Exhibit 13.1

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

Table of Contents

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

Dear Stockholders:

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

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

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

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

Mortgage Division Has Very Good Year

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

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

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

Workouts in Commercial Business Continue

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

Strategic Investment in Talent and Experience

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

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

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

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

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

Challenges Remain

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

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

Sincerely,

Eloise L. Mackus
Chief Executive Officer

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

Selected Financial and Other Data

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

SELECTED FINANCIAL CONDITION DATA:

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

SUMMARY OF OPERATIONS:

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

(See footnotes on next page.)

page 6     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

SELECTED FINANCIAL RATIOS AND OTHER DATA:

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 7

Forward-Looking Statements

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

changes in tax laws, rules and regulations;

•

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

•

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

•

our ability to grow our core businesses;

•

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

•

unanticipated litigation, claims or assessments; and

•

management’s ability to manage these and other risks.

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

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

General

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

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General (continued)

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

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

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

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 9

Financial Condition

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

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

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

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

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

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

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

page 10     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Financial Condition (continued)

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

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 11

Financial Condition (continued)

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

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

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

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

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

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

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

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

page 12     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Financial Condition (continued)

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

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 13

Financial Condition (continued)

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

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

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

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

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

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

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

page 14     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Financial Condition (continued)

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

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

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

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

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

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

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 15

Financial Condition (continued)

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

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

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

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

Comparison of Results of Operations for 2010 and 2009

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

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

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

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

page 16     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 17

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

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

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

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

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

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

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

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

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

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

page 18     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

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

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

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

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

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

Comparison of Results of Operations for 2009 and 2008

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

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT     |     page 19

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

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

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

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

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

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

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

page 20     |     CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

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

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

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

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT      |      page 21

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

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

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

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

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

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

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

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

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

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

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

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

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

page 22     |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

AVERAGE BALANCES, INTEREST RATES AND YIELDS.

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT      |      page 23

RATE/VOLUME ANALYSIS OF NET INTEREST INCOME.

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

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

page 24      |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Quantitative and Qualitative Disclosures about Market Risk

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

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

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 25

Liquidity and Capital Resources

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

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

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

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

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

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

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

page 26       |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Liquidity and Capital Resources (continued)

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

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT      |       page 27

Liquidity and Capital Resources (continued)

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

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

Impact of Inflation

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

Critical Accounting Policies

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

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

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

page 28       |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Critical Accounting Policies (continued)

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

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

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

Market Prices and Dividends Declared

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

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

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

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

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT      |       page 29

FINANCIAL STATEMENTS

Management’s Report On Internal Control Over Financial Reporting

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

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

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

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

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

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

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

March 30, 2011

page 30      |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

FINANCIAL STATEMENTS

Report Of Independent Registered Public Accounting Firm On Consolidated Financial Statements

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

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

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

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

Crowe Horwath LLP

Cleveland, Ohio
March 30, 2011

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 31

Consolidated Balance Sheets

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

(See accompanying notes.)

page 32      |      CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT

Consolidated Statements of Operations

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

(See accompanying notes.)

CENTRAL FEDERAL CORPORATION 2010 ANNUAL REPORT       |       page 33

Consolidated Statements of Changes in Stockholders’ Equity

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