<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 September 30, 2000

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

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


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


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




                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 October 31, 2000: 2,530,000


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


<PAGE>   2


                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
TOWER FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                (unaudited)
                                                               SEPTEMBER 30,     DECEMBER 31,
                                                                   2000              1999
                                                              -------------    -------------
<S>                                                           <C>              <C>
ASSETS
Cash and due from banks                                       $   4,601,734    $   2,273,592
Short term investments                                            3,287,547        7,321,726
Federal funds sold                                               24,580,229       20,848,377
                                                              -------------    -------------
       Total cash and cash equivalents                           32,469,510       30,443,695
Securities available for sale, at fair value                     15,625,800        5,816,391
Loans                                                           135,037,528       67,314,520
Allowance for loan losses                                        (2,024,509)      (1,009,509)
                                                              -------------    -------------
       Net loans                                                133,013,019       66,305,011
Premises and equipment, net                                       1,185,211          723,975
Other assets                                                        811,763          357,995
                                                              -------------    -------------

            Total assets                                      $ 183,105,303    $ 103,647,067
                                                              =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
   Noninterest bearing                                        $  18,449,854    $  10,689,378
   Interest bearing                                             141,782,549       71,043,860
                                                              -------------    -------------
       Total deposits                                           160,232,403       81,733,238
Short term borrowings                                               530,000          210,000
Accrued expenses and other liabilities                              941,623          383,650
                                                              -------------    -------------
       Total liabilities                                        161,704,026       82,326,888

Stockholders' equity
Preferred stock, no par value, 4,000,000 shares authorized;
       no shares issued and outstanding                                --               --
Common stock, no par value, 6,000,000 shares authorized;
       2,530,000 shares issued and outstanding                    2,530,000        2,530,000
Additional paid-in capital                                       20,939,770       20,939,770
Accumulated deficit                                              (2,062,557)      (2,148,876)
Accumulated other comprehensive loss, net of tax of $0               (5,936)            (715)
                                                              -------------    -------------
       Total stockholders' equity                                21,401,277       21,320,179
                                                              -------------    -------------

            Total liabilities and stockholders' equity        $ 183,105,303    $ 103,647,067
                                                              =============    =============
</TABLE>



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




                                       1
<PAGE>   3



TOWER FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED          NINE MONTHS ENDED
                                                    SEPTEMBER 30,              SEPTEMBER 30,
                                            -----------   -----------    -----------   -----------
                                               2000           1999           2000          1999
                                            -----------   -----------    -----------   -----------
<S>                                         <C>           <C>            <C>           <C>
INTEREST INCOME:
      Loans, including fees                 $ 2,866,362   $   781,662    $ 6,904,843   $ 1,169,494
      Securities - taxable                      250,872        82,499        595,564       185,048
      Short term investments                     55,020        90,780        156,021       354,337
      Federal funds sold                        407,795       159,689      1,023,638       305,816
                                            -----------   -----------    -----------   -----------
           Total interest income              3,580,049     1,114,630      8,680,066     2,014,695

INTEREST EXPENSE:
      Deposits                                2,033,823       426,397      4,591,293       678,499
      Short-term borrowings                       4,431          --           10,470          --
                                            -----------   -----------    -----------   -----------
           Total interest expense             2,038,254       426,397      4,601,763       678,499
                                            -----------   -----------    -----------   -----------
NET INTEREST INCOME                           1,541,795       688,233      4,078,303     1,336,196

Provision for loan losses                       320,000       235,000      1,015,000       690,000
                                            -----------   -----------    -----------   -----------
NET INTEREST INCOME AFTER PROVISION
   FOR LOAN LOSSES                            1,221,795       453,233      3,063,303       646,196

NONINTEREST INCOME:
      Trust                                     119,197          --          280,379          --
      Service charges                            19,658         6,776         59,166         8,751
      Loan broker fees                           87,358        99,213        236,532       180,780
      Other fees                                 63,460         8,505        143,681        14,798
                                            -----------   -----------    -----------   -----------
           Total noninterest income             289,673       114,494        719,758       204,329

NONINTEREST EXPENSE:
      Salaries and benefits                     837,770       502,287      2,177,807     1,307,754
      Occupancy and equipment                   166,147        92,907        456,420       236,539
      Marketing                                  63,225        41,672        149,813       112,750
      Processing                                 38,338        17,134        105,729        45,594
      Office supplies                            44,901        17,019        123,182        95,863
      Legal and professional                     68,905        84,984        322,854       287,898
      Other expense                             139,591        76,761        360,937       189,999
                                            -----------   -----------    -----------   -----------
           Total noninterest expense          1,358,877       832,764      3,696,742     2,276,397

INCOME (LOSS) BEFORE INCOME TAX EXPENSE         152,591      (265,037)        86,319    (1,425,872)
Income tax expense                                 --            --             --            --
                                            -----------   -----------    -----------   -----------

NET INCOME (LOSS)                           $   152,591   $  (265,037)   $    86,319   $(1,425,872)
                                            ===========   ===========    ===========   ===========
BASIC AND DILUTED INCOME (LOSS) PER SHARE   $      0.06   $     (0.10)   $      0.03   $     (0.63)
Average shares outstanding - basic            2,530,000     2,530,000      2,530,000     2,281,392
Average shares outstanding - diluted          2,532,938     2,530,000      2,531,528     2,281,392
</TABLE>



      The following notes are an integral part of the financial statements


                                        2


<PAGE>   4

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

<TABLE>
<CAPTION>

                                                THREE MONTHS ENDED             NINE MONTHS ENDED
                                                   SEPTEMBER 30,                 SEPTEMBER 30,
                                               2000            1999           2000           1999
                                            --------------------------    --------------------------
<S>                                         <C>            <C>            <C>            <C>
Net income (loss)                           $   152,591    $  (265,037)   $    86,319    $(1,425,872)

Net change in net unrealized appreciation
   (depreciation) on securities available
   for sale, net of tax                            (290)          --           (5,221)          --
                                            -----------    -----------    -----------    -----------
COMPREHENSIVE INCOME (LOSS)                 $   152,301    $  (265,037)   $    81,098    $(1,425,872)
                                            ===========    ===========    ===========    ===========

</TABLE>




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




                                       3
<PAGE>   5



TOWER FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the nine months ended September 30, 2000 and September 30, 1999
(unaudited)


<TABLE>
<CAPTION>
                                                                                          ACCUMULATED
                                                                                             OTHER
                                                           ADDITIONAL                    COMPREHENSIVE
                              PREFERRED       COMMON        PAID IN       ACCUMULATED        LOSS,
                                STOCK         STOCK         CAPITAL         DEFICIT       NET OF TAX          TOTAL
                              ---------------------------------------------------------------------------------------
<S>              <C>             <C>       <C>           <C>            <C>              <C>              <C>
Balance, January 1, 1999         $--       $       10    $       --     $  (473,434)     $       --       $  (473,424)

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

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

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

Net loss                          --             --              --      (1,425,872)             --        (1,425,872)
                              ---------------------------------------------------------------------------------------

BALANCE, SEPT 30, 1999           $--       $2,530,000    $ 20,939,770   $(1,899,306)     $       --       $21,570,464
                              =======================================================================================



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

Net change in net unrealized
    depreciation on securities
    available for sale, net
    of tax                        --             --              --            --              (5,221)         (5,221)

Net income                        --             --              --          86,319              --            86,319
                              ---------------------------------------------------------------------------------------

BALANCE, SEPT 30, 2000           $--       $2,530,000    $ 20,939,770   $(2,062,557)     $     (5,936)    $21,401,277
                              =======================================================================================
</TABLE>




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



                                       4
<PAGE>   6




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


<TABLE>
<CAPTION>
                                                                  NINE MONTHS ENDED
                                                                     SEPTEMBER 30
                                                             ----------------------------
                                                                 2000             1999
                                                             ------------    ------------
<S>                                                          <C>             <C>
Cash flows from operating activities:
    Net income (loss)                                        $     86,319    $ (1,425,872)
    Adjustments to reconcile net income (loss) to net cash
       from operating activities:
       Depreciation and amortization                              160,841          75,918
       Provision for loan losses                                1,015,000         690,000
       Change in other assets                                    (453,768)        (64,964)
       Change in accrued expenses and other liabilities           557,973         194,752
                                                             ------------    ------------
         Net cash from operating activities                     1,366,365        (530,166)

Cash flows from investing activities:
    Net change in loans                                       (67,723,008)    (46,069,619)
    Purchases of securities available for sale                 (9,814,630)    (10,562,250)
    Purchases of premises and equipment and
       leasehold expenditures                                    (622,077)       (639,442)
                                                             ------------    ------------
         Net cash from investing activities                   (78,159,715)    (57,271,311)

Cash flows from financing activities:
    Net change in deposits                                     78,499,165      68,765,667
    Net change in short-term borrowings                           320,000            --
    Gross proceeds from issuance of common stock                     --        25,300,000
    Payment of underwriters' fee and offering costs                  --        (1,830,230)
    Retirement of common stock                                       --               (10)
    Repayment of related party notes payable                         --          (760,000)
                                                             ------------    ------------
         Net cash from financing activities                    78,819,165      91,475,427
                                                             ------------    ------------

Net change in cash and cash equivalents                         2,025,815      33,673,950

Cash and cash equivalents, beginning of period                 30,443,695         213,920
                                                             ------------    ------------

Cash and cash equivalents, end of period                     $ 32,469,510    $ 33,887,870
                                                             ============    ============
</TABLE>




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



                                       5
<PAGE>   7



TOWER FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


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


     b.   BASIS OF PRESENTATION: The accompanying unaudited condensed
          consolidated 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 a
          complete presentation of the Company's financial statements. In the
          opinion of management, the condensed consolidated financial statements
          contain all adjustments (consisting only of normal recurring accruals)
          necessary to present fairly its consolidated financial position at
          September 30, 2000, its consolidated results of operations and
          comprehensive income for the three and nine month periods ended
          September 30, 2000 and September 30, 1999, and its consolidated
          statements of stockholders' equity and cash flows for the nine month
          periods ended September 30, 2000 and September 30, 1999. The income
          reported for the periods presented is not necessarily indicative of
          the results to be expected for the full year. These condensed
          consolidated financial statements should be read in conjunction with
          the audited financial statements for the year ended December 31, 1999
          and the period from July 8, 1998 (date of inception) through December
          31, 1998 and related notes included in the Company's Annual Report on
          Form 10-KSB for the period ended December 31, 1999.


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



2.   INITIAL PUBLIC OFFERING:

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





                                        6

<PAGE>   8
3.   EARNINGS (LOSS) PER SHARE:

     The following table reflects the calculation of basic and diluted earnings
(loss) per share:

<TABLE>
<CAPTION>

                                                       Three Months Ended             Nine Months Ended
                                                          September 30,                 September 30,
                                                    ------------------------      -------------------------
                                                       2000           1999           2000           1999
-----------------------------------------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>           <C>
BASIC
Net income (loss)                                  $  152,591     $ (265,037)    $   86,319     $(1,425,872)
                                                   --------------------------------------------------------
Weighted average common shares                      2,530,000      2,530,000      2,530,000       2,281,392
                                                   --------------------------------------------------------
Earnings (loss) per basic common share             $     0.06     $    (0.10)    $     0.03     $     (0.63)

DILUTED
Net income (loss)                                  $  152,591     $ (265,037)    $   86,319     $(1,425,872)
                                                   --------------------------------------------------------
Weighted average common shares                      2,530,000      2,530,000      2,530,000       2,281,392
Add: common stock equivalents - stock options           2,938              -          1,528               -
                                                   --------------------------------------------------------
Weighted average common shares and common
   stock equivalents                                2,532,938      2,530,000      2,531,528       2,281,392
                                                   --------------------------------------------------------
Earnings (loss) per diluted common share           $   $ 0.06     $    (0.10)    $     0.03     $     (0.63)
</TABLE>


4.   INCOME TAXES:

     At September 30, 2000, the Company had net operating loss carryforwards of
     approximately $2,063,000. No deferred tax asset is recorded, as a valuation
     allowance reduces the gross deferred tax asset of approximately $825,000 to
     zero.

5.   STOCK OPTION PLAN:

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

     At September 30, 2000, options for 309,170 shares had been granted to
     certain officers, employees, and directors. The options were granted at the
     market price on the dates of grant in a range from $8.000 to $10.1875 per
     share. Grants of 1,750 shares were made during the third quarter of 2000.
     Of the total options granted, options for 146,105 shares were vested and
     exercisable at September 30, 2000.

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

                                        7
<PAGE>   9

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

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

FORWARD-LOOKING STATEMENTS

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

-    the Company's status as a start-up company with approximately two years of
     operating history;
-    the effect of extensive banking regulation on the
     Bank's ability to grow and compete;
-    the effect of changes in federal economic and monetary policies on the
     Bank's ability to attract deposits, make loans and achieve satisfactory
     interest spreads;
-    the competitive disadvantage resulting from the Company's status as a
     highly-regulated company;
-    the Company's dependence on key management personnel;
-    the increased risk of losses due to loan defaults caused by the Bank's
     commercial loan concentration;
-    the Company's dependence on a favorable local economy in the Bank's
     primary service area;
-    the Bank's dependence on net interest spread for profitability; and
-    the Bank's ability to implement developments in technology to
     be competitive.

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

FINANCIAL CONDITION

Total assets of the Company were $183,105,303 at September 30, 2000 compared to
its assets at December 31, 1999 of $103,647,067. The significant increase in
assets was reflected generally in loans and was attributable primarily to the
inflow of funds from deposit growth at the Bank during the first nine months of
2000. Asset growth has been substantial during each quarter since the Bank began
operations. The significant growth during these previous quarters was also a
result of deposit growth at the Bank. Total assets at September 30, 1999 were
$90,640,883. As the Bank is only in its second year of operation, the Company
anticipates that assets will continue to increase significantly.

Cash and cash equivalents, which include Federal funds sold, were $32,469,510 at
September 30, 2000, a $2,025,815 increase from $30,443,695 at December 31, 1999.
While there was a net increase in cash and cash equivalents during the first
nine months of 2000 from the year end, a decline in short term investments
evidences the fact that the Company made a $4,000,000 capital contribution to
the Bank in the first quarter. The contribution was made to provide adequate
capital levels as a result of, and in anticipation of, further growth at the
Bank. An increase in federal funds sold during the first nine months of 2000 was
a function of general excess liquidity levels.

                                        8
<PAGE>   10

Securities available for sale were $15,625,800 at the end of the third quarter
of 2000, an increase of $9,809,409 from year-end. The increase in securities
available for sale was the result of purchases of short term investment
securities with excess liquid funds provided from deposit growth.

Total loans were $135,037,528 at September 30, 2000 reflecting a 101% growth
from year-end 1999. Total loans were $67,314,520 at December 31, 1999. The loans
outstanding at September 30, 2000 consisted of $108 million in commercial and
commercial real estate loans, $7 million in residential real estate and $19
million in home equity and consumer loans. Loan growth during the third quarter
was reflected in all categories but mainly in the commercial and commercial real
estate sector. Total loans at September 30, 1999 were $46,069,619.

The allowance for loan losses at September 30, 2000 was $2,024,509. This
represented approximately 1.5% of total loans outstanding. The provision for
loan losses during the third quarter of 2000 was $320,000 compared to $295,000
in the previous quarter. The addition to the allowance during the third quarter
was directly attributable to the amount of the loan growth during that period.
Management considers the allowance for loan losses to be adequate; however,
there can be no assurance that charge-offs in future periods will not exceed the
allowance. Additional provisions for loan losses are expected during 2000 as a
result of anticipated increases in the total loan portfolio. Other than a small
consumer loan loss of $491 incurred during 1999, the Company has not suffered
any loan losses. At September 30, 2000 there were no nonaccrual loans and no
loans past due more than 30 days.

Net premises and equipment increased by $461,236 during the first nine months of
2000 from $723,975 at December 31, 1999. The increase resulted from expenditures
on several projects net of normal depreciation. The expenditures included
leasehold improvements, equipment and furniture for a new branch bank in Fort
Wayne completed in May, 2000 additional equipment for technology infrastructure,
as well as furniture and equipment for additional personnel due to growth.

Other assets increased by $453,768 from year-end 1999 and were $811,763 at
September 30, 2000. The increase from year-end was mainly attributable to higher
levels of accrued interest income due to a larger base of earning assets.

Total deposits were $160,232,403 at the end of September 2000. Total deposits at
December 31, 1999 were $81,733,238. Deposit growth has been significant since
the Bank commenced operations, resulting from new deposit accounts established
from the business, consumer and municipal sectors. While growth during the first
nine months of 2000 was reflected in most categories, it was evident mainly in
noninterest bearing balances where growth was approximately $8 million and large
dollar CDs which grew roughly $61 million. The source of the large dollar CDs
increase was mainly from state and local municipalities.

Accrued expenses and other liabilities increased by $557,973 from $383,650 at
December 31, 1999. This increase was attributable mainly to accrued interest
expense from a higher level of deposits during the first nine months of 2000.

Total stockholders' equity at September 30, 2000 was $21,401,277; an increase of
$81,098 from the $21,320,179 at December 31, 1999. The increase was mainly
attributable to net income of $86,319 recorded during the first nine months of
2000 as well as the net change in the net unrealized depreciation on securities
available for sale, net of tax.

RESULTS OF OPERATIONS

Results of operations for the three-month period ended September 30, 2000
reflected net income of $152,591 or $.06 per share. It was the second
consecutive profitable quarter since the Bank began operations on February 19,
1999 and was the 6th consecutive quarter in which improved results of operations
was achieved. In comparison, a net loss of $(265,037) or $(.10) per share was
recorded for the three-month period ended September 30, 1999 and net income of
$84,453 or $.03 per share was posted last quarter. Operating improvement was
achieved over the third quarter of 1999 as during that quarter earning assets
levels were significantly less and the trust business had not yet been

                                        9
<PAGE>   11

developed. The $68,138 operating improvement from the second quarter of 2000 was
mainly the result of higher net interest income from loan growth during that
period and also due to higher levels of fee income.

Results for the nine-month period ended September 30, 2000 reflected net income
of $86,319 or $.03 per share; a significant improvement over the net loss of
$(1,425,872) or $(.63) per share posted for the first nine months of 1999. These
results reflect major improvements in net interest income and noninterest income
from a year ago, offset somewhat by a higher provisions for loan losses and
noninterest expenses. The overall improvement was reflective of more earning
assets and a much larger banking operation during 2000 than 1999.

At September 30, 2000, the Company had an accumulated deficit of $2,062,557. The
accumulated deficit is reflective of organizational and start-up costs incurred
during the development stage from July 1998 to February 1999. In addition,
general bank operations in 1999 and the first three months of 2000 generated a
loss as the Bank built its loan portfolio and trust business to achieve a
profitable level and built its allowance for loan losses. As was evidenced with
income results in the second and third quarters of 2000, management anticipates
that the Company will generate a profitable 4th quarter in 2000 as a result of
improved performance and the anticipated growth of the business.

Interest income for the three-month periods ended September 30, 2000 and
September 30, 1999 was $3,580,049 and $1,114,630, respectively, while interest
expense for those periods was $2,038,254 and $426,397, respectively, resulting
in net interest income of $1,541,795 for the third quarter of 2000 and $688,233
for the third quarter of 1999. Net interest income for the second quarter of
2000 was $1,357,514. The increase during each quarter of 1999 and 2000 in net
interest income was reflective of the general growth in loans and other earning
assets during those periods. The net interest margin for the third quarter of
2000 was 3.66%, while the net interest margin for last year's third quarter and
the second quarter of 2000 was 4.26% and 3.85%, respectively. The decline in the
net interest margin from both comparable periods was a result of increases in
the cost of funds. The higher cost of funds was and is reflective of a
competitive marketplace for deposits and the higher interest cost of large
dollar CDs. Management anticipates that the net interest margin will continue to
experience some decline in the near term as sufficient amounts of funds are
acquired to support loan growth and until the Bank fully acquires more
lower-cost, core retail and commercial deposits through its distribution network
being developed and business development efforts.

A provision for loan losses was recorded in the amount of $320,000 during the
third quarter of 2000 as compared to $235,000 for the third quarter of 1999, and
$295,000 for the second quarter of 2000. The amount of the provision taken each
quarter was directly related to the growth in the loan portfolio for that
quarter. The allowance for loan losses totaled $2,024,509 and was 1.5% of total
loans outstanding on September 30, 2000. As the Company has had no significant
loan loss experience and no nonperforming assets at September 30, 2000, the
allowance was established primarily upon peer industry data of comparable
commercial banks.

Noninterest income was $289,673 during the third quarter of 2000. This was a
$175,179 increase over the third quarter of 1999 and a $53,056 increase over the
second quarter of 2000. The increase in noninterest income from the comparable
periods is mainly attributable to the development of the fee-based trust
services group as well as the growth in various other fee-based services.

Noninterest expense was $1,358,877 for the third quarter of 2000 while
noninterest expense for the three months ended September 30, 1999 and June 30,
2000 was $832,764 and $1,214,678, respectively. The main components of
noninterest expense for the third quarter of 2000 were salaries and benefits of
$837,770, occupancy and equipment costs of $166,147, and legal and professional
expenses in the amount of $68,905. These costs were mainly the result of human
resource needs to operate the bank, rent expense and equipment depreciation, as
well as normal professional fees for accountants, attorneys and other
professionals used to originate loans. These costs will continue to rise as the
Bank continues to experience growth. Expense totals for the third quarter of
2000 were higher than those from last year's third quarter and the second
quarter of 2000 and were reflective of the general growth of the Bank in the
form of personnel and employee benefits, rent and equipment at the existing
location, as well as the opening of a new branch office in May, 2000.

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<PAGE>   12

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity strategy is to fund growth with deposits and to maintain
an adequate level of short- and medium-term investments to meet typical daily
loan and deposit activity needs. Deposit growth was substantial during the first
nine months of 2000 and throughout 1999 and was generated entirely from
in-market sources. At September 30, 2000, total deposits were $160,232,403 and
the loan to deposit ratio was 84.3%. The Company expects to continue to
experience substantial loan growth. Funding for the loan growth will continue to
mainly come from in-market sources through the marketing of deposit products and
the development of branch locations (the first of which was opened on May 1,
2000 and the second of which should open at the end of 2000). The Bank
recognizes that it is probable that future funding of loan growth will come from
more than just in-market deposits and is in the process of developing other
wholesale and out-of-market funding sources. It is possible that a minor portion
of the funding mix would be from other wholesale and/or out-of-market sources by
year-end 2000.

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

RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended by SFAS No. 138, requires derivative instruments be carried at fair
value on the balance sheet. The statement continues to allow derivative
instruments to be used to hedge various risks and sets forth specific criteria
to be used to determine when hedge accounting can be used. The statement also
provides for offsetting changes in fair value or cash flows of both the
derivative and the hedged asset or liability to be recognized in earnings in the
same period; however, any changes in fair value or cash flow that represent the
ineffective portion of a hedge are required to be recognized in earnings and
cannot be deferred. For derivative instruments not accounted for as hedges,
changes in fair value are required to be recognized in earnings. The adoption of
this statement on January 1, 2001 is not expected to have a material effect on
the consolidated financial statements.


                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

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

There were no matters submitted for vote of security holders during the quarter
ended September 30, 2000.

ITEM 5.  OTHER INFORMATION

The Company dismissed PricewaterhouseCoopers LLP ("PWC") and subsequently
appointed Crowe, Chizek and Company LLP ("Crowe Chizek") as its principal
independent accountants effective October 30, 2000. As required, the Company
filed a Form 8-K on November 2, 2000 disclosing the change of independent
accountants.

                                       11
<PAGE>   13

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits:

           (10.10) Lease agreement dated August 8, 2000 between the Company and
                   Rogers Markets, Inc.

              (27) Financial Data Schedule

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











                                   SIGNATURES

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


                                                     TOWER FINANCIAL CORPORATION


Dated:  November 6, 2000                             /s/  Donald F. Schenkel
                                                     ---------------------------
                                                     Donald F. Schenkel,
                                                     Chairman of the Board,
                                                     President and
                                                     Chief Executive Officer



Dated:  November 6, 2000                              /s/  Kevin J. Himmelhaver
                                                      --------------------------
                                                      Kevin J. Himmelhaver,
                                                      Chief Financial Officer














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