<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-Q


[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the quarter ended September 30, 1999

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the transition period from                   to
                                        -----------------    -----------------

                             Commission File Number:
                                    001-13949

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

<TABLE>
       <S>                                                <C>
                  DELAWARE                                     65-0424192
       (State or other jurisdiction of                      (I.R.S. Employer
       incorporation or organization)                      Identification No.)

         3601 N.W. 63RD, OKLAHOMA CITY, OK                       73116
         ---------------------------------                     ---------
         (Address of principal executive offices)              (Zip Code)
</TABLE>

         Registrant's telephone number, including area code:   (405) 841-2298

         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 [ ]

         Number of shares outstanding of the registrant's $0.01 par value common
         stock as of November 15, 1999 were as follows:

                                NUMBER OF SHARES
                          -----------------------------
                                   20,537,209

<PAGE>   2

                           LOCAL FINANCIAL CORPORATION
                                      INDEX

<TABLE>
<CAPTION>
                                                                           PAGE

<S>                                                                       <C>
PART I.  FINANCIAL INFORMATION

     Item 1.      Financial Statements

                  Consolidated Statements of Financial Condition-
                  September 30, 1999 (unaudited) and December 31, 1998........1

                  Consolidated Statements of Operations-
                  For the Three Months and Nine Months Ended
                  September 30, 1999 and 1998 (unaudited).....................2

                  Consolidated Statements of Cash Flows-
                  For the Nine Months Ended September 30, 1999 and 1998
                  (unaudited).................................................3

                  Notes to Consolidated Financial Statements..................4

     Item 2.      Management's Discussion and Analysis of Financial Condition
                  and Results of Operations...................................7

     Item 3.      Quantitative and Qualitative Disclosures about Market
                  Risk.......................................................15

PART II. OTHER INFORMATION

     Item 1.      Legal Proceedings..........................................15

     Item 6.      Exhibits and Reports on Form 8-K...........................16

Signatures        ...........................................................18

Index to Exhibits ...........................................................19
</TABLE>

<PAGE>   3

PART 1.       FINANCIAL INFORMATION
ITEM 1.       FINANCIAL STATEMENTS


                   LOCAL FINANCIAL CORPORATION AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    (Dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                          September 30, 1999  December 31, 1998
                                                                          ------------------  -----------------
                                                                             (unaudited)
<S>                                                                        <C>                  <C>
                                ASSETS
Cash and due from banks                                                     $    48,616          $    27,180
Interest bearing deposits with other banks                                        3,100               27,700
Securities available for sale                                                   449,858              570,964
Loans receivable, net of allowance for loan losses of $28,530 at
   September 30, 1999 and $27,901 at December 31, 1998                        1,642,058            1,362,272
Federal Home Loan Bank of Topeka stock
   and Federal Reserve Bank stock, at cost                                       29,216               42,693
Premises and equipment, net                                                      30,571               23,959
Assets acquired through foreclosure and repossession, net                           705                  693
Intangible assets, net                                                           16,513               17,843
Deferred tax asset, net                                                          12,364               10,959
Current income taxes receivable                                                   2,198               18,291
Other assets                                                                     26,644               26,425
                                                                            -----------          -----------

       Total assets                                                         $ 2,261,843          $ 2,128,979
                                                                            ===========          ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Deposits:
     Demand                                                                 $   435,288          $   379,796
     Savings                                                                     73,689               74,963
     Time                                                                     1,215,714            1,213,315
                                                                            -----------          -----------

       Total deposits                                                         1,724,691

Advances from the Federal Home Loan Bank of Topeka                              302,894              220,033
Senior notes                                                                     76,750               80,000
Other liabilities                                                                32,739               42,066
                                                                            -----------          -----------

       Total liabilities                                                      2,137,074            2,010,173
                                                                            -----------          -----------

Commitments and contingencies

Stockholders' equity:
   Common stock, $0.01 par value, 25,000,000 shares authorized; 20,537,269
     shares issued and 20,537,209 shares outstanding at
     September 30, 1999 and December 31, 1998                                       205                  205
   Preferred stock, $0.01 par value, 5,000,000 shares authorized;
     none outstanding                                                                --                   --
   Additional paid-in capital                                                   206,758              206,758
   Retained earnings                                                             66,438               50,197
   Treasury stock, 60 shares, at cost                                          (151,274)            (149,436)
   Accumulated other comprehensive income                                         2,642               11,082
                                                                            -----------          -----------

       Total stockholders' equity                                               124,769              118,806
                                                                            -----------          -----------

       Total liabilities and stockholders' equity                           $ 2,261,843          $ 2,128,979
                                                                            ===========          ===========
</TABLE>

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


                                       1
<PAGE>   4

                   LOCAL FINANCIAL CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (Dollars in thousands, except share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                            Three Months Ended           Nine Months Ended
                                                               September 30,               September 30,
                                                      -----------------------------  ---------------------------
                                                          1999            1998           1999           1998
                                                      ------------    -------------  ------------   ------------
<S>                                                    <C>            <C>            <C>           <C>
Interest and dividend income:
   Loans                                               $     33,868   $     23,754   $     95,288   $     68,652
   Securities available for sale                              9,100         11,572         25,558         31,230
   Federal Home Loan Bank of Topeka
     and Federal Reserve Bank stock                             492            918          1,701          2,659
   Other investments                                            148            142            728          4,361
                                                       ------------   ------------   ------------   ------------
Total interest and dividend income                           43,608         36,386        123,275        106,902
                                                       ------------   ------------   ------------   ------------

Interest expense:
   Deposit accounts                                          16,936         17,797         50,849         56,196
   Advances from the Federal Home Loan Bank of Topeka         5,257          2,187         11,107          5,024
   Securities sold under agreements to repurchase                --             --             --            251
   Notes payable                                              2,333          2,367          7,059          7,107
                                                       ------------   ------------   ------------   ------------
Total interest expense                                       24,526         22,351         69,015         68,578
                                                       ------------   ------------   ------------   ------------

Net interest and dividend income                             19,082         14,035         54,260         38,324
   Provision for loan losses                                   (500)          (500)        (1,500)          (950)
                                                       ------------   ------------   ------------   ------------
Net interest and dividend income after provision for
   loan losses                                               18,582         13,535         52,760         37,374
                                                       ------------   ------------   ------------   ------------


Noninterest income:
   Deposit related income                                     3,415          2,495          9,987          6,968
   Loan fees and loan service charges                           719            546          2,079          1,438
   Net gains on sale of assets                                  356            176            902            535
   Other                                                        231            335            815          1,218
                                                       ------------   ------------   ------------   ------------
Total noninterest income                                      4,721          3,552         13,783         10,159
                                                       ------------   ------------   ------------   ------------

Noninterest expense:
   Compensation and employee benefits                         7,155          4,466         21,077         12,096
   Deposit insurance premiums                                   200            332            679          1,015
   Equipment and data processing                              1,675            968          4,372          2,505
   Occupancy                                                  1,076            743          3,007          2,061
   Advertising                                                  405            546          1,063          1,368
   Professional fees                                            697            433          1,871          1,398
   Other                                                      3,107          2,201          8,723          6,160
                                                       ------------   ------------   ------------   ------------
Total noninterest expense                                    14,315          9,689         40,792         26,603
                                                       ------------   ------------   ------------   ------------

Income before income taxes and extraordinary item             8,988          7,398         25,751         20,930

   Provision for income taxes                                 3,251          2,673          9,328          7,431
                                                       ------------   ------------   ------------   ------------

Income before extraordinary item                              5,737          4,725         16,423         13,499

Extraordinary item - purchase and retirement of
   senior notes, net of tax                                    (182)            --           (182)            --
                                                       ------------   ------------   ------------   ------------

Net income                                             $      5,555   $      4,725   $     16,241   $     13,499
                                                       ============   ============   ============   ============

Earnings per share:
   Income before extraordinary item
     Basic                                             $       0.28   $       0.23   $       0.80   $       0.66
                                                       ============   ============   ============   ============
     Diluted                                           $       0.28   $       0.23   $       0.80   $       0.66
                                                       ============   ============   ============   ============

   Net income
     Basic                                             $       0.27   $       0.23   $       0.79   $       0.66
                                                       ============   ============   ============   ============
     Diluted                                           $       0.27   $       0.23   $       0.79   $       0.66
                                                       ============   ============   ============   ============

Average shares outstanding
     Basic                                               20,537,209     20,537,209     20,537,209     20,396,141
                                                       ============   ============   ============   ============
     Diluted                                             20,537,209     20,620,627     20,537,209     20,560,292
                                                       ============   ============   ============   ============
</TABLE>

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


                                       2
<PAGE>   5
                   LOCAL FINANCIAL CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                Nine Months Ended September 30,
                                                                               --------------------------------
                                                                                   1999                1998
                                                                               ------------        ------------
                                                                                        (unaudited)
<S>                                                                            <C>          <C>
CASH PROVIDED BY OPERATING ACTIVITIES:

Net income                                                                     $    16,241         $    13,499
Adjustments to reconcile net income to net cash provided by operating
activities-
   Provisions for losses on loans                                                    1,500                 950
   Deferred income tax expense                                                       9,230               8,436
   Accretion of discounts on loans acquired                                         (1,075)             (2,008)
   Net amortization (accretion) of premium on securities available for              (2,472)             (3,943)
    sale
   Depreciation and amortization                                                     3,033               2,336
   Net change in loans held for sale                                                11,416               4,943
   Net gain on sale of assets                                                         (902)               (535)
   Stock dividends received from Federal Home Loan Bank                             (1,613)             (2,659)
   Change in other assets                                                            7,944              21,858
   Change in other liabilities                                                     (14,144)             (2,927)
                                                                               -----------         -----------

       Net cash provided by operating activities                                    29,158              39,950
                                                                               -----------         -----------

CASH PROVIDED (ABSORBED) BY INVESTING ACTIVITIES:

   Proceeds from sales of securities available for sale                            152,814              37,499
   Proceeds from principal collections on securities available for sale            215,738             147,174
   Purchases of securities available for sale                                     (257,849)           (226,357)
   Purchases of repurchase agreements                                                   --          (1,139,462)
   Proceeds from maturity of repurchase agreements                                      --           1,317,462
   Purchases of Federal Home Loan Bank and Federal Reserve Bank stock               (4,318)                 --
   Proceeds from the sale of Federal Home Loan Bank stock                           19,408                  --
   Change in loans receivable, net                                                (291,604)            (96,247)
   Proceeds from disposal of assets acquired through foreclosure and                 1,118                 382
    repossession
   Purchases of premises and equipment                                              (9,109)             (2,922)
   Proceeds from sales of premises and equipment                                       435                  35
   Cash acquired in acquisition of Green Country Banking Corporation                    --               2,512
   Cash paid in acquisition of BankSouth Corporation, net of cash and
    cash
     Equivalents received                                                               --             (12,288)
                                                                               -----------         -----------

       Net cash provided (absorbed) by investing activities                       (173,367)             27,788
                                                                               -----------         -----------

CASH PROVIDED (ABSORBED) BY FINANCING ACTIVITIES:

   Change in transaction accounts                                                   54,218               7,494
   Change in time deposits                                                           2,399            (163,145)
   Proceeds from advances from the Federal Home Loan Bank                          509,783             869,415
   Repayments of advances from the Federal Home Loan Bank                         (426,922)           (787,607)
   Payment of liability assumed from Green Country Banking Corporation                  --              (3,162)
   Change in advances by borrowers for taxes and insurance                           4,817               4,078
   Principal payments of senior notes                                               (3,250)                 --
                                                                               -----------         -----------

       Net cash provided (absorbed) by financing activities                        141,045             (72,927)
                                                                               -----------         -----------

Net change in cash and cash equivalents                                             (3,164)             (5,189)

Cash and cash equivalents at beginning of period                                    54,880              54,152
                                                                               -----------         -----------

Cash and cash equivalents at end of period                                     $    51,716         $    48,963
                                                                               ===========         ===========

Supplemental disclosures of cashflow information:
   Cash paid (received) during the period for:
     Interest                                                                  $    70,167         $    61,687
                                                                               ===========         ===========
     Income taxes                                                              $   (11,857)        $   (11,405)
                                                                               ===========         ===========

Supplemental schedule of noncash investing and financing activities:
   Transfers of loans to assets acquired through foreclosure and               $     1,130         $       620
                                                                               ===========         ===========
repossession
   Transfers from other assets to treasury stock                               $     1,838         $        --
                                                                               ===========         ===========
</TABLE>

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


                                       3
<PAGE>   6

                   LOCAL FINANCIAL CORPORATION AND SUBSIDIARY


                   Notes to Consolidated Financial Statements

                    September 30, 1999 and December 31, 1998

(1)      BASIS OF PRESENTATION

         The accompanying unaudited Consolidated Financial Statements were
         prepared in accordance with the instructions for Form 10-Q and,
         therefore, do not include all disclosures necessary for a complete
         presentation of financial condition, results of operations, and cash
         flows in conformity with generally accepted accounting principles. All
         adjustments (consisting of only normal recurring adjustments) that are
         necessary, in the opinion of management, for a fair presentation of the
         interim financial statements have been included. The interim financial
         information should be read in conjunction with the audited Consolidated
         Financial Statements and Notes included in Local Financial Corporation
         and Subsidiary's (the "Company") Form 10-K for the period ended
         December 31, 1998 as filed with the Securities and Exchange Commission
         ("SEC").

(2)      LOANS RECEIVABLE

         Loans receivable are summarized below at amortized cost:

<TABLE>
<CAPTION>
                                             September 30, 1999    December 31, 1998
                                             ------------------    -----------------
                                                    (Dollars in Thousands)
<S>                                            <C>                    <C>
Residential real estate loans                  $   349,266            $   344,565

Commercial                                       1,166,033                927,682

Held for sale                                        4,772                 16,188

Consumer loans                                     150,517                101,738
                                               -----------            -----------

                  Total loans                    1,670,588              1,390,173
Less:
     Allowance for loan losses                     (28,530)               (27,901)
                                               -----------            -----------

                  Loans receivable, net        $ 1,642,058            $ 1,362,272
                                               ===========            ===========
</TABLE>

(3)      ADVANCES FROM THE FEDERAL HOME LOAN BANK OF TOPEKA ("FHLB")

         Advances from the FHLB are summarized as follows:

<TABLE>
<CAPTION>
                       September 30, 1999              December 31, 1998
               --------------------------------------- -----------------
                               Weighted                     Weighted
                               Average                      Average
                 Balance   Contractual Rate  Balance    Contractual Rate
               ----------- ---------------- ---------- -----------------
                              (Dollars in Thousands)
<S>            <C>         <C>              <C>        <C>
Variable rate  $   172,863          5.44%   $        --            --
Fixed rate         130,031          5.06        220,033          4.77%
               -----------   -----------    -----------   -----------

               $   302,894          5.27%   $   220,033          4.77%
               ===========   ===========    ===========   ===========
</TABLE>


                                       4
<PAGE>   7

         Although no specific assets are pledged, the FHLB requires the Company
         to hold eligible assets with a lending value, as defined, at least
         equal to FHLB advances, which can include such items as first mortgage
         loans, investment securities and interest bearing deposits which are
         not already pledged or encumbered.

         Scheduled principal repayments to the FHLB at September 30, 1999 are as
         follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                 WEIGHTED
                                                                  AVERAGE
                YEAR ENDING DECEMBER 31,         AMOUNT       CONTRACTUAL RATE
                                              -----------     ----------------
          <S>                                <C>              <C>
           1999                               $    32,863             5.90%
           2000                                    50,000             5.36
           2001                                         -                -
           2002                                    40,000             6.26
           2003 and thereafter                    180,031             4.92
                                              -----------

                                              $   302,894             5.27%
                                              ===========        =========
</TABLE>

(4)      COMPREHENSIVE INCOME

         Comprehensive income for the periods ended September 30, 1999 and 1998
consists of:

<TABLE>
<CAPTION>
                                                  Three Months Ended   Nine Months Ended
                                                    September 30,        September 30,
                                               ---------------------- ---------------------
                                                  1999        1998       1999       1998
                                               ----------  ---------- ---------   ---------
                                                         (Dollars in Thousands)
<S>                                             <C>        <C>         <C>        <C>
Net income                                      $  5,555   $  4,725    $ 16,241   $ 13,499

Other comprehensive income (loss), net of tax:
     Unrealized gains (losses) on securities,
       net of reclassification adjustment         (4,745)     6,995      (8,440)     7,807
                                                --------   --------    --------   --------

Comprehensive income                            $    810   $ 11,720    $  7,801   $ 21,306
                                                ========   ========    ========   ========
</TABLE>

(5)      NET INCOME PER SHARE

         Stock options and warrants to purchase 2,089,005 shares of common stock
         were outstanding as of September 30, 1999, but were not included in the
         computation of diluted net income per share because they are
         antidilutive.

(6)      SENIOR NOTES

         During the third quarter of 1999, the Company purchased and retired
         $3.25 million of Senior Notes which had been issued in connection with
         the Company's recapitalization in 1997. As a result, there is an
         extraordinary item charge to income amounting to $182,000, net of tax.


                                       5
<PAGE>   8

(7)      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"). The Bank, in
         turn, has one active operating subsidiary, Local Securities Corporation
         ("Local Securities"), 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".


                                       6
<PAGE>   9

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

GENERAL

         During the third quarter, the Company continued the strategic growth
initiatives which increased its commercial and consumer lending and expects
further increases in those areas. Also, during the third quarter, the Bank
received approval from the Office of Comptroller of the Currency for the merger
of Guthrie Federal Savings Bank, a federally chartered stock savings bank in
Guthrie, Oklahoma ("Guthrie Federal"), with the Bank being the surviving entity.
The merger was effective October 15, 1999. Guthrie Federal had assets, deposits
and shareholders' equity of $50.0 million, $35.0 million and $7.0 million,
respectively, as of September 30, 1999. 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.

         In this Form 10-Q, the Company, when discussing the future, may use
words like the words "anticipate", "believe", "estimate", "expect", "intend",
"should" and similar expressions, or the negative thereof. These words represent
forward-looking statements. In addition, any analysis of the adequacy of the
allowance for loan losses or the interest rate sensitivity of the Bank's assets
and liabilities represent attempts to predict future events and circumstances
and also represent forward-looking statements.

         Many factors could cause future results to differ from what is
anticipated in the forward-looking statements. For example, future financial
results could be affected by (i) the Bank's shift from a savings institution to
a commercial bank; (ii) deterioration in local, regional, national or global
economic conditions which could cause an increase in loan delinquencies or a
decrease in collateral values; (iii) changes in market interest rates or changes
in the speed at which market interest rates change; (iv) changes in laws and
regulations affecting the financial service industry; (v) changes in competition
and (vi) changes in consumer preferences.

         Please do not place unjustified or excessive reliance on any
forward-looking statements. They speak only as of the date made and are not
guarantees, promises or assurances of what will happen in the future. Various
factors, including those described above and those described in the Company's
Form S-1, as amended April 30, 1999, could affect the Company's financial
performance and could cause the Company's actual results or circumstances for
future periods to be materially different from what has been anticipated or
projected.

CHANGES IN FINANCIAL CONDITION FROM DECEMBER 31, 1998 TO SEPTEMBER 30, 1999

         During the nine months ended September 30, 1999, total assets increased
$132.9 million or 6.24%. The $132.9 million increase was due primarily to growth
in the Bank's loan portfolio. This loan growth, funded principally by paydowns
in the Bank's securities portfolio as well as FHLB advances, occurred most
significantly in the Bank's commercial and consumer loan portfolios where loan
balances during the nine months ended September 30, 1999 rose $238.3 million or
25.7% and $48.8 million or 48.0%, respectively.

         Total liabilities increased for the nine months ended September 30,
1999, primarily due to increases in FHLB advances and demand deposits which
increased $82.9 million or 37.7% and $55.5 million or 14.6%, respectively.
During the third quarter, the Company purchased and retired $3.25 million of
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.


                                        7
<PAGE>   10

         Total stockholders' equity increased $6.0 million during the nine
months ended September 30, 1999 which represented net income during the period
of $16.2 million adjusted for an $8.4 million decline in unrealized holding
gains on securities net of tax as well as a $1.8 million increase in Treasury
Stock resulting from settlement of outstanding litigation against the former
stockholders of the Company which represented an adjustment to the September
1997 price paid to redeem the previous owners' shares.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
SEPTEMBER 30, 1998 AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND
SEPTEMBER 30, 1998.

         Net Income. The Company reported income before extraordinary item of
$16.4 million or $0.80 basic earnings per share for the nine months ended
September 30, 1999 (based on 20.5 million average shares outstanding), compared
to net income of $13.5 million or $0.66 basic earnings per share (based on 20.4
million average shares outstanding) for the nine months ended September 30,
1998. Likewise, net income rose during the comparative three-month periods ended
September 30, 1999 and 1998 rising from $4.7 million or $0.23 basic earnings per
share for the three months ended September 30, 1998 to $5.7 million before
extraordinary item or $0.28 basic earnings per share for the three months ended
September 30, 1999 (based on 20.5 million average shares outstanding). The
extraordinary item charge to income amounting to $182,000, net of tax, occurred
in the third quarter as a result of the Company's purchase and retirement of
$3.25 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 totaled $54.3 million in the nine
months ended September 30, 1999 as compared to $38.3 million during the same
period in the prior year. Similarly, net interest and dividend income totaled
$19.1 million in the three months ended September 30, 1999 as compared to $14.0
million during the same period in the prior year. The $16.0 million and $5.1
million increases in net interest and dividend income during the comparative
nine and three month periods ended September 30, 1999, respectively, were due
primarily to the increases in the Company's total interest earning assets which
outpaced a similar increase in total interest-bearing liabilities coupled with
the declining costs of those liabilities.

         During both the nine and three month comparative periods ended
September 30, 1999 and September 30, 1998, the average yield of the Company's
interest-earning assets remained relatively stable while the average cost of the
Company's interest-bearing liabilities decreased resulting in a rise in the
Company's interest rate spread from 2.48% to 2.99% during the nine month
comparative periods and 2.65% to 3.07% during the three month comparative
periods. Accordingly, the Company's net interest margin, which is determined by
net interest income as a percentage of average total interest-earning assets,
increased 65 and 43 basis points, respectively, during the comparative nine and
three month periods.

         Interest Income. Total interest and dividend income increased by $16.4
million or 15.3% during the nine months ended September 30, 1999 as compared to
the same period in the prior year and rose by $7.2 million or 19.9% during the
three months ended September 30, 1999 as compared to the same period in the
prior year.

         The increases in interest income during both the nine and three month
comparative periods were due primarily to the growth in the Bank's commercial
loan portfolio where balances rose from $927.7 million at December 31, 1998 to
$1.2 billion at September 30, 1999. The full interest income effect of


                                       8
<PAGE>   11

this loan growth was partially offset by reductions in the average balance of
the Bank's securities portfolio and, to a lesser extent, a reduction in the
yields received on the securities portfolio.

         Interest Expense. Total interest expense increased $437,000 or 0.6% in
the nine months ended September 30, 1999 as compared to the same period in the
prior year. Likewise, total interest expense increased $2.2 million or 9.7%
during the three months ended September 30, 1999 as compared to the same period
in the prior year. These increases were driven primarily by increases in
interest expense paid on borrowings from the FHLB as the Bank utilized FHLB
Advances to help fund commercial loan growth in both the nine and three month
comparative periods.

         Provision for Loan Losses. The Bank established provisions for loan
losses of $1.5 million and $950,000 during the nine months ended September 30,
1999 and 1998, respectively. During such respective periods, loan charge-offs
(net of recoveries) amounted to $871,000 and $274,000. The Company's basis for
provisions was a function of management's 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
seasoning, change in collateral values, and detailed review of specific large
loan relationships.

         Noninterest Income. The components of noninterest income consist of
deposit-related income, loan fees and loan service charges, net gains on sale of
assets and other miscellaneous income. Total noninterest income rose $3.6
million or 35.7% during the nine months ended September 30, 1999 as compared to
the same period in the prior year. Likewise, total noninterest income rose $1.2
million or 32.9% during the three months ended September 30, 1999 as compared to
the same period in the prior year. Increases in noninterest income between both
the nine and three month comparative periods were due to increases in
deposit-related income during those periods. Deposit-related income such as NSF
fees and other service charges rose $3.0 million or 43.3% and $920,000 or 36.9%
during the nine and three months comparative periods ended September 30, 1999
and September 30, 1998, respectively. Additionally, the Company saw an increase
in loan fees and service charges in both the nine and three month comparative
periods ended September 30, 1999. These increases were directly related to the
increased origination loan volume and the portfolio acquired in the BankSouth
acquisition and related lending activities.

         Noninterest Expense. Total noninterest expense rose $14.2 million or
53.3% during the nine months ended September 30, 1999 as compared with the same
period in the prior year. Likewise, noninterest expense in the three month
period ended September 30, 1999 as compared to the same three month period in
the prior year rose $4.6 million or 47.7%. These increases in noninterest
expense resulted from additional compensation, benefits, and other noninterest
expenses associated with the formation of the new corporate lending unit. During
the past 2 years, the Company has strategically refocused its commercial lending
efforts towards growth of its Oklahoma-based commercial portfolio, hiring 41
experienced commercial lending officers and supporting staff and forming a new
corporate lending unit. Additional increases in noninterest expense were due to
the additional data processing expenses incurred as a result of the Company's
Year 2000 readiness efforts, additional costs incurred in connection with the
acquisition and operation of BankSouth as well as start-up costs associated with
the new Operations Center which became fully functional this quarter.

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


                                       9
<PAGE>   12

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.

         Management's methods for evaluating interest rate risk include an
analysis of the Company's 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. 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. 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.


                                       10
<PAGE>   13
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.

<TABLE>
<CAPTION>
                                                                Three Months Ended September 30,
                                       -------------------------------------------------------------------------
                                                        1999                                 1998
                                       ------------------------------------ ------------------------------------
                                                                   Average                               Average
                                         Average                   Yield/      Average                    Yield/
                                         Balance      Interest      Cost       Balance     Interest       Cost
                                       ----------    ----------    -------   ----------    ----------    -------
                                                                  (Dollars in Thousands)
<S>                                    <C>           <C>           <C>       <C>           <C>           <C>
Interest-earning assets:
   Loans receivable(1)                 $1,639,659    $   33,868      8.26%   $1,160,814    $   23,754       8.19%
   Securities(2)                          531,559         9,100      6.85%      606,840        11,572       7.63%
   Securities purchased under
     agreements to resell                      --            --        --            --            --         --
   Other earning assets(3)                 29,645           640      8.64%       65,575         1,060       6.41%
                                       ----------    ----------              ----------    ----------
     Total interest-earning assets      2,200,863        43,608      7.93%    1,833,229        36,386       7.87%
                                                     ----------    ======                  ----------     ======
Noninterest-earning assets                 94,170                                91,925
                                       ----------                            ----------
     Total assets                      $2,295,033                            $1,925,154
                                       ==========                            ==========

Interest-bearing liabilities:
   Deposits:
     Transaction accounts(4)           $  365,515    $    2,660      2.89%   $  269,761    $    1,603       2.36%
     Term certificates of deposit       1,150,450        14,276      4.92%    1,194,305        16,194       5.38%
                                       ----------    ----------              ----------    ----------
       Total interest bearing
         deposits                       1,515,965        16,936      4.43%    1,464,066        17,797       4.82%
   Borrowings:
     FHLB advances                        409,342         5,257      5.10%      155,502         2,187       5.58%
     Securities sold under
       agreements to repurchase and
       other                                   --            --        --            --            --         --
     Senior Notes                          78,251         2,333     11.81%       80,000         2,367      11.81%
                                       ----------    ----------              ----------    ----------
       Total interest-bearing
         liabilities                    2,003,558        24,526      4.86%    1,699,568        22,351       5.22%
                                                     ----------    ======                  ----------     ======

Noninterest-bearing liabilities           166,144                               118,742
                                       ----------                            ----------
       Total liabilities                2,169,702                             1,818,310
Stockholders' equity                      125,331                               106,844
                                       ----------                            ----------
       Total liabilities and
         stockholders' equity          $2,295,033                            $1,925,154
                                       ==========                            ==========

Net interest-earning assets            $  197,305                            $  133,661
                                       ==========                            ==========
Net interest income/interest rate
  spread                                             $   19,082      3.07%                 $   14,035       2.65%
                                                     ==========    ======                  ==========     ======

Net interest margin                                                  3.47%                                  3.04%
                                                                   ======                                 ======
Ratio of average interest-earning
  assets to average interest-bearing
  liabilities                                                      109.85%                                107.86%
                                                                   ======                                 ======

<CAPTION>


                                                               Nine Months Ended June 30,
                                    -----------------------------------------------------------------------------
                                                       1999                                   1998
                                    -----------------------------------------------------------------------------
                                                                   Average                                Average
                                      Average                       Yield/      Average                    Yield/
                                      Balance        Interest        Cost       Balance     Interest        Cost
                                    ----------      ----------     -------    ----------   ----------     -------
                                                                 (Dollars in Thousands)
<S>                                 <C>             <C>            <C>        <C>          <C>            <C>
Interest-earning assets:
   Loans receivable(1)              $1,532,134      $   95,288        8.29%   $1,102,531   $   68,652        8.30%
   Securities(2)                       510,201          25,558        6.68%      567,289       31,230        7.34%
   Securities purchased under
     agreements to resell                   --              --          --        94,082        3,947        5.61%
   Other earning assets(3)              48,412           2,429        6.69%       61,520        3,073        6.68%
                                    ----------      ----------                ----------   ----------
     Total interest-earning assets   2,090,747         123,275        7.86%    1,825,422      106,902        7.83%
                                                    ----------      ======                 ----------      ======
Noninterest-earning assets              92,384                                   101,107
                                    ----------                                ----------
     Total assets                   $2,183,131                                $1,926,529
                                    ==========                                ==========
Interest-bearing liabilities:
   Deposits:
     Transaction accounts(4)        $  341,299      $    6,924        2.71%   $  272,410   $    5,154        2.53%
     Term certificates of deposit    1,175,862          43,925        4.99%    1,253,801       51,042        5.44%
                                    ----------      ----------                ----------   ----------
       Total interest bearing
         deposits                    1,517,161          50,849        4.48%    1,526,211       56,196        4.92%
   Borrowings:
     FHLB advances                     298,882          11,107        4.97%      108,310        5,024        6.20%
     Securities sold under
       agreements to repurchase and
       other                                 2              --          --            --          251          --
     Senior Notes                       79,300           7,059       11.81%       80,000        7,107       11.81%
                                    ----------      ----------                ----------   ----------
       Total interest-bearing
         liabilities                 1,895,345          69,015        4.87%    1,714,521       68,578        5.35%
                                                    ----------      ======                 ----------      ======
Noninterest-bearing liabilities        164,139                                   112,234
                                    ----------                                ----------
       Total liabilities             2,059,484                                 1,826,755
Stockholders' equity                   123,647                                    99,774
                                    ----------                                ----------
       Total liabilities and
         stockholders' equity       $2,183,131                                $1,926,529
                                    ==========                                ==========

Net interest-earning assets         $  195,402                                $  110,901
                                    ==========                                ==========
Net interest income/interest rate
  spread                                            $   54,260        2.99%                $   38,324        2.48%
                                                    ==========      ======                 ==========      ======

Net interest margin                                                   3.46%                                  2.81%
                                                                    ======                                 ======
Ratio of average interest-earning
  assets to average interest-bearing
  liabilities                                                       110.31%                                106.47%
                                                                    ======                                 ======
</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 classified as available for sale, including the
     market valuation accounts.

(3)  Includes cash and due from banks, interest-bearing deposits, and Federal
     Home Loan Bank of Topeka and Federal Reserve Bank stock.

(4) Includes interest-bearing demand, passbook, NOW and money market accounts.


                                       11
<PAGE>   14
         The following table summarizes the anticipated maturities or repricing
of the Company's interest-earning assets and interest-bearing liabilities as of
September 30, 1999, based on the information and assumptions set forth in the
notes below:


<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
                             ----------   ----------   -----------    ----------   ---------    ----------
                                                       (Dollars in Thousands)
<S>                         <C>           <C>           <C>           <C>          <C>         <C>
Interest-earning assets(1):
   Loans receivable(2)       $  571,634   $  289,762    $  305,408    $  305,311   $  194,801   $1,666,916
   Securities(3)                165,622       38,545       103,209        85,930       52,488      445,794
   Other interest-earning
     assets(4)                   77,149        3,783            --            --           --       80,932
                             ----------   ----------    ----------    ----------   ----------   ----------
         Total               $  814,405   $  332,090    $  408,617    $  391,241   $  247,289   $2,193,642
                             ==========   ==========    ==========    ==========   ==========   ==========

Interest-bearing
liabilities:
   Deposits(5):
    Money market and NOW
      accounts               $  111,684   $   33,515    $   61,145    $   37,411   $   69,117   $  312,872
    Passbook accounts             2,566        7,699        16,439        12,178       34,807       73,689
    Certificates of deposit     451,005      542,521       194,171        27,186          831    1,215,714

   Borrowings:
    FHLB advances(6)            237,863           --        25,000        40,000           31      302,894
    Senior Notes                  1,000           --            --        75,750           --       76,750
                             ----------   ----------    ----------    ----------   ----------   ----------
         Total               $  804,118   $  583,735    $  296,755    $  192,525   $  104,786   $1,981,919
                             ==========   ==========    ==========    ==========   ==========   ==========
Excess (deficiency) of
   interest-earning assets
   over interest-bearing
   liabilities               $   10,287   $ (251,645)   $  111,862    $  198,716   $  142,503   $  211,723
                             ==========   ==========    ==========    ==========   ==========   ==========
Cumulative excess
   (deficiency) of
   interest-earning
   assets over
   interest-bearing
   liabilities               $   10,287   $ (241,358)   $ (129,496)   $   69,220   $  211,723   $  211,723
                             ==========   ==========    ==========    ==========   ==========   ==========
Cumulative excess
   (deficiency) of
   interest-earning
   assets over
   interest-bearing
   liabilities
   as a percent of total
   assets                          0.45%      (10.67)%       (5.73)%        3.06%        9.36%        9.36%
                             ==========   ==========    ==========    ==========   ==========   ==========
</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, Federal
      Home Loan Bank of Topeka stock and Federal Reserve Bank stock.
(5)   Adjusted to take into account assumed annual decay rates, which were
      applied against money market, NOW and passbook accounts.
(6)   Maturity based on projected call date rather than actual maturity date.

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


                                       12
<PAGE>   15

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 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 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 placed 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 September 30, 1999, the Company had $501 million
in borrowing capacity with the FHLB, of which $300 million was available under a
collateralized line of credit. Borrowings as of that date totaled $303 million
with $33 million from the line of credit.

         At September 30, 1999, the Bank had approximately $174.1 million of
outstanding loan commitments consisting of residential real estate, commercial
real estate and commercial business loans approved but unfunded. Certificates of
deposit which are scheduled to mature within one year totaled $993.5 million at
September 30, 1999, and borrowings which are scheduled to mature or reprice
within the same period amounted to $237.9 million. The Bank 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 the maturing
borrowings.

         As of March 1, 1998, the Company began making interest payments on its
Senior Notes. The Senior Notes have an annual debt service requirement of $8.4
million (or $4.2 million for each semi-annual period). The Company anticipates
that it will have sufficient funds available to meet the annual debt service
requirement.

         Capital Resources. Bank holding companies are required to maintain
capital ratios in accordance with guidelines adopted by the FRB. The guidelines
are commonly known as Risk-Based Capital Guidelines.

         On September 30, 1999, the Company exceeded all applicable capital
requirements by having a total risk-based capital ratio of 8.24%, a Tier I
risk-based capital ratio of 6.98% and a leverage ratio of 4.64%.

INFLATION AND CHANGING PRICES

         The Consolidated Financial Statements and related data presented herein
have been prepared in accordance with generally accepted accounting principles,
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


                                       13
<PAGE>   16

rates do not necessarily move in the same direction or in the same magnitude as
the prices of goods and services.

YEAR 2000 COMPLIANCE

         The Year 2000 could have a broad impact on the business environment in
which the Company operates due to the possibility that many computerized systems
across all industries will be unable to process information containing dates
beginning in the Year 2000. The Company has established an enterprise-wide
program to prepare its computer systems and applications for the Year 2000 and
is utilizing both internal and external resources to identify, correct and test
the systems for Year 2000 compliance. The Company had substantially completed
its reprogramming as of December 31, 1998 and testing efforts were complete as
of June 30, 1999. Further validation through testing will be continued
throughout calendar year 1999.

         The Company does not rely on in-house data processing or computer
programming for its main frame banking applications. The Company's primary data
processing vendor, AllTel, Inc., has a history of producing high quality banking
applications and has assured the Company that its core applications will be
capable of handling the Year 2000. The Company continues to test these
applications in its own environment to validate these assurances.

         Because third party failures could have a material impact on the
Company's ability to conduct business, questionnaires have been sent to
business-critical Company vendors and large commercial borrowers to certify that
plans are being developed to address the Year 2000 issue. The returned
questionnaires are currently being assessed by the Company, and are being
categorized based upon readiness for the Year 2000 issues and prioritized in
order of significance to the business of the Company. To the extent that
business-critical vendors have not provided the Company with satisfactory
evidence of their readiness to handle Year 2000 issues, contingency plans have
been developed. Furthermore, large commercial borrowers have been contacted
regarding the potential business risks associated with the Year 2000 issue, and
they have responded affirmatively as to their awareness. The Company has made
every reasonable effort to assess the Year 2000 readiness of these critical
business partners and has created action plans to address the identified risks.

         The Company has completed an assessment of the Year 2000 compliance
status of all its information technology and non-information technology
equipment and will continue to address the Year 2000 compliance of such
equipment.

         Testing and remediation of all of the Company's systems and
applications is expected to incrementally cost approximately $500,000 in 1999,
excluding costs of Company employees involved in Year 2000 compliance
activities. All estimated costs have been budgeted and are expected to be funded
by cash flows from operations.

         The Company does not believe the costs and efforts related to the Year
2000 compliance project will be material to its financial position or results of
operations. However, the cost of the project and the date on which the Company
plans to complete the Year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third party
modification plans and other factors. Unanticipated failures by critical vendors
and large commercial borrowers, as well as the failure by the Company to execute
its own remediation efforts, could have a material adverse effect on the cost of
the project and its completion date. As a result, there can be no assurance that
these forward-looking estimates will be achieved and the actual cost and vendor
compliance could differ materially from those plans, resulting in material
financial risk.


                                       14
<PAGE>   17

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Asset and Liability Management" for Quantitative and
Qualitative Disclosures about Market Risk.

PART II    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

         The Company has one outstanding significant legal proceeding. The
pending case is between the Bank and the Federal Deposit Insurance Corporation
("FDIC") and concerns certain claims and liabilities arising out of an
assistance agreement (the "Assistance Agreement") which was entered into by the
Bank in conjunction with its acquisition of a predecessor institution during
1989 (the "FDIC Case"). Recently, the Company has settled another significant
legal proceeding which had been pending between the Company and the two
individuals who were formerly the sole stockholders of the Company (the "Selling
Stockholders"), with regard to certain claims, liabilities and disputes which
had arisen between the Company and the Selling Stockholders with regard to the
terms and conditions of the Redemption Agreement entered into in September 1997
("Redemption Agreement") in connection with the redemption (the "Redemption") of
all of their shares of the Company's common stock (the "Redemption Agreement
Case"). The Redemption Agreement Case was completely settled and dismissed by
the agreement of the Selling Stockholders and the Company pursuant to a
settlement agreement executed on August 26, 1999, effective as of May 27, 1999
("Settlement Agreement"), the essential terms of which are briefly described
below.

         FDIC CASE. In the FDIC Case, the Bank filed a lawsuit in 1996 against
the United States in which it asserted that the United States had breached the
terms of the Assistance Agreement and other related agreements by, among other
things, changing certain federal income tax laws that had provided financial
assistance and incentives to the Bank in connection with the Assistance
Agreement (and possibly certain related agreements). In the lawsuit, the Bank
seeks to recover for the loss of these tax benefits and for certain other claims
(the "FDIC Claim").

         Under the Assistance Agreement, the FDIC is entitled to receive
payments from the Bank for certain portions of tax benefits attributable to the
acquired net operating loss carry forwards and other tax benefits which were
realized by the Bank from certain items for which assistance was provided to the
Bank under the Assistance Agreement. The FDIC has filed a counterclaim against
the Bank in the FDIC Case (the "FDIC Counterclaim") claiming that the Bank owes
the FDIC a substantial amount of money with regard to the tax benefits realized
by the Bank for which it has not paid the FDIC pursuant to the terms of the
Assistance Agreement (the "Tax Benefits Payment"). Management, after
consultation with legal counsel and based on available proceedings to date, has
determined that the Bank will have significant liability to the FDIC with
respect to the FDIC Counterclaim. At December 31, 1998, management estimated
this liability to be approximately $13.0 million, which has been reserved and is
included in other liabilities in the Consolidated Statements of Financial
Condition as of June 30, 1999 (the "FDIC Reserve"). As an integral part of the
Redemption Agreement, the Company was required by the Selling Stockholders to
maintain the FDIC Reserve in that amount.

         Management believes that as of December 31, 1998 the FDIC's estimate of
this liability was approximately $23.0 million. Pursuant to the Redemption
Agreement, as reaffirmed and amplified in the Settlement Agreement, the Selling
Stockholders have agreed to indemnify us with respect to the Tax Benefits
Payment under the Assistance Agreement by agreeing to be individually liable for
and to fully pay any and all amounts for which we are ultimately found to be
liable to the FDIC on the FDIC


                                       15
<PAGE>   18
Counterclaim for the Tax Benefits Payment which are in excess of the FDIC
Reserve. In this regard, the Company deposited $10.0 million of the redemption
price to be paid to the Selling Stockholders for the Redemption of their stock
into an escrow account to be available for such payment by the Selling
Stockholders of the FDIC Counterclaim (the "Escrow"), if necessary. All attorney
fees and costs of handling the FDIC Case which are incurred by the Company's
counsel in the FDIC Case are also to be paid out of the Escrow.

         SETTLEMENT OF REDEMPTION AGREEMENT CASE. Under the terms of the
Settlement Agreement, the Selling Stockholders consented to our reducing the
FDIC Reserve on the Company's books to the sum of $7.7 million while confirming
their individual liability for and obligation to fully pay any amounts which the
Company is ultimately required to pay to the FDIC on the FDIC Counterclaim to
the extent such amount exceeds the FDIC Reserve and the Escrow. Since the
Selling Stockholders could have liability on the FDIC Counterclaim for the Tax
Benefits Payment, the Redemption Agreement, as affirmed by the Settlement
Agreement, requires that all actions taken by the Company with regard to the
litigation of the FDIC Case be consented to by the Selling Stockholders and that
any settlement of the FDIC Case and/or of the FDIC Counterclaim be mutually
agreed to by the Company and the Selling Stockholders. However, the Settlement
Agreement also authorizes the Selling Stockholders to unilaterally settle the
FDIC Case and the FDIC Counterclaim provided they pay the Company, in cash, the
full amount of any sum which would be owing to the FDIC on the FDIC Counterclaim
in excess of the FDIC Reserve and the Escrow before the Company would become
bound by any such settlement. The Settlement Agreement also required that an
initial settlement offer be made by the Company's counsel to the FDIC,
immediately after the execution thereof, upon terms already agreed to by the
Selling Stockholders and the Company. Pursuant to the Settlement Agreement a
comprehensive settlement offer was communicated by the Company's counsel to the
FDIC in early September 1999. The FDIC has not yet responded to that settlement
offer. Resolution of the Redemption Agreement Case permits the Selling
Stockholders and the Company to actively pursue a complete settlement of the
FDIC Case with the FDIC.

         The Settlement Agreement completely resolved all issues and disputes
between the Company and the Selling Stockholders with regard to the Redemption
Agreement. The Selling Stockholders and the Company mutually released and
discharged each other of any and all claims with regard to the Redemption, or
otherwise, except for the continuing respective rights, duties and obligations
of the Selling Stockholders and the Company with regard to the FDIC Case which
are provided for in the Redemption Agreement, as reaffirmed and supplemented by
the terms of the Settlement Agreement. As a consequence of the settlement of the
Redemption Agreement Case, the Company's stockholders' equity at September 30,
1999 was reduced in the sum of $1.8 million by an increase to the amount shown
under treasury stock on our consolidated statement of financial condition in
recognition of the agreed adjustments to the claims, liabilities and disputes
which had arisen.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

         a.    Exhibits

         27    Financial Data Schedule

         b.    Reports on Form 8-K

         On July 7, 1999, Local Financial Corporation issued a press release
announcing its intention to move the listing of its common stock from the AMEX,
under the symbol "LO", to the NASDAQ National Market, under the symbol "LFIN",
with trading to begin on July 15, 1999.


                                       16
<PAGE>   19

         On July 27, 1999, Local Financial Corporation issued a press release
announcing its second quarter earnings gain.

         On August 26, 1999, Local Financial Corporation issued a press release
announcing the filing of a registration statement with the Securities and
Exchange Commission for its Trust Preferred Securities Offering of up to $30
million. (As matters developed, the Company decided not to file this
registration statement.)


                                       17
<PAGE>   20

                                   SIGNATURES

         Pursuant to the requirement 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.


<TABLE>
<S>                                     <C>
                                        LOCAL FINANCIAL CORPORATION


Date:         November 15, 1999         By /s/ Edward A. Townsend
                                        -------------------------
                                        Edward A. Townsend
                                        Chairman of the Board
                                        Chief Executive Officer


                                        LOCAL FINANCIAL CORPORATION


Date:         November 15, 1999         By /s/ Richard L. Park
                                        ----------------------
                                        Richard L. Park
                                        Chief Financial Officer
</TABLE>


                                       18
<PAGE>   21


                                    FORM 10-Q
                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                 DESCRIPTION
-------                -----------
<S>            <C>
  27           Financial Data Schedule
</TABLE>



                                       19