----

----

| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|----------------------------------------------------------------------------------|

| TOWER FINANCIAL CORPORATION                            |
|--------------------------------------------------------|
| (Exact name of Registrant as specified in its charter) |

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

| (260) 427-7000                        |
|---------------------------------------|
| (Registrant’s telephone number) |

| Large accelerated filer o |   | Accelerated filer o         |
|---------------------------|--------|-----------------------------|
| Non-accelerated filer o   |   | Smaller reporting company T |

----

|   | · | Changes in banking regulation; |
|--------|--------|--------------------------------|

|   | · | Governmental economic and regulatory policy changes and restrictions; |
|--------|--------|-----------------------------------------------------------------------|

|   | · | Changes in the national and local economy; |
|--------|--------|--------------------------------------------|

|   | · | Trends in customer behavior, their ability to repay loans, and risk of losses due to loan defaults; |
|--------|--------|-----------------------------------------------------------------------------------------------------|

|   | · | Outcomes of contingencies, including loan loss reserves; |
|--------|--------|----------------------------------------------------------|

|   | · | Changes in local real estate and other collateral values; |
|--------|--------|-----------------------------------------------------------|

|   | · | Changes in interest rates and interest rate relationships; |
|--------|--------|------------------------------------------------------------|

|   | · | Demand for our products and services; |
|--------|--------|---------------------------------------|

|   | · | The degree of competition by traditional and non-traditional competitors; |
|--------|--------|---------------------------------------------------------------------------|

|   | · | Changes in tax laws; |
|--------|--------|----------------------|

|   | · | Changes in prices; |
|--------|--------|--------------------|

|   | · | The impact of technological advances; and |
|--------|--------|-------------------------------------------|

|   | · | Changes in local real estate and other collateral values. |
|--------|--------|-----------------------------------------------------------|

----

INDEX

| PART I.   FINANCIAL INFORMATION |     |   |
|------------------------------------------------|----------|--------|
|                                           |     |   |   |   |   |
|                                           | Item 1.  |   | Financial Statements |   | page no. |
|                                           |     |   |   |   |   |
|                                           |     |   | Consolidated Condensed Balance Sheets at March 31, 2009 (unaudited) and December 31, 2008 |   | 4 |
|                                           |     |   |   |   |   |
|                                           |     |   | Consolidated Condensed Statements of Operations for the three months ended March 31, 2009 and March 31, 2008 (unaudited) |   | 5 |
|                                           |     |   |   |   |   |
|                                           |     |   | Consolidated Condensed Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2009 and March 31, 2008 (unaudited) |   | 6 |
|                                           |     |   |   |   |   |
|                                           |     |   | Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2009 and March 31, 2008 (unaudited) |   | 7 |
|                                           |     |   |   |   |   |
|                                           |     |   | Notes to Consolidated Condensed Financial Statements (unaudited) |   | 8 |
|                                           |     |   |   |   |   |
|                                           | Item 2.  |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations |   | 21 |
|                                           |     |   |   |   |   |
|                                           | Item 4.  |   | Controls and Procedures |   | 27 |
|                                           |     |   |   |   |   |
| PART II.   OTHER INFORMATION    |     |   |
|                                           |     |   |   |   |   |
|                                           | Item 1.  |   | Legal Proceedings |   | 28 |
|                                           |     |   |   |   |   |
|                                           | Item 1a. |   | Risk Factors |   | 28 |
|                                           |     |   |   |   |   |
|                                           | Item 6.  |   | Exhibits |   | 28 |
|                                           |     |   |   |   |   |
| SIGNATURES                                     |     | 28     |

----

Index

Item 

Tower 

|                                                                                                                                                                                                        |   | (unaudited) |        |   |         |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|-------------|--------|--------------|--------|
|                                                                                                                                                                                                        |   | March 31,   |        |   | December 31, |   |
|                                                                                                                                                                                                        |   | 2009        |        |   | 2008         |   |
| ASSETS                                                                                                                                                                                                      |   |        |        |   |         |   |
| Cash and due from banks                                                                                                                                                                                     |   | $           | 10,571,522  |   |         | $      | 19,418,905 |   |
| Short-term investments and interest-earning deposits                                                                                                                                                        |   |        | 7,174,523   |   |         |   | 9,525,414 |   |
| Federal funds sold                                                                                                                                                                                          |   |        | 39,188,562  |   |         |   | 2,632,054 |   |
| Total cash and cash equivalents                                                                                                                                                                             |   |        | 56,934,607  |   |         |   | 31,576,373 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| Securities available for sale, at fair value                                                                                                                                                                |   |        | 71,799,765  |   |         |   | 77,792,255 |   |
| FHLB and FRB stock                                                                                                                                                                                          |   |        | 4,032,446   |   |         |   | 4,032,446 |   |
|                                                                                                                                                                                                        |   |        | 1,344,649   |   |         |   | 151,614 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| Loans                                                                                                                                                                                                       |   |        | 558,148,415 |   |         |   | 561,011,675 |   |
| Allowance for loan losses                                                                                                                                                                                   |   |        | (11,497,524 | )      |         |   | (10,654,879 | ) |
| Net loans                                                                                                                                                                                                   |   |        | 546,650,891 |   |         |   | 550,356,796 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   | - |   |
| Premises and equipment, net                                                                                                                                                                                 |   |        | 7,817,558   |   |         |   | 8,010,596 |   |
| Accrued interest receivable                                                                                                                                                                                 |   |        | 2,446,081   |   |         |   | 2,615,260 |   |
| Bank owned life insurance                                                                                                                                                                                   |   |        | 12,704,445  |   |         |   | 12,589,699 |   |
| Other Real Estate Owned                                                                                                                                                                                     |   |        | 5,080,428   |   |         |   | 2,660,310 |   |
| Other assets                                                                                                                                                                                                |   |        | 6,823,074   |   |         |   | 6,798,774 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| Total assets                                                                                                                                                                                                |   | $           | 715,633,944 |   |         | $      | 696,584,123 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| LIABILITIES                                                                                                                                                                                                 |   |        |        |   |         |   |   |   |
| Deposits:                                                                                                                                                                                                   |   |        |        |   |         |   |   |   |
| Noninterest-bearing                                                                                                                                                                                         |   | $           | 75,079,864  |   |         | $      | 82,107,483 |   |
| Interest-bearing                                                                                                                                                                                            |   |        | 543,624,688 |   |         |   | 504,129,631 |   |
| Total deposits                                                                                                                                                                                              |   |        | 618,704,552 |   |         |   | 586,237,114 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| Federal Home Loan Bank (FHLB) advances                                                                                                                                                                      |   |        | 25,200,000  |   |         |   | 39,200,000 |   |
| Junior subordinated debt                                                                                                                                                                                    |   |        | 17,527,000  |   |         |   | 17,527,000 |   |
| Accrued interest payable                                                                                                                                                                                    |   |        | 582,410     |   |         |   | 658,956 |   |
| Other liabilities                                                                                                                                                                                           |   |        | 3,339,821   |   |         |   | 3,342,913 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| Total liabilities                                                                                                                                                                                           |   |        | 665,353,783 |   |         |   | 646,965,983 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| STOCKHOLDERS' EQUITY                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| Preferred stock, no par value, 4,000,000 shares authorized;                                                                                                                                                 |   |        |        |   |         |   |   |   |
| no shares issued and outstanding                                                                                                                                                                            |   |        | -           |   |         |   | - |   |
| Common stock and paid-in-capital, no par value, 6,000,000shares authorized; 4,155,432 and 4,149,432 shares issued; and 4,090,432 and 4,084,432 shares outstanding at at March 31,2009 and December 31, 2008 |   |        | 39,785,415  |   |         |   | 39,766,742 |   |
| Treasury stock, at cost, 65,000 shares at March 31, 2009and December 31, 2008                                                                                                                               |   |        | (884,376    | )      |         |   | (884,376 | ) |
| Retained earnings                                                                                                                                                                                           |   |        | 11,305,949  |   |         |   | 10,895,724 |   |
| Accumulated other comprehensive income(loss), net of tax of $37,695 at March 31, 2009 and ($82,399) at December 31, 2008                                                                                    |   |        | 73,173      |   |         |   | (159,950 | ) |
| Total stockholders' equity                                                                                                                                                                                  |   |        | 50,280,161  |   |         |   | 49,618,140 |   |
|                                                                                                                                                                                                        |   |        |        |   |         |   |   |   |
| Total liabilities and stockholders' equity                                                                                                                                                                  |   | $           | 715,633,944 |   |         | $      | 696,584,123 |   |

----

Index

Tower 

|                                                                   |   | (unaudited)        |      |
|------------------------------------------------------------------------|--------|--------------------|-----------|
|                                                                   |   | Three Months Ended |      |
|                                                                   |   | March 31           |      |
|                                                                   |   | 2009               |      |   | 2008 |   |
| Interest income:                                                       |   |               |      |   |   |   |
| Loans, including fees                                                  |   | $                  | 7,047,954 |   |   | $ | 9,267,399 |   |
| Securities - taxable                                                   |   |               | 633,717   |   |   |   | 614,514 |   |
| Securities - tax exempt                                                |   |               | 226,283   |   |   |   | 214,034 |   |
| Other interest income                                                  |   |               | 6,845     |   |   |   | 182,352 |   |
| Total interest income                                                  |   |               | 7,914,799 |   |   |   | 10,278,299 |   |
| Interest expense:                                                      |   |               |      |   |   |   |   |   |
| Deposits                                                               |   |               | 2,842,890 |   |   |   | 4,642,135 |   |
| FHLB advances                                                          |   |               | 250,256   |   |   |   | 274,140 |   |
| Junior subordinated debt                                               |   |               | 280,226   |   |   |   | 281,649 |   |
| Total interest expense                                                 |   |               | 3,373,372 |   |   |   | 5,197,924 |   |
| Net interest income                                                    |   |               | 4,541,427 |   |   |   | 5,080,375 |   |
| Provision for loan losses                                              |   |               | 960,000   |   |   |   | 300,000 |   |
| Net interest income after provision for loan losses                    |   |               | 3,581,427 |   |   |   | 4,780,375 |   |
| Noninterest income:                                                    |   |               |      |   |   |   |   |   |
| Trust and brokerage fees                                               |   |               | 867,889   |   |   |   | 894,392 |   |
| Service charges                                                        |   |               | 257,833   |   |   |   | 321,210 |   |
| Loan broker fees                                                       |   |               | 138,278   |   |   |   | 61,058 |   |
| Gain on sale of securities                                             |   |               | 191,151   |   |   |   | 59,837 |   |
| Other fees                                                             |   |               | 334,152   |   |   |   | 304,277 |   |
| Total noninterest income                                               |   |               | 1,789,303 |   |   |   | 1,640,774 |   |
| Noninterest expense:                                                   |   |               |      |   |   |   |   |   |
| Salaries and benefits                                                  |   |               | 2,722,449 |   |   |   | 3,086,398 |   |
| Occupancy and equipment                                                |   |               | 698,592   |   |   |   | 758,315 |   |
| Marketing                                                              |   |               | 144,657   |   |   |   | 150,202 |   |
| Data processing                                                        |   |               | 294,009   |   |   |   | 280,758 |   |
| Loan and professional costs                                            |   |               | 311,944   |   |   |   | 243,650 |   |
| Office supplies and postage                                            |   |               | 97,057    |   |   |   | 114,032 |   |
| Courier services                                                       |   |               | 61,435    |   |   |   | 89,465 |   |
| Business development                                                   |   |               | 100,997   |   |   |   | 154,873 |   |
| Communication                                                          |   |               | 43,918    |   |   |   | 70,792 |   |
| FDIC insurance premiums                                                |   |               | 279,490   |   |   |   | 167,514 |   |
| Other expense                                                          |   |               | 238,723   |   |   |   | 362,785 |   |
| Total noninterest expense                                              |   |               | 4,993,271 |   |   |   | 5,478,784 |   |
| Income before income taxes                                             |   |               | 377,459   |   |   |   | 942,365 |   |
| Income taxes expense (benefit)                                         |   |               | (32,766   | ) |   |   | 231,193 |   |
|                                                                   |   |               |      |   |   |   |   |   |
| Net income                                                             |   | $                  | 410,225   |   |   | $ | 711,172 |   |
|                                                                   |   |               |      |   |   |   |   |   |
| Basic earnings per common share                                        |   | $                  | 0.10      |   |   | $ | 0.18 |   |
| Diluted earnings per common share                                      |   | $                  | 0.10      |   |   | $ | 0.17 |   |
| Average common shares outstanding                                      |   |               | 4,090,365 |   |   |   | 4,062,145 |   |
| Average common shares and dilutive potential common shares outstanding |   |               | 4,090,365 |   |   |   | 4,088,684 |   |
|                                                                   |   |               |      |   |   |   |   |   |
| Dividends declared per share                                           |   | $                  | -         |   |   | $ | 0.044 |   |

----

Index

Tower 

|                                       |   | Common    |       |   |     |   |       | Accumulated   |   |   |     |   |   |   |     |
|--------------------------------------------|--------|-----------|------------|--------|----------|--------|------------|---------------|--------|--------|----------|--------|--------|--------|----------|
|                                       |   | Stock and |       |   |     |   |       | Other         |   |   |     |   |   |   |     |
|                                       |   | Paid-in   |       |   | Retained |   |       | Comprehensive |   |   | Treasury |   |   |   |     |
|                                       |   | Capital   |       |   | Earnings |   |       | Income (Loss) |   |   | Stock    |   |   | Total  |     |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |
| Balance, January 1, 2008                   |   | $         | 39,482,669 |   |     | $      | 9,208,719  |          |   | $      | 274,993  |   |   | $      | (758,827 | ) |   | $ | 48,207,554 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Net income for 2008                        |   |      |       |   |     |   | 711,172    |          |   |   |     |   |   |   |     |   |   |   | 711,172 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Other Comprehensive Income (See Note 5)    |   |      |       |   |     |   |       |          |   |   | 716,008  |   |   |   |     |   |   |   | 716,008 |   |
| Total Comprehensive Income                 |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   | 1,427,180 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Cash dividends paid ($0.044 per share)     |   |      |       |   |     |   | (179,104   | )             |   |   |     |   |   |   |     |   |   |   | (179,104 | ) |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Stock based compensation expense           |   |      | 14,760     |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   | 14,760 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Repurchase of 6,000 shares of common stock |   |      | -          |   |     |   |       |          |   |   |     |   |   |   | (65,620  | ) |   |   | (65,620 | ) |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Balance, March 31, 2008                    |   | $         | 39,497,429 |   |     | $      | 9,740,787  |          |   | $      | 991,001  |   |   | $      | (824,447 | ) |   | $ | 49,404,770 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Balance, January 1, 2009                   |   | $         | 39,766,742 |   |     | $      | 10,895,724 |          |   | $      | (159,950 | )      |   | $      | (884,376 | ) |   | $ | 49,618,140 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Net income for 2009                        |   |      |       |   |     |   | 410,225    |          |   |   |     |   |   |   |     |   |   |   | 410,225 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Other Comprehensive Income (See Note 5)    |   |      |       |   |     |   |       |          |   |   | 233,123  |   |   |   |     |   |   |   | 233,123 |   |
| Total Comprehensive Income                 |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   | 643,348 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Stock based compensation expense           |   |      | 18,673     |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   | 18,673 |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
|                                       |   |      |       |   |     |   |       |          |   |   |     |   |   |   |     |   |   |   |   |   |
| Balance, March 31, 2009                    |   | $         | 39,785,415 |   |     | $      | 11,305,949 |          |   | $      | 73,173   |   |   | $      | (884,376 | ) |   | $ | 50,280,161 |   |

----

Index

Tower 

|                                                                       |   | (unaudited)        |        |   | (unaudited)        |   |
|----------------------------------------------------------------------------|--------|--------------------|-------------|--------|--------------------|--------|
|                                                                       |   | Three Months ended |        |   | Three Months ended |   |
|                                                                       |   | March 31, 2009     |        |   | March 31, 2008     |   |
| Cash flows from operating activities:                                      |   |               |        |   |               |   |
| Net income                                                                 |   | $                  | 410,225     |   |               | $      | 711,172 |   |
| Adjustments to reconcile net income to net cash from operating activities: |   |               |        |   |               |   |   |   |
| Depreciation and amortization                                              |   |               | 333,079     |   |               |   | 347,590 |   |
| Provision for loan losses                                                  |   |               | 960,000     |   |               |   | 300,000 |   |
| Stock based compensation expense                                           |   |               | 18,673      |   |               |   | 14,760 |   |
| Earnings on life insurance                                                 |   |               | (114,746    | )      |               |   | (103,610 | ) |
| Gain on sale of securities AFS                                             |   |               | (191,151    | )      |               |   | (59,837 | ) |
| Gain on settlement of interest rate floor                                  |   |               | (136,242    | )      |               |   | - |   |
| Loss on disposal of premises and equipment                                 |   |               | -           |   |               |   | 7,492 |   |
| Loans originated for sale                                                  |   |               | (5,128,394  | )      |               |   | (2,173,000 | ) |
| (Gain)Loss on sale of other real estate owned                              |   |               | 26,463      |   |               |   | (10,085 | ) |
| Proceeds on sale of other real estate owned                                |   |               | 459,667     |   |               |   | 184,257 |   |
| Proceeds from sale of loans                                                |   |               | 3,935,359   |   |               |   | 4,676,016 |   |
| Change in accrued interest receivable                                      |   |               | 169,179     |   |               |   | 465,389 |   |
| Change in other assets                                                     |   |               | (135,742    | )      |               |   | 287,406 |   |
| Change in accrued interest payable                                         |   |               | (76,546     | )      |               |   | (374,212 | ) |
| Change in other liabilities                                                |   |               | (3,092      | )      |               |   | (252,839 | ) |
| Net cash from operating activities                                         |   |               | 526,732     |   |               |   | 4,020,499 |   |
| Cash flows from investing activities:                                      |   |               |        |   |               |   |   |   |
| Net change in loans                                                        |   |               | (168,995    | )      |               |   | 10,520,081 |   |
| Purchase of securities AFS                                                 |   |               | (1,713,080  | )      |               |   | (11,274,040 | ) |
| Proceeds from calls and maturities of securities AFS                       |   |               | 2,792,662   |   |               |   | 4,908,222 |   |
| Proceeds from settlement of interest rate floor                            |   |               | -           |   |               |   | 833,750 |   |
| Proceeds from sale of securities AFS                                       |   |               | 5,521,055   |   |               |   | 3,476,412 |   |
| Proceeds from sale of participation loans                                  |   |               | -           |   |               |   | 3,216,561 |   |
| Purchase of premises and equipment                                         |   |               | (67,578     | )      |               |   | (367,751 | ) |
| Net cash from investing activities                                         |   |               | 6,364,064   |   |               |   | 11,313,235 |   |
| Cash flows from financing activities:                                      |   |               |        |   |               |   |   |   |
| Net change in deposits                                                     |   |               | 32,467,438  |   |               |   | (12,954,942 | ) |
| Cash dividends paid                                                        |   |               | -           |   |               |   | (179,104 | ) |
| Proceeds from FHLB advances                                                |   |               | -           |   |               |   | 24,950,000 |   |
| Repayment of FHLB advances                                                 |   |               | (14,000,000 | )      |               |   | (27,850,000 | ) |
| Repurchase of common stock                                                 |   |               | -           |   |               |   | (65,620 | ) |
| Net cash from (used in) financing activities                               |   |               | 18,467,438  |   |               |   | (16,099,666 | ) |
| Net change in cash and cash equivalents                                    |   |               | 25,358,234  |   |               |   | (765,932 | ) |
| Cash and cash equivalents, beginning of period                             |   |               | 31,576,373  |   |               |   | 33,830,389 |   |
| Cash and cash equivalents, end of period                                   |   | $                  | 56,934,607  |   |               | $      | 33,064,457 |   |
|                                                                       |   |               |        |   |               |   |   |   |
| Supplemental disclosures of cash flow information                          |   |               |        |   |               |   |   |   |
| Cash paid during the year for:                                             |   |               |        |   |               |   |   |   |
| Interest                                                                   |   | $                  | 3,449,918   |   |               | $      | 6,124,730 |   |
| Income taxes                                                               |   |               | 500,000     |   |               |   | - |   |
| Noncash items:                                                             |   |               |        |   |               |   |   |   |
| Transfer of loans to other real estate owned                               |   |               | 2,914,900   |   |               |   | 299,919 |   |

----

Index

Tower 

----

Index

----

Index

|                                             |   | March 31, 2009    |       |
|--------------------------------------------------|--------|-------------------|------------|
|                                             |   | Amortized         |       |   | Gross Unrealized |   |   | Gross Unrealized |   |   | Fair |   |
|                                             |   | Cost              |       |   | Gains |   |   | Losses |   |   | Value |   |
|                                             |   |              |       |   |   |   |   |   |   |   |   |   |
| U.S. Government agency debt obligations          |   | $                 | 9,240,322  |   |   | $ | 214,046 |   |   | $ | - |   |   | $ | 9,454,368 |   |
| Obligations of states and political subdivisions |   |              | 22,033,254 |   |   |   | 256,506 |   |   |   | (345,340 | ) |   |   | 21,944,420 |   |
| Mortgage-backed securities                       |   |              | 39,633,081 |   |   |   | 1,142,027 |   |   |   | (411,786 | ) |   |   | 40,363,322 |   |
| Trust Preferred securities                       |   |              | 955,634    |   |   |   | - |   |   |   | (917,979 | ) |   |   | 37,655 |   |
|                                             |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                            |   | $                 | 71,862,291 |   |   | $ | 1,612,579 |   |   | $ | (1,675,105 | ) |   | $ | 71,799,765 |   |
|                                             |   |              |       |   |
|                                             |   | December 31, 2008 |       |
|                                             |   | Amortized         |       |   | Gross Unrealized |   |   | Gross Unrealized |   |   | Fair |   |
|                                             |   | Cost              |       |   | Gains |   |   | Losses |   |   | Value |   |
|                                             |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Government agency debt obligations          |   | $                 | 8,038,385  |   |   | $ | 230,747 |   |   | $ | - |   |   | $ | 8,269,132 |   |
| Obligations of states and political subdivisions |   |              | 21,908,378 |   |   |   | 87,023 |   |   |   | (737,771 | ) |   |   | 21,257,630 |   |
| Mortgage-backed securities                       |   |              | 47,449,188 |   |   |   | 943,358 |   |   |   | (357,953 | ) |   |   | 48,034,593 |   |
| Trust Preferred securities                       |   |              | 948,290    |   |   |   | - |   |   |   | (717,390 | ) |   |   | 230,900 |   |
|                                             |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                            |   | $                 | 78,344,241 |   |   | $ | 1,261,128 |   |   | $ | (1,813,114 | ) |   | $ | 77,792,255 |   |

|                                                  |   |      |
|-------------------------------------------------------|--------|-----------|
|                                                  |   | 3/31/2009 |   |   | 3/31/2009 |   |   | 12/31/2008 |   |   | 12/31/2008 |   |
|                                                  |   | Weighted  |   |   |   |   |   | Weighted |   |   |   |   |
|                                                  |   | Average   |   |   | Fair |   |   | Average |   |   | Fair |   |
|                                                  |   | Yield     |   |   | Value |   |   | Yield |   |   | Value |   |
|                                                  |   |      |   |   |   |   |   |   |   |   |   |   |
| Agencies:                                             |   |      |   |   |   |   |   |   |   |   |   |   |
| Due in one year or less                               |   |      | 0.00 | % |   | $ | - |   |   |   | 0.00 | % |   | $ | - |   |
| Due after one to five years                           |   |      | 4.40 | % |   |   | 5,917,497 |   |   |   | 4.45 | % |   |   | 5,739,408 |   |
| Due after five years                                  |   |      | 4.10 | % |   |   | 2,526,241 |   |   |   | 4.10 | % |   |   | 2,529,724 |   |
| Due after ten years                                   |   |      | 4.30 | % |   |   | 1,010,630 |   |   |   | 0.00 | % |   |   | - |   |
| Total Agencies                                        |   |      | 4.31 | % |   | $ | 9,454,368 |   |   |   | 4.35 | % |   | $ | 8,269,132 |   |
|                                                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities:                           |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Mortgage-backed securities                            |   |      | 4.75 | % |   | $ | 40,363,322 |   |   |   | 4.66 | % |   | $ | 48,034,593 |   |
|                                                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Obligations of state and political subdivisions:      |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due in one year or less                               |   |      | 4.30 | % |   | $ | 45,906 |   |   |   | 4.30 | % |   | $ | 110,790 |   |
| Due after one to five years                           |   |      | 5.07 | % |   |   | 827,201 |   |   |   | 5.07 | % |   |   | 806,104 |   |
| Due after five to ten years                           |   |      | 5.40 | % |   |   | 5,910,700 |   |   |   | 5.87 | % |   |   | 5,180,237 |   |
| Due after ten years                                   |   |      | 6.14 | % |   |   | 15,160,613 |   |   |   | 6.15 | % |   |   | 15,160,499 |   |
| Total Obligations of state and political subdivisions |   |      | 6.05 | % |   | $ | 21,944,420 |   |   |   | 6.03 | % |   | $ | 21,257,630 |   |
|                                                  |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Trust Preferred Securities                            |   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due after ten years                                   |   |      | 2.41 | % |   | $ | 37,655 |   |   |   | 3.11 | % |   | $ | 230,900 |   |

----

Index

|                                             |   |                                                |
|--------------------------------------------------|--------|-----------------------------------------------------|
|                                             |   | Continuing Unrealized Losses forLess than 12 months |   |   | Continuing Unrealized Losses forMore than 12 months |   |   | Total |   |
|                                             |   | Fair Value                                          |   |   | Gross Unrealized Losses |   |   | Fair Value |   |   | Gross Unrealized Losses |   |   | Fair Value |   |   | Gross Unrealized Losses |   |
| U.S. Government agency debt obligations          |   | $                                                   | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Obligations of states and political subdivisions |   |                                                | 9,232,865 |   |   |   | (270,903 | ) |   |   | 831,259 |   |   |   | (74,437 | ) |   |   | 10,064,124 |   |   |   | (345,340 | ) |
| Mortgage-backed securities                       |   |                                                | - |   |   |   | - |   |   |   | 2,419,396 |   |   |   | (411,786 | ) |   |   | 2,419,396 |   |   |   | (411,786 | ) |
| Trust preferred securities                       |   |                                                | - |   |   |   | - |   |   |   | 37,655 |   |   |   | (917,979 | ) |   |   | 37,655 |   |   |   | (917,979 | ) |
| Total temporarily impaired                       |   | $                                                   | 9,232,865 |   |   | $ | (270,903 | ) |   | $ | 3,288,310 |   |   | $ | (1,404,202 | ) |   | $ | 12,521,175 |   |   | $ | (1,675,105 | ) |

|                                             |   |                                                |
|--------------------------------------------------|--------|-----------------------------------------------------|
|                                             |   | Continuing Unrealized Losses forLess than 12 months |   |   | Continuing Unrealized Losses forMore than 12 months |   |   | Total |   |
|                                             |   | Fair Value                                          |   |   | Gross Unrealized Losses |   |   | Fair Value |   |   | Gross Unrealized Losses |   |   | Fair Value |   |   | Gross Unrealized Losses |   |
| U.S. Government agency debt obligations          |   | $                                                   | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Obligations of states and political subdivisions |   |                                                | 17,180,355 |   |   |   | (649,015 | ) |   |   | 816,971 |   |   |   | (88,756 | ) |   |   | 17,997,326 |   |   |   | (737,771 | ) |
| Mortgage-backed securities                       |   |                                                | 5,490,894 |   |   |   | (357,953 | ) |   |   | - |   |   |   | - |   |   |   | 5,490,894 |   |   |   | (357,953 | ) |
| Trust preferred securities                       |   |                                                | - |   |   |   | - |   |   |   | 230,900 |   |   |   | (717,390 | ) |   |   | 230,900 |   |   |   | (717,390 | ) |
| Total temporarily impaired                       |   | $                                                   | 22,671,249 |   |   | $ | (1,006,968 | ) |   | $ | 1,047,871 |   |   | $ | (806,146 | ) |   | $ | 23,719,120 |   |   | $ | (1,813,114 | ) |

----

Index

----

Index

|                                                                                                                       |   | Three months ended March 31 |     |
|----------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|----------|
|                                                                                                                       |   | 2009                             |     |   | 2008 |   |
| Net Income                                                                                                                 |   | $                                | 410,225  |   |   | $ | 711,172 |   |
| Change in securities available-for-sale:                                                                                   |   |                             |     |   |   |   |   |   |
| Other-than-temporary impairment on available-for-sale securities                                                           |   |                             | (200,589 | ) |   |   | - |   |
| Other-than-temporary impairment on available-for-sale securities associated with credit losses realized in income          |   |                             | -        |   |   |   | - |   |
| Other-than-temporary impairment on available-for-sale securities, recorded in OCI                                          |   |                             | (200,589 | ) |   |   | - |   |
|                                                                                                                       |   |                             |     |   |   |   |   |   |
| Unrealized gains (losses) on interest rate floor                                                                           |   |                             | (136,242 | ) |   |   | 444,770 |   |
| Unrealized holding gains (losses) on available-for-sale securities arising during the period                               |   |                             | 816,852  |   |   |   | 699,928 |   |
| Reclassification adjustment for (gains) losses realized in income on interest rate floor and available-for-sale securities |   |                             | (327,393 | ) |   |   | (59,837 | ) |
| Net unrealized (gains) losses                                                                                              |   |                             | 353,217  |   |   |   | 1,084,861 |   |
| Income tax expense (benefit)                                                                                               |   |                             | (120,094 | ) |   |   | (368,853 | ) |
| Total other comprehensive income                                                                                           |   |                             | 233,123  |   |   |   | 716,008 |   |
| Comprehensive Income                                                                                                       |   | $                                | 643,348  |   |   | $ | 1,427,180 |   |

|                                                                            |   | Three Months Ended |      |
|---------------------------------------------------------------------------------|--------|--------------------|-----------|
|                                                                            |   | March 31           |      |
|                                                                            |   | 2009               |      |   | 2008 |   |
| Basic                                                                           |   |               |      |   |   |   |
| Net income                                                                      |   | $                  | 410,225   |   |   | $ | 711,172 |   |
| Weighted average common shares outstanding                                      |   |               | 4,090,365 |   |   |   | 4,062,145 |   |
| Basic earnings per common share                                                 |   | $                  | 0.10      |   |   | $ | 0.18 |   |
|                                                                            |   |               |      |   |   |   |   |   |
| Diluted                                                                         |   |               |      |   |   |   |   |   |
| Net income                                                                      |   | $                  | 410,225   |   |   | $ | 711,172 |   |
| Weighted average common shares outstanding                                      |   |               | 4,090,365 |   |   |   | 4,062,145 |   |
| Add:  dilutive effect of assumed stock option exercises               |   |               | -         |   |   |   | 26,539 |   |
| Weighted average common shares and dilutive potential common shares outstanding |   |               | 4,090,365 |   |   |   | 4,088,684 |   |
| Diluted earnings per common share                                               |   | $                  | 0.10      |   |   | $ | 0.17 |   |

----

Index

|                                         |   |   |
|----------------------------------------------|--------|--------|
|                                         |   |   |   |   | Weighted- |   |   | Weighted- |   |   |   |   |
|                                         |   |   |   |   | Average |   |   | Average |   |   |   |   |
|                                         |   |   |   |   | Aggregate |   |   | Remaining |   |   |   |   |
|                                         |   |   |   |   | Exercise |   |   | Contractual |   |   | Instrinsic |   |
| Options                                      |   | Shares |   |   | Price |   |   | Term |   |   | Value |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at January 1, 2009               |   |   | 166,675 |   |   | $ | 11.88 |   |   |   | - |   |   | $ | - |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Granted                                      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercised                                    |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Forfeited or expired                         |   |   | (42,741 | ) |   |   | 10.03 |   |   |   | - |   |   |   | - |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at March 31, 2009                |   |   | 123,934 |   |   |   | 12.52 |   |   |   | 3.62 |   |   |   | - |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Vested or expected to vest at March 31, 2009 |   |   | 123,330 |   |   |   | 12.51 |   |   |   | 3.61 |   |   |   | - |   |
|                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable at March 31, 2009                |   |   | 119,707 |   |   |   | 12.40 |   |   |   | 3.52 |   |   |   | - |   |

----

Index

|                         |   | As of and for the three months ending March 31, 2009 |        |
|------------------------------|--------|------------------------------------------------------|-------------|
|                         |   |                                                 |        |   | Wealth |   |   | Corporate & |   |   |   |   |   |   |   |
|                         |   | Bank                                                 |        |   | Management |   |   | Intercompany |   |   | Eliminations |   |   | Total |   |
| Income Statement Information |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income          |   | $                                                    | 4,797,370   |   |   | $ | 24,283 |   |   | $ | (280,226 | ) |   | $ | - |   |   | $ | 4,541,427 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest income          |   |                                                 | 961,415     |   |   |   | 873,056 |   |   |   | 756,252 |   |   |   | (801,420 | ) |   |   | 1,789,303 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest expense         |   |                                                 | 4,125,957   |   |   |   | 603,065 |   |   |   | 264,249 |   |   |   | - |   |   |   | 4,993,271 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncash items                |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses    |   |                                                 | 960,000     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 960,000 |   |
| Depreciation/Amortization    |   |                                                 | 323,127     |   |   |   | 9,952 |   |   |   | - |   |   |   | - |   |   |   | 333,079 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense(benefit)  |   |                                                 | 46,431      |   |   |   | 119,251 |   |   |   | (198,448 | ) |   |   | - |   |   |   | (32,766 | ) |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Profit               |   |                                                 | 626,397     |   |   |   | 175,023 |   |   |   | 410,225 |   |   |   | (801,420 | ) |   |   | 410,225 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Information    |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Assets               |   |                                                 | 711,548,273 |   |   |   | 6,121,156 |   |   |   | 72,087,734 |   |   |   | (74,123,219 | ) |   |   | 715,633,944 |   |

----

Index

|                         |   | As of and for the three months ending March 31, 2008 |        |
|------------------------------|--------|------------------------------------------------------|-------------|
|                         |   |                                                 |        |   | Wealth |   |   | Corporate & |   |   |   |   |   |   |   |
|                         |   | Bank                                                 |        |   | Management |   |   | Intercompany |   |   | Eliminations |   |   | Total |   |
| Income Statement Information |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income          |   | $                                                    | 5,329,431   |   |   | $ | 32,594 |   |   | $ | (281,650 | ) |   | $ | - |   |   | $ | 5,080,375 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest income          |   |                                                 | 764,133     |   |   |   | 894,631 |   |   |   | 969,069 |   |   |   | (987,059 | ) |   |   | 1,640,774 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-interest expense         |   |                                                 | 4,625,239   |   |   |   | 704,828 |   |   |   | 148,717 |   |   |   | - |   |   |   | 5,478,784 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncash items                |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for loan losses    |   |                                                 | 300,000     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 300,000 |   |
| Depreciation/Amortization    |   |                                                 | 337,644     |   |   |   | 9,946 |   |   |   | - |   |   |   | - |   |   |   | 347,590 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense(benefit)  |   |                                                 | 303,513     |   |   |   | 100,150 |   |   |   | (172,470 | ) |   |   | - |   |   |   | 231,193 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Profit               |   |                                                 | 864,812     |   |   |   | 122,247 |   |   |   | 711,172 |   |   |   | (987,059 | ) |   |   | 711,172 |   |
|                         |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Information    |   |                                                 |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment Assets               |   |                                                 | 687,243,063 |   |   |   | 6,286,638 |   |   |   | 69,964,576 |   |   |   | (72,285,912 | ) |   |   | 691,208,365 |   |

|                           |   |           |
|--------------------------------|--------|----------------|
|                           |   | March 31, 2009 |   |   | December 31, 2008 |   |
|                           |   | Balance        |   |   | % |   |   | Balance |   |   | % |   |
|                           |   |           |   |   |   |   |   |   |   |   |   |   |
| Commercial                     |   | $              | 261,566,587 |   |   |   | 46.9 | % |   | $ | 255,027,227 |   |   |   | 45.5 | % |
| Commercial real estate         |   |           | 145,343,539 |   |   |   | 26.0 | % |   |   | 152,417,413 |   |   |   | 27.2 | % |
| Residential real estate        |   |           | 93,701,403 |   |   |   | 16.8 | % |   |   | 98,431,638 |   |   |   | 17.5 | % |
| Home equity                    |   |           | 38,311,252 |   |   |   | 6.8 | % |   |   | 34,957,139 |   |   |   | 6.2 | % |
| Consumer                       |   |           | 19,424,047 |   |   |   | 3.5 | % |   |   | 20,329,830 |   |   |   | 3.6 | % |
| Total loans                    |   |           | 558,346,828 |   |   |   | 100.0 | % |   |   | 561,163,247 |   |   |   | 100.0 | % |
| Net deferred loan costs/(fees) |   |           | (198,414 | ) |   |   |   |   |   |   | (151,572 | ) |   |   |   |   |
| Allowance for loan losses      |   |           | (11,497,524 | ) |   |   |   |   |   |   | (10,654,879 | ) |   |   |   |   |
|                           |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loans                      |   | $              | 546,650,890 |   |   |   |   |   |   | $ | 550,356,796 |   |   |   |   |   |

|                                          |   |   |
|-----------------------------------------------|--------|--------|
|                                          |   | 2009   |   |   | 2008 |   |
|                                          |   |   |   |   |   |   |
| Beginning balance, January 1                  |   | $      | 10,654,879 |   |   | $ | 8,208,162 |   |
| Provision expense                             |   |   | 960,000 |   |   |   | 300,000 |   |
| Charge-offs                                   |   |   | (315,867 | ) |   |   | (237,165 | ) |
| Recoveries                                    |   |   | 198,512 |   |   |   | 764,373 |   |
|                                          |   |   |   |   |   |   |   |   |
| Ending balance, March 31                      |   | $      | 11,497,524 |   |   | $ | 9,035,370 |   |
|                                          |   |   |   |   |   |   |   |   |
| Net charge-offs to average loans (annualized) |   |   | 0.09 | % |   |   | -0.37 | % |

----

Index

|                             |   |           |
|----------------------------------|--------|----------------|
|                             |   | March 31, 2009 |   |   | December 31, 2008 |   |
|                             |   |           |   |   |   |   |
| Specific allocations             |   | $              | 3,925,000 |   |   | $ | 3,101,000 |   |
| Loan pool percentage allocations |   |           | 7,570,000 |   |   |   | 7,497,000 |   |
| Unallocated                      |   |           | 2,524 |   |   |   | 56,879 |   |
|                             |   |           |   |   |   |   |   |   |
| Total allowance for loan losses  |   | $              | 11,497,524 |   |   | $ | 10,654,879 |   |

|                                           |   |           |
|------------------------------------------------|--------|----------------|
|                                           |   | March 31, 2009 |   |   | December 31, 2008 |   |
|                                           |   |           |   |   |   |   |
| Loans past due over 90 days and still accruing |   | $              | 1,304,057 |   |   | $ | 1,019,857 |   |
| Restructured loans                             |   |           | 191,260 |   |   |   | 327,967 |   |
| Nonaccrual loans                               |   |           | 11,707,830 |   |   |   | 15,675,334 |   |
| Total nonperforming loans                      |   | $              | 13,203,147 |   |   | $ | 17,023,158 |   |
| Other real estate owned                        |   |           | 5,080,428 |   |   |   | 2,660,310 |   |
| Total nonperforming assets                     |   | $              | 18,283,575 |   |   | $ | 19,683,468 |   |
|                                           |   |           |   |   |   |   |   |   |
| Nonperforming assets to total assets           |   |           | 2.55 | % |   |   | 2.83 | % |
|                                           |   |           |   |   |   |   |   |   |
| Nonperforming loans to total loans             |   |           | 2.36 | % |   |   | 3.03 | % |

|                                              |   |           |
|---------------------------------------------------|--------|----------------|
|                                              |   | March 31, 2009 |   |   | December 31, 2008 |   |
|                                              |   |           |   |   |   |   |
| Loans with no allocated allowance for loan losses |   | $              | 4,473,752 |   |   | $ | 6,462,113 |   |
| Loans with allocated allowance for loan losses    |   |           | 18,513,881 |   |   |   | 16,898,392 |   |
| Total Impaired Loans                              |   | $              | 22,987,633 |   |   | $ | 23,360,505 |   |
|                                              |   |           |   |   |   |   |   |   |
| Amount of allowance for loan losses allocated     |   | $              | 3,925,000 |   |   | $ | 3,101,000 |   |
|                                              |   |           |   |   |   |   |   |   |
| Average impaired loans during the period          |   | $              | 22,762,669 |   |   | $ | 22,414,645 |   |
|                                              |   |           |   |   |   |   |   |   |
| Interest recognized on impaired loans             |   | $              | 134,979 |   |   | $ | 244,703 |   |
|                                              |   |           |   |   |   |   |   |   |
| Cash-basis interest income recognized             |   | $              | 134,652 |   |   | $ | 244,703 |   |

----

Index

|                                                                  |   |           |
|-----------------------------------------------------------------------|--------|----------------|
|                                                                  |   | March 31, 2009 |   |   | December 31, 2008 |   |
| 0.65% variable rate advance, principal due at maturity April 13, 2009 |   |           | - |   |   |   | 2,000,000 |   |
| 0.65% variable rate advance, principal due at maturity May 20, 2009   |   |           | - |   |   |   | 3,000,000 |   |
| 0.65% variable rate advance, principal due at maturity June 29, 2009  |   |           | - |   |   |   | 9,000,000 |   |
| 5.00% bullet advance, principal due at maturity April 27, 2009        |   |           | 4,000,000 |   |   |   | 4,000,000 |   |
| 5.16% bullet advance, principal due at maturity August 18, 2009       |   |           | 4,000,000 |   |   |   | 4,000,000 |   |
| 3.08% bullet advance, principal due at maturity August 27, 2009       |   |           | 1,000,000 |   |   |   | 1,000,000 |   |
| 2.29% bullet advance, principal due at maturity March 22, 2010        |   |           | 2,000,000 |   |   |   | 2,000,000 |   |
| 3.26% bullet advance, principal due at maturity April 28, 2010        |   |           | 1,500,000 |   |   |   | 1,500,000 |   |
| 3.63% bullet advance, principal due at maturity June 28, 2010         |   |           | 4,000,000 |   |   |   | 4,000,000 |   |
| 4.32% bullet advance, principal due at maturity June 29, 2010         |   |           | 1,200,000 |   |   |   | 1,200,000 |   |
| 3.19% bullet advance, principal due at maturity March 28, 2011        |   |           | 2,000,000 |   |   |   | 2,000,000 |   |
| 3.60% bullet advance, principal due at maturity April 28, 2011        |   |           | 1,500,000 |   |   |   | 1,500,000 |   |
| 3.55% bullet advance, principal due at maturity March 26, 2012        |   |           | 2,000,000 |   |   |   | 2,000,000 |   |
| 3.81% bullet advance, principal due at maturity March 26, 2013        |   |           | 2,000,000 |   |   |   | 2,000,000 |   |
|                                                                  |   |           |   |   |   |   |   |   |
|                                                                  |   | $              | 25,200,000 |   |   | $ | 39,200,000 |   |

| Year   |   | Advances |       |
|--------|--------|----------|------------|
| 2009   |   |     | 9,000,000  |   |
| 2010   |   |     | 8,700,000  |   |
| 2011   |   |     | 3,500,000  |   |
| 2012   |   |     | 2,000,000  |   |
| 2013   |   |     | 2,000,000  |   |
|   |   | $        | 25,200,000 |   |

----

Index

|                          |   | March 31, 2009 |       |
|-------------------------------|--------|----------------|------------|
|                          |   | Level 1        |       |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Available-for-sale securities |   | $              | 47,769,974 |   |   | $ | 23,992,136 |   |   | $ | 37,655 |   |   | $ | 71,799,765 |   |

|                          |   | December 31, 2008 |       |
|-------------------------------|--------|-------------------|------------|
|                          |   | Level 1           |       |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Available-for-sale securities |   | $                 | 54,292,188 |   |   | $ | 23,269,167 |   |   | $ | 230,900 |   |   | $ | 77,792,255 |   |

|                                   |   | Available-for-sale securities |     |
|----------------------------------------|--------|-------------------------------|----------|
|                                   |   | March 31, 2009                |     |
|                                   |   |                          |     |
| Beginning Balance, January 1           |   | $                             | 230,900  |   |
| Net realized/unrealized gains (losses) |   |                          |     |   |
| Included in earnings:                  |   |                          |     |   |
| Interest income on securities          |   |                          | 7,344    |   |
| Included in other comprehensive income |   |                          | (200,589 | ) |
| Ending Balance, March 31               |   | $                             | 37,655   |   |

----

Index

|                    |   | March 31, 2009 |   |
|-------------------------|--------|----------------|--------|
|                    |   | Level 1        |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Impaired loans          |   |           | -      |   |   |   | - |   |   |   | 14,588,881 |   |   |   | 14,588,881 |   |
| Other real estate owned |   |           | -      |   |   |   | - |   |   |   | 2,660,000 |   |   |   | 2,660,000 |   |

|           |   | December 31, 2008 |   |
|----------------|--------|-------------------|--------|
|           |   | Level 1           |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
| Impaired loans |   |              | -      |   |   |   | - |   |   |   | 15,515,583 |   |   |   | 15,515,583 |   |

|                          |   |           |
|-------------------------------|--------|----------------|
|                          |   | March 31, 2009 |   |   | December 31, 2008 |   |
|                          |   | Carrying       |   |   | Fair |   |   | Carrying |   |   | Fair |   |
|                          |   | Value          |   |   | Value |   |   | Value |   |   | Value |   |
| Financial assets:             |   |           |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents     |   | $              | 56,934,607 |   |   | $ | 56,934,607 |   |   | $ | 31,576,373 |   |   | $ | 31,576,373 |   |
| Securities available for sale |   |           | 71,799,765 |   |   |   | 71,799,765 |   |   |   | 77,792,255 |   |   |   | 77,792,255 |   |
| FHLBI and FRB stock           |   |           | 4,032,446 |   |   |   | N/A |   |   |   | 4,032,446 |   |   |   | N/A |   |
| Loans held for sale           |   |           | 1,344,649 |   |   |   | 1,344,649 |   |   |   | 151,614 |   |   |   | 151,614 |   |
| Loans, net                    |   |           | 546,650,891 |   |   |   | 550,962,407 |   |   |   | 550,356,796 |   |   |   | 555,695,490 |   |
| Accrued interest receivable   |   |           | 2,446,081 |   |   |   | 2,446,081 |   |   |   | 2,615,260 |   |   |   | 2,615,260 |   |
| Financial liabilities:        |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                      |   |           | (618,704,552 | ) |   |   | (622,495,390 | ) |   |   | (586,237,114 | ) |   |   | (589,369,429 | ) |
| FHLB advances                 |   |           | (25,200,000 | ) |   |   | (25,716,332 | ) |   |   | (39,200,000 | ) |   |   | (39,870,750 | ) |
| Junior subordinated debt      |   |           | (17,527,000 | ) |   |   | (14,532,211 | ) |   |   | (17,527,000 | ) |   |   | (14,532,211 | ) |
| Accrued interest payable      |   |           | (582,410 | ) |   |   | (582,410 | ) |   |   | (658,956 | ) |   |   | (658,956 | ) |

----

Index

Item 

----

Index

----

Index

|                             |   |           |
|----------------------------------|--------|----------------|
|                             |   | March 31, 2009 |   |   | December 31, 2008 |   |
|                             |   | Balance        |   |   | % |   |   | Balance |   |   | % |   |
| Core deposits:                   |   |           |   |   |   |   |   |   |   |   |   |   |
| Noninterest-bearing demand       |   | $              | 75,079,864 |   |   |   | 12.1 | % |   | $ | 82,107,483 |   |   |   | 14.0 | % |
| Interest-bearing checking        |   |           | 83,667,665 |   |   |   | 13.5 | % |   |   | 73,452,486 |   |   |   | 12.5 | % |
| Money market                     |   |           | 165,132,915 |   |   |   | 26.7 | % |   |   | 140,384,566 |   |   |   | 24.0 | % |
| Savings                          |   |           | 16,961,656 |   |   |   | 2.7 | % |   |   | 17,049,660 |   |   |   | 2.9 | % |
| Time, under $100,000             |   |           | 95,619,367 |   |   |   | 15.5 | % |   |   | 93,764,792 |   |   |   | 16.0 | % |
| Total core deposits              |   |           | 436,461,467 |   |   |   | 70.5 | % |   |   | 406,758,987 |   |   |   | 69.4 | % |
| Non-core deposits:               |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| In-market core deposits:         |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Time, $100,000 and over          |   |           | 97,698,875 |   |   |   | 15.8 | % |   |   | 94,926,801 |   |   |   | 16.2 | % |
| Out-of-market non-core deposits: |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Brokered certificate of deposits |   |           | 84,544,210 |   |   |   | 13.7 | % |   |   | 84,551,326 |   |   |   | 14.4 | % |
| Total non-core deposits          |   |           | 182,243,085 |   |   |   | 29.5 | % |   |   | 179,478,127 |   |   |   | 30.6 | % |
|                             |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total deposits                   |   | $              | 618,704,552 |   |   |   | 100.0 | % |   | $ | 586,237,114 |   |   |   | 100.0 | % |

|                        |   |     |
|-----------------------------|--------|----------|
| Performance Ratios          |   | March 31 |   |
|                        |   | 2009     |   |   | 2008 |   |
|                        |   |     |   |   |   |   |
| Return on average assets *  |   |     | 0.24 | % |   |   | 0.41 | % |
| Return on average equity *  |   |     | 3.33 | % |   |   | 5.91 | % |
| Net interest margin (TEY) * |   |     | 2.85 | % |   |   | 3.15 | % |
| Efficiency ratio            |   |     | 78.87 | % |   |   | 81.52 | % |

----

Index

|                                                       |   | As of and For The Three Month Period Ended |    |
|------------------------------------------------------------|--------|--------------------------------------------|---------|
|                                                       |   | March 31, 2009                             |    |   | March 31, 2008 |   |
|                                                       |   |                                       |    |   | Interest |   |   | Annualized |   |   |   |   |   | Interest |   |   | Annualized |   |
|                                                       |   | Average                                    |    |   | Earned |   |   | Yield |   |   | Average |   |   | Earned |   |   | Yield |   |
| ($ in thousands)                                           |   | Balance                                    |    |   | or Paid |   |   | or Cost |   |   | Balance |   |   | or Paid |   |   | or Cost |   |
| Assets                                                     |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term investments and interest-earning deposits       |   | $                                          | 1,554   |   |   | $ | - |   |   |   | 0.00 | % |   | $ | 15,503 |   |   | $ | 117 |   |   |   | 3.04 | % |
| Federal funds sold                                         |   |                                       | 19,363  |   |   |   | 7 |   |   |   | 0.15 | % |   |   | 7,427 |   |   |   | 66 |   |   |   | 3.57 | % |
| Securities - taxable                                       |   |                                       | 59,585  |   |   |   | 634 |   |   |   | 4.32 | % |   |   | 49,803 |   |   |   | 615 |   |   |   | 4.97 | % |
| Securities - tax exempt (1)                                |   |                                       | 21,739  |   |   |   | 343 |   |   |   | 6.40 | % |   |   | 20,550 |   |   |   | 324 |   |   |   | 6.34 | % |
| Loans held for sale                                        |   |                                       | 864     |   |   |   | - |   |   |   | 0.00 | % |   |   | - |   |   |   | - |   |   |   | 0.00 | % |
| Loans                                                      |   |                                       | 559,607 |   |   |   | 7,048 |   |   |   | 5.11 | % |   |   | 570,240 |   |   |   | 9,267 |   |   |   | 6.54 | % |
| Total interest-earning assets                              |   |                                       | 662,712 |   |   |   | 8,032 |   |   |   | 4.91 | % |   |   | 663,523 |   |   |   | 10,389 |   |   |   | 6.30 | % |
| Allowance for loan losses                                  |   |                                       | (10,948 | ) |   |   |   |   |   |   |   |   |   |   | (8,522 | ) |   |   |   |   |   |   |   |   |
| Cash and due from banks                                    |   |                                       | 11,236  |   |   |   |   |   |   |   |   |   |   |   | 13,459 |   |   |   |   |   |   |   |   |   |
| Other assets                                               |   |                                       | 33,431  |   |   |   |   |   |   |   |   |   |   |   | 32,964 |   |   |   |   |   |   |   |   |   |
| Total assets                                               |   | $                                          | 696,431 |   |   |   |   |   |   |   |   |   |   | $ | 701,424 |   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                       |   |                                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing checking                                  |   | $                                          | 84,621  |   |   | $ | 177 |   |   |   | 0.85 | % |   | $ | 62,397 |   |   | $ | 220 |   |   |   | 1.42 | % |
| Savings                                                    |   |                                       | 17,400  |   |   |   | 21 |   |   |   | 0.49 | % |   |   | 15,242 |   |   |   | 45 |   |   |   | 1.19 | % |
| Money market                                               |   |                                       | 152,462 |   |   |   | 481 |   |   |   | 1.28 | % |   |   | 130,492 |   |   |   | 956 |   |   |   | 2.95 | % |
| Certificates of deposit                                    |   |                                       | 271,298 |   |   |   | 2,164 |   |   |   | 3.23 | % |   |   | 329,976 |   |   |   | 3,421 |   |   |   | 4.17 | % |
| FHLB advances                                              |   |                                       | 26,157  |   |   |   | 250 |   |   |   | 3.88 | % |   |   | 24,189 |   |   |   | 274 |   |   |   | 4.56 | % |
| Junior subordinated debt                                   |   |                                       | 17,527  |   |   |   | 280 |   |   |   | 6.48 | % |   |   | 17,527 |   |   |   | 282 |   |   |   | 6.47 | % |
| Total interest-bearing liabilities                         |   |                                       | 569,465 |   |   |   | 3,373 |   |   |   | 2.39 | % |   |   | 579,823 |   |   |   | 5,198 |   |   |   | 3.61 | % |
| Noninterest-bearing checking                               |   |                                       | 73,026  |   |   |   |   |   |   |   |   |   |   |   | 69,296 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                          |   |                                       | 3,998   |   |   |   |   |   |   |   |   |   |   |   | 3,878 |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                       |   |                                       | 49,942  |   |   |   |   |   |   |   |   |   |   |   | 48,427 |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                 |   | $                                          | 696,431 |   |   |   |   |   |   |   |   |   |   | $ | 701,424 |   |   |   |   |   |   |   |   |   |
| Net interest income                                        |   |                                       |    |   |   | $ | 4,659 |   |   |   |   |   |   |   |   |   |   | $ | 5,191 |   |   |   |   |   |
| Rate spread                                                |   |                                       |    |   |   |   |   |   |   |   | 2.52 | % |   |   |   |   |   |   |   |   |   |   | 2.69 | % |
| Net interest income as a percent of average earning assets |   |                                       |    |   |   |   |   |   |   |   | 2.85 | % |   |   |   |   |   |   |   |   |   |   | 3.15 | % |

----

Index

----

Index

|              |   |           |
|-------------------|--------|----------------|
|              |   | March 31, 2009 |   |   | December 31, 2008 |   |
|              |   |           |   |   | Well- |   |   | Minimum |   |   |   |   |   | Well- |   |   | Minimum |   |
|              |   | Actual         |   |   | Capitalized |   |   | Required |   |   | Actual |   |   | Capitalized |   |   | Required |   |
|              |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The Company       |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage capital  |   |           | 9.52 | % |   |   | 5.00 | % |   |   | 4.00 | % |   |   | 9.69 | % |   |   | 5.00 | % |   |   | 4.00 | % |
| Tier 1 risk-based |   |           | 11.47 | % |   |   | 6.00 | % |   |   | 4.00 | % |   |   | 11.66 | % |   |   | 6.00 | % |   |   | 4.00 | % |
| Total risk-based  |   |           | 12.77 | % |   |   | 10.00 | % |   |   | 8.00 | % |   |   | 12.99 | % |   |   | 10.00 | % |   |   | 8.00 | % |
|              |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The Bank          |   |           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Leverage capital  |   |           | 9.01 | % |   |   | 5.00 | % |   |   | 4.00 | % |   |   | 9.04 | % |   |   | 5.00 | % |   |   | 4.00 | % |
| Tier 1 risk-based |   |           | 10.82 | % |   |   | 6.00 | % |   |   | 4.00 | % |   |   | 10.87 | % |   |   | 6.00 | % |   |   | 4.00 | % |
| Total risk-based  |   |           | 12.08 | % |   |   | 10.00 | % |   |   | 8.00 | % |   |   | 12.12 | % |   |   | 10.00 | % |   |   | 8.00 | % |

----

Index

Item 

----

Index

Item 

Item 

Item 

|   | (a) | Exhibits. |
|--------|-----|-----------|

31.1 

31.2

32.1

32.2

SIGNATURES

|                           |   | TOWER FINANCIAL CORPORATION                              |
|--------------------------------|--------|----------------------------------------------------------|
|                           |   |                                                     |
|                           |   |                                                     |
| Dated:  May 15, 2009 |   | / s /  Michael D. Cahill                       |
|                           |   | Michael D. Cahill, President and Chief Executive Officer |
|                           |   |                                                     |
|                           |   |                                                     |
| Dated:  May 15, 2009 |   | / s /  Richard R. Sawyer                       |
|                           |   | Richard R. Sawyer                                        |
|                           |   | Chief Financial Officer                                  |

----