Exhibit 13.1

Annual Report to Security Holders for the Fiscal Year ended December 31, 2009

2009 Annual Report

TABLE OF CONTENTS

	3			MESSAGE TO STOCKHOLDERS
				MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	4			Selected Financial and Other Data
	6			Forward-Looking Statements
	6			General
	7			Financial Condition
	12			Comparison of Results of Operations for 2009 and 2008
	17			Comparison of Results of Operations for 2008 and 2007
	21			Quantitative and Qualitative Disclosures about Market Risk
	22			Liquidity and Capital Resources
	23			Impact of Inflation
	23			Critical Accounting Policies
	24			Market Prices and Dividends Declared
				FINANCIAL STATEMENTS
	25			Management’s Report on Internal Control Over Financial Reporting
	26			Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
	27			Consolidated Financial Statements
	33			Notes to Consolidated Financial Statements
	61			BOARD OF DIRECTORS AND OFFICERS
	61			CFBANK OFFICE LOCATIONS
				CORPORATE DATA
	61			Annual Report
	61			Annual Meeting
	61			Stockholder Services

				|   page 1

MESSAGE TO STOCKHOLDERS

Dear Fellow Stockholders:

The values of my childhood call me to speak openly and honestly, regardless of the message. After all, good news and bad news travel at the same speed. Unfortunately, this annual report to stockholders is a limited way to communicate, without the more immediate contact that leads to the best understanding of our business. During the coming year, we will find ways to keep you informed as frequently as possible, because even though we live in an electronic world, information regarding small community banks is still relatively inefficient.

Here are the facts. First, the financial tsunami of the 2008 and 2009 “Great Recession” reached our financial shores in September 2009. The rapid decline in the U.S. economy and, more importantly, in the Ohio economy, led to a sudden wave of negative factors which directly and immediately resulted in business contractions, higher vacancy rates and lower valuations for both residential and commercial real estate. Add to that the impact of higher unemployment, which directly affected consumers’ ability to meet their obligations and indirectly affected their confidence in the economic future. As a result of these negative factors and their effect on consumers, our Company provided a $9.9 million increase in the allowance for loan losses and wrote off $5.9 million in loan balances. Second, operating expenses increased over the previous year due to a 529% increase in FDIC insurance premiums and higher professional fees associated with problem loans. And third, due to the detrimental effect of the current economic condition on our performance, and uncertainty regarding how future economic conditions will affect our future performance, we recorded a $4.3 million valuation allowance to reduce our net deferred tax asset to zero, amplifying the loss even further. Going forward we will recognize the tax benefits as we recognize future taxable income.

Through it all, the Company remains well capitalized and core earnings continue to improve. CFBank’s core earnings — if we exclude the credit write-offs and the increase in non-controllable expense such as FDIC insurance and certain professional fees — were approximately $2 million for 2009.

As investors, we must all focus on the results of the Company, but also look inside the Company to determine if the basic premise of the business is relevant. To this I would answer in the affirmative. I believe our business model is not only well accepted, but is also substantially relevant for the future. Here is why. During 2009 and despite hardships, the Company remained well capitalized and originated over $105 million in new loans. The mortgage team’s first full year of operations resulted in a 304% increase in gains on sales of loans, which totaled $642,000. Our core controllable noninterest expense actually decreased during the year by $244,000. We will continue to be stewards of the financial resources provided to our Company.

Going forward, what should we as investors in community banks consider? First and foremost is a determination whether the Company has the capital and financial resources to weather the existing financial storm. As stated, we continue to remain well capitalized and generate core earnings to support the Company. Second, we, as investors, need to determine if the factors that led to the recession have ended or if the economy will continue a downward trend and, thus, affect our Company. Finally, as this storm recedes, are we poised to continue building for the future? Since I have not been given the ability to predict the future, all I can say is that we believe we are prepared for the future economic climate. We have diligently managed CFBank’s interest rate risk position and are poised for changes in upward movements of the U.S. Treasury yield curve. Our business plan remains relevant. I believe our niche focus and sense of urgency in execution will be attractions to many business and individual customers. Our belief in the viability of our niche position has resulted in our recent characterization of that position to consumers as “banking reinvented.” We have dedicated professionals at our Company who daily perform their duties without employment contracts or excessive compensation packages, and who are passionate about meeting the banking needs of our commercial and individual customers. We will be successful over the long-term.

There remain substantial challenges ahead for all banks. As of September 30, 2009, the FDIC Deposit Insurance Fund balance was a negative $8.243 billion. I estimate that, based on the total of all insured deposits as of that date, the FDIC must assess insurance premiums on all banks in the amount of $75 billion to absorb the deficit and have a fund balance of 1.25% of insurable deposits. This alone will temper the growth in core earnings over the coming years. Also, higher capital ratio requirements will challenge bank management to create reasonable returns without taking on additional volatility and risk. Our plan is to continue to focus on our niche business model, and add noninterest income to create returns without the need for additional capital.

In summary, 2009 was extremely difficult on you, as a stockholder, as well as us, as managers and stewards. Our goal is to survive, then to thrive. We have accomplished the former and will execute on the latter. Along the way, we have been reinventing banking.

Mark S. Allio
Chairman, President and CEO

				|   page 3

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)		2009				2008				2007				2006				2005
Total assets		$	273,742			$	277,781			$	279,582			$	236,028			$	173,021
Cash and cash equivalents			2,973				4,177				3,894				5,403				2,972
Securities available for sale			21,241				23,550				28,398				29,326				30,872
Loans held for sale			1,775				284				457				2,000				2,419
Loans, net(1)			231,105				233,922				230,475				184,695				124,026
Allowance for loan losses			7,090				3,119				2,684				2,109				1,495
Nonperforming assets			13,234				2,412				574				297				800
Foreclosed assets			—				—				86				—				—
Other intangible assets			169				—				—				—				—
Deposits			211,088				207,647				194,308				167,591				127,588
FHLB advances			32,007				29,050				49,450				32,520				22,995
Subordinated debentures			5,155				5,155				5,155				5,155				5,155
Total stockholders’ equity			23,227				33,075				27,379				29,085				16,081

SUMMARY OF OPERATIONS:

		FOR THE YEAR ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)		2009				2008				2007				2006				2005
Total interest income		$	14,446			$	16,637			$	17,523			$	13,654			$	8,691
Total interest expense			5,947				7,935				9,795				6,889				3,723
Net interest income			8,499				8,702				7,728				6,765				4,968
Provision for loan losses			9,928				917				539				820				674
Net interest income after provision for loan losses			(1,429	)			7,785				7,189				5,945				4,294
Noninterest income:
Net gain (loss) on sale of securities			—				54				—				(5	)			—
Other			1,377				894				728				828				866
Total noninterest income			1,377				948				728				823				866
Impairment loss on goodwill and intangibles			—				—				—				—				1,966
Noninterest expense			8,262				7,749				7,997				6,849				6,861
Income (loss) before income taxes			(8,314	)			984				(80	)			(81	)			(3,667	)
Income tax expense (benefit)			1,577				261				(63	)			(44	)			(377	)
Net income (loss)		$	(9,891	)		$	723			$	(17	)		$	(37	)		$	(3,290	)
Net income (loss) available to common stockholders		$	(10,298	)		$	694			$	(17	)		$	(37	)		$	(3,290	)

(See footnotes on next page.)

page 4   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

SELECTED FINANCIAL RATIOS AND OTHER DATA:

		AT OR FOR THE YEAR ENDED DECEMBER 31,
		2009				2008				2007				2006				2005
Performance Ratios: (2) (10)
Return on average assets			(3.45	%)			0.26	%			(0.01	%)			(0.02	%)			(2.02	%)
Return on average equity			(32.95	%)			2.68	%			(0.06	%)			(0.12	%)			(17.71	%)
Average yield on interest-earning assets (3)			5.34	%			6.41	%			7.23	%			6.84	%			5.87	%
Average rate paid on interest-bearing liabilities			2.50	%			3.38	%			4.50	%			4.00	%			2.75	%
Average interest rate spread (4)			2.84	%			3.03	%			2.73	%			2.84	%			3.12	%
Net interest margin, fully taxable equivalent (5)			3.14	%			3.35	%			3.19	%			3.39	%			3.35	%
Interest-earning assets to interest-bearing liabilities			114.20	%			110.90	%			111.47	%			115.83	%			109.46	%
Efficiency ratio (6)			83.60	%			80.75	%			94.57	%			90.20	%			151.30	%
Noninterest expense to average assets			2.88	%			2.79	%			3.08	%			3.20	%			5.43	%
Common stock dividend payout ratio			n/m				125.00	%			n/m				n/m				n/m
Capital Ratios: (2)
Equity to total assets at end of period			8.48	%			11.91	%			9.79	%			12.32	%			9.29	%
Average equity to average assets			10.47	%			9.72	%			10.81	%			13.89	%			11.43	%
Tangible capital ratio (9)			8.90	%			9.20	%			8.50	%			9.80	%			6.90	%
Core capital ratio (9)			8.90	%			9.20	%			8.50	%			9.80	%			6.90	%
Total risk-based capital ratio (9)			11.70	%			11.60	%			11.00	%			12.60	%			10.10	%
Asset Quality Ratios: (2)
Nonperforming loans to total loans (7)			5.56	%			1.02	%			0.21	%			0.16	%			0.64	%
Nonperforming assets to total assets (8)			4.83	%			0.87	%			0.21	%			0.13	%			0.46	%
Allowance for loan losses to total loans			2.98	%			1.32	%			1.15	%			1.13	%			1.19	%
Allowance for loan losses to nonperforming loans (7)			53.57	%			129.31	%			550.00	%			710.10	%			186.88	%
Net charge-offs (recoveries) to average loans			2.48	%			0.21	%			(0.02	%)			0.13	%			0.14	%
Per Share Data:
Basic earnings (loss) per common share		$	(2.51	)		$	0.16			$	—			$	(0.01	)		$	(1.47	)
Diluted earnings (loss) per common share			(2.51	)			0.16				—				(0.01	)			(1.47	)
Dividends declared per common share			—				0.20				0.28				0.36				0.36
Tangible book value per common share at end of period			3.91				6.36				6.17				6.40				7.17

Following are affected performance ratios for 2005 excluding this charge:

Return on average assets			(0.86	%)
Return on average equity			(7.27	%)
Efficiency ratio			117.60	%
Ratio of noninterest expense to average assets			4.20	%

GAAP net loss		$	(3,290	)
Impairment loss on goodwill and intangibles, net of tax			1,893
Loss excluding impairment loss on goodwill and intangibles		$	(1,397	)
Diluted loss per common share		$	(0.63	)

n/m — not meaningful

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 5

FORWARD-LOOKING STATEMENTS

Statements in this Annual Report that are not statements of historical fact are forward-looking statements. 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 or its management or Board 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:

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

Other risks are detailed in our filings with the Securities and Exchange Commission, including our Form 10-K filed for 2009, 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 the operation of our principal subsidiary, CFBank, a federally chartered savings association formed in Ohio in 1892.

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, 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 consumers, small businesses and small business owners.

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 the 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 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.

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GENERAL (CONTINUED)

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.

The significant volatility and disruption in capital, credit and financial markets experienced in 2008 continued to have a detrimental affect on our national and local economies in 2009. These effects include declining real estate values; continued tightening in the availability of credit; illiquidity in certain securities markets; increasing loan delinquencies, foreclosures, personal and business bankruptcies and unemployment rates; declining 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; declines in the value of our securities portfolio; 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.

Other than as discussed above and noted in the following narrative, we are not aware of any market or institutional trends, other events, or uncertainties that are expected to have a material effect on liquidity, capital resources or operations. We are not aware of any current recommendations by regulators which would have a material effect if implemented, except as described above and in the following narrative.

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

FINANCIAL CONDITION

General. Assets totaled $273.7 million at December 31, 2009 and decreased $4.1 million, or 1.5%, from $277.8 million at December 31, 2008. The decrease was primarily due to a $2.8 million decrease in net loan balances as a result of net loan charge-offs and an increase in the allowance for loan losses (ALLL), and a $1.6 million decrease in the deferred tax asset due to a valuation allowance recorded in 2009 to reduce the value to zero.

ASSET BALANCES

Securities available for sale. Securities available for sale totaled $21.2 million at December 31, 2009 and decreased $2.4 million, or 9.8%, from $23.6 million at December 31, 2008. The decline was due to repayments and scheduled maturities in excess of purchases. Fluctuations in the market value of securities held by the Company relates primarily to changes in interest rates.

Loans. Net loans totaled $231.1 million at December 31, 2009 and decreased $2.8 million, or 1.2%, from $233.9 million at December 31, 2008. Commercial, commercial real estate and multi-family loans totaled $181.8 million at December 31, 2009 and decreased $255,000, or .1%, from $182.1 million at December 31, 2008. The slight decrease in commercial, commercial real estate and multi-family loans was due to loan payoffs, repayments and charge-offs in excess of originations, which totaled $33.7 million during 2009. Mortgage loans totaled $30.6 million at December 31, 2009 and increased $1.7 million, or 6.1%, from $28.9 million at December 31, 2008. The increase in mortgage loans was due to an increase in loans originated for portfolio and $1.9 million in loans transferred from loans held for sale to portfolio. Consumer loans totaled $26.0 million at December 31, 2009 and decreased $399,000, or 1.5%, from $26.4 million at December 31, 2008. The decrease was due to repayments of auto and home equity lines of credit, partially offset by the purchase of $2.2 million in auto loans.

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 7

FINANCIAL CONDITION (CONTINUED)

LOAN PORTFOLIO COMPOSITION

Allowance for loan losses. The ALLL totaled $7.1 million at December 31, 2009 and increased $4.0 million, or 127.3%, from $3.1 million at December 31, 2008. The increase was due to continued adverse economic conditions affecting loan performance which resulted in an increase in nonperforming loans and loan charge-offs. The ratio of the ALLL to total loans totaled 2.98% at December 31, 2009, compared to 1.32% at December 31, 2008. For additional information regarding nonperforming loans and loan charge-offs, see the section titled “Provision for loan losses”.

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 conditions and trends and expectations about future economic conditions and trends; and other factors that warrant recognition in providing for an adequate ALLL. Based on the variables involved and the fact that management must make judgments about outcomes that are uncertain, the determination of the ALLL is considered to be a critical accounting policy. See the “Critical Accounting Policies” section of this Annual Report for additional discussion.

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 full payment under the loan terms is not expected. Commercial, commercial real estate and multi-family residential loans are individually evaluated for impairment when 90 days delinquent and adversely classified, regardless of size. 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 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 $13.7 million at December 31, 2009, and increased $11.4 million, from $2.3 million, at December 31, 2008. The ALLL specifically allocated to impaired loans totaled $2.0 million at December 31, 2009 and $514,000 at December 31, 2008. 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. 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.

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. During 2009, management updated its methodology for calculating the general component of the ALLL to improve the analysis relative to historical loss rates. CFBank began building the commercial, commercial real estate and multi-family residential loan portfolios in 2003, and no losses were experienced in these loan portfolios until 2009. Given the short nature of this loss history, and the current depressed economic environment, management believes the updated methodology improves its ability to estimate probable incurred losses in these portfolios. The updated methodology also provides a more detailed analysis of large groups of smaller balance loans, such as single-family residential and consumer loans.

Under the updated methodology, the loan portfolio is segregated by loan type and internal loan risk ratings. Commercial loans are segregated by secured and unsecured amounts. Commercial real estate loans are segregated by permanent mortgages on commercial real estate, land loans, and construction loans. Multi-family residential real estate loans are segregated by permanent mortgages on multi-family real estate, and construction loans. Single-family residential loans are segregated by first liens, junior liens, and construction loans. Consumer loans are segregated by home equity lines of credit (which are further segregated by loans originated by CFBank, and loans purchased), auto loans (which are further segregated by loans originated by CFBank, and loans purchased), credit cards, loans on deposits, and other consumer loans. These individual segments are then further segregated by internal loan risk ratings.

page 8   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

FINANCIAL CONDITION (CONTINUED)

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 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 and classified loans. This adjustment process is performed for each segment of the portfolio. CFBank has experienced an increasing trend in loan charge-offs and past due, nonaccrual and classified loans, and the industry information was adjusted to reflect CFBank’s portfolio performance, as well as to reflect a continued adverse economic outlook. See Note 1 to our consolidated financial statements for more information regarding nonaccrual and charge-off accounting policies.

The updated methodology offers a more detailed segregation of the loan portfolio, which was not segregated into as many groupings with the previous methodology. The updated methodology applies a dual factor rate (the probability of default and the loss given default) to arrive at probable losses, compared to a single factor rate (historical losses on single-family residential loans and estimates based on industry losses for commercial, commercial real estate and multi-family residential loans) under the previous methodology. The updated methodology considers individual loan performance, compared to portfolio performance under the previous methodology. Management believes that the loan-level detail used by the updated methodology results in a better estimate of the ALLL. Quantifying the effect of the update in methodology is not practical.

All lending activity involves risks of loan losses. Certain types of loans, such as option 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, or used option ARM products, or loans with initial teaser rates.

Unsecured commercial loans may present a higher risk of non-collection than secured commercial loans. Unsecured commercial loans totaled $3.9 million, or 9.1% of the commercial loan portfolio at December 31, 2009. The unsecured loans are primarily lines of credit to small businesses in CFBank’s market area and are guaranteed by the small business owners. None of the unsecured loans are 30 days or more delinquent or nonperforming at December 31, 2009.

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 portfolios, in the aggregate, including single-family, multi-family and commercial real estate, more than 90% of the portfolio has loan-to-value ratios of 85% or less, 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, 2009, 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.

Home equity lines of credit include both purchased loans and loans we originated for 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, Virginia and Florida. The outstanding balance of the purchased home equity lines of credit totaled $4.6 million at December 31, 2009, and $2.8 million, or 61.5%, of the balances are collateralized by properties in these states. The collateral values associated with loans in these states have declined from 10% to 25% since these loans were originated in 2005 and 2006. As a result, balances on those loans exceeded collateral values by $580,000 at year-end 2009. We have experienced increased write-offs in the purchased portfolio as the depressed state of the housing market and general economy has continued and, in 2009, three loans totaling $322,000 were written off. We continue to monitor collateral values and borrower FICO^® scores and, when the situation warrants, have frozen the lines of credit.

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 9

FINANCIAL CONDITION (CONTINUED)

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 annually, and loan officers maintain close contact with borrowers between annual reviews. Adjustments to loan risk ratings are based on the annual reviews, or any time loan officers receive information that may affect risk ratings. Additionally, an independent review of commercial, commercial real estate and multi-family residential loans is performed at least annually. Management uses the results of this review 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 believe the ALLL is adequate to absorb probable incurred credit losses in the loan portfolio as of December 31, 2009; however, future additions to the allowance may be necessary based on factors including, but not limited to, 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 would occur if economic conditions and factors which affect credit quality, real estate values and general business conditions continue to worsen or do not improve.

Premises and equipment. Premises and equipment, net, totaled $7.0 million at December 31, 2009 and increased $1.8 million, or 33.5% from $5.2 million at December 31, 2008. The increase was primarily due to the purchase of the remaining two-thirds interest in Smith-Ghent LLC, which included $2.2 million related to Company’s headquarters building in Fairlawn, partially offset by current year depreciation.

Deposits. Deposits totaled $211.1 million at December 31, 2009 and increased $3.5 million, or 1.7%, from $207.6 million at December 31, 2008. The increase was due to an $18.9 million increase in money market account balances, a $2.5 million increase in noninterest bearing checking account balances, a $508,000 increase in interest bearing checking accounts, and a $309,000 increase in savings accounts. Certificate of deposit accounts decreased $18.8 million during 2009.

DEPOSIT BALANCES

Money market account balances increased $18.9 million in 2009 due to competitive rates offered by CFBank and the transfer of maturing certificate of deposit balances by customers seeking increased liquidity and higher yields. Noninterest bearing checking account balances increased $2.5 million in 2009 as a result of management’s continued focus on building complete banking relationships with commercial clients.

CFBank is 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 balances up to $50 million. Customer balances in the CDARS program decreased $11.0 million and totaled $37.4 million at December 31, 2009. The current year decrease in CDARS account balances was a result of customers transferring these funds into more liquid accounts, including the money market account. CDARS balances are considered brokered deposits by regulations. Not considering CDARS deposits, brokered deposits totaled $8.8 million at December 31, 2009 and decreased $15.0 million, or 63.2%, from $23.8 million at December 31, 2008. The decrease in brokered deposits was based on CFBank’s asset liability management strategies and a decrease in CFBank’s funding requirements for loan growth in 2009. We expect to continue to use the CDARS program and other brokered deposits as funding sources depending on market conditions, demand by our customers, pricing, liquidity and asset liability management considerations.

CFBank is a participant in the FDIC’s Transaction Account Guarantee Program. Under that program, through June 30, 2010, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. Coverage under the Transaction Account Guarantee Program is in addition to, and separate from, the coverage available under the FDIC’s general deposit insurance rules.

FHLB advances. Short-term FHLB advances totaled $2.1 million at December 31, 2009 and decreased $3.8 million, from $5.9 million at December 31, 2008. Short-term advances were repaid with funds from the increase in deposits and cash flows from the securities portfolio. Long-term FHLB advances totaled $29.9 million at December 31, 2009 and increased $6.7 million, or 29.1% from $23.2 million at December 31, 2008. The increase in long-term FHLB advances resulted from management’s decision, as part of the Company’s asset liability management program, to use these advances to extend the terms of liabilities and fix their cost at the current low interest rates to protect net interest margin should interest rates rise.

page 10   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

FINANCIAL CONDITION (CONTINUED)

Collateral pledged to the FHLB includes single-family mortgage loans under a blanket lien arrangement, second mortgage loans, multi-family mortgage loans, commercial real estate loans, home equity lines of credit and securities. Based on the collateral pledged and CFBank’s holdings of FHLB stock, CFBank is eligible to borrow up to a total of $39.7 million at year-end 2009. CFBank’s borrowing capacity decreased from $62.4 million at December 31, 2008 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 “Liquidity and Capital Resources” section of this Annual Report.

Subordinated debentures. Subordinated debentures totaled $5.2 million at year-end 2009 and 2008. 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.

Stockholders’ equity. Stockholders’ equity totaled $23.2 million at December 31, 2009 and decreased $9.8 million, or 29.8%, compared to $33.1 million at December 31, 2008. The decrease was due to the current year net loss, partially offset by a $354,000 increase in the market value of the securities portfolio.

The Company is a participant in the Troubled Asset Relief Program (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 Company 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 the standards for compensation and corporate governance established under the American Recovery and Reinvestment Act of 2009 (the ARRA), and the Interim Final Rule promulgated by the Secretary of the U.S. Treasury under 31 C.F.R. Part 30 (collectively, the TARP Compensation Standards). The company is in compliance with the terms and conditions and the TARP Compensation Standards. See Notes 15 and 16 to our consolidated financial statements for more information regarding the preferred stock and warrant.

In March 2009, the Company’s Board of Directors voted to suspend the Company’s quarterly dividend on its common stock from the previous level of $.05 per share. The Board’s decision to suspend the quarterly cash dividend allows for preservation of capital during the current economic environment, allows for use of capital in execution of our banking model, and positions the Company for future growth.

With the capital provided by the TARP Capital Purchase Plan, we intend to continue to make financing available to businesses and consumers in our existing market areas. Since receipt of the TARP Capital Purchase Plan proceeds in December 2008 and through December 31, 2009, we have originated loans totalling $108.9 million, or 15 times the amount of TARP Capital Purchase Plan funds received.

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 2009 and 2008. See the “Liquidity and Capital Resources” section of this Annual Report for a discussion of dividends as a source of funding for the Company and dividend restrictions imposed on CFBank by the OTS.

CFBANK CAPITAL RATIOS

Well-capitalized

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.

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 11

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 continuing 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 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 decreased to 3.14% during 2009, compared to 3.35% during 2008. The decrease was due to a decline in asset yields greater than the decline in funding costs. Yield on interest-earning assets decreased 107 basis points (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 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 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 nonperforming loans continues to increase, or downward repricing on existing interest-earning assets and current loan production caused by sustained low market interest rates continues to be greater than the decrease in funding costs.

NET INTEREST INCOME

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 5.34% in 2009, from 6.41% in 2008. The decrease in income caused by the lower yield was partially offset by an $11.3 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 lower yields on loans partially offset by an increase in average loan balances. The average yield on loans decreased 98 bp to 5.58% in 2009, compared to 6.56% 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 $4.9 million, or 2.1%, and totaled $236.4 million in 2009, compared to $231.5 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 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.

page 12   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

COMPARISON OF RESULTS OF OPERATIONS FOR 2009 AND 2008 (CONTINUED)

The average yield on securities decreased 7 bp to 5.13% in 2009, compared to 5.20% in 2008, due to current year securities purchases at lower yields.

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 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 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 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 continued 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 5.56% of total loans, at December 31, 2009, compared to $2.4 million, or 1.02% 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.

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 13

COMPARISON OF RESULTS OF OPERATIONS FOR 2009 AND 2008 (CONTINUED)

We have incorporated the OTS internal asset classifications as a part of our credit monitoring system and internal loan risk rating system. In accordance with regulations, problem assets are classified as “substandard,” “doubtful” or “loss,” and the classifications are subject to review by the OTS. An asset is considered “substandard” under the regulations 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” under the regulations 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, conditions and values, “highly questionable and improbable.” Assets considered “loss” under the regulations are those considered “uncollectible” and having so little value that their continuance as assets without the establishment of a specific loss allowance is not warranted. Assets are required to be designated “special mention” when they posses weaknesses but do not currently expose the insured institution to sufficient risk to warrant classification in one of these problem asset categories.

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 continued adverse economic environment that existed in 2009 and its detrimental effect on collateral values and the ability of borrowers to make loan payments. 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

page 14   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

COMPARISON OF RESULTS OF OPERATIONS FOR 2009 AND 2008 (CONTINUED)

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 2.48% of average loans in 2009, compared to $482,000, or 0.21% 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:

		AT 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

ALLOWANCE FOR LOAN LOSSES

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. If market mortgage rates increase, or the housing market deteriorates further, mortgage production, and resultant gains on sales of loans, could decrease.

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.

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 15

COMPARISON OF RESULTS OF OPERATIONS FOR 2009 AND 2008 (CONTINUED)

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.

The FDIC issued a final rule establishing risk-based assessment rates that became effective April 1, 2009. Under those rules, initial assessment rates are determined by combining supervisory ratings with financial ratios, and long-term debt issuer ratings for large banks that have one or more ratings assigned. Supervisory ratings are determined by regulators in areas of capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk (CAMELS). For most institutions, including CFBank, assessment rates are based on weighted average CAMELS component ratings and six financial ratios. The financial ratios are (1) the tier 1 leverage ratio; (2) loans past due 30-89 days/gross assets; (3) nonperforming assets/gross assets; (4) net loan charge-offs/gross assets; (5) net income before taxes/risk-weighted assets; and (6) the adjusted brokered deposit ratio. Future events which negatively affect any of these factors could cause an increase in FDIC premiums paid by CFBank.

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 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.

NONINTEREST EXPENSE / AVERAGE ASSETS

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 16   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

COMPARISON OF RESULTS OF OPERATIONS FOR 2008 AND 2007

General. Net income totaled $723,000, or $.16 per diluted common share, and increased $740,000 for the year ended December 31, 2008, compared to a net loss of $17,000, or $.00 per diluted common share, for 2007. The net loss for 2007 was primarily due to a $511,000 after-tax cost of an arbitration loss and lease termination expense. Additional information on the arbitration loss and the lease termination expense is included in Note 24 to our consolidated financial statements.

Net interest income. Net interest margin increased to 3.35% during 2008, compared to 3.19% during 2007. The margin was positively impacted by reductions in the Federal Funds rate, the prime rate and other market interest rates, beginning in September 2007 and continuing through December 2008, which resulted in larger decreases in funding costs than in asset yields.

Net interest income increased $974,000, or 12.6%, to $8.7 million in 2008, compared to $7.7 million in 2007. The increase was due to a 19.0% decrease in interest expense offset by a 5.1% decrease in interest income. The average cost of interest-bearing liabilities decreased to 3.38% in 2008, from 4.50% in 2007, due to lower short-term interest rates in 2008. The decrease in expense caused by the lower cost was partially offset by a $17.0 million increase in the average balance of interest-bearing liabilities in 2008 due to deposit growth. Interest income decreased 5.1% primarily due to a decline in the average yield on interest earning assets to 6.41% in 2008, from 7.23% in 2007. The decrease in income caused by the lower yield was partially offset by a $17.6 million increase in average interest-earning assets in 2008 due to growth in loan balances.

Interest income decreased $886,000, or 5.1%, to $16.6 million in 2008, compared to $17.5 million in 2007. The decrease was due to lower income on loans and securities. Interest income on loans decreased $654,000, or 4.1%, to $15.2 million in 2008, compared to $15.8 million in 2007, due to lower yields on loans partially offset by an increase in average loan balances. The average yield on loans decreased 98 bp to 6.56% in 2008, compared to 7.54% in 2007, due to lower market rates on new originations and downward repricing on variable-rate loans. Average loan balances increased $21.3 million, or 10.2%, and totaled $231.5 million in 2008, compared to $210.2 million in 2007, due to growth in commercial, commercial real estate and multi-family mortgage loans. Interest income on securities decreased $191,000, or 12.6%, and totaled $1.3 million in 2008, compared to $1.5 million in 2007, due to a decrease in the average balance of securities partially offset by an increase in the average yield on securities. The average balance of securities decreased $3.9 million and totaled $26.0 million in 2008, compared to $29.9 million in 2007, due to sales, maturities and prepayments. The average yield on securities increased 11 bp to 5.20% in 2008, compared to 5.09% in 2007, due to prepayments on mortgage-backed securities owned at a discount.

Interest expense decreased $1.9 million, or 19.0%, to $7.9 million in 2008, compared to $9.8 million in 2007. The decrease was due to a decline in the cost of both deposits and borrowings, partially offset by an increase in average deposit balances. Interest expense on deposits decreased $1.0 million, or 14.0%, to $6.2 million in 2008, compared to $7.2 million in 2007, 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 103 bp, to 3.31% in 2008, compared to 4.34% in 2007, due to a decline in short-term market interest rates during 2008. Average deposit balances increased $21.3 million, or 12.8%, to $187.5 million in 2008, compared to $166.2 million in 2007, due to growth in certificate of deposit accounts. Interest expense on FHLB advances and other borrowings, including subordinated debentures, decreased $852,000, or 33.1%, to $.1.7 million in 2008, compared to $2.6 million in 2007, due to a decrease in both the average cost and average balance of borrowings. The average cost of FHLB advances and other borrowings decreased 135 bp, to 3.67% in 2008, compared to 5.02% in 2007, due to lower short-term interest rates during 2008. The average balance of FHLB advances and other borrowings decreased $4.3 million, to $47.0 million in 2008, compared to $51.3 million in 2007, 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 $917,000 in 2008, compared to $539,000 in 2007. The increase in 2008 was primarily due to an increase in nonperforming loans and net loan charge-offs.

Nonperforming loans increased $1.9 million and totaled $2.4 million, or 1.02% of total loans, at December 31, 2008, compared to $488,000, or 0.21% of total loans, at December 31, 2007. The increase in nonperforming loans included: one commercial loan, totaling $646,000, and three multi-family loans to one borrower, totaling $1.3 million, which were past due and on nonaccrual status at December 31, 2008; and one commercial real estate loan totaling $347,000, which was 90 days past maturity and still accruing interest at December 31, 2008, as the borrower continued to make monthly payments on the loan. The amount of the ALLL specifically allocated to nonperforming loans totaled $514,000 at December 31, 2008.

Net charge-offs totaled $481,000, or 0.21% of average loans, in 2008, compared to net recoveries of $36,000, or 0.02% of average loans, in 2007. Net charge-offs in 2008 related to home equity lines of credit, single-family mortgages and auto loans.

At December 31, 2008, in addition to the nonperforming loans discussed previously, seven commercial loans and one commercial real estate loan, totaling $2.6 million and $530,000, respectively, were classified as substandard. At December 31, 2007, four commercial loans and one multi-family loan, totaling $2.1 million and $1.3 million, respectively, were classified as substandard.

The ratio of the ALLL to total loans was 1.32% at December 31, 2008, compared to 1.15% at December 31, 2007.

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 17

COMPARISON OF RESULTS OF OPERATIONS FOR 2008 AND 2007 (CONTINUED)

Noninterest income. Noninterest income totaled $948,000 and increased $220,000 in 2008, compared to $728,000 in 2007. The increase was primarily due to a $257,000 increase in service charges on deposit accounts related to a third party payment processor. These accounts were active only during the fourth quarter of 2008. Noninterest income also included $54,000 in net gains on sales of securities in 2008, and $74,000 lower net gains on sales of loans due to fewer mortgage loan originations in 2008. Mortgage loans originated for sale totaled $27.0 million in 2008, compared to $37.3 million in 2007.

Noninterest expense. Noninterest expense decreased $248,000, or 3.1%, and totaled $7.7 million in 2008, compared to $8.0 million in 2007. The decrease in noninterest expense in 2008 was due to a $543,000 decrease in salaries and employee benefits and $49,000 decrease in occupancy and equipment expense. In 2007, these expense categories included $741,000 of the arbitration loss and lease termination expense. Salaries and employee benefits in 2008 included approximately $98,000 additional expense related to the addition of five mortgage originators and one mortgage management staff position. Occupancy and equipment expense in 2008 included a $67,000 increase in real estate tax expense related to our Worthington office and a $23,000 increase in rent expense primarily related to additional space in the Fairlawn office, offset by a $61,000 decline in rent expense associated with the former mortgage location. Advertising and promotion expenses decreased $158,000 as a result of management’s decision to reduce these activities in 2008. Data processing expenses increased $130,000 in 2008, and included costs associated with increased check clearing activity related to the third party payment processor, referred to in the “Noninterest income” section of this Annual Report. Professional fees increased $200,000 in 2008 due to legal fees associated with nonperforming loans and costs related to selection of a new core processing system, which was tentatively planned for implementation in 2009 to improve operational efficiency and support the requirements of our business banking strategy, but cancelled due to general economic conditions in 2009. Gains on sales of foreclosed assets, included in foreclosed assets, net, decreased $27,000 in 2008. Depreciation increased $64,000 in 2008 due to expense related to the Worthington office building.

FDIC insurance premiums, included in other noninterest expense, increased $65,000 and totaled $86,000 in 2008, compared to $21,000 in 2007. FDIC premiums were reduced by a $103,000 one-time assessment credit issued by the FDIC under the Federal Insurance Reform Act of 2005, which offset $74,000 in premiums in 2007 and $29,000 in premiums in 2008, at which time it was fully utilized.

The ratio of noninterest expense to average assets improved to 2.79% in 2008, from 3.08% in 2007. The efficiency ratio improved to 80.75% in 2008, compared to 94.57% in 2007.

Income taxes. Income taxes totaled $261,000 in 2008, compared to a tax benefit of $63,000 associated with the loss in 2007.

page 18   |     CENTRAL FEDERAL CORPORATION 2009 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,
		2009												2008												2007
		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)		$	22,692			$	1,120				5.13	%		$	25,951			$	1,329				5.20	%		$	29,864			$	1,520				5.09	%
Loans and loans held for sale (3)			236,409				13,197				5.58	%			231,539				15,193				6.56	%			210,169				15,847				7.54	%
Other earning assets			10,251				32				0.31	%			513				8				1.56	%			350				18				5.14	%
FHLB stock			2,053				97				4.72	%			2,064				107				5.18	%			2,105				138				6.56	%
Total interest-earning assets			271,405				14,446				5.34	%			260,067				16,637				6.41	%			242,488				17,523				7.23	%
Noninterest-earning assets			15,243												17,409												17,098
Total assets		$	286,648											$	277,476											$	259,586
Interest-bearing liabilities:
Deposits		$	200,438				4,723				2.36	%		$	187,495				6,210				3.31	%		$	166,242				7,218				4.34	%
FHLB advances and other borrowings			37,214				1,224				3.29	%			47,013				1,725				3.67	%			51,295				2,577				5.02	%
Total interest-bearing liabilities			237,652				5,947				2.50	%			234,508				7,935				3.38	%			217,537				9,795				4.50	%
Noninterest-bearing liabilities			18,976												16,009												13,997
Total liabilities			256,628												250,517												231,534
Equity			30,020												26,959												28,052
Total liabilities and equity		$	286,648											$	277,476											$	259,586
Net interest-earning assets		$	33,753											$	25,559											$	24,951
Net interest income/interest rate spread						$	8,499				2.84	%						$	8,702				3.03	%						$	7,728				2.73	%
Net interest margin											3.14	%											3.35	%											3.19	%
Average interest-earning assets to average interest- bearing liabilities			114.20	%											110.90	%											111.47	%

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 19

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, 2009												YEAR ENDED DECEMBER 31, 2008
		COMPARED TO YEAR ENDED DECEMBER 31, 2008												COMPARED TO YEAR ENDED DECEMBER 31, 2007
		INCREASE (DECREASE) DUE TO												INCREASE (DECREASE) DUE TO
(DOLLARS IN THOUSANDS)		RATE				VOLUME				NET				RATE				VOLUME				NET
Interest-earning assets:
Securities (1)		$	(20	)		$	(189	)		$	(209	)		$	29			$	(220	)		$	(191	)
Loans and loans held for sale			(2,311	)			315				(1,996	)			(2,173	)			1,519				(654	)
Other earning assets			(11	)			35				24				(16	)			6				(10	)
FHLB stock			(9	)			(1	)			(10	)			(28	)			(3	)			(31	)
Total interest-earning assets			(2,351	)			160				(2,191	)			(2,188	)			1,302				(886	)
Interest-bearing liabilities:
Deposits			(1,892	)			405				(1,487	)			(1,854	)			846				(1,008	)
FHLB advances and other borrowings			(166	)			(335	)			(501	)			(651	)			(201	)			(852	)
Total interest-bearing liabilities			(2,058	)			70				(1,988	)			(2,505	)			645				(1,860	)
Net change in net interest income		$	(293	)		$	90			$	(203	)		$	317			$	657			$	974

page 20   |     CENTRAL FEDERAL CORPORATION 2009 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 18 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 4 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, 2009, 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 (CFBANK ONLY)

BASIS POINT CHANGE IN RATES		NPV RATIO
+300			10.72	%
+200			11.29	%
+100			11.70	%
+50			11.82	%
0			11.99	%
-50			12.01	%
-100			12.05	%

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 2008 and 2009, the terms of some liabilities were extended to fix their cost at low levels and to protect net interest margin should interest rates rise. During the flat/inverted yield curve that existed during 2006 and much of 2007, we maintained a shorter duration of liabilities and benefited from repricing as interest rates fell, which increased net interest margin in 2008. In 2006, we issued $9.7 million in callable brokered certificates of deposit, which improved net interest margin when the call options were exercised in 2008 when short-term interest rates fell.

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 21

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, prepayments and sales 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. 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), lines of credit with two commercial banks, use of brokered deposits, and the ability to obtain deposits by offering above-market interest rates.

The following table summarizes CFBank’s cash available from liquid assets and borrowing capacity at December 31, 2009 and 2008.

		AT DECEMBER 31,
(DOLLARS IN THOUSANDS)		2009				2008
Cash and unpledged securities		$	5,033			$	6,828
Additional borrowing capacity at the FHLB			7,720				33,314
Additional borrowing capacity at the FRB			12,129				—
Unused commercial bank lines of credit			8,000				5,000
Total		$	32,882			$	45,142

Cash available from liquid assets and borrowing capacity decreased from $45.1 million at December 31, 2008 to $32.9 million at December 31, 2009. CFBank’s additional borrowing capacity with the FHLB decreased from $33.3 million at December 31, 2008 to $7.7 million at December 31, 2009 primarily due to deterioration in the credit performance of CFBank’s loan portfolio, which resulted in an increase in collateral maintenance requirements by the FHLB. Future tightening in overall credit policies by the FHLB or FRB, deterioration in the credit performance of CFBank’s loan portfolio, or a decline in the balances of pledged collateral, may further reduce CFBank’s borrowing capacity.

In addition to the sources of funds listed above, CFBank has the ability to use brokered deposits to raise additional funds. Brokered deposits totaled $45.9 million at December 31, 2009, and $67.2 million at December 31, 2008. Brokered deposits included customer deposits in the CDARS program of $37.4 million and $48.4 million at December 31, 2009 and 2008, respectively. Management intends to continue to use brokered deposits, including the CDARS program, as a funding source. Current regulatory restrictions limit an institution’s use of brokered deposits in situations where capital levels fall below well-capitalized levels.

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 levels fall below well-capitalized levels. 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 temporarily increased deposit insurance coverage from $100,000 to $250,000 per depositor through December 31, 2013. CFBank is a participant in the FDIC’s Temporary Liquidity Guarantee Program that provides unlimited deposit insurance coverage, through June 30, 2010, 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 addition to its existing liquid assets, it can raise funds in the securities markets through debt or equity offerings, receive dividends from its subsidiaries, or sell assets. Cash can be used by the Holding Company to make acquisitions or investments in subsidiaries, and to fund quarterly interest payments on its subordinated debentures, dividends to common shareholders, dividends on the preferred stock issued to the U.S. Treasury, and operating expenses.

page 22   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

At December 31, 2009, the Holding Company had cash of $1.8 million available to meet cash needs. Annual debt service on the subordinated debentures is currently approximately $160,000. 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 3.10% at year-end 2009. 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 in 2009 were approximately $425,000. The Holding Company’s available cash at December 31, 2009 is sufficient to cover cash needs, at their current level, for approximately 2 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, CFBank 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 CFBank would remain well capitalized after the dividend payment. As of December 31, 2009, CFBank can pay no dividends to the Holding Company without OTS approval. Future dividend payments by CFBank to the Holding Company would be based upon future earnings and 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.

At December 31, 2009, CFBank exceeded all of its regulatory capital requirements to be considered well-capitalized. Tier 1 capital level was $24.1 million, or 8.9% of adjusted total assets, which exceeded the required level of $13.6 million, or 5.0%. Tier 1 risk-based capital level was $24.1 million, or 10.5% of risk-weighted assets, which exceeded the required level of $13.8 million, or 6.0%. Total risk-based capital was $27.0 million, or 11.7% of risk-weighted assets, which exceeded the required level of $23.0 million, or 10.0%.

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 the steps necessary to minimize any 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 operation, 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 position 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.

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 23

CRITICAL ACCOUNTING POLICIES (CONTINUED)

Determination of the allowances 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 performing loans, trends in 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 the Company will not be able to collect all amounts contractually due. 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 section titled “Allowance for loan losses” and in Notes 1, 3 and 4 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 2009, the Company had net operating loss carry- forwards of approximately $7.7 million which expire at various dates from 2024 to 2029. Realization is dependent on generating sufficient future taxable income prior to expiration of the loss carryforwards. The Company’s net loss in 2009 reduced management’s near term estimate of future taxable income, and reduced the amount of the net deferred tax asset considered realizable. A $4.3 million valuation allowance was recorded in 2009, reducing the amount of the net deferred tax asset to zero. Additional information is included in Notes 1 and 12 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 4 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, 2009, there were 4,099,587 shares of common stock outstanding and 523 record holders.

The following table shows the quarterly reported high and low sales prices of the common stock and cash dividends per common share declared during 2009 and 2008.

		HIGH				LOW				DIVIDENDS
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				—
2008
First quarter		$	4.94			$	3.75			$	0.05
Second quarter			5.08				3.54				0.05
Third quarter			3.90				3.07				0.05
Fourth quarter			4.10				2.35				0.05

As a participant in the TARP Capital Purchase Program, 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 “Stockholders’ equity” and in Note 15 to our consolidated financial statements.

page 24   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

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, 2009.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. 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 temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Mark S. Allio
Chairman of the Board, President and Chief Executive Officer

Therese Ann Liutkus, CPA
Treasurer and Chief Financial Officer

March 15, 2010

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 25

FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS

Crowe Horwath LLP
Member Horwath International

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, 2009 and 2008 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, 2009. 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, 2009 and 2008 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

Crowe Horwath LLP

Cleveland, Ohio
March 15, 2010

page 26   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

CONSOLIDATED BALANCE SHEETS

		DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)		2009				2008
Assets
Cash and cash equivalents		$	2,973			$	4,177
Securities available for sale			21,241				23,550
Loans held for sale			1,775				284
Loans, net of allowance of $7,090 and $3,119			231,105				233,922
Federal Home Loan Bank stock, at cost			1,942				2,109
Loan servicing rights			88				112
Premises and equipment, net			7,003				5,246
Other intangible assets			169				—
Bank owned life insurance			4,017				3,892
Deferred tax asset			—				1,598
Accrued interest receivable and other assets			3,429				2,891
		$	273,742			$	277,781
Liabilities and Stockholders’ Equity
Deposits
Noninterest bearing		$	17,098			$	14,557
Interest bearing			193,990				193,090
Total deposits			211,088				207,647
Short-term Federal Home Loan Bank advances			2,065				5,850
Long-term Federal Home Loan Bank advances			29,942				23,200
Advances by borrowers for taxes and insurance			161				167
Accrued interest payable and other liabilities			2,104				2,687
Subordinated debentures			5,155				5,155
Total liabilities			250,515				244,706
Stockholders’ equity
Preferred stock, Series A, $.01 par value; $7,225 aggregate liquidation value, 1,000,000 shares authorized; 7,225 shares issued			7,021				6,989
Common stock, $.01 par value; shares authorized; 12,000,000 in 2009 and 6,000,000 in 2008, shares issued; 4,658,120 in 2009 and 4,660,070 in 2008			47				47
Common stock warrant			217				217
Additional paid-in capital			27,517				27,455
Retained earnings (accumulated deficit)			(9,034	)			1,262
Accumulated other comprehensive income			704				350
Treasury stock, at cost; 558,533 shares			(3,245	)			(3,245	)
Total stockholders’ equity			23,227				33,075
		$	273,742			$	277,781

(See accompanying notes.)

CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT     |   page 27

CONSOLIDATED STATEMENTS OF OPERATIONS

		YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)		2009				2008				2007
Interest and dividend income
Loans, including fees		$	13,197			$	15,193			$	15,847
Securities			1,120				1,329				1,520
Federal Home Loan Bank stock dividends			97				107				138
Federal funds sold and other			32				8				18
			14,446				16,637				17,523
Interest expense
Deposits			4,723				6,210				7,218
Short-term Federal Home Loan Bank advances and other debt			1				541				1,639
Long-term Federal Home Loan Bank advances and other debt			1,027				850				512
Subordinated debentures			196				334				426
			5,947				7,935				9,795
Net interest income			8,499				8,702				7,728
Provision for loan losses			9,928				917				539
Net interest income after provision for loan losses			(1,429	)			7,785				7,189
Noninterest income
Service charges on deposit accounts			345				544				287
Net gains on sales of loans			642				159				233
Loan servicing fees, net			36				34				49
Net gains on sales of securities			—				54				—
Earnings on bank owned life insurance			125				123				123
Net gain on acquisition			208				—				—
Other			21				34				36
			1,377				948				728
Noninterest expense
Salaries and employee benefits			4,166				4,058				4,601
Occupancy and equipment			481				485				534
Data processing			616				687				558
Franchise taxes			346				308				293
Professional fees			769				558				358
Director fees			108				136				148
Postage, printing and supplies			162				159				162
Advertising and promotion			52				45				203
Telephone			103				91				99
Loan expenses			82				20				23
Foreclosed assets, net			(1	)			(3	)			(30	)
Depreciation			483				683				619
FDIC premiums			541				86				21
Amortization of intangibles			6				—				—
Other			348				436				408
		$	8,262			$	7,749			$	7,997
Income (loss) before income taxes		$	(8,314	)		$	984			$	(80	)
Income tax expense (benefit)			1,577				261				(63	)
Net income (loss)			(9,891	)			723				(17	)
Preferred stock dividends and accretion of discount on preferred stock			(407	)			(29	)			—
Net income (loss) available to common stockholders		$	(10,298	)		$	694			$	(17	)
Earnings (loss) per common share:
Basic		$	(2.51	)		$	0.16			$	—
Diluted		$	(2.51	)		$	0.16			$	—

(See accompanying notes.)

page 28   |     CENTRAL FEDERAL CORPORATION 2009 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

																		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 (LOSS)				STOCK				EQUITY
Balance at January 1, 2007		$	—			$	46			$	—			$	27,204			$	2,643			$	(25	)		$	(783	)		$	29,085
Comprehensive income:
Net loss																			(17	)											(17	)
Change in unrealized gain (loss) on securities available for sale, net of reclassification and tax effects																							212								212
Total comprehensive income																															195
Release of 17,633 stock based incentive plan shares															152																152
Tax benefits from dividends on unvested stock based incentive plan shares															3																3
Tax effect from vesting of stock based incentive plan shares															(26	)															(26	)
Stock option expense															15																15
Purchase of 125,000 treasury shares																											(830	)			(830	)
Cash dividends declared on common stock ($.28 per share)																			(1,215	)											(1,215	)
Balance at December 31, 2007			—				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 $22			6,986								217																				7,203
Accretion of discount on preferred stock			3																(3	)											—
Issuance of 31,750 stock based incentive plan shares							1																								1
Release of 23,417 stock based incentive plan shares															127																127
Tax benefits from dividends on unvested stock based incentive plan shares															3																3
Tax effect from vesting of stock based incentive plan shares															(45	)															(45	)
Stock option expense															22																22
Purchase of 365,000 treasury shares																											(1,632	)			(1,632	)
Preferred stock dividends																			(26	)											(26	)
Cash dividends declared on common stock ($.20 per share)																			(843	)											(843	)
Balance at December 31, 2008		$	6,989			$	47			$	217			$	27,455			$	1,262			$	350			$	(3,245	)		$	33,075