<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, 2000
[ ] TRANSITION REPORT PURSUANT TO 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------ ------------
Commission file number 000-25287
TOWER FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
INDIANA 35-2051170
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
116 East Berry Street, Fort Wayne, Indiana 46802
(Address of principal executive offices)
(219) 427-7000
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [ X ] No [ ]
Number of shares of the issuer's common stock, without par
value, outstanding as of April 30, 2000: 2,530,000.
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(unaudited)
MARCH 31, DECEMBER 31,
2000 1999
-------------- ---------------
<S> <C> <C>
ASSETS
Cash $ 2,308,968 $ 2,273,592
Interest bearing deposits in banks 3,182,528 7,321,726
Federal funds sold 20,741,220 20,848,377
------------ ------------
Total cash and cash equivalents 26,232,716 30,443,695
Securities available for sale, at fair value 20,828,044 5,816,391
Loans 94,217,729 67,314,520
Allowance for loan losses (1,409,509) (1,009,509)
------------ ------------
Net loans 92,808,220 66,305,011
Premises and equipment, net 846,686 723,975
Other assets 578,934 357,995
------------ ------------
Total assets $141,294,600 $103,647,067
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Noninterest bearing $ 16,240,818 $ 10,689,378
Interest bearing 103,046,691 71,043,860
------------ ------------
Total deposits 119,287,509 81,733,238
Short term borrowings 210,000 210,000
Accrued expenses and other liabilities 632,570 383,650
------------ ------------
Total liabilities 120,130,079 82,326,888
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 4,000,000 shares authorized;
no shares issued and outstanding
Common stock, no par value, 6,000,000 shares authorized;
2,530,000 shares issued and outstanding at March 31, 2000
and at December 31, 1999 2,530,000 2,530,000
Additional paid-in capital 20,939,770 20,939,770
Accumulated deficit (2,299,601) (2,148,876)
Net unrealized depreciation on securities available for sale, net of tax (5,648) (715)
------------ ------------
Total stockholders' equity 21,164,521 21,320,179
Total liabilities and stockholders' equity $141,294,600 $103,647,067
============ ============
</TABLE>
The following notes are an integral part of the financial statements.
1
<PAGE> 3
TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------ -------------------
<S> <C> <C>
INTEREST INCOME:
Loans, including fees $ 1,758,097 $ 40,083
Securities 112,466 36,706
Interest bearing deposits with banks 97,030 156,878
Federal funds sold 256,257 -
------------------ -------------------
Total interest income 2,223,850 233,667
INTEREST EXPENSE:
Deposits 1,041,977 33,709
Borrowings 2,879 -
------------------ -------------------
Total interest expense 1,044,856 33,709
------------------ -------------------
NET INTEREST INCOME 1,178,994 199,958
Provision for loan losses 400,000 90,000
------------------ -------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 778,994 109,958
NONINTEREST INCOME:
Trust 64,858 -
Service charges 19,336 72
Loan fees 75,939 5,612
Other fees 33,335 486
------------------ -------------------
Total noninterest income 193,468 6,170
NONINTEREST EXPENSE:
Salaries and benefits 648,281 426,324
Occupancy and equipment 146,393 59,595
Marketing 42,983 21,495
Processing 32,896 11,756
Office supply 32,207 40,541
Legal and professional 122,736 118,231
Other expense 97,691 57,296
------------------ -------------------
Total noninterest expense 1,123,187 735,238
LOSS BEFORE INCOME TAX (150,725) (619,110)
Provision for income tax - -
------------------ -------------------
NET LOSS $ (150,725) $ (619,110)
================== ===================
BASIC AND DILUTED LOSS PER SHARE $ (0.06) $ (0.35)
Average shares outstanding 2,530,000 1,775,889
</TABLE>
The following notes are an integral part of the financial statements
2
<PAGE> 4
TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------ -------------------
<S> <C> <C>
Net loss, as reported $ (150,725) $ (619,110)
Unrealized depreciation on securities available for sale, net of tax (4,933) (86)
------------------ -------------------
COMPREHENSIVE LOSS $ (155,658) $ (619,196)
================== ===================
</TABLE>
The following notes are an integral part of the financial statements.
3
<PAGE> 5
TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the three months ended March 31, 2000 and March 31, 1999
(unaudited)
<TABLE>
<CAPTION>
NET
UNREALIZED
DEPRECIATION
ON SECURITIES
ADDITIONAL AVAILABLE
PREFERRED COMMON PAID IN ACCUMULATED FOR SALE,
STOCK STOCK CAPITAL DEFICIT NET OF TAX TOTAL
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 $ - $ 10 $ - $ (473,434) $ - $ (473,424)
Issuance of common stock,
net of underwriters' fee
and offering costs 2,530,000 20,943,770 23,473,770
- - -
Retirement of common stock - (10) - - - (10)
Net unrealized depreciation on
securities available for sale,
net of tax - - - - (86) (86)
Net loss - - - (619,110) - (619,110)
----------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1999 $ - $2,530,000 $ 20,943,770 $(1,092,544) $ (86) $ 22,381,140
==============================================================================================
Balance, January 1, 2000 $ - $2,530,000 $ 20,939,770 $(2,148,876) $ (715) $ 21,320,179
Net unrealized depreciation on
securities available for sale,
net of tax - - - - (4,933) (4,933)
Net loss - - - (150,725) - (150,725)
----------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 2000 $ - $2,530,000 $ 20,939,770 $(2,299,601) $ (5,648) $ 21,164,521
==============================================================================================
</TABLE>
The following notes are an integral part of the financial statements.
4
<PAGE> 6
TOWER FINANCIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
------------------ -------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (150,725) $ (619,110)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 42,580 13,649
Provision for loan losses 400,000 90,000
(Increase) decrease in accrued interest receivable
and other assets (220,939) 62,933
Increase in accrued interest payable and other liabilities 248,920 204,703
------------------ -------------------
Net cash provided by (used in) operating activities 319,836 (247,825)
------------------ -------------------
Cash flows used in investing activities:
Net increase in loans (26,903,209) (11,392,481)
Purchase of securities available for sale (15,016,586) (5,441,586)
Purchase of equipment and leasehold expenditures (165,291) (499,039)
------------------ -------------------
Net cash used in investing activities (42,085,086) (17,333,106)
------------------ -------------------
Cash flows from financing activities:
Net increase in deposits 37,554,271 14,999,856
Gross proceeds from issuance of common stock - 25,300,000
Payment of underwriters' fee and offering costs - (1,826,230)
Retirement of common stock - (10)
Repayment of related party notes payable - (760,000)
------------------ -------------------
Net cash provided from financing activities 37,554,271 37,713,616
------------------ -------------------
Net increase (decrease) in cash and cash equivalents (4,210,979) 20,132,685
Cash and cash equivalents, beginning of period 30,443,695 213,920
------------------ -------------------
Cash and cash equivalents, end of period $ 26,232,716 $ 20,346,605
================== ===================
</TABLE>
The following notes are an integral part of the financial statements.
5
<PAGE> 7
TOWER FINANCIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. ORGANIZATION: Tower Financial Corporation ("the Company") was
incorporated on July 8, 1998. The Company's wholly-owned subsidiary,
Tower Bank & Trust Company ("the Bank") opened on February 19, 1999
after receiving federal and state bank regulatory approvals to commence
its banking operations. Until February 19, 1999, the Company was in the
development stage and its activities were limited to the organization
of the Bank as well as the completion of its initial public stock
offering.
B. BASIS OF PRESENTATION: The accompanying unaudited consolidated
condensed financial statements were prepared in accordance with
generally accepted accounting principles for interim periods and with
instructions for Form 10-QSB and, therefore, do not include all
disclosures required by generally accepted accounting principles for
complete presentation of the Company's financial statements. In the
opinion of management, the consolidated condensed financial statements
contain all adjustments necessary to present fairly its consolidated
financial position at March 31, 2000 and its consolidated results of
operations, comprehensive income, stockholders' equity and cash flows
for the three-month periods ended March 31, 2000 and March 31, 1999.
These consolidated condensed financial statements should be read in
conjunction with the audited financial statements for the year ended
December 31, 1999 and the period from July 8, 1998 (date of inception)
through December 31, 1998 and related notes included in the Company's
Annual Report on Form 10-KSB for the period ended December 31, 1999.
C. PRINCIPALS OF CONSOLIDATION: The accompanying consolidated condensed
financial statements include the accounts of the Company and the Bank.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
2. INITIAL PUBLIC OFFERING:
On January 29, 1999, the Company completed an initial public offering of
its common stock during which 2,200,000 shares were sold at $10.00 per
share. On February 12, 1999, the Company completed the sale of 330,000
common shares included in the underwriters' overallotment option at $10.00
per share. Total proceeds from the offering were $25,300,000 less
underwriters' fees and offering expenses of $1,830,230 for net proceeds of
$23,469,770. The Company used approximately $15,000,000 of the net proceeds
from the stock offering to provide the initial capitalization of the Bank
in February 1999.
3. EARNINGS PER SHARE:
Earnings per share is computed based on the weighted average number of
shares outstanding during the first quarter of 2000 and 1999 at 2,530,000
and 1,775,889 shares, respectively.
Stock options granted through March 31, 2000 had an anti-dilutive effect on
earnings per share.
4. INCOME TAXES:
At March 31, 2000, the Company had net operating loss carryforwards of
approximately $2,299,601. No deferred tax asset is recorded as a valuation
allowance reduces the gross deferred tax asset of approximately
$919,870 to zero.
6
<PAGE> 8
5. STOCK OPTION PLAN:
On December 14, 1998, and subsequently amended on January 21, 1999, the
stockholders and Board of Directors adopted the 1998 Stock Option and
Incentive Plan (the "Plan") for officers, employees and directors. The
maximum number of shares, which may be issued under the Plan, may not
exceed 310,000 and includes both incentive stock options and non-qualified
options. The exercise price for incentive stock options may not be less
than the fair market value of the shares at the time of grant, except as
granted to a 10% shareholder in which case the option price may not be less
than 110% of fair market value. The exercise price for non-qualified stock
options may not be less than the fair market value of the shares at the
time of grant. The duration of each option may not exceed ten years from
the date of grant.
At March 31, 2000, options for 307,420 shares had been granted to certain
officers, employees, and directors. The options were granted at the market
price on the dates of grant in a range from $8.125 to $10.1875 per share.
During the first quarter of 2000, certain directors surrendered options for
an aggregate of 22,350 shares for cancellation. As permitted by the Plan,
stock options to purchase these 22,350 shares were then granted ratably to
two directors who were added to the Board in 1999. Also during the quarter,
options for 3,000 shares were granted to an officer and options for 1,010
shares were terminated in accordance with the Plan due to an employee
termination. Under the Plan, the shares associated with the terminated
options may be subject to new option grants. Of the total options granted,
options for 141,855 shares were vested and exercisable at March 31, 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.
Prior to the opening of the Bank, the Company's principal activities related to
the organization of the Bank and the conducting of the Company's initial public
offering ("IPO"). The Company funded its start-up and organizational costs
through loans from directors in an aggregate amount of $760,000, which loans
were repaid upon completion of the IPO. Total proceeds to the Company from the
IPO were $22,709,770 (net of offering expenses, underwriters' discounts and
repayment of director loans), of which $15,000,000 was used to initially
capitalize the Bank.
The following presents management's discussion and analysis of the consolidated
financial condition of the Company as of March 31, 2000 and December 31, 1999
and results of operations for the three months ended March 31, 2000 and March
31, 1999. This discussion should be read in conjunction with the Company's
unaudited consolidated condensed financial statements and the related notes
appearing elsewhere in this report.
FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report filed on Form 10-QSB that are
not historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Forward-looking statements are made
based upon management's current expectations and beliefs concerning future
developments and their potential effects upon the Company or the Bank. There can
be no assurance that future developments affecting the Company or the Bank will
be those anticipated by management. Actual results may differ materially from
those included in the forward-looking statements. These forward-looking
statements involve risks and uncertainties including, but not limited to, the
following:
7
<PAGE> 9
- - the Company's status as a start-up company with less than two years of
operating history;
- - the Company's expectation of significant losses during the first years
of operations,
- - 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 $141,294,600 at March 31, 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 quarter of 2000. Asset
growth has been substantial during each quarter since the Bank began operations.
The significant growth during these quarters was also a result of deposit growth
at the Bank. Total assets at March 31, 1999 were $37,695,699. As the Bank enters
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 $26,232,716 at
March 31, 2000, a $4,210,979 decrease from $30,443,695 at December 31, 1999.
Securities available for sale were $20,828,044 at the end of the first quarter
of 2000, an increase of $15,011,653 from year-end. The decrease in cash and cash
equivalents during the first quarter of 2000 was due mainly to the fact that the
Company made a $4,000,000 capital contribution to the Bank. The contribution was
made to provide adequate capital levels as a result of, and in anticipation of,
further growth at the Bank. 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 $94,217,729 at March 31, 2000 reflecting significant growth
from the fourth quarter of 1999. Total loans were $67,314,520 at December 31,
1999. The loans outstanding at March 31, 2000 consisted of $75 million in
commercial and commercial real estate loans, $7 million in residential real
estate and $12 million in home equity and consumer loans. Loan growth occurred
during the first quarter, mainly in the commercial and commercial real estate
sector.
The allowance for loan losses at March 31, 2000 was $1,409,509. This represented
approximately 1.5% of total loans outstanding. The provision for the allowance
during the first quarter was $400,000 compared to $320,000 in the previous
quarter. The addition to the allowance during the first quarter was directly
attributable to the amount of the loan growth during that period. Management
considers the allowance for loan losses to be adequate; however, there can be no
assurance that charge-offs in future periods will not exceed the allowance.
Additional provisions for the allowance are expected during 2000 as a result of
anticipated increases in the total loan portfolio. Other than a small consumer
loan loss of $491 incurred during 1999, the Company has not suffered any loan
losses. At March 31, 2000 there were no nonaccrual loans and no loans past due
more than 30 days.
8
<PAGE> 10
Net premises and equipment increased by $122,711 during the first three months
of 2000 from $723,975 at December 31, 1999. The net increase resulted from
expenditures on several projects including leasehold improvements, equipment and
furniture for a new branch bank in Fort Wayne, development of Internet
functionality and site work, as well as furniture and equipment for new
personnel.
Other assets increased by $220,933 from the prior quarter ending December 31,
1999 and were $578,934 at March 31, 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 $119,287,509 at the end of March 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
quarter of 2000 was reflected in most categories, it was evident mainly in
noninterest-bearing balances where growth was approximately $5.5 million and
large dollar CDs which grew roughly $30.8 million.
Accrued expenses and other liabilities increased by $248,920 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 quarter of 2000.
Total stockholders' equity at March 31, 2000 was $21,164,521; a decrease of
$155,658 from the $21,320,179 at December 31, 1999. The decrease was mainly
attributable to the net loss of $150,725 recorded during the first quarter of
2000 as well as the net change in the unrealized depreciation on securities.
RESULTS OF OPERATIONS
Results of operations for the three-month period ended March 31, 2000 reflected
an operating loss of $150,750. In comparison, the net loss was $249,570 and
$619,110 for the fourth and first quarters of 1999, respectively. Improved
operating results have been reflected in each quarter since the Bank began
operations on February 19, 1999. The $98,820 operating improvement from the
fourth quarter of 1999 was mainly the result of higher net interest income as a
result of loan growth during that period. Significant improvement was achieved
over the first quarter of 1999 as that quarter was the initial quarter of bank
operations and reflected expenses associated with the development stage.
At March 31, 2000, the Company had an accumulated deficit of $2,299,601. The
accumulated deficit and net losses are reflective of organizational and start-up
costs incurred during the development stage from July 1998 to February 1999. In
addition, general bank operations in 1999 and the first quarter of 2000 have
generated a loss as the Bank builds its loan portfolio and trust business to
achieve a profitable level and builds its allowance for loan loss. Management
believes that the Company may begin to generate some profitable quarters during
2000 as a result of the anticipated growth of the business.
Net loss per share for the three-month periods ended March 31, 2000 and 1999 was
$.06 and $.35, respectively. Net loss per share for the fourth quarter of 1999
was $.10.
Interest income for the three-month periods ended March 31, 2000 and 1999 was
$2,223,850 and $233,667, respectively, while interest expense for those periods
was $1,044,856 and $33,709, respectively, resulting in net interest income of
$1,178,994 for the first quarter of 2000 and $199,958 for the first quarter of
1999. Net interest income for the fourth quarter of 1999 was $951,720. 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 first quarter of 2000 was 4.19%, while
the net interest margin for the first and fourth quarters of 1999 was 4.61% and
4.13%, respectively.
9
<PAGE> 11
A loan loss provision was recorded in the amount of $400,000 during the first
quarter of 2000 as compared to $320,000 for the fourth quarter, and $90,000 for
the first quarter, 1999. The increase in provision is directly related to the
growth in the loan portfolio. The loan loss provision totaled $1,409,509 and was
1.5% of total loans outstanding on March 31, 2000. As the Company has had no
significant loan loss experience and no nonperforming assets at March 31, 2000,
the provision was established primarily upon peer industry data of comparable
commercial banks.
Noninterest income was $193,468 during the first quarter of 2000. This was a
$187,298 increase over the first quarter of 1999 and a $110,058 increase over
the fourth quarter of 1999. 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 fees from the mortgage origination
unit.
Noninterest expense was $1,123,187 for the first quarter of 2000 while
noninterest expense for the three months ended March 31, 1999 and the three
months ended December 31, 1999 was $735,238 and $964,700, respectively. The main
components of noninterest expense for the first quarter of 2000 were salaries
and benefits of $648,281, occupancy and equipment costs of $146,393, and legal
and professional expenses in the amount of $122,736. 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 2000 quarter
were higher than those for previous quarters and were reflective of the general
growth of the Bank in the form of personnel, rent and equipment at the existing
location, as well as the opening of a new branch office in May, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity strategy is to fund growth with deposits and to maintain
an adequate level of short- and medium-term investments to meet typical daily
loan and deposit activity needs. Deposit growth was substantial during the first
quarter of 2000 and throughout 1999 and was generated entirely from in-market
sources. At March 31, 2000, total deposits were $119, 287,509 and the loan to
deposit ratio was 79.0%. The Company expects to continue to experience
substantial loan growth. Funding for the loan growth will continue to come from
in-market sources through the marketing of products and the development of
branch locations (the first of which was opened on May 1, 2000). Should the Bank
be unable to obtain sufficient funding from in-market sources to match the loan
growth, the Company will develop wholesale or out-of-market deposit and
borrowing capacities.
In the IPO, the Company raised equity capital with aggregate proceeds, net of
underwriters' discount and offering expenses, of $23,469,770. The Company
initially contributed $15,000,000 of the net proceeds from the offering to the
Bank. During the first quarter of 2000, the Company contributed an additional
$4,000,000 in capital to the Bank as a result of the substantial growth
experienced to date. Based upon growth projections and deposit levels achieved
during the first year of 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.
YEAR 2000 ISSUE
The year 2000 presented potential problems to businesses that utilize computers
in their daily operations. It was anticipated that some computer systems might
not be able to interpret dates properly after December 31, 1999 because only two
digits were used to indicate the year.
The Company encountered no problems as of March 31, 2000 (that it was aware of)
as a result of the movement to the new millennium; however, all pertinent
procedures and contingencies remain in place to counter any problems which might
arise in the future.
10
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Bank may be involved from time to time in various routine legal proceedings
incidental to its business. Neither the Company nor the Bank is engaged in any
legal proceeding that is expected to have a material adverse effect on the
results of operation or financial position of the Company or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of the shareholders of the Company was held on April
18, 2000.
(b) The following directors were elected at the meeting to serve until the
annual meeting of shareholders in the year 2003:
<TABLE>
<CAPTION>
Votes Votes Broker
For Withheld Non-Votes
-------------------------------------------
<S> <C> <C> <C>
Craig S. Hartman 2,187,912 22,190 none
Jerome F. Henry, Jr. 2,202,031 8,071 none
Debra A. Niezer 2,196,431 13,671 none
Maurice D. O'Daniel 2,197,231 12,871 none
Joseph D. Ruffolo 2,195,952 14,150 none
</TABLE>
In addition, the following directors continue in office until the annual
meeting of shareholders in the year indicated:
Keith E. Busse 2002
Peter T. Eshelman 2002
Michael S. Gouloff 2002
R.V. Prasad Mantravadi, M.D. 2001
Michael J. Mirro, M.D. 2001
William G. Niezer 2001
Leonard I. Rifkin 2001
Donald F. Schenkel 2002
Larry L. Smith 2001
John V. Tippmann, Sr. 2001
J. Richard Tomkinson 2002
Irene A. Walters 2002
(c) Other matters voted upon and the results of the voting were as follows:
The shareholders voted 2,195,128 in the affirmative and 5,924 in the
negative, with 9,050 abstentions and no broker non-votes, to appoint
PricewaterhouseCoopers LLP as auditors of the Company for 2000.
11
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(27) Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended March 31,
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: May 10, 2000 /s/ Donald F. Schenkel
---------------------------------------------
Donald F. Schenkel, Chairman of the Board,
President and Chief Executive Officer
Dated: May 10, 2000 /s/ Kevin J. Himmelhaver
---------------------------------------------
Kevin J. Himmelhaver, Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF TOWER FINANCIAL CORPORATION
FOR THE NINE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,308,968
<INT-BEARING-DEPOSITS> 3,182,528
<FED-FUNDS-SOLD> 20,741,220
<TRADING-ASSETS> 1,425,620
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 20,828,044
<LOANS> 94,217,729
<ALLOWANCE> (1,409,509)
<TOTAL-ASSETS> 141,294,600
<DEPOSITS> 119,287,509
<SHORT-TERM> 0
<LIABILITIES-OTHER> 632,570
<LONG-TERM> 0
0
0
<COMMON> 2,530,000
<OTHER-SE> 18,634,521
<TOTAL-LIABILITIES-AND-EQUITY> 141,294,600
<INTEREST-LOAN> 1,758,097
<INTEREST-INVEST> 112,466
<INTEREST-OTHER> 353,287
<INTEREST-TOTAL> 2,223,850
<INTEREST-DEPOSIT> 1,041,977
<INTEREST-EXPENSE> 1,044,856
<INTEREST-INCOME-NET> 1,178,994
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,123,187
<INCOME-PRETAX> (150,750)
<INCOME-PRE-EXTRAORDINARY> (150,750)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150,750)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (1,409,509)
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
