##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from __________ to______________
 Commission File Number 0-25045
 CENTRAL FEDERAL CORPORATION
  Delaware
    
    34-1877137(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 2923 Smith Road, Fairlawn, Ohio 44333
  (330) 666-7979
  
  þ o
 o þ
  Class:
    
    Outstanding at October 26, 2005Common stock, $0.01 par value
    
    2,243,662 shares
 o þ




---



PagePART I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Operations for the three and nine months ended
September 30, 2005 and 2004
    
    
    4Consolidated Statement of Changes in Shareholders Equity
for the nine months ended September 30, 2005
    
    
    5Consolidated Statements of Comprehensive Loss for the three and nine
months ended September 30, 2005 and 2004
    
    
    6Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2005 and 2004
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis
    
    
    20Item 3. Controls and Procedures
    
    
    28PART II. Other InformationItem 6. Exhibits
    
    
    29Signatures
    
    
    30EX-31.1 302 CEO CertificationEX-31.2 302 CFO CertificationEX-32.1 906 CEO & CFO Certification




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##### Table of Contents



September 30, 2005
    
    
    December 31, 2004(unaudited)ASSETSCash and cash equivalents
    
    $
    2,335
    
    
    $
    32,675Securities available for sale
    
    
    33,321
    
    
    
    13,508Loans held for sale
    
    
    178
    
    
    
    Loans, net of allowance of $1,225 and $978
    
    
    106,999
    
    
    
    108,149Federal Home Loan Bank stock
    
    
    3,914
    
    
    
    3,778Loan servicing rights
    
    
    286
    
    
    
    208Foreclosed assets, net
    
    
    33
    
    
    
    132Premises and equipment, net
    
    
    2,839
    
    
    
    2,690Goodwill
    
    
    
    
    
    
    1,749Other intangible assets
    
    
    
    
    
    
    299Bank owned life insurance
    
    
    3,504
    
    
    
    3,401Loan sales proceeds receivable
    
    
    1,057
    
    
    
    1,888Deferred tax asset
    
    
    1,952
    
    
    
    1,491Accrued interest receivable and other assets
    
    
    1,435
    
    
    
    1,037$
    157,853
    
    
    $
    171,005LIABILITIES AND SHAREHOLDERS EQUITYDepositsNon-interest bearing
    
    $
    5,925
    
    
    $
    5,505Interest bearing
    
    
    114,820
    
    
    
    96,119Total deposits
    
    
    120,745
    
    
    
    101,624Federal Home Loan Bank advances
    
    
    13,945
    
    
    
    41,170Other borrowings
    
    
    
    
    
    
    2,249Advances by borrowers for taxes and insurance
    
    
    69
    
    
    
    321Accrued interest payable and other liabilities
    
    
    757
    
    
    
    979Subordinated debentures
    
    
    5,155
    
    
    
    5,155Total liabilities
    
    
    140,671
    
    
    
    151,498Shareholders equityPreferred stock, 1,000,000 shares authorized;
none issued
    
    
    
    
    
    
    Common stock, $.01 par value; 6,000,000 shares
authorized; 2005 - 2,312,195 shares issued,
2004 - 2,294,520 shares issued
    
    
    23
    
    
    
    23Additional paid-in capital
    
    
    12,801
    
    
    
    12,519Retained earnings
    
    
    5,179
    
    
    
    8,497Accumulated other comprehensive income
    
    
    316
    
    
    
    61Unearned stock based incentive plan shares
    
    
    (354
    )
    
    
    (351
    )Treasury stock, at cost (2005 - 68,533 shares,
2004 - 108,671 shares)
    
    
    (783
    )
    
    
    (1,242
    )Total shareholders equity
    
    
    17,182
    
    
    
    19,507$
    157,853
    
    
    $
    171,005
  3.




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Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Interest and dividend incomeLoans, including fees
    
    $
    1,724
    
    
    $
    1,287
    
    
    $
    5,274
    
    
    $
    3,328Taxable securities
    
    
    411
    
    
    
    181
    
    
    
    727
    
    
    
    620Tax exempt securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20Federal Home Loan Bank stock dividends
    
    
    48
    
    
    
    40
    
    
    
    136
    
    
    
    112Federal funds sold and other
    
    
    4
    
    
    
    109
    
    
    
    86
    
    
    
    1802,187
    
    
    
    1,617
    
    
    
    6,223
    
    
    
    4,260Interest expenseDeposits
    
    
    758
    
    
    
    360
    
    
    
    1,939
    
    
    
    993Federal Home Loan Bank advances and other debt
    
    
    119
    
    
    
    146
    
    
    
    415
    
    
    
    250Subordinated debentures
    
    
    83
    
    
    
    58
    
    
    
    231
    
    
    
    162960
    
    
    
    564
    
    
    
    2,585
    
    
    
    1,405Net interest income
    
    
    1,227
    
    
    
    1,053
    
    
    
    3,638
    
    
    
    2,855Provision for loan losses
    
    
    50
    
    
    
    296
    
    
    
    402
    
    
    
    366Net interest income after provision for loan losses
    
    
    1,177
    
    
    
    757
    
    
    
    3,236
    
    
    
    2,489Noninterest incomeService charges on deposit accounts
    
    
    46
    
    
    
    36
    
    
    
    142
    
    
    
    98Net gains on sales of loans
    
    
    54
    
    
    
    19
    
    
    
    361
    
    
    
    63Loan servicing fees, net
    
    
    15
    
    
    
    (6
    )
    
    
    22
    
    
    
    49Net gains (losses) on sales of securities
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (55
    )Earnings on bank owned life insurance
    
    
    35
    
    
    
    36
    
    
    
    103
    
    
    
    110Other
    
    
    11
    
    
    
    7
    
    
    
    45
    
    
    
    17161
    
    
    
    56
    
    
    
    673
    
    
    
    282Noninterest expenseSalaries and employee benefits
    
    
    901
    
    
    
    977
    
    
    
    2,685
    
    
    
    2,513Occupancy and equipment
    
    
    117
    
    
    
    84
    
    
    
    350
    
    
    
    222Data processing
    
    
    117
    
    
    
    105
    
    
    
    360
    
    
    
    315Franchise taxes
    
    
    54
    
    
    
    55
    
    
    
    163
    
    
    
    168Professional fees
    
    
    145
    
    
    
    90
    
    
    
    376
    
    
    
    282Director fees
    
    
    46
    
    
    
    47
    
    
    
    127
    
    
    
    127Postage, printing and supplies
    
    
    31
    
    
    
    89
    
    
    
    128
    
    
    
    184Advertising and promotion
    
    
    16
    
    
    
    22
    
    
    
    114
    
    
    
    71Telephone
    
    
    28
    
    
    
    20
    
    
    
    94
    
    
    
    64Loan expenses
    
    
    6
    
    
    
    8
    
    
    
    25
    
    
    
    38Foreclosed assets, net
    
    
    15
    
    
    
    12
    
    
    
    22
    
    
    
    3Depreciation
    
    
    99
    
    
    
    98
    
    
    
    311
    
    
    
    252Amortization of intangibles
    
    
    20
    
    
    
    
    
    
    
    82
    
    
    
    Impairment loss on goodwill and intangibles
    
    
    1,966
    
    
    
    
    
    
    
    1,966
    
    
    
    Other
    
    
    82
    
    
    
    226
    
    
    
    280
    
    
    
    4323,643
    
    
    
    1,833
    
    
    
    7,083
    
    
    
    4,671Loss before income taxes
    
    
    (2,305
    )
    
    
    (1,020
    )
    
    
    (3,174
    )
    
    
    (1,900
    )Income tax benefit
    
    
    (237
    )
    
    
    (355
    )
    
    
    (547
    )
    
    
    (683
    )Net loss
    
    $
    (2,068
    )
    
    $
    (665
    )
    
    $
    (2,627
    )
    
    $
    (1,217
    )Loss per share:Basic
    
    $
    (0.94
    )
    
    ($
    0.33
    )
    
    $
    (1.19
    )
    
    ($
    0.61
    )Diluted
    
    $
    (0.94
    )
    
    ($
    0.33
    )
    
    $
    (1.19
    )
    
    ($
    0.61
    )
  4.




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Accumulated Other
    
    
    Unearned StockAdditional Paid-In
    
    
    
    
    
    
    Comprehensive
    
    
    Based Incentive
    
    
    
    
    
    
    Total ShareholdersCommon Stock
    
    
    Capital
    
    
    Retained Earnings
    
    
    Income
    
    
    Plan Shares
    
    
    Treasury Stock
    
    
    EquityBalance at January 1, 2005
    
    $
    23
    
    
    $
    12,519
    
    
    $
    8,497
    
    
    $
    61
    
    
    $
    (351
    )
    
    $
    (1,242
    )
    
    $
    19,507Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    (2,627
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,627
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255
    
    
    
    
    
    
    
    
    
    
    
    255Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,372
    )Issuance of stock based incentive plan shares (17,675 shares)
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    
    
    
    
    Release of 15,852 stock based incentive plan shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    
    
    
    
    190Tax benefits from stock based incentive plan shares released
    
    
    
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33Stock options exercised (40,138 shares)
    
    
    
    
    
    
    2
    
    
    
    (86
    )
    
    
    
    
    
    
    
    
    
    
    459
    
    
    
    375Tax benefits from stock options exercised
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Cash dividends declared ($.27 per share)
    
    
    
    
    
    
    
    
    
    
    (605
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (605
    )Balance at September 30, 2005
    
    $
    23
    
    
    $
    12,801
    
    
    $
    5,179
    
    
    $
    316
    
    
    $
    (354
    )
    
    $
    (783
    )
    
    $
    17,182
  5.




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (2,068
    )
    
    $
    (665
    )
    
    $
    (2,627
    )
    
    $
    (1,217
    )Change in net unrealized gain (loss) on securities
available for sale
    
    
    (75
    )
    
    
    396
    
    
    
    (142
    )
    
    
    (165
    )Less: Reclassification adjustment for gains and
(losses) later recognized in net income
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (55
    )Net unrealized gains and (losses)
    
    
    (75
    )
    
    
    432
    
    
    
    (142
    )
    
    
    (110
    )Initial unrealized gain on mortgage-backed
securities received in securitization
    
    
    
    
    
    
    
    
    
    
    530
    
    
    
    Tax effect
    
    
    25
    
    
    
    (147
    )
    
    
    (133
    )
    
    
    37Other comprehensive income (loss)
    
    
    (50
    )
    
    
    285
    
    
    
    255
    
    
    
    (73
    )Comprehensive loss
    
    $
    (2,118
    )
    
    $
    (380
    )
    
    $
    (2,372
    )
    
    $
    (1,290
    )
  6.




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##### Table of Contents



Nine months ended September 30,2005
    
    
    2004Cash flows from operating activities
    
    $
    (379
    )
    
    $
    (929
    )Cash flows from investing activitiesNet decrease in interest bearing deposits
    
    
    
    
    
    
    1,289Available-for-sale securities:Sales
    
    
    1,435
    
    
    
    15,191Maturities, prepayments and calls
    
    
    2,550
    
    
    
    4,503Purchases
    
    
    (5,037
    )
    
    
    (6,076
    )Loan originations and payments, net
    
    
    (17,677
    )
    
    
    (34,262
    )Loans purchased
    
    
    
    
    
    
    (5,390
    )Additions to premises and equipment
    
    
    (462
    )
    
    
    (1,007
    )Other
    
    
    69
    
    
    
    79Net cash from investing activities
    
    
    (19,122
    )
    
    
    (25,673
    )Cash flows from financing activitiesNet change in deposits
    
    
    19,111
    
    
    
    16,997Net change in short-term borrowings from the
Federal Home Loan Bank and other
    
    
    (27,474
    )
    
    
    13,900Proceeds from Federal Home Loan Bank
advances and other debt
    
    
    
    
    
    
    12,270Repayments on Federal Home Loan Bank
advances and other debt
    
    
    (2,000
    )
    
    
    Net change in advances by borrowers for
taxes and insurance
    
    
    (252
    )
    
    
    (6
    )Cash dividends paid
    
    
    (599
    )
    
    
    (549
    )Proceeds from exercise of stock options
    
    
    375
    
    
    
    306Repurchase of common stock
    
    
    
    
    
    
    (131
    )Net cash from financing activities
    
    
    (10,839
    )
    
    
    42,787Net change in cash and cash equivalents
    
    
    (30,340
    )
    
    
    16,185Beginning cash and cash equivalents
    
    
    32,675
    
    
    
    8,936Ending cash and cash equivalents
    
    $
    2,335
    
    
    $
    25,121Supplemental cash flow information:Interest paid
    
    $
    2,509
    
    
    $
    1,407Income taxes paid
    
    
    
    
    
    
    Supplemental noncash disclosures:Securitization of single-family residential mortgage loans
    
    $
    18,497
    
    
    $
    Transfers from loans to repossessed assets
    
    
    
    
    
    
    728
  7.




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Operating Segments:
  Earnings Per Share
  8.




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##### Table of Contents



Three months ended September 30,
    
    
    Nine months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004BasicNet loss
    
    $
    (2,068
    )
    
    $
    (665
    )
    
    $
    (2,627
    )
    
    $
    (1,217
    )Weighted average common shares outstanding
    
    
    2,208,071
    
    
    
    2,017,645
    
    
    
    2,200,176
    
    
    
    2,001,276Basic loss per common share
    
    $
    (0.94
    )
    
    $
    (0.33
    )
    
    $
    (1.19
    )
    
    $
    (0.61
    )DilutedNet loss
    
    $
    (2,068
    )
    
    $
    (665
    )
    
    $
    (2,627
    )
    
    $
    (1,217
    )Weighted average common shares outstanding for
basic loss per share
    
    
    2,208,071
    
    
    
    2,017,645
    
    
    
    2,200,176
    
    
    
    2,001,276Add: Dilutive effects of assumed exercises of
stock options and stock based incentive plan
shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average shares and dilutive potential common shares
    
    
    2,208,071
    
    
    
    2,017,645
    
    
    
    2,200,176
    
    
    
    2,001,276Diluted loss per common share
    
    $
    (0.94
    )
    
    $
    (0.33
    )
    
    $
    (1.19
    )
    
    $
    (0.61
    )
  Three months ended September 30,
    
    
    Nine months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Stock options
    
    
    297,539
    
    
    
    259,504
    
    
    
    261,550
    
    
    
    254,395Stock based incentive plan shares
    
    
    33,537
    
    
    
    34,524
    
    
    
    30,187
    
    
    
    34,549
 9.




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Stock Compensation
 Accounting for Stock-Based Compensation.
 Three months ended September 30,
    
    
    Nine months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss as reported
    
    $
    (2,068
    )
    
    $
    (665
    )
    
    $
    (2,627
    )
    
    $
    (1,217
    )Deduct: Stock-based compensation expense
determined under fair value based method
    
    
    59
    
    
    
    23
    
    
    
    358
    
    
    
    144Pro forma net loss
    
    $
    (2,127
    )
    
    $
    (688
    )
    
    $
    (2,985
    )
    
    $
    (1,361
    )Basic loss per share as reported
    
    $
    (0.94
    )
    
    $
    (0.33
    )
    
    $
    (1.19
    )
    
    $
    (0.61
    )Pro forma basic loss per share
    
    
    (0.96
    )
    
    
    (0.34
    )
    
    
    (1.36
    )
    
    
    (0.68
    )Diluted loss per share as reported
    
    $
    (0.94
    )
    
    $
    (0.33
    )
    
    $
    (1.19
    )
    
    $
    (0.61
    )Pro forma diluted loss per share
    
    
    (0.96
    )
    
    
    (0.34
    )
    
    
    (1.36
    )
    
    
    (0.68
    )
   Three monthsended September30,
    
    
    Nine months ended September 30,2005
    
    
    2005
    
    
    2004Risk-free interest rate
    
    
    3.98
    %
    
    
    3.85
    %
    
    
    3.26
    %Expected option life (years)
    
    
    6
    
    
    
    6
    
    
    
    6Expected stock price volatility
    
    
    26
    %
    
    
    27
    %
    
    
    24
    %Dividend yield
    
    
    3.62
    %
    
    
    3.46
    %
    
    
    2.86
    %Weighted average fair value of options
granted during the period
    
    $
    2.03
    
    
    $
    2.27
    
    
    $
    2.52
 10.




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##### Table of Contents



Reclassifications:
  11.




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##### Table of Contents



NOTE 2  SECURITIES
  Gross
    
    
    GrossFair
    
    
    Unrealized
    
    
    UnrealizedValue
    
    
    Gains
    
    
    LossesSeptember 30, 2005Federal agency
    
    $
    5,907
    
    
    $
    1
    
    
    $
    (101
    )Mortgage-backed
    
    
    25,403
    
    
    
    662
    
    
    
    (73
    )Municipal
    
    
    2,011
    
    
    
    
    
    
    
    (9
    )Total
    
    $
    33,321
    
    
    $
    663
    
    
    $
    (183
    )December 31, 2004Federal agency
    
    $
    4,983
    
    
    $
    2
    
    
    $
    (37
    )Mortgage-backed
    
    
    8,525
    
    
    
    195
    
    
    
    (68
    )Total
    
    $
    13,508
    
    
    $
    197
    
    
    $
    (105
    )
  Three months ended September 30,
    
    
    Nine months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Proceeds
    
    $
    1,435
    
    
    $
    11,239
    
    
    $
    1,435
    
    
    $
    15,191Gross gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Gross losses
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (96
    )
   Availablefor SaleFairValueDue from one to five years
    
    $
    6,910Due from five to ten years
    
    
    1,008Mortgage-backed
    
    
    25,403Total
    
    $
    33,321
 12.




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NOTE 2  SECURITIES (
   Less than 12 Months
    
    
    12 Months or More
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    LossSeptember 30, 2005Federal agency
    
    $
    4,913
    
    
    $
    (101
    )
    
    $
    
    
    
    $
    
    
    
    $
    4,913
    
    
    $
    (101
    )Mortgage-backed
    
    
    2,953
    
    
    
    (19
    )
    
    
    2,076
    
    
    
    (54
    )
    
    
    5,029
    
    
    
    (73
    )Municipal
    
    
    2,011
    
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    2,011
    
    
    
    (9
    )Total temporarily
impaired
    
    $
    9,877
    
    
    $
    (129
    )
    
    $
    2,076
    
    
    $
    (54
    )
    
    $
    11,953
    
    
    $
    (183
    )December 31, 2004Federal agency
    
    $
    3,976
    
    
    $
    (37
    )
    
    $
    
    
    
    $
    
    
    
    $
    3,976
    
    
    $
    (37
    )Mortgage-backed
    
    
    700
    
    
    
    (1
    )
    
    
    2,476
    
    
    
    (67
    )
    
    
    3,176
    
    
    
    (68
    )Total temporarily
impaired
    
    $
    4,676
    
    
    $
    (38
    )
    
    $
    2,476
    
    
    $
    (67
    )
    
    $
    7,152
    
    
    $
    (105
    )
  13.




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NOTE 3  LOANS
  September 30, 2005
    
    
    December 31, 2004Commercial
    
    $
    12,481
    
    
    $
    7,030Real estate:Single-family residential
    
    
    23,352
    
    
    
    41,450Multi-family residential
    
    
    25,620
    
    
    
    25,602Commercial
    
    
    26,753
    
    
    
    20,105Construction
    
    
    
    
    
    
    1,127Consumer
    
    
    20,181
    
    
    
    13,952Subtotal
    
    
    108,387
    
    
    
    109,266Less: Net deferred loan fees
    
    
    (163
    )
    
    
    (139
    )Allowance for loan losses
    
    
    (1,225
    )
    
    
    (978
    )Loans, net
    
    $
    106,999
    
    
    $
    108,149
  Three months ended September 30,
    
    
    Nine months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Beginning balance
    
    $
    1,242
    
    
    $
    465
    
    
    $
    978
    
    
    $
    415Provision for loan losses
    
    
    50
    
    
    
    296
    
    
    
    402
    
    
    
    366Loans charged-off
    
    
    (83
    )
    
    
    (22
    )
    
    
    (200
    )
    
    
    (50
    )Recoveries
    
    
    16
    
    
    
    8
    
    
    
    45
    
    
    
    16Ending balance
    
    $
    1,225
    
    
    $
    747
    
    
    $
    1,225
    
    
    $
    747
   September 30, 2005
    
    
    December 31, 2004Loans past due over 90 days still on accrual
    
    $
    
    
    
    $
    Nonaccrual loans
    
    
    606
    
    
    
    286
  14.




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NOTE 4  SECONDARY MORTGAGE MARKET ACTIVITIES
    Three months ended September 30,
    
    
    Nine months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Servicing rights:Beginning of period
    
    $
    302
    
    
    $
    237
    
    
    $
    208
    
    
    $
    221Additions
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    3Amortized to expense
    
    
    (28
    )
    
    
    (11
    )
    
    
    (49
    )
    
    
    (40
    )Provision for loss in fair value
    
    
    12
    
    
    
    (14
    )
    
    
    7
    
    
    
    28End of period
    
    $
    286
    
    
    $
    212
    
    
    $
    286
    
    
    $
    212Valuation allowance:Beginning of period
    
    $
    25
    
    
    $
    14
    
    
    $
    20
    
    
    $
    56Additions expensed
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    14Reductions credited to expense
    
    
    (12
    )
    
    
    
    
    
    
    (7
    )
    
    
    (42
    )End of period
    
    $
    13
    
    
    $
    28
    
    
    $
    13
    
    
    $
    28
   September 30, 2006
    
    $
    63September 30, 2007
    
    
    63September 30, 2008
    
    
    63September 30, 2009
    
    
    63September 30, 2010
    
    
    47
 15.




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NOTE 5  SECURITIZATON
 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise Accounting for Certain Investments in Debt and Equity
Securities
 16.




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NOTE 6  GOODWILL AND INTANGIBLE ASSETS
  Three and nine months endedSeptember 30, 2005Beginning of period
    
    $
    1,749Acquired goodwill
    
    
    Impairment
    
    
    (1,749
    )End of period
    
    $
    
   September 30, 2005
    
    
    December 31, 2004Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationAmortized intangible assets:Noncompete agreement
    
    $
    
    
    
    $
    
    
    
    $
    25
    
    
    $
    4Prior owner intangible
    
    
    
    
    
    
    
    
    
    
    295
    
    
    
    17Total
    
    $
    
    
    
    $
    
    
    
    $
    320
    
    
    $
    21
   17.




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##### Table of Contents



NOTE 7  FEDERAL HOME LOAN BANK ADVANCES
  September 30, 2005
    
    
    December 31, 2004Maturity October 2005 at 4.06% floating rate
    
    $
    3,675
    
    
    $
    Maturity January 2005 at 2.20% floating rate
    
    
    
    
    
    
    28,900Maturities March 2006 thru September 2008,
fixed at rates from 2.03% to 3.41%,
averaging 2.91% at September 30, 2005, and
maturities March 2005 thru September 2008,
fixed at rates from 1.50% to 3.41%,
averaging 2.70% at December 31, 2004
    
    
    10,270
    
    
    
    12,270Total
    
    $
    13,945
    
    
    $
    41,170
   September 30, 2005
    
    
    December 31, 2004First mortgage loans under a blanket lien arrangement
    
    $
    23,131
    
    
    $
    41,269Second mortgage loans
    
    
    786
    
    
    
    695Multi-family mortgage loans
    
    
    11,245
    
    
    
    10,372Home equity lines of credit
    
    
    5,272
    
    
    
    3,236Commercial real estate loans
    
    
    18,186
    
    
    
    14,964Securities
    
    
    17,066
    
    
    
    770Total
    
    $
    75,686
    
    
    $
    71,306
   September 30, 2006
    
    $
    7,675September 30, 2007
    
    
    4,270September 30, 2008
    
    
    2,000September 30, 2009
    
    
    September 30, 2010
    
    
    Total
    
    $
    13,945
 18.




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NOTE 8  SEGMENT INFORMATION
    MortgageBanking
    
    
    Services
    
    
    Parent and Other
    
    
    TotalThree months ended September 30, 2005Net interest income (expense)
    
    $
    1,301
    
    
    $
    10
    
    
    $
    (84
    )
    
    $
    1,227Provision for loan losses
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (50
    )Other revenue
    
    
    67
    
    
    
    87
    
    
    
    7
    
    
    
    161Impairment loss on goodwill and intangibles
    
    
    
    
    
    
    (1,966
    )
    
    
    
    
    
    
    (1,966
    )Other expense
    
    
    (1,429
    )
    
    
    (185
    )
    
    
    (63
    )
    
    
    (1,677
    )Loss before income tax
    
    
    (111
    )
    
    
    (2,054
    )
    
    
    (140
    )
    
    
    (2,305
    )Income tax benefit
    
    
    (47
    )
    
    
    (104
    )
    
    
    (86
    )
    
    
    (237
    )Net loss
    
    $
    (64
    )
    
    $
    (1,950
    )
    
    $
    (54
    )
    
    $
    (2,068
    )Nine months ended September 30, 2005Net interest income (expense)
    
    $
    3,847
    
    
    $
    22
    
    
    $
    (231
    )
    
    $
    3,638Provision for loan losses
    
    
    (402
    )
    
    
    
    
    
    
    
    
    
    
    (402
    )Other revenue
    
    
    252
    
    
    
    394
    
    
    
    27
    
    
    
    673Impairment loss on goodwill and intangibles
    
    
    
    
    
    
    (1,966
    )
    
    
    
    
    
    
    (1,966
    )Other expense
    
    
    (4,190
    )
    
    
    (681
    )
    
    
    (246
    )
    
    
    (5,117
    )Loss before income tax
    
    
    (493
    )
    
    
    (2,231
    )
    
    
    (450
    )
    
    
    (3,174
    )Income tax benefit
    
    
    (192
    )
    
    
    (164
    )
    
    
    (191
    )
    
    
    (547
    )Net loss
    
    $
    (301
    )
    
    $
    (2,067
    )
    
    $
    (259
    )
    
    $
    (2,627
    )September 30, 2005Segment assets
    
    $
    156,699
    
    
    $
    480
    
    
    $
    674
    
    
    $
    157,853
 19.




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Forward-Looking Statements
  General
  Management Strategy
     20.




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Goodwill and Other Intangible
Assets
     Financial Condition
 General.
 21.




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##### Table of Contents



Cash and cash equivalents.
 Securities.
 Loans.
 Deposits.
 Federal Home Loan Bank advances.
 Other borrowings.
 Shareholders equity.
 Comparison of the Results of Operations for the Three Months Ended September 30, 2005 and 2004
 General.
 Net interest income.
 22.




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Provision for loan losses.
  23.




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Noninterest income.
 Noninterest expense.
 Income taxes.
 Comparison of the Results of Operations for the Nine Months Ended September 30, 2005 and 2004
 General.
 Net interest income.
  24.




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Provision for loan losses.
 Noninterest income.
 Noninterest expense.
 Income taxes.
 Critical Accounting Policies
  25.




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Goodwill and Other Intangible Assets
 Liquidity and Capital Resources
   26.




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27.




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Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
 28.




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(a)
    
    ExhibitNumber
    
    Exhibit3.1*
    
    
    Certificate of Incorporation3.2*
    
    
    Bylaws4.0*
    
    
    Form of Common Stock Certificate31.1
    
    
    Rule 13a-14(a) Certifications of the Chief Executive Officer31.2
    
    
    Rule 13a-14(a) Certifications of the Chief Financial Officer32.1
    
    
    Section 1350 Certifications of the Chief Executive Officer and
Chief Financial Officer
 
 *
    
    Incorporated by reference into this document from the Exhibits filed with the
Registration Statement on Form SB-2 and any amendments thereto, Registration No.
333-64089. 29.




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##### Table of Contents



CENTRAL FEDERAL CORPORATIONDated: October 28, 2005
    
    By:
    
    /s/ Mark S. AllioMark S. AllioVice Chairman of the Board, President andChief Executive OfficerDated: October 28, 2005
    
    By:
    
    /s/ Therese Ann LiutkusTherese Ann Liutkus, CPATreasurer and Chief Financial Officer
 30.