             $     27,621             28,345             28,297
                                                             ============       ============       ============
</Table>

         Other than Oklahoma, the Company has granted commercial real estate
         loans to customers principally in California, New York, Texas and
         Oregon. The remainder of the Company's portfolio is significantly
         concentrated in Oklahoma. Although the Company has a diversified loan
         portfolio, a substantial portion of the debtors' ability to honor their
         loan contracts is dependent upon the overall economy as well as the
         economy of the respective states.


         At December 31, 2001, 2000 and 1999, the Company classified
         approximately $2,817,000, $3,207,000 and $2,222,000, respectively, of
         loans as impaired, as defined by SFAS No. 114,

                                       F-19                          (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN. At December 31,
         2001, 2000 and 1999, these loans had an impairment allowance of
         approximately $706,000, $904,000 and $857,000, respectively, which
         was measured using the collateral value method. The average recorded
         investment in impaired loans for the years ended December 31, 2001,
         2000 and 1999 was approximately $3,476,000, $1,524,000 and $957,000,
         respectively. Interest payments received on impaired loans are
         recorded as interest income, unless collection of the remaining
         recorded investment is doubtful, at which time the loan is placed on
         nonaccrual status and payments received are recorded as reductions of
         principal. The Company recognized interest income on impaired loans
         of approximately $10,000, $609,000 and $115,000 for the years ended
         December 31, 2001, 2000 and 1999, respectively.


         At December 31, 2001 and 2000, loans to directors, officers and
         employees of the Company aggregated approximately $6,557,000 and
         $7,628,000, respectively. In management's opinion, such transactions
         were made on substantially the same terms as those prevailing at the
         time for comparable transactions with other persons and did not involve
         more than normal risk.


(5)      PREMISES AND EQUIPMENT

         Premises and equipment consisted of the following (dollars in
         thousands):

<Table>
<Caption>
                                                                                        DECEMBER 31,
                                                                            -------------------------------------
                                                                                  2001               2000
                                                                            ------------------ ------------------
                   <S>                                                      <C>                <C>

                   Land                                                       $      5,727              5,732
                   Buildings and building improvements                              31,060             28,970
                   Furniture, fixtures and equipment                                26,380             24,433
                                                                              ------------       ------------
                                                                                    63,167             59,135
                   Less accumulated depreciation and amortization                  (24,416)           (21,270)
                                                                              ------------       ------------

                                                                              $     38,751             37,865
                                                                              ============       ============
</Table>

         Depreciation and amortization expense relating to premises and
         equipment for the years ended December 31, 2001, 2000 and 1999 was
         approximately $3,975,000, $3,633,000 and $2,305,000, respectively.


(6)      DEPOSIT ACCOUNTS

         Accrued interest on deposit accounts of approximately $3,363,000 and
         $4,637,000 was included in other liabilities in the accompanying
         consolidated statements of financial condition at December 31, 2001 and
         2000, respectively.


         The aggregate amount of certificates of deposit with a denomination
         greater than $100,000 was approximately $204,000,000 and $219,000,000
         at December 31, 2001 and 2000, respectively.


                                       F-20                          (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         Contractual maturities of time deposits at December 31, 2001, are
         summarized as follows (dollars in thousands):

<Table>
<Caption>

                        YEARS ENDING DECEMBER 31,                              AMOUNT
                                                                         ------------------
                        <S>                                              <C>
                                        2002                               $     957,875
                                        2003                                      96,959
                                        2004                                      23,286
                                        2005                                      17,686
                                 2006 and thereafter                               6,309
                                                                           -------------
                                                                           $   1,102,115
                                                                           -------------

</Table>

(7)      SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

         Periodically, the Company provides securities sold under agreements to
         repurchase to customers as a part of the commercial banking operations.
         The securities underlying the agreements were under the Company's
         control at December 31, 2001 and 2000 and are summarized as follows
         (dollars in thousands):

<Table>
<Caption>
                                                                              2001                    2000
                                                                      ----------------------  ----------------------
          <S>                                                         <C>                     <C>

          Average outstanding balance                                   $       42,987          $       18,352
          Weighted average interest rate during the year                          3.39%                   5.85%
          Maximum month-end balance                                     $       53,622          $       38,214
          Outstanding balance at end of year                                    38,694                  38,214
          Weighted average interest rate at end of year                           1.29%                   5.92%
          Mortgage-backed securities securing the agreements
                   at period-end:
                            Carrying value                              $       53,885          $       42,053
                            Estimated market value                              54,978                  42,053
          Accrued interest payable at the end of the year                            -                       -

</Table>

(8)      ADVANCES FROM THE FEDERAL HOME LOAN BANK OF TOPEKA

         Advances from the FHLB are summarized as follows (dollars in
         thousands):

<Table>
<Caption>
                                                             DECEMBER 31,
                                     --------------------------------------------------------------
                                                 2001                            2000
                                     ------------------------------ -------------------------------
                                                       WEIGHTED                        WEIGHTED
                                                       AVERAGE                         AVERAGE
                                                     CONTRACTUAL                     CONTRACTUAL
                                        BALANCE          RATE          BALANCE           RATE
                                     -------------- --------------- --------------- ---------------
                   <S>               <C>            <C>             <C>             <C>

                   Fixed rate          $  728,205          3.75%      $  190,028           6.44%
                                       ==========     =========       ==========      =========

</Table>


                                       F-21                          (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         Additionally, the Company had outstanding letters of credit with the
         FHLB of approximately $77,045,000 and $136,720,000 at December 31, 2001
         and 2000, respectively. The letters of credit have one-year terms and
         were pledged to secure certain deposits.

         The FHLB requires the Company to hold eligible assets with a lending
         value, as defined, at least equal to FHLB advances and letters of
         credit issued. Eligible assets can include such items as first and
         second mortgage loans, multifamily mortgage loans, commercial and
         construction real estate loans, small business loans and investment
         securities, which are not already pledged or otherwise encumbered. At
         December 31, 2001, the Company had approximately $156,478,000 in
         investment securities pledged against FHLB advances.

         At December 31, 2001, the Company had additional borrowing capacity of
         approximately $370,000,000 under the FHLB credit policy.

         Scheduled principal repayments of advances from the FHLB at December
         31, 2001 were as follows (dollars in thousands):

<Table>
<Caption>
                                                                                                 WEIGHTED
                                                                                                  AVERAGE
                                                                                                CONTRACTUAL
                              YEARS ENDING DECEMBER 31,                       AMOUNT               RATE
                                                                         ------------------  ------------------
                              <S>                                        <C>                 <C>
                                        2002                               $     128,180            1.92%
                                        2003                                           -               -
                                        2004                                           -               -
                                        2005                                           -               -
                                 2006 and thereafter                             600,025            4.14
                                                                           -------------       ---------

                                                                           $     728,205            3.75%
                                                                           =============       =========

</Table>

(9)      SENIOR NOTES

         Senior Notes of $21,545,000, $41,160,000 and $75,250,000 at 11% issued
         to various investors were outstanding at December 31, 2001, 2000 and
         1999, respectively. During 2001, 2000 and 1999, the Company purchased
         and retired $19,615,000, $34,090,000 and $4,750,000, respectively, of
         Senior Notes. The purchase and retirement of the Senior Notes resulted
         in a $1,630,000, $922,000 and $257,000 extraordinary loss, net of tax
         benefit of $878,000, $498,000 and $138,000 for the years ended December
         31, 2001, 2000 and 1999, respectively. The extraordinary loss had an
         $(0.08), $(0.04) and $(0.01) per share impact on both basic and diluted
         earnings per share for the years ended December 31, 2001, 2000 and
         1999, respectively. Senior Notes are due September 8, 2004 and pay
         interest semiannually. Senior Notes are general unsecured obligations
         of Local Financial and will rank senior to such other indebtedness as
         the Company may incur that is not expressly subordinated to the Senior
         Notes. The indenture generally restricts the incurrence of additional
         indebtedness by the Company, except for certain junior indebtedness.


                                       F-22                          (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(10)     MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES

         On September 20, 2001, and October 3, 2001, Local Financial Capital
         Trust I, a newly formed Delaware business trust and wholly-owned
         finance subsidiary of Local Financial, issued 1,400,000 and 210,000
         shares, respectively, of its 9.00% Trust Preferred Securities at $25
         per share for an aggregate price of approximately $40.3 million, all of
         which was outstanding at December 31, 2001. The Trust Preferred
         Securities will mature on September 30, 2031. The proceeds from the
         sale of the Trust Preferred Securities and the issuance of $1.2 million
         in common securities to Local Financial were used by the Trust to
         purchase approximately $41.5 million of 9% junior subordinated
         debentures (the Debentures) of Local Financial which have the same
         payment terms as the Trust Preferred Securities. Distributions on the
         Trust Preferred Securities and on the common securities issued to Local
         Financial are payable on March 31, June 30, September 30, and December
         31 of each year beginning December 31, 2001. Except under certain
         circumstances, the common securities issued to the Company possess sole
         voting rights with respect to matters involving the Trust. Under
         certain circumstances, the Company may, from time to time, defer the
         Debentures' interest payments, which would result in a deferral of
         distribution payments on the related Trust Preferred Securities and,
         with certain exceptions, prevent the Company from declaring or paying
         cash distributions on the Company's common stock and any other future
         debt ranking equally with or junior to the Debentures.

         Subject to any applicable regulatory approvals, the Trust Preferred
         Securities and the common securities issued by the Trust to the Company
         are redeemable in whole or in part on or after September 30, 2006, or
         at any time in whole, but not in part, from the date of issuance upon
         the occurrence of certain events. The Trust Preferred Securities are
         presently fully included in Tier 1 capital for regulatory capital
         adequacy determination purposes. The obligations of the Company with
         respect to the issuance of the Trust Preferred Securities constitute a
         full and unconditional guarantee by the Company of the Trust's
         obligation with respect to the Trust Preferred Securities subject to
         certain limitations.




                                       F-23                          (Continued)

<Page>


                                    LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                                     Notes to Consolidated Financial Statements

                                          December 31, 2001, 2000 and 1999

(11)     COMPREHENSIVE INCOME

         Comprehensive income consists of net income and net unrealized gains
         (losses) on securities available for sale, net of reclassification
         adjustment, and is presented in the consolidated statements of
         stockholders' equity. Reclassification adjustment consists of realized
         gains and loss on securities available-for-sale included in the
         consolidated statements of operations.

         The changes in the components of other comprehensive income (loss) are
         reported net of income taxes for the periods indicated as follows
         (dollars in thousands):

<Table>
<Caption>
                                                                          YEAR ENDED DECEMBER 31, 2001
                                                             ------------------------------------------------------
                                                                  PRE-TAX             TAX                NET
                                                                  AMOUNT             EFFECT            AMOUNT
                                                             ------------------ ----------------- -----------------
          <S>                                                <C>                <C>               <C>

          Unrealized loss on securities:
             Unrealized holding loss arising during the
               period                                          $       (572)               200              (372)
             Less reclassification adjustment for gains
               included in net income                                  (151)                53               (98)
                                                               ------------       ------------      ------------
          Other comprehensive loss                             $       (723)               253              (470)
                                                               ============       ============      ============
</Table>

<Table>
<Caption>
                                                                          YEAR ENDED DECEMBER 31, 2000
                                                             ------------------------------------------------------
                                                                  PRE-TAX             TAX                NET
                                                                  AMOUNT             EFFECT            AMOUNT
                                                             ------------------ ----------------- -----------------
          <S>                                                <C>                <C>               <C>

          Unrealized gain on securities:
             Unrealized holding gain arising during the
               period                                          $      6,708             (2,348)            4,360
             Less reclassification adjustment for gains
               included in net income                                  (303)               106              (197)
                                                               ------------       ------------      ------------
          Other comprehensive income                           $      6,405             (2,242)            4,163
                                                               ============       ============      ============
</Table>

<Table>
<Caption>
                                                                          YEAR ENDED DECEMBER 31, 1999
                                                             -----------------------------------------------------
                                                                  PRE-TAX             TAX                NET
                                                                  AMOUNT             EFFECT            AMOUNT
                                                             ------------------ ----------------- ----------------
          <S>                                                <C>                <C>               <C>

          Unrealized loss on securities:
             Unrealized holding loss arising during the
               period                                          $    (16,285)             5,700           (10,585)
             Less reclassification adjustment for gains
               included in net income                                  (124)                43               (81)
                                                               ------------       ------------      ------------
          Other comprehensive loss                             $    (16,409)             5,743           (10,666)
                                                               ============       ============      ============
</Table>


                                                      F-24           (Continued)
<Page>


                                    LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                                     Notes to Consolidated Financial Statements

                                          December 31, 2001, 2000 and 1999

(12)     INCOME TAXES

         The provision for income taxes has been allocated as follows, including
         the tax effect of the changes in unrealized gains (losses) on available
         for sale securities (dollars in thousands):

<Table>
<Caption>
                                                                          YEARS ENDED DECEMBER 31,
                                                           -------------------------------------------------------
                                                                 2001               2000               1999
                                                           -----------------  -----------------  -----------------
          <S>                                              <C>                <C>                <C>

          Income from operations before
             extraordinary item                              $     14,367             14,331             12,627
          Extraordinary item                                         (878)              (498)              (138)
          Stockholders' equity                                       (253)             2,242             (5,743)
                                                             ------------       ------------       ------------
                                                             $     13,236             16,075              6,746
                                                             ============       ============       ============
</Table>

         Components of the provision for income taxes from operations are as
         follows (dollars in thousands):

<Table>
<Caption>
                                                                          YEARS ENDED DECEMBER 31,
                                                           -------------------------------------------------------
                                                                 2001               2000               1999
                                                           -----------------  -----------------  -----------------
          <S>                                              <C>                <C>                <C>

          Current income tax expense                         $     12,538              8,752              4,686
          Deferred income tax expense                               1,829              5,579              7,941
                                                             ------------       ------------       ------------
                                                             $     14,367             14,331             12,627
                                                             ============       ============       ============
</Table>

         The effective income tax rates differ from the statutory federal income
         tax rate of 35%. A reconciliation of the provision for income taxes
         based on the statutory rates with the effective rates is as follows
         (dollars in thousands):

<Table>
<Caption>
                                                                          YEARS ENDED DECEMBER 31,
                                                           --------------------------------------------------------
                                                                 2001               2000               1999
                                                           -----------------  -----------------  ------------------
          <S>                                              <C>                <C>                <C>

          Income tax at statutory rate (35%)                 $     14,866             13,673             12,207
             Effect of state income tax, net of federal             1,220              1,093              1,370
             Change in valuation allowance                         (1,220)            (1,093)            (1,370)
             Other, net                                              (499)               658                420
                                                             ------------       ------------       ------------
             Provision for income taxes                      $     14,367             14,331             12,627
                                                             ============       ============       ============
</Table>




                                                      F-25           (Continued)

<Page>


                                LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                                 Notes to Consolidated Financial Statements

                                      December 31, 2001, 2000 and 1999


Current income tax receivables of approximately $2,044,000 and $74,000 are
included in the caption current and deferred taxes, net in the consolidated
statements of financial condition at December 31, 2001 and 2000, respectively.
Deferred income tax assets and liabilities are included in current and deferred
taxes, net in the consolidated statements of financial condition and consisted
of the following (dollars in thousands):

<Table>
<Caption>
                                                                                    DECEMBER 31,
                                                                        -------------------------------------
                                                                              2001               2000
                                                                        -----------------  ------------------
               <S>                                                      <C>                <C>

               Deferred income tax assets:
                  Realized losses on available for sale securities        $        645              1,840
                  State net operating loss carryforwards                         3,352              4,572
                  Allowance for loan losses                                      8,463              8,940
                  Other                                                          2,203              2,350
                                                                          ------------       ------------
                                                                                14,663             17,702
                                                                          ------------       ------------

               Deferred income tax liabilities:
                  Stock dividends receivable                                      (756)              (756)
                  Depreciation and amortization                                 (2,282)            (1,793)
                  Deferred loan fees                                              (663)            (1,134)
                  Unrealized gains on available for sale
                    securities                                                  (2,212)            (2,465)
                  Other                                                            (34)               (80)
                                                                          ------------       ------------
                                                                                (5,947)            (6,228)
                                                                          ------------       ------------
                  Net deferred tax asset                                         8,716             11,474
               Valuation allowance on state net operating losses                 3,352              4,572
                                                                          ------------       ------------
                  Deferred tax asset, net                                 $      5,364              6,902
                                                                          ============       ============
</Table>

         At December 31, 2001, the Company had approximately $82,000,000 of
         operating loss carryforwards available for state income tax purposes.
         The state net operating losses expire in varying amounts between 2011
         and 2014.

         During 1997, the Company established a valuation allowance for the
         portion of the available state net operating loss carryforwards for
         which it was determined to be more likely than not that the benefit of
         the deferred tax asset would not be realized. Based on the current
         strategy of new management and current taxable income for the years
         ended December 31, 2001, 2000 and 1999, no valuation allowance for
         other deferred tax assets has been established as the Company believes
         it is more likely than not that sufficient income for federal income
         tax purposes will be realized.

         As a result of the Small Business Job Protection Act, the Company was
         required to change its method of accounting for bad debts from the
         reserve method to the direct charge-off method for


                                                  F-26               (Continued)
<Page>


                     LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                      Notes to Consolidated Financial Statements

                           December 31, 2001, 2000 and 1999


         income tax purposes during 1997. The Company is required to recapture
         the excess of the qualifying and nonqualifying tax loan loss reserves
         over the base year tax loan loss reserves over a six-year period,
         beginning in its tax year ended June 30, 1999. At December 31, 2001,
         the recapture amount is estimated to be $3,328,000 and the qualifying
         and nonqualifying base year tax reserves totaled approximately
         $10,647,000 and $1,421,000, respectively.

         In accordance with SFAS No. 109, ACCOUNTING FOR INCOME TAXES, a
         deferred tax liability has not been recognized for the tax bad debt
         reserve and supplemental reserves of the Company that arose in tax
         years that began prior to December 31, 1987. At December 31, 2001, the
         portion of the tax bad debt reserve and supplemental reserves
         attributable to pre-1988 tax years was approximately $15,921,000. The
         amount of unrecognized deferred tax liability at December 31, 2001 was
         approximately $5,572,000. This deferred tax liability could be
         recognized if certain distributions are made with respect to the stock
         of Local, or the bad debt reserve is used for any purpose other than
         absorbing bad debt losses.

(13)     COMMITMENTS AND CONTINGENCIES

         The Company is involved in litigation with the U.S. Government. The
         litigation relates to an assistance agreement entered into by the
         Company with the FDIC in connection with an acquisition of a federal
         savings bank in 1988. The FDIC estimated the Company's liability under
         the assistance agreement to be approximately $23 million as of December
         31, 2000 and such amount continues to accrue interest.

         Prior to the purchase of the Company in 1997 from its two prior owners,
         a reserve account was established relating to amounts that may be owed
         under the assistance agreement. This reserve account has a current
         balance of approximately $7.7 million. As part of the purchase of the
         Company in 1997, $10 million of the purchase price was deposited by the
         Company into an escrow account, which remains on deposit. Any amounts
         the Company may ultimately owe to the U.S. Government will be paid
         first from these two accounts. If the amounts in these two accounts are
         not sufficient to satisfy the Company's obligations to the U.S.
         Government, the prior owners have contractually agreed to pay the
         difference. Under the agreement with the prior owners, they may not
         settle the litigation with the U.S. Government unless, at the same
         time, the prior owners deliver sufficient funds to pay any difference
         owed to the U.S. Government. The U.S. Government rejected a
         settlement offer the Company made in 1999. A subsequent settlement
         offer was communicated by the Company to the U.S. Government in
         December 2001. The U.S. Government responded with a request for more
         information. The Company complied with their additional request and is
         waiting for the U.S. Government to accept or reject the new settlement
         offer. If the case is not settled and the U.S. Government obtains a
         final non-appealable judgment, the prior owners are contractually
         obligated to pay any difference owed to the U.S. Government within 30
         days of the judgment. No trial date has been set.

         On September 8, 1997, the Company completed a securities offering and
         Senior Notes were issued to individual investors for the purpose of
         redeeming all of the previously issued and outstanding shares of the
         Company's common stock. The redemption amount is subject to adjustment
         under terms set forth in the Redemption Agreement, as defined.


                                    F-27                             (Continued)
<Page>


                     LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                      Notes to Consolidated Financial Statements

                           December 31, 2001, 2000 and 1999


         On August 26, 1999, the Company entered into a settlement of the
         Redemption Agreement. As a consequence of the settlement of the
         Redemption Agreement, the Company's stockholders' equity was reduced by
         approximately $1,800,000 by an increase to the cost of treasury stock
         in the consolidated statements of financial condition in recognition of
         the agreed adjustments to the claims, liabilities and disputes which
         had arisen. Supplemental cash flow information of noncash activities as
         a consequence of the settlement were a transfer from other assets to
         other liabilities and treasury stock of approximately $5,712,000 and
         $1,838,000, respectively.

         In the ordinary course of business, the Company is subject to other
         legal actions and complaints. Management, after consultation with legal
         counsel, and based on available facts and proceedings to date, believes
         the ultimate liability, if any, arising from such legal actions or
         complaints, will not have a material adverse effect on the Company's
         consolidated financial position or future results of operations.

         Commitments to extend credit are agreements to lend to a customer as
         long as there is no violation of any condition established in the
         contract. Commitments generally have fixed expiration dates or other
         termination clauses and may require payment of a fee. The Company
         evaluates each customer's creditworthiness on a case-by-case basis. The
         amount of collateral obtained, if it is deemed necessary by the Company
         upon extension of credit, is based on management's credit evaluation of
         the counterparty. Collateral held varies but may include accounts
         receivable, inventory, property, plant and equipment, and
         income-producing commercial properties. At December 31, 2001 and 2000,
         the Company had approximately $292,542,000 and $232,813,000,
         respectively, of outstanding loan commitments (including unused lines
         of credit) for home equity, commercial real estate and commercial
         business loans approved but nonfunded.

         Standby letters of credit and financial guarantees written of
         approximately $7,228,000 and $17,633,000 at December 31, 2001 and 2000,
         respectively, are conditional commitments issued by the Company to
         guarantee the performance of a customer to a third party. Those
         guarantees are primarily issued to support public and private borrowing
         arrangements, including commercial paper, bond financing and similar
         transactions. The Company holds marketable securities as collateral
         supporting those commitments for which collateral is deemed necessary.









                                    F-28                             (Continued)

<Page>


                     LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                      Notes to Consolidated Financial Statements

                           December 31, 2001, 2000 and 1999


         The Company leases certain real estate and equipment under operating
         leases. For the years ended December 31, 2001, 2000 and 1999, lease
         expense totaled approximately $1,068,000, $891,000 and $1,094,000,
         respectively. Future obligations under operating leases at December 31,
         2001 are summarized as follows (dollars in thousands):


              YEARS ENDING DECEMBER 31,                         AMOUNT
                                                          ------------------
                      2002                                  $       1,054
                      2003                                            909
                      2004                                            676
                      2005                                            558
                      2006 and thereafter                           4,756
                                                            -------------
                                                            $       7,953
                                                            =============

(14)     REGULATORY MATTERS

         Local Financial and Local are subject to various regulatory capital
         requirements administered by the federal banking agencies. Failure to
         meet minimum capital requirements can initiate certain mandatory--and
         possible additional discretionary--actions by regulators that, if
         undertaken, could have a direct material effect on Local Financial's
         and Local's consolidated financial statements. Under capital adequacy
         guidelines and the regulatory framework for prompt corrective action,
         Local Financial and Local must meet specific capital guidelines that
         involve quantitative measures of Local Financial's and Local's assets,
         liabilities, and certain off-balance-sheet items as calculated under
         regulatory accounting practices. Local Financial's and Local's capital
         amounts and classification are also subject to qualitative judgments by
         the regulators about components, risk weightings, and other factors.

         Quantitative measures established by regulation to ensure capital
         adequacy require Local Financial and Local to maintain minimum amounts
         and ratios (set forth in the following table) of total and Tier I
         capital (as defined in the regulations) to risk-weighted assets (as
         defined), and of Tier I capital (as defined) to average assets (as
         defined). Management believes, as of December 31, 2001, that Local
         Financial and Local meet all capital adequacy requirements to which
         they are subject.

         As of December 31, 2001 and 2000, the most recent notification from the
         OCC and Federal Reserve categorized Local and Local Financial as well
         capitalized under the regulatory framework for prompt corrective
         action. To be categorized as well capitalized Local and Local Financial
         must maintain minimum total risk-based, Tier I risk-based, and Tier I
         leverage ratios as set forth in the table. There are no conditions or
         events since those notifications that management believes have changed
         Local's and Local Financial's category.






                                    F-29                             (Continued)
<Page>

<Table>
<Caption>
                                      LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                                       Notes to Consolidated Financial Statements

                                            December 31, 2001, 2000 and 1999


                                                                                             TO BE WELL CAPITALIZED
                                                                      MINIMUM FOR CAPITAL    FOR PROMPT CORRECTIVE
                                                    ACTUAL             ADEQUACY PURPOSES       ACTION PROVISIONS
                                            ----------------------- ------------------------ -----------------------
                                              AMOUNT      RATIO       AMOUNT       RATIO       AMOUNT      RATIO
                                            ----------- ----------- ------------ ----------- ----------- -----------
                                                                    (dollars in thousands)
          <S>                               <C>         <C>         <C>          <C>         <C>         <C>

          LOCAL FINANCIAL
          As of December 31, 2001:
             Total capital (to risk           $209,038       10.49%   $159,359         8.00%   $199,199       10.00%
              weighted assets)
             Tier I capital (to risk           184,105        9.24      79,680         4.00     119,519        6.00
              weighted assets)
             Tier I capital (to average        184,105        6.63     111,053         4.00     138,816        5.00
              assets)

          LOCAL
          As of December 31, 2001:
             Total capital (to risk           $226,794       11.41%   $159,006         8.00%   $198,757       10.00%
              weighted assets)
             Tier I capital (to risk           201,915       10.16      79,503         4.00     119,254        6.00
              weighted assets)
             Tier I capital (to average        201,915        7.28     110,990         4.00     138,737        5.00
              assets)

          LOCAL FINANCIAL
          As of December 31, 2000:
             Total capital (to risk           $156,653        9.00%   $139,314         8.00%   $174,143       10.00%
              weighted assets)
             Tier I capital (to risk           134,804        7.74      69,657         4.00     104,486        6.00
              weighted assets)
             Tier I capital (to average        134,804        5.61      96,198         4.00     120,248        5.00
              assets)

          LOCAL
          As of December 31, 2000:
             Total capital (to risk           $197,292       11.34%   $139,209         8.00%   $174,011       10.00%
              weighted assets)
             Tier I capital (to risk           175,459       10.08      69,604         4.00     104,406        6.00
              weighted assets)
             Tier I capital (to average        175,459        7.30      96,147         4.00     120,183        5.00
              assets)
</Table>

         Management intends to continue compliance with all regulatory capital
         requirements.

         Federal regulations allow Local to pay dividends during a calendar year
         up to the amount that would reduce its surplus capital ratio, as
         defined, to one-half of its surplus capital ratio at the beginning of
         the calendar year, adjusted to reflect its net income to date during
         the calendar year. At the beginning of calendar year 2002, under
         applicable regulations without prior consent of the OCC, the total
         capital available for the payment of dividends by Local to Local
         Financial was approximately $17,203,000.

(15)     STOCK COMPENSATION

         Effective with the securities offering and redemption in September
         1997, the Board of Directors adopted a stock option plan. The stock
         option plan has 2,100,370 shares of common stock authorized and
         provides for the granting of stock options intended to comply with the
         applicable requirements of the Internal Revenue Code. On September 8,
         1997, non-qualified stock options


                                                       F-30          (Continued)
<Page>


                                   LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                                    Notes to Consolidated Financial Statements

                                         December 31, 2001, 2000 and 1999


         for 1,116,005 shares of common stock were granted to executive
         officers of the Company at an exercise price of $10 per share. On
         December 31, 1997, incentive stock options for 158,000 shares of
         common stock were granted to officers and compensatory stock options
         for 60,000 shares of common stock were granted to directors of the
         Company at an exercise price of $11.75 per share. During the year
         ended December 31, 1998, all previously issued options were rescinded
         and canceled in exchange for an equal number of options at an exercise
         price of $10 per share. An additional 15,000, 429,000 and 278,000
         shares were issued at $10 per share during 2001, 2000 and 1999,
         respectively. During the years ended December 31, 2001, 2000 and 1999,
         0, 16,000 and 3,000 shares, respectively, were forfeited. Stock
         options to buy 1,301,005 and 799,000 shares of common stock shall be
         exercisable in three and five equal annual installments, respectively,
         commencing with the end of the first twelve month period following the
         date the stock options were granted. The stock options expire ten
         years from the effective dates of the respective option agreements.

         The per share weighted-average fair value of stock options granted for
         the years ended December 31, 2001, 2000 and 1999 was $5.67, $2.28 and
         $4.07, respectively, on the date of grant using the Black-Scholes
         option-pricing model with the following assumptions: risk-free interest
         rate of 4.30%, 4.97% and 6.34%, respectively, volatility rate of
         37.06%, 9.13% and 32.96%, respectively, expected life of 5 years for
         each period, and no expected dividend yield.

         The Company applies APB Opinion No. 25 and related interpretations in
         accounting for its stock option plan. Accordingly, no compensation cost
         has been recognized for its stock option rights. Had the Company
         determined compensation cost based on the fair value at the grant date
         for its stock options under SFAS No. 123, ACCOUNTING FOR STOCK BASED
         COMPENSATION, the Company's net income for the years ended December 31,
         2001, 2000 and 1999 would have been decreased to the pro forma amounts
         below.

<Table>
<Caption>
                                                                           YEARS ENDED DECEMBER 31,
                                                               -------------------------------------------------
                                                                    2001             2000            1999
                                                               ---------------- --------------- ----------------
          <S>                                   <C>            <C>              <C>             <C>

          Net income (in thousands)             as reported      $     26,477     $     23,814    $     21,992
                                                pro forma              26,005           22,934          21,296

          Basic net income per share            as reported              1.30             1.16            1.07
          Diluted net income per share          as reported              1.26             1.16            1.07

          Basic net income per share            pro forma                1.28             1.12            1.04
          Diluted net income per share          pro forma                1.24             1.12            1.04
</Table>

         Stock options of 2,100,005 were outstanding at December 31, 2001, with
         an exercise price of $10 and contractual life of outstanding options of
         7.25 years. Stock options of 2,085,005 and 1,672,005, with an exercise
         price of $10 and contractual life of outstanding options of 8.2 and 8.8
         years, were outstanding at December 31, 2000 and 1999, respectively. At
         December 31, 2001, 1,562,275 options were exercisable compared to
         1,328,674 at December 31, 2000 and 849,270 at December 31, 1999.


                                                     F-31            (Continued)
<Page>


                     LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                      Notes to Consolidated Financial Statements

                           December 31, 2001, 2000 and 1999

         In connection with the securities offering discussed in Note 13,
         warrants to buy 591,000 shares of common stock of the Company were
         issued to the placement agent. During 2001, 2,000 warrants were
         exercised for proceeds of $19,000. In addition, the Company purchased
         335,667 warrants during the year at a cost of approximately $1,000,000.
         As of December 31, 2001, warrants totaling 253,333 remain outstanding.
         The warrants are exercisable for a five year period ending September 8,
         2002, at an exercise price of $10 per share.

(16)     EMPLOYEE BENEFITS

         On November 1, 1999, the Company established a nonleveraged employee
         stock ownership plan (the ESOP Plan) that covers substantially all of
         its full-time employees. Contributions to the ESOP Plan are
         discretionary as determined by the Board of Directors of the Company.
         Contributions shall be allocated and credited to those participants who
         accrue credited service for such plan year and who are employed on the
         last day of the plan year. Contributions will be allocated to
         participants in the ratio in which each participant's compensation
         bears to the total compensation of all participants. In December 1999,
         the Board of Directors of the Company declared and paid a cash
         contribution to the ESOP Plan of approximately $2,700,000 which is
         included in compensation and employee benefits in the accompanying
         consolidated statements of operations. In 2000, the Board of Directors
         of the Company declared and paid a cash contribution of $3,819,000
         which is included in compensation and employee benefits in the
         accompanying consolidated statements of financial operations. The ESOP
         Plan held no common stock of the Company as of December 31, 1999.
         Common stock of the Company amounting to 189,920 shares was credited to
         plan participants effective December 31, 2000, and an additional 48,305
         shares effective December 31, 2001.

         The Company had a retirement plan (the Plan), which was a
         noncontributory defined benefit pension plan, covering substantially
         all of its full-time employees. The benefits were based on years of
         service and the employees' compensation during the last five years of
         employment. No contributions were made during the year ended December
         31, 1999 as the Plan was overfunded. In September 1999, the Company
         adopted a plan to freeze the accrual of benefits under the Plan,
         effective October 31, 1999, and terminate the plan. Termination of the
         Plan was completed in 2000. Upon termination, the assets held by the
         Plan's trustee were distributed to Plan participants or beneficiaries
         in the order provided by the Employee Retirement Income Security Act of
         1974 with the excess distributed to the Company. As a result of the
         Plan amendment and termination of the Plan, a curtailment gain of
         approximately $2,734,000 was recognized for the year ended December 31,
         1999 and a settlement gain of approximately $3,634,000, net of excise
         taxes of $1,642,000, was recognized for the year ended December 31,
         2000 and is included in compensation and employee benefits in the
         accompanying consolidated statements of operations.





                                    F-32                             (Continued)
<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         The following table sets forth the Plan's funded status and amounts
         recognized in the Company's consolidated statements of financial
         condition and operations for the periods indicated (dollars in
         thousands):

<Table>
<Caption>

                                                                              YEARS ENDED DECEMBER 31,
                                                                        -------------------------------------
                                                                              2000               1999
                                                                        -----------------  ------------------
          <S>                                                           <C>                <C>
          CHANGE IN BENEFIT OBLIGATION
          Benefit obligation at beginning of period                       $     11,087             12,141
          Service cost                                                               -                713
          Interest cost                                                            335                647
          Recognized net gain from past experience
             different from that assumed                                         4,759                277
          Plan amendment                                                             -                459
          Curtailment gain                                                           -             (2,734)
          Settlement gain                                                       (5,276)                 -
          Benefits paid                                                        (10,905)              (416)
                                                                          ------------       ------------

          Benefit obligation at end of period                                        -             11,087
                                                                          ------------       ------------

          CHANGE IN PLAN ASSETS
          Fair value of plan assets at beginning of period                      20,950             19,944
          Actual return on plan assets                                             903              1,422
          Benefits paid                                                        (10,905)              (416)
          Assets reverted back to the Company                                  (10,948)                 -
                                                                          ------------       ------------

          Fair value of plan assets at end of plan period                            -             20,950
                                                                          ------------       ------------

          Funded status                                                              -              9,863
          Unrecognized net gain from past experience
             different from that assumed                                             -             (5,012)
          Unrecognized transition asset being recognized
             over 15 years                                                           -                (56)
                                                                          ------------       ------------

          Prepaid benefit cost                                            $          -              4,795
                                                                          ============       ============

          COMPONENTS OF NET PERIODIC PENSION BENEFIT
          Service cost                                                    $          -                713
          Interest cost                                                            335                647
          Expected return on plan assets                                        (1,156)            (1,580)
          Net amortization and deferral                                            (56)              (765)
          Curtailment gain                                                           -             (2,734)
          Settlement gain                                                       (5,276)                 -
          Plan amendment                                                             -                459
                                                                          ------------       ------------

          Net periodic pension benefit                                    $     (6,153)            (3,260)
                                                                          ============       ============

</Table>

         The Company has a qualified, contributory 401(k) plan. Eligible
         employees of the Company may elect to defer a portion of their salary
         and contribute to the 401(k) plan to fund retirement

                                      F-33                           (Continued)
<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         benefits. Prior to October 1, 2001, the Company did not participate
         with matched or fixed contributions to the 401(k) plan. Effective
         October 1, 2001, the 401(k) plan was amended to allow Company
         matching contributions of 100% of a participant's elective 401(k)
         deferral not to exceed 2% of a participant's eligible compensation.
         The cost of this benefit for the year ended December 31, 2001 was
         approximately $125,000.

(17)     FAIR VALUE OF FINANCIAL INSTRUMENTS

         SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
         requires that the Company disclose estimated fair values for its
         financial instruments. Fair value estimates, methods and assumptions
         set forth below for the Company's financial instruments, are made
         solely to comply with the requirements of SFAS No. 107.

         Fair values are based on estimates or calculations at the transaction
         level using present value techniques in instances where quoted market
         prices are not available. Because broadly traded markets do not exist
         for most of the Company's financial instruments, the fair value
         calculations attempt to incorporate the effect of current market
         conditions at a specific time. Fair valuations are management's
         estimates of the values, and they are often calculated based on current
         pricing policy, the economic and competitive environment, the
         characteristics of the financial instruments, expected losses and other
         such factors. These calculations are subjective in nature, involve
         uncertainties and matters of significant judgment and do not include
         tax ramifications; therefore, the results cannot be determined with
         precision, substantiated by comparison to independent markets and may
         not be realized in an actual sale or immediate settlement of the
         instruments. The Company has not included certain material items in its
         disclosure, such as the value of the long-term relationships with the
         Company's depositors, since this intangible is not a financial
         instrument. There may be inherent weaknesses in any calculation
         technique, and changes in the underlying assumptions used, including
         discount rates and estimates of future cash flows, could significantly
         affect the results. For all of these reasons, the aggregation of the
         fair value calculations presented herein do not represent, and should
         not be construed to represent, the underlying value of the Company







                                      F-34                           (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         The following table presents a summary of the Company's financial
         instruments, as defined by SFAS No. 107 (dollars in thousands):


<Table>
<Caption>

                                                     DECEMBER 31, 2001                  DECEMBER 31, 2000
                                             ----------------------------------  ---------------------------------
                                                CARRYING          ESTIMATED         CARRYING         ESTIMATED
                                                 VALUE           FAIR VALUE          VALUE          FAIR VALUE
                                             ----------------  ----------------  ---------------  ----------------
          <S>                                <C>               <C>               <C>              <C>
          Financial Assets
             Cash and cash equivalents         $     60,491            60,491            43,971           43,971
             Securities available for sale          193,736           193,736           354,048          354,048
             Securities held to maturity            430,956           432,978                 -                -
             Loans receivable, net                1,972,145         2,011,547         1,848,876        1,847,248
             FHLB stock and FRB stock                42,213            42,213            19,417           19,417

          Financial Liabilities
             Deposits                             1,809,362         1,820,931         1,931,793        1,933,127
             Advances from the FHLB                 728,205           749,115           190,028          189,914
             Securities sold under
               agreements to repurchase              38,694            38,694            38,214           38,214
             Senior notes                            21,545            23,509            41,160           39,930
             Mandatorily redeemable trust
               preferred securities                  40,250            40,475                 -                -

</Table>

         The following are descriptions of the methods used to determine the
         estimated fair values:

         (a)      CASH AND CASH EQUIVALENTS

                  The carrying amount is a reasonable estimate of fair value
                  because of the relatively short period of time between the
                  origination of the instrument and its expected realization.

         (b)      SECURITIES

                  The fair value of investment securities, except certain
                  municipal securities, is estimated based on bid prices
                  published by financial news services or price quotations
                  received from securities dealers. The fair value of certain
                  municipal securities is not readily available through market
                  sources other than dealer quotations, so fair value estimates
                  are based on quoted market prices of similar instruments,
                  adjusted for differences between the quoted instruments and
                  the instruments being valued. The estimated fair value of FHLB
                  and FRB stock approximates the carrying value as of December
                  31, 2001 and 2000.

         (c)      LOANS

                  The fair valuation calculation process differentiates loans
                  based on their financial characteristics, such as product
                  classification, loan category, pricing features and remaining
                  maturity. Prepayment estimates are evaluated by product and
                  loan rate. In


                                      F-35                           (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


                  establishing the credit risk component of the fair value
                  calculations for loans, the Company considered several
                  approaches, including the use of variable discount rates
                  based on relative credit quality, forecasting cash flows, net
                  of projected losses and secondary market pricing for certain
                  third party loan sale transactions. After evaluating such
                  information, the Company concluded that the allowance for loan
                  losses represented a reasonable estimate of the credit risk
                  component of the fair value of loans at December 31, 2001 and
                  2000.

                  The fair value of commercial real estate loans, other real
                  estate mortgage loans, real estate construction loans, and
                  commercial business loans is calculated by discounting
                  contractual cash flows adjusted for prepayment estimates using
                  discount rates that reflect the Company's current pricing for
                  loans with similar characteristics and remaining maturity.

                  For real estate single family first and junior lien mortgages,
                  fair value is calculated by discounting contractual cash
                  flows, adjusted for prepayment estimates, using discount rates
                  based on the Company's current pricing for loans of similar
                  size, type, remaining maturity and repricing characteristics.

                  For other consumer loans, the fair value is calculated by
                  discounting the contractual cash flows, adjusted for
                  prepayment estimates, using discount rates based on the
                  Company's current pricing for loans of similar size, type, and
                  remaining maturity.

         (d)      DEPOSIT LIABILITIES

                  SFAS No. 107 states that the fair value of deposits with no
                  stated maturity, such as noninterest-bearing demand deposits,
                  interest-bearing checking and savings deposits and market rate
                  savings, is equal to the amount payable on demand at the
                  measurement date. Although SFAS No. 107's requirements for
                  these categories are not consistent with the market practice
                  of using prevailing interest rates to value these amounts, the
                  amount included for these deposits in the previous table is
                  their carrying value at December 31, 2001 and 2000. The fair
                  value of certificates of deposit and other time deposits is
                  calculated based on the discounted value of contractual cash
                  flows. The discount rate is estimated using the rates
                  currently offered for similar duration deposits.

         (e)      ALL OTHER LIABILITIES

                  The estimated fair value of FHLB advances is provided by the
                  FHLB of Topeka. For securities sold under agreements to
                  repurchase, the carrying amount is a reasonable estimate of
                  fair value. The estimated fair value of Senior Notes and the
                  Trust Preferred Securities is based on current quoted market
                  prices. Commitments are related primarily to variable rate
                  loans originated at current market rates. The estimate of fair
                  value of these commitments is considered to be immaterial.


                                      F-36                           (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


         (f)      LIMITATIONS

                  The information presented in this note is based on market
                  quotes and fair value calculations as of December 31, 2001 and
                  2000. These amounts have not been updated since these dates;
                  therefore, the valuations may have changed since that point in
                  time.


























                                      F-37                           (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(18)     SUPPLEMENTAL QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

         Following is a summary of the unaudited interim results of operations
         for the years ended December 31, 2001 and 2000 (dollars in thousands,
         except per share data):


<Table>
<Caption>

                                                      FIRST       SECOND        THIRD       FOURTH         FULL
                           2001                      QUARTER      QUARTER      QUARTER      QUARTER        YEAR
          ---------------------------------------- ------------ ------------ ------------ ------------ -------------
          <S>                                      <C>          <C>          <C>          <C>          <C>
          Interest and dividend income               $  48,891       47,949       47,892       48,406      193,138
          Net interest and dividend income           $  20,645       21,311       22,392       24,146       88,494
          Provision for loan losses                  $     750        1,150        1,775        1,725        5,400
          Income before provision for income
             taxes and extraordinary item            $  10,046       10,524       10,833       11,071       42,474
          Extraordinary item-purchase and
             retirement of senior notes, net of
             tax                                     $      (3)          (1)           -       (1,626)      (1,630)
          Net income                                 $   6,772        7,051        7,194        5,460       26,477

          Earnings per share:
             Income before extraordinary item
               Basic                                 $    0.33         0.34         0.35         0.36         1.38
               Diluted                               $    0.32         0.33         0.34         0.35         1.34
             Net income
               Basic                                 $    0.33         0.34         0.35         0.27         1.30
               Diluted                               $    0.32         0.33         0.34         0.27         1.26



                                                      FIRST       SECOND        THIRD       FOURTH         FULL
                           2000                      QUARTER      QUARTER      QUARTER      QUARTER        YEAR
          ---------------------------------------- ------------ ------------ ------------ ------------ -------------
          Interest and dividend income               $  45,800       45,526       47,887       50,989      190,202
          Net interest and dividend income           $  19,038       19,012       19,472       20,828       78,350
          Provision for loan losses                  $     500          500          500        1,200        2,700
          Income before provision for income
             taxes and extraordinary item            $   9,361        9,425        9,657       10,624       39,067
          Extraordinary item-purchase and
             retirement of senior notes, net of
             tax                                     $    (871)           -            -          (51)        (922)
          Net income                                 $   5,109        6,020        6,161        6,524       23,814

          Earnings per share:
             Income before extraordinary item
               Basic                                 $    0.29         0.29         0.30         0.32         1.20
               Diluted                               $    0.29         0.29         0.30         0.32         1.20
             Net income
               Basic                                 $    0.25         0.29         0.30         0.32         1.16
               Diluted                               $    0.25         0.29         0.30         0.31         1.16

</Table>


                                      F-38                           (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999


(19)     PARENT COMPANY FINANCIAL INFORMATION

         Condensed financial information for Local Financial Corporation is as
         follows (dollars in thousands):


                                       STATEMENTS OF FINANCIAL CONDITION


<Table>
<Caption>

                                                                                 DECEMBER 31,
                                                                     -----------------------------------
                                                                           2001               2000
                                                                     ----------------   ----------------
                   <S>                                               <C>                <C>
                   Assets:
                      Cash and due from banks                          $        236                269
                      Investment in subsidiaries                            224,772            196,926
                      Other assets                                            2,432              1,769
                                                                       ------------       ------------

                        Total assets                                   $    227,440            198,964
                                                                       ============       ============

                   Liabilities and stockholders' equity:
                      Senior notes                                     $     21,545             41,160
                      Other liabilities                                      42,359              1,533
                                                                       ------------       ------------

                        Total liabilities                                    63,904             42,693
                                                                       ------------       ------------

                      Common stock                                              205                205
                      Additional paid-in capital                            205,773            206,758
                      Retained earnings                                     122,480             96,003
                      Treasury stock                                       (169,031)          (151,274)
                      Accumulated other comprehensive
                        income, net                                           4,109              4,579
                                                                       ------------       ------------

                        Total stockholders' equity                          163,536            156,271
                                                                       ------------       ------------

                        Total liabilities and stockholders' equity     $    227,440            198,964
                                                                       ============       ============

</Table>







                                      F-39                           (Continued)

<Page>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2001, 2000 and 1999




                                               STATEMENTS OF OPERATIONS


<Table>
<Caption>

                                                                            YEARS ENDED DECEMBER 31,
                                                            ---------------------------------------------------------
                                                                  2001                2000               1999
                                                            ------------------  -----------------  ------------------
          <S>                                               <C>                 <C>                <C>
          Income:
             Dividend income from subsidiaries                $      6,431              36,825              7,900
             Equity in undistributed earnings
               (excess distribution) of subsidiaries                25,122              (7,937)            20,936
             Other                                                       -                   -                171
                                                              ------------        ------------       ------------

                 Total income                                       31,553              28,888             29,007

          Expense:
             Interest expense                                        5,346               6,033              9,310
             Compensation and employee benefits                        104                  70                115
             Other                                                     476                 342                879
                                                              ------------        ------------       ------------

                 Total expense                                       5,926               6,445             10,304

          Income before benefit for income taxes
             and extraordinary item                                 25,627              22,443             18,703
          Benefit for income taxes                                  (2,480)             (2,293)            (3,546)
                                                              ------------        ------------       ------------

                 Income before extraordinary item                   28,107              24,736             22,249
          Extraordinary item, net of tax                            (1,630)               (922)              (257)
                                                              ------------        ------------       ------------

                 Net income                                   $     26,477              23,814             21,992
                                                              ============        ============       ============

</Table>






                                      F-40                           (Continued)

<Page>

                              LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                               Notes to Consolidated Financial Statements

                                    December 31, 2001, 2000 and 1999




                                       STATEMENTS OF CASH FLOWS


<Table>
<Caption>

                                                                            YEARS ENDED DECEMBER 31,
                                                            ---------------------------------------------------------
                                                                  2001                2000               1999
                                                            ------------------  -----------------  ------------------
<S>                                                         <C>                 <C>                <C>
Cash provided (absorbed) by operating activities
   Net income                                                 $     26,477              23,814             21,992
   Adjustments to reconcile net income to net
     cash provided (absorbed) by operating activities:
       Equity in (undistributed earnings) excess
         distribution of subsidiaries                              (25,122)              7,937            (20,936)
       Change in other liabilities                                    (669)             (1,307)              (580)
       Change in other assets                                         (663)              2,090              4,320
                                                              ------------        ------------       ------------

Net cash provided by operating activities                               23              32,534              4,796

Cash absorbed by investing activities:
   Investment in subsidiaries                                       (3,194)                  -               (240)
                                                              ------------        ------------       ------------

Net cash absorbed by investing activities                           (3,194)                  -               (240)

Cash provided (absorbed) by financing activities:
   Proceeds from issuance of common stock                               19                   -                  -
   Purchase of treasury stock                                      (17,757)                  -                  -
   Purchase of senior notes                                        (19,615)            (34,090)            (4,750)
   Proceeds from issuance of junior subordinated                                             -                  -
     debentures                                                     41,495
   Purchase of stock warrants                                       (1,004)                  -                  -
                                                              ------------        ------------       ------------

Net cash provided (absorbed) by financing activities                 3,138             (34,090)            (4,750)

Net change in cash and cash equivalents                                (33)             (1,556)              (194)
Cash and cash equivalents at beginning of year                         269               1,825              2,019
                                                              ------------        ------------       ------------

Cash and cash equivalents at end of year                      $        236                 269              1,825
                                                              ============        ============       ============

</Table>



                                                  F-41