10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2010

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 0-25045

CENTRAL FEDERAL CORPORATION.

(Exact name of registrant as specified in its charter)

Delaware	34-1877137
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)
2923 Smith Road, Fairlawn, Ohio	44333
(Address of Principal Executive Offices)	(Zip Code)

(330) 666-7979
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $.01 per share	Nasdaq® Capital Market
(Title of Class)	(Name of Exchange on which Registered)

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act YES o NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act YES o NO þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) YES þ NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO þ

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates as of June 30, 2010 was $5.3 million based upon the closing price as reported on the Nasdaq^® Capital Market for that date.

As of March 15, 2011, there were 4,127,798 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Rule 14a-3(b) Annual Report to Stockholders for its fiscal year ended December 31, 2010, which was filed with the Securities and Exchange Commission (the Commission) on or about March 30, 2011, and its Proxy Statement for the 2011 Annual Meeting of Stockholders to be held on May 19, 2011, which was filed with the Commission on or about March 30, 2011, are incorporated herein by reference into Parts II and III, respectively, of this Form 10-K.

INDEX

	Page
PART I
Item 1. Business		4
Item 1A. Risk Factors		31
Item 2. Properties		36
Item 3. Legal Proceedings		36
Item 4. (Removed and Reserved)		36
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		37
Item 6. Selected Financial Data		37
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation		37
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		37
Item 8. Financial Statements and Supplementary Data		37
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		38
Item 9A. Controls and Procedures		38
Item 9B. Other Information		38
PART III
Item 10. Directors, Executive Officers and Corporate Governance		38
Item 11. Executive Compensation		40
Item 12. Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters		40
Item 13. Certain Relationships and Related Transactions, and Director Independence		41
Item 14. Principal Accounting Fees and Services		41
PART IV
Item 15. Exhibits, Financial Statement Schedules		41
SIGNATURES
EXHIBIT INDEX

2

Forward-Looking Statements

Statements in this Form 10-K and in other communications by the Company, as defined below, that are not statements of historical fact are forward-looking statements which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per common share, capital structure and other financial items; (2) plans and objectives of the Company, as defined below, management or Boards of Directors; (3) statements regarding future events, actions or economic performance; and (4) statements of assumptions underlying such statements. Words such as “estimate,” “strategy,” “may,” “believe,” “anticipate,” “expect,” “predict,” “will,” “intend,” “plan,” “targeted,” and the negative of these terms, or similar expressions, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Various risks and uncertainties may cause actual results to differ materially from those indicated by our forward-looking statements. The following factors could cause such differences:

• a continuation of current high unemployment rates and difficult economic conditions or adverse changes in general economic conditions and economic conditions in the markets we serve, any of which may affect, among other things, our level of nonperforming assets, charge-offs, and provision for loan loss expense;

• changes in interest rates that may reduce net interest margin and impact funding sources;

• our ability to maintain sufficient liquidity to continue to fund our operations;

• changes in market rates and prices, including real estate values, which may adversely impact the value of financial products including securities, loans and deposits;

• the possibility of other-than-temporary impairment of securities held in the Company’s securities portfolio;

• results of examinations of the Company and Bank by the regulators, including the possibility that the regulators may, among other things, require the Company to increase its allowance for loan losses or write-down assets;

• the uncertainties arising from the Company’s participation in the Troubled Asset Relief Program (TARP) Capital Purchase Program, including the impacts on employee recruitment and retention and other business and practices, and uncertainties concerning the potential redemption by us of the United States Department of the Treasury’s (U.S. Treasury’s) preferred stock investment under the program, including the timing of, regulatory approvals for, and conditions placed upon, any such redemption;

• changes in tax laws, rules and regulations;

• various monetary and fiscal policies and regulations, including those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), the Office of the Controller of the Currency (OCC) and the Office of Thrift Supervision (OTS);

• competition with other local and regional commercial banks, savings banks, credit unions and other non-bank financial institutions;

• our ability to grow our core businesses;

• technological factors which may affect our operations, pricing, products and services;

• unanticipated litigation, claims or assessments; and

• management’s ability to manage these and other risks.

Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. The Company believes it has chosen these assumptions or bases in good faith and that they are reasonable. We caution you, however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. The forward-looking statements included in this report speak only as of the date of the report. We undertake no obligation to publicly release revisions to any forward-looking statements to reflect events or circumstances after the date of such statements, except to the extent required by law.

3

PART I

Item 1. Business.

General

Central Federal Corporation (the Holding Company), which was formerly known as Grand Central Financial Corp., was organized as a Delaware corporation in September 1998 as the holding company for CFBank in connection with CFBank’s conversion from a mutual to stock form of organization. CFBank is a community-oriented savings institution which was originally organized in 1892, and was formerly known as Central Federal Savings and Loan Association of Wellsville and more recently as Central Federal Bank. As used herein, the terms “we,” “us,” “our” and the “Company” refer to Central Federal Corporation and its subsidiaries, unless the context indicates to the contrary. As a savings and loan holding company, we are subject to regulation by the OTS. Central Federal Capital Trust I (the Trust), a wholly owned subsidiary of the Holding Company, was formed in 2003 to raise additional funding for the Company. The Holding Company is not considered the primary beneficiary of this trust (variable interest entity), therefore, the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. Ghent Road, Inc., a wholly owned subsidiary of the Holding Company, was formed in 2006 and owns land adjacent to CFBank’s Fairlawn, Ohio office. Smith Ghent LLC, a wholly owned subsidiary of the Holding Company, owns the office building and land in Fairlawn which is leased to CFBank. The Holding Company previously was a one-third owner in Smith Ghent LLC and acquired the remaining two-thirds interest on October 6, 2009. Currently, we do not transact material business other than through CFBank. At December 31, 2010, assets totaled $275.2 million and stockholders’ equity totaled $16.0 million.

CFBank is a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve. Our business model emphasizes personalized service, clients’ access to decision makers, solution-driven lending and quick execution, efficient use of technology and the convenience of online internet banking, mobile banking, remote deposit, corporate cash management and telephone banking. We attract retail and business deposits from the general public and use the deposits, together with borrowings and other funds, primarily to originate commercial and commercial real estate loans, single-family and multi-family residential mortgage loans and home equity lines of credit. We also invest in consumer loans, construction and land loans and securities. In 2003, we began originating more commercial, commercial real estate and multi-family mortgage loans than in the past as part of our expansion into business financial services. The majority of our customers are small businesses, small business owners and consumers. Revenues are derived principally from the generation of interest and fees on loans originated and, to a lesser extent, interest and dividends on securities. Our primary sources of funds are retail and business deposit accounts and certificates of deposit, brokered certificates of deposit and, to a lesser extent, principal and interest payments on loans and securities, Federal Home Loan Bank (FHLB) advances, other borrowings and proceeds from the sale of loans. Our principal market area for loans and deposits includes the following Ohio counties: Summit County through our office in Fairlawn, Ohio; Franklin County through our office in Worthington, Ohio; and Columbiana County through our offices in Calcutta and Wellsville, Ohio. We originate commercial and conventional real estate loans and business loans primarily throughout Ohio.

4

Market Area and Competition

Our primary market area is a competitive market for financial services and we face competition both in making loans and in attracting deposits. Direct competition comes from a number of financial institutions operating in our market area, many with a statewide or regional presence, and in some cases, a national presence. Many of these financial institutions are significantly larger and have greater financial resources than we do. Competition for loans and deposits comes from savings institutions, mortgage banking companies, commercial banks, credit unions, brokerage firms and insurance companies.

Lending Activities

Loan Portfolio Composition. The loan portfolio consists primarily of commercial, commercial real estate and multi-family mortgage loans and, to a lesser degree, mortgage loans secured by single-family residences and consumer loans. At December 31, 2010, gross loans receivable totaled $200.5 million and decreased $38.6 million, or 16.1%, from $239.1 million at December 31, 2009. Commercial, commercial real estate and multi-family mortgage loans totaled $156.8 million and represented 78.2% of the gross loan portfolio at December 31, 2010 compared to 76.2% of the gross loan portfolio at December 31, 2009 and 76.7% at December 31, 2008. The increase in the percentage of commercial, commercial real estate and multi-family mortgage loans in the portfolio during the current year was due to a decline in the overall loan portfolio as a result of management’s decision to reduce the origination of loans in response to the continued uncertainty with the economy and to prudently manage the Company’s capital. Commercial, commercial real estate and multi-family mortgage loan balances decreased $23.3 million, or 13.1%, during 2010. Portfolio single-family residential mortgage loans totaled $25.6 million and represented 12.8% of total gross loans at year-end 2010 and 2009 and 12.1% at year-end 2008. The remainder of the portfolio consisted of consumer loans, which totaled $18.1 million, or 9.0% of gross loans receivable at year-end 2010.

The types of loans originated are subject to federal and state laws and regulations. Interest rates charged on loans are affected by the demand for such loans, the supply of money available for lending purposes and the rates offered by competitors. In turn, these factors are affected by, among other things, economic conditions, fiscal policies of the federal government, monetary policies of the Federal Reserve Board and legislative tax policies.

5

The following table sets forth the composition of the loan portfolio in dollar amounts and as a percentage of the portfolio at the dates indicated.

	At December 31,
	2010						2009						2008						2007						2006
				Percent						Percent						Percent						Percent						Percent
	Amount			of Total			Amount			of Total			Amount			of Total			Amount			of Total			Amount			of Total
	(Dollars in thousands)
Real estate mortgage loans:
Single-family	$	23,273			11.61	%	$	29,578			12.37	%	$	28,737			12.07	%	$	29,569			12.68	%	$	29,973			16.05	%
Multi-family		35,308			17.61	%		37,788			15.81	%		41,541			17.45	%		43,673			18.73	%		47,153			25.24	%
Construction (1)		4,919			2.45	%		5,811			2.43	%		3,068			1.29	%		6,164			2.65	%		4,454			2.38	%
Commercial real estate		80,725			40.26	%		96,854			40.51	%		97,015			40.76	%		90,193			38.68	%		43,335			23.20	%
Total real estate mortgage loans		144,225			71.93	%		170,031			71.12	%		170,361			71.57	%		169,599			72.74	%		124,915			66.87	%
Consumer loans:
Home equity loans		968			0.48	%		1,159			0.48	%		633			0.27	%		601			0.26	%		860			0.46	%
Home equity lines of credit		16,316			8.14	%		19,023			7.96	%		19,804			8.31	%		18,726			8.03	%		21,879			11.71	%
Automobile		98			0.05	%		4,943			2.07	%		5,151			2.17	%		7,962			3.41	%		6,465			3.46	%
Other		724			0.36	%		1,040			0.43	%		1,007			0.42	%		960			0.41	%		784			0.42	%
Total consumer loans		18,106			9.03	%		26,165			10.94	%		26,595			11.17	%		28,249			12.11	%		29,988			16.05	%
Commercial loans		38,194			19.04	%		42,897			17.94	%		41,087			17.26	%		35,311			15.15	%		31,901			17.08	%
Total loans receivable		200,525			100.00	%		239,093			100.00	%		238,043			100.00	%		233,159			100.00	%		186,804			100.00	%
Less:
Allowance for loan losses		(9,758	)					(7,090	)					(3,119	)					(2,684	)					(2,109	)
Loans receivable, net	$	190,767					$	232,003					$	234,924					$	230,475					$	184,695

⁽¹⁾ Construction loans include single-family real estate loans of $2,324, $1,056, $180, $1,434, and $429 at December 31, 2010, 2009, 2008, 2007, and 2006, commercial real estate loans of $2,595, $4,755, $2,871, $4,730, and $3,788 at December 31, 2010, 2009, 2008, 2007, and 2006; and multi-family real estate loans of $237 in 2006. Loan balances at December 31, 2010, 2009 and 2008 are reported at the recorded investment, which includes accrued interest. Loan balances at December 31, 2008 and 2007 do not include accrued interest.

6

Loan Maturity. The following table shows the remaining contractual maturity of the loan portfolio at December 31, 2010. Demand loans and other loans having no stated schedule of repayments or no stated maturity are reported as due within one year. The table does not include potential prepayments or scheduled principal amortization.

	At December 31, 2010
	Real Estate				Commercial		Total Loans
	Mortgage Loans(1)		Consumer Loans		Loans		Receivable
	(Dollars in thousands)
Amounts due:
Within one year	$	23,734	$	859	$	23,366	$	47,959
After one year:
More than one year to three years		13,346		805		4,061		18,212
More than three years to five years		19,231		221		3,080		22,532
More than five years to 10 years		60,706		264		6,748		67,718
More than 10 years to 15 years		7,682		4,859		838		13,379
More than 15 years		19,526		11,098		101		30,725
Total due after 2011		120,491		17,247		14,828		152,566
Total amount due	$	144,225	$	18,106	$	38,194	$	200,525

⁽¹⁾ Real estate mortgage loans include single-family, multi-family and commercial real estate loans and construction loans.

The following table sets forth at December 31, 2010, the dollar amount of total loans receivable contractually due after December 31, 2011, and whether such loans have fixed interest rates or adjustable interest rates.

	Due after December 31, 2011
	Fixed		Adjustable		Total
	(Dollars in thousands)
Real estate mortgage loans(1)	$	47,523	$	72,968	$	120,491
Consumer loans		1,253		15,994		17,247
Commercial loans		5,277		9,551		14,828
Total loans	$	54,053	$	98,513	$	152,566

⁽¹⁾ Real estate mortgage loans include single-family, multi-family and commercial real estate loans and construction loans.

Origination of Loans. Lending activities are conducted through our offices. In 2003, we began originating commercial, commercial real estate and multi-family mortgage loans and expanded into business financial services in the Fairlawn and Columbus, Ohio, markets.

7

CFBank participates in various loan programs offered by the Small Business Administration (SBA) enabling us to provide our customers and small business owners in our markets with access to funding to support their businesses, as well as reduce credit risk associated with these loans. Individual loans include SBA guarantees of up to 90%. SBA loans totaled $6.3 million at December 31, 2010 and increased from $3.0 million at December 31, 2009 and $1.1 million at December 31, 2008. We also participate in the State of Ohio’s GrowNOW program, which provides small business borrowers with a 3% interest rate reduction on small business loans funded through deposits from the State of Ohio at CFBank. At December 31, 2010, loans outstanding under the GrowNOW program totaled $2.0 million compared to $2.2 million at December 31, 2009 and $1.4 million at December 31, 2008.

Commercial, commercial real estate and multi-family loans are predominantly adjustable rate loans, although we offer both fixed rate and adjustable rate loans. Fixed rates are generally limited to three to five years. CFBank also accommodates borrowers who desire fixed rate loans for longer than three to five years by utilizing interest rate swaps to protect the related fixed rate loans from changes in value due to changes in interest rates. See Note 20 to the Consolidated Financial Statements.

A majority of our single-family mortgage loan originations are fixed-rate loans. Current originations of long-term, fixed-rate single-family mortgages are generally sold rather than retained in portfolio in order to minimize investment in long-term, fixed-rate assets that have the potential to expose the Company to long-term interest rate risk. Although we currently expect that most of our long-term, fixed-rate mortgage loan originations will continue to be sold, primarily on a servicing-released basis, a portion of these loans may be retained for portfolio within our interest rate risk and profitability guidelines.

Single-Family Mortgage Lending. A significant lending activity has been the origination of permanent conventional mortgage loans secured by single-family residences located within and outside of our primary market area. Loan originations are obtained from our loan officers and their contacts with the local real estate industry, existing or past customers, members of the local communities, and to a lesser extent through telemarketing and purchased leads. We offer both fixed-rate and adjustable-rate mortgage (ARM) loans with maturities generally up to 30 years, priced competitively with current market rates. We offer several ARM loan programs with terms of up to 30 years and interest rates that adjust with a maximum adjustment limitation of 2.0% per year and a 6.0% lifetime cap. The interest rate adjustments on ARM loans currently offered are indexed to a variety of established indices and these loans do not provide for initial deep discount interest rates. We do not originate option ARM loans.

The volume and types of single-family ARM loan originations are affected by market factors such as the level of interest rates, consumer preferences, competition and the availability of funds. In recent years, demand for single-family ARM loans has been weak due to consumer preference for fixed-rate loans as a result of the low interest rate environment. Consequently, our origination of ARM loans on single-family residential properties has not been significant as compared to our origination of fixed-rate loans.

We currently sell substantially all of the single-family mortgage loans that we originate on a servicing released basis. All single-family mortgage loans sold are underwritten according to Federal Home Loan Mortgage Corporation (Freddie Mac) or Federal National Mortgage Association (Fannie Mae) guidelines, or are underwritten directly by the investor. A high volume of residential mortgage originations is a key component for profitability in this part of our business. We are in the process of achieving direct endorsed underwriter status, a designation by the Department of Housing and Urban Development that will allow us to offer loans insured by the Federal Housing Authority (FHA). For the year ended December 31, 2010, single-family mortgage loans originated for sale totaled $79.6 million, and increased $13.6 million, or 20.6%, compared to $66.0 million in 2009. The increase in mortgage loan production was due to continued low mortgage interest rates through 2010, which resulted from the Federal Reserve Board reducing interest rates to historically low levels in the fourth quarter of 2008, and the success of CFBank’s staff of mortgage loan originators in increasing this business despite the depressed condition of the housing market. The volume of refinance activity, which is very sensitive to market mortgage interest rates, may be a significant factor that impacts the level of residential originations in 2011. If market mortgage rates increase or the housing market deteriorates further, mortgage production, and resultant gains on sales of loans, could decrease. The Dodd-Frank Wall Street Reform and Consumer Protection Act ( the Dodd-Frank Act) contains provisions which limit the methods of compensation for mortgage loan originators and this may impact the Company as a result of loan origination professionals’ decisions about whether to remain in the industry.

8

At December 31, 2010, portfolio single-family mortgage loans totaled $23.3 million, or 11.6% of total loans. Our policy is to originate single-family residential mortgage loans for portfolio in amounts up to 85% of the lower of the appraised value or the purchase price of the property securing the loan, without requiring private mortgage insurance. Loans in excess of 85% of the lower of the appraised value or purchase price of the property securing the loan require private mortgage insurance. Mortgage loans generally include due-on-sale clauses which provide us with the contractual right to deem the loan immediately due and payable in the event the borrower transfers ownership of the property without our consent.

Portfolio single-family ARM loans, which totaled $9.6 million, or 41.1% of the single-family mortgage loan portfolio at December 31, 2010, generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Periodic and lifetime caps on interest rate increases help to reduce the credit risks associated with ARM loans, but also limit the interest rate sensitivity of such loans. CFBank requires that all ARM loans held in the loan portfolio have payments sufficient to amortize the loan over its term, and the loans do not have negative principal amortization.

Commercial Real Estate and Multi-Family Residential Mortgage Lending. Origination of commercial real estate and multi-family residential mortgage loans had been a significant lending activity since 2003, when we expanded into business financial services in the Fairlawn and Columbus, Ohio, markets. Management decreased the origination of these loan types in 2010 in response to continued weak economic conditions impacting the financial strength of borrowers and market values of collateral underlying these types of loans, and the related increased risk characteristics and adverse credit-related performance of CFBank’s existing commercial real estate and multi-family residential loan portfolios. Commercial real estate and multi-family residential mortgage loans decreased $18.6 million in 2010 and totaled $116.0 million, or 57.9% of gross loans, at December 31, 2010. We anticipate that commercial real estate and multi-family residential mortgage lending activities and loan balances may continue to decrease in the near term as a result of the recessionary economic conditions which began in 2008 and continued through 2010. Future lending activities are subject to a number of conditions including, but not limited to, the capital position of CFBank, the general economy, the performance of existing loans and the availability of appropriate funding sources.

We originate commercial real estate loans that are secured by properties used for business purposes, such as manufacturing facilities, office buildings or retail facilities. We originate multi-family residential mortgage loans that are secured by apartment buildings, condominiums, and multi-family residential houses. Commercial real estate and multi-family residential mortgage loans are secured by properties generally located in our primary market area.

Underwriting policies provide that commercial real estate and multi-family residential mortgage loans may be made in amounts up to 75% of the lower of the appraised value or purchase price of the property. An independent appraisal of the property is required on all loans greater than or equal to $250,000. In underwriting commercial real estate and multi-family residential mortgage loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed and adjustable rate loans. Fixed rates are generally limited to three to five years, at which time they convert to adjustable rate loans. CFBank also accommodates borrowers who desire fixed rate loans for longer than three to five years by utilizing interest rate swaps to protect the related fixed rate loans from changes in value due to changes in interest rates. See Note 20 to the Consolidated Financial Statements. Adjustable rate loans are tied to various market indices and generally adjust monthly or annually. Payments on both fixed and adjustable rate loans are based on 15 to 25 year amortization periods.

9

Commercial real estate and multi-family residential mortgage loans are generally considered to involve a greater degree of risk than single-family residential mortgage loans. Because payments on loans secured by commercial real estate and multi-family residential properties are dependent on successful operation or management of the properties, repayment of commercial real estate and multi-family residential mortgage loans may be subject to a greater extent to adverse conditions in the real estate market or the economy. As with single-family residential mortgage loans, adjustable rate commercial real estate and multi-family residential mortgage loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable rate commercial real estate and multi-family residential mortgage loans generally do not contain periodic and lifetime caps on interest rate changes. We seek to minimize the additional risk presented by adjustable rate commercial real estate and multi-family residential mortgage loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Commercial real estate and multi-family residential mortgage loans also have larger loan balances to single borrowers or groups of related borrowers compared to single-family residential mortgage loans. Some of our borrowers also have more than one commercial real estate or multi-family residential mortgage loan outstanding with us. Additionally, some loans may be collateralized by junior liens. Consequently, an adverse development involving one or more loans or credit relationships can expose us to significantly greater risk of loss compared to an adverse development involving a single-family residential mortgage loan. We seek to minimize and mitigate these risks through underwriting policies which require such loans to be qualified at origination on the basis of the property’s income and debt coverage ratio and the financial strength of the property owners and/or guarantors.

Commercial Lending. Origination of commercial loans has been a significant lending activity since 2003, when we expanded into business financial services in the Fairlawn and Columbus, Ohio, markets. Management decreased the origination of commercial loans in 2010 in response to continued weak economic conditions impacting the financial strength of companies requesting financing, and the increased risk characteristics and adverse credit-related performance of the existing commercial loan portfolio. Commercial loan balances decreased $4.7 million, or 11.0%, in 2010 and totaled $38.2 million, or 19.1% of gross loans, at December 31, 2010. We anticipate that commercial lending activities may continue to decrease in the near term as a result of the recessionary economic conditions which began in 2008 and continued through 2010. Future commercial lending activities are subject to a number of conditions including, but not limited to, the capital position of CFBank, the general economy, the performance of existing loans and the availability of appropriate funding sources.

We make commercial loans primarily to businesses. Those loans are generally secured by business equipment, inventory, accounts receivable and other business assets. In underwriting commercial loans, we consider the net operating income of the company, the debt service ratio and the financial strength, expertise and credit history of the business owners and/or guarantors. We offer both fixed and adjustable rate commercial loans. Fixed rates are generally limited to three to five years. Adjustable rate loans are tied to various market indices and generally adjust monthly or annually.

10

Commercial loans are generally considered to involve a greater degree of risk than loans secured by real estate. Because payments on commercial loans are dependent on successful operation of the business enterprise, repayment of such loans may be subject to a greater extent to adverse conditions in the economy. We seek to mitigate these risks through underwriting policies which require such loans to be qualified at origination on the basis of the enterprise’s income and debt coverage ratio and the financial strength of the business owners and/or guarantors.

Adjustable rate commercial loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable rate commercial loans generally do not contain periodic and lifetime caps on interest rate changes. We seek to minimize the additional risk presented by adjustable rate commercial loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Construction and Land Lending. To a lesser extent, we originate construction, land and land development loans in our primary market areas. Due to continued weak economic conditions impacting the financial strength and market values of collateral underlying these loans, management decreased the origination of construction and land loans in 2010. Construction loans are made to finance the construction of residential and commercial properties. Construction loans are fixed or adjustable-rate loans which may convert to permanent loans with maturities of up to 30 years. Our policies provide that construction loans may be made in amounts up to 75% of the appraised value of the property, and an independent appraisal of the property is required. Loan proceeds are disbursed in increments as construction progresses and as inspections warrant, and regular inspections are required to monitor the progress of construction. Land development loans generally do not exceed 65% of the actual cost or current appraised value of the property, whichever is less. Loans on raw land generally do not exceed 65% of the actual cost or current appraised value of the property, whichever is less.

Construction and land financing is considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development compared to the estimated cost (including interest) of construction. If the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value which is insufficient to assure full repayment. We attempt to reduce such risks on construction loans by requiring personal guarantees and reviewing current personal financial statements and tax returns as well as other projects of the developer. Construction loans totaled $4.9 million at December 31, 2010. Land loans totaled $5.9 million at December 31, 2010.

Consumer and Other Lending. The consumer loan portfolio generally consists of home equity lines of credit, automobile loans, home improvement loans and loans secured by deposits. At December 31, 2010, the consumer loan portfolio totaled $18.1 million, or 9.0% of gross loans receivable.

Home equity lines of credit comprise the majority of consumer loan balances and totaled $16.3 million at December 31, 2010. Home equity lines of credit include both purchased loans and loans we originated for our portfolio. In 2005 and 2006, we purchased home equity lines of credit collateralized by properties located throughout the United States. The outstanding balance of the purchased home equity lines of credit totaled $3.4 million at December 31, 2010.

11

We offer a variable rate home equity line of credit which we originate for our portfolio. The interest rate adjusts monthly at various margins above the prime rate of interest as disclosed in The Wall Street Journal. The margin is based on certain factors including the loan balance, value of collateral, election of auto-payment, and the borrower’s FICO^® score. The amount of the line is based on the borrower’s credit, income and equity in the home. When combined with the balance of the prior mortgage liens, these lines generally may not exceed 89.9% of the appraised value of the property at the time of the loan commitment. The lines are secured by a subordinate lien on the underlying real estate and are, therefore, vulnerable to declines in property values in the geographic areas where the properties are located. Credit approval for home equity lines of credit requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral for secured loans. Consumer loans typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.

The purchased home equity lines of credit present higher risk than the home equity lines of credit we originate for our portfolio. The purchased home equity lines of credit are collateralized by properties located throughout the United States, including geographic areas that have experienced significant declines in housing values, such as California, Florida and Virginia. The collateral values associated with certain loans in these states have declined by up to 60% since these loans were originated in 2005 and 2006, and as a result, some loan balances exceed collateral values. As the depressed state of the housing market and general economy has continued, we have experienced increased write-offs in the purchased portfolio. We continue to monitor collateral values and borrower FICO^® scores and, when the situation warrants, have frozen the lines of credit.

Auto loan balances primarily represent remaining unpaid amounts on pools of loans purchased in 2005, 2006, 2007 and 2009. The remaining balance of these purchased auto loans, $4.3 million, was sold during 2010. We continue to originate a few automobile loans, primarily as a courtesy to our existing customers.

Delinquencies and Classified Assets. The Board of Directors monitors the status of all loans 30 days or more past due, past due statistics and trends for all loans on a monthly basis. Procedures with respect to resolving delinquencies vary depending on the nature and type of the loan and period of delinquency. In general, we make every effort, consistent with safety and soundness principles, to work with the borrower to have the loan brought current. If the loan is not brought current, it then becomes necessary to take legal action and/or repossess collateral.

We maintain an internal credit rating system and loan review procedures specifically developed to monitor credit risk for commercial, commercial real estate and multi-family residential loans. Internal loan reviews for these loan types are performed at least annually, and more often for loans with higher credit risk. Loan officers maintain close contact with borrowers between reviews. Adjustments to loan risk ratings are based on the reviews and at any time information is received that may affect risk ratings. Additionally, an independent review of commercial, commercial real estate and multi-family residential loans, which was performed at least annually prior to June 2010, is now performed semi-annually. Management uses the results of these reviews to help determine the effectiveness of the existing policies and procedures and to provide an independent assessment of our internal loan risk rating system.

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Federal regulations and CFBank’s asset classification policy require use of an internal asset classification system as a means of reporting and monitoring assets. We have incorporated the OTS asset classifications as a part of our credit monitoring and internal loan risk rating system. Loans are classified into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. Problem assets are classified as special mention, substandard, doubtful or loss, and the classifications are subject to review by the OTS. Assets designated as special mention, which are considered criticized assets, possess weaknesses that, if left uncorrected, may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. An asset considered doubtful has all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, condition and values, highly questionable and improbable. Assets considered loss are uncollectible and have so little value that their continuance as assets without the establishment of a specific loss allowance is not warranted.

See the section titled “Allowance for loan losses” in our 2010 Annual Report to Stockholders, attached as Exhibit 13.1 to this Form 10-K, for detailed information on criticized and classified loans as of December 31, 2010 and 2009.

Classified loans include all nonaccrual loans, which are discussed in further detail in the section titled “Nonperforming Assets”. In addition to nonaccrual loans, classified loans include the following loans that were identified as substandard assets, were still accruing interest at December 31, 2010, but exhibit weaknesses that could lead to nonaccrual status in the future. As substandard loans, these loans are characterized by the distinct possibility that some loss will be sustained if the deficiencies are not corrected. The loans have been identified as significant problem loans that are inadequately protected by the current net worth and paying capacity of the obligors or of the collateral pledged, if any. Only one of these loans was delinquent at December 31, 2010, and the delinquent payment was made in January 2011.

	Number of loans		Balance
			(Dollars in thousands)
Commercial		9	$	3,250
Multi-family residential real estate		6		5,781
Commercial real estate		8		9,504
Total		23	$	18,535

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The following table sets forth information concerning delinquent loans in dollar amounts and as a percentage of the total loan portfolio. The amounts presented represent the total remaining balances of the loans rather than the actual payment amounts which are overdue. Loans shown as 90 days or more delinquent include nonaccrual loans, regardless of delinquency.

	December 31, 2010										December 31, 2009										December 31, 2008
	60-89 Days					90 Days or More					60-89 Days					90 Days or More					60-89 Days					90 Days or More
						Number					Number					Number					Number		Balance			Number
	Number		Balance			of		Balance			of		Balance			of		Balance			of		of			of		Balance
	of Loans		of Loans			Loans		of Loans			Loans		of Loans			Loans		of Loans			Loans		Loans			Loans		of Loans
	(Dollars in thousands)
Real estate loans:
Single-family		8	$	444			3	$	266			—	$	—			6	$	426			—	$	—			3	$	63
Multi-family		—		—			3		3,986			—		—			8		4,406			—		—			3		1,264
Commercial		—		—			5		3,550			2		515			15		6,864			1		530			1		347
Consumer loans:
Home equity lines of credit		1		54			2		161			—		—			5		1,307			—		—			1		60
Automobile		—		—			—		—			3		18			1		14			1		2			—		—
Other		1		31			1		10			3		4			—		—			1		1			1		32
Commercial loans		—		—			5		2,084			—		—			1		217			—		—			1		646
Total delinquent loans		10	$	529			19	$	10,057			8	$	537			36	$	13,234			3	$	533			10	$	2,412
Delinquent loans as a percent of total loans				.26	%				5.02	%				.22	%				5.54	%				.22	%				1.01	%

The table does not include delinquent loans less than 60 days past due. At December 31, 2010, 2009, and 2008 loans past due 30 to 59 days totaled $2,316, $4,000, and $1,070, respectively.

	December 31, 2007										December 31, 2006
	60-89 Days					90 Days or More					60-89 Days					90 Days or More
						Number					Number					Number
	Number		Balance			of		Balance			of		Balance			of		Balance
	of Loans		of Loans			Loans		of Loans			Loans		of Loans			Loans		of Loans
	(Dollars in thousands)
Real estate loans:
Single-family		—	$	—			5	$	332			—	$	—			5	$	288
Consumer loans:
Home equity lines of credit		—		—			1		146			—		—			—		—
Automobile		—		—			1		9			1		1			1		9
Commercial loans		—		—			1		1			2		509			—		—
Total delinquent loans		—	$	—			8	$	488			3	$	510			6	$	297
Delinquent loans as a percent of total loans				.00	%				.21	%				.27	%				.16	%

The table does not include delinquent loans less than 60 days past due. At December 31, 2007 and 2006, loans past due 30 to 59 days totaled $333 and $1,533, respectively.

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Nonperforming Assets. The following table contains information regarding nonperforming loans and repossessed assets. CFBank’s policy is to stop accruing interest on loans 90 days or more past due unless the loan principal and interest are determined by management to be fully secured and in the process of collection. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income.

	At December 31,
	2010			2009			2008			2007			2006
	(Dollars in thousands)
Nonaccrual loans:
Single-family real estate	$	266		$	426		$	63		$	235		$	288
Multi-family real estate		3,986			4,406			1,264			—			—
Commercial real estate		3,550			6,864			—			—			—
Consumer		171			1,307			92			155			9
Commercial		2,084			217			646			1			—
Total nonaccrual loans		10,057			13,220			2,065			391			297
Loans past due 90 days or more and still accruing:
Single-family real estate		—			—			—			97			—
Commercial real estate		—			—			347			—			—
Consumer		—			14			—			—			—
Total nonperforming loans(1)		10,057			13,234			2,412			488			297
REO		3,509			—			—			86			—
Other foreclosed assets		1,000			—			—			—			—
Total nonperforming assets(2)	$	14,566		$	13,234		$	2,412		$	574		$	297
Troubled debt restructurings (3)		839			1,310			—			—			—
Total nonperforming assets and troubled debt restructurings	$	15,405		$	14,544		$	2,412		$	574		$	297
Nonperforming loans to total loans		5.02	%		5.54	%		1.01	%		.21	%		.16	%
Nonperforming assets to total assets		5.29	%		4.83	%		.87	%		.21	%		.13	%

(1)	Total nonperforming loans equal nonaccrual loans and loans past due 90 days or more and still accruing.
(2)	Nonperforming assets consist of nonperforming loans, REO and other foreclosed assets.
(3)	Troubled debt restructurings where customers have established a sustained period of repayment performance, loans are current according to their modified terms, and repayment of the remaining contractual payments is expected.

The increase in nonperforming loans in 2009 and 2010 as compared to prior years was primarily related to deterioration in the commercial, multi-family residential real estate, commercial real estate, and home equity lines of credit portfolios as a result of the sustained adverse economic conditions and its affect on collateral values and borrowers’ ability to make loan payments.

At December 31, 2010, nonaccrual loans included $4.5 million in troubled debt restructurings. For the year ended December 31, 2010, the amount of additional interest income that would have been recognized on nonaccrual loans, if such loans had continued to perform in accordance with their contractual terms, was approximately $420,000. There was no interest income recognized on nonaccrual loans in 2010.

At December 31, 2010, troubled debt restructurings included $700,000 in land loans and $139,000 in commercial loans, which were not included in nonperforming loans, where customers have established a sustained period of repayment performance, loans are current according to their modified terms, and repayment of the remaining contractual payments is expected. For the year ended December 31, 2010, the amount of additional interest income that would have been recognized on these troubled debt restructurings, if such loans had continued to perform in accordance with the original contract terms, was approximately $7,000. Interest income recognized on these troubled debt restructurings totaled $41,000 in 2010.

15

For information on real estate owned (REO) and other foreclosed assets, see the section titled “Foreclosed Assets.”

Allowance for Loan Losses (ALLL). The ALLL is a valuation allowance for probable incurred credit losses. The ALLL methodology is designed as part of a thorough process that incorporates management’s current judgments about the credit quality of the loan portfolio into a determination of the ALLL in accordance with generally accepted accounting principles and supervisory guidance. Management analyzes the adequacy of the ALLL quarterly through reviews of the loan portfolio, including: the nature and volume of the loan portfolio and segments of the portfolio; industry and loan concentrations; historical loss experience; delinquency statistics and the level of nonperforming loans; specific problem loans; the ability of borrowers to meet loan terms; an evaluation of collateral securing loans and the market for various types of collateral; various collection strategies; current economic condition, trends and outlook; and other factors that warrant recognition in providing for an adequate ALLL. See the section titled “Allowance for loan losses” in our 2010 Annual Report to Stockholders, attached as Exhibit 13.1 to this Form 10-K, for a detailed discussion of management’s methodology for determining the appropriate level of the ALLL.

The ALLL totaled $9.8 million at December 31, 2010 and increased $2.7 million, or 37.6%, from $7.1 million at December 31, 2009, and increased $6.6 million, or 212.9%, from $3.1 million at December 31, 2008. The ratio of the ALLL to total loans totaled 4.87% at December 31, 2010, compared to 2.97% at December 31, 2009, and 1.31% at December 31, 2008. The increase in the ALLL was due to continued adverse economic conditions affecting loan performance which resulted in continued high levels of nonperforming loans and loan charge-offs in 2009 and 2010.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 2010; however, future additions to the allowance may be necessary based on factors including, but not limited to, further deterioration in client business performance, continued or deepening recessionary economic conditions, declines in borrowers’ cash flows, and market conditions which result in lower real estate values. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the ALLL. Such agencies may require additional provisions for loan losses based on judgments and estimates that differ from those used by management. Management continues to diligently monitor credit quality in the existing portfolio and analyze potential loan opportunities carefully in order to manage credit risk. An increase in the ALLL and loan losses could occur if economic conditions and factors which affect credit quality, real estate values and general business conditions worsen or do not improve.

16

The following table sets forth activity in the ALLL for the periods indicated.

	2010			2009			2008			2007			2006
	(Dollars in thousands)
ALLL, beginning of period	$	7,090		$	3,119		$	2,684		$	2,109		$	1,495
Charge-offs:
Real estate mortgage loans:
Single-family		169			453			73			27			159
Multi-family		250			287			—			—			—
Commercial real estate		3,145			1,114			—			—			—
Consumer loans:
Home equity lines of credit		830			388			360			—			77
Automobile		50			17			61			15			66
Other		44			7			3			2			—
Commercial		1,677			3,998			—			—			—
Total charge-offs		6,165			6,264			497			44			302
Recoveries on loans previously charged off:
Real estate mortgage loans:
Single-family		51			18			4			72			53
Multi-family		47			—			—			—			—
Commercial real estate		99			5			—			—			—
Consumer loans:
Home equity lines of credit		10			3			—			—			—
Automobile		20			22			11			8			43
Commercial		128			295			—			—			—
Total recoveries		355			343			15			80			96
Net charge-offs (recoveries)		5,810			5,921			482			(36	)		206
Provision for loan losses		8,468			9,928			917			539			820
Reclassification of ALLL on loan-related commitments		10			(36	)		—			—			—
ALLL, end of period	$	9,758		$	7,090		$	3,119		$	2,684		$	2,109
ALLL to total loans		4.87	%		2.97	%		1.31	%		1.15	%		1.13	%
ALLL to nonperforming loans		97.03	%		53.57	%		129.31	%		550.00	%		710.10	%
Net charge-offs (recoveries) to the ALLL		59.54	%		83.51	%		15.45	%		-1.34	%		9.77	%
Net charge-offs (recoveries) to average loans		2.63	%		2.47	%		.20	%		-.02	%		.13	%

Continuing adverse economic conditions and their effect on the housing market, collateral values, businesses and consumers’ ability to pay may increase the level of charge-offs in the future. Further or continuing weakness in the housing markets in geographic regions that have experienced the largest decline in housing values may negatively impact our purchased home equity lines of credit. Additionally, our commercial, commercial real estate and multi-family residential loan portfolios, where we have experienced an increase in delinquent and nonperforming assets and charge-offs, may be detrimentally affected by prolonged adverse economic conditions. Further decline in these portfolios could expose us to significant losses which could materially and adversely affect the Company’s earnings, capital and profitability.

17

The following table sets forth the ALLL in each of the categories listed at the dates indicated and the percentage of such amounts to the total ALLL and loans in each category as a percent of total loans. Although the ALLL may be allocated to specific loans or loan types, the entire ALLL is available for any loan that, in management’s judgment, should be charged off.

	At December 31,
	2010								2009
			% of			Percent					% of			Percent
			Allowance			of Loans					Allowance			of Loans
			in each			in Each					in each			in Each
			Category			Category					Category			Category
			to Total			to Total					to Total			to Total
	Amount		Allowance			Loans			Amount		Allowance			Loans
	(Dollars in thousands)
Real estate loans:
Single-family	$	241		2.47	%		11.61	%	$	445		6.28	%		12.37	%
Multi-family		2,520		25.82	%		17.61	%		713		10.06	%		15.81	%
Commercial real estate		4,719		48.36	%		40.26	%		4,057		57.22	%		40.51	%
Construction		74		.76	%		2.45	%		134		1.89	%		2.43	%
Consumer loans:
Home equity lines of credit		303		3.11	%		8.14	%		886		12.50	%		7.96	%
Other		22		.23	%		.89	%		96		1.35	%		2.98	%
Commercial loans		1,879		19.25	%		19.04	%		759		10.70	%		17.94	%
Total ALLL	$	9,758		100.00	%		100.00	%	$	7,090		100.00	%		100.00	%

	At December 31,
	2008								2007								2006
			% of			Percent					% of			Percent					% of			Percent
			Allowance			of Loans					Allowance			of Loans					Allowance			of Loans
			in each			in Each					in each			in Each					in each			in Each
			Category			Category					Category			Category					Category			Category
			to Total			to Total					to Total			to Total					to Total			to Total
	Amount		Allowance			Loans			Amount		Allowance			Loans			Amount		Allowance			Loans
	(Dollars in thousands)
Single-family mortgage loans	$	43		1.38	%		12.07	%	$	86		3.20	%		12.68	%	$	110		5.22	%		16.05	%
Consumer loans		142		4.55	%		11.17	%		46		1.72	%		12.11	%		53		2.51	%		16.05	%
Commercial, commercial real estate and multi-family mortgage loans		2,934		94.07	%		76.76	%		2,552		95.08	%		75.21	%		1,946		92.27	%		67.90	%
Total ALLL	$	3,119		100.00	%		100.00	%	$	2,684		100.00	%		100.00	%	$	2,109		100.00	%		100.00	%

⁽¹⁾ The information as provided for the years ended December 31, 2010 and 2009 was not available for the years ending December 31, 2008, 2007 and 2006.

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Foreclosed Assets

Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed. REO and other foreclosed assets totaled $4.5 million at December 31, 2010. There were no REO or other foreclosed assets at December 31, 2009. See the section titled “Foreclosed Assets” in our 2010 Annual Report to Stockholders, attached as Exhibit 13.1 to this Form 10-K, for information regarding foreclosed assets at December 31, 2010. The level of foreclosed assets may increase in the future as we continue our workout efforts related to nonperforming and other loans with credit issues.

Investment Activities

Federally chartered savings institutions have the authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies, certificates of deposit of insured banks and savings institutions, bankers’ acceptances and federal funds. Subject to various restrictions, federally chartered savings institutions may also invest their assets in commercial paper, municipal bonds, investment-grade corporate debt securities and mutual funds whose assets conform to the investments that a federally chartered savings institution is otherwise authorized to make directly.

The investment policy established by the Board of Directors is designed to provide and maintain adequate liquidity, generate a favorable return on investment without incurring undue interest rate and credit risk, and compliment lending activities. The policy provides authority to invest in U.S. Treasury and federal entity/agency securities meeting the policy’s guidelines, mortgage-backed securities and collateralized mortgage obligations insured or guaranteed by the United States government and its entities/agencies, municipal bonds and other investment instruments. At December 31, 2010, the securities portfolio totaled $28.8 million. At December 31, 2010, all mortgage-backed securities and collateralized mortgage obligations in the securities portfolio were insured or guaranteed by Ginnie Mae, Freddie Mac or Fannie Mae.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. See Note 1 and Note 2 to our Consolidated Financial Statements contained in our 2010 Annual Report to Stockholders, attached as Exhibit 13.1 to this Form 10-K, for a detailed discussion of management’s evaluation of securities for OTTI.

19

The following table sets forth certain information regarding the amortized cost and fair value of securities at the dates indicated.

	2010				2009				2008
	Amortized				Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(Dollars in thousands)
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
Mortgage-backed securities — residential	$	1,884	$	2,107	$	5,171	$	5,561	$	6,671	$	6,922
Collateralized mortgage obligations		26,242		26,691		13,551		14,030		16,349		16,628
Collateralized mortgage obligations issued by private issuers		—		—		1,635		1,650		—		—
Total securities available for sale	$	28,126	$	28,798	$	20,357	$	21,241	$	23,020	$	23,550

The following table sets forth information regarding the amortized cost, weighted average yield and contractual maturity dates of debt securities as of December 31, 2010.

						After One Year through					After Five Years through
	One Year or Less					Five Years					Ten Years					After Ten Years					Total
			Weighted					Weighted					Weighted					Weighted					Weighted
	Amortized		Average			Amortized		Average			Amortized		Average			Amortized		Average			Amortized		Average
	Cost		Yield			Cost		Yield			Cost		Yield			Cost		Yield			Cost		Yield
	(Dollars in thousands)
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
Mortgage-backed securities — residential	$	3		6.00	%	$	—		0.00	%	$	723		7.20	%	$	1,158		7.06	%	$	1,884		7.10	%
Collateralized mortgage obligations		—		0.00	%		1,444		2.47	%		1,670		2.48	%		23,128		3.06	%		26,242		2.99	%
Total securities available for sale	$	3		6.00	%	$	1,444		2.47	%	$	2,393		3.91	%	$	24,286		3.25	%	$	28,126		3.27	%

20

Sources of Funds

General. Primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from sales of loans, borrowings, and funds generated from operations of CFBank. Contractual loan payments are a relatively stable source of funds, while deposit inflows and outflows and loan prepayments are significantly influenced by general market interest rates and economic conditions and competition. Borrowings may be used on a short-term basis for liquidity purposes or on a long-term basis to fund asset growth or manage interest rate risk in accordance with asset/liability management strategies.

The Holding Company, as a savings and loan holding company, has more limited sources of liquidity than CFBank, and is significantly dependent on dividends from CFBank to provide the liquidity necessary to meet its obligations. Banking regulations limit the amount of dividends that may be paid to the Holding Company by CFBank without prior approval of the OTS. As of December 31, 2010, CFBank may pay no dividends to the Holding Company without OTS approval. Future dividend payments by CFBank to the Holding Company would be based on future earnings and OTS approval. In general, in addition to its existing liquid assets, sources of liquidity include funds raised in the securities markets through debt or equity offerings, dividends received from its subsidiaries or the sale of assets. Pursuant to an agreement with OTS effective May 2010, the Holding Company may not incur, issue, renew, redeem, or rollover any debt, or otherwise incur any additional debt, other than liabilities that are incurred in the ordinary course of business to acquire goods and services, without the prior non-objection of the OTS. Additionally, the Holding Company is not able to declare, make, or pay any cash dividends or any other capital distributions, or purchase, repurchase, or redeem, or commit to purchase, repurchase or redeem any Holding Company equity stock without the prior non-objection of the OTS. Pursuant to a notice from the OTS dated October 20, 2010, the Holding Company may not pay interest on debt or commit to do so without the prior, written non-objection of the OTS. The agreement with and notice from the OTS, however, do not restrict the Holding Company’s ability to raise funds in the securities markets through equity offerings.

See the section titled “Liquidity and Capital Resources” contained in our 2010 Annual Report to Stockholders, attached as Exhibit 13.1 to this Form 10-K, for additional information.

Deposits. CFBank offers a variety of deposit accounts with a range of interest rates and terms including savings accounts, retail and business checking accounts, money market accounts and certificates of deposit. Management regularly evaluates the internal cost of funds, surveys rates offered by competitors, reviews cash flow requirements for lending and liquidity and executes rate changes when necessary as part of its asset/liability management, profitability and liquidity objectives. Certificate of deposit accounts represent the largest portion of our deposit portfolio and totaled 55.1% of average deposit balances in 2010. The term of the certificates of deposit typically offered vary from seven days to five years at rates established by management. Specific terms of an individual account vary according to the type of account, the minimum balance required, the time period funds must remain on deposit and the interest rate, among other factors.

The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and competition. CFBank relies on competitive interest rates, customer service and relationships with customers to retain deposits. Accordingly, rates offered by competing financial institutions affect our ability to attract and retain deposits. Deposits are obtained predominantly from the areas in which CFBank offices are located.

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CFBank has been a participant in the Certificate of Deposit Account Registry Service^® (CDARS), a network of banks that allows us to provide our customers with FDIC insurance coverage on certificate of deposit account balances up to $50 million. Customer balances in the CDARS program totaled $29.2 million at December 31, 2010 and decreased $7.9 million, or 21.3%, from $37.1 million at December 31, 2009. The decrease was due to customers seeking higher short-term yields than management was willing to offer in the CDARS program based on CFBank’s asset/liability management strategies. Although most of the certificate of deposit accounts are expected to be reinvested with CFBank, there is a risk that the CDARS account holders may not require the full FDIC coverage available through the CDARS program, and may select higher yielding investments outside of CFBank.

We consider brokered deposits to be a useful element of a diversified funding strategy and an alternative to borrowings. Management regularly compares rates on brokered certificates of deposit with other funding sources in order to determine the best mix of funding sources, balancing the costs of funding with the mix of maturities. CDARS deposits are considered brokered deposits by regulation. Brokered deposits, including CDARS deposits, totaled $68.0 million at December 31, 2010, $53.4 million at December 31, 2009 and $67.2 million at December 31, 2008. The increase in brokered deposits was based on CFBank’s asset/ liability management strategies to build on-balance-sheet liquidity and lock-in the cost of longer-term liabilities at low current market interest rates. Current regulatory restrictions limit an institution’s use of brokered deposits in situations where capital falls below well-capitalized levels and in certain situations where a well-capitalized institution is under a formal regulatory enforcement action. CFBank was not subject to these regulatory restrictions on the use of brokered deposits at December 31, 2010. CFBank was, however, subject to a $76.4 million limit on the amount of its brokered deposits as a result of a directive from the OTS dated April 6, 2010.

CFBank could raise additional deposits by offering above-market interest rates. Current regulatory restrictions limit an institution’s ability to pay above-market interest rates in situations where capital falls below well-capitalized levels or in certain situations where a well-capitalized institution is under a formal regulatory enforcement action. CFBank was not subject to regulatory restrictions on its ability to pay above-market interest rates at December 31, 2010.

Based on our historical experience with deposit retention, current retention strategies and participation in programs offering additional FDIC insurance protection, we believe that, although it is not possible to predict future terms and conditions upon renewal, a significant portion of existing deposits will remain with CFBank. Potential retail deposit outflows could occur should CFBank be subject to the limitations on brokered deposits and deposit pricing associated with below well-capitalized capital levels or a formal regulatory enforcement action.

Certificate accounts in amounts of $100,000 or more totaled $86.1 million at December 31, 2010, maturing as follows:

			Weighted
			Average
Maturity Period	Amount		Rate
	(Dollars in thousands)
Three months or less	$	16,113		0.94	%
Over 3 through 6 months		11,205		1.34	%
Over 6 through 12 months		11,321		1.40	%
Over 12 months		47,467		1.98	%
Total	$	86,106

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The following table sets forth the distribution of average deposit account balances for the periods indicated and the weighted average interest rates on each category of deposits presented. Averages for the periods presented are based on month-end balances.

	For the Year ended December 31,
	2010								2009								2008
			Percent								Percent								Percent
			of Total			Average					of Total			Average					of Total			Average
	Average		Average			Rate			Average		Average			Rate			Average		Average			Rate
	Balance		Deposits			Paid			Balance		Deposits			Paid			Balance		Deposits			Paid
	(Dollars in thousands)
Interest-bearing checking accounts	$	11,171		4.78	%		.15	%	$	10,650		4.92	%		.21	%	$	11,399		5.66	%		.49	%
Money market accounts		61,959		26.52	%		.99	%		54,529		25.17	%		1.58	%		44,059		21.89	%		2.41	%
Savings accounts		11,050		4.73	%		.10	%		10,516		4.85	%		.10	%		10,322		5.13	%		.33	%
Certificates of deposit		128,772		55.11	%		2.08	%		124,743		57.57	%		3.07	%		121,715		60.47	%		4.16	%
Noninterest-bearing deposits:
Demand deposits		20,706		8.86	%		—			16,243		7.49	%		—			13,776		6.85	%		—
Total average deposits	$	233,658		100.00	%		1.56	%	$	216,681		100.00	%		2.36	%	$	201,271		100.00	%		3.31	%

The following table presents by various rate categories, the amount of certificate accounts outstanding at the dates indicated and the periods to maturity of the certificate accounts outstanding at December 31, 2010.

	Period to Maturity from December 31, 2010								At December 31,
	Less than One		One to Two		Two to		Over Three
	Year		Years		Three Years		Years		2010		2009		2008
	(Dollars in thousands)
Certificate accounts:
0 to 0.99%	$	19,615	$	2,252	$	86	$	—	$	21,953	$	21,136	$	2,159
1.00 to 1.99%		40,311		20,768		3,837		466		65,382		32,130		11,628
2.00 to 2.99%		4,333		3,945		11,894		13,827		33,999		11,287		33,850
3.00 to 3.99%		2,685		177		34		141		3,037		19,908		33,297
4.00 to 4.99%		2,439		—		657		—		3,096		25,814		31,401
5.00% and above		513		206		110		499		1,328		2,158		18,915
Total certificate accounts	$	69,896	$	27,348	$	16,618	$	14,933	$	128,795	$	112,433	$	131,250

Borrowings. As part of our operating strategy, FHLB advances are used as an alternative to retail and brokered deposits to fund operations. The advances are collateralized primarily by single-family and multi-family mortgage loans, securities, and to a lesser extent, commercial real estate loans and cash, and secondarily by CFBank’s investment in the capital stock of the FHLB of Cincinnati. FHLB advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. The maximum amount that the FHLB will advance to member institutions fluctuates from time to time in accordance with the policies of the FHLB. FHLB advances totaled $23.9 million at December 31, 2010. Based on the collateral pledged and CFBank’s holdings of FHLB stock, CFBank was eligible to borrow up to a total of $24.7 million at year-end 2010.

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In addition to access to FHLB advances, CFBank has borrowing capacity available with the Federal Reserve Bank (FRB) through the Borrower in Custody program. The borrowings are collateralized by commercial and commercial real estate loans. Based on the collateral pledged, CFBank was eligible to borrow up to a total of $26.0 million at year-end 2010. There were no amounts outstanding from the FRB at December 31, 2010. CFBank also had $3.0 million available in an unsecured line of credit with a commercial bank at December 31, 2010. Interest on the line accrued daily and was variable based on the prime rate as published in the Wall Street Journal. There was no amount outstanding on this line of credit at December 31, 2010. The line was not renewed by the commercial bank in March 2011 due to the credit performance of CFBank’s loan portfolio and its effect on CFBank’s financial performance.

CFBank’s borrowing capacity may be negatively impacted by changes such as, but not limited to, further tightening of credit policies by the FHLB or FRB, further deterioration in the credit performance of CFBank’s loan portfolio or CFBank’s financial performance, a decline in the balance of pledged collateral, deterioration in CFBank’s capital below well-capitalized levels or certain situations where a well-capitalized institution is under a formal regulatory enforcement action. See the section titled “Liquidity and Capital Resources” contained in our 2010 Annual Report to Stockholders, attached as Exhibit 13.1 to this Form 10-K, for additional information.

See the section titled “Subordinated Debentures” contained in our 2010 Annual Report to Stockholders, attached as Exhibit 13.1 to this Form 10-K, for information regarding subordinated debentures issued by the Company in 2003.

The following table sets forth certain information regarding short-term borrowings at or for the periods ended on the dates indicated:

	At or for the Year ended December 31,
	2010		2009			2008
	(Dollars in thousands)
Short-term FHLB advances and other borrowings:
Average balance outstanding	$	—	$	597		$	30,549
Maximum amount outstanding at any month-end during the period		—		2,065			36,950
Balance outstanding at end of period		—		2,065			5,850
Weighted average interest rate during the period		—		0.17	%		1.77	%
Weighted average interest rate at end of period		—		0.18	%		0.54	%

Subsidiary Activities

As of December 31, 2010, we maintained CFBank, Ghent Road, Inc., Smith Ghent LLC, and the Trust as wholly owned subsidiaries.

Personnel

As of December 31, 2010, the Company had 62 full-time and 12 part-time employees.

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Regulation and Supervision

Set forth below is a brief description of certain laws and regulations that apply to us. This description, as well as other descriptions of laws and regulations contained in this Form 10-K, is not complete and is qualified in its entirety by reference to the applicable laws and regulations.

Legislation is introduced from time to time in the United States Congress that may affect our operations. In addition, the regulations governing the Company and CFBank may be amended from time to time by the OTS, the FDIC, the Board of Governors of the Federal Reserve System or the SEC, as appropriate. The Dodd-Frank Act that was enacted on July 21, 2010 provides, among other things, for new restrictions and an expanded framework of regulatory oversight for financial institutions and their holding companies, including the Holding Company and CFBank. Under the new law, CFBank’s primary regulator, the OTS, will be eliminated, and CFBank will be subject to regulation and supervision by the OCC, which currently oversees national banks. In addition, beginning in 2011, all financial institution holding companies, including the Holding Company, will be regulated by the Board of Governors of the Federal Reserve System. This will result in federal capital requirements being imposed on the Holding Company and may result in additional restrictions on investments and other holding company activities. The law also creates a new consumer financial protection bureau that will have the authority to promulgate rules intended to protect consumers in the financial product and services market. The creation of this independent bureau could result in new regulatory requirements and raise the cost of regulatory compliance. In addition, new regulations mandated by the law could require changes in regulatory capital requirements, loan loss provisioning practices, and compensation practices and require holding companies to serve as a source of strength for their financial institution subsidiaries. Effective July 21, 2011, financial institutions may pay interest on demand deposits, which could increase our interest expense. We cannot determine the full impact of the new law on our business and operations at this time. Any legislative or regulatory changes in the future could adversely affect our operations and financial condition.

Central Federal Corporation. Central Federal Corporation is a savings and loan holding company subject to regulatory oversight by the OTS. The Holding Company is required to register and file reports with the OTS and is subject to regulation and examination by the OTS. In addition, the OTS has enforcement authority over us and any non-savings institution subsidiaries. In 2011, this regulatory oversight will be transferred to the Board of Governors of the Federal Reserve System. The Holding Company generally is not subject to activity restrictions. If the Holding Company acquired control of another savings institution as a separate subsidiary, it would become a multiple savings and loan holding company, and its activities and any of its subsidiaries (other than CFBank or any other savings institution) would generally become subject to additional restrictions. If CFBank fails the qualified thrift lender test described below, the Holding Company must obtain the approval of the OTS prior to continuing, directly or through other subsidiaries, any business activity other than those approved for multiple thrift holding companies or their subsidiaries. In addition, within one year of such failure the Holding Company must register as, and will become subject to, the restrictions applicable to bank holding companies. The activities authorized for a bank holding company are more limited than the activities authorized for a unitary or multiple thrift holding company.

CFBank. CFBank, as a federally chartered savings institution, is subject to regulation, periodic examination, enforcement authority and oversight by the OTS extending to all aspects of CFBank’s operations. As noted above, OTS oversight is to transfer to the OCC in 2011. CFBank also is subject to regulation and examination by the FDIC, which insures the deposits of CFBank to the maximum extent permitted by law. This regulation and supervision primarily is intended for the protection of depositors and not for the purpose of protecting stockholders.

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The investment and lending authority of federal savings institutions are prescribed by federal laws and regulations, and federal savings institutions are prohibited from engaging in any activities not permitted by such laws and regulations. In addition, all savings institutions, including CFBank, are required to maintain qualified thrift lender status to avoid certain restrictions on their operations. This status is maintained by meeting the OTS qualified thrift lender test, which requires a savings institution to have a designated level of thrift-related assets generally consisting of residential housing related loans and investments, thereby indirectly limiting investment in other assets. At December 31, 2010, CFBank met the test and has met the test since its effectiveness. If CFBank loses qualified thrift lender status, it becomes subject to national bank investment and activity limits.

The OTS regularly examines CFbank and prepares reports for the consideration of CFBank’s board of directors on any deficiencies that it may find in CFBank’s operations. When these examinations are conducted, the examiners may require CFBank to provide for higher general or specific loan loss reserves. CFBank’s relationship with its depositors and borrowers also is regulated to a great extent by both Federal and state laws, especially in such matters as the ownership of savings accounts and the form and content of CFBank’s mortgage requirements.

The OTS, as well as other federal banking agencies, has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure and compensation and employee benefits. Any institution which fails to comply with these standards must submit a compliance plan.

FDIC Regulation and Insurance of Accounts. CFBank’s deposits are insured up to the applicable limits by the FDIC, and such insurance is backed by the full faith and credit of the United States Government. Effective July 21, 2010, the basic deposit insurance level was increased to $250,000. As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions. Our deposit insurance premiums for the year ended December 31, 2010 were $581,000. Those premiums have increased in recent years and may continue to increase due to strains on the FDIC deposit insurance fund due to the cost of large bank failures and the increase in the number of troubled banks.

In accordance with the Dodd-Frank Act, the FDIC has issued regulations setting insurance premium assessments effective April 2011 and payable in September 2011. The new premiums are based on an institution’s total assets minus its Tier 1 capital instead of its deposits. The intent of the new assessment calculations is not to substantially change the level of premiums paid, notwithstanding the use of assets as the calculation base instead of deposits. CFBank’s premiums continue to be based on its same assignment under one of four risk categories based on capital, supervisory ratings and other factors; however, the premium rates for those risk categories are revised to maintain similar premium levels under the new calculation as currently exist. If our risk category changes based on our supervisory rating (CAMELS rating), our premiums could increase substantially.

As a result of a decline in the reserve ratios (the ratio of the net worth of the deposit insurance fund to estimated insured deposits) and concerns about expected failure costs and available liquid assets in the deposit insurance fund, the FDIC required each insured institution to prepay on December 30, 2009, the estimated amount of its quarterly assessments for the fourth quarter of 2009 and all quarters through the end of 2012 (in addition to the regular quarterly assessment for the third quarter which was due on December 30, 2009). The prepaid amount is recorded as an asset with a zero risk weight and the institution will continue to record quarterly expense for deposit insurance. For purposes of calculating the prepaid amount, assessments are measured at the institution’s assessment rate as of September 30, 2009, with a uniform increase of 3 basis points effective January 1, 2011, and are based on the institution’s

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assessment base for the third quarter of 2009, with growth assumed quarterly at an annual rate of 5%. If events cause actual assessments during the prepayment period to vary from the prepaid amount, institutions will pay excess assessments in cash, or receive a rebate of prepaid amounts not exhausted after collection of assessments due on January 13, 2013, as applicable. Collection of the prepayment does not preclude the FDIC from changing assessment rates or revising the risk-based assessment system in the future. The rule includes a process for exemption from the prepayment for institutions whose safety and soundness would be affected adversely. The FDIC estimates that the reserve ratio will reach the designated reserve ratio of 1.15% by 2017 as required by statute.

The FDIC also may prohibit any FDIC-insured institution from engaging in any activity that it determines by regulation or order to pose a serious risk to the deposit insurance fund. The FDIC also has the authority to initiate enforcement actions against CFBank and may terminate our deposit insurance if it determines that we have engaged in unsafe or unsound practices or are in an unsafe or unsound condition.

Regulatory Capital Requirements. CFBank is required to maintain a minimum level of regulatory capital. The OTS has established capital standards, including a leverage ratio or core capital requirement and a risk-based capital requirement applicable to savings institutions. The OTS also may impose capital requirements in excess of these standards on individual institutions on a case-by-case basis. See Note 18 to the Consolidated Financial Statements for information on CFBank’s compliance with these capital requirements.

The capital standards generally require core capital equal to at least 4.0% of adjusted total assets. Core capital consists of tangible capital plus certain intangible assets, including a limited amount of purchased credit card relationships. The OTS also requires savings institutions to have total capital of at least 8.0% of risk-weighted assets. Total capital consists of core capital, as defined above, and supplementary capital. Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets. The OTS is also authorized to require a savings institution to maintain an additional amount of total capital to account for concentration of credit risk and the risk of non-traditional activities. In determining the amount of risk-weighted assets, all assets, including certain off-balance-sheet items, are multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent in the type of asset. From a policy perspective, due to increased nonperforming loans and depressed economic conditions, the OTS encouraged institutions to have capital in excess of these requirements (often 8% core and 12% risk-based capital) during 2010.

The OTS and the FDIC are authorized and, under certain circumstances, required to take actions against savings institutions that fail to meet their capital requirements. The OTS is generally required to restrict the activities of an “undercapitalized institution,” which is an institution with less than either a 4% core capital ratio, a 4% Tier 1 risk-based capital ratio or an 8.0% risk-based capital ratio. Any such institution must submit a capital restoration plan and, until such plan is approved by the OTS, may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions.

Any savings institution that fails to comply with its capital plan or has a Tier 1 risk-based or core capital ratio of less than 3.0% or a risk-based capital ratio of less than 6.0% and is considered “significantly undercapitalized” must be made subject to one or more additional specified actions and operating restrictions which may cover all aspects of its operations and may include a forced merger or acquisition of the institution. An institution that becomes “critically undercapitalized” because it has a tangible capital ratio of 2.0% or less is subject to further restrictions on its activities in addition to those applicable to significantly undercapitalized institutions. In addition, the OTS must appoint a receiver, or conservator with the concurrence of the FDIC, for a savings institution, with certain limited exceptions, within 90 days after it becomes critically undercapitalized. Any undercapitalized institution is also subject to the general enforcement authority of the OTS and the FDIC, including the appointment of a conservator or a receiver.

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The OTS is also generally authorized to reclassify an institution into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.

The imposition by the OTS or the FDIC of any of these measures on CFBank may have a substantial adverse effect on our operations and profitability.

Limitations on Dividends and Other Capital Distributions. OTS regulations impose various restrictions on distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account.

Generally, for savings institutions such as CFBank, it is required that before and after the proposed distribution the institution remain well-capitalized. Savings institutions may make capital distributions during any calendar year equal to the greater of 100% of net income for the year-to-date plus retained net income for the two preceding years. However, an institution deemed to be in need of more than normal supervision by the OTS may have its dividend authority restricted by the OTS. CFBank may not declare or pay any dividends without prior approval of the OTS.

The Holding Company’s ability to pay dividends, repurchase common stock, service debt obligations and fund operations is dependent upon receipt of dividend payments from CFBank. Future dividend payments by CFBank to the Holding Company would be based upon future earnings and the approval of the OTS.

Pursuant to an agreement with OTS effective May 2010, the Holding Company may not incur, issue, renew, redeem, or rollover any debt, or otherwise incur any additional debt, other than liabilities that are incurred in the ordinary course of business to acquire goods and services, without the prior non-objection of the OTS. Additionally, the Holding Company is not able to declare, make, or pay any cash dividends or any other capital distributions, or purchase, repurchase, or redeem, or commit to purchase, repurchase or redeem any Holding Company equity stock without the prior non-objection of the OTS. Pursuant to a notice from the OTS dated October 20, 2010, the Holding Company may not pay interest on debt or commit to do so without the prior, written non-objection of the OTS. The agreement with and notice from the OTS, however, do not restrict the Holding Company’s ability to raise funds in the securities markets through equity offerings.

Our ability to pay dividends on or to repurchase our common stock is also subject to limits due to our participation in the TARP Capital Purchase Program. See Note 16 to the Consolidated Financial Statements.

Additional Regulatory Limitations. CFBank received a letter from the OTS dated March 15, 2011 notifying it that, without the approval or non-objection of the OTS, CFBank: i) may not increase its total assets during any quarter in excess of interest credited on deposits during the prior quarter; ii) may not add or replace a director, senior executive officer or change the responsibilities of any senior executive officer; iii) may not make any golden parachute payment to its directors, officers or employees; iv) may not enter into, renew, extend or revise any contractual arrangement regarding compensation with any senior executive officer or director of the bank; v) may not enter into any significant arrangement or contract with a third party service provider or any arrangement that is not in the ordinary course of business; or vi) may not declare or pay any dividend or make any capital distribution.

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Federal and State Taxation

Federal Taxation

General. We report income on a calendar year, consolidated basis using the accrual method of accounting, and we are subject to federal income taxation in the same manner as other corporations, with some exceptions discussed below. The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Company and CFBank. We are subject to a maximum federal income tax rate of 34% for 2010. At year-end 2010, the Company had net operating loss carryforwards of approximately $12.9 million which expire at various dates from 2024 to 2030. See Note 13 to the Consolidated Financial Statements for additional information.

Distributions. Under the Small Business Job Protection Act of 1996, if CFBank makes “non-dividend distributions” to the Company, such distributions will be considered to have been made from CFBank’s unrecaptured tax bad debt reserves (including the balance of its reserves as of December 31, 1987) to the extent thereof, and then from CFBank’s supplemental reserve for losses on loans, to the extent thereof, and an amount based on the amount distributed (but not in excess of the amount of such reserves) will be included in CFBank’s taxable income. Non-dividend distributions include distributions in excess of CFBank’s current and accumulated earnings and profits, as calculated for federal income tax purposes, distributions in redemption of stock, and distributions in partial or complete liquidation. Dividends paid out of CFBank’s current or accumulated earnings and profits will not be so included in CFBank’s taxable income.

The amount of additional taxable income triggered by a non-dividend distribution is an amount that, when reduced by the tax attributable to the income, is equal to the amount of the distribution. Thus, if CFBank makes a non-dividend distribution to the Holding Company, approximately one and one-half times the amount of such distribution (but not in excess of the amount of the reserves described in the previous paragraph) would be includable in income for federal income tax purposes, assuming a 34% federal corporate income tax rate. CFBank does not intend to pay dividends that would result in a recapture of any portion of its bad debt reserves.

Corporate Alternative Minimum Tax. The Internal Revenue Code of 1986, as amended, imposes a tax on alternative minimum taxable income (AMTI) at a rate of 20%. AMTI is federal taxable income before net operating loss adjusted by certain tax preference amounts. AMTI is increased by an amount equal to 75% of the amount by which the Company’s adjusted current earnings exceed its AMTI. Only 90% of AMTI may be offset by alternative minimum tax net operating loss carryovers. The Company currently has alternative minimum tax net operating losses totaling $12.5 million at December 31, 2010 from tax years 2004 through 2010.

Ohio Taxation

The Holding Company and Ghent Road, Inc. are subject to the Ohio corporate franchise tax, which is a tax measured by both net earnings and net worth. In general, the tax liability is the greater of 5.1% on the first $50,000 of computed Ohio taxable income and 8.5% of computed Ohio taxable income in excess of $50,000 or 0.4% times taxable net worth. The minimum tax is either $50 or $1,000 per year based on the size of the corporation, and maximum tax liability as measured by net worth is limited to $150,000 per year.

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A special litter tax also applies to all corporations, including the Holding Company and Ghent Road, Inc., subject to the Ohio corporate franchise tax. This litter tax does not apply to financial institutions. If the franchise tax is paid on the net income basis, the litter tax is equal to 0.11% of the first $50,000 of computed Ohio taxable income and 0.22% of computed Ohio taxable income in excess of $50,000. If the franchise tax is paid on the net worth basis, the litter tax is equal to 0.014% times taxable net worth. Certain holding companies will qualify for complete exemption from the net worth tax if certain conditions are met. The Holding Company will most likely meet these conditions, and thus, calculate its Ohio franchise tax on the net income basis only. When the Holding Company files as a qualifying holding company, Ghent Rd., Inc. must make an adjustment to its net worth computation.

CFBank is a financial institution for State of Ohio tax purposes. As such, CFBank is subject to the Ohio corporate franchise tax on financial institutions, which is imposed annually at a rate of 1.3% of CFBank’s apportioned book net worth, determined in accordance with U.S. generally accepted accounting principles, less any statutory deductions. As a financial institution, CFBank is not subject to any tax based on net income or net profits imposed by the State of Ohio.

Delaware Taxation

As a Delaware corporation not earning income in Delaware, the Company is exempted from Delaware corporate income tax, but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.

Available Information

Our website address is www.CFBankonline.com. We make available free of charge through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after we electronically file such reports with the Commission. These reports can be found on our website under the caption “Investor Relations — SEC Filings.” Investors also can obtain copies of our filings from the Commission’s website at www.sec.gov.

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Item 1A. Risk Factors.

The following are certain risk factors that could impact our business, financial results and results of operations. Investing in our common stock involves risks, including those described below. These risk factors should be considered by prospective and current investors in our common stock when evaluating the disclosures in this Annual Report on Form 10-K (particularly the forward-looking statements). These risk factors could cause actual results and conditions to differ materially from those projected in forward- looking statements. If any of the events in the following risks actually occur, or if additional risks and uncertainties not presently known to us or that we believe are immaterial do materialize, then our business, financial condition or results of operations could be materially adversely impacted. In addition, the trading price of our common stock could decline due to any of the events described in these risks.

The continuation of the current economic slowdown or further deterioration of economic conditions in Ohio could hurt our business.

We lend primarily to consumers and businesses in Ohio. Businesses and consumers are affected by economic, regulatory and political trends which all may impact the borrower’s ability to repay loans. In addition, approximately 80% of our loans are secured by real estate and changes in the real estate market can result in inadequate collateral to secure a loan. Over the past three years, the sustained economic slowdown has, in many cases, negatively affected real estate values. This has resulted in increases in nonperforming assets and loan charge-offs. If these economic trends continue, worsen or do not improve, additional borrowers could default on their loans, resulting in continued high, or increasing levels of loan charge-offs and losses.

The allowance for loan losses may not be adequate to cover actual losses.

The ALLL is maintained to provide for probable incurred credit losses. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the ALLL, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our ALLL may not be sufficient to cover probable losses in our loan portfolio, resulting in additions to the allowance. Further, federal regulatory agencies, as an integral part of their examination process, review our loans and ALLL and could require an increase in the allowance. The additions to our ALLL would be made through increased provision for loan losses, which would reduce our income and could materially and adversely affect the Company’s financial condition, earnings and profitability.

The level of commercial real estate and multi-family loans in our portfolios may expose us to increased lending risks and additional loan losses.

Commercial real estate and multi-family residential loans totaled $118.6 million, or 59.2% of the loan portfolio, at December 31, 2010. Because payments on loans secured by commercial real estate and multi-family properties are dependent on successful operation or management of the properties, repayment of such loans may be subject to a greater extent than other types of loans to adverse conditions in the real estate market or the economy. These loans also have larger loan balances to single borrowers or groups of related borrowers compared to single-family residential mortgage loans. Some of our borrowers also have more than one commercial real estate or multi-family residential loan outstanding with us. Additionally, criticized and classified loans in these categories totaled $36.7 million, including nonperforming loans of $7.5 million, at December 31, 2010. Continuing adverse economic conditions could have a negative impact on these loan balances in future periods. Further decline in the quality of these loans could expose us to significant losses which could materially and adversely affect the Company’s financial condition, earnings and profitability.

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Our business is subject to interest rate risk, and variations in market interest rates may negatively affect our financial performance.

Management is unable to accurately predict future market interest rates, which are affected by many factors, including, but not limited to: inflation; recession; changes in employment levels; changes in the money supply; and domestic and international disorder and instability in domestic and foreign financial markets. Changes in the interest rate environment may reduce the Company’s profits. Net interest income is a significant component of our net income, and consists of the difference, or “spread”, between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest spreads are affected by the difference between the maturities and repricing characteristics of interest-earning assets and interest-bearing liabilities. Although certain interest-earning assets and interest-bearing liabilities may have similar maturities or periods to which they reprice, they may react in different degrees to changes in market interest rates. In addition, residential mortgage loan origination volumes are affected by market interest rates on loans; rising interest rates generally are associated with a lower volume of loan originations, while falling interest rates are usually associated with higher loan originations. Our ability to generate gains on sales of mortgage loans is significantly dependent on the level of originations. Cash flows are affected by changes in market interest rates. Generally, in rising interest rate environments, loan prepayment rates are likely to decline, and in falling interest rate environments, loan prepayment rates are likely to increase. A majority of our commercial, commercial real estate and multi-family residential real estate loans are adjustable rate loans and an increase in the general level of interest rates may adversely affect the ability of some borrowers to pay the interest on and principal of their obligations, especially borrowers with loans that have adjustable rates of interest. Changes in interest rates, prepayment speeds and other factors may also cause the value of our loans held for sale to change. Accordingly, changes in levels of market interest rates could materially and adversely affect our net interest spread, loan volume, asset quality, value of loans held for sale and cash flows, as well as the market value of our securities portfolio and overall profitability.

We face strong competition from other financial institutions, financial service companies and other organizations offering services similar to those offered by us, which could result in our not being able to sustain or grow our loan and deposit businesses.

We conduct our business operations primarily in Summit, Columbiana and Franklin Counties, Ohio, and make loans generally throughout Ohio. Increased competition within these markets may result in reduced loan originations and deposits. Ultimately, we may not be able to compete successfully against current and future competitors. Many competitors offer the types of loans and banking services that we offer. These competitors include other savings associations, national banks, regional banks and other community banks. We also face competition from many other types of financial institutions, including finance companies, brokerage firms, insurance companies, credit unions, mortgage banks and other financial intermediaries. In particular, our competitors include national banks and major financial companies whose greater resources may afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns.

Additionally, banks and other financial institutions with larger capitalization, and financial intermediaries not subject to bank regulatory restrictions, have larger lending limits and are thereby able to serve the credit needs of larger clients. These institutions, particularly to the extent they are more diversified than we are, may be able to offer the same loan products and services that we offer at more competitive rates and prices. If we are unable to attract and retain banking clients, we may be unable to sustain current loan and deposit levels or increase our loan and deposit levels, and our business, financial condition and future prospects may be negatively affected.

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We rely, in part, on external financing to fund our operations, and any lack of availability of such funds in the future could adversely impact our business strategies and future prospects.

We rely on deposits, advances from the FHLB and other borrowings to fund our operations. We believe that, although it is not possible to predict future terms and conditions upon renewal, a significant portion of existing deposits will remain with CFBank. If CFBank’s capital levels fall below well-capitalized levels, or remain at well-capitalized levels but CFBank is under a formal regulatory enforcement action, regulatory restrictions would eliminate our ability to use brokered deposits and above-market pricing of deposits to retain deposits or increase funding. CDARS balances are considered brokered deposits by regulation. Brokered deposits, including CDARS balances, totaled $68.0 million at December 31, 2010.

CFBank’s borrowing capacity from the FHLB decreased in 2010 primarily due to increased collateral requirements as a result of the credit performance of CFBank’s loan portfolio, tightening of overall credit policies by the FHLB, and a decline in eligible collateral due to a reduction in new loan originations. FRB borrowing programs are limited to short-term, overnight funding, and would not be available to CFBank for longer term funding needs. Future deterioration in the credit performance of CFBank’s loan portfolio or CFBank’s financial performance, tightening of overall credit policies by the FHLB or FRB, or a decline in the balances of pledged collateral may further reduce CFBank’s borrowing capacity.

The Holding Company has previously issued junior subordinated debentures to raise additional capital to fund our operations. We may seek additional debt or equity capital in the future to achieve our long-term business objectives. However, pursuant to an agreement with OTS effective May 2010, the Holding Company may not incur, issue, renew, redeem, or rollover any debt, or otherwise incur any additional debt, other than liabilities that are incurred in the ordinary course of business to acquire goods and services, without the prior non-objection of the OTS. Additionally, the Holding Company is not able to declare, make, or pay any cash dividends or any other capital distributions, or purchase, repurchase, or redeem, or commit to purchase, repurchase or redeem any Holding Company equity stock without the prior non-objection of the OTS. Pursuant to a notice from the OTS dated October 20, 2010, the Holding Company may not pay interest on debt or commit to do so without the prior, written non-objection of the OTS. The agreement and notice with the OTS do not restrict the Holding Company’s ability to raise funds in the securities markets though equity offerings. The sale of equity or convertible debt securities in the future may be dilutive to our existing stockholders. Debt refinancing arrangements may require us to pledge some of our assets and enter into covenants that would restrict our ability to incur further indebtedness. Additional financing sources, if sought, might be unavailable to us or, if available, could be on unfavorable terms. If additional financing sources are unavailable, or not available on reasonable terms, our business strategies and future prospects could be adversely impacted.

The Holding Company may not rely on dividends from CFBank for any of the Company’s revenue.

The OTS regulates and must approve the payment of dividends from CFBank to the Holding Company. The payment of dividends from CFBank to the Holding Company is not likely to be approved by the OTS while CFBank is suffering significant losses. If CFBank is unable to pay dividends, the Holding Company may not have the funds to be able to service its debt, pay its other obligations or pay dividends on the Company’s common stock, which could have a material adverse impact on our financial condition or the value of your investment in our common stock.

We are subject to extensive regulation that could have adverse effects.

Our operations are subject to extensive regulation by federal, state and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of our operations. We believe that we are in substantial compliance in all material respects with applicable federal, state and local laws, rules and regulations. Any change in the laws or regulations applicable to the Company, or in banking regulators’ supervisory policies or examination procedures, whether by the OTS, the FDIC, the FHLB System, the FR System, the Congress or other federal or state regulators, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Our participation in the TARP Capital Purchase Program, which includes restrictions on the ability to pay dividends or repurchase outstanding common stock, as well as restrictions on executive compensation, may act to depress the market value of the Company’s common stock and hinder our ability to attract and retain well-qualified executives.

Pursuant to the terms of the Securities Purchase Agreement between the Company and the U.S. Treasury, the ability to declare or pay dividends on any of the Company’s common stock is limited to $0.05 per share per quarter. Specifically, the Company is not permitted to declare or pay dividends on common stock if the Company is in arrears on the payment of dividends on the preferred stock issued to the U.S. Treasury (the Preferred Stock). In addition, the ability to repurchase outstanding common stock is restricted. The approval of the U.S. Treasury generally is required for the Company to make any stock repurchase (other than purchases of common stock in connection with the administration of any employee benefit plan in the ordinary course of business and consistent with past practice) unless all of the Preferred Stock has been redeemed or transferred by the U.S. Treasury to unaffiliated third parties. Further, outstanding common stock may not be repurchased if the Company is in arrears on the payment of Preferred Stock dividends. The restriction on the Company’s ability to pay dividends may depress the market price of the Company’s common stock.

As a participant under the TARP Capital Purchase Program, the Company must comply with the executive compensation and corporate governance standards imposed by statute and the TARP Compensation Standards for as long as the U.S. Treasury holds any securities acquired from the Company pursuant to the Securities Purchase Agreement or upon exercise of the warrant issued to the U.S. Treasury as part of our participation in the TARP Capital Purchase Program (the Warrant), excluding any period during which the U.S. Treasury holds only the Warrant. In addition, the restrictions on the Company’s ability to compensate senior executives in relationship to executive compensation at companies that are not recipients of TARP funds may limit the Company’s ability to recruit and retain senior executives.

The Company’s participation in the TARP Capital Purchase Program could adversely affect the Company’s financial condition and results of operations.

The U.S. Treasury’s ability to change the terms, rules or requirements of the TARP Capital Purchase Program could adversely affect the Company’s financial condition and results of operations.

If we are unable to redeem the Preferred Stock after five years, the cost of this capital will increase substantially.

If we are unable to redeem the Preferred Stock prior to February 13, 2013, the cost of this capital will increase substantially on that date, from 5.0% per annum to 9.0% per annum. Depending on the Company’s financial condition at the time, this increase in the annual dividend rate on the Preferred Stock could have a material negative effect on liquidity and results of operations.

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The Preferred Stock reduces net income available to holders of the Company’s common stock and earnings per share of common stock, and the Warrant issued to the U.S. Treasury may be dilutive to holders of the Company’s common stock.

While the additional capital raised through participation in the TARP Capital Purchase Program provides further funding for our business, our participation has increased the number of diluted outstanding common shares and carries a preferred dividend. The dividends declared and the accretion of discount on the Preferred Stock reduces the net income available to holders of the Company’s common stock and earnings per common share. The Preferred Stock will also receive preferential treatment in the event of the Company’s liquidation, dissolution or winding up. Additionally, the ownership interest of the existing holders of the Company’s common stock will be diluted to the extent the Warrant, issued to the U.S. Treasury in conjunction with the sale to the U.S. Treasury of the Preferred Stock, is exercised. The common stock underlying the Warrant represented approximately 7.5% of total common shares outstanding as of March 15, 2011. Although the U.S. Treasury has agreed not to vote any of the common stock it receives upon exercise of the Warrant, a transferee of any portion of the Warrant, or of any common stock acquired upon exercise of the Warrant, is not bound by this restriction.

If we fail to continue to meet all applicable continued listing requirements of the Nasdaq^® Capital Market and Nasdaq^® determines to delist our common stock, the market liquidity and market price of our common stock could decline, and our ability to access the capital markets could be negatively affected.

Our common stock is listed on the Nasdaq^® Capital Market. To maintain that listing, we must satisfy minimum financial and other continued listing requirements. For example, Nasdaq^® rules require that we maintain a minimum closing bid price of $1.00 per share for our common stock. If our stock price falls below a $1.00 closing bid price for at least 30 consecutive trading days, or we fail to meet other requirements for continued listing on the Nasdaq^® Capital Market, and we are unable to cure the events of noncompliance in a timely or effective manner, our common stock could be delisted from the Nasdaq^® Capital Market. On December 17, 2010 we did receive a notice from the Nasdaq^® Capital Market that we did not comply with the minimum bid price requirement for continued listing on the Nasdaq^® Capital Market because the bid price for our common stock had fallen below $1.00 per share for 30 consecutive business days. We were able to regain compliance on January 26, 2011, and, as such, there was no lapse in our ability to be listed. Any such delisting, however, could adversely affect the market liquidity of our common stock and the market price of our common stock could decrease. In addition, the delisting of our common stock could materially adversely affect our access to the capital markets. Any limitation on market liquidity or reduction in the price of our common stock as a result of that delisting could adversely affect our ability to raise capital on terms acceptable to us, or at all.

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Item 2. Properties.

We conduct our business through four branch offices located in Summit, Columbiana, and Franklin Counties, Ohio. The net book value of the Company’s properties totaled $5.7 million at December 31, 2010. Ghent Road, Inc. owned land located adjacent to the Fairlawn, Ohio office held for future development that totaled $167,000 at year-end 2010. All properties are owned. Smith Ghent LLC owns the Fairlawn office and leases it to CFBank.

Location

Administrative/Home Office:

2923 Smith Rd

Fairlawn, Ohio 44333

Branch Offices:

601 Main Street

Wellsville, Ohio 43968

49028 Foulks Drive

East Liverpool, Ohio 43920

7000 N. High St

Worthington, Ohio 43085

Item 3. Legal Proceedings.

We may, from time to time, be involved in various legal proceedings in the normal course of business. Periodically, there have been various claims and lawsuits involving CFBank, such as claims to enforce liens, condemnation proceedings on properties in which CFBank holds security interests, claims involving the making and servicing of real property loans and other issues incident to our business.

We are not a party to any other pending legal proceeding that management believes would have a material adverse effect on our financial condition or operations, if decided adversely to us.

No tax shelter penalty was assessed against the Company or any of our subsidiaries by the Internal Revenue Service in calendar year 2010 or at any other time in connection with any transaction deemed by the Internal Revenue Service to be abusive or to have a significant tax avoidance purpose.

Item 4. Removed and Reserved.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

During the fiscal quarter ended December 31, 2010, the Company did not repurchase or sell any of its securities.

The market information required by Item 201(a), the stockholders information required by Item 201(b) and the dividend information required by Item 201(c) of Regulation S-K are incorporated by reference to our 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rule 14a-3(b) and (c) of the Exchange Act; the information appears under the caption “Market Prices and Dividends Declared” on page 29 and in “Note 18 — Regulatory Matters” at page 65 therein, respectively.

The equity compensation plan information required by Item 201(d) of Regulation S-K is set forth herein under Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 6 Selected Financial Data.

Information required by Item 301 of Regulation S-K is incorporated by reference to our 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rule 14a-3(b) and (c) of the Exchange Act; the information appears under the caption “Selected Financial and Other Data” at page 6 therein.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Information required by Item 303 of Regulation S-K is incorporated by reference to our 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rule 14a-3(b) and (c) of the Exchange Act; the information appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” at page 6 therein.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Information required by Item 305 of Regulation S-K is incorporated by reference to our 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rule 14a-3(b) and (c) of the Exchange Act; the information appears under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” at page 6 therein.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements required by Article 8 of Regulation S-X are incorporated by reference to our 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rules 14a-3(b) and (c) of the Exchange Act. The consolidated financial statements appear under the caption “Financial Statements” at page 30 therein and include the following:

Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None

Item 9A. Controls and Procedures.

Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-14(c). Management, with the participation of our principal executive and financial officers, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports we file or submit under the Exchange Act.

Management’s Report on Internal Control Over Financial Reporting. Information required by Item 308 of Regulation S-K is incorporated by reference to our 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rule 14a-3(b) of the Exchange Act; the information appears under the caption “Management’s Report on Internal Control over Financial Reporting” at page 30 therein.

Changes in internal control over financial reporting. We made no significant changes in our internal controls or in other factors that could significantly affect these controls in the fourth quarter of 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Directors. Information required by Item 401 of Regulation S-K with respect to our directors and committees of the Board of Directors is incorporated by reference to our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders filed with the Commission on or about March 30, 2011, under the caption “PROPOSAL 1. ELECTION OF DIRECTORS.”

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Executive Officers of the Registrant

	Age at
	December 31,	Position held with the Holding Company
Name	2010	and/or Subsidiaries
Eloise L. Mackus	60	Chief Executive Officer, General Counsel and Corporate Secretary, Holding Company and CFBank; Director and Secretary, Ghent Road Inc.; Secretary, Smith Ghent LLC
Therese Ann Liutkus	51	President, Treasurer and Chief Financial Officer, Holding Company and CFBank; Director and Treasurer, Ghent Road Inc.; Treasurer, Smith Ghent LLC
John S. Lawell	47	Senior Vice President, Operations, CFBank
Corey D. Caster	33	Vice President, Mortgage Division, CFBank

Eloise L. Mackus is Chief Executive Officer, General Counsel and Corporate Secretary of the Holding Company and CFBank and has over 20 years of banking and banking-related experience. Prior to joining us in July 2003, Ms. Mackus practiced in law firms in Connecticut and Ohio and was the Vice President and General Manager of International Markets for The J. M. Smucker Company. Ms. Mackus completed a bachelor’s degree at Calvin College and a juris doctorate at The University of Akron School of Law.

Therese Ann Liutkus is President, Treasurer and Chief Financial Officer of the Holding Company and CFBank. Prior to joining us in November 2003, Ms. Liutkus was Chief Financial Officer of First Place Financial Corp. and First Place Bank for six years, and she has more than 25 years of banking experience. Ms. Liutkus is a certified public accountant and has a bachelor’s degree in accounting from Cleveland State University.

John S. Lawell is Senior Vice President of Operations for CFBank. He joined CFBank as Assistant Vice President of Operations in March of 2004, bringing over 25 years of banking and information technology experience to the company. Formerly, Mr. Lawell was Assistant Vice President with Lake Shore Savings and Loan for 7 years. Mr. Lawell is a graduate of Lorain County Community College.

Corey D. Caster is Vice President of the Mortgage Division for CFBank and joined us in July of 2008. Mr. Caster started his career in the mortgage industry in 1999 with a local mortgage banker and managed several branches in Northeast Ohio. In 2004, he joined his wife to run their own mortgage company, which at its height had over seventy employees in four branches. Mr. Caster holds a bachelor’s degree from John Carroll University.

Compliance with Section 16(a) of the Exchange Act. Information required by Item 405 of Regulation S-K is incorporated by reference to our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders filed with the Commission on or about March 30, 2011, under the caption “ADDITIONAL INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS — SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.” Copies of Section 16 reports, Forms 3, 4 and 5, are available on our website, www.CFBankonline.com under the caption “Investor Relations — Section 16 Filings.”

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Code of Ethics. We have adopted a Code of Ethics and Business Conduct, which meets the requirements of Item 406 of Regulation S-K and applies to all employees, including our principal executive officer, principal financial officer and principal accounting officer. Since the Company’s inception in 1998, we have had a code of ethics. We require all directors, officers and other employees to adhere to the Code of Ethics and Business Conduct in addressing the legal and ethical issues encountered in conducting their work. The Code of Ethics and Business Conduct requires that our employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s best interest. All employees are required to attend annual training sessions to review the Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct is available on our website, www.CFBankonline.com under the caption “Investor Relations — Corporate Governance.” Disclosures of amendments to or waivers with regard to the provisions of the Code of Ethics and Business Conduct also will be posted on the Company’s website.

Corporate Governance. Information required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is incorporated by reference to our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders filed with the Commission on or about March 30, 2011, under the caption “PROPOSAL 1. ELECTION OF DIRECTORS.”

Item 11. Executive Compensation.

Information required by Item 402 of Regulation S-K is incorporated by reference to our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders filed with the Commission on or about March 30, 2011, under the caption “COMPENSATION OF EXECUTIVE OFFICERS.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Owners and Management. Information required by Item 403 of Regulation S-K is incorporated by reference to our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders filed with the Commission on or about March 30, 2011, under the caption “STOCK OWNERSHIP.”

Related Stockholder Matters — Equity Compensation Plan Information. Information required by Item 201(d) of Regulation S-K is incorporated by reference to our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders filed with the Commission on or about March 30, 2011, under the caption “EQUITY COMPENSATION PLAN INFORMATION,” and to our 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rule 14a-3(b) and (c) of the Exchange Act, where the information appears under the caption “Note 15 — Stock-Based Compensation” at page 62 therein.

See Part II, Item 8, Financial Statements, Notes 1 and 15, for a description of the principal provisions of our equity compensation plans. The information required by Item 8 is incorporated by reference to our 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rules 14a-3(b) and (c) of the Exchange Act; the financial statements appear under the caption “Financial Statements” at page 30 therein.

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Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information required by Items 404 and 407(a) of Regulation S-K is incorporated by reference to our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders filed with the Commission on or about March 30, 2011, under the caption “ADDITIONAL INFORMATION ABOUT DIRECTORS AND OFFICERS — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.”

Item 14. Principal Accounting Fees and Services.

Information required by Item 9(e) of Schedule 14A pursuant to this Item 14 is incorporated by reference to our definitive Proxy Statement for our 2011 Annual Meeting of Stockholders filed with the Commission on or about March 30, 2011, under the caption “PROPOSAL 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.”

PART IV

Item 15. Exhibits, Financial Statement Schedules

See Exhibit Index at page 44 of this Report on Form 10-K.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CENTRAL FEDERAL CORPORATION
 

/s/ Eloise L. Mackus  

Eloise L Mackus, Esq. 

Chief Executive Officer, General Counsel and Corporate Secretary

Date: March 30, 2011 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Jerry F. Whitmer	Director, Chairman	March 30, 2011
Jerry F. Whitmer, Esq.
/s/ Eloise L. Mackus	Chief Executive Officer,	March 30, 2011
Eloise L. Mackus, Esq.	General Counsel and Corporate Secretary (principal executive officer)
/s/ Therese Ann Liutkus	President, Treasurer and Chief	March 30, 2011
Therese Ann Liutkus, CPA	Financial Officer (principal accounting and financial officer)
/s/ Jeffrey W. Aldrich	Director	March 30, 2011
Jeffrey W. Aldrich
/s/ Thomas P. Ash	Director	March 30, 2011
Thomas P. Ash
/s/ William R. Downing	Director	March 30, 2011
William R. Downing
/s/ Gerry W. Grace	Director	March 30, 2011
Gerry W. Grace

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EXHIBIT INDEX

Exhibit No.			Description of Exhibit
	3.1		Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Registration Statement on Form SB-2 No. 333-64089, filed with the Commission on September 23, 1998)
	3.2		Amendment to Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Registration Statement on Form S-2 No. 333-129315, filed with the Commission on October 28, 2005)
	3.3		Second Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.3 to the registrant’s Form 10-K for the fiscal year ended December 31, 2007, filed with the Commission on March 27, 2008)
	4.1		Form of Stock Certificate of Central Federal Corporation (incorporated by reference to Exhibit 4.0 to the registrant’s Registration Statement on Form SB-2 No. 333-64089, filed with the Commission on September 23, 1998)
	4.2		Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock, Series A, of Central Federal Corporation (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K, filed with the Commission on December 5, 2008)
	4.3		Warrant dated December 5, 2008, to purchase shares of common stock of the Registrant (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K, filed with the Commission on December 5, 2008)
	10.1	*	1999 Stock-Based Incentive Plan (as Amended and Restated) (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement filed with the Commission on March 21, 2000)
	10.2	*	Central Federal Corporation 2009 Equity Compensation Plan (incorporated by reference to Appendix A to the registrant’s Definitive Proxy Statement filed with the Commission on March 31, 2009)
	10.3		Letter Agreement, dated December 5, 2008, including Securities Purchase Agreement — Standard Terms, between the Registrant and the United States Department of the Treasury (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed with the Commission on December 5, 2008)
	11.1		Statement Re: Computation of Per Share Earnings
	13.1		Annual Report to Security Holders for the Fiscal Year Ended December 31, 2010
	21.1		Subsidiaries of the Registrant
	23.1		Consent of Independent Registered Public Accounting Firm
	31.1		Rule 13a-14(a) Certifications of the Chief Executive Officer
	31.2		Rule 13a-14(a) Certifications of the Chief Financial Officer
	32.1		Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer
	99.1		31 C.F.R. Section 30.15 Certification of Principal Executive Officer
	99.2		31 C.F.R. Section 30.15 Certification of Principal Financial Officer

* Management contract or compensation plan or arrangement identified pursuant to Item 15 of Form 10-K

43

EX-11.1

Exhibit 11.1

Computation of Per Share Earnings

The information regarding Computation of Per Share Earnings is incorporated by reference to the Company’s 2010 Annual Report to Stockholders distributed to stockholders and furnished to the Commission under Rules 14a-3(b) and (c) of the Exchange Act; the computation appears under the caption “Note 22 — Earnings (Loss) Per Common Share” at page 70 therein.

EX-13.1

Exhibit 13.1

Annual Report to Security Holders for the Fiscal Year ended December 31, 2010

Table of Contents

2	Message to Stockholders
	Management’s Discussion and Analysis of Financial Condition and Results of Operations
6	Selected Financial and Other Data
8	Forward-Looking Statements
8	General
10	Financial Condition
16	Comparison of Results of Operations for 2010 and 2009
19	Comparison of Results of Operations for 2009 and 2008
25	Quantitative and Qualitative Disclosures about Market Risk
26	Liquidity and Capital Resources
28	Impact of Inflation
28	Critical Accounting Policies
29	Market Prices and Dividends Declared
	Financial Statements
30	Management’s Report on Internal Control Over Financial Reporting
31	Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
32	Consolidated Financial Statements
38	Notes to Consolidated Financial Statements
72	Board of Directors And Officers
72	CFBank office Locations
	Corporate Data
72	Annual Report
72	Annual Meeting
72	Stockholder Services

Dear Stockholders:

Difficult times do not become better times overnight. This is certainly true for Central Federal Corporation and CFBank, as 2010 was a highly challenging year. While losses for the Company had slowed by the end of the year and we have seen positive signs in our mortgage business, we are not out of the woods yet and, of course, cannot know what 2011 might bring.

As we look at the year that is now behind us, perspective allows us to see June 2010 as the year’s low point. The financial crisis of 2008-2009 and vulnerable loans produced poor results that continue. With a change in management, we were able to begin to correct problems with our commercial loan portfolio and begin to see improving results. During this period we increased CFBank’s residential mortgage business and maintained the Bank’s important relationships with commercial clients. While moving in the right direction, all these things have taken, and will continue to take, time.

A brutal recession was still pounding the nation in June 2010, with unemployment at its peak and credit quality battered for community banks nationwide, when two independent reviews revealed a commercial loan portfolio weakened by, among other things, a continued negative economic environment. With Ohio’s ongoing economic fragility, it is taking time and effort to work our way forward from that point. Since June, however, improvement has taken place in many areas. Although we still operate at a loss, the loss for 2010 was significantly less than it was in 2009. Net loss for the year ended December 31, 2010, was $6.9 million, compared to $9.9 million for 2009, a 31% reduction; and the loss for the fourth quarter was $990,000, compared to a loss of $5.6 million in the quarter ended June 30. Of course, we will never be satisfied reporting losses, and we continue to work toward a return to profitability.

page 2     |

We are lending selectively, to both commercial and residential clients. Our risk-based capital ratios have improved steadily since June 2010, but they are still not to the level they should be. Bringing these ratios to levels that both we and our regulators find satisfactory may require additional capital, and the Board of Directors is looking at available alternatives.

Mortgage Division Has Very Good Year

The residential mortgage area of CFBank had its best year ever, in terms of income, including fees generated, and in quantity of loans originated both for homes purchased and for loans refinanced. From 2009 to 2010, noninterest income increased by 30%, from $1.4 million to $1.8 million. This included a 35% increase in income from the sale of loans, reflecting an increase in volume in our mortgage business.

Our experienced mortgage staff has worked hard to design programs that suit each customer’s situation, creating good quality loans that meet our clients’ needs. Our experience in home lending has taught us that by listening to our clients and understanding their needs and concerns, we can customize loans that enable our clients to achieve their financial goals.

|     page 3

Improvements we have seen in our commercial business reflect intense efforts to work through distressed assets.

Workouts in Commercial Business Continue

Improvements we have seen in our commercial business reflect the intense efforts undertaken to work through distressed assets, including expanding our workout efforts with additional staff. Our workout activities are achieving results, with the portfolio of commercial loans showing improvement during the last half of 2010. The level of criticized and classified assets decreased 12% from June 30, 2010, due to both resolution of distressed assets and a careful approach to new loans.

Strategic Investment in Talent and Experience

We continue to focus on strategic decisions that will improve performance and establish the basis for future success, but Ohio’s economic weakness continues. As we have said before, saving and reducing costs do not on their own lead to prosperity. Investment is also needed.

Nowhere is this truer than with our valued professionals. Tim Fitzwater, for example, joined us to head commercial banking. Tim has more than 36 years of experience and is well known and respected in the banking community. His appointment reaffirmed the strategic mission of CFBank, with its focus on commercial and community banking, our customer base of business borrowers and depositors, and our devotion to local markets.

We also added new management in the areas of workout (Kemper Allison, with more than 20 years of experience) and credit (Keith Anderson, with more than 30 years of experience). We added a mortgage loan underwriter and we are in the process of achieving direct endorsed underwriter status, a designation by the Department of Housing and Urban Development that will allow us to offer loans insured by the Federal Housing Authority.

page 4     |

We have a solid franchise, one on which we believe we can capitalize and expand.

Other new hires include office managers in Fairlawn and Worthington and new credit analysts for commercial loans. We have great confidence in the superb staff in each CFBank office.

Challenges Remain

We have had challenges, both regulatory and economic, which were a direct result of the condition of our asset quality. Until these challenges have been fully resolved, CFBank can expect further regulatory scrutiny. There may be additional adverse consequences resulting from our legacy credit issues. The need for further improvement is critical, but our team has shown the ability to face these challenges. It is important to recognize the hard work by so many of our people to identify and minimize losses we have been facing.

This situation took time to get into, and it will take time to get out. Still, we have a solid franchise, one on which we believe we can capitalize and expand. We will continue to inform you of the challenges facing CFBank and the steps we take to address those challenges. It is vital that we communicate with you on a realistic basis, and we commit that we will.

Sincerely,

Eloise L. Mackus
Chief Executive Officer

|     page 5

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Selected Financial and Other Data

The information in the following tables should be read in conjunction with our consolidated financial statements, the related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report.

SELECTED FINANCIAL CONDITION DATA:

	AT DECEMBER 31,
(DOLLARS IN THOUSANDS)	2010		2009		2008		2007		2006
Total assets	$	275,232	$	273,742	$	277,781	$	279,582	$	236,028
Cash and cash equivalents		34,275		2,973		4,177		3,894		5,403
Securities available for sale		28,798		21,241		23,550		28,398		29,326
Loans held for sale		1,953		1,775		284		457		2,000
Loans, net(1)		190,767		232,003		234,924		230,475		184,695
Allowance for loan losses (ALLL)		9,758		7,090		3,119		2,684		2,109
Nonperforming assets		14,566		13,234		2,412		574		297
Foreclosed assets		4,509		—		—		86		—
Other intangible assets		129		169		—		—		—
Deposits		227,381		211,088		207,647		194,308		167,591
FHLB advances		23,942		32,007		29,050		49,450		32,520
Subordinated debentures		5,155		5,155		5,155		5,155		5,155
Total stockholders’ equity		15,989		23,227		33,075		27,379		29,085

SUMMARY OF OPERATIONS:

	FOR THE YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)	2010			2009			2008		2007			2006
Total interest income	$	12,617		$	14,446		$	16,637	$	17,523		$	13,654
Total interest expense		4,183			5,947			7,935		9,795			6,889
Net interest income		8,434			8,499			8,702		7,728			6,765
Provision for loan losses		8,468			9,928			917		539			820
Net interest income (loss) after provision for loan losses		(34	)		(1,429	)		7,785		7,189			5,945
Noninterest income:
Net gain (loss) on sale of securities		468			—			54		—			(5	)
Other		1,326			1,377			894		728			828
Total noninterest income		1,794			1,377			948		728			823
Noninterest expense		8,432			8,262			7,749		7,997			6,849
Income (loss) before income taxes		(6,672	)		(8,314	)		984		(80	)		(81	)
Income tax expense (benefit)		198			1,577			261		(63	)		(44	)
Net income (loss)	$	(6,870	)	$	(9,891	)	$	723	$	(17	)	$	(37	)
Net income (loss) available to common stockholders	$	(7,280	)	$	(10,298	)	$	694	$	(17	)	$	(37	)

(See footnotes on next page.)

page 6     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

SELECTED FINANCIAL RATIOS AND OTHER DATA:

	AT OR FOR THE YEAR ENDED DECEMBER 31,
	2010			2009			2008			2007			2006
Performance Ratios: (2)
Return on average assets		(2.41	%)		(3.45	%)		0.26	%		(0.01	%)		(0.02	%)
Return on average equity		(35.52	%)		(32.95	%)		2.68	%		(0.06	%)		(0.12	%)
Average yield on interest-earning assets (3)		4.76	%		5.32	%		6.38	%		7.23	%		6.84	%
Average rate paid on interest-bearing liabilities		1.73	%		2.50	%		3.38	%		4.50	%		4.00	%
Average interest rate spread (4)		3.03	%		2.82	%		3.00	%		2.73	%		2.84	%
Net interest margin, fully taxable equivalent (5)		3.18	%		3.13	%		3.34	%		3.19	%		3.39	%
Interest-earning assets to interest-bearing liabilities		109.74	%		114.59	%		111.33	%		111.47	%		115.83	%
Efficiency ratio (6)		85.98	%		83.60	%		80.75	%		94.57	%		90.20	%
Noninterest expense to average assets		2.96	%		2.88	%		2.79	%		3.08	%		3.20	%
Common stock dividend payout ratio		n/m			n/m			125.00	%		n/m			n/m
Capital Ratios: (2)
Equity to total assets at end of period		5.81	%		8.48	%		11.91	%		9.79	%		12.32	%
Average equity to average assets		6.79	%		10.47	%		9.72	%		10.81	%		13.89	%
Tangible capital ratio (7)		6.59	%		8.87	%		9.16	%		8.48	%		9.79	%
Core capital ratio (7)		6.59	%		8.87	%		9.16	%		8.48	%		9.79	%
Total risk-based capital ratio (7)		10.68	%		11.72	%		11.58	%		11.01	%		12.55	%
Tier 1 risk-based capital ratio (7)		9.41	%		10.46	%		10.51	%		9.89	%		11.49	%
Asset Quality Ratios: (2)
Nonperforming loans to total loans (8)		5.02	%		5.54	%		1.01	%		0.21	%		0.16	%
Nonperforming assets to total assets (9)		5.29	%		4.83	%		0.87	%		0.21	%		0.13	%
Allowance for loan losses to total loans		4.87	%		2.97	%		1.31	%		1.15	%		1.13	%
Allowance for loan losses to nonperforming loans (8)		97.03	%		53.57	%		129.31	%		550.00	%		710.10	%
Net charge-offs (recoveries) to average loans		2.63	%		2.47	%		0.20	%		(0.02	%)		0.13	%
Per Share Data:
Basic earnings (loss) per common share	$	(1.77	)	$	(2.51	)	$	0.16		$	—		$	(0.01	)
Diluted earnings (loss) per common share		(1.77	)		(2.51	)		0.16			—			(0.01	)
Dividends declared per common share		—			—			0.20			0.28			0.36
Tangible book value per common share at end of period		2.13			3.91			6.36			6.17			6.40

(1)	Loans, net represents the recorded investment in loans net of the ALLL.
(2)	Asset quality ratios and capital ratios are end-of-period ratios. All other ratios are based on average monthly balances during the indicated periods.
(3)	Calculations of yield are presented on a taxable equivalent basis using the federal income tax rate of 34%.
(4)	The average interest rate spread represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of average interest-bearing liabilities.
(5)	The net interest margin represents net interest income as a percent of average interest-earning assets.
(6)	The efficiency ratio equals noninterest expense (excluding amortization of intangibles) divided by net interest income plus noninterest income (excluding gains or losses on securities transactions).
(7)	Regulatory capital ratios of CFBank.
(8)	Nonperforming loans consist of nonaccrual loans and other loans 90 days or more past due.
(9)	Nonperforming assets consist of nonperforming loans and foreclosed assets.
n/m — not meaningful

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 7

Forward-Looking Statements

Statements in this Annual Report and in other communications by the Company that are not statements of historical fact are forward-looking statements which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to: (1) projections of revenues, income or loss, earnings or loss per common share, capital structure and other financial items; (2) plans and objectives of the Company, as defined below, management or Boards of Directors; (3) statements regarding future events, actions or economic performance; and (4) statements of assumptions underlying such statements. Words such as “estimate,” “strategy,” “may,” “believe,” “anticipate,” “expect,” “predict,” “will,” “intend,” “plan,” “targeted,” and the negative of these terms, or similar expressions, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Various risks and uncertainties may cause actual results to differ materially from those indicated by our forward-looking statements. The following factors could cause such differences:

• a continuation of current high unemployment rates and difficult economic conditions or adverse changes in general economic conditions and economic conditions in the markets we serve, any of which may affect, among other things, our level of nonperforming assets, charge-offs, and provision for loan loss expense;

• changes in interest rates that may reduce net interest margin and impact funding sources;

• our ability to maintain sufficient liquidity to continue to fund our operations;

• changes in market rates and prices, including real estate values, which may adversely impact the value of financial products including securities, loans and deposits;

• the possibility of other-than-temporary impairment of securities held in the Company’s securities portfolio;

• results of examinations of the Company and Bank by the regulators, including the possibility that the regulators may, among other things, require the Company to increase its allowance for loan losses or write-down assets;

• the uncertainties arising from the Company’s participation in the Troubled Asset Relief Program (TARP) Capital Purchase Program, including the impacts on employee recruitment and retention and other business and practices, and uncertainties concerning the potential redemption by us of the U.S. Treasury’s preferred stock investment under the program, including the timing of, regulatory approvals for, and conditions placed upon, any such redemption;

• changes in tax laws, rules and regulations;

• various monetary and fiscal policies and regulations, including those determined by the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), the Office of the Controller of the Currency (OCC) and the Office of Thrift Supervision (OTS);

• competition with other local and regional commercial banks, savings banks, credit unions and other non-bank financial institutions;

• our ability to grow our core businesses;

• technological factors which may affect our operations, pricing, products and services;

• unanticipated litigation, claims or assessments; and

• management’s ability to manage these and other risks.

Forward-looking statements are not guarantees of performance or results. A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. The Company believes it has chosen these assumptions or bases in good faith and that they are reasonable. We caution you, however, that assumptions or bases almost always vary from actual results, and the differences between assumptions or bases and actual results can be material. The forward-looking statements included in this report speak only as of the date of the report. We undertake no obligation to publicly release revisions to any forward-looking statements to reflect events or circumstances after the date of such statements, except to the extent required by law.

Our filings with the Securities and Exchange Commission (SEC), including our Form 10-K filed for 2010, detail other risks, all of which are difficult to predict and many of which are beyond our control.

General

Central Federal Corporation (hereafter referred to, together with its subsidiaries, as the Company and individually as the Holding Company) is a savings and loan holding company incorporated in Delaware in 1998. Substantially all of our business is conducted through our principal subsidiary, CFBank, a federally chartered savings association formed in Ohio in 1892.

page 8     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

General (continued)

CFBank is a community-oriented financial institution offering a variety of financial services to meet the needs of the communities we serve. Our business model emphasizes personalized service, clients’ access to decision makers, solution-driven lending and quick execution, efficient use of technology and the convenience of online internet banking, mobile banking, remote deposit, corporate cash management and telephone banking. We attract deposits from the general public and use the deposits, together with borrowings and other funds, primarily to originate commercial and commercial real estate loans, single-family and multi-family residential mortgage loans and home equity lines of credit. The majority of our customers are small businesses, small business owners and consumers.

Our principal market area for loans and deposits includes the following Ohio counties: Summit County through our office in Fairlawn, Ohio; Franklin County through our office in Worthington, Ohio; and Columbiana County through our offices in Calcutta and Wellsville, Ohio. We originate commercial and residential real estate loans and business loans primarily throughout Ohio.

Our net income is dependent primarily on net interest income, which is the difference between the interest income earned on loans and securities and our cost of funds, consisting of interest paid on deposits and borrowed funds. Net interest income is affected by regulatory, economic and competitive factors that influence interest rates, loan demand, the level of non-performing assets and deposit flows. Net income is also affected by, among other things, loan fee income, provisions for loan losses, service charges, gains on loan sales, operating expenses, and franchise and income taxes. Operating expenses principally consist of employee compensation and benefits, occupancy, FDIC insurance premiums and other general and administrative expenses. In general, results of operations are significantly affected by general economic and competitive conditions, changes in market interest rates and real estate values, government policies and actions of regulatory authorities. Future changes in applicable laws, regulations or government policies may also materially impact our performance.

As a result of the current economic recession, which has included failures of financial institutions, investments in banks and other companies by the United States government, and government-sponsored economic stimulus packages, one area of public and political focus is how and the extent to which financial institutions are regulated by the government. The current regulatory environment may result in new or revised regulations that could have a material adverse impact on our performance.

On July 21, 2010, President Obama signed into law the “Dodd-Frank Wall Street Reform and Consumer Protection Act” (Dodd-Frank Act) that could impact the performance of the Company in future periods. The Dodd-Frank Act included numerous provisions designed to strengthen the financial industry, enhance consumer protection, expand disclosures and provide for transparency. Some of these provisions included changes to FDIC insurance coverage, which included a permanent increase in the coverage to $250,000 per depositor. Additional provisions created a Bureau of Consumer Financial Protection, which is authorized to write rules on all consumer financial products. Still other provisions created a Financial Stability Oversight Council, which is not only empowered to determine the entities that are systemically significant and therefore require more stringent regulations, but which is also charged with reviewing, and when appropriate, submitting, comments to the SEC and Financial Accounting Standards Board with respect to existing or proposed accounting principles, standards or procedures. Further, the Dodd-Frank Act retained the thrift charter and merged the OTS, the regulator of CFBank, into the OCC. The aforementioned are only a few of the numerous provisions included in the Dodd-Frank Act. The overall impact of the entire Dodd-Frank Act will not be known until the full implementation is completed.

The significant volatility and disruption in capital, credit and financial markets experienced in 2008 continued to have a detrimental effect on our national and local economies in 2010. These effects included lower real estate values; tightened availability of credit; increased loan delinquencies, foreclosures, personal and business bankruptcies and unemployment rates; decreased consumer confidence and spending; significant loan charge-offs and write-downs of asset values by financial institutions and government-sponsored agencies; and a reduction of manufacturing and service business activity and international trade. These conditions also adversely affected the stock market generally, and have contributed to significant declines in the trading prices of financial institution stocks. We do not expect these difficult market conditions to improve in the short term, and a continuation or worsening of these conditions could increase their adverse effects. Adverse effects of these conditions include increases in loan delinquencies and charge-offs; increases in our loan loss reserves based on general economic factors; increases to our specific loan loss reserves due to the impact of these conditions on specific borrowers or the collateral for their loans; increases in our cost of funds due to increased competition and aggressive deposit pricing by local and national competitors with liquidity needs; attrition of our core deposits due to this aggressive deposit pricing and/or consumer concerns about the safety of their deposits; increases in regulatory and compliance costs; and declines in the trading price of our common stock.

Management’s discussion and analysis represents a review of our consolidated financial condition and results of operations for the periods presented. This review should be read in conjunction with our consolidated financial statements and related notes.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 9

Financial Condition

General. Assets totaled $275.2 million at December 31, 2010 and increased $1.5 million, or .5%, from $273.7 million at December 31, 2009. The increase was primarily due to a $31.3 million increase in cash and cash equivalents, a $7.6 million increase in securities available for sale, and a $4.5 million increase in foreclosed assets, partially offset by a $41.2 million decrease in net loan balances.

Cash and cash equivalents. Cash and cash equivalents totaled $34.3 million at December 31, 2010 and increased $31.3 million from $3.0 million at December 31, 2009. The increase in cash and cash equivalents was a result of building on-balance-sheet liquidity. The increase in liquidity was accomplished primarily through the issuance of brokered deposits, which also served to lock-in the cost of longer-term liabilities at low current market interest rates. As a result of the losses suffered in 2010 and 2009, management was concerned that CFBank would be restricted from accepting brokered deposits and moved aggressively to build liquidity to deal with increasing nonperforming assets and potential retail deposit outflow. During the year ended December 31, 2010, $34.6 million in brokered deposits were issued with an average life of 36 months at an average cost of 1.83%. Liquidity was also increased through proceeds from the sales of a $4.3 million auto loan portfolio and $5.8 million in commercial real estate and multi-family loans.

Securities available for sale. Securities available for sale totaled $28.8 million at December 31, 2010 and increased $7.6 million, or 35.6%, from $21.2 million at December 31, 2009. The increase was due to purchases during the current year period exceeding sales, maturities and repayments. A portion of the proceeds from the issuance of brokered deposits and sales of loans used to increase on-balance-sheet liquidity were invested in securities available for sale, which offered higher yields than overnight cash investments.

Loans. Net loans totaled $190.8 million at December 31, 2010 and decreased $41.2 million, or 17.8%, from $232.0 million at December 31, 2009. Commercial, commercial real estate and multi-family loans, including construction loans, totaled $156.8 million at December 31, 2010 and decreased $25.5 million, or 14.0%, from $182.3 million at December 31, 2009. The decrease was primarily in commercial real estate loan balances, including the related construction loans, which decreased $18.3 million due to the sale of $4.1 million in loans, the transfer of $3.5 million to foreclosed assets, $3.0 million in net charge-offs, and principal repayments and payoffs in excess of current year originations. Commercial loans declined by $4.7 million primarily due to the transfer of $1.0 million to foreclosed assets, $1.5 million in net charge-offs, and principal repayments and payoffs in excess of current year originations. Multi-family loans declined by $2.5 million primarily related to the sale of $1.7 million in loans. Single-family residential mortgage loans, including construction loans, totaled $25.6 million at December 31, 2010 and decreased $5.0 million, or 16.4%, from $30.6 million at December 31, 2009. The decrease in mortgage loans was due to current period principal repayments in excess of loans originated for portfolio. Consumer loans totaled $18.1 million at December 31, 2010 and decreased $8.1 million, or 30.8%, from $26.2 million at December 31, 2009. The decrease was due to the sale of a $4.3 million auto loan portfolio and repayments of auto loans and home equity lines of credit.

Allowance for loan losses (ALLL). The ALLL totaled $9.8 million at December 31, 2010 and increased $2.7 million, or 37.6%, from $7.1 million at December 31, 2009. The ratio of the ALLL to total loans totaled 4.87% at December 31, 2010, compared to 2.97% at December 31, 2009. The increase in the ALLL was due to continued adverse economic conditions affecting loan performance which resulted in continued high levels of nonperforming loans and loan charge-offs. See the section titled “Comparison of Results of Operations for 2010 and 2009, Provision for loan losses” for additional information regarding loan charge-offs.

In June 2010, the new management team took several significant steps to assess the credit quality of existing loans and loan relationships and improve our lending operations. These steps included: (1) independent loan reviews in the second quarter of 2010 covering in excess of 80% of the commercial, commercial real estate and multi-family residential loan portfolios; (2) an additional independent loan review of the same portfolios in the fourth quarter of 2010; (3) an independent review to assess the methodology used to determine the level of the ALLL; (4) the addition of new personnel to direct our commercial banking activities; (5) use of a loan workout firm to assist in addressing troubled loan relationships; and (6) reorganization of our credit and workout functions. These steps were designed to assess credit quality, improve collection and workout efforts with troubled borrowers and enhance the loan underwriting and approval process.

The ALLL is a valuation allowance for probable incurred credit losses. The ALLL methodology is designed as part of a thorough process that incorporates management’s current judgments about the credit quality of the loan portfolio into a determination of the ALLL in accordance with generally accepted accounting principles and supervisory guidance. Management analyzes the adequacy of the ALLL quarterly through reviews of the loan portfolio, including the nature and volume of the loan portfolio and segments of the portfolio; industry and loan concentrations; historical loss experience; delinquency statistics and the level of nonperforming loans; specific problem loans; the ability of borrowers to meet loan terms; an evaluation of collateral securing loans and the market for various types of collateral; various collection strategies; current economic condition, trends and outlook; and other factors that warrant recognition in providing for an adequate ALLL. Based on the variables involved and the significant judgments management must make about outcomes that are uncertain, the determination of the ALLL is considered to be a critical accounting policy. See the section titled “Critical Accounting Policies” for additional discussion.

page 10     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Financial Condition (continued)

The ALLL consists of specific and general components. The specific component relates to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Commercial, commercial real estate and multi-family residential loans, regardless of size, and all other loans over $500,000 are individually evaluated for impairment when they are 90 days past due, or earlier than 90 days past due if information regarding the payment capacity of the borrower indicates that payment in full according to the loan terms is doubtful. Loans for which the terms have been modified to grant concessions, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and are classified as impaired. If a loan is determined to be impaired, the loan is evaluated to determine whether an impairment loss should be recognized, either through a write-off or specific valuation allowance, so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate, or at the fair value of collateral, less costs to sell, if repayment is expected solely from the collateral. Large groups of smaller balance loans, such as consumer and single-family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

Individually impaired loans totaled $10.7 million at December 31, 2010, and decreased $3.0 million, or 21.6%, from $13.7 million at December 31, 2009. The amount of the ALLL specifically allocated to individually impaired loans totaled $2.9 million at December 31, 2010, compared to $2.0 million at December 31, 2009.

The specific reserve on impaired loans is based on management’s estimate of the fair value of collateral securing the loans, or based on projected cash flows from the sale of the underlying collateral and payments from the borrowers. On at least a quarterly basis, management reviews each impaired loan to determine whether it should have a specific reserve or partial charge-off. Management relies on appraisals, Brokers Price Opinions (BPO) or internal evaluations to help make this determination. Determination of whether to use an updated appraisal, BPO or internal evaluation is based on factors including, but not limited to, the age of the loan and the most recent appraisal, condition of the property and whether we expect the collateral to go through the foreclosure or liquidation process. Management considers the need for a downward adjustment to the valuation based on current market conditions and on management’s analysis, judgment and experience. The amount ultimately charged-off for these loans may be different from the specific reserve, as the ultimate liquidation of the collateral and/or projected cash flows may be different from management’s estimates.

Nonperforming loans, which are nonaccrual loans and loans at least 90 days past due but still accruing interest, decreased $3.1 million, or 24.0%, and totaled $10.1 million at December 31, 2010, compared to $13.2 million at December 31, 2009. The decrease in nonperforming loans was primarily due to $6.2 million in loan charge-offs, $4.5 million in commercial and commercial real estate properties transferred to foreclosed assets, and, to a lesser extent, loan payments and proceeds from the sale of the underlying collateral of various loans, partially offset by $6.8 million in additional loans that became nonperforming during 2010. Nonperforming loans totaled 5.02% of total loans at December 31, 2010, compared to 5.54% of total loans at December 31, 2009. The following table presents information regarding the number and balance of nonperforming loans at year-end 2010 and 2009.

	AT DECEMBER 31,
	2010				2009
(DOLLARS IN THOUSANDS)	NUMBER OF LOANS		BALANCE		NUMBER OF LOANS		BALANCE
Commercial		5	$	2,084		1	$	217
Single-family residential real estate		3		266		6		426
Multi-family residential real estate		3		3,986		8		4,406
Commercial real estate		5		3,550		15		6,864
Home equity lines of credit		2		161		5		1,307
Other consumer loans		1		10		1		14
Total		19	$	10,057		36	$	13,234

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 11

Financial Condition (continued)

Nonaccrual loans include some loans that were modified and identified as troubled debt restructurings, where concessions had been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate, payment extensions, principal forgiveness and other actions intended to maximize collection. Troubled debt restructurings included in nonaccrual loans totaled $4.5 million at December 31, 2010, and $1.8 million at December 31, 2009.

Nonaccual loans at December 31, 2010 and 2009 do not include $839,000 and $1.3 million, respectively, in troubled debt restructurings where customers have established a sustained period of repayment performance, generally six months, the loans are current according to their modified terms and repayment of the remaining contractual payments is expected. These loans are included in total impaired loans.

See Notes 1 and 3 to our consolidated financial statements for additional information regarding impaired loans and nonperforming loans.

The general component of the ALLL covers loans not classified as impaired and is based on historical loss experience, adjusted for current factors. Current factors considered include, but are not limited to, management’s oversight of the portfolio, including lending policies and procedures; nature, level and trend of the portfolio, including past due and nonperforming loans, loan concentrations, loan terms and other characteristics; current economic conditions and outlook; collateral values; and other items. The general ALLL is calculated based on CFBank’s loan balances and actual historical payment default rates for individual loans with payment defaults. For loans with no actual payment default history, industry estimates of payment default rates are applied, based on the applicable property types in the state where the collateral is located. Results are then scaled based on CFBank’s internal loan risk ratings, increasing the probability of default on loans with higher risk ratings, and industry loss rates are applied based on loan type. Industry estimates of payment default rates and industry loss rates are based on information compiled by the FDIC.

Industry information is adjusted based on management’s judgment regarding items specific to CFBank, and the current factors discussed previously. The adjustment process is dynamic, as current experience adds to the historical information, and economic conditions and outlook migrate over time. Specifically, industry information is adjusted by comparing the historical payment default rates (CFBank historical default rates and industry estimates of payment default rates) against the current rate of payment default to determine if the current level is high or low compared to historical rates, or rising or falling in light of the current economic outlook. Industry information is adjusted by comparison to CFBank’s historical one year loss rates, as well as the trend in those loss rates, past due, nonaccrual, criticized and classified loans. This adjustment process is performed for each segment of the portfolio. The following portfolio segments have been identified: single-family mortgage loans; construction loans; home equity lines of credit; other consumer loans; commercial real estate loans; multi-family residential real estate loans; and commercial and industrial loans. These individual segments are then further segregated by classes and internal loan risk ratings. See Note 3 to our consolidated financial statements for additional information.

All lending activity involves risks of loan losses. Certain types of loans, such as option adjustable rate mortgage (ARM) products, junior lien mortgages, high loan-to-value ratio mortgages, interest only loans, subprime loans and loans with initial teaser rates, can have a greater risk of non-collection than other loans. CFBank has not engaged in subprime lending, used option ARM products or made loans with initial teaser rates.

Unsecured commercial loans may present a higher risk of non-collection than secured commercial loans. Unsecured commercial loans totaled $3.5 million or 9.2% of the commercial loan portfolio at December 31, 2010. The unsecured loans are primarily lines of credit to small businesses in CFBank’s market area and are guaranteed by the small business owners. At December 31, 2010, one unsecured commercial loan with a balance of $167,000 was impaired, while none of the remaining unsecured loans was 30 days or more delinquent.

One of the more notable recessionary effects nationwide has been the reduction in real estate values. Real estate values in Ohio did not experience the dramatic increase prior to the recession that many other parts of the country did and, as a result, the declines have not been as significant, comparatively; however, real estate is the collateral on a substantial portion of the Company’s loans, and it is critical to determine the impact of any declining values in the allowance determination. For individual loans evaluated for impairment, current appraisals were obtained wherever practical, or if not available, estimated declines in value were considered in the evaluation process. Within the real estate loan portfolio, in the aggregate, including single-family, multi-family and commercial real estate, approximately 90% of the portfolio has loan-to-value ratios of 85% or less, generally based on the value of the collateral at origination, allowing for some decline in real estate values without exposing the Company to loss. Declining collateral values and a continued adverse economic outlook have been considered in the ALLL at December 31, 2010; however, sustained recessionary pressure and declining real estate values in excess of management’s estimates, particularly with regard to commercial real estate and multi-family real estate, may expose the Company to additional losses.

page 12     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Financial Condition (continued)

Home equity lines of credit include both purchased loans and loans we originated for our portfolio. In 2005 and 2006, we purchased home equity lines of credit collateralized by properties located throughout the United States, including geographic areas that have experienced significant declines in housing values, such as California, Florida and Virginia. The outstanding balance of the purchased home equity lines of credit totaled $3.4 million at December 31, 2010, and $1.8 million, or 52.7%, of the balance is collateralized by properties in these states. The collateral values associated with certain loans in these states have declined by up to 60% since these loans were originated in 2005 and 2006 and as a result, some loan balances exceed collateral values. There were 16 loans with an aggregate principal balance outstanding of $1.3 million at December 31, 2010, where the loan balance exceeded the collateral value by an aggregate amount of $1.0 million. As the depressed state of the housing market and general economy has continued, we have experienced increased write-offs in the purchased portfolio. Four loans totaling $720,000 were written off during the year ended December 31, 2010, compared to three loans totaling $322,000 during the year ended December 31, 2009. We continue to monitor collateral values and borrower FICO^® scores and, when the situation warrants, have frozen the lines of credit.

Management’s loan review process is an integral part of identifying problem loans and determining the ALLL. We maintain an internal credit rating system and loan review procedures specifically developed to monitor credit risk for commercial, commercial real estate and multi-family residential loans. Credit reviews for these loan types are performed at least annually, and more often for loans with higher credit risk. Loan officers maintain close contact with borrowers between reviews. Adjustments to loan risk ratings are based on the reviews and at any time information is received that may affect risk ratings. Additionally, an independent review of commercial, commercial real estate and multi-family residential loans, which was performed at least annually prior to June 2010, is now performed semi-annually. Management uses the results of these reviews to help determine the effectiveness of the existing policies and procedures, and to provide an independent assessment of our internal loan risk rating system.

We have incorporated the OTS asset classifications as a part of our credit monitoring and internal loan risk rating system. In accordance with regulations, problem loans are classified as special mention, substandard, doubtful or loss, and the classifications are subject to review by the OTS. Assets designated as special mention, which are considered criticized assets, possess weaknesses that, if left uncorrected, may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. An asset considered doubtful has all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, condition and values, highly questionable and improbable. Assets considered loss are uncollectible and have so little value that their continuance as assets without the establishment of a specific loss allowance is not warranted.

The following table presents information regarding loan classifications as of December 31, 2010 and December 31, 2009. No loans were classified doubtful or loss at either date. This table includes nonperforming loans as of each date.

	AT DECEMBER 31,
(DOLLARS IN THOUSANDS)	2010		2009
Special mention:
Commercial	$	6,281	$	3,892
Multi-family residential real estate		4,529		3,143
Commercial real estate		9,337		1,432
Home equity lines of credit		839		3,894
Total	$	20,986	$	12,361
Substandard:
Commercial	$	5,338	$	317
Single-family residential real estate		266		426
Multi-family residential real estate		9,758		5,671
Commercial real estate		13,059		10,723
Home equity lines of credit		161		1,307
Other consumer loans		10		14
Total	$	28,592	$	18,458

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 13

Financial Condition (continued)

The increase in loans classified as special mention and substandard was due to the increasing duration and lingering nature of the current recessionary economic environment and its continued detrimental effects on our borrowers, including deterioration in client business performance, declines in borrowers’ cash flows and lower collateral values.

Management’s loan review process includes the identification of substandard loans where accrual of interest continues because the loans are under 90 days delinquent and/or the loans are well secured, a complete documentation review had been performed, and the loans are in the active process of being collected, but the loans exhibit some type of weakness that could lead to nonaccrual status in the future. At December 31, 2010, in addition to the nonperforming loans discussed previously, nine commercial loans totaling $3.2 million, eight commercial real estate loans totaling $9.5 million and six multi-family residential real estate loans totaling $5.8 million were classified as substandard. Only one of these loans was delinquent at December 31, 2010, and the delinquent payment was made in January 2011. At December 31, 2009, in addition to the nonperforming loans discussed previously, a $100,000 commercial loan, four commercial real estate loans totaling $3.9 million, and a $1.3 million multi-family residential real estate loan were classified as substandard. None of these loans were delinquent at December 2009.

We believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 2010; however, future additions to the allowance may be necessary based on factors including, but not limited to, further deterioration in client business performance, continued or deepening recessionary economic conditions, declines in borrowers’ cash flows and market conditions which result in lower real estate values. Additionally, various regulatory agencies, as an integral part of their examination process, periodically review the ALLL. Such agencies may require additional provisions for loan losses based on judgments and estimates that differ from those used by management, or information available at the time of their review. Management continues to diligently monitor credit quality in the existing portfolio and analyze potential loan opportunities carefully in order to manage credit risk. An increase in the ALLL and loan losses could occur if economic conditions and factors which affect credit quality, real estate values and general business conditions worsen or do not improve.

Foreclosed assets. Foreclosed assets totaled $4.5 million at December 31, 2010. There were no foreclosed assets at December 31, 2009. Foreclosed assets at year-end 2010 include $2.3 million related to approximately 42 acres of undeveloped land located in Columbus, Ohio, that had been previously financed for development purposes. A $982,000 charge-off was recorded when the property was foreclosed in April 2010. Although the property is listed for sale, current economic conditions negatively impact the market for undeveloped land, and sale of this property in the near future is unlikely. Foreclosed assets also include $967,000 related to a commercial building near Cleve-land, Ohio, that is currently 100% occupied. A $201,000 charge-off was recorded when the property was foreclosed in November 2010. CFBank owns a participating interest in this property and the lead bank is currently managing the building operations, including listing and sale of the property. Foreclosed assets also include $194,000 related to a condominium in Akron, Ohio, that is currently vacant and listed for sale. A $48,000 charge-off was recorded when the property was foreclosed in October 2010. In addition to these properties, foreclosed assets also include $1.0 million in inventory from a jewelry manufacturer in Fairlawn, Ohio, which was sold in March 2011. An $800,000 charge-off was recorded when the inventory was acquired in December 2010. The sale in March 2011 resulted in no additional loss. There were no other assets acquired by CFBank through foreclosure during 2010. The level of foreclosed assets may increase in the future as we continue our work-out efforts related to nonperforming and other loans with credit issues.

Premises and equipment. Premises and equipment, net, totaled $6.0 million at December 31, 2010 and decreased $1.0 million, or 14.1% from $7.0 million at December 31, 2009. The decline was due to current year depreciation expense and $535,000 transferred to assets held for sale related to two parcels of land adjacent to the Company’s Fairlawn, Ohio, headquarters where the Company has a signed agreement to sell. The sale, which is expected to close by the third quarter of 2011, is expected to result in no gain or loss and will improve the cash position of the Holding Company.

Deposits. Deposits totaled $227.4 million at December 31, 2010 and increased $16.3 million, or 7.7%, from $211.1 million at December 31, 2009. The increase was due to a $16.4 million increase in certificate of deposit account balances and a $3.3 million increase in noninterest bearing checking account balances, partially offset by a $3.5 million decrease in money market account balances.

Certificate of deposit account balances totaled $128.8 million at December 31, 2010 and increased $16.4 million, or 14.6%, from $112.4 million at December 31, 2009. The increase was primarily due to a $14.6 million increase in brokered deposits. CFBank has been a participant in the Certificate of Deposit Account Registry Service^® (CDARS), a network of banks that allows us to provide our customers with FDIC insurance coverage on certificate of deposit account balances up to $50 million. CDARS balances are considered brokered deposits by regulation. Brokered deposits, including CDARS

page 14     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Financial Condition (continued)

balances, totaled $68.0 million at December 31, 2010, and increased $14.6 million, or 27.4%, from $53.4 million at December 31, 2009. During 2010, $34.6 million in brokered deposits were issued with an average life of 36 months at an average cost of 1.83%. The increase in brokered deposits was based on CFBank’s determination to build on-balance-sheet liquidity and lock-in the cost of longer-term liabilities at low current market interest rates. See the section titled “Liquidity and Capital Resources” for additional information regarding regulatory restrictions on brokered deposits.

Customer balances in the CDARS program totaled $29.2 million at December 31, 2010 and decreased $7.9 million, or 21.3%, from $37.1 million at December 31, 2009. Customer balances in the CDARS program represented 42.9% of total brokered deposits at December 31, 2010 and 69.5% at December 31, 2009. The decrease was due to customers seeking higher short-term yields than management was willing to offer in the CDARS program based on CFBank’s asset/liability management strategies.

Noninterest bearing checking account balances totaled $20.4 million at December 31, 2010 and increased $3.3 million, or 19.3%, from $17.1 million at December 31, 2009. The increase was a result of our continued success in building complete banking relationships with commercial clients. Through December 31, 2012, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. This coverage is in addition to, and separate from, the coverage available under the FDIC’s general deposit insurance rules.

Money market account balances totaled $56.8 million at December 31, 2010 and decreased $3.5 million, or 5.8%, from $60.3 million at December 31, 2009. The decrease was due to customers seeking higher yields on these short-term funds than management was willing to offer based on CFBank’s asset/liability management strategies.

Short-term Federal Home Loan Bank (FHLB) advances. Short-term FHLB advances, which totaled $2.1 million at December 31, 2009, were repaid in 2010 with funds provided by the increase in on-balance-sheet liquidity. There were no outstanding short-term borrowings at December 31, 2010.

Long-term FHLB advances. Long-term FHLB advances totaled $23.9 million at December 31, 2010 and decreased $6.0 million, or 20.0%, from $29.9 million at December 31, 2009. The decrease was due to repayment of maturing advances. These advances were not renewed due to a reduction in CFBank’s borrowing capacity with the FHLB, which resulted from tightening of overall credit policies by the FHLB during the current year and increased collateral requirements as a result of the credit performance of CFBank’s loan portfolio. The maturing advances were repaid with funds provided by the increase in on-balance-sheet liquidity.

Collateral pledged to the FHLB includes single-family mortgage loans, multi-family mortgage loans, securities, and to a lesser extent, commercial real estate loans and cash. Based on the collateral pledged and CFBank’s holdings of FHLB stock, CFBank was eligible to borrow up to a total of $24.7 million at year-end 2010. CFBank’s borrowing capacity decreased from $39.7 million at December 31, 2009 primarily due to deterioration in the credit performance of the pledged loan portfolios, which resulted in an increase in collateral maintenance requirements by the FHLB. See the section titled “Liquidity and Capital Resources” for additional information.

Subordinated debentures. Subordinated debentures totaled $5.2 million at year-end 2010 and 2009. These debentures were issued in 2003 in exchange for the proceeds of a $5.0 million trust preferred securities offering issued by a trust formed by the Company. The terms of the subordinated debentures allow for the Company to defer interest payments for a period not to exceed five years. The Company’s Board of Directors elected to defer interest payments beginning with the quarterly interest payment due on December 30, 2010 in order to preserve cash at the Holding Company. Cumulative deferred interest payments totaled $40,000 at year-end 2010. Pursuant to a notice from OTS dated October 20, 2010, the Company may not make interest payments on the subordinated debentures without the prior, written non-objection of the OTS. See the section titled “Liquidity and Capital Resources” for additional information regarding Holding Company liquidity.

Stockholders’ equity. Stockholders’ equity totaled $16.0 million at December 31, 2010 and decreased $7.2 million, or 31.2%, compared to $23.2 million at December 31, 2009. The decrease was due to a $6.9 million net loss and $410,000 in dividends on preferred stock for 2010.

The Company is a participant in the TARP Capital Purchase Program and issued $7.2 million of preferred stock to the United States Department of the Treasury (U.S. Treasury) on December 5, 2008. The preferred stock pays cumulative dividends of 5%, which increases to 9% after February 14, 2013. In conjunction with the issuance of the preferred stock, the Company also issued the U.S. Treasury a warrant to purchase 336,568 shares of the Company’s common stock at an exercise price of $3.22 per share. The Company’s participation in this program is subject to certain terms and conditions, including limits on the payment of dividends on the Company’s common stock to a quarterly cash dividend of $0.05 per share, and limits on the Company’s ability to repurchase its common stock. The Company is also subject to limitations on compensation established for TARP participants (the TARP Compensation Standards). The Company is in compliance with the terms and conditions and the TARP Compensation Standards.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 15

Financial Condition (continued)

The Company’s Board of Directors elected to defer dividend payments on the preferred stock beginning with the dividend payable on November 15, 2010 in order to preserve cash at the Holding Company. At December 31, 2010, one quarterly dividend payment had been deferred. Cumulative deferred dividends totaled $90,000 at year-end 2010. Pursuant to an agreement with the OTS effective May 2010, the Company may not pay cash dividends on the preferred stock, or its common stock, without the prior, written non-objection of the OTS. See Notes 15 and 16 to our consolidated financial statements for more information regarding the preferred stock and warrant. See the section titled “Liquidity and Capital Resources” for additional information regarding Holding Company liquidity.

With the capital provided by the TARP Capital Purchase Plan, we have continued to make financing available to businesses and consumers in our existing market areas. Since receipt of the $7.2 million TARP Capital Purchase Plan proceeds in December 2008 and through December 31, 2010, we have originated $208.9 million in new loans.

OTS regulations require savings institutions to maintain certain minimum levels of regulatory capital. Additionally, the regulations establish a framework for the classification of savings institutions into five categories: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. Generally, an institution is considered well-capitalized if it has a core (Tier 1) capital ratio of at least 5.0% (based on adjusted total assets); a core (Tier 1) risk-based capital ratio of a least 6.0%; and a total risk-based capital ratio of at least 10.0%. CFBank had capital ratios above the well-capitalized levels at year-end 2010 and 2009. See the section titled “Liquidity and Capital Resources” for a discussion of dividends as a source of funding for the Holding Company and dividend restrictions imposed on CFBank by the OTS.

The current economic environment has resulted in discussion by regulators and others about a possible need for higher capital requirements for financial institutions, including CFBank. No final regulations have been issued in this regard; however, an increase in regulatory capital requirements could have a material and adverse impact on the Company and CFBank. The OTS currently has the ability to impose higher capital requirements on a case by case basis.

Comparison of Results of Operations for 2010 and 2009

General. Net loss totaled $6.9 million, or $1.77 per diluted common share, in 2010, compared to a net loss of $9.9 million, or $2.51 per diluted common share, in 2009. The net loss for 2010 was primarily due to an $8.5 million provision for loan losses, while the net loss for 2009 was primarily related to a $9.9 million provision for loan losses and a $4.3 million valuation allowance related to the deferred tax asset.

The $8.5 million provision for loan losses in 2010 reflected continued adverse economic conditions which affected loan performance and resulted in a sustained high level of nonperforming loans and loan charge-offs. Nonperforming loans totaled $10.1 million, or 5.02% of total loans at year-end 2010, compared to $13.2 million, or 5.54% of total loans at year-end 2009. Net loan charge-offs totaled $5.8 million, or 2.63% of average loans for the year ended December 31, 2010, compared to $5.9 million, or 2.47% of average loans for the year ended December 31, 2009. The net loan charge-offs and resulting net loss in 2009 reduced the Company’s near term estimates of future taxable income and the amount of the deferred tax asset, primarily related to net operating loss carryforwards, considered realizable. The Company recorded a $4.3 million valuation allowance to reduce the carrying amount of the deferred tax asset to zero at December 31, 2009.

Net interest income. Net interest income is a significant component of net income, and consists of the difference between interest income generated on interest-earning assets and interest expense incurred on interest-bearing liabilities. Net interest income is primarily affected by the volumes, interest rates and composition of interest-earning assets and interest-bearing liabilities. The tables titled “Average Balances, Interest Rates and Yields” and “Rate/Volume Analysis of Net Interest Income” provide important information on factors impacting net interest income and should be read in conjunction with this discussion of net interest income.

Net interest margin increased to 3.18% during 2010, compared to 3.13% during 2009. The increase was due to a decline in funding costs greater than the decline in asset yields. Yield on average interest-earning assets decreased 56 basis points (bp) in 2010 due to a decrease in higher yielding loan balances and an increase in lower yielding securities and other earning asset balances, primarily short-term cash investments that resulted from the increase in on-balance-sheet liquidity in 2010. Cost of average interest-bearing liabilities decreased 77 bp due to a decline in both deposit and borrowing costs, which reflected the sustained low market interest rate environment that existed in 2010. Management has extended the terms of some liabilities to fix their cost at the current low rates and to protect net interest margin should interest rates rise. Additional downward pressure on net interest margin could occur if the level of short-term cash investments increase, loan balances decrease, nonperforming loans increase, downward repricing on existing interest-earning assets and loan production caused by sustained low market interest rates continues, or the opportunity to decrease funding costs is unavailable.

page 16     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Comparison of Results of Operations for 2010 and 2009 (continued)

Net interest income decreased $65,000, or .8%, to $8.4 million in 2010, compared to $8.5 million in 2009. The decrease was due to a 12.7% decrease in interest income partially offset by a 29.7% decrease in interest expense. Interest income decreased due to a decline in both the average yield and average balance of interest-earning assets. The average yield on interest-earning assets declined to 4.76% in 2010, from 5.32% in 2009 due to a decrease in higher yielding loan balances and an increase in lower yielding securities and other earning asset balances, primarily short-term cash investments that resulted from the increase in on-balance-sheet liquidity in 2010. The average balance of interest-earning assets decreased $6.5 million primarily due to a decline in average loan balances partially offset by an increase in other interest-earning assets, primarily short-term cash investments, as well as an increase in the average balance of securities. The average cost of interest-bearing liabilities decreased to 1.73% in 2010, from 2.50% in 2009, due to continued low market interest rates in 2010. The decrease in expense caused by the lower cost was partially offset by a $4.6 million increase in the average balance of interest—bearing liabilities in 2010 primarily due to deposit growth.

Interest income decreased $1.8 million, or 12.7%, to $12.6 million in 2010, compared to $14.4 million in 2009. The decrease was due to lower income on loans and securities. Interest income on loans decreased $1.4 million, or 10.5%, to $11.8 million in 2010, compared to $13.2 million in 2009, due to both a decrease in average yield and a decrease in average loan balances. The average yield on loans decreased 6 bp to 5.50% in 2010, compared to 5.56% in 2009, and the average loan balances decreased $22.6 million, or 9.5%, and totaled $214.7 million in 2010, compared to $237.3 million in 2009. The decrease in average yield on loans was due to a $2.9 million increase in average nonperforming loans, from $8.4 million in 2009 to $11.3 million in 2010. The decrease in the average balance of loans was due to $5.8 million in net loan write-offs for the year ended December 31, 2010, the sale of $4.3 million in auto loans during the first quarter of 2010, the sale of $5.8 million of commercial real estate and multi-family loans during the third quarter of 2010, $4.5 million transferred to foreclosed assets and principal repayments and loan pay-offs greater than originations. Interest income on securities decreased $462,000, or 41.3%, and totaled $658,000 in 2010, compared to $1.1 million in 2009, due to a decrease in the average yield on securities partially offset by an increase in the average balance of securities. The average yield on securities decreased 244 bp to 2.69% in 2010, compared to 5.13% in 2009, due to current year securities purchases at lower yields. The average balance of securities increased $2.5 million and totaled $25.2 million in 2010, compared to $22.7 million in 2009, due to purchases in excess of sales, maturities and repayments.

Interest expense decreased $1.7 million, or 29.7%, to $4.2 million in 2010, compared to $5.9 million in 2009. The decrease was due to a decline in the average cost of deposits and a decline in both the average cost and average balance of borrowings, partially offset by an increase in average deposit balances. Interest expense on deposits decreased $1.4 million, or 29.7%, to $3.3 million in 2010, compared to $4.7 million in 2009, due to a decrease in the average cost of deposits, partially offset by an increase in average deposit balances. The average cost of deposits decreased 80 bp, to 1.56% in 2010, compared to 2.36% in 2009, due to the positive impact of low short-term market interest rates on the cost of both existing and new deposits. Average deposit balances increased $12.5 million, or 6.2%, to $212.9 million in 2010, compared to $200.4 million in 2009, primarily due to growth in brokered certificate of deposit accounts. Management used brokered deposits as one of CFBank’s asset/liability management strategies to build on-balance-sheet liquidity and lock-in the cost of longer-term liabilities at low current market interest rates. See the section titled “Financial Condition — Deposits” for further information on brokered deposits, and the section titled “Liquidity and Capital Resources” for a discussion of regulatory restrictions on CFBank’s use of brokered deposits. Brokered deposits generally cost more than traditional deposits and can negatively impact the overall cost of deposits. The average cost of brokered deposits decreased 76 bp to 1.97% in 2010, from 2.73% in 2009. Average brokered deposit balances increased $4.3 million, or 6.6%, to $69.6 million in 2010 from $65.3 million in 2009. Interest expense on FHLB advances and other borrowings, including subordinated debentures, decreased $359,000, or 29.3%, to $865,000 in 2010, compared to $1.2 million in 2009, due to a decrease in both the average cost and average balance of borrowings. The average cost of FHLB advances and other borrowings decreased 33 bp, to 2.96% in 2010, compared to 3.29% in 2009, due to maturities of higher cost advances and lower short-term interest rates during 2010. The average balance of FHLB advances and other borrowings decreased $7.9 million, to $29.3 million in 2010, compared to $37.2 million in 2009, due to the repayment of FHLB advances with funds from the increase in deposits.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 17

Comparison of Results of Operations for 2010 and 2009 (continued)

Provision for loan losses. The provision for loan losses totaled $8.5 million in 2010, and decreased $1.4 million, or 14.7%, compared to $9.9 million in 2009. The decrease in the provision in 2010 was primarily due to a $3.2 million decrease in nonperforming loans, a $111,000 decrease in net charge-offs and a $41.2 million decrease in net loan balances compared to the prior year. The level of the provision for loan losses during 2010 and 2009 was primarily a result of adverse economic conditions in our market area that continue to negatively impact our borrowers, our loan performance and our loan quality. See the section titled “Financial Condition — Allowance for loan losses” for additional information.

Net charge-offs totaled $5.8 million, or 2.63% of average loans in 2010, compared to $5.9 million, or 2.47% of average loans in 2009. The 1.9% decrease in net charge-offs in 2010 was primarily in the commercial loan portfolio, offset by an increase in net charge-offs in the commercial real estate loan portfolio. The following table presents information regarding net charge-offs for 2010 and 2009.

	FOR THE YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)	2010		2009
Commercial	$	1,549	$	3,703
Single-family residential real estate		118		435
Multi-family residential real estate		203		287
Commercial real estate		3,046		1,109
Home equity lines of credit		820		385
Other consumer loans		74		2
Total	$	5,810	$	5,921

Noninterest income. Noninterest income totaled $1.8 million and increased $417,000, or 30.3%, in 2010, compared to $1.4 million in 2009. The increase was due to a $468,000 increase in net gains on sales of securities and a $224,000 increase in net gains on sales of loans. Noninterest income was positively impacted by a $208,000 net gain on acquisition due to recognition, at fair value, of the Company’s one-third ownership interest in Smith Ghent LLC, which was held prior to its purchase of the remaining two-thirds interest in October 2009. There was no such gain in 2010. Service charges on deposit accounts decreased $51,000 in 2010.

Net gains on sales of securities totaled $468,000 in 2010. There were no gains on sales of securities in 2009. The sales proceeds were reinvested in securities with a 0% total risk-based capital requirement. The gains on sales positively impacted CFBank’s core capital ratio, and the reinvestment in 0% risk-weighted assets had a positive impact on CFBank’s total risk-based capital ratio. Investment in these securities, however, had a negative impact on interest income due to low current market interest rates.

Net gains on sales of loans totaled $866,000 and increased $224,000, or 34.9%, in 2010, compared to $642,000 in 2009. The increase was primarily due to a 20.6% increase in mortgage loans originated for sale, which totaled $79.6 million in 2010, compared to $66.0 million in 2009. The increase in mortgage loan production was due to continued low mortgage interest rates in 2010 and the success of CFBank’s staff of mortgage loan originators in increasing this business despite the depressed condition of the housing market. CFBank’s mortgage professionals continue to gain market share by building relationships with local realtors and individual borrowers. If market mortgage rates increase or the housing market deteriorates further, mortgage production and resultant gains on sales of loans could decrease. The Dodd-Frank Act contains provisions which limit the methods of compensation for mortgage loan originators and this may impact the Company as a result of loan origination professionals’ decisions about whether to remain in the industry.

Service charges on deposit accounts totaled $294,000 and decreased $51,000, or 14.8%, in 2010, compared to $345,000 in 2009. The decrease was due to a $38,000 decrease in nonsufficient funds fees and an $11,000 decrease in checking account fees compared to 2009.

Noninterest expense. Noninterest expense increased $170,000, or 2.1%, and totaled $8.4 million in 2010, compared to $8.3 million in 2009. The increase in noninterest expense was primarily due to an increase in professional fees and advertising and promotion expenses, partially offset by a decrease in occupancy and equipment expense.

Professional fees increased $226,000, or 29.4%, and totaled $995,000 in 2010, compared to $769,000 in 2009. The increase was primarily related to legal costs associated with nonperforming loans, which totaled $475,000 in 2010, compared to $227,000 in 2009. Management expects that professional fees associated with nonperforming loans may continue at current levels or increase as we continue our workout efforts related to nonperforming and other loans with credit issues.

page 18     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Comparison of Results of Operations for 2010 and 2009 (continued)

Advertising and promotion expense increased $55,000, or 105.8%, and totaled $107,000 in 2010, compared to $52,000 in 2009. The increase was due to costs associated with enhancement of marketing and presentation materials related to CFBank’s products and services.

Occupancy and equipment expense decreased $278,000, or 57.8%, and totaled $203,000 in 2010, compared to $481,000 in 2009. The decrease was due to the elimination of rent expense for the Company’s Fairlawn office as a result of the October 2009 acquisition of the remaining interest in Smith Ghent LLC, which owns the Fairlawn office building.

The ratio of noninterest expense to average assets increased to 2.96% in 2010, from 2.88% in 2009 due to an increase in noninterest expense and decrease in average assets in 2010. The efficiency ratio increased to 85.98% in 2010, from 83.60% in 2009 due to an increase in noninterest expense and decrease in net interest income and noninterest income (excluding gains on sales of securities) in 2010.

Income taxes. Income tax expense totaled $198,000 in 2010, compared to $1.6 million in 2009. Income tax expense decreased for the year ended December 31, 2010 due to a $2.3 million charge related to the valuation allowance against the deferred tax asset in 2010, compared to $4.3 million in 2009.

Comparison of Results of Operations for 2009 and 2008

General. Net loss totaled $9.9 million, or $2.51 per diluted common share, in 2009, compared to net income of $723,000, or $.16 per diluted common share, in 2008. The net loss for 2009 was primarily due to a $9.9 million provision for loan losses and a $4.3 million valuation allowance related to the deferred tax asset.

The $9.9 million provision for loan losses was recorded in response to adverse economic conditions affecting loan performance, which resulted in an increase in nonperforming loans and loan charge-offs. Nonperforming loans increased $10.8 million, and totaled $13.2 million at December 31, 2009, compared to $2.4 million at December 31, 2008. Net loan charge-offs increased $5.4 million, and totaled $5.9 million during 2009, compared to $482,000 in 2008. The net loan charge-offs and resultant net loss reduced the Company’s near term estimates of future taxable income and the amount of the deferred tax asset, primarily related to net operating loss carryforwards, considered realizable. The Company recorded a $4.3 million valuation allowance to reduce the carrying amount of the deferred tax asset to zero at December 31, 2009.

Net interest income. Net interest margin decreased to 3.13% during 2009, compared to 3.34% during 2008. The decrease was due to a decline in asset yields greater than the decline in funding costs. Yield on average interest-earning assets decreased 106 bp in 2009 due to an increase in nonperforming loans and downward repricing on adjustable-rate assets, as well as lower pricing on new loan production, in response to low market interest rates. Cost of average interest-bearing liabilities decreased 88 bp due to a decline in both deposit and borrowing costs, which reflected the sustained low market interest rate environment that existed in 2009. Management extended the terms of some liabilities to fix their cost at the low rates and to protect net interest margin should interest rates rise.

Net interest income decreased $203,000, or 2.3%, to $8.5 million in 2009, compared to $8.7 million in 2008. The decrease was due to a 13.2% decrease in interest income partially offset by a 25.1% decrease in interest expense. Interest income decreased due to a decline in the average yield on interest earning assets to 5.32% in 2009, from 6.38% in 2008. The decrease in income caused by the lower average yield was partially offset by an $11.2 million increase in average interest-earning assets in 2009 due to growth in average loan balances and other interest-earning assets, primarily short-term cash investments. The average cost of interest-bearing liabilities decreased to 2.50% in 2009, from 3.38% in 2008, due to continued low short-term interest rates in 2009. The decrease in expense caused by the lower cost was partially offset by a $3.1 million increase in the average balance of interest-bearing liabilities in 2009 due to deposit growth.

Interest income decreased $2.2 million, or 13.2%, to $14.4 million in 2009, compared to $16.6 million in 2008. The decrease was due to lower income on loans and securities. Interest income on loans decreased $2.0 million, or 13.1%, to $13.2 million in 2009, compared to $15.2 million in 2008, due to a lower average yield on loans partially offset by an increase in average loan balances. The average yield on loans decreased 97 bp to 5.56% in 2009, compared to 6.53% in 2008, due to an increase in nonperforming loans, lower market rates on new originations and downward repricing on adjustable-rate loans. Average loan balances increased $4.8 million, or 2.1%, and totaled $237.3 million in 2009, compared to $232.5 million in 2008, due to growth in commercial, commercial real estate and single-family residential real estate loans as a result of lower loan payoffs in 2009. Interest income on securities decreased $209,000, or 15.7%, and totaled $1.1 million in 2009, compared to $1.3 million in 2008, due to decreases in both the average balance of securities and the average yield on securities. The average balance of securities decreased $3.3 million and totaled $22.7 million in 2009, compared to $26.0 million in 2008, due to maturities and repayments in excess of purchases. The average yield on securities decreased 7 bp to 5.13% in 2009, compared to 5.20% in 2008, due to securities purchases in 2009 at lower yields.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 19

Comparison of Results of Operations for 2009 and 2008 (continued)

Interest expense decreased $2.0 million, or 25.1%, to $5.9 million in 2009, compared to $7.9 million in 2008. The decrease was due to a decline in the average cost of both deposits and borrowings and a decline in average borrowing balances, partially offset by an increase in average deposit balances. Interest expense on deposits decreased $1.5 million, or 23.9%, to $4.7 million in 2009, compared to $6.2 million in 2008, due to a decrease in the average cost of deposits, partially offset by an increase in average deposit balances. The average cost of deposits decreased 95 bp, to 2.36% in 2009, compared to 3.31% in 2008, due to low short-term market interest rates positively impacting the cost of both existing and new deposits. Average deposit balances increased $12.9 million, or 6.9%, to $200.4 million in 2009, compared to $187.5 million in 2008, primarily due to growth in money market accounts. Interest expense on FHLB advances and other borrowings, including subordinated debentures, decreased $501,000, or 29.0%, to $1.2 million in 2009, compared to $1.7 million in 2008, due to a decrease in both the average cost and average balance of borrowings. The average cost of FHLB advances and other borrowings decreased 38 bp, to 3.29% in 2009, compared to 3.67% in 2008, due to lower short-term interest rates during 2009. The average balance of FHLB advances and other borrowings decreased $9.8 million, to $37.2 million in 2009, compared to $47.0 million in 2008, due to the repayment of FHLB advances with funds from the increase in deposits and cash flows from the securities portfolio.

Provision for loan losses. The provision for loan losses totaled $9.9 million in 2009, compared to $917,000 in 2008. The increase in the provision in 2009 was due to adverse economic conditions affecting loan performance, which resulted in an increase in nonperforming loans and loan charge-offs. The provision in 2009 was significantly impacted by a $3.3 million net charge-off related to a single commercial loan customer.

Nonperforming loans, which are nonaccrual loans and loans 90 days past due still accruing interest, increased $10.8 million and totaled $13.2 million, or 5.54% of total loans, at December 31, 2009, compared to $2.4 million, or 1.01% of total loans, at December 31, 2008. The increase in nonperforming loans was primarily related to deterioration in the multi-family residential, commercial real estate, and home equity lines of credit portfolios. The following table presents information regarding the number and balance of nonperforming loans at year-end 2009 and 2008.

	AT DECEMBER 31,
	2009				2008
(DOLLARS IN THOUSANDS)	NUMBER OF LOANS		BALANCE		NUMBER OF LOANS		BALANCE
Commercial		1	$	217		1	$	646
Single-family residential real estate		6		426		1		63
Multi-family residential real estate		8		4,406		1		1,264
Commercial real estate		15		6,864		1		348
Home equity lines of credit		5		1,307		1		60
Other consumer loans		1		14		1		31
Total		36	$	13,234		6	$	2,412

Nonaccrual loans include some loans that were modified and identified as troubled debt restructurings, where concessions had been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate, payment extensions, principal forgiveness, and other actions intended to maximize collection. Troubled debt restructurings included in nonaccrual loans totaled $1.8 million at December 31, 2009. There were no troubled debt restructurings at December 31, 2008.

Individually impaired loans totaled $13.7 million at December 31, 2009, compared to $2.3 million at December 31, 2008. Individually impaired loans are included in nonperforming loans, except for $1.3 million in troubled debt restructurings where customers have established a sustained period of repayment performance, loans are current according to their modified terms and repayment of the remaining contractual payments is expected. The amount of the ALLL specifically allocated to individually impaired loans totaled $2.0 million at December 31, 2009, compared to $514,000 at December 31, 2008.

page 20     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Comparison of Results of Operations for 2009 and 2008 (continued)

The following table presents information on classified and criticized loans as of December 31, 2009 and 2008. No loans were classified loss at either date.

	AT DECEMBER 31,
(DOLLARS IN THOUSANDS)	2009		2008
Special mention
Commercial	$	3,892	$	535
Multi-family residential real estate		3,143		2,852
Commercial real estate		1,432		1,221
Home equity lines of credit		3,894		—
Total	$	12,361	$	4,608
Substandard
Commercial	$	317	$	2,570
Single-family residential real estate		426		63
Multi-family residential real estate		5,671		1,264
Commercial real estate		10,723		877
Home equity lines of credit		1,307		60
Other consumer loans		14		32
Total	$	18,458	$	4,866
Doubtful
Commercial	$	—	$	646

The increase in loans classified special mention and substandard was primarily related to deterioration in the commercial, multi-family residential, commercial real estate, and home equity lines of credit portfolios due to the adverse economic environment that existed in 2009 and its detrimental effect on collateral values and the ability of borrowers to make loan payments.

Management’s loan review, assignment of risk ratings and classification of assets, includes the identification of substandard loans where accrual of interest continues because the loans are under 90 days delinquent and/or the loans are well secured, a complete documentation review had been performed, and the loans are in the active process of being collected, but the loans exhibit some type of weakness that could lead to nonaccrual status in the future. At December 31, 2009, in addition to the nonperforming loans discussed previously, one commercial loan, totaling $100,000, four commercial real estate loans, totaling $3.9 million, and one multi-family residential real estate loan, totaling $1.3 million, were classified as substandard. At December 31, 2008, in addition to the nonperforming loans discussed previously, seven commercial loans, totaling $2.6 million, and one commercial real estate loan, totaling $530,000, were classified as substandard.

Net charge-offs totaled $5.9 million, or 2.47% of average loans in 2009, compared to $482,000, or 0.20% of average loans in 2008. The increase in net charge-offs in 2009 was primarily in the commercial and commercial real estate portfolios. Net commercial loan charge-offs included $3.3 million related to a single commercial loan customer. The following table presents information regarding net charge-offs for 2009 and 2008.

	FOR THE YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)	2009		2008
Commercial	$	3,703	$	—
Single-family residential real estate		435		69
Multi-family residential real estate		287		—
Commercial real estate		1,109		—
Home equity lines of credit		385		360
Other consumer loans		2		53
Total	$	5,921	$	482

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT      |      page 21

Comparison of Results of Operations for 2009 and 2008 (continued)

Noninterest income. Noninterest income totaled $1.4 million and increased $429,000, or 45.3%, in 2009, compared to $948,000 in 2008. The increase was due to a $483,000 increase in net gains on sales of loans and a $208,000 gain on the Company’s purchase of the remaining two-thirds interest in Smith Ghent LLC. These increases were partially offset by a $199,000 decrease in service charges on deposit accounts. Noninterest income in 2008 also included $54,000 in net gains on sales of securities. There were no security sales in 2009.

Net gains on the sales of loans totaled $642,000 and increased $483,000, or 303.8%, in 2009, compared to $159,000 in 2008. The increase was due to a 144.4% increase in mortgage loans originated for sale, which totaled $66.0 million in 2009, compared to $27.0 million in 2008, and a positive change in CFBank’s internal pricing policies. The increase in mortgage loan production was due to low mortgage interest rates in 2009, which resulted from the Federal Reserve Board reducing rates to historically low levels in the fourth quarter of 2008, and management’s decision to increase CFBank’s staff of professional mortgage loan originators, who have been successful in increasing this business despite the depressed condition of the housing market.

The $208,000 net gain on acquisition was due to recognition, at fair value, of the Company’s one-third ownership interest in Smith Ghent LLC, which was held prior to its purchase of the remaining two-thirds interest in October 2009.

Service charges on deposit accounts totaled $345,000 and decreased $199,000, or 36.6%, in 2009, compared to $544,000 in 2008. In 2008, service charges on deposit accounts included increased income during the fourth quarter from deposit accounts of a third party payment processor. These accounts were not active in 2009.

Noninterest expense. Noninterest expense increased $513,000, or 6.6%, and totaled $8.3 million in 2009, compared to $7.7 million in 2008. The increase in noninterest expense was primarily due to an increase in FDIC premiums, salaries and employee benefits and professional fees, partially offset by a decrease in depreciation expense.

FDIC premiums totaled $541,000 in 2009 and increased $455,000, from $86,000 in 2008. The increase was due to higher quarterly assessment rates, an increase in deposit balances and a $128,000 special assessment to restore the reserve ratio of the Deposit Insurance Fund (DIF), as announced on May 22, 2009 by the FDIC Board of Directors. A one-time FDIC credit issued to CFBank as a result of the Federal Deposit Insurance Reform Act of 2005 reduced premiums in 2008.

On November 12, 2009, the FDIC Board of Directors approved a Notice of Proposed Rulemaking that required institutions to prepay, on December 31, 2009, their estimated quarterly risk-based assessments for the fourth quarter of 2009, and all of 2010, 2011 and 2012. The assessment was based on a 5% annual growth rate in deposits from September 30, 2009, and included a 3 bp increase in the assessment rate beginning in 2011. The assessment paid by CFBank on December 31, 2009 totaled $1.4 million, and will be expensed over the coverage period.

Salaries and employee benefits expense totaled $4.2 million and increased $108,000, or 2.7%, in 2009, compared to $4.1 million in 2008. The increase was due to increased staffing levels, salary adjustments and medical benefits expense, reduced by elimination of bonuses.

Professional fees totaled $769,000 and increased $211,000, or 37.8%, in 2009, compared to $558,000 in 2008. The increase was due to $99,000 in higher legal fees related to nonperforming loans and $142,000 in legal and forensic accounting services related to the investigation of unusual return item activity involving deposit accounts for a third party payment processor. The increases were partially offset by a $36,000 decrease in consulting fees related to the Company’s implementation of the internal control reporting requirements of Section 404 of the Sarbanes-Oxley Act.

Depreciation expense totaled $483,000 and decreased $200,000 in 2009, compared to $683,000 in 2008. The decrease was due to assets fully depreciated at December 31, 2008.

The ratio of noninterest expense to average assets increased to 2.88% in 2009, from 2.79% in 2008. The efficiency ratio increased to 83.60% in 2009, from 80.75% in 2008. The increase in both ratios was due to the increase in noninterest expense in 2009.

Income taxes. Income taxes totaled $1.6 million in 2009, compared to $261,000 in 2008. The increase in the income tax expense was due to a $4.3 million valuation allowance against the deferred tax asset, discussed previously.

page 22     |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

AVERAGE BALANCES, INTEREST RATES AND YIELDS.

The following table presents, for the periods indicated, the total dollar amount of fully taxable equivalent interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed in both dollars and rates. Average balances are computed using month-end balances.

	FOR THE YEARS ENDED DECEMBER 31,
	2010								2009								2008
	Average			Interest		Average			Average			Interest		Average			Average			Interest		Average
	Outstanding			Earned/		Yield/			Outstanding			Earned/		Yield/			Outstanding			Earned/		Yield/
(DOLLARS IN THOUSANDS)	Balance			Paid		Rate			Balance			Paid		Rate			Balance			Paid		Rate
Interest-earning assets:
Securities (1) (2)	$	25,160		$	658		2.69	%	$	22,692		$	1,120		5.13	%	$	25,951		$	1,329		5.20	%
Loans and loans held for sale (3)		214,747			11,813		5.50	%		237,322			13,197		5.56	%		232,550			15,193		6.53	%
Other earning assets		23,960			61		0.25	%		10,251			32		0.31	%		513			8		1.56	%
FHLB stock		1,942			85		4.38	%		2,053			97		4.72	%		2,064			107		5.18	%
Total interest-earning assets		265,809			12,617		4.76	%		272,318			14,446		5.32	%		261,078			16,637		6.38	%
Noninterest-earning assets		19,039								14,330								16,398
Total assets	$	284,848							$	286,648							$	277,476
Interest-bearing liabilities:
Deposits	$	212,952			3,318		1.56	%	$	200,438			4,723		2.36	%	$	187,495			6,210		3.31	%
FHLB advances and other borrowings		29,264			865		2.96	%		37,214			1,224		3.29	%		47,013			1,725		3.67	%
Total interest-bearing liabilities		242,216			4,183		1.73	%		237,652			5,947		2.50	%		234,508			7,935		3.38	%
Noninterest-bearing liabilities		23,289								18,976								16,009
Total liabilities		265,505								256,628								250,517
Equity		19,343								30,020								26,959
Total liabilities and equity	$	284,848							$	286,648							$	277,476
Net interest-earning assets	$	23,593							$	34,666							$	26,570
Net interest income/interest rate spread				$	8,434		3.03	%				$	8,499		2.82	%				$	8,702		3.00	%
Net interest margin							3.18	%							3.13	%							3.34	%
Average interest-earning assets to average interest-bearing liabilities		109.74	%							114.59	%							111.33	%

(1)	Average balance is computed using the carrying value of securities.
	Average yield is computed using the historical amortized cost average balance for available for sale securities.
(2)	Average yields and interest earned are stated on a fully taxable equivalent basis.
(3)	Average balance is computed using the recorded investment in loans net of the ALLL and includes nonperforming loans.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT      |      page 23

RATE/VOLUME ANALYSIS OF NET INTEREST INCOME.

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the increase and decrease related to changes in balances and/or changes in interest rates. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by the prior rate) and (ii) changes in rate (i.e., changes in rate multiplied by prior volume). For purposes of this table, changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

	YEAR ENDED DECEMBER 31, 2010									YEAR ENDED DECEMBER 31, 2009
	COMPARED TO YEAR ENDED DECEMBER 31, 2009									COMPARED TO YEAR ENDED DECEMBER 31, 2008
	INCREASE (DECREASE) DUE TO									INCREASE (DECREASE) DUE TO
(DOLLARS IN THOUSANDS)	RATE			VOLUME			NET			RATE			VOLUME			NET
Interest-earning assets:
Securities (1)	$	(582	)	$	120		$	(462	)	$	(20	)	$	(189	)	$	(209	)
Loans and loans held for sale		(141	)		(1,243	)		(1,384	)		(2,301	)		305			(1,996	)
Other earning assets		(7	)		36			29			(11	)		35			24
FHLB stock		(7	)		(5	)		(12	)		(9	)		(1	)		(10	)
Total interest-earning assets		(737	)		(1,092	)		(1,829	)		(2,341	)		150			(2,191	)
Interest-bearing liabilities:
Deposits		(1,684	)		279			(1,405	)		(1,892	)		405			(1,487	)
FHLB advances and other borrowings		(116	)		(243	)		(359	)		(166	)		(335	)		(501	)
Total interest-bearing liabilities		(1,800	)		36			(1,764	)		(2,058	)		70			(1,988	)
Net change in net interest income	$	1,063		$	(1,128	)	$	(65	)	$	(283	)	$	80		$	(203	)

(1) Securities amounts are presented on a fully taxable equivalent basis.

page 24      |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss from adverse changes in market prices and interest rates. We have not engaged in and, accordingly, have no risk related to trading accounts, commodities or foreign exchange. Our hedging policy allows hedging activities, such as interest rate swaps, up to 10% of total assets. Disclosures about our hedging activities are set forth in Note 19 to our consolidated financial statements. The Company’s market risk arises primarily from interest rate risk inherent in our lending, investing, deposit gathering and borrowing activities. The measurement of market risk associated with financial instruments is meaningful only when all related and offsetting on- and off-balance-sheet transactions are aggregated and the resulting net positions are identified. Disclosures about fair value are set forth in Note 5 to our consolidated financial statements.

Management actively monitors and manages interest rate risk. The primary objective in managing interest rate risk is to limit, within established guidelines, the adverse impact of changes in interest rates on our net interest income and capital. We measure the effect of interest rate changes on CFBank’s net portfolio value (NPV), which is the difference between the estimated market value of its assets and liabilities under different interest rate scenarios. The change in the NPV ratio is a long-term measure of what might happen to the market value of financial assets and liabilities over time if interest rates changed instantaneously and the Company did not change existing strategies. At December 31, 2010, CFBank’s NPV ratios, using interest rate shocks ranging from a 300 bp rise in rates to a 100 bp decline in rates are shown in the following table. All values are within the acceptable range established by CFBank’s Board of Directors.

NET PORTFOLIO VALUE AS A PERCENT OF ASSETS (CFBANK ONLY)

BASIS POINT CHANGE IN RATES	NPV RATIO
+300		9.22	%
+200		9.56	%
+100		9.48	%
+50		9.27	%
0		9.13	%
-50		8.83	%
-100		8.72	%

In evaluating CFBank’s exposure to interest rate risk, certain shortcomings inherent in the method of analysis presented in the foregoing table must be considered. For example, the table indicates results based on changes in the level of interest rates, but not changes in the shape of the yield curve. CFBank also has exposure to changes in the shape of the yield curve. Although certain assets and liabilities may have similar maturities or periods to which they reprice, they may react in different degrees to changes in market interest rates. The interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. In the event of a change in interest rates, prepayments and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. The ability of many borrowers to service their debt may decrease when interest rates rise. As a result, the actual effect of changing interest rates may differ materially from that presented in the foregoing table.

We continue to originate substantially all fixed-rate single-family mortgage loans for sale rather than retain long-term, low fixed-rate loans in portfolio. We continue to originate commercial, commercial real estate and multi-family residential mortgage loans for our portfolio, which, in many cases, have adjustable interest rates. Many of these loans have interest-rate floors, which protect income to CFBank should rates continue to fall. Due to the current historic low level of market interest rates in 2009 through 2010, the terms of some liabilities were extended to fix their cost at low levels and to protect net interest margin should interest rates rise. See the section titled “Financial Condition — Deposits” for information regarding the use of brokered deposits to extend liabilities and increase on-balance-sheet liquidity.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 25

Liquidity and Capital Resources

In general terms, liquidity is a measurement of an enterprise’s ability to meet cash needs. The primary objective in liquidity management is to maintain the ability to meet loan commitments and to repay deposits and other liabilities in accordance with their terms without an adverse impact on current or future earnings. Principal sources of funds are deposits; amortization and prepayments of loans; maturities, sales and principal receipts of securities available for sale; borrowings; and operations. While maturities and scheduled amortization of loans are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition.

CFBank is required by regulation to maintain sufficient liquidity to ensure its safe and sound operation. Thus, adequate liquidity may vary depending on CFBank’s overall asset/liability structure, market conditions, the activities of competitors and the requirements of its own deposit and loan customers, and regulatory considerations. Management believes that CFBank’s liquidity is sufficient.

Liquidity management is both a daily and long-term responsibility of management. We adjust our investments in liquid assets, primarily cash, short-term investments and other assets that are widely traded in the secondary market, based on our ongoing assessment of expected loan demand, expected deposit flows, yields available on interest-earning deposits and securities and the objective of our asset/liability management program. In addition to liquid assets, we have other sources of liquidity available including, but not limited to, access to advances from the FHLB, borrowings from the Federal Reserve Bank (FRB), and the ability to obtain deposits by offering above-market interest rates. Under a directive from the OTS dated April 6, 2010, CFBank may not increase the amount of brokered deposits above $76.4 million, excluding interest credited, without the prior non-objection of the OTS. Brokered deposits totaled $68.0 million at December 31, 2010.

The following table summarizes CFBank’s cash available from liquid assets and borrowing capacity at December 31, 2010 and 2009.

	AT DECEMBER 31,
(DOLLARS IN THOUSANDS)	2010		2009
Cash and unpledged securities	$	43,352	$	5,033
Additional borrowing capacity at the FHLB		426		7,720
Additional borrowing capacity at the FRB		25,977		12,129
Unused commercial bank lines of credit		3,000		8,000
Total	$	72,755	$	32,882

Cash available from liquid assets and borrowing capacity increased to $72.8 million at December 31, 2010 from $32.9 million at December 31, 2009. Cash and unpledged securities increased $38.3 in 2010 due to the use of brokered deposits to increase on-balance-sheet liquidity. As of December 31, 2010, CFBank, under the directive by the OTS as previously discussed, has the ability to obtain an additional $8.4 million in brokered deposits for liquidity and asset/liability management purposes, as needed. CFBank’s additional borrowing capacity with the FHLB decreased to $426,000 at December 31, 2010, from $7.7 million at December 31, 2009, primarily due to tightening of overall credit policies by the FHLB during the current year and increased collateral requirements as a result of the credit performance of CFBank’s loan portfolio. CFBank’s additional borrowing capacity at the FRB increased to $26.0 million at December 31, 2010 from $12.1 million at December 31, 2009 due to additional commercial real estate loans pledged as collateral with the FRB in 2010. FRB borrowing programs are limited to short-term, overnight funding, and would not be available to CFBank for longer term funding needs. Unused commercial bank lines of credit decreased to $3.0 million at December 31, 2010 and zero at March 1, 2011, from $8.0 million at December 31, 2009, due to non-renewal of the lines of credit as a result of the credit performance of CFBank’s loan portfolio and its effect on CFBank’s financial performance. CFBank’s borrowing capacity may be negatively impacted by changes such as, but not limited to, further tightening of credit policies by the FHLB or FRB, further deterioration in the credit performance of CFBank’s loan portfolio or CFBank’s financial performance, a decline in the balance of pledged collateral, deterioration in CFBank’s capital below well-capitalized levels or certain situations where a well-capitalized institution is under a formal regulatory enforcement action.

We rely primarily on a willingness to pay market-competitive interest rates to attract and retain retail deposits. Accordingly, rates offered by competing financial institutions affect our ability to attract and retain deposits. Deposits are obtained predominantly from the areas in which CFBank offices are located, and brokered deposits are accepted. We use brokered deposits as an element of a diversified funding strategy and an alternative to borrowings. Management regularly

page 26       |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Liquidity and Capital Resources (continued)

compares rates on brokered deposits with other funding sources in order to determine the best mix of funding sources, balancing the costs of funding with the mix of maturities. Although CFBank customers participate in the CDARS program, CDARS deposits are considered brokered deposits by regulation. Brokered deposits, including CDARS deposits, totaled $68.0 million at December 31, 2010 and $53.4 million at December 31, 2009. Current regulatory restrictions limit an institution’s use of brokered deposits in situations where capital falls below well-capitalized levels and in certain situations where a well-capitalized institution is under a formal regulatory enforcement action. CFBank was not subject to these regulatory restrictions on the use of brokered deposits at December 31, 2010. CFBank was, however, subject to a $76.4 million limit on the amount of its brokered deposits as a result of a directive from the OTS dated April 6, 2010, as described previously.

CFBank could raise additional deposits by offering above-market interest rates. Current regulatory restrictions limit an institution’s ability to pay above-market interest rates in situations where capital falls below well-capitalized levels or in certain situations where a well-capitalized institution is under a formal regulatory enforcement action. CFBank was not subject to regulatory restrictions on its ability to pay above-market interest rates at December 31, 2010. CFBank relies on competitive interest rates, customer service, and relationships with customers to retain deposits. To promote and stabilize liquidity in the banking and financial services sector, the FDIC, as included in the Dodd-Frank Act as previously discussed, permanently increased deposit insurance coverage from $100,000 to $250,000 per depositor. CFBank is a participant in the FDIC’s program which provides unlimited deposit insurance coverage, through December 31, 2012, for noninterest-bearing transaction accounts. Based on our historical experience with deposit retention, current retention strategies and participation in programs offering additional FDIC insurance protection, we believe that, although it is not possible to predict future terms and conditions upon renewal, a significant portion of existing deposits will remain with CFBank.

The Holding Company, as a savings and loan holding company, has more limited sources of liquidity than CFBank. In general, in addition to its existing liquid assets, sources of liquidity include funds raised in the securities markets through debt or equity offerings, dividends received from its subsidiaries, or the sale of assets. Pursuant to an agreement with OTS effective May 2010, the Holding Company may not incur, issue, renew, redeem, or rollover any debt, or otherwise incur any additional debt, other than liabilities that are incurred in the ordinary course of business to acquire goods and services, without the prior non-objection of the OTS. Additionally, the Holding Company is not able to declare, make, or pay any cash dividends or any other capital distributions, or purchase, repurchase, or redeem, or commit to purchase, repurchase or redeem any Holding Company equity stock without the prior non-objection of the OTS. Pursuant to a notice from the OTS dated October 20, 2010, the Holding Company may not pay interest on debt or commit to do so without the prior, written non-objection of the OTS. The agreement with and notice from the OTS do not restrict the Holding Company’s ability to raise funds in the securities markets through equity offerings.

At December 31, 2010, the Holding Company and its subsidiaries, other than CFBank, had cash of $855,000 available to meet cash needs. Annual debt service on the subordinated debentures is currently approximately $162,500. The subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate (LIBOR) plus 2.85%. The total rate in effect was 3.15% at December 31, 2010. An increase in the three-month LIBOR would increase the debt service requirement of the subordinated debentures. Annual dividends on the preferred stock are approximately $361,000 at the current 5% level, which is scheduled to increase to 9% after February 14, 2013. Annual operating expenses are expected to be approximately $700,000 in 2011. The Holding Company’s available cash at December 31, 2010 is sufficient to cover cash needs, at their current level, for approximately eight months. The Board of Directors elected to defer the November 15, 2010 and February 15, 2011 scheduled dividend payments related to the preferred stock and the December 30, 2010 and March 30, 2011 interest payments on the subordinated debentures in order to preserve cash at the Holding Company. The Company expects that the Board will also elect to defer future payments. See Notes 11 and 16 to our consolidated financial statements for additional information regarding deferral of these payments. The Holding Company has a signed agreement to sell two parcels of land adjacent to the Company’s Fairlawn headquarters for approximately $535,000. Proceeds from the sale, which is expected to close by the third quarter of 2011, will improve the cash position of the Holding Company. On an annual basis, deferral of the interest and dividend payments and proceeds from the sale would increase cash available to meet operating expenses by approximately $1.1 million and extend the cash coverage to approximately two years.

Banking regulations limit the amount of dividends that can be paid to the Holding Company by CFBank without prior approval of the OTS. Generally, financial institutions may pay dividends without prior approval as long as the dividend is not more than the total of the current calendar year-to-date earnings plus any earnings from the previous two years not already paid out in dividends, and as long as the financial institution remains well capitalized after the dividend payment. As of December 31, 2010, CFBank may pay no dividends to the Holding Company without OTS approval. Future dividend payments by CFBank to the Holding Company would be based on future earnings or the approval of the OTS. The Holding Company is significantly dependent on dividends from CFBank to provide the liquidity necessary to meet its obligations. In view of the uncertainty surrounding CFBank’s future ability to pay dividends to the Holding Company, management is exploring additional sources of funding to support its working capital needs. In the current economic environment, however, there can be no assurance that it will be able to do so or, if it can, what the cost of doing so will be.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT      |       page 27

Liquidity and Capital Resources (continued)

At December 31, 2010, CFBank exceeded all of its regulatory capital requirements to be considered well-capitalized. Tier 1 capital level was $18.0 million, or 6.6% of adjusted total assets, which exceeded the required level of $13.6 million, or 5.0%. Tier 1 risk-based capital level was $18.0 million, or 9.4% of risk-weighted assets, which exceeded the required level of $11.5 million, or 6.0%. Risk-based capital was $20.4 million, or 10.7% of risk-weighted assets, which exceeded the required level of $19.1 million, or 10.0%.

See Note 18 to our consolidated financial statements for more information regarding regulatory capital matters.

Impact of Inflation

The financial statements and related data presented herein have been prepared in accordance with U.S. generally accepted accounting principles, which presently require us to measure financial position and results of operations primarily in terms of historical dollars. Changes in the relative value of money due to inflation are generally not considered. In our opinion, changes in interest rates affect our financial condition to a far greater degree than changes in the inflation rate. While interest rates are generally influenced by changes in the inflation rate, they do not move concurrently. Rather, interest rate volatility is based on changes in the expected rate of inflation, as well as changes in monetary and fiscal policy. A financial institution’s ability to be relatively unaffected by changes in interest rates is a good indicator of its ability to perform in a volatile economic environment. In an effort to protect performance from the effects of interest rate volatility, we review interest rate risk frequently and take steps to minimize detrimental effects on profitability.

Critical Accounting Policies

We follow financial accounting and reporting policies that are in accordance with U.S. generally accepted accounting principles and conform to general practices within the banking industry. These policies are presented in Note 1 to our consolidated financial statements. Some of these accounting policies are considered to be critical accounting policies, which are those policies that are both most important to the portrayal of the Company’s financial condition and results of operations, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Application of assumptions different than those used by management could result in material changes in our financial condition or results of operations. These policies, current assumptions and estimates utilized, and the related disclosure of this process, are determined by management and routinely reviewed with the Audit Committee of the Board of Directors. We believe that the judgments, estimates and assumptions used in the preparation of the consolidated financial statements were appropriate given the factual circumstances at the time.

We have identified accounting policies that are critical accounting policies, and an understanding of these policies is necessary to understand our financial statements. The following discussion details the critical accounting policies and the nature of the estimates made by management.

Determination of the allowance for loan losses. The ALLL represents management’s estimate of probable incurred credit losses in the loan portfolio at each balance sheet date. The allowance consists of general and specific components. The general component covers loans not classified as impaired and is based on historical loss experience, adjusted for current factors. Current factors considered include, but are not limited to, management’s oversight of the portfolio, including lending policies and procedures; nature, level and trend of the portfolio, including past due and nonperforming loans, loan concentrations, loan terms and other characteristics; current economic conditions and outlook; collateral values; and other items. The specific component of the ALLL relates to loans that are individually classified as impaired. Nonperforming loans exceeding policy thresholds are regularly reviewed to identify impairment. A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to

page 28       |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Critical Accounting Policies (continued)

the contractual terms of the loan agreement. Determining whether a loan is impaired and whether there is an impairment loss requires judgment and estimates, and the eventual outcomes may differ from estimates made by management. The determination of whether a loan is impaired includes review of historical data, judgments regarding the ability of the borrower to meet the terms of the loan, an evaluation of the collateral securing the loan and estimation of its value, net of selling expenses, if applicable, various collection strategies and other factors relevant to the loan or loans. Impairment is measured based on the fair value of collateral, less costs to sell, if the loan is collateral dependent, or alternatively, the present value of expected future cash flows discounted at the loan’s effective rate, if the loan is not collateral dependent. When the selected measure is less than the recorded investment in the loan, an impairment loss is recorded. As a result, determining the appropriate level for the ALLL involves not only evaluating the current financial situation of individual borrowers or groups of borrowers, but also current predictions about future events that could change before an actual loss is determined. Based on the variables involved and the fact that management must make judgments about outcomes that are inherently uncertain, the determination of the ALLL is considered to be a critical accounting policy. Additional information regarding this policy is included in the previous section titled “Financial Condition — Allowance for loan losses” and in Notes 1, 3 and 5 to our consolidated financial statements.

Valuation of the deferred tax asset. Another critical accounting policy relates to valuation of the deferred tax asset, which includes the benefit of loss carryforwards which expire in varying amounts in future periods. At year-end 2010, the Company had net operating loss carryforwards of approximately $13.2 million which expire at various dates from 2024 to 2030. Realization is dependent on generating sufficient future taxable income prior to expiration of the loss carryforwards. The Company’s net losses in 2009 and 2010 reduced management’s near term estimate of future taxable income, and reduced to zero the amount of the net deferred tax asset considered realizable. At December 31, 2010 the valuation allowance totaled $6.7 million, compared to $4.3 million at December 31, 2009. Additional information regarding this policy is included in Notes 1 and 13 to our consolidated financial statements.

Fair value of financial instruments. Another critical accounting policy relates to fair value of financial instruments, which are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. Additional information is included in Notes 1 and 5 to our consolidated financial statements.

Market Prices and Dividends Declared

The common stock of Central Federal Corporation trades on the Nasdaq^® Capital Market under the symbol “CFBK.” As of December 31, 2010, there were 4,127,798 shares of common stock outstanding and 518 record holders.

The following table shows the quarterly reported high and low sales prices of the common stock during 2010 and 2009. There were no dividends declared during 2010 or 2009.

	HIGH		LOW
2010
First quarter	$	1.87	$	0.83
Second quarter		2.00		1.19
Third quarter		1.70		0.88
Fourth quarter		1.25		0.45
2009
First quarter	$	3.45	$	2.00
Second quarter		3.50		2.26
Third quarter		3.00		1.85
Fourth quarter		2.60		1.05

As a participant in the TARP Capital Purchase Program and pursuant to an agreement with the OTS, the Company is subject to certain terms and conditions, including limits on the payment of dividends on the Company’s common stock. Additional information is contained in the section titled “Financial Condition — Stockholders’ equity” and in Note 16 to our consolidated financial statements.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT      |       page 29

FINANCIAL STATEMENTS

Management’s Report On Internal Control Over Financial Reporting

The management of Central Federal Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on our assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2010.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

This annual report does not contain an audit report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to audit by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Eloise L. Mackus
Chief Executive Officer,
General Counsel and Corporate Secretary

Therese Ann Liutkus, CPA
President, Treasurer and Chief Financial Officer

March 30, 2011

page 30      |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

FINANCIAL STATEMENTS

Report Of Independent Registered Public Accounting Firm On Consolidated Financial Statements

The Board of Directors and Stockholders
Central Federal Corporation
Fairlawn, Ohio

We have audited the accompanying consolidated balance sheets of Central Federal Corporation as of December 31, 2010 and 2009 and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Central Federal Corporation as of December 31, 2010 and 2009 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.

Crowe Horwath LLP

Cleveland, Ohio
March 30, 2011

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 31

Consolidated Balance Sheets

	DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	2010			2009
Assets
Cash and cash equivalents	$	34,275		$	2,973
Securities available for sale		28,798			21,241
Loans held for sale		1,953			1,775
Loans, net of allowance of $9,758 and $7,090		190,767			232,003
Federal Home Loan Bank stock		1,942			1,942
Loan servicing rights		57			88
Foreclosed assets, net		4,509			—
Premises and equipment, net		6,016			7,003
Assets held for sale		535			—
Other intangible assets		129			169
Bank owned life insurance		4,143			4,017
Accrued interest receivable and other assets		2,108			2,531
	$	275,232		$	273,742
Liabilities and Stockholders’ Equity
Deposits
Noninterest bearing	$	20,392		$	17,098
Interest bearing		206,989			193,990
Total deposits		227,381			211,088
Short-term Federal Home Loan Bank advances		—			2,065
Long-term Federal Home Loan Bank advances		23,942			29,942
Advances by borrowers for taxes and insurance		213			161
Accrued interest payable and other liabilities		2,552			2,104
Subordinated debentures		5,155			5,155
Total liabilities		259,243			250,515
Stockholders’ equity
Preferred stock, Series A, $.01 par value; $7,225 aggregate liquidation value, 1,000,000 shares authorized; 7,225 shares issued		7,069			7,021
Common stock, $.01 par value; shares authorized; 12,000,000, shares issued: 4,686,331 in 2010 and 4,658,120 in 2009		47			47
Common stock warrant		217			217
Additional paid-in capital		27,542			27,517
Accumulated deficit		(16,313	)		(9,034	)
Accumulated other comprehensive income		672			704
Treasury stock, at cost; 558,533 shares		(3,245	)		(3,245	)
Total stockholders’ equity		15,989			23,227
	$	275,232		$	273,742

(See accompanying notes.)

page 32      |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Consolidated Statements of Operations

	YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	2010			2009			2008
Interest and dividend income
Loans, including fees	$	11,813		$	13,197		$	15,193
Securities		658			1,120			1,329
Federal Home Loan Bank stock dividends		85			97			107
Federal funds sold and other		61			32			8
		12,617			14,446			16,637
Interest expense
Deposits		3,318			4,723			6,210
Short-term Federal Home Loan Bank advances and other debt		—			1			541
Long-term Federal Home Loan Bank advances and other debt		698			1,027			850
Subordinated debentures		167			196			334
		4,183			5,947			7,935
Net interest income		8,434			8,499			8,702
Provision for loan losses		8,468			9,928			917
Net interest income (loss) after provision for loan losses		(34	)		(1,429	)		7,785
Noninterest income
Service charges on deposit accounts		294			345			544
Net gains on sales of loans		866			642			159
Loan servicing fees, net		21			36			34
Net gains on sales of securities		468			—			54
Earnings on bank owned life insurance		126			125			123
Gain on acquisition		—			208			—
Other		19			21			34
		1,794			1,377			948
Noninterest expense
Salaries and employee benefits		4,211			4,166			4,058
Occupancy and equipment		203			481			485
Data processing		625			616			687
Franchise taxes		338			346			308
Professional fees		995			769			558
Director fees		137			108			136
Postage, printing and supplies		151			162			159
Advertising and promotion		107			52			45
Telephone		106			103			91
Loan expenses		83			82			20
Foreclosed assets, net		4			(1	)		(3	)
Depreciation		508			483			683
FDIC premiums		581			541			86
Amortization of intangibles		40			6			—
Other		343			348			436
		8,432			8,262			7,749
Income (loss) before income taxes		(6,672	)		(8,314	)		984
Income tax expense		198			1,577			261
Net income (loss)		(6,870	)		(9,891	)		723
Preferred stock dividends and accretion of discount on preferred stock		(410	)		(407	)		(29	)
Net income (loss) available to common stockholders	$	(7,280	)	$	(10,298	)	$	694
Earnings (loss) per common share:
Basic	$	(1.77	)	$	(2.51	)	$	0.16
Diluted	$	(1.77	)	$	(2.51	)	$	0.16

(See accompanying notes.)

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 33

Consolidated Statements of Changes in Stockholders’ Equity

	YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
											RETAINED			ACCUMULATED
						COMMON					EARNINGS			OTHER					TOTAL
	PREFERRED			COMMON		STOCK		ADDITIONAL			(ACCUMULATED			COMPREHENSIVE		TREASURY			STOCKHOLDERS’
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	STOCK			STOCK		WARRANT		PAID-IN CAPITAL			DEFICIT)			INCOME		STOCK			EQUITY
Balance at January 1, 2008	$	—		$	46	$	—	$	27,348		$	1,411		$	187	$	(1,613	)	$	27,379
Comprehensive income:
Net income												723								723
Change in unrealized gain (loss) on securities available for sale, net of reclassification and tax effects															163					163
Total comprehensive income																				886
Issuance of 7,225 shares preferred stock and 336,568 common stock warrants, net of offering costs of $22		6,986					217													7,203
Accretion of discount on preferred stock		3										(3	)							—
Issuance of 31,750 stock based incentive plan shares					1															1
Release of 23,417 stock based incentive plan shares, net of forfeitures									127											127
Tax benefits from dividends on unvested stock based incentive plan shares									3											3
Tax effect from vesting of stock based incentive plan shares									(45	)										(45	)
Stock option expense, net of forfeitures									22											22
Purchase of 365,000 treasury shares																	(1,632	)		(1,632	)
Preferred stock dividends												(26	)							(26	)
Cash dividends declared on common stock ($0.20 per share)												(843	)							(843	)
Balance at December 31, 2008		6,989			47		217		27,455			1,262			350		(3,245	)		33,075
Comprehensive loss:
Net loss												(9,891	)							(9,891	)
Change in unrealized gain (loss) on securities available for sale, net of reclassification and tax effects															354					354
Total comprehensive loss																				(9,537	)
Preferred stock offering costs		(13	)																	(13	)
Accretion of discount on preferred stock		45										(45	)							—
Release of 11,921 stock based incentive plan shares, net of forfeitures									55			2								57
Tax benefits from dividends on unvested stock based incentive plan shares									1											1
Tax effect from vesting of stock based incentive plan shares									(20	)										(20	)
Stock option expense, net of forfeitures									26											26
Preferred stock dividends												(362	)							(362	)
Balance at December 31, 2009	$	7,021		$	47	$	217	$	27,517		$	(9,034	)	$	704	$	(3,245	)	$	23,227

(Continued on next page.)

page 34       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Consolidated Statements of Changes in Stockholders’ Equity (continued)

	YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
									RETAINED			ACCUMULATED
					COMMON				EARNINGS			OTHER						TOTAL
	PREFERRED		COMMON		STOCK		ADDITIONAL		(ACCUMULATED			COMPREHENSIVE			TREASURY			STOCKHOLDERS’
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	STOCK		STOCK		WARRANT		PAID-IN CAPITAL		DEFICIT)			INCOME			STOCK			EQUITY
Balance at January 1, 2010	$	7,021	$	47	$	217	$	27,517	$	(9,034	)	$	704		$	(3,245	)	$	23,227
Comprehensive loss:
Net loss										(6,870	)								(6,870	)
Change in unrealized gain (loss) on securities available for sale, net of reclassification and tax effects													(32	)					(32	)
Total comprehensive loss																			(6,902	)
Accretion of discount on preferred stock		48								(48	)								—
Release of 2,817 stock based incentive plan shares, net of forfeitures								5		1									6
Tax effect from vesting of stock based incentive plan shares								19											19
Stock option expense, net of forfeitures								1											1
Preferred stock dividends										(362	)								(362	)
Balance at December 31, 2010	$	7,069	$	47	$	217	$	27,542	$	(16,313	)	$	672		$	(3,245	)	$	15,989

(See accompanying notes.)

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 35

Consolidated Statements of Cash Flows

	YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	2010			2009			2008
Net income (loss)	$	(6,870	)	$	(9,891	)	$	723
Adjustments to reconcile net income (loss) to net cash from operating activities:
Provision for loan losses		8,468			9,928			917
Valuation (gain) loss on mortgage servicing rights		1			(4	)		3
Depreciation		508			483			683
Amortization, net		509			(38	)		(55	)
Net realized gain on sales of securities		(468	)		—			(54	)
Originations of loans held for sale		(79,506	)		(66,024	)		(26,973	)
Proceeds from sale of loans held for sale		80,192			63,312			27,306
Net gain on sale of loans		(866	)		(642	)		(159	)
Valuation loss on loans transferred from held for sale to portfolio		—			5			—
Net gain on acquisition		—			(208	)		—
Loss (gain) on disposal of premises and equipment		1			—			(1	)
Loss (gain) on sale of foreclosed assets		—			(1	)		(22	)
FHLB stock dividends		—			—			(81	)
Stock-based compensation expense		7			83			149
Change in deferred income taxes (net of change in valuation allowance)		198			1,579			314
Net change in:
Bank owned life insurance		(126	)		(125	)		(123	)
Accrued interest receivable and other assets		632			(542	)		(262	)
Accrued interest payable and other liabilities		367			(442	)		(457	)
Net cash from operating activities		3,047			(2,527	)		1,908
Cash flows from investing activities
Available-for-sale securities:
Sales		13,632			—			2,064
Maturities, prepayments and calls		7,173			6,419			10,103
Purchases		(28,599	)		(3,698	)		(6,917	)
Loan originations and payments, net		18,086			(4,403	)		(4,401	)
Loans purchased		—			(2,231	)		—
Proceeds from sale of portfolio loans		10,073			—			—
Proceeds from redemption of FHLB stock		—			167			—
Purchase of FHLB stock		—			—			(65	)
Additions to premises and equipment		(56	)		(40	)		(212	)
Proceeds from the sale of premises and equipment		—			1			1
Proceeds from the sale of foreclosed assets		—			28			231
Net cash used in acquisition		—			(675	)		—
Net cash from investing activities	$	20,309		$	(4,432	)	$	804

(Continued on next page.)

page 36       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Consolidated Statements of Cash Flows (continued)

	YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	2010			2009			2008
Cash flows from financing activities
Net change in deposits	$	16,230		$	3,363		$	13,247
Net change in short-term borrowings from the FHLB and other debt		(2,065	)		(3,785	)		(32,400	)
Proceeds from long-term FHLB advances and other debt		—			17,942			14,000
Repayments on long-term FHLB advances and other debt		(6,000	)		(11,200	)		(2,000	)
Net change in advances by borrowers for taxes and insurance		52			(6	)		13
Cash dividends paid on common stock		—			(205	)		(860	)
Cash dividends paid on preferred stock		(271	)		(341	)		—
Proceeds from issuance of preferred stock and common stock warrant		—			—			7,203
Costs associated with issuance of preferred stock		—			(13	)		—
Purchase of treasury shares		—			—			(1,632	)
Net cash from financing activities		7,946			5,755			(2,429	)
Net change in cash and cash equivalents		31,302			(1,204	)		283
Beginning cash and cash equivalents		2,973			4,177			3,894
Ending cash and cash equivalents	$	34,275		$	2,973		$	4,177
Supplemental cash flow information:
Interest paid	$	4,152		$	6,095		$	7,340
Income taxes paid		(25	)		—			51
Supplemental noncash disclosures:
Transfers from loans to foreclosed assets	$	4,509		$	174		$	123
Premises and equipment transferred to assets held for sale		535			—			—
Loans issued to finance the sale of repossessed assets		—			162			—
Loans transferred from held for sale to portfolio		—			1,852			—

(See accompanying notes.)

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

NOTE 1 — Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation: The consolidated financial statements include Central Federal Corporation, its wholly-owned subsidiaries, CFBank, Ghent Road, Inc., and Smith Ghent LLC, together referred to as “the Company”. Ghent Road, Inc. was formed in 2006 and owns real property. Prior to October 2009, the Company owned a one-third interest in Smith Ghent LLC, which owns the Company’s headquarters in Fairlawn, Ohio. The Company purchased the remaining two-thirds interest in October 2009. Intercompany transactions and balances are eliminated in consolidation.

CFBank provides financial services through its four full-service banking offices in Fairlawn, Calcutta, Wellsville and Worthington, Ohio. Its primary deposit products are checking, savings, money market and term certificate accounts, and its primary lending products are commercial and residential mortgages and commercial and installment loans. Substantially all loans are secured by specific items or combinations of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. There are no significant concentrations of loans to any one industry or customer. However, the customers’ ability to repay their loans is dependent on the real estate and general economic conditions in the customers’ geographic areas.

Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles (GAAP), management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for loan losses (ALLL), deferred tax assets, and fair values of financial instruments are particularly subject to change.

Cash Flows: Cash and cash equivalents include cash, deposits with other financial institutions with maturities fewer than 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits in other financial institutions and borrowings with original maturities under 90 days.

Securities: Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as available for sale when they might be sold before maturity. Equity securities with readily determinable fair values are classified as available for sale. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or will more likely than not be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: 1) OTTI related to credit loss, which must be recognized in the income statement and 2) OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings.

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at fair value, as determined by outstanding commitments from investors. The company adopted the option to account for loans held for sale at fair value for all loans originated beginning January 1, 2010.

Mortgage loans held for sale are generally sold with servicing rights released. The carrying value of mortgage loans sold is reduced by the amount allocated to the servicing right when mortgage loans held for sale are sold with servicing rights retained. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

page 38       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 1— Summary of Significant Accounting Policies (continued)

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, adjusted for purchase premiums and discounts, deferred loan fees and costs, and an ALLL. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. The recorded investment in loans includes accrued interest receivable. Commercial loans include loans to businesses collateralized by business assets. Single-family residential real estate loans include loans to individuals collateralized by one- to four-family residences. Multi-family residential real estate loans include loans to individuals and companies collateralized by multi-family residences, including apartment buildings and condominiums. Commercial real estate loans include loans to individuals and businesses collateralized by owner and non-owner occupied properties and land. Construction loans include loans to individuals and companies for the construction of residential and commercial properties. Consumer loans include home equity lines of credit, both originated by CFBank and purchased, and other types of consumer installment loans and credit cards.

The accrual of interest income on commercial loans, single-family residential real estate loans, multi-family residential real estate loans, commercial real estate loans, construction loans and home equity lines of credit is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Other consumer loans are typically charged off no later than 90 days past due. Past due status is based on the contractual terms of the loan for all portfolio segments.

Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans.

For all classes of loans, interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Commercial, multi-family residential real estate loans and commercial real estate loans placed on nonaccrual status are individually classified as impaired loans. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

CFBank’s charge-off policy for commercial loans, single-family residential real estate loans, multi-family residential real estate loans, commercial real estate loans, construction loans and home equity lines of credit requires management to establish a specific reserve or record a charge-off as soon as it is apparent that the borrower is troubled and there is, or likely will be a collateral shortfall related to the estimated value of the collateral securing the loan. For all portfolio segments, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful.

Concentration of Credit Risk: Most of the Company’s primary business activity is with customers located within the Ohio counties of Columbiana, Franklin, Summit and contiguous counties. Therefore, the Company’s exposure to credit risk is significantly affected by changes in the economies within these counties. Although these counties are the Company’s primary market area for loans, the Company originates residential and commercial real estate loans throughout the United States.

Allowance for Loan Losses: The ALLL is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired.

A loan is impaired when, based on current information and events, it is probable that CFBank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 39

NOTE 1 — Summary of Significant Accounting Policies (continued)

All classes of loans within the commercial, multi-family residential and commercial real estate segments, regardless of size, and all other classes of loans over $500 are individually evaluated for impairment when they are 90 days past due, or earlier than 90 days past due if information regarding the payment capacity of the borrower indicates that payment in full according to the loan terms is doubtful. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance loans, such as consumer and single-family residential real estate loans, are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures. Troubled debt restructurings are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructurings that subsequently default, the amount of reserve is determined in accordance with the accounting policy for the ALLL.

The general component covers non-impaired loans of all classes and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the most recent year. This actual loss experience is supplemented with other economic factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

The following portfolio segments have been identified: commercial loans; single-family mortgage loans; multi-family residential real estate loans; commercial real estate loans; construction loans; home equity lines of credit; and other consumer loans.

A description of each segment of the loan portfolio, along with the risk characteristics of each segment is included below:

Commercial loans: We make commercial loans to businesses generally located within our primary market area. Those loans are generally secured by business equipment, inventory, accounts receivable and other business assets. In underwriting commercial loans, we consider the net operating income of the company, the debt service ratio and the financial strength, expertise and credit history of the business owners and/or guarantors. Because payments on commercial loans are dependent on successful operation of the business enterprise, repayment of such loans may be subject to a greater extent to adverse conditions in the economy. We seek to mitigate these risks through underwriting policies which require such loans to be qualified at origination on the basis of the enterprise’s financial performance and the financial strength of the business owners and/or guarantors.

Single-family mortgage loans: Single-family mortgage loans include permanent conventional mortgage loans secured by single-family residences located within and outside of our primary market area. Credit approval for residential real estate loans requires demonstration of sufficient income to repay the principal and interest and the real estate taxes and insurance, stability of employment and an established credit record. Our policy is to originate single-family residential mortgage loans for portfolio in amounts up to 85% of the lower of the appraised value or the purchase price of the property securing the loan, without requiring private mortgage insurance. Loans in excess of 85% of the lower of the appraised value or purchase price of the property securing the loan require private mortgage insurance. CFBank has not engaged in subprime lending, used option adjustable-rate mortgage products or made loans with initial teaser rates.

Multi-family residential real estate loans: We originate multi-family residential real estate loans that are secured by apartment buildings, condominiums and multi-family residential houses generally located in our primary market area. Underwriting policies provide that multi-family residential real estate loans may be made in amounts up to 75% of the lower of the appraised value or purchase price of the property. In underwriting multi-family residential real estate loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed and adjustable rate loans. Fixed rates are generally limited to three to five years, at which time they convert to adjustable rate loans. Because payments on loans secured by multi-family residential properties are dependent on successful operation or management of the properties, repayment of multi-family residential real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy. Adjustable rate multi-family residential real estate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable rate multi-family residential real estate loans generally do not contain periodic and lifetime caps on interest rate changes. We seek to minimize the additional risk presented by adjustable rate multi-family residential real estate loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

page 40       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 1 — Summary of Significant Accounting Policies (continued)

Commercial real estate loans: We originate commercial real estate loans that are secured by properties used for business purposes, such as manufacturing facilities, office buildings or retail facilities generally located within our primary market area. Underwriting policies provide that commercial real estate loans may be made in amounts up to 75% of the lower of the appraised value or purchase price of the property. In underwriting commercial real estate loans, we consider the appraised value and net operating income of the property, the debt service ratio and the property owner’s and/or guarantor’s financial strength, expertise and credit history. We offer both fixed and adjustable rate loans. Fixed rates are generally limited to three to five years, at which time they convert to adjustable rate loans. Because payments on loans secured by commercial real estate properties are dependent on successful operation or management of the properties, repayment of commercial real estate loans may be subject to a greater extent to adverse conditions in the real estate market or the economy. Adjustable rate commercial real estate loans generally pose credit risks not inherent in fixed-rate loans, primarily because as interest rates rise, the borrowers’ payments rise, increasing the potential for default. Additionally, adjustable rate commercial real estate loans generally do not contain periodic and lifetime caps on interest rate changes. We seek to minimize the additional risk presented by adjustable rate commercial real estate loans through underwriting criteria that require such loans to be qualified at origination with sufficient debt coverage ratios under increasing interest rate scenarios.

Construction loans: We originate construction loans to finance the construction of residential and commercial properties generally in our primary market area. Construction loans are fixed or adjustable-rate loans which may convert to permanent loans with maturities of up to 30 years. Our policies provide that construction loans may be made in amounts up to 75% of the appraised value of the property, and an independent appraisal of the property is required. Loan proceeds are disbursed in increments as construction progresses and as inspections warrant, and regular inspections are required to monitor the progress of construction. In underwriting construction loans, we consider the property owner’s and/or guarantor’s financial strength, expertise and credit history. Construction financing is considered to involve a higher degree of credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan is dependent largely upon the accuracy of the initial estimate of the property’s value at completion of construction or development compared to the estimated cost (including interest) of construction. If the estimate of value proves to be inaccurate, we may be confronted with a project, when completed, having a value which is insufficient to assure full repayment. We attempt to reduce such risks on construction loans through inspections of construction progress on the property and by requiring personal guarantees and reviewing current personal financial statements and tax returns, as well as other projects of the developer.

Home equity lines of credit: Home equity lines of credit include both loans we originate for portfolio and purchased loans. We originate home equity lines of credit to customers generally in our primary market area. Home equity lines of credit are variable rate loans and the interest rate adjusts monthly at various margins above the prime rate of interest as disclosed in The Wall Street Journal. The margin is based on certain factors including the loan balance, value of collateral, election of auto-payment, and the borrower’s FICO^® score. The amount of the line is based on the borrower’s credit, income and equity in the home. When combined with the balance of the prior mortgage liens, these lines generally may not exceed 89.9% of the appraised value of the property at the time of the loan commitment. The lines are secured by a subordinate lien on the underlying real estate and are, therefore, vulnerable to declines in property values in the geographic areas where the properties are located. Credit approval for home equity lines of credit requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral. Collectibility of home equity lines of credit are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. In 2005 and 2006, we purchased home equity lines of credit collateralized by properties located throughout the United States. The purchased home equity lines of credit present higher risk than the home equity lines of credit we originate for our portfolio as they include properties in geographic areas that have experienced significant declines in housing values, such as California, Florida and Virginia. The collateral values associated with certain loans in these states have declined by up to 60% since these loans were originated in 2005 and 2006, and as a result, some loan balances exceed collateral values. We continue to monitor collateral values and borrower FICO^® scores on both purchased and portfolio loans and, when the situation warrants, have frozen the lines of credit.

Other consumer loans: We originate other consumer loans, including closed-end home equity, home improvement, auto and credit card loans to consumers generally in our primary market area. Credit approval for other consumer loans requires income sufficient to repay principal and interest due, stability of employment, an established credit record and sufficient collateral for secured loans. Consumer loans typically have shorter terms and lower balances with higher yields as compared to real estate mortgage loans, but generally carry higher risks of default. Consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 41

NOTE 1 — Summary of Significant Accounting Policies (continued)

During the quarter ended September 30, 2009, management updated its methodology for calculating the general component of the ALLL to improve the analysis of historical loss rates. Given the short nature of CFBank’s commercial, commercial real estate and multi-family residential real estate loan loss history, and the economic environment, the new methodology improved management’s ability to estimate probable incurred credit losses in the portfolio. The general ALLL is calculated based on CFBank’s loan balances and actual historical payment default rates. For loans with no actual payment default history, industry estimates of payment default rates are applied based on loan type and the state where the collateral is located. Results are then scaled based on CFBank’s internal loan risk ratings, and industry loss rates are applied based on loan type. Industry information is modified based on management’s judgment regarding items specific to CFBank, and primarily include the level and trend of past due and nonaccrual loans and the current economic outlook. Industry information is adjusted by comparing the historical payment default rates (bank and industry) against the current rate of payment default to determine if the current level is high or low compared to historical levels, or rising or falling in light of the current economic outlook. The adjustment process is dynamic, as current experience adds to the historical information, and economic conditions and outlook migrate over time.

Servicing Rights: When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing assets are evaluated for impairment based upon the fair value of the rights as compared to carrying amount. Impairment is determined by stratifying rights into groupings based on predominant risk characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual grouping, to the extent that fair value is less than the carrying amount. If it is later determined that all or a portion of the impairment no longer exists for a particular grouping, a reduction of the allowance may be recorded as an increase to income. Changes in valuation allowances are reported with loan servicing fees, net on the income statement. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the income statement as loan servicing fees, net is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal, or a fixed amount per loan, and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income. Loan servicing fees, net totaled $21, $36 and $34 for the years ended December 31, 2010, 2009 and 2008, respectively. Late fees and ancillary fees related to loan servicing are not material.

Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Foreclosed Assets: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 3 to 40 years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from 2 to 25 years.

Federal Home Loan Bank (FHLB) stock: CFBank is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Bank Owned Life Insurance: CFBank purchased life insurance policies on certain directors and employees in 2002. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Other Intangible Assets: Other intangible assets consist of identified intangibles from the purchase of the remaining two-thirds interest in Smith Ghent LLC in October 2009.

page 42       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 1 — Summary of Significant Accounting Policies (continued)

The intangible asset was initially measured at fair value and is being amortized on a straight-line method over the estimated life of 4.5 years.

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Derivatives: Derivative financial instruments are recognized as assets or liabilities at fair value. The Company’s derivatives consist mainly of interest rate swap agreements, which are used as part of its asset liability management to help manage interest rate risk. The Company does not use derivatives for trading purposes. The derivative transactions are considered instruments with no hedging designation, otherwise known as stand-alone derivatives. Changes in the fair value of the derivatives are reported currently in earnings, as other noninterest income.

Mortgage Banking Derivatives: Commitments to fund mortgage loans to be sold into the secondary market, otherwise known as interest rate locks and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are based on anticipated gains on the underlying loans. Changes in the fair values of these derivatives are included in net gains on sales of loans.

Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to directors and employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the required service period for each separately vesting portion of the award.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance of $4,312 was recorded in 2009 to reduce the carrying amount of the Company’s net deferred tax asset to zero. See Note 13 — Income Taxes.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The Company recognizes interest related to income tax matters as interest expense and penalties related to income tax matters as other noninterest expense.

Retirement Plans: Pension expense is the amount of annual contributions to the multi-employer contributory trusteed pension plan. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Supplemental retirement plan expense allocates the benefits over years of service.

Earnings (Loss) Per Common Share: Basic earnings (loss) per common share is net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the period. All outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends are considered participating securities for this calculation. Diluted earnings (loss) per common share includes the dilutive effect of additional potential common shares issuable under stock options and the common stock warrant.

Comprehensive Income (Loss): Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses on securities available for sale, which are also recognized as a separate component of equity.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements. Cash on deposit with the FHLB includes $800 pledged as collateral for FHLB advances.

Equity: Treasury stock is carried at cost. The carrying value of preferred stock and the common stock warrant is based on allocation of issuance proceeds, net of issuance costs, in proportion to their relative fair values. Preferred stock is carried net of the discount established through the allocation of proceeds.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 43

NOTE 1 — Summary of Significant Accounting Policies (continued)

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by CFBank to the Holding Company or by the Holding Company to stockholders. On December 5, 2008, the Company issued 7,225 shares of preferred stock to the United States Department of the Treasury (U.S. Treasury) under the Troubled Asset Relief Program (TARP) Capital Purchase Program. While that preferred stock remains outstanding, dividends on the Company’s common stock are limited to a quarterly cash dividend of a maximum of $.05 per share. In addition, while any dividends on the preferred stock remain unpaid, no dividends may be declared or paid on common stock. Pursuant to an agreement with the OTS effective May 2010, the Company may not declare, make, or pay any cash dividends (including dividends on the Preferred Stock, or its common stock) or any other capital distributions, or purchase, repurchase, or redeem, or commit to purchase, repurchase or redeem any equity stock without the prior non-objection of the OTS. See Note 16 — Preferred Stock.

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 5 — Fair Value. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect these estimates.

Operating Segments: While the chief decision-makers monitor the revenue streams of the Company’s various products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Operating results are not reviewed by senior management to make resource allocation or performance decisions.

Accordingly, all of the financial service operations are considered by management to be aggregated in one reportable operating segment.

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on prior year net income (loss) or stockholders’ equity.

Adoption of New Accounting Standards: In June 2009, the Financial Accounting Standards Board (FASB) issued guidance on accounting for transfers of financial assets. This guidance amends previous guidance relating to the transfers of financial assets and eliminates the concept of a qualifying special purpose entity. This guidance must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. This guidance must be applied to transfers occurring on or after the effective date. Additionally, on and after the effective date, the concept of a qualifying special-purpose entity is no longer relevant for accounting purposes. Therefore, formerly qualifying special-purpose entities should be evaluated for consolidation by reporting entities on and after the effective date in accordance with the applicable consolidation guidance. Additionally, the disclosure provisions of this guidance were also amended and apply to transfers that occurred both before and after the effective date of this guidance. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

page 44       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 2 — Securities

The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at December 31, 2010 and 2009 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss):

			GROSS		GROSS
	AMORTIZED		UNREALIZED		UNREALIZED		FAIR
	COST		GAINS		LOSSES		VALUE
2010
Issued by U.S. government-sponsored entities and agencies:
Mortgage-backed securities — residential	$	1,884	$	223	$	—	$	2,107
Collateralized mortgage obligations		26,242		463		14		26,691
Total	$	28,126	$	686	$	14	$	28,798
2009
Issued by U.S. government-sponsored entities and agencies:
Mortgage-backed securities — residential	$	5,171	$	390	$	—	$	5,561
Collateralized mortgage obligations		13,551		479		—		14,030
Collateralized mortgage obligations issued by private issuers		1,635		15		—		1,650
Total	$	20,357	$	884	$	—	$	21,241

There was no other-than-temporary impairment recognized in accumulated other comprehensive income (loss) for securities available for sale at December 31, 2010 or 2009.

The proceeds from sales and calls of securities and the associated gains in 2010 and 2008 are listed below:

	2010		2009		2008
Proceeds	$	13,632	$	—	$	2,064
Gross gains		468		—		54

The tax expense related to the gains was $159 and $18 in 2010 and 2008, respectively.

At year-end 2010 and 2009, there were no debt securities contractually due at a single maturity date. The amortized cost and fair value of mortgage-backed securities and collateralized mortgage obligations, which are not due at a single maturity date, totaled $28,126 and $28,798 at December 31, 2010, and $20,357 and $21,241 at December 31, 2009.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 45

NOTE 2 — Securities (continued)

Fair value of securities pledged was as follows:

	2010		2009
Pledged as collateral for:
FHLB advances	$	10,657	$	11,045
Public deposits		4,210		4,038
Customer repurchase agreements		2,465		3,088
Interest-rate swaps		1,589		1,010
Total	$	18,921	$	19,181

At year-end 2010 and 2009, there were no holdings of securities of any one issuer, other than U.S. government-sponsored entities and agencies, in an amount greater than 10% of stockholders’ equity.

The following table summarizes securities with unrealized losses at December 31, 2010 aggregated by major security type and length of time in a continuous unrealized loss position. There were no securities with unrealized losses at December 31, 2009.

2010	LESS THAN 12 MONTHS				12 MONTHS OR MORE				TOTAL
			UNREALIZED				UNREALIZED				UNREALIZED
DESCRIPTION OF SECURITIES	FAIR VALUE		LOSS		FAIR VALUE		LOSS		FAIR VALUE		LOSS
Issued by U.S. government-sponsored entities and agencies:
Collateralized mortgage obligations	$	2,091	$	14	$	—	$	—	$	2,091	$	14
Total temporarily impaired	$	2,091	$	14	$	—	$	—	$	2,091	$	14

The unrealized loss at December 31, 2010 is related to one Ginnie Mae collateralized mortgage obligation, which carries the full faith and credit guarantee of the U.S. government. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell the security and it is likely that it will not be required to sell the security before its anticipated recovery, the Company does not consider this security to be other-than-temporarily impaired at December 31, 2010.

page 46       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 3 — Loans

Loans at year-end were as follows:

	2010			2009
Commercial	$	38,194		$	42,897
Real estate:
Single-family residential		23,273			29,578
Multi-family residential		35,308			37,788
Commercial		80,725			96,854
Construction		4,919			5,811
Consumer:
Home equity lines of credit		16,316			19,023
Other		1,790			7,142
Subtotal		200,525			239,093
Less: ALLL		(9,758	)		(7,090	)
Loans, net	$	190,767		$	232,003

Construction loans include $2,324 and $1,056 in single-family residential loans, and $2,595 and $4,755 in commercial real estate loans, at December 31, 2010 and 2009 respectively.

Activity in the ALLL was as follows:

	2010			2009			2008
Beginning balance	$	7,090		$	3,119		$	2,684
Provision for loan losses		8,468			9,928			917
Reclassification of ALLL on loan related commitments (1)		10			(36	)		—
Loans charged-off		(6,165	)		(6,264	)		(497	)
Recoveries		355			343			15
Ending balance	$	9,758		$	7,090		$	3,119

(1) Reclassified from (to) accrued interest payable and other liabilities in the consolidated balance sheet.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 47

NOTE 3 — Loans (continued)

The following table presents the balance in the ALLL and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2010:

			REAL ESTATE								CONSUMER
											HOME
											EQUITY
			SINGLE		MULTI-				CONSTRUC-		LINES OF
	COMMERCIAL		FAMILY		FAMILY		COMMERCIAL		TION		CREDIT		OTHER		TOTAL
ALLL:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	332	$	—	$	1,296	$	1,276	$	—	$	—	$	—	$	2,904
Collectively evaluated for impairment		1,547		241		1,224		3,443		74		303		22		6,854
Total ending allowance balance	$	1,879	$	241	$	2,520	$	4,719	$	74	$	303	$	22	$	9,758
Loans:
Individually evaluated for impairment	$	2,223	$	142	$	3,985	$	4,250	$	—	$	138	$	—	$	10,738
Collectively evaluated for impairment		35,971		23,131		31,323		76,475		4,919		16,178		1,790		189,787
Total ending loan balance	$	38,194	$	23,273	$	35,308	$	80,725	$	4,919	$	16,316	$	1,790	$	200,525

Individually impaired loans were as follows:

	2010		2009
Period-end loans with no allocated ALLL	$	1,645	$	6,964
Period-end loans with allocated ALLL		9,093		6,734
Total	$	10,738	$	13,698
Amount of the ALLL allocated	$	2,904	$	2,033

	2010		2009		2008
Average of individually impaired loans during the year	$	11,722	$	7,341	$	1,647
Interest income recognized during impairment		41		—		3

page 48       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 3 — Loans (continued)

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2010:

	UNPAID
	PRINCIPAL		RECORDED		ALLL
	BALANCE		INVESTMENT		RELOCATED
With no related allowance recorded:
Commercial	$	937	$	587	$	—
Real Estate:
Single-family residential		461		142		—
Commercial:
Owner occupied		78		78		—
Land		695		700		—
Consumer:
Home equity lines of credit:
Originated for portfolio		138		138		—
Total with no allowance recorded		2,309		1,645		—
With an allowance recorded:
Commercial		2,035		1,636		332
Real Estate:
Multi-family residential		3,996		3,985		1,296
Commercial:
Non-owner occupied		2,551		2,419		1,244
Owner occupied		1,055		1,053		32
Total with an allowance recorded		9,637		9,093		2,904
Total	$	11,946	$	10,738	$	2,904

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 49

NOTE 3 — Loans (continued)

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans:

	2010		2009
Loans past due over 90 days still on accrual:
Other consumer loans	$	—	$	14
Nonaccrual loans:
Commercial		2,084		217
Real estate:
Single-family residential		266		426
Multi-family residential		3,986		4,406
Commercial:
Non-owner occupied		2,419		1,560
Owner occupied		1,131		2,050
Land		—		3,254
Consumer:
Home equity lines of credit:
Originated for portfolio		161		529
Purchased for portfolio		—		778
Other consumer		10		—
Total nonaccrual loans		10,057		13,220
Total nonperfoming loans	$	10,057	$	13,234

Nonaccrual loans and loans past due over 90 days still on accrual include both smaller balance single-family mortgage and consumer loans that are collectively evaluated for impairment and individually classified impaired loans.

page 50       |       CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 3 — Loans (continued)

The following table presents the aging of the recorded investment in past due loans as of December 31, 2010 by class of loans:

					GREATER THAN						NONACCRUAL
	30 - 59 DAYS		60 - 89 DAYS		90 DAYS				LOANS NOT		LOANS NOT
	PAST DUE		PAST DUE		PAST DUE		TOTAL PAST DUE		PAST DUE		PAST DUE
Commercial	$	449	$	—	$	—	$	449	$	37,745	$	1,635
Real Estate:
Single-Family residential		1,104		444		266		1,814		21,459		—
Multi-Family residential		—		—		1,242		1,242		34,066		2,744
Commercial:
Non-owner occupied		1,188		—		2,419		3,607		36,687		—
Owner occupied		—		—		1,053		1,053		33,516		78
Land		—		—		—		—		5,862		—
Construction		—		—		—		—		4,919		—
Consumer:
Home equity lines of credit:
Originated for portfolio		1		54		—		55		12,850		161
Purchased for portfolio		—		—		—		—		3,411		—
Other		23		41		—		64		1,726		—
Total	$	2,765	$	539	$	4,980	$	8,284	$	192,241	$	4,618

Nonaccrual loans include loans that were modified and identified as troubled debt restructurings, where concessions had been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate, payment extensions, principal forgiveness, and other actions intended to maximize collection.

At December 31, 2010 and 2009, nonaccrual troubled debt restructurings were as follows:

	2010		2009
Commercial	$	1,597	$	217
Single-family residential real estate		142		261
Multi-family residential real estate		2,744		—
Commercial real estate		—		854
Home equity lines of credit		—		496
Total	$	4,483	$	1,828

The Company has allocated $714 and $511 of specific reserves to loans whose terms have been modified in troubled debt restructurings as of December 31, 2010 and 2009. The Company has not committed to lend additional amounts as of December 31, 2010 and 2009 to customers with outstanding loans that are classified as troubled debt restructurings.

Nonaccrual loans at December 31, 2010 and 2009 do not include $839 and $1,310, respectively, in troubled debt restructurings where customers have established a sustained period of repayment performance, loans are current according to their modified terms, and repayment of the remaining contractual payments is expected. These loans are included in total impaired loans.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Management analyzes loans individually by classifying the loans as to credit risk. This analysis includes commercial, commercial real estate, and multi-family loans. This analysis is performed on an ongoing basis. The following definitions are used for risk ratings:

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 51

NOTE 3 — Loans (continued)

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of CFBank’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that there will be some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, condition, and values, highly questionable and improbable.

Loans not meeting the criteria to be classified into one of the above categories are considered to be pass-rated loans. Loans listed as not rated are included in groups of homogeneous loans. Past due information is the primary credit indicator for groups of homogenous loans. As of December 31, 2010, and based on the most recent analysis performed, the risk category of loans by class of loans follows. There were no loans rated doubtful at December 31, 2010.

	NOT RATED		PASS		SPECIAL MENTION		SUBSTANDARD		TOTAL
Commercial	$	473	$	26,102	$	6,281	$	5,338	$	38,194
Real Estate:
Single-family residential		23,007		—		—		266		23,273
Multi-family residential		—		21,021		4,529		9,758		35,308
Commercial:
Non-owner occupied		91		27,412		4,247		8,544		40,294
Owner occupied		499		27,253		5,090		1,727		34,569
Land		1,089		1,985		—		2,788		5,862
Construction		—		4,919		—		—		4,919
Consumer:
Home equity lines of credit:
Originated for portfolio		12,744		—		—		161		12,905
Purchased for portfolio		2,572		—		839		—		3,411
Other		1,780		—		—		10		1,790
Total	$	42,255	$	108,692	$	20,986	$	28,592	$	200,525

Management’s loan review, assignment of risk ratings and classification of assets includes the identification of substandard loans where accrual of interest continues because the loans are under 90 days delinquent and/or the loans are well secured, a complete documentation review had been performed, and the loans are in the active process of being collected, but the loans exhibit some type of weakness that could lead to nonaccrual status in the future. At December 31, 2010, in addition to the nonperforming loans discussed previously, nine commercial loans totaling $3,250, eight commercial real estate loans totaling $9,504 and six multi-family residential real estate loans totaling $5,781 were classified as substandard.

NOTE 4 — Foreclosed Assets

Foreclosed assets at year-end were as follows:

	2010
Commercial	$	1,000
Commercial real estate		3,509
Total foreclosed assets	$	4,509

There were no foreclosed assets at December 31, 2009. Foreclosed assets at December 31, 2010 included inventory related to a commercial loan and three commercial real estate prperties.

page 52     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 5 — Fair Value

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The Company used the following methods and significant assumptions to estimate the fair value of each type of asset and liability:

Securities available for sale: The fair value of securities available for sale is determined using pricing models that vary based on asset class and include available trade, bid, and other market information or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).

Derivatives: The fair value of derivatives is based on valuation models using observable market data as of the measurement date (Level 2).

Impaired loans: The fair value of impaired loans with specific allocations of the ALLL is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value.

Loan servicing rights: Fair value is based on a valuation model that calculates the present value of estimated future net servicing income (Level 2).

Loans held for sale: Loans held for sale are carried at fair value, as determined by outstanding commitments from third party investors (Level 2).

Assets and liabilities measured at fair value on a recurring basis, including financial assets and liabilities for which the Company has elected the fair value option, are summarized below:

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2010
	USING SIGNIFICANT OTHER OBSERVABLE INPUTS
	(LEVEL 2)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
Mortgage-backed securities — residential	$	2,107
Collateralized mortgage obligations		26,691
Total securities available for sale	$	28,798
Loans held for sale	$	1,953
Yield maintenance provisions (embedded derivatives)	$	686
Interest rate lock commitments	$	41
Financial Liabilities:
Interest-rate swaps	$	686

No assets or liabilities measured at fair value on a recurring basis were measured using Level 1 or Level 3 inputs at December 31, 2010 or 2009.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 53

NOTE 5 — Fair Value (continued)

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2009
	USING SIGNIFICANT OTHER OBSERVABLE INPUTS
	(LEVEL 2)
Financial Assets:
Securities available for sale:
Issued by U.S. government-sponsored entities and agencies:
Mortgage-backed securities — residential	$	5,561
Collateralized mortgage obligations		14,030
Collateralized mortgage obligations issued by private issuers		1,650
Total securities available for sale	$	21,241
Yield maintenance provisions (embedded derivatives)	$	480
Financial Liabilities:
Interest-rate swaps	$	480

Assets measured at fair value on a non-recurring basis are summarized below:

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2010 USING
	SIGNIFICANT OTHER OBSERVABLE INPUTS		SIGNIFICANT UNOBSERVABLE INPUTS
	(LEVEL 2)		(LEVEL 3)
Loan servicing rights	$	17
Impaired loans:
Commercial			$	1,591
Real Estate:
Single-family residential				142
Multi-family residential				2,690
Commercial:
Non-owner occupied				1,176
Owner occupied				1,020
Total impaired loans			$	6,619

	FAIR VALUE MEASUREMENTS AT DECEMBER 31, 2009 USING
	SIGNIFICANT OTHER OBSERVABLE INPUTS		SIGNIFICANT UNOBSERVABLE INPUTS
	(LEVEL 2)		(LEVEL 3)
Loan servicing rights	$	16
Impaired loans			$	6,757

At December 31, 2010 and 2009, the Company had no assets or liabilities measured at fair value on a non-recurring basis that were measured using Level 1 inputs.

Impaired loan servicing rights, which are carried at fair value, were carried at $17, which was made up of the amortized cost of $22, net of a valuation allowance of $5 at December 31, 2010. At December 31, 2009, impaired loan servicing rights were carried at $16, which was made up of the amortized cost of $20, net of a valuation allowance of $4. There was a $1 charge against earnings with respect to servicing rights for the year ended December 31, 2010, and a $4 increase in earnings with respect to servicing rights for the year ended December 31, 2009.

page 54     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 5 — Fair Value (continued)

Impaired loans carried at the fair value of the collateral for collateral dependent loans had an unpaid principal balance of $10,693, with a valuation allowance of $2,898, resulting in an $865 additional provision for loan losses for the year ended December 31, 2010. Impaired loans carried at the fair value of collateral had an unpaid principal balance of $8,790, with a valuation allowance of $2,033 at December 31, 2009, resulting in a $1,519 additional provision for loan losses for the year ended December 31, 2009.

During the year ended December 31, 2010, the Company did not have any significant transfers of assets or liabilities between those measured using Level 1 or 2 inputs. The Company recognizes transfers of assets and liabilities between Level 1 and 2 inputs based on the information relating to those assets and liabilities at the end of the reporting period.

Carrying amount and estimated fair values of financial instruments at year-end were as follows:

	2010						2009
	CARRYING			FAIR			CARRYING			FAIR
	AMOUNT			VALUE			AMOUNT			VALUE
Financial assets
Cash and cash equivalents	$	34,275		$	34,275		$	2,973		$	2,973
Securities available for sale		28,798			28,798			21,241			21,241
Loans held for sale		1,953			1,953			1,775			1,804
Loans, net		190,767			194,970			232,003			233,493
FHLB stock		1,942			n/a			1,942			n/a
Accrued interest receivable		119			119			86			86
Yield maintenance provisions (embedded derivatives)		686			686			480			480
Interest rate lock commitments		41			41			—			—
Financial liabilities
Deposits	$	(227,381	)	$	(228,859	)	$	(211,088	)	$	(212,306	)
FHLB advances		(23,942	)		(24,656	)		(32,007	)		(32,443	)
Subordinated debentures		(5,155	)		(2,653	)		(5,155	)		(1,955	)
Accrued interest payable		(191	)		(191	)		(160	)		(160	)
Interest-rate swaps		(686	)		(686	)		(480	)		(480	)

The methods and assumptions used to estimate fair value are described as follows.

Carrying amount is the estimated fair value for cash and cash equivalents, short-term borrowings, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. The methods for determining the fair values for securities and loans held for sale were described previously. For fixed rate loans or deposits and for variable rate loans with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair value of FHLB advances are based on current rates for similar financing. Fair value of subordinated debentures is based on discounted cash flows using current market rates for similar debt. It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability. The method for determining the fair values for derivatives (interest-rate swaps, yield maintenance provisions and interest rate lock commitments) was described previously. The fair value of off-balance-sheet items is not considered material.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 55

NOTE 6 — Loan Servicing

Mortgage loans serviced for others are not reported as assets. The principal balances of these loans at year-end were as follows:

	2010		2009
Mortgage loans serviced for Freddie Mac	$	15,633	$	19,280

Custodial escrow balances maintained in connection with serviced loans were $242 and $272 at year-end 2010 and 2009. Activity for mortgage servicing rights and the related valuation allowance follows:

	2010			2009			2008
Servicing rights, net of valuation allowance:
Beginning of year	$	88		$	112		$	157
Additions		1			5			—
Amortized to expense		(31	)		(33	)		(42	)
Change in valuation allowance		(1	)		4			(3	)
End of year	$	57		$	88		$	112
Valuation allowance:
Beginning of year	$	4		$	8		$	5
Additions expensed		1			—			3
Reductions credited to operations		—			(4	)		—
End of year	$	5		$	4		$	8

The fair value of capitalized mortgage servicing rights was $86 and $131 at year-end 2010 and 2009. Fair value at year-end 2010 was determined using a 9% discount rate and prepayments speeds ranging from 219% to 700% depending on the stratification of the specific right. Fair value at year-end 2009 was determined using a 9% discount rate and prepayments speeds ranging from 170% to 379% depending on the stratification of the specific right.

The weighted average amortization period is 3.4 years.

page 56     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 7 — Premises and Equipment

Year-end premises and equipment were as follows:

	2010			2009
Land and land improvements	$	1,846		$	2,381
Buildings		5,790			5,784
Furniture, fixtures and equipment		3,048			3,031
		10,684			11,196
Less: accumulated depreciation		(4,668	)		(4,193	)
	$	6,016		$	7,003

The decline in land and land improvements for the year ended December 31, 2010 was due to $535 transferred to assets held for sale related to two parcels of land where the Company has a signed agreement to sell. The sale, which is expected to close by the third quarter of 2011, is expected to result in no gain or loss and will improve the cash position of the Holding Company.

CFBank leases certain office properties. Rent expense was $8, $212, and $239 for 2010, 2009 and 2008.

In May 2010, the Bank entered into a 5 year operating lease for a mortgage loan production office in Green, Ohio, which may be cancelled after 1 year. Monthly payments are $1 through April 2011, increasing to $2 in May 2011 through April 2015 in the event the lease is not cancelled. Total rent expense under this operating lease was $8 in 2010.

The Holding Company was a one-third owner of Smith Ghent LLC, an Ohio limited liability company that owns and manages the office building at 2923 Smith Road, Fairlawn, Ohio 44333, where the Holding Company’s headquarters and CFBank’s Fairlawn office are located. In October 2009, the Holding Company purchased the remaining two-thirds interest, making Smith Ghent LLC a wholly owned subsidiary of the Holding Company. CFBank entered into a 10 year operating lease with Smith Ghent LLC in March 2004 that provided for monthly payments of $11, increasing 2% annually for the life of the lease through March 2014. During 2008, the lease was amended for additional office space and provided for additional monthly payments of $3 through June 30, 2009, at which time the monthly payment continued on a month-to-month basis. Since the purchase of the remaining two-thirds interest in Smith Ghent LLC, both rent expense paid by CFBank and rental income to Smith Ghent LLC are eliminated in consolidation. Total rent expense under this operating lease, as amended, and common area maintenance costs, was $212 and $239 in 2009 and 2008.

NOTE 8 — Deposits

Time deposits of $100 or more were $86,106 and $52,555 at year-end 2010 and 2009.

Scheduled maturities of time deposits for the next five years were as follows:

2011	$	69,896
2012		27,348
2013		16,618
2014		5,971
2015		8,463
Thereafter		499
Total	$	128,795

Time deposits included $68,013 and $53,405 in brokered deposits at year-end 2010 and 2009.

Under a directive from the Office of Thrift Supervision (OTS) dated April 6, 2010, CFBank may not increase the amount of brokered deposits above $76.4 million, excluding interest credited, without the prior non-objection of the OTS.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 57

NOTE 9 — Federal Home Loan Bank Advances

At year end, long-term advances from the FHLB were as follows:

	Rate			2010		2009
Fixed-rate advances
Maturing January 2010		3.19	%	$	—	$	5,000
Maturing March 2010		4.96	%		—		1,000
Maturing March 2011		1.90	%		2,200		2,200
Maturing April 2011		2.88	%		3,000		3,000
Maturing July 2011		3.85	%		3,000		3,000
Maturing April 2012		2.30	%		5,000		5,000
Maturing June 2012		2.05	%		742		742
Maturing January 2014		3.12	%		5,000		5,000
Maturing May 2014		3.06	%		5,000		5,000
Total				$	23,942	$	29,942

Each advance is payable at its maturity date, with a prepayment penalty for fixed-rate advances.

The advances were collateralized as follows:

	2010		2009
Single-family mortgages	$	14,922	$	25,053
Second mortgages		—		938
Multi-family mortgage loans		10,670		12,703
Home equity lines of credit		—		13,331
Commercial real estate loans		1,985		62,313
Securities		10,657		11,045
Cash		800		—
Total	$	39,034	$	125,383

Based on the collateral pledged to FHLB and CFBank’s holdings of FHLB stock, CFBank was eligible to borrow up to a total of $24,729 from the FHLB at year-end 2010.

Commercial real estate loans pledged as collateral to the FHLB decreased from year-end 2009 because these loans were disallowed by FHLB in 2010 as a result of the credit performance of the portfolio. The loans were pledged as collateral with the Federal Reserve Bank (FRB) in 2010 and increased CFBank’s borrowing capacity with the FRB. See Note 10 — Other Borrowings for additional information.

Payments over the next five years are as follows:

2011	$	8,200
2012		5,742
2014		10,000
Total	$	23,942

page 58     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 10 — Other Borrowings

At year-end 2010 and 2009, there were no outstanding borrowings with the FRB. Assets pledged as collateral with the FRB were as follows:

	2010		2009
Commercial loans	$	13,131	$	18,407
Commercial real estate loans		26,214		254
Total	$	39,345	$	18,661

Based on this collateral, CFBank was eligible to borrow up to $25,977 from the FRB at year-end 2010.

Commercial real estate loans pledged as collateral to the FRB increased from year-end 2009, as these loans were previously pledged to the FHLB and were transferred to the FRB in 2010 to increase CFBank’s borrowing capacity with the FRB. The decrease in the pledged loan balances from that shown at year-end 2009 in Note 9 — FHLB Advances is primarily due to the difference in loan eligibility factors applied by the FRB as compared to the FHLB.

CFBank had a line of credit with one commercial bank totaling $3.0 million at December 31, 2010 which was terminated by the commercial bank in March 2011 due to CFBank’s financial performance. At year-end 2010 and 2009, there was no outstanding balance on this line of credit. Interest on this line accrues daily and is variable based on the prime rate as published in the Wall Street Journal.

	2010			2009			2008
Commercial bank lines of credit
Average daily balance during the year	$	—		$	—		$	2
Average interest rate during the year		3.25	%		1.67	%		2.71	%
Maximum month-end balance during the year	$	—		$	—		$	—
Weighted average interest rate at year-end		3.25	%		2.00	%		2.00	%

NOTE 11 — Subordinated Debentures

In December 2003, Central Federal Capital Trust I, a trust formed by the Holding Company, closed a pooled private offering of 5,000 trust preferred securities with a liquidation amount of $1 per security. The Holding Company issued $5,155 of subordinated debentures to the trust in exchange for ownership of all of the common stock of the trust and the proceeds of the preferred securities sold by the trust. The Holding Company is not considered the primary beneficiary of this trust (variable interest entity); therefore, the trust is not consolidated in the Company’s financial statements, but rather the subordinated debentures are shown as a liability. The Holding Company’s investment in the common stock of the trust was $155 and is included in other assets.

The Holding Company may redeem the subordinated debentures, in whole or in part, in a principal amount with integral multiples of $1, on or after December 30, 2008 at 100% of the principal amount, plus accrued and unpaid interest. The subordinated debentures mature on December 30, 2033. The subordinated debentures are also redeemable in whole or in part from time to time, upon the occurrence of specific events defined within the trust indenture. There are no required principal payments on the subordinated debentures over the next five years. The Holding Company has the option to defer interest payments on the subordinated debentures for a period not to exceed five consecutive years. The Holding Company’s Board of Directors elected to defer interest payments beginning with the quarterly interest payment due on December 30, 2010 in order to preserve cash at the Holding Company. Cumulative deferred interest payments totaled $40 at year-end 2010.

The trust preferred securities and subordinated debentures have a variable rate of interest, reset quarterly, equal to the three-month London Interbank Offered Rate plus 2.85%. The total rate in effect was 3.15% at year-end 2010 and 3.10% at year-end 2009.

Pursuant to an agreement with OTS effective May 2010, the Holding Company may not incur, issue, renew, redeem, or rollover any debt, or otherwise incur any additional debt, other than liabilities that are incurred in the ordinary course of business to acquire goods and services, without the prior non-objection of the OTS. Pursuant to a notice from the OTS dated October 20, 2010, the Holding Company may not pay interest on debt, including the subordinated debentures, or commit to do so without the prior, written non-objection of the OTS.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 59

NOTE 12 — Benefit Plans

Multi-employer pension plan: CFBank participates in a multi-employer contributory trusteed pension plan. The retirement benefits to be provided by the plan were frozen as of June 30, 2003 and future employee participation in the plan was stopped. The plan was maintained for all eligible employees and the benefits were funded as accrued. The cost of funding was charged directly to operations. The unfunded liability at June 30, 2010 totaled $242 and at June 30, 2009 was $232. CFBank’s contribution for the plan years ending June 30, 2011, June 30, 2010 and June 30, 2009, totaled $60, $120 and $204.

401(k) Plan: A 401(k) plan allows employee contributions up to the maximum amount allowable under federal tax regulations, which are matched in an amount equal to 25% of the first 8% of the compensation contributed. Expense for 2010, 2009 and 2008 was $39, $40 and $38.

Salary Continuation Agreement: In 2004, CFBank initiated a nonqualified salary continuation agreement for the former Chairman Emeritus. Benefits provided under the plan are unfunded, and payments are made by CFBank. Under the plan, CFBank pays him, or his beneficiary, a benefit of $25 annually for 20 years, beginning 6 months after his retirement date, which was February 28, 2008. The expense related to this plan totaled $17, $17 and $24 in 2010, 2009 and 2008. The accrual is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $259 at year-end 2010 and $267 at year-end 2009.

Life Insurance Benefits: CFBank entered into agreements with certain employees, former employees and directors to provide life insurance benefits which are funded through life insurance policies purchased and owned by CFBank. The expense related to these benefits totaled $7, $6 and $16 in 2010, 2009 and 2008. The accrual for CFBank’s obligation under these agreements is included in accrued interest payable and other liabilities in the consolidated balance sheets and totaled $179 at year-end 2010 and $172 at year-end 2009.

NOTE 13 — Income Taxes

Income tax expense (benefit) was as follows:

	2010		2009			2008
Current federal	$	198	$	(201	)	$	(53	)
Deferred federal		—		1,778			314
Total	$	198	$	1,577		$	261

Effective tax rates differ from federal statutory rate of 34% applied to income (loss) before income taxes due to the following:

	2010			2009			2008
Federal statutory rate times financial statement income (loss)	$	(2,269	)	$	(2,827	)	$	335
Effect of:
Bank owned life insurance income		(43	)		(43	)		(42	)
Increase in deferred tax valuation allowance		2,276			4,312			—
Other		234			135			(32	)
	$	198		$	1,577		$	261
Effective tax rate		-3.0	%		-19.0	%		26.5	%

page 60     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 13 — Income Taxes (continued)

Year-end deferred tax assets and liabilities were due to the following:

	2010		2009
Deferred tax assets:
Allowance for loan losses	$	2,339	$	1,732
Deferred loan fees		42		94
Post-retirement death benefits		61		58
Deferred compensation		88		91
Nonaccrual interest		76		57
Other deferred income		3		74
Tax mark-to-market adjustments on securities available for sale		228		312
Net operating loss		4,503		2,615
Other		79		114
		7,419		5,147
Deferred tax liabilities:
Depreciation		—		85
FHLB stock dividend		366		366
Mortgage servicing rights		19		30
Prepaid expenses		47		53
Unrealized gain on securities available for sale		228		301
Other		99		—
Deferred tax valuation allowance		6,660		4,312
		7,419		5,147
Net deferred tax asset	$	—	$	—

Realization of deferred tax assets associated with the net operating loss carryforwards is dependent upon generating sufficient taxable income prior to their expiration. A valuation allowance to reflect management’s estimate of the temporary deductible differences that may expire prior to their utilization has been recorded at year-end 2010 and 2009, which reduced the carrying amount of the net deferred tax asset to zero in both years.

At year-end 2010, the Company had net operating loss carryforwards of approximately $13,243 which expire at various dates from 2024 to 2030.

Federal income tax laws provided additional bad debt deductions through 1987, totaling $2,250. Accounting standards do not require a deferred tax liability to be recorded on this amount, which otherwise would total $765 at year-end 2010. If CFBank were liquidated or otherwise ceases to be a bank or if tax laws were to change, this amount would be expensed.

At December 31, 2010 and 2009, the Company had no unrecognized tax benefits recorded. The Company does not expect the amount of unrecognized tax benefits to significantly change within the next twelve months.

The Company is subject to U.S. federal income tax and is no longer subject to federal examination for years prior to 2007.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 61

NOTE 14 — Related-Party Transactions

Loans to principal officers, directors and their affiliates during 2010 were as follows:

Beginning balance	$	2,302
New Loans		359
Effect of changes in composition of related parties		(106	)
Repayments		(758	)
Ending balance	$	1,797

Deposits from principal officers, directors, and their affiliates at year-end 2010 and 2009 were $863 and $1,346.

NOTE 15 — Stock-Based Compensation

The Company has three stock-based compensation plans (the Plans) as described below. Total compensation cost that has been charged against income for the Plans was $6, $81, and $149 for 2010, 2009 and 2008, respectively. The total income tax benefit was $2, $19, and $44, respectively.

The Plans, which are stockholder-approved, provide for stock option grants and restricted stock awards to directors, officers and employees. The 1999 Stock-Based Incentive Plan, which expired July 13, 2009, provided 193,887 shares for stock option grants and 77,554 shares for restricted stock awards. The 2003 Equity Compensation Plan (2003 Plan) as amended and restated, provided an aggregate of 500,000 shares for stock option grants and restricted stock awards, of which up to 150,000 shares could be awarded in the form of restricted stock awards. The 2009 Equity Compensation Plan, which was approved by stockholders on May 21, 2009, replaced the 2003 Plan and provides 1,000,000 shares, plus any remaining shares available to grant or that are later forfeited or expire under the 2003 Plan, that may be issued as stock option grants, stock appreciation rights or restricted stock awards.

Stock Options: The Plans permit the grant of stock options to directors, officers and employees for up to 1,693,887 shares of common stock. Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of grant, generally have vesting periods ranging from one to three years, and are exercisable for ten years from the date of grant.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock. The Company uses historical data to estimate option exercise and post-vesting termination behavior. Employee and management options are tracked separately. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

The fair value of options granted was determined using the following weighted-average assumptions as of grant date.

	2010			2009			2008
Risk-free interest rate		2.62	%		1.64	%		2.64	%
Expected term (years)		7			7			6
Expected stock price volatility		46	%		27	%		24	%
Dividend yield		3.77	%		3.63	%		5.82	%

page 62     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 15 — Stock-Based Compensation (continued)

A summary of stock option activity in the Plans for 2010 follows:

						WEIGHTED
						AVERAGE
				WEIGHTED		REMAINING
				AVERAGE EXERCISE		CONTRACTUAL
	SHARES			PRICE		TERM (YEARS)		INTRINSIC VALUE
Outstanding at beginning of year		310,361		$	7.89
Granted		91,050			0.91
Exercised		—			—
Expired		(4,075	)		7.37
Cancelled or forfeited		(127,560	)		6.86
Outstanding at end of year		269,776		$	6.04		6.7	$	—
Expected to vest		107,734		$	1.29		8.7	$	—
Exercisable at end of year		162,042		$	9.19		4.9	$	—

During the year ended December 31, 2010, there were 127,560 stock options cancelled or forfeited. Expense associated with unvested forfeited shares is reversed.

Information related to the stock option Plans during each year follows. There were no stock options exercised in 2010, 2009 or 2008.

	2010		2009		2008
Weighted average fair value of options granted	$	.31	$	.49	$	.40

As of December 31, 2010, there was $21 of total unrecognized compensation cost related to nonvested stock options granted under the Plans. The cost is expected to be recognized over a weighted-average period of 1.7 years. Substantially all of the 107,734 nonvested stock options at December 31, 2010 are expected to vest.

Restricted Stock Awards: The Plans permit the grant of restricted stock awards to directors, officers and employees. Compensation is recognized over the vesting period of the awards based on the fair value of the stock at grant date. The fair value of the stock was determined using the closing share price on the date of grant and shares generally have vesting periods of one to three years. There were 1,105,162 shares available to be issued under the Plans at December 31, 2010. There were 36,000 shares issued in 2010, and 32,875 shares issued in 2008. There were no shares issued in 2009.

A summary of changes in the Company’s nonvested restricted shares for the year follows:

				WEIGHTED AVERAGE
NONVESTED SHARES	SHARES			GRANT-DATE FAIR VALUE
Nonvested at January 1, 2010		28,733		$	5.35
Granted		36,000			1.38
Vested		(18,526	)		6.08
Forfeited		(7,789	)		4.03
Nonvested at December 31, 2010		38,418		$	1.54

As of December 31, 2010, there was $37 of total unrecognized compensation cost related to nonvested shares granted under the Plans. The cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of shares vested during the years ended December 31, 2010, 2009 and 2008 was $24, $56 and $66, respectively.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 63

NOTE 16 — Preferred Stock

On December 5, 2008, in connection with the TARP Capital Purchase Program, the Company issued to the U.S. Treasury 7,225 shares of Central Federal Corporation Fixed Rate Cumulative Perpetual Preferred Stock, Series A (Preferred Stock) for $7,225. The Preferred Stock initially pays quarterly dividends at a five percent annual rate, which increases to nine percent after February 14, 2013, on a liquidation preference of $1 per share.

The Preferred Stock has preference over the Company’s common stock with respect to the payment of dividends and distribution of the Company’s assets in the event of a liquidation or dissolution. Except in certain circumstances, the holders of Preferred Stock have no voting rights. If any quarterly dividend payable on the Preferred Stock is in arrears for six or more quarterly dividend periods (whether consecutive or not), the holders will be entitled to vote for the election of two additional directors. These voting rights terminate when the Company has paid the dividends in full. The Company’s Board of Directors elected to defer the dividends beginning with the dividend payable on November 15, 2010 in order to preserve cash at the Holding Company. At December 31, 2010, one quarterly dividend payment had been deferred. Cumulative deferred dividends totaled $90 at year-end 2010. Although deferred, this dividend has been accrued with an offsetting change to accumulated deficit.

As required under the TARP Capital Purchase Program in connection with the sale of the Preferred Stock to the U.S. Treasury, dividend payments on, and repurchases of, the Company’s outstanding preferred and common stock are subject to certain restrictions. For as long as any Preferred Stock is outstanding, no dividends may be declared or paid on the Company’s outstanding common stock until all accrued and unpaid dividends on Preferred Stock are fully paid. In addition, the U.S. Treasury’s consent is required on any increase in quarterly dividends declared on shares of common stock in excess of $.05 per share before December 5, 2011, the third anniversary of the issuance of the Preferred Stock, unless the Preferred Stock is redeemed by the Company or transferred in whole by the U.S. Treasury. Further, the U.S. Treasury’s consent is required for any repurchase of any equity securities or trust preferred securities, except for repurchases of Preferred Stock or repurchases of common shares in connection with benefit plans consistent with past practice, before December 5, 2011, the third anniversary of the issuance of the Preferred Stock, unless redeemed by the Company or transferred in whole by the U.S. Treasury.

As a recipient of funding under the TARP Capital Purchase Program, the Company must comply with the executive compensation and corporate governance standards imposed by the American Recovery and Reinvestment Act of 2009 for as long as the U.S. Treasury holds the above securities.

Pursuant to an agreement with the OTS effective May 2010, the Company may not declare, make, or pay any cash dividends, (including dividends on the Preferred Stock, or its common stock), or any other capital distributions, or purchase, repurchase, or redeem, or commit to purchase, repurchase or redeem any equity stock without the prior non-objection of the OTS.

Following is information on Preferred Stock and the discount on Preferred Stock at year-end 2010 and 2009. The discount is being accreted over 5 years using the level-yield method.

	2010			2009
Series A Preferred Stock	$	7,225		$	7,225
Discount on Preferred Stock		(156	)		(204	)
Total Preferred Stock	$	7,069		$	7,021

NOTE 17 — Common Stock Warrant

In connection with the issuance of the Preferred Stock, the Company also issued to the U.S. Treasury a warrant to purchase 336,568 shares of the Company’s common stock at an exercise price of $3.22 per share, which would represent an aggregate investment, if exercised for cash, of approximately $1,100 in Company common stock. The exercise price may be paid either by withholding a number of shares of common stock issuable upon exercise of the warrant equal to the value of the aggregate exercise price of the warrant, determined by reference to the market price of the Company’s common stock on the trading day on which the warrant is exercised, or if agreed to by the Company and the warrant holder, by the payment of cash equal to the aggregate exercise price. The warrant may be exercised any time before December 5, 2018.

page 64     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 18 — Regulatory Matters

CFBank is subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. As of December 31, 2010, CFBank met all capital adequacy requirements to which it is subject.

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2010 and 2009, CFBank was well capitalized under the regulatory framework for prompt corrective action. OTS has authority to downgrade capital status in the event of regulatory concerns.

CFBank received a letter from OTS dated March 15, 2011 notifying it that, without the approval or non-objection of the OTS, CFBank: i) may not increase its total assets during any quarter in excess of interest credited on deposits during the prior quarter; ii) may not add or replace a director, senior executive officer or change the responsibilities of any senior executive officer; iii) may not make any golden parachute payment to its directors, officers or employees; iv) may not enter into, renew, extend or revise any contractual arrangement regarding compensation with any senior executive officer or director of the bank; v) may not enter into any significant arrangement or contract with a third party service provider or any arrangement that is not in the ordinary course of business; or vi) may not declare or pay any dividend or make any capital distribution.

Actual and required capital amounts and ratios are presented below at year end.

											TO BE WELL CAPITALIZED
						FOR CAPITAL					UNDER PROMPT CORRECTIVE
	ACTUAL					ADEQUACY PURPOSES					ACTION REGULATIONS
	AMOUNT		RATIO			AMOUNT		RATIO			AMOUNT		RATIO
2010
Total Capital to risk weighted assets	$	20,428		10.68	%	$	15,296		8.0	%	$	19,120		10.0	%
Tier 1 (Core) Capital to risk weighted assets		17,983		9.41	%		7,648		4.0	%		11,472		6.0	%
Tier 1 (Core) Capital to adjusted total assets		17,983		6.59	%		10,909		4.0	%		13,637		5.0	%
Tangible Capital to adjusted total assets		17,983		6.59	%		4,091		1.5	%		N/A		N/A
2009
Total Capital to risk weighted assets	$	26,978		11.72	%	$	18,417		8.0	%	$	23,021		10.0	%
Tier 1 (Core) Capital to risk weighted assets		24,073		10.46	%		9,208		4.0	%		13,813		6.0	%
Tier 1 (Core) Capital to adjusted total assets		24,073		8.87	%		10,850		4.0	%		13,563		5.0	%
Tangible Capital to adjusted total assets		24,073		8.87	%		4,069		1.5	%		N/A		N/A

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 65

NOTE 18 — Regulatory Matters (continued)

The Qualified Thrift Lender test requires at least 65% of assets be maintained in housing-related finance and other specified areas. If this test is not met, limits are placed on growth, branching, new investments, FHLB advances and dividends, or CFBank must convert to a commercial bank charter. Management believes that this test is met.

CFBank converted from a mutual to a stock institution in 1998, and a “liquidation account” was established with an initial balance of $14,300, which was net worth reported in the conversion prospectus. The liquidation account represents a calculated amount for the purposes described below, and it does not represent actual funds included in the consolidated financial statements of the Company. Eligible depositors who have maintained their accounts, less annual reductions to the extent they have reduced their deposits, would be entitled to a priority distribution from this account if CFBank liquidated. Dividends may not reduce CFBank’s stockholder’s equity below the required liquidation account balance.

Dividend Restrictions: The Holding Company’s principal source of funds for dividend payments is dividends received from CFBank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. CFBank must receive OTS approval prior to any dividend payments. See Note 16 — Preferred Stock for a description of restrictions on the payment of dividends on the Company’s common stock as a result of participation in the TARP Capital Purchase Program and pursuant to a May 2010 agreement with OTS.

NOTE 19 — Derivative Instruments

Interest-rate swaps: CFBank utilizes interest-rate swaps as part of its asset liability management strategy to help manage its interest rate risk position, and does not use derivatives for trading purposes. The notional amount of the interest-rate swaps does not represent amounts exchanged by the parties. The amount exchanged is determined by reference to the notional amount and the other terms of the individual interest-rate swap agreements. CFBank was party to interest-rate swaps with a combined notional amount of $8,278 at December 31, 2010 and $7,987 at December 31, 2009.

The objective of the interest-rate swaps is to protect the related fixed rate commercial real estate loans from changes in fair value due to changes in interest rates. CFBank has a program whereby it lends to its borrowers at a fixed rate with the loan agreement containing a two-way yield maintenance provision, which will be invoked in the event of prepayment of the loan, and is expected to exactly offset the fair value of unwinding the swap. The yield maintenance provision represents an embedded derivative which is bifurcated from the host loan contract and, as such, the swaps and embedded derivatives are not designated as hedges. Accordingly, both instruments are carried at fair value and changes in fair value are reported in current period earnings. CFBank currently does not have any derivatives designated as hedges.

Contingent Features: The counterparty to CFBank’s interest-rate swaps is exposed to credit risk whenever the interest-rate swaps are in a liability position. At year-end 2010, CFBank had $1,589 in securities pledged as collateral for these derivatives. Should the liability increase, CFBank will be required to pledge additional collateral. Additionally, CFBank’s interest-rate swap instruments contain provisions that require CFBank to remain well capitalized under regulatory capital standards. CFBank was well capitalized at December 31, 2010. If CFBank’s capital falls below well-capitalized levels, the counterparty to the interest-rate swap instruments could request immediate payment.

Summary information about the derivative instruments is as follows:

	2010			2009
Notional amount	$	8,278		$	7,987
Weighted average pay rate on interest-rate swaps		4.02	%		4.09	%
Weighted average receive rate on interest-rate swaps		0.27	%		0.24	%
Weighted average maturity (years)		7.4			7.9
Fair value of interest-rate swaps	$	(686	)	$	(480	)
Fair value of yield maintenance provisions	$	686		$	480

page 66     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 19 — Derivative Instruments (continued)

The fair value of the yield maintenance provisions and interest-rate swaps is recorded in other assets and other liabilities, respectively, in the consolidated balance sheet. Changes in the fair value of the yield maintenance provisions and interest-rate swaps are reported currently in earnings, as other noninterest income in the consolidated statements of operations. There were no net gains or losses recognized in earnings related to yield maintenance provisions and interest-rate swaps in 2010, 2009 or 2008.

Mortgage Banking Derivatives: Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market are considered derivatives. These mortgage banking derivatives are not designated in hedge relationships. At year-end 2010, the Company had approximately $5,760 of interest rate lock commitments related to residential mortgage loans. The fair value of these mortgage banking derivatives was reflected by a derivative asset of $41 which was included in other assets in the consolidated balance sheet. At year-end 2009, these mortgage banking derivatives were not significant. Fair values were estimated based on anticipated gains upon the sale of the underlying loans. Changes in the fair values of these mortgage banking derivatives are included in net gains on sales of loans. Net gains recognized in earnings related to these mortgage banking derivatives totaled $41 in 2010.

NOTE 20 — Loan Commitments and Other Related Activities

Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amounts of financial instruments with off-balance-sheet risk at year end were as follows:

	2010				2009
	FIXED RATE		VARIABLE RATE		FIXED RATE		VARIABLE RATE
Commitments to make loans	$	3,872	$	240	$	4,727	$	3,583
Unused lines of credit		86		26,728		76		32,735
Standby letters of credit		490		13		128		—

Commitments to make loans are generally made for periods of 60 days or less, except for construction loan commitments, which are typically for a period of one year, and loans under a specific drawdown schedule, which are based on the individual contracts. The fixed rate loan commitments had interest rates ranging from 3.00% to 8.00% and maturities ranging from 3 months to 30 years at December 31, 2010. The fixed rate loan commitments had interest rates ranging from 4.00% to 7.75% and maturities ranging from 2 months to 30 years at December 31, 2009.

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 67

NOTE 21 — Parent Company Only Condensed Financial Information

Condensed financial information of Central Federal Corporation follows:

CONDENSED BALANCE SHEETS

	DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	2010		2009
Assets
Cash and cash equivalents	$	745	$	1,807
Investment in banking subsidiary		18,661		24,786
Investment in and advances to other subsidiaries		1,851		1,863
Other assets		94		2
Total assets	$	21,351	$	28,458
Liabilities and Equity
Subordinated debentures	$	5,155	$	5,155
Accrued expenses and other liabilities		207		76
Stockholders’ equity		15,989		23,227
Total liabilities and stockholders’ equity	$	21,351	$	28,458

CONDENSED STATEMENTS OF OPERATIONS

	YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)	2010			2009			2008
Interest income	$	—		$	20		$	—
Other income		—			208			—
Interest expense		167			196			334
Other expense		567			425			366
Loss before income tax and undistributed subsidiaries’ operations		(734	)		(393	)		(700	)
Income tax (expense) benefit		—			(346	)		261
Effect of subsidiaries’ operations		(6,136	)		(9,152	)		1,162
Net income (loss)	$	(6,870	)	$	(9,891	)	$	723

page 68     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 21 — Parent Company Only Condensed Financial Information (continued)

CONDENSED STATEMENTS OF CASH FLOWS

	DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	2010			2009			2008
Cash flows from operating activities
Net income (loss)	$	(6,870	)	$	(9,891	)	$	723
Adjustments:
Effect of subsidiaries’ operations		6,136			9,152			(1,162	)
Net gain on acquisition		—			(208	)		—
Stock-based compensation expense		2			2			—
Change in other assets and other liabilities		(51	)		848			(20	)
Net cash from operating activities		(783	)		(97	)		(459	)
Cash flows from investing activities
Investments in banking subsidiary		—			(7,225	)		—
Investments in other subsidiaries		(8	)		(677	)		(12	)
Net cash from investing activities		(8	)		(7,902	)		(12	)
Cash flows from financing activities
Proceeds from issuance of preferred stock and common stock warrant		—			—			7,203
Costs associated with issuance of preferred stock		—			(13	)		—
Purchase of treasury stock		—			—			(1,632	)
Dividends paid		(271	)		(546	)		(860	)
Net cash from financing activities		(271	)		(559	)		4,711
Net change in cash and cash equivalents		(1,062	)		(8,558	)		4,240
Beginning cash and cash equivalents		1,807			10,365			6,125
Ending cash and cash equivalents	$	745		$	1,807		$	10,365

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 69

NOTE 22 — Earnings (Loss) Per Common Share

The factors used in the earnings (loss) per common share computation follow.

(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)	2010			2009			2008
Basic
Net income (loss)	$	(6,870	)	$	(9,891	)	$	723
Less: Preferred dividends and accretion of discount on preferred stock		(410	)		(407	)		(29	)
Less: Net (income) loss allocated to unvested share-based payment awards		29			27			(4	)
Net income (loss) allocated to common stockholders	$	(7,251	)	$	(10,271	)	$	690
Weighted average common shares outstanding		4,094,790			4,088,904			4,200,504
Basic earnings (loss) per common share	$	(1.77	)	$	(2.51	)	$	0.16
Diluted
Net income (loss) allocated to common stockholders	$	(7,251	)	$	(10,271	)	$	690
Weighted average common shares outstanding for basic earnings (loss) per common share		4,094,790			4,088,904			4,200,504
Add: Dilutive effects of assumed exercises of stock options		—			—			1,185
Add: Dilutive effects of assumed exercise of stock warrant		—			—			381
Average shares and dilutive potential common shares		4,094,790			4,088,094			4,202,070
Diluted income (loss) per common share	$	(1.77	)	$	(2.51	)	$	0.16

The following potential average common shares were anti-dilutive and not considered in computing diluted earnings (loss) per common share because, with respect to the years ended December 31, 2010 and 2009, the Company had a loss from continuing operations and, with respect to the year ended December 31, 2008, the exercise price of the options was greater than the average stock price for the period.

	2010		2009		2008
Stock options		269,776		310,361		322,258
Stock warrant		336,568		336,568		—

page 70     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

NOTE 23 — Other Comprehensive Income (Loss)

Other comprehensive income (loss) components and related tax effects were as follows:

	2010			2009		2008
Unrealized holding gains on securities available for sale	$	436		$	354	$	300
Reclassification adjustment for gains realized in income		(468	)		—		(54	)
Net change in unrealized gains (losses)		(32	)		354		246
Tax effect		—			—		(83	)
Net of tax amount	$	(32	)	$	354	$	163

The following is a summary of the accumulated other comprehensive income balances, net of tax:

	BALANCE AT					BALANCE AT
	DECEMBER 31, 2009		CURRENT PERIOD CHANGE			DECEMBER 31, 2010
Unrealized gains (losses) on securities available for sale	$	704	$	(32	)	$	672

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 71

BOARD OF DIRECTORS AND OFFICERS

CENTRAL FEDERAL CORPORATION AND CFBANK BOARD OF DIRECTORS	CENTRAL FEDERAL CORPORATION OFFICERS	CFBANK COLUMBUS DEVELOPMENT BOARD	CFBANK EXECUTIVE OFFICERS	CFBANK COLUMBIANA REGION DEVELOPMENT BOARD
Jerry F. Whitmer, Esq. Of Counsel Brouse McDowell Chairman Central Federal Corporation & CFBank Jeffrey W. Aldrich Former President Sterling China Co. Thomas P. Ash Director of Governmental Relations Buckeye Association of School Administrators William R. Downing President R.H. Downing Inc. Gerry W. Grace Former President Grace Services, Inc.	Eloise L. Mackus, Esq. Chief Executive Officer, General Counsel & Corporate Secretary Therese A. Liutkus, CPA President, Treasurer & Chief Financial Officer John A. Lende, CPA Vice President & Controller Laura L. Martin Assistant Corporate Secretary	Lou J. Briggs Former President Pro Tem Worthington City Council James J. Chester Partner, Chester Willcox and Saxbe, LLP Douglas S. Morgan Attorney Hahn Loeser David L. Royer Continental Real Estate Companies Joseph Robertson, IV Managing Director RBC Capital Markets Brenda K. Stier-Anstine President Marketing Works Roland Tokarski President Quandel Group Steven J. Yakubov Interventional Cardiologist Riverside Methodist Hospital	Eloise L. Mackus, Esq. Chief Executive Officer, General Counsel & Corporate Secretary Therese A. Liutkus, CPA President, Treasurer & Chief Financial Officer Timothy R. Fitzwater Senior Commercial Officer John S. Lawell Senior Vice President, Operations Corey D. Caster Vice President Mortgage Division Dana C. Johnson Vice President, Enterprise Risk & Internal Audit	Nicholas T. Amato Attorney Amato Law Office Vicki M. Holden Executive Director CrossRoads D. Terrence O’Hara President W.C. Bunting James J. Sabatini II Trustee St. Clair Township Co-Owner Sabatini Shoes Diana M. Spencer Vice President, Columbiana Region CFBank Joseph J. Surace Mayor Village of Wellsville Penny J. Traina Commissioner Columbiana County

CFBANK OFFICE LOCATIONS

CALCUTTA, OHIO	FAIRLAWN, OHIO	WELLSVILLE, OHIO	WORTHINGON, OHIO
49028 Foulks Drive	2923 Smith Road	601 Main Street	7000 North High Street
Calcutta, Ohio 43920	Fairlawn, Ohio 44333	Wellsville, Ohio 43968	Worthington, Ohio 43085
330-385-4323	330-666-7979	330-532-1517	614-334-7979

CORPORATE DATA

ANNUAL REPORT

A copy of the Annual Report on Form 10-K filed with the Securities and Exchange Commission will be available March 30, 2011 without charge upon written request to:

Therese A. Liutkus, CPA
President, Treasurer and Chief Financial Officer
Central Federal Corporation
2923 Smith Road
Fairlawn, Ohio 44333
Phone: 330-576-1209
Fax: 330-576-1339
Email: TerriLiutkus@cfbankmail.com

ANNUAL MEETING

The Annual Meeting of Stockholders of Central Federal Corporation will be held at 10 a.m. on Thursday, May 19, 2011 at the Fairlawn Country Club, 200 North Wheaton Road, Fairlawn, Ohio.

STOCKHOLDER SERVICES

Registrar and Transfer Company serves as transfer agent for Central Federal Corporation shares. Communications regarding change of address, transfer of shares or lost certificates should be sent to:

Registrar & Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Phone: 800-368-5948

page 72     |     

EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

CFBank
Ghent Road, Inc.
Smith Ghent LLC
Central Federal Capital Trust I

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in Registration Statements on Form S-8 (333-84817, 333-105515, 333-114025, 333-115943, 333-125661, 333-152984 and 333-163102), and Form S-3 (333-110218, 333-124323 and 333-156564) of Central Federal Corporation (formerly Grand Central Financial Corp.) of our report dated March 30, 2011, related to the consolidated financial statements of Central Federal Corporation included in this Annual Report on Form 10-K for the year ended December 31, 2010.

Crowe Horwath LLP

Cleveland, Ohio
March 30, 2011

EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certifications

I, Eloise L. Mackus, certify, that:

1. I have reviewed this report on Form 10-K of Central Federal Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2011	/s/ Eloise L. Mackus
	Eloise L. Mackus, Esq.
	Chief Executive Officer, General Counsel and Corporate Secretary

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certifications

I, Therese Ann Liutkus, certify, that:

1. I have reviewed this report on Form 10-K of Central Federal Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 30, 2011	/s/ Therese Ann Liutkus
	Therese Ann Liutkus, CPA
	President, Treasurer and Chief Financial Officer

EX-32.1

Exhibit 32.1

Section 1350 Certifications

In connection with the Annual Report of Central Federal Corporation (the “Company”) on Form 10-K for the fiscal year ended December 31, 2010 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Eloise L. Mackus, Chief Executive Officer of the Company and Therese Ann Liutkus, President, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

/s/ Eloise L. Mackus  

Eloise L. Mackus, Esq. 

Chief Executive Officer, General Counsel and
Corporate Secretary 

/s/ Therese Ann Liutkus  

Therese Ann Liutkus, CPA 

President, Treasurer and Chief Financial Officer 

Date: March 30, 2011

EX-99.1

Exhibit 99.1

31 C.F.R. Section 30.15 Certifications

I, Eloise L. Mackus, certify, based on my knowledge, that:

(i) The compensation committee of Central Federal Corporation has discussed, reviewed, and evaluated with the senior risk officer at least twice during the most recently completed fiscal year that was a TARP period, senior executive officer (SEO) compensation plans and employee compensation plans and the risks these plans pose to Central Federal Corporation; and steps have been taken to ensure that in the current and each future fiscal year that is a TARP period, the committee will discuss, review and evaluate SEO and employee compensation plans and risks with the senior risk officer at least every six months during any part of the fiscal year that is a TARP period;

(ii) The compensation committee of Central Federal Corporation has identified and limited during any part of the most recently completed fiscal year that was a TARP period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Central Federal Corporation and has identified any features of the employee compensation plans that pose risks to Central Federal Corporation and has limited those features to ensure that Central Federal Corporation is not unnecessarily exposed to risks;

(iii) The compensation committee has reviewed, at least twice during the most recently completed fiscal year that was a TARP period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of Central Federal Corporation to enhance the compensation of an employee, and has limited any such features; and steps have been taken to ensure that in the current and each future fiscal year that is a TARP period, the committee will review, at least every six months during any part of the fiscal year that is a TARP period, the terms of each employee compensation plan and identify any features of the plan that could encourage the manipulation of reported earnings of Central Federal Corporation to enhance the compensation of an employee, and will limit any such features;

(iv) The compensation committee of Central Federal Corporation will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v) The compensation committee of Central Federal Corporation will provide a narrative description of how it limited during any part of the most recently completed fiscal year that was a TARP period the features in

(A) SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Central Federal Corporation;

(B) Employee compensation plans that unnecessarily expose Central Federal Corporation to risks; and

(C) Employee compensation plans that could encourage the manipulation of reported earnings of Central Federal Corporation to enhance the compensation of an employee;

(vi) Central Federal Corporation has required that bonus payments to SEOs or any of the next twenty most highly compensated employees, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii) Central Federal Corporation has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(viii) Central Federal Corporation has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during any part of the most recently completed fiscal year that was a TARP period;

(ix) Central Federal Corporation and its employees have complied with the excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, during any part of the most recently completed fiscal year that was a TARP period; and any expenses that, pursuant to the policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x) Central Federal Corporation will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during any part of the most recently completed fiscal year that was a TARP period;

(xi) Central Federal Corporation will disclose the amount, nature, and justification for the offering, during any part of the most recently completed fiscal year that was a TARP period, of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii) Central Federal Corporation will disclose whether Central Federal Corporation, the board of directors of Central Federal Corporation, or the compensation committee of Central Federal Corporation has engaged during any part of the most recently completed fiscal year that was a TARP period a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii) Central Federal Corporation has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(xiv) Central Federal Corporation has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Central Federal Corporation and Treasury, including any amendments;

(xv) Central Federal Corporation has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi) I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. ( See, for example 18 U.S.C. 1001.)

Dated: March 30, 2011

/s/ Eloise L Mackus Eloise L. Mackus, Esq.

Chief Executive Officer, General Counsel and Corporate Secretary

EX-99.2

Exhibit 99.2

31 C.F.R. Section 30.15 Certifications

I, Therese Ann Liutkus, certify, based on my knowledge, that:

(i) The compensation committee of Central Federal Corporation has discussed, reviewed, and evaluated with the senior risk officer at least twice during the most recently completed fiscal year that was a TARP period, senior executive officer (SEO) compensation plans and employee compensation plans and the risks these plans pose to Central Federal Corporation; and steps have been taken to ensure that in the current and each future fiscal year that is a TARP period, the committee will discuss, review and evaluate SEO and employee compensation plans and risks with the senior risk officer at least every six months during any part of the fiscal year that is a TARP period;

(ii) The compensation committee of Central Federal Corporation has identified and limited during any part of the most recently completed fiscal year that was a TARP period any features of the SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Central Federal Corporation and has identified any features of the employee compensation plans that pose risks to Central Federal Corporation and has limited those features to ensure that Central Federal Corporation is not unnecessarily exposed to risks;

(iii) The compensation committee has reviewed, at least twice during the most recently completed fiscal year that was a TARP period, the terms of each employee compensation plan and identified any features of the plan that could encourage the manipulation of reported earnings of Central Federal Corporation to enhance the compensation of an employee, and has limited any such features; and steps have been taken to ensure that in the current and each future fiscal year that is a TARP period, the committee will review, at least every six months during any part of the fiscal year that is a TARP period, the terms of each employee compensation plan and identify any features of the plan that could encourage the manipulation of reported earnings of Central Federal Corporation to enhance the compensation of an employee, and will limit any such features;

(iv) The compensation committee of Central Federal Corporation will certify to the reviews of the SEO compensation plans and employee compensation plans required under (i) and (iii) above;

(v) The compensation committee of Central Federal Corporation will provide a narrative description of how it limited during any part of the most recently completed fiscal year that was a TARP period the features in

(A) SEO compensation plans that could lead SEOs to take unnecessary and excessive risks that could threaten the value of Central Federal Corporation;

(B) Employee compensation plans that unnecessarily expose Central Federal Corporation to risks; and

(C) Employee compensation plans that could encourage the manipulation of reported earnings of Central Federal Corporation to enhance the compensation of an employee;

(vi) Central Federal Corporation has required that bonus payments to SEOs or any of the next twenty most highly compensated employees, as defined in the regulations and guidance established under section 111 of EESA (bonus payments), be subject to a recovery or “clawback” provision during any part of the most recently completed fiscal year that was a TARP period if the bonus payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria;

(vii) Central Federal Corporation has prohibited any golden parachute payment, as defined in the regulations and guidance established under section 111 of EESA, to a SEO or any of the next five most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(viii) Central Federal Corporation has limited bonus payments to its applicable employees in accordance with section 111 of EESA and the regulations and guidance established thereunder during any part of the most recently completed fiscal year that was a TARP period;

(ix) Central Federal Corporation and its employees have complied with the excessive or luxury expenditures policy, as defined in the regulations and guidance established under section 111 of EESA, during any part of the most recently completed fiscal year that was a TARP period; and any expenses that, pursuant to the policy, required approval of the board of directors, a committee of the board of directors, an SEO, or an executive officer with a similar level of responsibility were properly approved;

(x) Central Federal Corporation will permit a non-binding shareholder resolution in compliance with any applicable Federal securities rules and regulations on the disclosures provided under the Federal securities laws related to SEO compensation paid or accrued during any part of the most recently completed fiscal year that was a TARP period;

(xi) Central Federal Corporation will disclose the amount, nature, and justification for the offering, during any part of the most recently completed fiscal year that was a TARP period, of any perquisites, as defined in the regulations and guidance established under section 111 of EESA, whose total value exceeds $25,000 for any employee who is subject to the bonus payment limitations identified in paragraph (viii);

(xii) Central Federal Corporation will disclose whether Central Federal Corporation, the board of directors of Central Federal Corporation, or the compensation committee of Central Federal Corporation has engaged during any part of the most recently completed fiscal year that was a TARP period a compensation consultant; and the services the compensation consultant or any affiliate of the compensation consultant provided during this period;

(xiii) Central Federal Corporation has prohibited the payment of any gross-ups, as defined in the regulations and guidance established under section 111 of EESA, to the SEOs and the next twenty most highly compensated employees during any part of the most recently completed fiscal year that was a TARP period;

(xiv) Central Federal Corporation has substantially complied with all other requirements related to employee compensation that are provided in the agreement between Central Federal Corporation and Treasury, including any amendments;

(xv) Central Federal Corporation has submitted to Treasury a complete and accurate list of the SEOs and the twenty next most highly compensated employees for the current fiscal year, with the non-SEOs ranked in descending order of level of annual compensation, and with the name, title, and employer of each SEO and most highly compensated employee identified; and

(xvi) I understand that a knowing and willful false or fraudulent statement made in connection with this certification may be punished by fine, imprisonment, or both. ( See, for example 18 U.S.C. 1001.)

Dated: March 30, 2011

/s/ Therese Ann Liutkus Therese Ann Liutkus, CPA

President, Treasurer and Chief Financial Officer