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

                                   FORM 10-QSB
(Mark One)

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

     For the quarterly period ended June 30, 2000

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

     For the transition period from ____________ to ____________
     Commission file number 000-25287


                           TOWER FINANCIAL CORPORATION
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


             INDIANA                                   35-2051170
             -------                                   ----------
  (State or other jurisdiction of                  (I.R.S. Employer
  incorporation or organization)                  Identification No.)



                116 East Berry Street, Fort Wayne, Indiana 46802
                    (Address of principal executive offices)


                                 (219) 427-7000
--------------------------------------------------------------------------------
                           (Issuer's telephone number)

     Check whether the issuer (1) filed all reports required to be filed by
     Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
     such shorter period that the registrant was required to file such reports),
     and (2) has been subject to such filing requirements for the past 90 days.
     Yes [ X ] No [ ]


  Number of shares of the issuer's common stock, without par value, outstanding
                         as of July 31, 2000: 2,530,000


      Transitional Small Business Disclosure Format      Yes [ ] No [X]



<PAGE>   2


                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                            (unaudited)


                                                                              JUNE 30,        DECEMBER 31,
                                                                                2000             1999
                                                                           -------------    -------------
<S>                                                                        <C>              <C>
ASSETS
Cash and due from banks                                                    $   3,696,415    $   2,273,592
Interest bearing deposits in banks                                             3,232,527        7,321,726
Federal funds sold                                                            23,651,890       20,848,377
                                                                           -------------    -------------
       Total cash and cash equivalents                                        30,580,832       30,443,695
Securities available for sale, at fair value                                  15,466,304        5,816,391
Loans                                                                        113,728,277       67,314,520
Allowance for loan losses                                                     (1,704,509)      (1,009,509)
                                                                           -------------    -------------
       Net loans                                                             112,023,768       66,305,011
Premises and equipment, net                                                    1,022,699          723,975
Other assets                                                                     684,270          357,995
                                                                           -------------    -------------
            Total assets                                                   $ 159,777,873    $ 103,647,067
                                                                           =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Noninterest bearing                                                        $  16,010,534    $  10,689,378
Interest bearing                                                             121,652,313       71,043,860
                                                                           -------------    -------------
       Total deposits                                                        137,662,847       81,733,238
Short term borrowings                                                            210,000          210,000
Accrued expenses and other liabilities                                           656,050          383,650
                                                                           -------------    -------------
       Total liabilities                                                     138,528,897       82,326,888

Commitments and contingencies

Stockholders' equity
Preferred stock, no par value, 4,000,000 shares authorized;
       no shares issued and outstanding                                             --               --
Common stock, no par value, 6,000,000 shares authorized;
       2,530,000 shares issued and outstanding at June 30, 2000
       and at December 31, 1999                                                2,530,000        2,530,000
Additional paid-in capital                                                    20,939,770       20,939,770
Accumulated deficit                                                           (2,215,148)      (2,148,876)
Net unrealized depreciation on securities available for sale, net of tax          (5,646)            (715)
                                                                           -------------    -------------
       Total stockholders' equity                                             21,248,976       21,320,179
                                                                           -------------    -------------
            Total liabilities and stockholders' equity                     $ 159,777,873    $ 103,647,067
                                                                           =============    =============
</TABLE>

      The following notes are an integral part of the financial statements.

                                        1


<PAGE>   3

TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>

                                                 THREE MONTHS ENDED              SIX MONTHS ENDED
                                                        JUNE 30,                     JUNE 30,
                                             -------------------------    --------------------------
                                                 2000          1999           2000           1999
                                             -----------   -----------    -----------    -----------
<S>                                          <C>           <C>            <C>            <C>
Interest income:
      Loans, including fees                  $ 2,280,384   $   347,749    $ 4,038,481    $   387,832
      Securities                                 232,226        65,843        344,692        102,549
      Interest bearing deposits with banks        49,998       158,223        101,001        263,551
      Federal funds sold                         313,559        94,583        615,843        146,133
                                             -----------   -----------    -----------    -----------
           Total interest income               2,876,167       666,398      5,100,017        900,065
Interest expense:
      Deposits                                 1,515,493       218,393      2,557,470        252,102
      Borrowings                                   3,160          --            6,039           --
                                             -----------   -----------    -----------    -----------
           Total interest expense              1,518,653       218,393      2,563,509        252,102
                                             -----------   -----------    -----------    -----------
Net interest income                            1,357,514       448,005      2,536,508        647,963
Provision for loan losses                        295,000       365,000        695,000        455,000
                                             -----------   -----------    -----------    -----------
Net interest income after provision
   for loan losses                             1,062,514        83,005      1,841,508        192,963
Noninterest income:
      Trust                                       96,324          --          161,182           --
      Service charges                             20,172         1,903         39,508          1,975
      Loan fees                                   73,235        75,955        149,174         81,567
      Other fees                                  46,886         5,807         80,221          6,293
                                             -----------   -----------    -----------    -----------
           Total noninterest income              236,617        83,665        430,085         89,835
Noninterest expense:
      Salaries and benefits                      691,756       379,143      1,340,037        805,467
      Occupancy and equipment                    143,880        84,037        290,273        143,632
      Marketing                                   43,605        49,583         86,588         71,078
      Processing                                  34,495        16,704         67,391         28,460
      Office supply                               46,074        38,303         78,281         78,844
      Legal and professional                     131,213        84,683        253,949        202,914
      Other expense                              123,655        55,942        221,346        113,238
                                             -----------   -----------    -----------    -----------
           Total noninterest expense           1,214,678       708,395      2,337,865      1,443,633

Income (loss) before income tax                   84,453      (541,725)       (66,272)    (1,160,835)
Provision for income tax                            --            --             --             --
                                             -----------   -----------    -----------    -----------
Net income (loss)                            $    84,453   $  (541,725)   $   (66,272)   $(1,160,835)
                                             ===========   ===========    ===========    ===========
Basic and diluted income (loss) per share    $      0.03   $     (0.21)   $     (0.03)   $     (0.54)
Average shares outstanding                     2,530,000     2,530,000      2,530,000      2,155,028
</TABLE>




      The following notes are an integral part of the financial statements

                                        2



<PAGE>   4

TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

<TABLE>
<CAPTION>

                                                   THREE MONTHS ENDED            SIX MONTHS ENDED
                                                       JUNE 30,                       JUNE 30,
                                               -------------------------    --------------------------
                                                   2000          1999           2000          1999
                                               -----------   -----------    -----------    -----------

<S>                                            <C>           <C>            <C>            <C>
Net income (loss), as reported                 $    84,453   $  (541,725)   $   (66,272)   $(1,160,835)

Unrealized appreciation (depreciation) on
   securities available for sale, net of tax             2          --           (4,931)          --
                                               -----------   -----------    -----------    -----------

COMPREHENSIVE INCOME (LOSS)                    $    84,455   $  (541,725)   $   (71,203)   $(1,160,835)
                                               ===========   ===========    ===========    ===========
</TABLE>








      The following notes are an integral part of the financial statements.

                                        3



<PAGE>   5

TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the six months ended June 30, 2000 and June 30, 1999
(unaudited)

<TABLE>
<CAPTION>


                                                                                                   NET
                                                                                                UNREALIZED
                                                                                               DEPRECIATION
                                                                                               ON SECURITIES
                                                              ADDITIONAL                        AVAILABLE
                                 PREFERRED      COMMON         PAID IN         ACCUMULATED       FOR SALE,
                                   STOCK        STOCK          CAPITAL           DEFICIT        NET OF TAX       TOTAL
                                -------------------------------------------------------------------------------------------

<S>                              <C>        <C>             <C>              <C>             <C>             <C>
Balance, January 1, 1999           $--      $         10    $       --       $   (473,434)   $       --      $   (473,424)

Issuance of common stock,
    net of underwriters' fee
    and offering costs              --         2,530,000      20,939,770            --               --        23,469,770

Retirement of common
    stock                           --               (10)           --              --               --               (10)

Net unrealized depreciation
    on securities available
    for sale, net of tax            --              --              --              --               --              --

Net loss                            --              --              --         (1,160,835)           --        (1,160,835)
                                -------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1999             $--      $  2,530,000    $ 20,939,770     $ (1,634,269)   $       --      $ 21,835,501
                                ===========================================================================================



Balance, January 1, 2000           $--      $  2,530,000    $ 20,939,770     $ (2,148,876)   $       (715)   $ 21,320,179

Net unrealized depreciation
    on securities available
    for sale, net of tax            --              --              --              --             (4,931)         (4,931)

Net loss                            --              --              --            (66,272)           --           (66,272)
                                -------------------------------------------------------------------------------------------

BALANCE, JUNE 30, 2000             $--      $  2,530,000    $ 20,939,770     $ (2,215,148)   $     (5,646)   $ 21,248,976
                                ===========================================================================================
</TABLE>



      The following notes are an integral part of the financial statements.

                                        4



<PAGE>   6

TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(unaudited)

<TABLE>
<CAPTION>
                                                                          SIX MONTHS ENDED
                                                                               June 30
                                                                    ----------------------------
                                                                         2000           1999
                                                                    ------------    ------------
<S>                                                                 <C>             <C>
Cash flows from operating activities:
    Net loss                                                        $    (66,272)   $ (1,160,835)
    Adjustments to reconcile net loss to net cash provided
       by (used in) operating activities:
       Depreciation and amortization                                      96,600          43,354
       Provision for loan losses                                         695,000         455,000
       (Increase) decrease in accrued interest receivable and
          other assets                                                  (326,275)          6,542
       Increase in accrued interest payable and other liabilities        272,400          35,983
                                                                    ------------    ------------
         Net cash provided by (used in) operating activities             671,453        (619,956)
                                                                    ------------    ------------
Cash flows used in investing activities:
    Net increase in loans                                            (46,413,757)    (30,500,873)
    Purchase of securities available for sale                         (9,654,844)     (5,537,023)
    Purchase of equipment and leasehold expenditures                    (395,324)       (560,174)
                                                                    ------------    ------------
         Net cash used in investing activities                       (56,463,925)    (36,598,070)
                                                                    ------------    ------------
Cash flows from financing activities:
    Net increase in deposits                                          55,929,609      34,186,445
    Gross proceeds from issuance of common stock                            --        25,300,000
    Payment of underwriters' fee and offering costs                         --        (1,830,230)
    Retirement of common stock                                              --               (10)
    Repayment of related party notes payable                                --          (760,000)
                                                                    ------------    ------------
         Net cash provided from financing activities                  55,929,609      56,896,205
                                                                    ------------    ------------
Net increase in cash and cash equivalents                                137,137      19,678,179
Cash and cash equivalents, beginning of period                        30,443,695         213,920
                                                                    ------------    ------------
Cash and cash equivalents, end of period                            $ 30,580,832    $ 19,892,099
                                                                    ============    ============
</TABLE>




      The following notes are an integral part of the financial statements.

                                        5


<PAGE>   7

TOWER FINANCIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     A.   ORGANIZATION: Tower Financial Corporation ("the Company") was
          incorporated on July 8, 1998. The Company's wholly-owned subsidiary,
          Tower Bank & Trust Company ("the Bank") opened on February 19, 1999
          after receiving federal and state bank regulatory approvals to
          commence its banking operations. Until February 19, 1999, the Company
          was in the development stage and its activities were limited to the
          organization of the Bank as well as the completion of its initial
          public stock offering.

     B.   BASIS OF PRESENTATION: The accompanying unaudited consolidated
          condensed financial statements were prepared in accordance with
          generally accepted accounting principles for interim periods and with
          instructions for Form 10-QSB and, therefore, do not include all
          disclosures required by generally accepted accounting principles for
          complete presentation of the Company's financial statements. In the
          opinion of management, the consolidated condensed financial statements
          contain all adjustments necessary to present fairly its consolidated
          financial position at June 30, 2000, its consolidated results of
          operations and comprehensive income for the three and six month
          periods ended June 30, 2000 and June 30, 1999, and its consolidated
          statement of stockholders' equity and cash flows for the six month
          periods ended June 30, 2000 and June 30, 1999. These consolidated
          condensed financial statements should be read in conjunction with the
          audited financial statements for the year ended December 31, 1999 and
          the period from July 8, 1998 (date of inception) through December 31,
          1998 and related notes included in the Company's Annual Report on Form
          10-KSB for the period ended December 31, 1999.

     C.   PRINCIPALS OF CONSOLIDATION: The accompanying consolidated condensed
          financial statements include the accounts of the Company and the Bank.
          All significant intercompany accounts and transactions have been
          eliminated in consolidation.

2.   INITIAL PUBLIC OFFERING:

     On January 29, 1999, the Company completed an initial public offering of
     its common stock during which 2,200,000 shares were sold at $10.00 per
     share. On February 12, 1999, the Company completed the sale of 330,000
     common shares included in the underwriters' overallotment option at $10.00
     per share. Total proceeds from the offering were $25,300,000 less
     underwriters' fees and offering expenses of $1,830,230 for net proceeds of
     $23,469,770. The Company used approximately $15,000,000 of the net proceeds
     from the stock offering to provide the initial capitalization of the Bank
     in February 1999.

3.   EARNINGS PER SHARE:

     Earnings per share is computed based on the weighted average number of
     shares outstanding during the three months ended June 30, 2000 and June 30,
     1999 at 2,530,000 shares, and during the six months ended June 30, 2000 and
     June 30, 1999 at 2,530,000 and 2,155,028 shares, respectively.

     Stock options granted through June 30, 2000 had an anti-dilutive effect on
     earnings per share.

4.   INCOME TAXES:

     At June 30, 2000, the Company had net operating loss carryforwards of
     approximately $2,215,000. No deferred tax asset is recorded as a valuation
     allowance reduces the gross deferred tax asset of approximately $886,000 to
     zero.

                                        6



<PAGE>   8

5.   STOCK OPTION PLAN:

     On December 14, 1998, and subsequently amended on January 21, 1999, the
     stockholders and Board of Directors adopted the 1998 Stock Option and
     Incentive Plan (the "Plan") for officers, employees and directors. The
     maximum number of shares, which may be issued under the Plan, may not
     exceed 310,000 and includes both incentive stock options and non-qualified
     options. The exercise price for incentive stock options may not be less
     than the fair market value of the shares at the time of grant, except as
     granted to a 10% shareholder in which case the option price may not be less
     than 110% of fair market value. The exercise price for non-qualified stock
     options may not be less than the fair market value of the shares at the
     time of grant. The duration of each option may not exceed ten years from
     the date of grant.

     At June 30, 2000, options for 307,420 shares had been granted to certain
     officers, employees, and directors. The options were granted at the market
     price on the dates of grant in a range from $8.125 to $10.1875 per share.
     There was no activity relative to the Plan during the second quarter of
     2000. Of the total options granted, options for 141,855 shares were vested
     and exercisable at June 30, 2000.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATION

The Company was formed to be the bank holding company for the Bank. The Company
was in a development stage until the Bank commenced operations on February 19,
1999. The Bank is an Indiana chartered bank with depository accounts insured by
the Federal Deposit Insurance Corporation and is also a member of the Federal
Reserve System. The Bank provides a full range of commercial and consumer
banking services and investment management and personal trust services primarily
in Allen County, Indiana, including Fort Wayne and its suburbs. The Bank also
operates loan production offices in Huntington County, Indiana and Whitley
County, Indiana.

Prior to the opening of the Bank, the Company's principal activities related to
the organization of the Bank and the conducting of the Company's initial public
offering ("IPO"). The Company funded its start-up and organizational costs
through loans from directors in an aggregate amount of $760,000, which loans
were repaid upon completion of the IPO. Total proceeds to the Company from the
IPO were $22,709,770 (net of offering expenses, underwriters' discounts and
repayment of director loans), of which $15,000,000 was used to initially
capitalize the Bank.

The following presents management's discussion and analysis of the consolidated
financial condition of the Company as of June 30, 2000 and December 31, 1999 and
results of operations for the three months and six months ended June 30, 2000
and June 30, 1999. This discussion should be read in conjunction with the
Company's unaudited consolidated condensed financial statements and the related
notes appearing elsewhere in this report.

FORWARD-LOOKING STATEMENTS

The statements contained in this Quarterly Report filed on Form 10-QSB that are
not historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Forward-looking statements are made
based upon management's current expectations and beliefs concerning future
developments and their potential effects upon the Company or the Bank. There can
be no assurance that future developments affecting the Company or the Bank will
be those anticipated by management. Actual results may differ materially from
those included in the forward-looking statements. These forward-looking
statements involve risks and uncertainties including, but not limited to, the
following:

-    the Company's status as a start-up company with less than two years of
     operating history;
-    the effect of extensive banking regulation on the Bank's ability to grow
     and compete,
-    the effect of changes in federal economic and monetary policies on the
     Bank's ability to attract deposits, make loans and achieve satisfactory
     interest spreads,

                                        7


<PAGE>   9

-    the competitive disadvantage resulting from the Company's status as a
     highly-regulated company;
-    the Company's dependence on key management personnel,
-    the increased risk of losses due to loan defaults caused by the Bank's
     commercial loan concentration,
-    the Company's dependence on a favorable local economy in the Bank's primary
     service area,
-    the Bank's dependence on net interest spread for profitability; and
-    the Bank's ability to implement developments in technology to be
     competitive.

Readers are also directed to other risks and uncertainties discussed in other
documents filed by the Company with the Securities and Exchange Commission. The
Company undertakes no obligation to update or revise any forward-looking
information, whether as a result of new information, future developments or
otherwise.

FINANCIAL CONDITION

Total assets of the Company were $159,777,873 at June 30, 2000 compared to its
assets at December 31, 1999 of $103,647,067. The significant increase in assets
was reflected generally in loans and was attributable primarily to the inflow of
funds from deposit growth at the Bank during the first six months of 2000. Asset
growth has been substantial during each quarter since the Bank began operations.
The significant growth during these previous quarters was also a result of
deposit growth at the Bank. Total assets at June 30, 1999 were $56,167,929. As
the Bank is only in its second year of operation, the Company anticipates that
assets will continue to increase significantly.

Cash and cash equivalents, which include Federal funds sold, were $30,580,832 at
June 30, 2000, a $137,137 increase from $30,443,695 at December 31, 1999. While
there was a slight net increase in cash and cash equivalents during the first
half of 2000 from the year end, a decline in interest bearing deposits with
banks evidences the fact that the Company made a $4,000,000 capital contribution
to the Bank in the first quarter. The contribution was made to provide adequate
capital levels as a result of, and in anticipation of, further growth at the
Bank. An increase in federal funds sold during the first six months of 2000 was
a function of general excess liquidity levels.

Securities available for sale were $15,466,304 at the end of the second quarter
of 2000, an increase of $9,649,913 from year-end. The increase in securities
available for sale was the result of purchases of short-term investment
securities with excess liquid funds provided from deposit growth.

Total loans were $113,728,277 at June 30, 2000 reflecting a 69% growth from
year-end 1999. Total loans were $67,314,520 at December 31, 1999. The loans
outstanding at June 30, 2000 consisted of $89 million in commercial and
commercial real estate loans, $8 million in residential real estate and $16
million in home equity and consumer loans. Loan growth during the second quarter
was reflected in all categories but mainly in the commercial and commercial real
estate sector. Total loans at June 30, 1999 were $30,500,873.

The allowance for loan losses at June 30, 2000 was $1,704,509. This represented
approximately 1.5% of total loans outstanding. The provision for the allowance
during the second quarter of 2000 was $295,000 compared to $400,000 in the
previous quarter. The addition to the allowance during the second quarter was
directly attributable to the amount of the loan growth during that period.
Management considers the allowance for loan losses to be adequate; however,
there can be no assurance that charge-offs in future periods will not exceed the
allowance. Additional provisions for the allowance are expected during 2000 as a
result of anticipated increases in the total loan portfolio. Other than a small
consumer loan loss of $491 incurred during 1999, the Company has not suffered
any loan losses. At June 30, 2000 there were no nonaccrual loans and no loans
past due more than 30 days.

Net premises and equipment increased by $298,724 during the first six months of
2000 from $723,975 at December 31, 1999. The net increase resulted from
expenditures on several projects including leasehold improvements, equipment and
furniture for a new branch bank in Fort Wayne completed in May, ongoing
development of the Tower web page and Internet banking functionality, as well as
furniture and equipment for additional personnel.

                                        8



<PAGE>   10

Other assets increased by $326,275 from year-end 1999 and were $684,270 at June
30, 2000. The increase from year-end was mainly attributable to higher levels of
accrued interest income due to a larger base of earning assets.

Total deposits were $137,662,847 at the end of June 2000. Total deposits at
December 31, 1999 were $81,733,238. Deposit growth has been significant since
the Bank commenced operations, resulting from new deposit accounts established
from the business, consumer and municipal sectors. While growth during the first
six months of 2000 was reflected in most categories, it was evident mainly in
noninterest-bearing balances where growth was approximately $5.3 million and
large dollar CDs which grew roughly $41.8 million. The source of the large
dollar CDs increase was mainly from state and local municipalities.

Accrued expenses and other liabilities increased by $272,400 from $383,650 at
December 31, 1999. This increase was attributable mainly to accrued interest
expense from a higher level of deposits during the first six months of 2000.

Total stockholders' equity at June 30, 2000 was $21,248,976; a decrease of
$71,203 from the $21,320,179 at December 31, 1999. The decrease was mainly
attributable to the net loss of $66,272 recorded during the first six months of
2000 as well as the net change in the unrealized depreciation on securities.

RESULTS OF OPERATIONS

Results of operations for the three-month period ended June 30, 2000 reflected
net income of $84,453 or $.03 per share. It was the first profitable quarter
since the Bank began operations on February 19, 1999 and was the 5th consecutive
quarter in which improved results of operations was achieved. In comparison, a
net loss of $541,725 or $(.21) per share and $150,725 or $(.06) per share was
posted for the three-month periods ended June 30, 1999 and March 31, 2000,
respectively. Operating improvement was achieved over the second quarter of 1999
as during that quarter earning assets levels were significantly less and the
trust business had not yet been developed. The $235,178 operating improvement
from the first quarter of 2000 was mainly the result of higher net interest
income from loan growth during that period and also due to less provision for
loan losses.

Results for the six-month period ended June 20, 2000 reflected a net loss of
$66,272 or $(.03) per share; a significant improvement over the net loss of
$1,161,835 or $(.54) per share posted for the first six months of 1999. These
results reflect major improvements in net interest income and noninterest income
from a year ago offset somewhat by a higher loan loss provision and noninterest
expenses. The overall increase was reflective of more earning assets and of a
much larger banking business during 2000.

At June 30, 2000, the Company had an accumulated deficit of $2,215,148. The
accumulated deficit and thus far year-to-date net losses are reflective of
organizational and start-up costs incurred during the development stage from
July 1998 to February 1999. In addition, general bank operations in 1999 and the
first six months of 2000 have generated a loss as the Bank builds its loan
portfolio and trust business to achieve a profitable level and builds its
allowance for loan losses. As was evidenced with the second quarter net income,
management believes that the Company will continue to generate profitable
quarters during 2000 as a result of improved performance and the anticipated
growth of the business.

Interest income for the three-month periods ended June 30, 2000 and June 30,
1999 was $2,876,167 and $666,398, respectively, while interest expense for those
periods was $1,518,653 and $218,393, respectively, resulting in net interest
income of $1,357,514 for the second quarter of 2000 and $448,005 for the second
quarter of 1999. Net interest income for the first quarter of 2000 was
$1,178,994. The increase during each quarter of 1999 and 2000 in net interest
income was reflective of the general growth in loans and other earning assets
during those periods. The net interest margin for the second quarter of 2000 was
3.85%, while the net interest margin for last year's second quarter


                                        9



<PAGE>   11
and the first quarter of 2000 was 4.08% and 4.19%, respectively. The decline in
the net interest margin from both comparable periods was a result of increases
in the cost of funds. The higher cost of funds was and is reflective of a
competitive marketplace for deposits and the higher interest cost of large
dollar CDs. Management anticipates that the net interest margin will continue to
experience decline in the near term as sufficient amounts of funds are acquired
to support growth and until the Bank acquires more lower-cost, core retail and
commercial deposits.

A loan loss provision was recorded in the amount of $295,000 during the second
quarter of 2000 as compared to $365,000 for the second quarter of 2000, and
$400,000 for the first quarter of 2000. The amount of the provision taken each
quarter was directly related to the growth in the loan portfolio for that
quarter. The loan loss provision totaled $1,704,509 and was 1.5% of total loans
outstanding on June 30, 2000. As the Company has had no significant loan loss
experience and no nonperforming assets at June 30, 2000, the provision was
established primarily upon peer industry data of comparable commercial banks.

Noninterest income was $236,617 during the second quarter of 2000. This was a
$152,952 increase over the second quarter of 1999 and a $43,149 increase over
the first quarter of 2000. The increase in noninterest income from the
comparable periods is mainly attributable to the development of the fee-based
trust services group as well as the growth in various other fee-based services.

Noninterest expense was $1,214,678 for the second quarter of 2000 while
noninterest expense for the three months ended June 30, 1999 and March 31, 2000
was $708,395 and $1,123,187, respectively. The main components of noninterest
expense for the second quarter of 2000 were salaries and benefits of $691,756,
occupancy and equipment costs of $143,880, and legal and professional expenses
in the amount of $131,213. These costs were mainly the result of human resource
needs to operate the bank, rent expense and equipment depreciation, as well as
normal professional fees for accountants, attorneys and other professionals used
to originate loans. These costs will continue to rise as the business continues
to experience growth. Expense totals for the second quarter of 2000 were higher
than those from last year's second quarter and the first quarter of 2000 and
were reflective of the general growth of the Bank in the form of personnel, rent
and equipment at the existing location, as well as the opening of a new branch
office in May, 2000.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity strategy is to fund growth with deposits and to maintain
an adequate level of short- and medium-term investments to meet typical daily
loan and deposit activity needs. Deposit growth was substantial during the first
six months of 2000 and throughout 1999 and was generated entirely from in-market
sources. At June 30, 2000, total deposits were $137,662,847 and the loan to
deposit ratio was 82.6%. The Company expects to continue to experience
substantial loan growth. Funding for the loan growth will continue to mainly
come from in-market sources through the marketing of products and the
development of branch locations (the first of which was opened on May 1, 2000
and the second of which should open around the end of the year). The Bank
recognizes that the future funding of loan growth will come from more than just
in-market deposits and is in the process of developing other wholesale and
out-of-market funding sources. A minor portion of the funding mix is expected to
be from other wholesale and/or out-of-market sources by year-end 2000.

In the IPO, the Company raised equity capital with aggregate proceeds, net of
underwriters' discount and offering expenses, of $23,469,770. The Company
initially contributed $15,000,000 of the net proceeds from the offering to the
Bank. During the first quarter of 2000, the Company contributed an additional
$4,000,000 in capital to the Bank as a result of the substantial growth
experienced to date. Based upon growth projections and deposit levels achieved
since the Bank began operations, management believes that the Company is likely
to have adequate funds to meet its capital requirements and the capital
requirements of the Bank for at least twelve months.



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<PAGE>   12

                           PART II. OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

The Bank may be involved from time to time in various routine legal proceedings
incidental to its business. Neither the Company nor the Bank is engaged in any
legal proceeding that is expected to have a material adverse effect on the
results of operation or financial position of the Company or the Bank.

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

The results of the Company's Annual Meeting of Shareholders held on April 18,
2000 were previously reported in the Company's quarterly report on Form 10-QSB
for the period ended March 31, 2000. There were no other matters submitted for
vote of security holders during the quarter ended June 30, 2000.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits:

          (27) Financial Data Schedule

     (b)  No reports on Form 8-K were filed during the quarter ended June 30,
          2000.







                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                          TOWER FINANCIAL CORPORATION


Dated:  August 7, 2000           / s /  Donald F. Schenkel
                                 ----------------------------------------------
                                 Donald F. Schenkel, Chairman of the Board,
                                 President and Chief Executive Officer


Dated:  August 7, 2000           / s /  Kevin J. Himmelhaver
                                 ----------------------------------------------
                                 Kevin J. Himmelhaver, Chief Financial Officer






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