<PAGE>
                                  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 quarterly period ended June 30, 2003

                                       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 | |

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                Yes |X|  No | |

Number of shares outstanding of the registrant's $0.01 par value common stock as
of July 24, 2003 were as follows: 16,915,223

<PAGE>

                           LOCAL FINANCIAL CORPORATION
                                      INDEX

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

      Item 1. Financial Statements

              Consolidated Statements of Financial Condition-
              June 30, 2003 (unaudited) and December 31, 2002...................................      1

              Consolidated Statements of Operations-
              For the Three Months and Six Months Ended June 30, 2003 and 2002 (unaudited)......      2

              Consolidated Statements of Cash Flows-
              For the Six Months Ended June 30, 2003 and 2002 (unaudited).......................      3

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

      Item 2. Management's Discussion and Analysis of Financial Condition and
              Results of Operations.............................................................     10

      Item 3. Quantitative and Qualitative Disclosures about Market Risk........................     16

      Item 4. Controls and Procedures...........................................................     18

PART II.   OTHER INFORMATION

      Item 1. Legal Proceedings.................................................................     18

      Item 4. Submission of Matters to a Vote of Security Holders...............................     18

      Item 6. Exhibits and Reports on Form 8-K..................................................     19

Signatures .....................................................................................     20

Index to Exhibits ..............................................................................     21
</TABLE>

<PAGE>

PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                                                   JUNE 30, 2003    DECEMBER 31, 2002
                                                                                   -------------    -----------------
                                                                                    (unaudited)
<S>                                                                                <C>              <C>
                                     ASSETS

Cash and due from banks                                                             $    52,722         $    51,166
Interest bearing deposits with other banks                                                4,500               7,200
Securities:
   Available for sale                                                                   113,683             163,473
   Held to maturity                                                                     317,693             364,832
                                                                                    -----------         -----------
      Total securities                                                                  431,376             528,305

Loans receivable, net of allowance for loan losses of $30,087 at June 30, 2003
   and $29,532 at December 31, 2002                                                   2,174,124           2,084,144
Federal Home Loan Bank of Topeka and Federal Reserve Bank stock, at cost                 39,612              38,187
Premises and equipment, net                                                              43,709              42,415
Assets acquired through foreclosure and repossession, net                                 1,625               1,693
Intangible assets, net                                                                   19,478              19,695
Current and deferred taxes, net                                                          10,711               9,428
Other assets                                                                             70,066              57,625
                                                                                    -----------         -----------

      Total assets                                                                  $ 2,847,923         $ 2,839,858
                                                                                    ===========         ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits:
   Demand                                                                           $   785,837         $   756,476
   Savings                                                                               92,569              82,983
   Time                                                                                 961,172             989,980
                                                                                    -----------         -----------

      Total deposits                                                                  1,839,578           1,829,439

Advances from the Federal Home Loan Bank of Topeka                                      712,685             684,193
Securities sold under agreements to repurchase                                           28,125              59,696
Senior Notes                                                                             21,295              21,295
Other liabilities                                                                        18,007              17,105

Mandatorily redeemable trust preferred securities                                        60,250              60,250

Commitments and contingencies

Stockholders' equity:
   Common stock, $0.01 par value, 25,000,000 shares authorized;
      20,972,967 shares issued and 16,915,223 shares outstanding at
      June 30, 2003 and 20,863,967 shares issued and 17,785,323 shares
      outstanding at December 31, 2002                                                      210                 209
   Preferred stock, $0.01 par value, 5,000,000 shares authorized;
      none outstanding                                                                       --                  --
   Additional paid-in capital                                                           209,841             208,599
   Retained earnings                                                                    165,656             151,495
   Treasury stock, 4,057,744 shares at June 30, 2003 and 3,078,644 shares
      at December 31, 2002, at cost                                                    (208,411)           (193,783)
   Accumulated other comprehensive income, net of tax                                       687               1,360
                                                                                    -----------         -----------

      Total stockholders' equity                                                        167,983             167,880
                                                                                    -----------         -----------

      Total liabilities and stockholders' equity                                    $ 2,847,923         $ 2,839,858
                                                                                    ===========         ===========
</TABLE>

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


                                       1
<PAGE>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (dollars in thousands, except share data)

<TABLE>
<CAPTION>
                                                                      Three Months Ended                    Six Months Ended
                                                                           June 30,                             June 30,
                                                                 ------------------------------      ------------------------------
                                                                     2003              2002               2003              2002
                                                                 ------------      ------------      ------------      ------------
                                                                                             (unaudited)
<S>                                                              <C>               <C>               <C>               <C>
Interest income:
   Loans                                                         $     32,979      $     35,008      $     66,028      $     69,479
   Securities available for sale                                        1,548             1,664             3,656             5,285
   Securities held to maturity                                          2,399             6,685             6,553            12,984
   Federal Home Loan Bank of Topeka and
      Federal Reserve Bank stock                                          370               448               731               966
   Other investments                                                       17               342                39               449
                                                                 ------------      ------------      ------------      ------------
           Total interest income                                       37,313            44,147            77,007            89,163

Interest expense:
   Deposit accounts                                                     8,370            13,272            17,330            26,924
   Advances from the Federal Home Loan Bank of Topeka                   6,422             6,302            12,901            12,784
   Securities sold under agreements to repurchase                          76               121               183               248
   Senior Notes                                                           629               637             1,258             1,273
   Trust preferred securities                                           1,171               921             2,349             1,843
                                                                 ------------      ------------      ------------      ------------
           Total interest expense                                      16,668            21,253            34,021            43,072

   Net interest income                                                 20,645            22,894            42,986            46,091
   Provision for loan losses                                           (1,800)           (1,800)           (3,600)           (3,600)
                                                                 ------------      ------------      ------------      ------------
        Net interest income after provision for loan losses            18,845            21,094            39,386            42,491

Noninterest income:
   Deposit related income                                               6,182             4,825            11,658             9,118
   Loan fees and loan service charges                                     609               630             1,262             1,156
   Net gains on sale of assets                                            252               604               388               674
   Other                                                                1,775             1,722             3,335             3,325
                                                                 ------------      ------------      ------------      ------------
           Total noninterest income                                     8,818             7,781            16,643            14,273
                                                                 ------------      ------------      ------------      ------------

Noninterest expense:
   Compensation and employee benefits                                   9,847            10,875            20,413            21,248
   Equipment and data processing                                        1,575             1,351             3,275             3,218
   Occupancy                                                            1,124             1,077             2,462             2,264
   Advertising                                                            152               182               279               321
   Professional fees                                                      415               309               678               573
   Other                                                                3,818             3,910             7,559             7,384
                                                                 ------------      ------------      ------------      ------------
           Total noninterest expense                                   16,931            17,704            34,666            35,008
                                                                 ------------      ------------      ------------      ------------

Income before provision for income taxes                               10,732            11,171            21,363            21,756
Provision for income taxes                                              3,641             3,706             7,202             7,212
                                                                 ------------      ------------      ------------      ------------

           Net income                                            $      7,091      $      7,465      $     14,161      $     14,544
                                                                 ============      ============      ============      ============

Earnings per share:
   Net income:
      Basic                                                      $       0.41      $       0.39      $       0.81      $       0.76
                                                                 ============      ============      ============      ============
      Diluted                                                    $       0.40      $       0.37      $       0.78      $       0.73
                                                                 ============      ============      ============      ============

Average shares outstanding:
      Basic                                                        17,143,219        19,170,425        17,468,647        19,172,248
                                                                 ============      ============      ============      ============
      Diluted                                                      17,724,125        19,993,691        18,064,616        19,949,596
                                                                 ============      ============      ============      ============
</TABLE>

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


                                       2
<PAGE>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                             SIX MONTHS ENDED
                                                                                                                  JUNE 30,
                                                                                                       ----------------------------
                                                                                                          2003              2002
                                                                                                       ---------        -----------
                                                                                                                (unaudited)
<S>                                                                                                    <C>              <C>
Cash provided (absorbed) by operating activities:
   Net income                                                                                          $  14,161        $    14,544
      Adjustments to reconcile net income to net cash provided by operating activities:
        Provision for loan losses                                                                          3,600              3,600
        Deferred income tax benefit                                                                         (980)              (361)
        Accretion of discounts and amortization of deferred fees on loans acquired and
           securities, net                                                                                 1,084             (1,442)
        Depreciation and amortization                                                                      2,641              2,041
        Net change in loans held for sale                                                                  5,441              4,533
        Net gains on sale of assets                                                                         (388)              (674)
        Change in other assets                                                                            (2,315)            (2,361)
        Change in other liabilities                                                                        1,115             10,288
                                                                                                       ---------        -----------

           Net cash provided by operating activities                                                      24,359             30,168
                                                                                                       ---------        -----------

Cash provided (absorbed) by investing activities:
   Proceeds from sales of securities available for sale                                                       --             54,239
   Proceeds from principal collections on securities                                                     270,715            143,110
   Purchases of securities                                                                              (176,091)          (166,007)
   Purchases of Federal Home Loan Bank and Federal Reserve Bank stock                                     (1,425)              (933)
   Proceeds from the sale of Federal Home Loan Bank stock                                                     --              7,429
   Purchases of bank owned life insurance                                                                (10,000)                --
   Change in loans receivable, net                                                                       (99,658)           (17,560)
   Proceeds from disposal of assets acquired through foreclosure and repossession                          1,296              1,824
   Purchases of premises and equipment                                                                    (4,141)            (3,860)
   Proceeds from sales of premises and equipment                                                             279                 63
                                                                                                       ---------        -----------

           Net cash provided (absorbed) by investing activities                                          (19,025)            18,305
                                                                                                       ---------        -----------

Cash provided (absorbed) by financing activities:
   Change in transaction accounts                                                                         38,947             48,595
   Change in time deposits                                                                               (28,808)            25,684
   Change in securities sold under agreements to repurchase                                              (31,571)            (4,996)
   Proceeds from advances from the Federal Home Loan Bank                                                924,034            880,075
   Repayments of advances from the Federal Home Loan Bank                                               (895,542)        (1,005,256)
   Proceeds from the issuance of common stock                                                              1,090              1,190
   Purchase of treasury stock                                                                            (14,628)            (2,309)
                                                                                                       ---------        -----------

           Net cash absorbed by financing activities                                                      (6,478)           (57,017)
                                                                                                       ---------        -----------

Net change in cash and cash equivalents                                                                   (1,144)            (8,544)

Cash and cash equivalents at beginning of period                                                          58,366             60,491
                                                                                                       ---------        -----------

Cash and cash equivalents at end of period                                                             $  57,222        $    51,947
                                                                                                       =========        ===========

Supplemental disclosures of cash flow information:
   Cash paid during the period for:
      Interest                                                                                         $  34,684        $    41,778
                                                                                                       =========        ===========
      Income taxes                                                                                     $   6,600        $     1,500
                                                                                                       =========        ===========

Supplemental schedule of noncash investing and financing activities:
   Transfer of loans to assets acquired through foreclosure and repossession                           $   1,228        $       864
                                                                                                       =========        ===========
</TABLE>

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


                                       3
<PAGE>

                  LOCAL FINANCIAL CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(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
      accounting principles generally accepted in the United States of America.
      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 the Local Financial Corporation
      (the "Company") Form 10-K for the year ended December 31, 2002 as filed
      with the Securities and Exchange Commission (the "SEC").

(2)   STOCK COMPENSATION

      The Company applies the intrinsic-value based method of accounting
      prescribed by APB Opinion No. 25 and related interpretations in accounting
      for its stock option plan. Under this method, compensation expense is
      recorded on the date of grant only if the current market price of the
      underlying stock exceeds the exercise price. Accordingly, no compensation
      cost has been recognized for its stock option rights. Had the Company
      determined compensation cost based on the fair value at the grant date for
      its stock options under Statement of Financial Accounting Standards
      ("SFAS") No. 123, Accounting for Stock-Based Compensation, and as provided
      for under SFAS No. 148, Accounting for Stock-Based Compensation -
      Transition and Disclosure, an amendment of SFAS No. 123, the Company's net
      income for the three and six months ended June 30, 2003 and 2002 would
      have been decreased to the pro forma amounts below (dollars in thousands,
      except share data):

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                             JUNE 30,                       JUNE 30,
                                                                   --------------------------      --------------------------
                                                                      2003            2002            2003            2002
                                                                   ----------      ----------      ----------      ----------
<S>                                                                <C>             <C>             <C>             <C>
      Net income as reported                                       $    7,091      $    7,465      $   14,161      $   14,544

      Deduct: Total stock-based employee
         compensation expense determined under
         fair value based method for awards, net
         of related tax effects                                          (106)           (116)           (211)           (224)
                                                                   ----------      ----------      ----------      ----------

      Pro forma net income                                         $    6,985      $    7,349      $   13,950      $   14,320
                                                                   ==========      ==========      ==========      ==========

      Earnings per share:
         Basic-as reported                                         $     0.41      $     0.39      $     0.81      $     0.76
                                                                   ==========      ==========      ==========      ==========
         Basic-pro forma                                           $     0.41      $     0.38      $     0.80      $     0.75
                                                                   ==========      ==========      ==========      ==========

         Diluted-as reported                                       $     0.40      $     0.37      $     0.78      $     0.73
                                                                   ==========      ==========      ==========      ==========
         Diluted-pro forma                                         $     0.39      $     0.37      $     0.77      $     0.72
                                                                   ==========      ==========      ==========      ==========
</TABLE>


                                       4
<PAGE>

(3)   LOANS RECEIVABLE

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

<TABLE>
<CAPTION>
                                                     JUNE 30, 2003      DECEMBER 31, 2002
                                                     -------------      -----------------
<S>                                                  <C>                <C>
      Residential real estate(1)                      $   335,804         $   276,883

      Commercial                                        1,741,484           1,695,293

      Held for sale                                         3,135               8,576

      Consumer(1)                                         123,788             132,924
                                                      -----------         -----------

                 Total loans                            2,204,211           2,113,676
      Less:
            Allowance for loan losses                     (30,087)            (29,532)
                                                      -----------         -----------

                 Loans receivable, net                $ 2,174,124         $ 2,084,144
                                                      ===========         ===========
</TABLE>

      (1) Beginning in June 2003, the Company began including home equity first
      mortgages as residential real estate loans. Consequently, loans receivable
      as of December 31, 2002 include a $64.0 million reclassification from
      consumer loans to residential real estate loans.

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

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

<TABLE>
<CAPTION>
                                        JUNE 30, 2003                          DECEMBER 31, 2002
                              -------------------------------         -------------------------------
                                                 WEIGHTED                                 WEIGHTED
                                                 AVERAGE                                  AVERAGE
                              BALANCE        CONTRACTUAL RATE         BALANCE        CONTRACTUAL RATE
                              -------        ----------------         -------        ----------------
<S>                          <C>             <C>                     <C>             <C>
      Fixed rate             $625,022              4.04%             $600,022              4.14%
      Variable rate            87,663              1.48                84,171              1.51
                             --------                                --------
                             $712,685              3.73%             $684,193              3.82%
                             ========              ====              ========              ====
</TABLE>

      Additionally, the Company had outstanding letters of credit with the FHLB
      of approximately $137.4 million and $93.9 million at June 30, 2003 and
      December 31, 2002, respectively. The letters of credit have one-year terms
      or less and were pledged to secure certain deposits.

      The FHLB requires the Company to hold eligible assets with a lending
      value, as defined, at least equal to FHLB advances and letters of credit
      issued. Eligible assets can include such items as first and second
      mortgage loans, multifamily mortgage loans, commercial and construction
      real estate loans, small business loans and investment securities, which
      are not already pledged or otherwise encumbered. At June 30, 2003, the
      Company had approximately $879.9 million in eligible assets pledged
      against FHLB advances.

      At June 30, 2003, the Company had additional borrowing capacity of
      approximately $210.1 million under the FHLB credit policy.


                                       5
<PAGE>

      Scheduled principal repayments of advances from the FHLB at June 30, 2003
      were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                   WEIGHTED
                                                                                   AVERAGE
                  YEARS ENDING DECEMBER 31,                 AMOUNT            CONTRACTUAL RATE
                                                        ------------          ----------------
<S>                                                     <C>                   <C>
                       2003                             $     77,663                 1.53%
                       2004                                       --                   --
                       2005                                   35,000                 1.71
                       2006                                  100,000                 3.35
                       2007 and thereafter                   500,022                 4.30
                                                        ------------

                                                        $    712,685                 3.73%
                                                        ============                 ====
</TABLE>

(5)   SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

      Periodically, the Company provides securities sold under agreements to
      repurchase to customers as a part of the commercial banking operations.
      The securities underlying the agreements were under the Company's control
      at June 30, 2003 and December 31, 2002 and are summarized as follows
      (dollars in thousands):

<TABLE>
<CAPTION>
                                                                      JUNE 30,      DECEMBER 31,
                                                                        2003            2002
                                                                      --------      ------------
<S>                                                                   <C>           <C>
      Average outstanding balance                                     $40,171         $43,425
      Weighted average interest rate during the period                   0.92%           1.22%
      Maximum month-end balance                                       $48,955         $64,701
      Outstanding balance at end of period                             28,125          59,696
      Weighted average interest rate at end of period                    0.65%           0.94%
      Mortgage-backed securities securing the agreements
         at period-end:
            Carrying value                                            $37,408         $66,931
            Estimated market value                                     37,578          68,501
      Accrued interest payable at the end of the period                    --              --
</TABLE>

(6)   STOCKHOLDERS' EQUITY

      The Company increased its shares of treasury stock during 2003 as part of
      a stock repurchase program in which the Company purchased 979,100 shares
      of its common stock at a cost of approximately $14.6 million. The increase
      in common stock and additional paid-in capital during the six months ended
      June 30, 2003 of approximately $1.2 million included the exercise of
      109,000 options to purchase the Company's stock.


                                       6
<PAGE>

(7)   COMPREHENSIVE INCOME

      Comprehensive income for the three and six months ended June 30, 2003 and
      2002 consisted of (dollars in thousands):

<TABLE>
<CAPTION>
                                                                          THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                               JUNE 30,                       JUNE 30,
                                                                      ------------------------       ------------------------
                                                                        2003            2002           2003             2002
                                                                      --------        --------       --------        --------
<S>                                                                   <C>             <C>            <C>             <C>
      Net income                                                      $  7,091        $  7,465       $ 14,161        $ 14,544

      Other comprehensive income (loss),
         net of tax:
            Unrealized gains (losses) on securities,
              net of reclassification adjustment                        (1,028)             97           (673)         (1,852)
                                                                      --------        --------       --------        --------

      Comprehensive income                                            $  6,063        $  7,562       $ 13,488        $ 12,692
                                                                      ========        ========       ========        ========
</TABLE>

(8)   EARNINGS PER SHARE

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

      The following table reconciles the net income and weighted average shares
      outstanding used in the calculation of basic and diluted net income per
      share for the three and six months ended June 30, 2003 and 2002:

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED                                    SIX MONTHS ENDED
                                                    JUNE 30, 2003                                        JUNE 30, 2003
                                     -------------------------------------------       ---------------------------------------------
                                                      WEIGHTED                                           WEIGHTED
                                                       AVERAGE                                           AVERAGE
                                                       SHARES          PER SHARE                          SHARES           PER SHARE
                                     NET INCOME      OUTSTANDING         AMOUNT        NET INCOME       OUTSTANDING          AMOUNT
                                     ----------      -----------       ---------       -----------      -----------      -----------
<S>                                  <C>             <C>               <C>             <C>              <C>              <C>
Basic net income per share           $ 7,091,000      17,143,219       $    0.41       $14,161,000      17,468,647       $      0.81
                                                                       =========                                         ===========
Effect of dilutive securities:
   Options                                    --         580,906                                --         595,969
                                     -----------      ----------                       -----------      ----------
Diluted net income per share         $ 7,091,000      17,724,125       $    0.40       $14,161,000      18,064,616       $      0.78
                                     ===========      ==========       =========       ===========      ==========       ===========
</TABLE>

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED                                    SIX MONTHS ENDED
                                                    JUNE 30, 2002                                        JUNE 30, 2002
                                     -------------------------------------------       ---------------------------------------------
                                                      WEIGHTED                                           WEIGHTED
                                                       AVERAGE                                           AVERAGE
                                                       SHARES          PER SHARE                          SHARES           PER SHARE
                                     NET INCOME      OUTSTANDING         AMOUNT        NET INCOME       OUTSTANDING          AMOUNT
                                     ----------      -----------       ---------       -----------      ----------       -----------
<S>                                  <C>             <C>               <C>             <C>              <C>              <C>
Basic net income per share           $ 7,465,000      19,170,425       $    0.39       $14,544,000      19,172,248       $      0.76
                                                                       =========                                         ===========
Effect of dilutive securities:
   Warrants                                   --          55,841                                --          64,912
   Options                                    --         767,425                                --         712,436
                                     -----------      ----------                       -----------      ----------
Diluted net income per share         $ 7,465,000      19,993,691       $    0.37       $14,544,000      19,949,596       $      0.73
                                     ===========      ==========       =========       ===========      ==========       ===========
</TABLE>


                                       7
<PAGE>

      Stock options to purchase 1,786,240 shares of common stock were
      outstanding as of June 30, 2003 and were included in the computation of
      diluted net income per share for 2003. Stock options and warrants to
      purchase 2,196,671 shares of common stock were outstanding as of June 30,
      2002 and were included in the computation of diluted net income per share
      for 2002.

(9)   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 (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 No. 131, Disclosure About Segments of an Enterprise and Related
      Information.

(10)  RECLASSIFICATIONS

      Certain reclassifications were made to the 2002 consolidated financial
      statements to conform to the 2003 presentation.

(11)  NEW ACCOUNTING PRONOUNCEMENTS

      In November 2002, the Financial Accounting Standards Board ("FASB") issued
      Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements
      for Guarantees, Including Indirect Guarantees of Indebtedness to Others,
      an interpretation of FASB Statements No. 5, 57 and 107 and a rescission of
      FASB Interpretation No. 34 ("Interpretation No. 45"). Interpretation No.
      45 elaborates on the disclosures to be made by a guarantor in its interim
      and annual financial statements about its obligations under guarantees
      issued. Interpretation No. 45 also clarifies that a guarantor is required
      to recognize, at inception of a guarantee, a liability for the fair value
      of the obligation undertaken. The initial recognition and measurement
      provisions of Interpretation No. 45 are applicable to guarantees issued or
      modified after December 31, 2002 and did not have a material effect on the
      Company's consolidated financial statements. The disclosure requirements
      are effective for financial statements of interim and annual periods
      ending after December 15, 2002. Standby letters of credit and financial
      guarantees written of approximately $11.4 million and $9.5 million at June
      30, 2003 and December 31, 2002, respectively, are conditional commitments
      issued by the Company to guarantee the performance of a customer to a
      third party. Those guarantees are primarily issued to support public and
      private borrowing arrangements, including commercial paper, bond financing
      and similar transactions. The Company holds marketable securities as
      collateral supporting those commitments for which collateral is deemed
      necessary.

      In January 2003, the FASB issued Interpretation No. 46, Consolidation of
      Variable Interest Entities, an Interpretation of Accounting Research
      Bulletin No. 51 ("Interpretation No. 46"). Interpretation No. 46 requires
      a company to consolidate a variable interest entity if the company has a
      variable interest (or combination of variable interests) that will absorb
      a majority of the entity's expected losses if they occur, receive a
      majority of the entity's expected residual returns


                                       8
<PAGE>

      if they occur, or both. The application of Interpretation No. 46 had no
      impact on the Company's consolidated financial statements.

      In May 2003, the FASB issued Statement No. 150, Accounting for Certain
      Financial Instruments with Characteristics of both Liabilities and Equity
      ("Statement No. 150"). Statement No. 150 requires issuers to classify as
      liabilities (or assets in some circumstance) three classes of freestanding
      financial instruments that embody obligations for the issuer. Generally,
      Statement No. 150 is effective for financial instruments entered into or
      modified after May 31, 2003 and is otherwise effective at the beginning of
      the first interim period beginning after June 15, 2003. The Company
      adopted the provisions of Statement No. 150 on July 1, 2003. The Company
      did not enter into any financial instruments within the scope of Statement
      No. 150 during June 2003. The adoption of Statement No. 150 did not have a
      material effect on the Company's consolidated financial statements.


                                       9
<PAGE>

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

      A number of the presentations and disclosures in this Form 10-Q,
including, without limitation, statements regarding the level of allowance for
loan losses, the rate of delinquencies and amounts of charge-offs, and the rates
of loan growth, and any statements preceded by, followed by or which include the
words "may," "could," "should," "will," "would," "hope," "might," "believe,"
"expect," "anticipate," "estimate," "intend," "plan," "assume" or similar
expressions constitute forward-looking statements.

      These forward-looking statements, implicitly and explicitly, include the
assumptions underlying the statements and other information with respect to our
beliefs, plans, objectives, goals, expectations, anticipations, estimates,
intentions, financial condition, results of operations, future performance and
business, including our expectations and estimates with respect to our revenues,
expenses, earnings, return on equity, return on assets, efficiency ratio, asset
quality and other financial data and capital and performance ratios.

      Although we believe that the expectations reflected in our forward-looking
statements are reasonable, these statements involve risks and uncertainties that
are subject to change based on various important factors (some of which are
beyond our control). The following factors, among others, could cause our
financial performance to differ materially from our goals, plans, objectives,
intentions, expectations and other forward-looking statements:

      -     the strength of the United States economy in general and the
            strength of the regional and local economies within Oklahoma;

      -     adverse changes in the local real estate market, as most of the
            Company's loans are concentrated in Oklahoma and a substantial
            portion of these loans have real estate as collateral;

      -     the effects of, and changes in, trade, monetary and fiscal policies
            and laws, including interest rate policies of the Board of Governors
            of the Federal Reserve System;

      -     inflation, interest rate, market and monetary fluctuations;

      -     adverse changes in asset quality and the resulting credit
            risk-related losses and expenses;

      -     our timely development of new products and services in a changing
            environment, including the features, pricing and quality of our
            products and services compared to the products and services of our
            competitors;

      -     the willingness of users to substitute competitors' products and
            services for our products and services;

      -     the impact of changes in financial services policies, laws and
            regulations, including laws, regulations and policies concerning
            taxes, banking, securities and insurance, and the application
            thereof by regulatory bodies;

      -     technological changes;


                                       10
<PAGE>

      -     changes in consumer spending and savings habits; and

      -     regulatory or judicial proceedings.

      If one or more of the factors affecting our forward-looking information
and statements proves incorrect, then our actual results, performance or
achievements could differ materially from those expressed in, or implied by,
forward-looking information and statements contained in this Form 10-Q.
Therefore, we caution you not to place undue reliance on our forward-looking
information and statements.

      We do not intend to update our forward-looking information and statements,
whether written or oral, to reflect change. All forward-looking statements
attributable to us are expressly qualified by these cautionary statements.

      A reader should 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 10-K for the year ended December 31, 2002, 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, 2002 TO JUNE 30, 2003

      During the six months ended June 30, 2003, total assets increased slightly
by $8.1 million or 0.3%. The Company's loan portfolio, net of allowance,
increased $90.0 million or 4.3% during the six months ended June 30, 2003
primarily as a result of increased residential and commercial loan volume.
Residential mortgage loans, which include home equity first mortgages, rose by
$58.9 million or 21.3% during the period as record low interest rates continue
to generate increased levels of mortgage loan activity. Commercial loans showed
moderate growth of $46.2 million or 2.7% during the six months ended June 30,
2003. Additionally, the increase in other assets reflected the purchase during
the period ended June 30, 2003 of an additional $10.0 million of bank-owned life
insurance. These increases were offset in part by a decline in the Company's
security portfolio of $96.9 million or 18.3% during the same period resulting
from paydowns and maturities.

      Total deposits reflected an increase of $10.1 million or 0.6% during the
six months ended June 30, 2003 as the Company's focus on transaction accounts
successfully replaced maturing time deposits with demand and savings deposits.
Advances from the FHLB of Topeka used to help meet funding needs rose $28.5
million or 4.2% during the period. Securities under agreement to repurchase
which represent interest-bearing accounts from commercial customers decreased
during the six months ended June 30, 2003 by $31.6 million or 52.9%.

      Stockholders' equity increased slightly from $167.9 million at December
31, 2002 to $168.0 million at June 30, 2003. Earnings during the period of $14.2
million were offset by an increase in treasury shares and the adjustment to
accumulated other comprehensive income resulting from a decrease in unrealized
gains on available for sale securities. The Company increased its shares of
treasury stock during 2003 as part of a stock repurchase program in which the
Company purchased 979,100 shares of its common stock at an average per share
price of $14.94 and an aggregate cost of $14.6 million. The increase in common
stock and additional paid-in capital during the period ended June 30, 2003 of
$1.2 million included the exercise of 109,000 options to purchase the Company's
stock. At June 30, 2003, the Company and the Bank exceeded all regulatory
requirements for capital adequacy. See "--Liquidity and Capital Resources".


                                       11
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND 2002 AND THE
SIX MONTHS ENDED JUNE 30, 2003 AND 2002

      Net Income. Net income for the three and six months ended June 30, 2003
was $7.1 million and $14.2 million, respectively, down slightly from $7.5
million and $14.5 million, respectively, for the same periods in the prior year.
Diluted earnings per share for the second quarter 2003 were $.40, up 8.1% from
the second quarter 2002. Diluted earnings per share for the six months ended
June 30, 2003 were $.78, up 6.8% from the same period last year. Diluted
earnings per share include the effect of the Company's share repurchase program
which resulted in 2.0 million fewer shares outstanding on average during the
second quarter of 2003 compared to the second quarter of 2002.

      Net Interest Income. The Company's net interest income declined $2.2
million or 9.8% to $20.6 million for the quarter ended June 30, 2003 from $22.9
million for the comparable 2002 period. Net interest income declined $3.1
million or 6.7% to $43.0 million for the six months ended June 30, 2003 from
$46.1 million for the comparable 2002 period. Net interest margin during both
the three and six month periods ended June 30, 2003 declined to 3.15% and 3.25%,
respectively, from 3.44% and 3.47% for the three and six month periods ended
June 30, 2002, respectively. The decrease in net interest income was largely due
to the current low level of interest rates and the resulting asset repricings.
The Company anticipates further declines in net interest income along with lower
spreads and margins.

      Interest Income. Total interest income declined 15.5% during the three
months ended June 30, 2003 from $44.1 million at June 30, 2002 to $37.3 million.
Similarly, interest income declined 13.6% during the six months ended June 30,
2003 compared to the same period in the prior year from $89.2 million to $77.0
million. The decline was primarily due to a lower yield on interest-earning
assets, which dropped from 6.63% to 5.68% in the three-month comparative period
and from 6.73% to 5.84% in the six-month comparative period. The decreases in
yield were offset to a certain extent in both comparative periods by increases
in loan average balances driven primarily by growth in the residential mortgage
and commercial loan portfolios.

      Interest Expense. Total interest expense decreased $4.6 million or 21.6%
in the three months ended June 30, 2003 as compared to the same period in the
prior year, and fell by $9.1 million or 21.0% in the six months ended June 30,
2003 as compared to the same period in the prior year. These decreases came
primarily as a result of the declining cost of deposits, which fell
approximately 100 basis points during both comparative periods. Also
contributing to the decrease in interest expense was the decline in average
balance of interest-bearing deposits of $85.1 million or 4.9% for the
three-month comparative period and $56.6 million or 3.3% for the six-month
comparative period. This decrease was partially offset by an increase in
interest expense on trust preferred securities as the Company accrued interest
on the additional trust preferred securities issued in July and October of 2002.

      Provision for Loan Losses. The Company's provision for loan losses
remained the same at $1.8 million and $3.6 million for the three and six-month
periods ended June 30, 2003 and June 30, 2002, respectively. Charge-offs (net of
recoveries) in the three and six-month periods ended June 30, 2003 were $2.0
million and $3.0 million, respectively.

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


                                       12
<PAGE>

large loans and pools of homogeneous small loans, portfolio seasoning, changes
in collateral values, and detailed reviews of specific large loan relationships.

      Noninterest Income. The components of noninterest income are deposit
related income, loan fees and loan service charges, net gains on sale of assets,
and other income. Total noninterest income increased $1.0 million or 13.3%
during the three months ended June 30, 2003 and $2.4 million or 16.6% during the
six months ended June 30, 2003 compared to the same periods in the prior year.
These increases were primarily due to a significant increase in deposit related
income, which consists primarily of service charges and fees on deposit
accounts. Deposit related income rose $1.4 million or 28.1% and $2.5 million or
27.9% during the three and six month comparative periods, respectively.

      Noninterest expense. Total noninterest expense for the three and six
months ended June 30, 2003 decreased by $773,000 or 4.4% and $342,000 or 1.0%,
respectively, compared to the same period in the prior year. The declines during
the comparative periods were primarily due to a reduction in compensation and
employee benefits expense, which fell 9.5% and 3.9%, respectively, led by a
reduction in executive benefit plan expense and a focus on monitoring and
controlling compensation and benefits expense, as it represents the largest
component of noninterest expense.


                                       13
<PAGE>

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

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

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED JUNE 30,
                                           -----------------------------------------------------------------------------------
                                                                 2003                                       2002
                                           -----------------------------------------------------------------------------------
                                                                         AVERAGE                                       AVERAGE
                                             AVERAGE                      YIELD/       AVERAGE                          YIELD/
                                             BALANCE       INTEREST       COST         BALANCE           INTEREST        COST
                                           ----------     ----------     -------      ----------        ----------     -------
<S>                                        <C>            <C>            <C>          <C>               <C>            <C>
ASSETS
Loans receivable(1)                        $2,183,413     $   32,979      6.04%       $1,985,362        $   35,008       7.05%
Securities:
   Available for sale(2)                      133,756          1,548      4.63           110,463             1,664       6.03
   Held to maturity                           262,503          2,399      3.65           450,972             6,685       5.93
                                           ----------     ----------                  ----------        ----------
      Total securities                        396,259          3,947      3.98           561,435             8,349       5.95
Other earning assets(3)                        45,196            387      3.43           118,293               790       2.67
                                           ----------     ----------                  ----------        ----------
      Total interest-earning
        assets                              2,624,868         37,313      5.68%        2,665,090            44,147       6.63%
                                                          ----------     =====                          ----------      =====
Noninterest-earning assets                    153,049                                    128,034
                                           ----------                                 ----------
      Total assets                         $2,777,917                                 $2,793,124
                                           ==========                                 ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
   Transaction accounts(4)                 $  670,057          1,739      1.04%       $  594,471             2,726       1.84%
   Term certificates of deposit               973,532          6,631      2.73         1,134,201            10,546       3.73
                                           ----------     ----------                  ----------        ----------
      Total deposits                        1,643,589          8,370      2.04         1,728,672            13,272       3.08
FHLB advances                                 640,920          6,422      3.96           603,996             6,302       4.13
Securities sold under agreements
   to repurchase                               33,881             76      0.90            37,330               121       1.30
Senior Notes                                   21,295            629     11.81            21,545               637      11.81
Mandatorily redeemable trust
   preferred securities                        60,250          1,171      7.77            40,250               921       9.16
                                           ----------     ----------                  ----------        ----------
      Total interest-bearing                2,399,935         16,668      2.79%        2,431,793            21,253       3.51%
                                                          ----------     =====                          ----------      =====
Noninterest-bearing liabilities               210,088                                    191,445
Stockholders' equity                          167,894                                    169,886
                                           ----------                                 ----------
      Total liabilities
        and stockholders' equity           $2,777,917                                 $2,793,124
                                           ==========                                 ==========
Net interest-earning assets                $  224,933                                 $  233,297
                                           ==========                                 ==========
Net interest income/interest rate
   spread                                                 $   20,645      2.89%                         $   22,894       3.12%
                                                          ==========    ======                          ==========     ======
Net interest margin                                                       3.15%                                          3.44%
                                                                        ======                                         ======
Ratio of average interest-earning
   to average interest-bearing                                          109.37%                                        109.59%
                                                                        ======                                         ======
</TABLE>

<TABLE>
<CAPTION>
                                                                           SIX MONTHS ENDED JUNE 30,
                                              -------------------------------------------------------------------------------------
                                                                2003                                       2002
                                              -------------------------------------------------------------------------------------
                                                                              AVERAGE                                      AVERAGE
                                               AVERAGE                         YIELD/        AVERAGE                        YIELD/
                                               BALANCE          INTEREST        COST         BALANCE           INTEREST      COST
                                              ----------       ----------     -------       ----------       ----------    --------
<S>                                           <C>              <C>            <C>           <C>              <C>           <C>
ASSETS
Loans receivable(1)                           $2,157,244       $   66,028       6.15%       $1,995,866       $   69,479      6.99%
Securities:
   Available for sale(2)                         148,737            3,656       4.92           136,915            5,285      7.72
   Held to maturity                              296,341            6,553       4.42           431,111           12,984      6.02
                                              ----------       ----------                   ----------       ----------
      Total securities                           445,078           10,209       4.59           568,026           18,269      6.43
Other earning assets(3)                           45,841              770       3.36            94,790            1,415      2.99
                                              ----------       ----------                   ----------       ----------
      Total interest-earning
        assets                                 2,648,163           77,007       5.84%        2,658,682           89,163      6.73%
                                                               ----------      =====                         ----------    ======
Noninterest-earning assets                       149,113                                       127,302
                                              ----------                                    ----------
      Total assets                            $2,797,276                                    $2,785,984
                                              ==========                                    ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
   Transaction accounts(4)                    $  663,328            3,596       1.09%       $  577,712            5,298      1.85%
   Term certificates of deposit                  978,040           13,734       2.83         1,120,246           21,626      3.89
                                              ----------       ----------                   ----------       ----------
      Total deposits                           1,641,368           17,330       2.13         1,697,958           26,924      3.20
FHLB advances                                    658,528           12,901       3.90           631,717           12,784      4.03
Securities sold under agreements
   to repurchase                                  40,171              183       0.92            38,417              248      1.30
Senior Notes                                      21,295            1,258      11.81            21,545            1,273     11.81
Mandatorily redeemable trust
   preferred securities                           60,250            2,349       7.80            40,250            1,843      9.16
                                              ----------       ----------                   ----------       ----------
      Total interest-bearing                   2,421,612           34,021       2.83%        2,429,887           43,072      3.57%
                                                               ----------      =====                         ----------    ======
Noninterest-bearing liabilities                  206,341                                       188,654
Stockholders' equity                             169,323                                       167,443
                                              ----------                                    ----------
      Total liabilities
        and stockholders' equity              $2,797,276                                    $2,785,984
                                              ==========                                    ==========
Net interest-earning assets                   $  226,551                                    $  228,795
                                              ==========                                    ==========
Net interest income/interest rate
   spread                                                      $   42,986       3.01%                        $   46,091      3.16%
                                                               ==========     ======                         ==========    ======
Net interest margin                                                             3.25%                                        3.47%
                                                                              ======                                       ======
Ratio of average interest-earning
   to average interest-bearing                                                109.36%                                      109.42%
                                                                              ======                                       ======
</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 the market valuation accounts.

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

(4)   Includes passbook, NOW and money market accounts.


                                       14
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

      Liquidity. Liquidity refers to the Company's ability to generate
sufficient cash to meet the funding needs of current loan demand, savings
deposit withdrawals, principal and interest payments with respect to outstanding
borrowings and to pay operating expenses. It is management's policy to maintain
greater liquidity than required in order to be in a position to fund loan
originations, to meet withdrawals from deposit accounts, to make principal and
interest payments with respect to outstanding borrowings and to make investments
that take advantage of interest rate spreads. The Company monitors its liquidity
in accordance with guidelines established by the Company and applicable
regulatory requirements. The 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 is usually caused by
factors over which the Company has limited control. The Company derives its
liquidity from both its assets and liabilities. Liquidity is derived from assets
by receipt of interest and principal payments and prepayments, by the ability to
sell assets at market prices and by utilizing unpledged assets as collateral for
borrowings. Liquidity is derived from liabilities by maintaining a variety of
funding sources, including deposits, advances from the FHLB, securities sold
under agreements to repurchase and other short and long-term borrowings.

      The Company's liquidity management is both a daily and long-term function
of funds management. Liquid assets are generally 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 June 30, 2003, the Company had $210.1 million in
available borrowing capacity with the FHLB.

      At June 30, 2003, the Company had outstanding loan commitments (including
unused lines of credit) for home equity, commercial real estate and commercial
business loans of approximately $372.4 million and an additional $11.4 million
in performance standby letters of credit. Certificates of deposit, which are
scheduled to mature within one year, totaled $696.8 million at June 30, 2003,
and borrowings, which are scheduled to mature within the same period, totaled
$105.8 million. The Company anticipates that sufficient funds will be available
to meet its current loan total 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.

      In September 1997, the Company issued $80.0 million of Senior Notes. As of
June 30, 2003, the Company had purchased and retired $58.7 million of those
outstanding Senior Notes. These transactions reduced future interest costs
associated with those notes. The remaining $21.3 million of Senior Notes mature
in September 2004 and have an annual debt service requirement of $2.3 million
(or $1.15 million for each semi-annual period) in 2003.

      Capital Resources. Bank holding companies are required to maintain capital
ratios in accordance with guidelines adopted by the Federal Reserve Bank. The
guidelines are commonly known as Risk-Based Capital Guidelines. On June 30,
2003, the Company exceeded all applicable capital requirements pursuant to the
Risk-Based Capital Guidelines and was considered "well capitalized" by having a
total risk-based capital ratio of 11.20%, a Tier 1 risk-based capital ratio of
9.43% and a leverage ratio of 7.15%.


                                       15
<PAGE>

INFLATION AND CHANGING PRICES

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

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

      The following tables present contractual cash obligations and commitments
of the Company as of June 30, 2003. See Notes 4 and 5 of the Notes to the
Consolidated Financial Statements and "--Liquidity and Capital Resources"
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 Payments due by Period
                                                          --------------------------------------------------------------------
                                                                                                      More Than
                                                                        Less than       One to         Three to        Over
             Contractual Cash Obligations                  Total         One Year     Three Years     Five Years    Five Years
--------------------------------------------------        --------      ---------     -----------     ----------    ----------
<S>                                                       <C>           <C>           <C>             <C>           <C>
FHLB advances                                             $712,685       $ 77,663       $ 35,000       $100,000       $500,022
Securities sold under agreements to repurchase              28,125         28,125             --             --             --
Senior Notes                                                21,295             --         21,295             --             --
Mandatorily redeemable trust preferred securities           60,250             --             --             --         60,250
Operating leases                                             7,807          1,081          1,601            898          4,227
Data processing maintenance obligation                         796            265            531             --             --
                                                          --------       --------       --------       --------       --------
   Total contractual cash obligations                     $830,958       $107,134       $ 58,427       $100,898       $564,499
                                                          ========       ========       ========       ========       ========
</TABLE>

<TABLE>
<CAPTION>
                                                                       Amount of Commitment Expiration Per Period
                                                        ----------------------------------------------------------------------
                                                                                                      More Than
                                                          Unfunded      Less than        One to        Three to        Over
                     Commitments                        Commitments      One Year     Three Years     Five Years    Five Years
--------------------------------------------------      -----------     ---------     -----------     ----------    ----------
<S>                                                     <C>             <C>           <C>             <C>           <C>
Lines of credit                                           $263,339       $142,324       $105,997       $ 14,935       $     83
Standby letters of credit                                   11,420         10,393          1,027             --             --
Other commitments                                          109,104         12,267         10,156         29,588         57,093
                                                          --------       --------       --------       --------       --------
   Total commitments                                      $383,863       $164,984       $117,180       $ 44,523       $ 57,176
                                                          ========       ========       ========       ========       ========
</TABLE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ASSET AND LIABILITY MANAGEMENT

      Asset and liability management is concerned with the timing and magnitude
of the repricing of assets and liabilities. It is the objective of the Company
to attempt to control risks associated with interest rate movements. In general,
management's strategy is to evaluate asset and liability balances within
maturity categories to control 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


                                       16
<PAGE>

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.

      The following table summarizes the anticipated maturities or repricing of
the Company's interest-earning assets and interest-bearing liabilities as of
June 30, 2003, based on the information and assumptions set forth in the notes
below (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                        MORE THAN
                                                         THREE TO       MORE THAN      THREE YEARS
                                       WITHIN THREE       TWELVE       ONE YEAR TO       TO FIVE        OVER FIVE
                                           MONTHS         MONTHS       THREE YEARS        YEARS           YEARS             TOTAL
                                       ------------     ----------     -----------     -----------      ----------       ----------
<S>                                    <C>              <C>            <C>             <C>              <C>              <C>
Interest-earning assets(1):
   Loans receivable(2)                  $1,102,420      $  396,564      $  324,014      $  242,747      $  126,680       $2,192,425
   Securities:
      Available for sale(3)                 37,694          24,502          42,223           7,413             794          112,626
      Held to maturity                      64,450          84,836          40,727          58,005          69,675          317,693
   Other interest-earning assets(4)         92,857           3,977              --              --              --           96,834
                                        ----------      ----------      ----------      ----------      ----------       ----------
           Total                        $1,297,421      $  509,879      $  406,964      $  308,165      $  197,149       $2,719,578
                                        ==========      ==========      ==========      ==========      ==========       ==========

Interest-bearing liabilities:
   Deposits(5):
      Money market and NOW
        accounts                        $  272,590      $   30,606      $   64,269      $   47,759      $  181,104       $  596,328
      Passbook accounts                      3,805          11,414          23,342          16,298          37,710           92,569
      Certificates of deposit              302,306         395,299         175,659          84,599           3,309          961,172
   FHLB advances(6)                         87,663              --          25,000         100,000         500,022          712,685
   Securities sold under
      agreements to repurchase              28,125              --              --              --              --           28,125
   Senior Notes                                 --              --          21,295              --              --           21,295
   Mandatorily redeemable trust
       preferred securities(6)              20,000              --              --              --          40,250           60,250
                                        ----------      ----------      ----------      ----------      ----------       ----------
           Total                        $  714,489      $  437,319      $  309,565      $  248,656      $  762,395       $2,472,424
                                        ==========      ==========      ==========      ==========      ==========       ==========

Excess (deficiency) of
   interest-earning assets over
   interest-bearing liabilities         $  582,932      $   72,560      $   97,399      $   59,509      $ (565,246)      $  247,154
                                        ==========      ==========      ==========      ==========      ==========       ==========

Cumulative excess of
   interest-earnings assets over
   interest-bearing liabilities         $  582,932      $  655,492      $  752,891      $  812,400      $  247,154       $  247,154
                                        ==========      ==========      ==========      ==========      ==========       ==========

Cumulative excess of
   interest-earning assets over
   interest-bearing liabilities
   as a percentage of total assets           20.47%          23.02%          26.44%          28.53%           8.68%            8.68%
                                        ==========      ==========      ==========      ==========      ==========       ==========
</TABLE>

----------

(1)   Adjustable-rate loans and securities are included in the period in which
      interest rates are next scheduled to adjust rather than in the period in
      which they mature and fixed-rate loans and securities are included in the
      periods in which they are scheduled to be repaid, based on scheduled
      amortization, in each case as adjusted to take into account estimated
      prepayments based on, among other things, historical performance.

(2)   Balances have been reduced for nonaccrual loans.

(3)   Does not include unrealized gain on securities classified as available for
      sale.

(4)   Comprised of cash and due from banks, deposits with other banks, Federal
      Home Loan Bank 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.


                                       17
<PAGE>

(6)   Adjustable-rate FHLB advances and trust preferred securities are included
      in the period in which interest rates are next scheduled to adjust rather
      than in the period in which they mature, while fixed rate FHLB advances
      and trust preferred securities are included in the period in which they
      are scheduled to mature.

ITEM 4. CONTROLS AND PROCEDURES

      As of the end of the period covered by this quarterly report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer along
with the Company's Chief Financial Officer, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures pursuant to
the Exchange Act Rule 13a-14. Based upon that evaluation, the Company's Chief
Executive Officer along with the Company's Chief Financial Officer concluded
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's periodic SEC
filings. There have been no significant changes in the Company's internal
controls or in other factors, which could significantly affect these controls
subsequent to the date the Company carried out its evaluation.

      Disclosure controls and procedures are the Company's controls and other
procedures that are designed to ensure that information required to be disclosed
by the Company in the reports that the Company files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that the Company files under the Exchange Act is accumulated and communicated to
the Company's management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      The Company is involved in routine legal proceedings occurring in the
ordinary course of business, which, in the aggregate, are believed by management
to be immaterial to the consolidated financial position and results of
operations of the Company.

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

The Company held its Annual Meeting of Stockholders on May 28, 2003. Management
solicited proxies for the meeting and there was no solicitation in opposition to
management's nominees for director, as listed in the Proxy Statement. All
nominees for director were re-elected for a three-year term. Votes were cast for
director as follows:

<TABLE>
<CAPTION>
                   Nominee                      For         Withheld    Abstain
                   -------                      ---         --------    -------
<S>                                          <C>            <C>         <C>
           Joseph A. Leone                   16,863,652            --   296,567
           Jan A. Norton                     11,961,979     4,901,673   296,567

        Other Continuing Directors
        ----- ---------- --------
           Edward A. Townsend
           William D. Breedlove
           Andrew M. Coats
           Robert A. Kotecki
           George P. Nigh
           J. David Rosenberg
</TABLE>


                                       18
<PAGE>

      The stockholders ratified the appointment of KPMG LLP, independent
auditors, to audit the Company's financial statements for the year ending
December 31, 2003. Votes were cast as follows:

<TABLE>
<CAPTION>
                For                    Against               Abstain
                ---                    -------               -------
<S>                                    <C>                   <C>
             16,804,496                337,944                17,779
</TABLE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

      a.    Exhibits

      Exhibit 31.1 - Certification as adopted pursuant to section 302 of
                     the Sarbanes-Oxley Act of 2002.

      Exhibit 31.2 - Certification as adopted pursuant to section 302 of
                     the Sarbanes-Oxley Act of 2002.

      Exhibit 32   - Certification pursuant to 18 U.S.C. section 1350, as
                     adopted pursuant to section 906 of the Sarbanes-Oxley
                     Act of 2002.

      b.    Reports on Form 8-K

      The Company filed the following Form 8-Ks during the quarter ended June
30, 2003:

      1. On April 17, 2003, Local Financial Corporation announced by press
release its earnings for the quarter ended March 31, 2003. Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, the chief executive officer and chief
financial officer of the Company have each signed a certification with respect
to the Report.

      2. Effective June 27, 2003, Local Oklahoma Bank, the wholly-owned
subsidiary of Local Financial Corporation, affected a charter change to become
an Oklahoma state banking corporation and a state member bank of the Federal
Reserve System.


                                       19
<PAGE>

                                   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: August 14, 2003                           By /s/ Edward A. Townsend
                                                -------------------------
                                                Edward A. Townsend
                                                Chairman of the Board
                                                Chief Executive Officer


                                                LOCAL FINANCIAL CORPORATION

Date: August 14, 2003                           By /s/ Richard L. Park
                                                ----------------------
                                                Richard L. Park
                                                Chief Financial Officer


                                       20
<PAGE>

                                    FORM 10-Q
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT           DESCRIPTION
<S>               <C>
31.1              Certification as Adopted Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002

31.2              Certification as Adopted Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002

32                Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>


                                       21