<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 March 31, 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)

                  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)

         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 May 12, 1999 were as follows:

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

<PAGE>   2



                           LOCAL FINANCIAL CORPORATION
                                      INDEX

<TABLE>
<CAPTION>
                                                                                   PAGE
<S>               <C>                                                              <C>
PART I.  FINANCIAL INFORMATION

     Item 1.      Financial Statements

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

                  Consolidated Statements of Operations-
                  For the Three Months Ended March 31, 1999 and 1998 (unaudited)....2

                  Consolidated Statements of Cash Flows-
                  For the Three Months Ended March 31, 1999 and 1998 (unaudited)....3

                  Notes to Consolidated Financial Statements........................5

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

     Item 3.      Quantitative and Qualitative Disclosures about Market Risk.......14

PART II. OTHER INFORMATION

     Item 1       Legal Proceedings................................................14

     Item 6.      Exhibits and Reports on Form 8-K.................................14

Signatures        .................................................................15

Index to Exhibits .................................................................16
</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>
                                                                      March 31,      December 31,
                                                                        1999             1998
                                                                    -------------    -------------
                                                                    (unaudited)
                           ASSETS
<S>                                                                 <C>                     <C>   
Cash and due from banks                                             $      30,831           27,180
Interest bearing deposits with other banks                                 19,700           27,700
Securities available for sale                                             460,148          570,964
Loans receivable, net of allowance for loan losses of $28,310
   at March 31, 1999 and $27,901 at December 31, 1998                   1,457,124        1,362,272
Federal Home Loan Bank of Topeka stock, at cost                            34,576           42,693
Premises and equipment, net                                                25,746           23,959
Assets acquired through foreclosure and repossession, net                     447              693
Intangible assets, net                                                     17,117           17,843
Deferred tax asset, net                                                     8,376           10,959
Current income taxes receivable                                            17,817           18,291
Other assets                                                               27,786           26,425
                                                                    -------------    -------------

           Total assets                                             $   2,099,668        2,128,979
                                                                    =============    =============

            LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Deposits:
     Demand                                                         $     368,052          379,796
     Savings                                                               76,317           74,963
     Time                                                               1,194,316        1,213,315
                                                                    -------------    -------------

           Total deposits                                               1,638,685        1,668,074

Advances from borrowers for taxes and insurance                             5,606            4,400
Advances from the Federal Home Loan Bank of Topeka                        220,033          220,033
Senior notes                                                               80,000           80,000
Other liabilities                                                          31,362           37,666
                                                                    -------------    -------------

           Total liabilities                                            1,975,686        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
      March 31, 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                                                       55,336           50,197
   Treasury stock, 60 shares, at cost                                    (149,436)        (149,436)
   Accumulated other comprehensive income                                  11,119           11,082
                                                                    -------------    -------------

           Total stockholders' equity                                     123,982          118,806

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

           Total liabilities and stockholders' equity               $   2,099,668        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
                                                                             March 31,
                                                                   ----------------------------
                                                                        1999            1998
                                                                   ------------    ------------
<S>                                                                <C>             <C>         
Interest and dividend income:
  Loans                                                            $     29,748    $     22,529
  Securities available for sale                                           8,492           8,885
  Federal Home Loan Bank of Topeka stock                                    665             851
  Other investments                                                         295           3,226
                                                                   ------------    ------------
Total interest and dividend income                                       39,200          35,491
                                                                   ------------    ------------

Interest Expense:
  Deposit accounts                                                       17,184          19,506
  Advances from the Federal Home Loan Bank of Topeka                      2,624           1,509
  Securities sold under agreements to repurchase                           --               251
  Notes payable                                                           2,363           2,377
                                                                   ------------    ------------
Total interest expense                                                   22,171          23,643
                                                                   ------------    ------------

Net interest and dividend income                                         17,029          11,848
  Provision for loan losses                                                (500)           (150)
                                                                   ------------    ------------
Net interest and dividend income after provision for loan losses         16,529          11,698
                                                                   ------------    ------------

Noninterest income:
  Deposit related income                                                  3,124           1,987
  Loan fees and loan service charges                                        673             338
  Net gains on sale of assets                                               327              25
  Other                                                                     257             324
                                                                   ------------    ------------
Total noninterest income                                                  4,381           2,674
                                                                   ------------    ------------

Noninterest expense:
  Compensation and employee benefits                                      6,847           3,644
  Deposit insurance premiums                                                238             340
  Equipment and data processing                                           1,243             729
  Occupancy                                                                 826             627
  Advertising                                                               344             266
  Professional fees                                                         501             487
  Other                                                                   2,842           1,699
                                                                   ------------    ------------
Total noninterest expense                                                12,841           7,792
                                                                   ------------    ------------

Income before provision for income taxes                                  8,069           6,580

  Provision for income taxes                                              2,930           2,331
                                                                   ------------    ------------
Net income                                                         $      5,139    $      4,249
                                                                   ============    ============


Basic net income per share                                         $       0.25    $       0.21
                                                                   ============    ============
Diluted net income per share                                       $       0.25    $       0.21
                                                                   ============    ============

Weighted average shares outstanding - Basic                          20,537,209      20,109,302
                                                                   ============    ============

Weighted average shares outstanding - Diluted                        20,537,209      20,267,530
                                                                   ============    ============
</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)
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                            Three Months Ended
                                                                                                  March 31,
                                                                                        ----------------------------
                                                                                           1999            1998
                                                                                        ------------    ------------
<S>                                                                                     <C>             <C>         
CASH PROVIDED (ABSORBED) BY OPERATING ACTIVITIES:

   Net income                                                                           $      5,139    $      4,249
   Adjustments to reconcile net income to net cash provided by operating
      activities-
      Provisions for losses on loans                                                             500             150
      Deferred income tax expense                                                              2,563           2,258
      Accretion of discounts on loans acquired                                                  (579)         (1,359)
      Net amortization (accretion) of premium on securities available for sale                  (789)            (75)
      Depreciation and amortization                                                            1,251           1,230
      Net change in loans held for sale                                                        3,267         (16,480)
      (Gain) on sale of assets                                                                  (327)            (25)
      Stock dividends received from Federal Home Loan Bank stock                                (665)           (851)
      Change in other assets                                                                    (888)          2,319
      Change in other liabilities                                                             (6,304)         (3,685)
                                                                                        ------------    ------------

          Net cash provided by operating activities                                            3,168         (12,269)
                                                                                        ------------    ------------

CASH PROVIDED (ABSORBED) BY INVESTING ACTIVITIES:

   Proceeds from principal collections on securities available for sale                      111,663          59,974
   Purchases of securities available for sale                                                   --           (88,642)
   Purchases of repurchase agreements                                                           --          (750,962)
   Proceeds from maturity of repurchase agreements                                              --           720,462
   Proceeds from the sale of Federal Home Loan Bank stock                                      8,782            --
   Change in loans receivable, net                                                           (97,790)         55,899
   Proceeds from disposal of assets acquired through foreclosure and repossession                355             131
   Purchases of premises and equipment                                                        (2,478)           (974)
   Proceeds from sales of premises and equipment                                                 134              26
   Cash acquired in acquisition of Green Country Banking Corporation                            --             2,512
                                                                                        ------------    ------------

          Net cash provided (absorbed) by investing activities                                20,666          (1,574)
                                                                                        ------------    ------------

CASH PROVIDED (ABSORBED) BY FINANCING ACTIVITIES:

   Change in transaction accounts                                                            (10,390)         14,254
   Change in time deposits                                                                   (18,999)        (36,707)
   Proceeds from advances from the Federal Home Loan Bank                                     18,950         156,065
   Repayments of advances from the Federal Home Loan Bank                                    (18,950)       (147,556)
   Payment of liability assumed from Green Country Banking Corporation                          --            (3,162)
   Change in advances by borrowers for taxes and insurance                                     1,206           1,089
                                                                                        ------------    ------------

          Net cash (absorbed) by financing activities                                        (28,183)        (16,017)
                                                                                        ------------    ------------

Net change in cash and cash equivalents                                                       (4,349)        (29,860)

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

Cash and cash equivalents at end of period                                              $     50,531    $     24,292
                                                                                        ============    ============


Supplemental disclosures of cashflow information: Cash paid (received) during
   the period for:
      Interest                                                                          $     24,321    $     21,223
                                                                                        ============    ============
      Income taxes                                                                      $       (109)   $       (539)
                                                                                        ============    ============

Supplemental schedule of noncash investing and financing activities:
   Transfers of loans to assets acquired through foreclosure
      and repossession                                                                  $        109    $        163
                                                                                        ============    ============
</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

                      March 31, 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 (in thousands):

<TABLE>
<CAPTION>
                                                    MARCH 31, 1999  DECEMBER 31, 1998
                                                    --------------  -----------------
<S>                                                 <C>               <C>           
          Residential real estate loans             $      347,132    $      344,565

          Commercial                                     1,013,297           927,682

          Held for sale                                     12,921            16,188

          Consumer loans                                   112,084           101,738
                                                    --------------    --------------

                            Total loans                  1,485,434         1,390,173
          Less:
               Allowance for loan losses                   (28,310)          (27,901)
                                                    --------------    --------------

                            Loans receivable, net   $    1,457,124    $    1,362,272
                                                    ==============    ==============
</TABLE>

(3)      COMPREHENSIVE INCOME

         Comprehensive income for the periods ended March 31, 1999 and 1998
consists of (dollars in thousands):

<TABLE>
<CAPTION>
                                                             Three Months
                                                           Ended March 31,
                                                 -------------------------------------
                                                       1999               1998
                                                 -----------------  ------------------
<S>                                                <C>                <C>          
          Net income                               $       5,139      $       4,249

          Other comprehensive income, net of tax:
               Unrealized gains on securities,
               net of reclassification adjustment             37              1,282
                                                   -------------      -------------

          Comprehensive income                     $       5,176      $       5,531
                                                   =============      =============
</TABLE>


                                       4
<PAGE>   7

(4)      NET INCOME PER SHARE

         Stock options and warrants to purchase common stock of 2,051,005 were
         outstanding during the three months ended March 31, 1999, but were not
         included in the computation of diluted net income per share because
         they are antidilutive.

(5)      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, N.A. (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 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".





                                       5
<PAGE>   8

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

GENERAL

         During the last 18 months and in pursuit of the Company's strategic
growth initiatives, the Company has shifted the activities of Local Oklahoma
Bank (the "Bank") from those of a traditional savings and loan to those
generally associated with a commercial bank. The Bank has increased its
commercial and consumer lending and expects further increases in those areas.
The Bank has also targeted increases in non-interest income as well as increases
in lending activities rather than investing activities. In order to accommodate
this strategy, the Company has chosen to convert the Bank to a national banking
association and, on February 17, 1999, filed an application with the Comptroller
of the Currency to effect such a conversion and received approval on April 29,
1999. Accordingly, in connection with the Bank's charter conversion, the Company
filed an application with the Federal Reserve Board to become registered as a
bank holding company and received approval on March 25, 1999. The Bank
consummated its conversion to a national banking association on May 11, 1999,
and the Company was registered as a bank holding company on that same day.

         On March 31, 1999, the Company completed its merger of Local Federal
Bank, FSB, and its subsidiary Local America Bank of Tulsa, FSB, with the merged
entity operating under the name Local Oklahoma Bank, F.S.B. Local Financial
Corporation's primary asset is the capital stock of Local Oklahoma Bank.

         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 Company'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 21, 1999 (the "Risk Factors" of which are
incorporated into this Report), 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 MARCH 31, 1999

          During the three months ended March 31, 1999, total assets declined
$29.3 million or 1.38%. The $110.8 million decline was due primarily to pay
downs in the Company's security portfolio. This liquidity was used to fund the
net loan growth of $95.3 million. Growth in the loan portfolios occurred




                                       6
<PAGE>   9

principally in the Company's commercial and consumer loan portfolios where loan
balances during the quarter ended March 31, 1999 rose $85.6 million or 9.2% and
$10.3 million or 10.2% respectively.

         Total liabilities declined during the quarter ended March 31, 1999,
primarily due to seasonal declines in the deposit portfolio in the demand and
time deposit areas where balances declined $11.7 million or 3.09% and $19.0
million or 1.57%, respectively, compared to prior quarter end.

         Total Stockholders' equity increased $5.1 million during the March
quarter which represented net income during the period.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31,
1998.

         Net Income. The Company reported net income of $5.1 million or $0.25
basic earnings per share for the three months ended March 31, 1999 (based on
20.5 million average shares outstanding), compared to $4.2 million or $0.21
basic earnings per share (based on 20.1 million average shares outstanding) in
the three months ended March 31, 1998.

         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 $17.0 million in the three
months ended March 31, 1999 as compared to $11.8 million during the same period
in the prior year. The $5.2 million increase in net interest and dividend income
during the comparative period ended March 31, 1999 was due primarily to the
increase in the average balance of interest-earning assets, which rose from $1.8
billion in March 1998 to $2.0 billion in March 1999 or 11%, outpacing the 5%
increase in average balance of interest-bearing liabilities. As a result, the
Company's interest rate spread increased 46 basis points rising from 2.38% to
2.84% during the 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 73 basis points rising from 2.64% to
3.37% during this same period.

         Interest Income. Total interest and dividend income increased $3.7
million or 10.45% during the three months ended March 31, 1999, rising from
$35.5 million during the three months ended March 31, 1998, to $39.2 million
during the three months ended March 31, 1999. This increase was driven primarily
by the increased average balance of loans outstanding which was partially offset
by the declining average balance in the securities portfolio.

         Interest Expense. Total interest expense declined by $1.5 million or
6.23% in the three months ended March 31, 1999 as compared to the same period in
the prior year primarily due to the decline in interest expense on deposit
accounts. Interest expense on deposit accounts declined $2.3 million during the
comparative periods due to a combination of rate and volume declines in total
deposits. This decline was partially offset by increased interest expense on
FHLB advances driven by the higher level of borrowings at March 31, 1999 as
compared to March 31, 1998. The Company intends to continue to utilize
borrowings as a funding source for growth in the loan portfolios.

         Provision for Loan Losses. The Company established provisions for loan
losses of $150,000 and $500,000 during the three months ended March 31, 1998 and
March 31, 1999, respectively. During such respective periods, loan charge-offs
(net of recoveries) amounted to $(99,000) and $91,000. The Company's basis for
provisions were a function of management's credit risk monitoring process that
considers several factors, including among other things, current economic
conditions affecting the



                                       7
<PAGE>   10

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. Total noninterest income amounted to $4.4 million
and $2.7 million during the three months ended March 31, 1999 and 1998,
respectively. The components of noninterest income consist of deposit-related
income, loan fees and loan service charges, net gains (losses) on sale of assets
and other miscellaneous income. The noninterest income recognized during the
three months ended March 31, 1999, was due primarily to deposit-related income
which totaled $3.1 million for the period compared to $2.0 million for the three
months ended March 31, 1998. The increase in deposit-related income between the
comparative periods is due to increases in the Company's demand deposit base
arising from normal deposit growth as well as the BankSouth Corporation
acquisition, which occurred during the fourth quarter of 1998. Additionally, the
Company saw a 99% increase in loan fees and loan service charges between March
31, 1998 and March 31, 1999. This increase was directly related to the increased
origination loan volume, the portfolio acquired in the BankSouth acquisition and
related lending activity. During the three months ended March 31, 1999, the
Company realized $327,000 in gains on sale of assets primarily related to the
sale of mortgage loans in the secondary market.

         Noninterest Expense. Total noninterest expense increased by $5.0
million or 64.8% during the three months ended March 31, 1999 as compared to the
same period in the prior year. The increase primarily resulted from the
additional compensation, benefits and other noninterest expenses associated with
the formation of a new corporate lending unit. During the past 18 months, the
Company has strategically refocused its commercial lending efforts towards
growth of its Oklahoma-based commercial portfolio, hiring 38 experienced
commercial lending officers and supporting staff and forming a new corporate
lending unit. Additional increases in noninterest expense arose as a result of
and in connection with the costs of acquiring and operating BankSouth.

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.

         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.




                                       8
<PAGE>   11

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 rate; (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 MARCH 31,
                                                          -----------------------------------------------------------------------
                                                                          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)                                  $ 1,421,342   $ 29,748    8.37%       $ 1,045,185   $ 22,529     8.74%
    Securities (2)                                            525,886     8,492     6.46%           493,565      8,885     7.30%
    Securities purchased under agreements to resell                --        --        --           226,726      3,149     5.63%
    Other earning assets (3)                                   71,840       960     5.35%            56,119        928     6.71%
                                                          -----------   -------                 -----------   -------- 
       Total interest-earning assets                        2,019,068    39,200     7.76%         1,821,595     35,491     7.90%
                                                                        -------   ======                      --------   ======  
Noninterest-earning assets                                     91,555                               112,591
                                                          -----------                           ----------- 
       Total assets                                       $ 2,110,623                           $ 1,934,186
                                                          ===========                           =========== 
Interest-bearing liabilities:                                                   
    Deposits:                                                                   
       Transaction accounts (4)                               323,007     1,987     2.49%           267,473      1,778     2.70%
       Term certificates of deposit                         1,202,361    15,197     5.13%         1,313,228     17,728     5.47%
                                                          -----------   -------   ------        -----------   --------   ------  
          Total interest bearing deposits                   1,525,368    17,184     4.57%         1,580,701     19,506     5.00%
    Borrowings:                                                                 
       FHLB advances                                          220,578     2,624     4.82%            77,775      1,509     7.87%
       Securities sold under agreements to                                      
          repurchase and other                                     --        --        --                --        251       --
       Senior Notes                                            80,000     2,363    11.81%            80,000      2,377    11.81%
                                                          -----------   -------                 -----------   -------- 
          Total interest-bearing liabilities                1,825,946    22,171     4.92%         1,738,476     23,643     5.52%
                                                                        -------   ======                      --------   ======  
Noninterest-bearing liabilities                               163,721                               103,863
                                                          -----------                           ----------- 
          Total liabilities                                 1,989,667                             1,842,339
Stockholders' equity                                          120,956                                91,847
                                                          -----------                           ----------- 
          Total liabilities and stockholders'                         
             equity                                       $ 2,110,623                           $ 1,934,186
                                                          ===========                           =========== 
Net interest-earning assets                                 $ 193,122                              $ 83,119
                                                          ===========                           =========== 
Net interest income/interest rate spread                               $ 17,029     2.84%                     $ 11,848     2.38%
                                                                       ========   ======                      ========   ======  
Net interest margin                                                                 3.37%                                  2.64%
                                                                                  ======                                 ======  
Ratio of average interest-earning assets to
    average interest-bearing liabilities                                          110.58%                                104.78%
                                                                                  ======                                 ======  
</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 held to maturity and available for
     sale, including the market valuation accounts.

(3)  Includes cash and due from banks, equity securities, interest bearing
     deposits, and FHLB stock.

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




                                       9
<PAGE>   12


         The following table summarizes the anticipated maturities or repricing
of the Company's interest-earning assets and interest-bearing liabilities as of
March 31, 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)            $    489,008    $    283,992     $    287,064    $    228,649    $    195,279    $  1,483,992
   Securities(3)                       256,841          77,651           76,251          31,616             683         443,042
   Other interest-earning
     assets(4)                          85,107            --               --              --              --            85,107
                                  ------------    ------------     ------------    ------------    ------------    ------------
         Total                    $    830,956    $    361,643     $    363,315    $    260,265    $    195,962    $  2,012,141
                                  ============    ============     ============    ============    ============    ============

Interest-bearing liabilities:
   Deposits(5):
    Money market and NOW
      accounts                    $     35,899    $     36,199     $     65,686    $     39,913    $     72,856    $    250,553
    Passbook accounts                    2,658           7,973           17,026          12,613          36,047          76,317
    Certificates of deposit            391,323         570,318          207,932          24,153             590       1,194,316

   Borrowings:
    FHLB advances(6)                      --           115,000           65,000          40,000              33         220,033
    Senior Notes                          --              --               --              --            80,000          80,000
                                  ------------    ------------     ------------    ------------    ------------    ------------
         Total                    $    429,880    $    729,490     $    355,644    $    116,679    $    189,526    $  1,821,219
                                  ============    ============     ============    ============    ============    ============

Excess (deficiency) of
   interest-earning assets over
   interest-bearing liabilities   $    401,076    $   (367,847)    $      7,671    $    143,586    $      6,436    $    190,922
                                  ============    ============     ============    ============    ============    ============

Cumulative excess
   (deficiency) of interest-
   earning assets over
   interest-bearing liabilities   $    401,076    $     33,229     $     40,900    $    184,486    $    190,922    $    190,922
                                  ============    ============     ============    ============    ============    ============

Cumulative excess
   (deficiency) of interest-
   earning assets over
   interest-bearing liabilities
   as a percent of total assets          19.10%           1.58%            1.95%           8.79%           9.09%           9.09%
                                  ============    ============     ============    ============    ============    ============
</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 and FHLB
     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 




                                       10
<PAGE>   13

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 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 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 March 31, 1999, the Company had $628.3 million in
borrowing capacity with the FHLB, of which $260.0 million was available under a
collateralized line of credit. Borrowings as of that date totaled $220.0 million
with no borrowings from the line of credit. The Bank does not currently accept
brokered deposits as a source of liquidity and does not anticipate a change in
this practice in the foreseeable future.

         At March 31, 1999, the Company had approximately $206.7 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 $961.6 million at
March 31, 1999, and borrowings which are scheduled to mature or reprice within
the same period amounted to $115.0 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 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 $8.8
million (or $4.4 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. Federally insured savings institutions such as the
Bank are required to maintain minimum levels of regulatory capital. The
following table reflects the Bank's actual levels of regulatory capital and
applicable regulatory capital requirements at March 31, 1999.

<TABLE>
<CAPTION>
                                        MINIMUM
                                       REQUIRED(4)                    ACTUAL                        EXCESS
                                 ---------------------         ---------------------        ---------------------
                                 PERCENT        AMOUNT         PERCENT        AMOUNT        PERCENT        AMOUNT
                                 -------        ------         -------        ------        -------        ------
                                                              (DOLLARS IN THOUSANDS)
<S>                               <C>         <C>               <C>         <C>               <C>        <C>      
   Tangible capital               1.50%       $  30,774         7.91%       $ 162,291         6.41%      $ 131,517
   Core capital (1)               3.00%          61,547         7.91%         162,291         4.91%        100,744
   Risk-based capital (2)(3)      8.00%         112,064        12.77%         178,814         4.77%         66,750
</TABLE>

(1)  Does not reflect amendments, proposed by the OTS in April 1991, which would
     increase this requirement to between 4% and 5%.

(2)  Does not reflect the interest-rate risk component to the risk-based capital
     requirement, the effective date of which has been postponed.



                                       11
<PAGE>   14

(3)  Tangible and core capital are computed as a percentage of adjusted total
     assets and risk-based capital is computed as a percentage of adjusted
     risk-weighted assets.

(4)  Does not reflect the requirements to be met in order for an institution to
     be deemed "adequately capitalized" under applicable laws and regulations.

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 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 completed its
reprogramming as of December 31, 1998 and testing efforts were substantially
complete as of March 31, 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's 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 do not provide the Company with satisfactory evidence
of their readiness to handle Year 2000 issues, contingency plans will be
developed. Furthermore, information has been provided to large commercial
borrowers regarding the potential business risks associated with the Year 2000
issue. The Company intends to make every reasonable effort to assess the Year
2000 readiness of these critical business partners and to create action plans to
address the identified risks.

         The Company has substantially 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.



                                       12
<PAGE>   15
         Testing and remediation of all of the Company's systems and
applications is expected to incrementally cost approximately $500,000 in 1999,
excluding internal costs 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.

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

         In the ordinary course of business, the Company is subject to other
legal actions and complaints. In its Annual Report on Form 10-K for the year
ended December 31, 1998, the Company disclosed legal proceedings between the
Bank and the Federal Deposit Insurance Corporation and between the Company and
certain former shareholders. No material developments have occurred since the
Annual Report. 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 6.       EXHIBITS AND REPORTS ON FORM 8-K

         a.       Exhibits

         27       Financial Data Schedule

         b.       Reports on Form 8-K

         On February 19, 1999, the Company filed a Form 8-K covering a press
release issued with respect to its fourth quarter and full year 1998 earnings.



                                       13
<PAGE>   16

                                   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.


                                                LOCAL FINANCIAL CORPORATION


Date:         May 12, 1999                      By/s/ Edward A. Townsend
                                                ------------------------
                                                Edward A. Townsend
                                                Chairman of the Board
                                                Chief Executive Officer


                                                LOCAL FINANCIAL CORPORATION


Date:         May 12, 1999                      By/s/ Richard L. Park
                                                ---------------------
                                                Richard L. Park
                                                Chief Financial Officer


                                       14
<PAGE>   17



                                    FORM 10-Q
                                INDEX TO EXHIBITS

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





                                       15