<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 March 31, 2001

[ ]  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 April 30, 2001: 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
At March 31, 2001 and December 31, 2000

<TABLE>
<CAPTION>
                                                                          (unaudited)
                                                                           MARCH 31,       DECEMBER 31,
                                                                             2001             2000
                                                                         -------------    -------------
<S>                                                                      <C>              <C>
ASSETS
Cash and due from banks                                                  $   4,319,167    $   7,910,306
Short-term investments and interest earning deposits                         2,306,567        8,288,169
Federal funds sold                                                          51,325,828       26,517,269
                                                                         -------------    -------------
       Total cash and cash equivalents                                      57,951,562       42,715,744

Interest earning deposits                                                    1,608,000        2,500,000
Securities available for sale, at fair value                                 6,089,800       10,626,300

Loans                                                                      163,325,182      155,880,445
Allowance for loan losses                                                   (2,589,509)      (2,364,509)
                                                                         -------------    -------------
       Net loans                                                           160,735,673      153,515,936

Premises and equipment, net                                                  1,405,495        1,254,123
Accrued interest receivable                                                  1,002,864        1,052,576
Other assets                                                                   793,236          748,029
                                                                         -------------    -------------
       Total assets                                                      $ 229,586,630    $ 212,412,708
                                                                         =============    =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
   Noninterest bearing                                                   $  26,076,709    $  25,372,181
   Interest bearing                                                        177,194,329      162,923,943
                                                                         -------------    -------------
       Total deposits                                                      203,271,038      188,296,124

Short-term borrowings                                                          530,000          530,000
FHLB advances                                                                2,500,000                -
Accrued interest payable                                                       506,466          465,872
Other liabilities                                                              181,276          725,219
                                                                         -------------    -------------
       Total liabilities                                                   206,988,780      190,017,215

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, 6,000,000
   shares authorized; 2,530,000 shares issued and outstanding               23,469,770       23,469,770
Accumulated deficit                                                           (871,648)      (1,074,806)
Accumulated other comprehensive income (loss), net of tax expense
   (benefit) of $(180) at March 31, 2001 and $347 at December 31, 2000            (272)             529
                                                                         -------------    -------------
       Total stockholders' equity                                           22,597,850       22,395,493
                                                                         -------------    -------------
       Total liabilities and stockholders' equity                        $ 229,586,630    $ 212,412,708
                                                                         =============    =============
</TABLE>


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

                                       1
<PAGE>   3
TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2001 and March 31, 2000
(unaudited)


<TABLE>
<CAPTION>
                                                          THREE MONTHS        THREE MONTHS
                                                              ENDED              ENDED
                                                          MARCH 31, 2001     MARCH 31, 2000
                                                          --------------     --------------
<S>                                                        <C>                <C>
INTEREST INCOME:
      Loans, including fees                                $ 3,358,574        $ 1,758,097
      Securities - taxable                                     104,369            112,466
      Securities - tax exempt                                      647                  -
      Other interest income                                    455,736            353,287
                                                           -----------        -----------
           Total interest income                             3,919,326          2,223,850

INTEREST EXPENSE:
      Deposits                                               2,206,814          1,041,977
      Other borrowings                                           9,768              2,879
                                                           -----------        -----------
           Total interest expense                            2,216,582          1,044,856
                                                           -----------        -----------

Net interest income                                          1,702,744          1,178,994

Provision for loan losses                                      225,000            400,000
                                                           -----------        -----------

Net interest income after provision for loan losses          1,477,744            778,994

NONINTEREST INCOME:
      Trust fees                                               173,534             64,858
      Service charges                                           34,048             19,336
      Loan broker fees                                          83,947             75,939
      Other fees                                                47,497             33,335
                                                           -----------        -----------
           Total noninterest income                            339,026            193,468

NONINTEREST EXPENSE:
      Salaries and benefits                                    849,325            648,281
      Occupancy and equipment                                  217,444            146,393
      Marketing                                                 69,154             42,983
      Data processing                                           55,125             32,896
      Legal and professional costs                              66,935            122,736
      Other expense                                            222,175            129,898
                                                           -----------        -----------
           Total noninterest expense                         1,480,158          1,123,187

INCOME (LOSS) BEFORE INCOME TAXES                              336,612           (150,725)
Income taxes expense                                           133,454                  -
                                                           -----------        -----------

NET INCOME (LOSS)                                          $   203,158        $  (150,725)
                                                           ===========        ===========

BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE         $      0.08        $     (0.06)
Average common shares outstanding                            2,530,000          2,530,000
Average common shares and potential dilutive common
   shares outstanding                                        2,531,750          2,530,000
</TABLE>


      The following notes are an integral part of the financial statements


                                       2
<PAGE>   4

TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the three months ended March 31, 2001 and March 31, 2000
(unaudited)


<TABLE>
<CAPTION>
                                                                     THREE MONTHS      THREE MONTHS
                                                                        ENDED              ENDED
                                                                    MARCH 31, 2001    MARCH 31, 2000
                                                                    --------------    --------------
<S>                                                                   <C>               <C>
Net income (loss)                                                     $ 203,158         $(150,725)

Other comprehensive income (loss):
Change in net unrealized appreciation (depreciation) on
   securities available for sale, net of tax expense (benefit)
   of $(527) in 2001 and $0 in 2000                                        (801)           (4,933)
                                                                      ---------         ---------

COMPREHENSIVE INCOME (LOSS)                                           $ 202,357         $(155,658)
                                                                      =========         =========
</TABLE>




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














                                       3
<PAGE>   5

TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the three months ended March 31, 2001 and March 31, 2000
(unaudited)


<TABLE>
<CAPTION>
                                                             COMMON                          ACCUMULATED
                                                            STOCK AND                           OTHER
                                             PREFERRED       PAID IN       ACCUMULATED      COMPREHENSIVE
                                               STOCK         CAPITAL         DEFICIT        INCOME (LOSS)         TOTAL
                                            ---------------------------------------------------------------------------------
<S>                                          <C>          <C>              <C>               <C>               <C>
Balance, January 1, 2000                     $      -     $ 23,469,770     $ (2,148,876)     $       (715)     $ 21,320,179

Change in unrealized appreciation
    (depreciation) on securities
    available for sale, net of tax of $0            -                -                -            (4,933)           (4,933)

Net loss                                            -                -         (150,725)                -          (150,725)
                                            ---------------------------------------------------------------------------------

BALANCE, MARCH 31, 2000                      $      -     $ 23,469,770     $ (2,299,601)     $     (5,648)     $ 21,164,521
                                            =================================================================================



Balance, January 1, 2001                     $      -     $ 23,469,770     $ (1,074,806)     $        529      $ 22,395,493

Change in unrealized appreciation
    (depreciation) on securities
    available for sale, net of tax
    expense (benefit) of $(527)                     -                -                -              (801)             (801)

Net income                                          -                -          203,158                 -           203,158
                                            ---------------------------------------------------------------------------------

BALANCE, MARCH 31, 2001                      $      -     $ 23,469,770     $   (871,648)     $       (272)     $ 22,597,850
                                            =================================================================================
</TABLE>




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






                                       4

<PAGE>   6

TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2001 and March 31, 2000
(unaudited)


<TABLE>
<CAPTION>
                                                                                  THREE MONTHS      THREE MONTHS
                                                                                      ENDED             ENDED
                                                                                  MARCH 31, 2001    MARCH 31, 2000
                                                                                  --------------    --------------
<S>                                                                                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                             $    203,158      $   (150,725)
     Adjustments to reconcile net income (loss) to net cash
        from operating activities:
         Depreciation and amortization                                                   78,318            42,580
         Provision for loan losses                                                      225,000           400,000
         Change in accrued interest receivable                                           49,712          (203,323)
         Change in other assets                                                         (44,680)          (17,616)
         Change in accrued interest payable                                              40,594           280,288
         Change in other liabilities                                                   (543,943)          (31,368)
                                                                                   ------------      ------------
             Net cash provided from operating activities                                  8,159           319,836
                                                                                   ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Net change in loans                                                             (7,444,737)      (26,903,209)
     Net change in interest earning deposits                                            892,000                 -
     Purchase of securities available for sale                                       (5,464,828)      (30,866,586)
     Proceeds from maturities of securities available for sale                       10,000,000        15,850,000
     Purchase of equipment and leasehold expenditures                                  (229,690)         (165,291)
                                                                                   ------------      ------------
             Net cash from investing activities                                      (2,247,255)      (42,085,086)
                                                                                   ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net change in deposits                                                          14,974,914        37,554,271
     Proceeds from FHLB advances                                                      2,500,000                 -
                                                                                   ------------      ------------
             Net cash provided from financing activities                             17,474,914        37,554,271
                                                                                   ------------      ------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                              15,235,818        (4,210,979)

Cash and cash equivalents, beginning of period                                       42,715,744        30,443,695
                                                                                   ------------      ------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $ 57,951,562      $ 26,232,716
                                                                                   ============      ============

Supplemental disclosures of cash flow information: Cash paid during the period
for:
     Interest                                                                      $  2,175,988      $    764,568
     Income taxes                                                                       181,674                 -
</TABLE>




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

                                       5
<PAGE>   7
TOWER FINANCIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


NOTE 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.

  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 March
      31, 2001 and its consolidated results of operations, comprehensive income,
      changes in stockholders' equity and cash flows for the three-month periods
      ended March 31, 2001 and March 31, 2000. The results for the period ended
      March 31, 2001 should not be considered as indicative of results for a
      full year. These consolidated condensed financial statements should be
      read in conjunction with the audited financial statements for the years
      ended December 31, 2000 and 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 year ended December 31,
      2000.

  c.  PRINCIPLES 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.

  d.  NEW ACCOUNTING PRONOUNCEMENTS: Beginning January 1, 2001, a new accounting
      standard requires all derivatives to be recorded at fair value. Unless
      designated as hedges, changes in these fair values will be recorded in the
      income statement. Fair value changes involving hedges will generally be
      recorded by offsetting gains and losses on the hedge and on the hedged
      item, even if the fair value of the hedged item is not otherwise recorded.
      The adoption of this standard on January 1, 2001 did not have a material
      effect on the financial condition of the Company.


NOTE 2 -- EARNINGS PER SHARE

      The following table reflects the calculation of basic and diluted earnings
      (loss) per common share for the three-month periods ended March 31, 2001
      and 2000.

<TABLE>
<CAPTION>
                                                                   FOR THE PERIOD ENDED MARCH 31,
                                                                   -----------------------------
                                                                          2001             2000
      ------------------------------------------------------------------------------------------
      <S>                                                          <C>              <C>
      BASIC
      Net income (loss)                                            $   203,158      $  (150,725)
                                                                   -----------------------------
      Weighted average common shares outstanding                     2,530,000        2,530,000
                                                                   -----------------------------
      Basic earnings (loss) per common share                       $      0.08      $     (0.06)

      DILUTED
      Net income (loss)                                            $   203,158      $  (150,725)
                                                                   -----------------------------
      Weighted average common shares outstanding                     2,530,000        2,530,000
      Add:  dilutive effect of assumed stock option exercises            1,750                -
                                                                   -----------------------------
      Weighted average common shares and dilutive additional
         potential common shares outstanding                         2,531,750        2,530,000
                                                                   -----------------------------
      Diluted earnings (loss) per common share                     $      0.08      $     (0.06)
</TABLE>



                                       6
<PAGE>   8

NOTE 3 -- LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans at March 31, 2001 and December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                             MARCH 31, 2001               DECEMBER 31, 2000
                                     -----------------------------------------------------------
                                         BALANCE            %           BALANCE           %
      ------------------------------------------------------------------------------------------
      <S>                             <C>                <C>         <C>               <C>
      Commercial                      $  102,808,924      63.0%      $  98,794,370      63.4%
      Commercial real estate              31,752,763      19.4%         30,620,966      19.7%
      Residential real estate              7,303,442       4.5%          6,977,947       4.5%
      Home equity                          6,726,732       4.1%          6,993,762       4.5%
      Consumer                            14,639,505       9.0%         12,386,400       7.9%
                                      ----------------------------------------------------------
           Total loans                   163,231,366     100.0%        155,773,445     100.0%
      Deferred loan costs                     93,816                       107,000
      Allowance for loan losses           (2,589,509)                   (2,364,509)
                                      --------------                 -------------

           NET LOANS                  $  160,735,673                 $ 153,515,936
                                      ==============                 =============
</TABLE>


Activity in the allowance for loan losses during the three months ended March
31, 2001 and 2000 was as follows:

<TABLE>
<CAPTION>
                                                        2001              2000
      ----------------------------------------------------------------------------
      <S>                                           <C>                <C>
      Beginning balance, January 1                  $ 2,364,509        $ 1,009,509
      Provision charged to operating expense            225,000            400,000
      Charge-offs                                             -                  -
      Recoveries                                              -                  -
                                                   --------------------------------
           ENDING BALANCE, MARCH 31                 $ 2,589,509        $ 1,409,509
                                                   ================================
</TABLE>

      Loans classified as nonaccrual or impaired were $322,980 at March 31, 2001
      while loans past due greater than 90 days and still accruing interest were
      $24,416. There were no troubled debt restructurings at March 31, 2001. At
      December 31, 2000, there were no loans classified as nonaccrual or past
      due greater than 90 days and there were no troubled debt restructurings.


NOTE 4 -- INCOME TAXES

      For the period ended March 31, 2001, the Company recorded income tax
      expense of $133,454. The expense reflected an effective tax rate of 39.6%
      which was the same as the statutory rate for that period.

      A valuation allowance related to deferred tax assets is required when it
      is considered more likely than not that all or part of the benefits
      related to such assets will not be realized. Prior to the fourth quarter
      of 2000, management had determined that an allowance was required and no
      tax expense or benefit had been recorded by the Company. At December 31,
      2000, as a result of three consecutive quarters of net income and
      projections of net income in future periods, management determined that a
      valuation allowance for deferred tax assets was no longer needed. Hence,
      during the fourth quarter of 2000, a net tax benefit of $588,100 was
      recorded to eliminate the valuation allowance previously recorded.


NOTE 5 - STOCK OPTION PLAN

      Options to buy common stock are granted to directors, officers and
      employees under the 1998 Stock Option and Incentive Plan (the "1998 Plan")
      which provides for the issuance of up to 310,000 shares of the common
      stock of the Company 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.


                                       7
<PAGE>   9

NOTE 5 - STOCK OPTION PLAN (CONTINUED)

      At March 31, 2001, options for 303,120 shares were outstanding to certain
      officers, employees, and directors. The options were granted at the market
      price on the dates of grant in a range from $7.625 to $10.1875 per share.
      During the quarter, options for 1,500 shares were granted to an officer
      and options for 6,030 shares were terminated in accordance with the 1998
      Plan due to employee terminations. Under the 1998 Plan, the shares
      associated with the terminated options may be subject to new option
      grants. Of the total options outstanding, options for 225,435 shares were
      vested and exercisable at March 31, 2001.

      On April 17, 2001, the stockholders approved the adoption of the 2001
      Stock Option and Incentive Plan (the "2001 Plan") for officers, employees
      and directors. The 2001 Plan provides for the issuance of up to 125,000
      shares of common stock of the Company 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.















                                       8
<PAGE>   10

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The Company was formed to be the bank holding company for the Bank. 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.

The following presents management's discussion and analysis of the consolidated
financial condition of the Company as of March 31, 2001 and December 31, 2000
and results of operations for the three months ended March 31, 2001 and March
31, 2000. 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 and the Company's Annual Report on Form
10-KSB for the year ended December 31, 2000.

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 three 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;
   -  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 trends in customer behavior as well as their ability to repay loans;
   -  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 $229,586,630 at March 31, 2001 compared to its
assets at December 31, 2000 of $212,412,708. The 8% increase in assets was
reflected generally in loans and liquid assets and was attributable primarily to
the inflow of funds from deposit growth at the Bank during the first quarter of
2001. Asset growth has been substantial during each quarter since the Bank began
operations. The significant growth during previous quarters was also a result of
deposit growth at the Bank. Total assets at March 31, 2000 were $141,294,600. As
the Bank enters its third year of operation, the Company anticipates that assets
will continue to increase.


                                        9
<PAGE>   11

Cash and cash equivalents, which include Federal funds sold, were $57,951,562 at
March 31, 2001, a $15,235,818 or 36% increase from $42,715,744 at December 31,
2000. Securities available for sale were $6,089,800 at the end of the first
quarter of 2001, a decrease of $4,536,500 from December 31, 2000. The net
increase in cash and cash equivalents during the first quarter of 2001 was due
mainly to the Bank acquiring more liquid assets in the form of federal funds
sold. The decrease in securities available for sale was a result of the maturity
of a short-term investment security. The significant increase in the balance of
liquid assets reflected at March 31, 2001 as compared to December 31, 2000 was
reflective of daily liquidity needs and the downward trend in interest rates
during the first quarter of 2001.

Total loans were $163,325,182 at March 31, 2001 reflecting a 5% increase from
total loans of $155,880,445 at December 31, 2000. The loans outstanding at March
31, 2001 consisted of $135 million in commercial and commercial real estate
loans, $7 million in residential real estate and $21 million in home equity and
consumer loans. Loan growth in the first quarter of 2001 occurred mainly in the
commercial and commercial real estate portfolio, and at a 5% increase, was not
as strong as prior quarters. The slowed growth was the result of a general
weakening in the economy and its effects on the local market as well as paydowns
experienced in the loan portfolio. Management anticipates stronger growth in the
second quarter of 2001 as the interest rate environment improves.

The allowance for loan losses at March 31, 2001 was $2,589,509. This represented
approximately 1.59% of total loans outstanding. The provision for loan losses
during the first quarter of 2000 was $225,000 compared to $400,000 in the first
quarter of 2000. The addition to the allowance during the first quarter of each
year was directly attributable to the amount of the loan growth during the
respective period and risk factors inherent in the portfolio. 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 2001 as a result of
anticipated increases in the total loan portfolio. Other than a small consumer
loan loss during 1999, the Company has not suffered any loan losses. At March
31, 2001, nonaccrual loans amounted to $322,980 and loans still accruing but
past due 90 days or more were $24,416.

Net premises and equipment increased by $151,372 during the first three months
of 2001 from $1,254,123 at December 31, 2000. The net increase resulted mainly
from expenditures on several projects including leasehold improvements and
equipment and furniture for a new branch location in Fort Wayne, as well as
furniture and equipment for new personnel.

Accrued interest receivable decreased by $49,712 while other assets increased by
$45,207 from December 31, 2000 balances and were $1,002,864 and $793,236
respectively at March 31, 2001. The decrease in accrued interest receivable from
year-end was mainly attributable to the timing of loan payments and the increase
in other assets was mainly attributable to income tax transactions.

Total deposits were $203,271,038 at March 31, 2001. Total deposits at December
31, 2000 were $188,296,124. Deposit growth has been significant since the Bank
commenced operations, resulting from new deposit accounts established from the
business, consumer and the municipal sectors. While growth during the first
quarter of 2001 was reflected in most categories, it was evident mainly in money
market balances where growth was approximately $14 million and CDs under
$100,000 which grew approximately $7 million. Balances decreased in the interest
bearing checking and CD's over $100,000 categories. The majority of the growth
was from the commercial and business sector while the decreases were reflected
in the public fund accounts. As the Bank continues to diversify the funding base
of the business, the percent of total funding provided by the public fund sector
should continue to decline.

At March 31, 2001, the Bank had $2,500,000 in Federal Home Loan Bank ("FHLB")
advances. Prior to 2001, the Bank had no FHLB advances. The Company also had
$530,000 in federal funds purchased at March 31, 2001 and December 31, 2000.




                                       10

<PAGE>   12

Accrued interest payable increased $40,594 and other liabilities decreased by
$543,943 from December 31, 2000 and were $506,466 and $181,276 at March 31,
2001, respectively. The increase in accrued interest payable was attributable
mainly to accrued interest expense from a higher level of deposits during the
first quarter of 2001 while the decrease in other liabilities was related to the
payment of various payroll and other expense accrued at December 31, 2000.

Total stockholders' equity at March 31, 2001 was $22,597,850; an increase of
$202,357 from $22,395,493 at December 31, 2000. The increase was mainly
attributable to net income of $203,158 recorded during the first quarter of 2001
as well as the net change in the unrealized depreciation on securities.

RESULTS OF OPERATIONS

Results of operations for the three-month period ended March 31, 2001 reflected
net income of $203,158 or $.08 per share. The first quarter of 2001 was the
first quarter that the Company had reflected a normal tax expense against
earnings. In comparison, the Company had net income of $987,750 or $.39 per
share for the fourth quarter of 2000 and a net loss of $150,725 or $.06 per
share for the first quarter of 2000. The fourth quarter of 2000 results included
a $588,100 or $.23 per share tax benefit resulting primarily from the use of a
net operating loss carryforward. Prior to the fourth quarter of 2000, no tax
expense or benefit had been recorded by the Company. Improved core operating
results on a comparable basis have been reflected in each quarter since the Bank
began operations in early 1999. The operating improvement during the three-month
period ended March 31, 2001 from the fourth quarter of 2000 was mainly the
result of higher net interest income from loan growth, higher fee income and a
lower loan loss provision. Significant improvement in operating results was
achieved over the first quarter of 2000 due to the overall growth of the
business.

At March 31, 2001, the Company had an accumulated deficit of $871,648. The
accumulated deficit is a continued reflection of the organizational and start-up
costs incurred during the development stage of the Company and the Bank from
July 1998 to February 1999. In addition, general bank operations in 1999 through
the first quarter of 2000 generated losses as the Bank built its loan portfolio
and trust business to achieve a profitable level and built its allowance for
loan losses. The deficit has been reduced over the last twelve months by
$1,427,953 as the Company has generated profitable results.

Interest income for the three-month periods ended March 31, 2001 and 2000 was
$3,919,326 and $2,223,850, respectively, while interest expense for those
periods was $2,216,582 and $1,044,856 respectively, resulting in net interest
income of $1,702,744 for the first quarter of 2001 and $1,178,994 for the first
quarter of 2000. Net interest income for the fourth quarter of 2000 was
$1,643,920. The increase during each quarter of 2000 and 2001 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 first quarter of 2001 was
3.48%, while the net interest margin for the first quarter of 2000 was 4.19%.
The decline in the net interest margin from a year ago is the result of higher
average costs of deposits to fund the growth in the loan portfolio.

A loan loss provision was recorded in the amount of $225,000 during the first
quarter of 2001 as compared to $400,000 for the first quarter of 2000. The
provision recorded was directly related to the growth in the loan portfolio and
risk factors inherent in the loan portfolio. The loan loss allowance at March
31, 2001 totaled $2,589,509 and was 1.59% of total loans outstanding on that
date. As the Company has had no significant loan loss experience and at March
31, 2001 nonperforming assets were only $322,980 and loans still accruing but
past due 90 days or longer were $24,416, management believes the allowance for
loan losses is adequate.

Noninterest income was $339,026 during the first quarter of 2001. This was a
$145,558 or 75% increase over the first quarter of 2000. The increase in
noninterest income from the comparable period is mainly attributable to growth
in and development of the fee-based trust services and, to a lesser degree, from
growth in fees from the mortgage origination unit and deposit service charges.


                                       11

<PAGE>   13

Noninterest expense was $1,480,158 for the first quarter of 2001 while
noninterest expense for the three-month period ended March 31, 2000 was
$1,123,187. The main components of noninterest expense for the first quarter of
2001 were salaries and benefits of $849,325, occupancy and equipment costs of
$217,444, and legal and professional expenses in the amount of $66,935. 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. Expense
totals for the 2001 quarter were higher than those for 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 and the opening of a second new branch office in
January 2001.


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. Strong deposit growth was realized during the
first quarter of 2001 as it has been each quarter throughout 2000 and 1999.
Deposits have been generated mainly from in-market sources, however the Bank has
expanded its funding base during the first quarter of 2001 to include national,
non-brokered certificates of deposit and borrowings from the FHLB. The total
dollars and percentage of total funding that these sources provided the Bank
were $7,096,000 and 3.4%, respectively. At March 31, 2001, total deposits were
$203,271,038 and the loan to deposit ratio was 80.3%. Total borrowings at March
31, 2001 were $3,030,000. The Company expects to continue to experience loan
growth. Funding for the loan growth will continue to come primarily from
in-market sources through the marketing of products and the development of
branch locations. The Company and the Bank will continue to develop wholesale,
out-of-market deposits and borrowing capacities and use them to augment funding,
interest rate sensitivity strategy, liquidity capabilities and to diversify the
funding base of the Bank.

In its initial public offering in early 1999, 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 during 1999. Additionally, during the first
quarter of 2001, the Company contributed $2,000,000 in capital to the Bank due
to continued growth.

As noted in previous filings, as a condition to regulatory approvals for the
formation of the Bank, the Company and the Bank are required to have
capitalization sufficient to provide a ratio of Tier 1 capital to total assets
of not less than eight percent (8%) and Tier 1 capital to average assets in
excess of nine percent (9%), during the first three years of operation. These
restrictions will expire in February 2002. The Company and the Bank currently
have capitalization sufficient to meet these requirements. The extent of growth
realized by the Company from March 2001 through February 2002 will determine
whether the Company will need to generate additional capital to support
continued growth. Management believes that the Company could grow to an average
asset level approximating $260 million without the need for additional capital
prior to the expiration of the regulatory capital requirements. Management is
currently exploring various capital alternatives in the event additional capital
is needed.


                           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.


                                       12

<PAGE>   14

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

(a) The annual meeting of the shareholders of the Company was held on April 17,
    2001.

(b) The following directors were elected at the meeting to serve until the
    annual meeting of shareholders in the year 2004:

<TABLE>
<CAPTION>
                                        Votes        Votes      Registered    Broker
                                         For        Withheld     Non-Votes   Non-Votes
                                     -------------------------------------------------
      <S>                              <C>             <C>         <C>         <C>
      R.V. Prasad Mantravadi M.D.      2,407,055       8,350       59,638      54,957
      Michael J. Mirro M.D.            2,344,895      70,510       59,638      54,957
      William G. Niezer                2,402,949      12,456       59,638      54,957
      Leonard I. Rifkin                2,407,859       7,546       59,638      54,957
      Larry L. Smith                   2,370,630      44,775       59,638      54,957
      John V. Tippmann, Sr.            2,403,059      12,346       59,638      54,957
</TABLE>


      In addition, the following directors continue in office until the annual
meeting of shareholders in the year indicated:

      Keith E. Busse                   2002       Debra A. Niezer          2003
      Kathryn D. Callen                2003       Maurice D. O'Daniel      2003
      Peter T. Eshelman                2002       Joseph D. Ruffolo        2003
      Michael S. Gouloff               2002       Donald F. Schenkel       2002
      Craig S. Hartman                 2003       J. Richard Tomkinson     2002
      Jerome F. Henry, Jr.             2003       Irene A. Walters         2002


(c) Other matters voted upon and the results of the voting were as follows:

         The shareholders voted 2,278,679 in the affirmative and 79,551 in the
         negative, with 57,175 abstentions and no broker non-votes, to approve
         the 2001 Tower Financial Corporation Stock Option and Incentive Plan.

         The shareholders voted 2,393,736 in the affirmative and 16,254 in the
         negative, with 5,415 abstentions and no broker non-votes, to appoint
         Crowe, Chizek and Company LLP as auditors of the Company for 2001.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  (a)    No exhibits.

  (b)    No reports on Form 8-K were filed during the quarter ended March 31,
         2001.






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<PAGE>   15

                                   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:  May 10, 2001             /s/  Donald F. Schenkel
                                 -----------------------------------------------
                                 Donald F. Schenkel, Chairman of the Board,
                                 President and Chief Executive Officer


Dated:  May 10, 2001             /s/  Kevin J. Himmelhaver
                                 -----------------------------------------------
                                 Kevin J. Himmelhaver, Executive Vice President,
                                 Chief Financial Officer and Secretary















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