##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO 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 
incorporation or organization)
    
    (IRS Employer
Identification No.)
 
  
  
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



PagePART I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Operations for the three months ended
March 31, 2008 and 2007
    
    
    4Consolidated Statement of Changes in Shareholders Equity
for the three months ended March 31, 2008
    
    
    5Consolidated Statements of Comprehensive Income for the three
months ended March 31, 2008 and 2007
    
    
    6Condensed Consolidated Statements of Cash Flows for the three months ended
March 31, 2008 and 2007
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 4T. Controls and Procedures
    
    
    22PART II. Other InformationItem 1. Legal Proceedings
    
    
    23Item 6. Exhibits
    
    
    23Signatures
    
    
    24EX-11.1EX-31.1EX-31.2EX-32.1




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##### Table of Contents



March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)ASSETSCash and cash equivalents
    
    $
    6,914
    
    
    $
    3,894Securities available for sale
    
    
    27,607
    
    
    
    28,398Loans held for sale
    
    
    1,965
    
    
    
    457Loans, net of allowance of $2,729 and $2,684
    
    
    224,748
    
    
    
    230,475Federal Home Loan Bank stock
    
    
    2,054
    
    
    
    1,963Loan servicing rights
    
    
    146
    
    
    
    157Foreclosed assets, net
    
    
    
    
    
    
    86Premises and equipment, net
    
    
    5,544
    
    
    
    5,717Bank owned life insurance
    
    
    3,798
    
    
    
    3,769Deferred tax asset
    
    
    1,777
    
    
    
    1,995Accrued interest receivable and other assets
    
    
    1,841
    
    
    
    2,671$
    276,394
    
    
    
    279,582LIABILITIES AND SHAREHOLDERS EQUITYDepositsNoninterest bearing
    
    $
    12,166
    
    
    $
    12,151Interest bearing
    
    
    174,192
    
    
    
    182,157Total deposits
    
    
    186,358
    
    
    
    194,308Federal Home Loan Bank advances
    
    
    55,150
    
    
    
    49,450Advances by borrowers for taxes and insurance
    
    
    71
    
    
    
    154Accrued interest payable and other liabilities
    
    
    2,109
    
    
    
    3,136Subordinated debentures
    
    
    5,155
    
    
    
    5,155Total liabilities
    
    
    248,843
    
    
    
    252,203Shareholders equityPreferred stock, 1,000,000 shares authorized;
none issued
    
    
    
    
    
    
    Common stock, $.01 par value; 6,000,000 shares
authorized; 2008  4,661,195 shares issued,
2007  4,628,320 shares issued
    
    
    46
    
    
    
    46Additional paid-in capital
    
    
    27,361
    
    
    
    27,348Retained earnings
    
    
    1,312
    
    
    
    1,411Accumulated other comprehensive income
    
    
    445
    
    
    
    187Treasury stock, at cost (193,533 shares)
    
    
    (1,613
    )
    
    
    (1,613
    )Total shareholders equity
    
    
    27,551
    
    
    
    27,379$
    276,394
    
    
    $
    279,582
  3.




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Three months endedMarch 31,2008
    
    
    2007Interest and dividend incomeLoans, including fees
    
    $
    3,977
    
    
    $
    3,538Securities
    
    
    355
    
    
    
    376Federal Home Loan Bank stock dividends
    
    
    26
    
    
    
    40Federal funds sold and other
    
    
    1
    
    
    
    44,359
    
    
    
    3,958Interest expenseDeposits
    
    
    1,775
    
    
    
    1,669Federal Home Loan Bank advances and other debt
    
    
    440
    
    
    
    381Subordinated debentures
    
    
    100
    
    
    
    1062,315
    
    
    
    2,156Net interest income
    
    
    2,044
    
    
    
    1,802Provision for loan losses
    
    
    224
    
    
    
    35Net interest income after provision for loan losses
    
    
    1,820
    
    
    
    1,767Noninterest incomeService charges on deposit accounts
    
    
    82
    
    
    
    57Net gains on sales of loans
    
    
    36
    
    
    
    75Loan servicing fees, net
    
    
    11
    
    
    
    21Net gain on sales of securities
    
    
    23
    
    
    
    Earnings on bank owned life insurance
    
    
    29
    
    
    
    32Other
    
    
    3
    
    
    
    15184
    
    
    
    200Noninterest expenseSalaries and employee benefits
    
    
    1,048
    
    
    
    1,063Occupancy and equipment
    
    
    106
    
    
    
    119Data processing
    
    
    145
    
    
    
    134Franchise taxes
    
    
    82
    
    
    
    69Professional fees
    
    
    70
    
    
    
    88Director fees
    
    
    34
    
    
    
    37Postage, printing and supplies
    
    
    51
    
    
    
    51Advertising and promotion
    
    
    12
    
    
    
    24Telephone
    
    
    22
    
    
    
    29Loan expenses
    
    
    7
    
    
    
    5Foreclosed assets, net
    
    
    (1
    )
    
    
    6Depreciation
    
    
    175
    
    
    
    143Other
    
    
    88
    
    
    
    841,839
    
    
    
    1,852Income before income taxes
    
    
    165
    
    
    
    115Income tax expense
    
    
    41
    
    
    
    30Net income
    
    $
    124
    
    
    $
    85Earnings per share:Basic
    
    $
    0.03
    
    
    $
    0.02Diluted
    
    $
    0.03
    
    
    $
    0.02
  4.




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Accumulated Other
    
    
    
    
    
    
    TotalCommon
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    ShareholdersStock
    
    
    Paid-In Capital
    
    
    Earnings
    
    
    Income
    
    
    Stock
    
    
    EquityBalance at January 1, 2008
    
    $
    46
    
    
    $
    27,348
    
    
    $
    1,411
    
    
    $
    187
    
    
    $
    (1,613
    )
    
    $
    27,379Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    124Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    258
    
    
    
    
    
    
    
    258Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    382Issuance of 32,875 stock based incentive plan shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Release of 4,277 stock based incentive plan shares
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Tax benefits from dividends on unvested stock based incentive plan shares
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Tax effect from vesting of stock based incentive plan shares
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Stock option expense
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Cash dividends declared ($.05 per share)
    
    
    
    
    
    
    
    
    
    
    (223
    )
    
    
    
    
    
    
    
    
    
    
    (223
    )Balance at March 31, 2008
    
    $
    46
    
    
    $
    27,361
    
    
    $
    1,312
    
    
    $
    445
    
    
    $
    (1,613
    )
    
    $
    27,551
  5.




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Three months endedMarch 31,2008
    
    
    2007Net income
    
    $
    124
    
    
    $
    85Change in net unrealized gain (loss) on securities
available for sale
    
    
    415
    
    
    
    89Less: Reclassification adjustment for gains
later recognized in net income
    
    
    (23
    )
    
    
    Net unrealized gain
    
    
    392
    
    
    
    89Tax effect
    
    
    (134
    )
    
    
    (30
    )Other comprehensive income
    
    
    258
    
    
    
    59Comprehensive income
    
    $
    382
    
    
    $
    144
  6.




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Three months endedMarch 31,2008
    
    
    2007Cash flows from operating activities
    
    $
    (1,160
    )
    
    $
    1,091Cash flows from investing activitiesAvailable-for-sale securities:Sales
    
    
    23
    
    
    
    Maturities, prepayments and calls
    
    
    4,047
    
    
    
    934Purchases
    
    
    (2,829
    )
    
    
    (749
    )Loan originations and payments, net
    
    
    5,516
    
    
    
    (3,675
    )Loans purchased
    
    
    
    
    
    
    (2,104
    )Proceeds from redemption of FHLB stock
    
    
    
    
    
    
    850Purchase of FHLB stock
    
    
    (65
    )
    
    
    Additions to premises and equipment
    
    
    (2
    )
    
    
    (573
    )Proceeds from the sale of foreclosed assets
    
    
    86
    
    
    
    Net cash from investing activities
    
    
    6,776
    
    
    
    (5,317
    )Cash flows from financing activitiesNet change in deposits
    
    
    (7,991
    )
    
    
    (2,082
    )Net change in short-term borrowings from the FHLB and
other debt
    
    
    (1,300
    )
    
    
    3,450Proceeds from FHLB advances and other debt
    
    
    8,000
    
    
    
    3,200Repayments on FHLB advances and other debt
    
    
    (1,000
    )
    
    
    (1,000
    )Net change in advances by borrowers for taxes and insurance
    
    
    (83
    )
    
    
    (58
    )Cash dividends paid
    
    
    (222
    )
    
    
    (409
    )Net cash from financing activities
    
    
    (2,596
    )
    
    
    3,101Net change in cash and cash equivalents
    
    
    3,020
    
    
    
    (1,125
    )Beginning cash and cash equivalents
    
    
    3,894
    
    
    
    5,403Ending cash and cash equivalents
    
    $
    6,914
    
    
    $
    4,278Supplemental cash flow information:Interest paid
    
    $
    2,247
    
    
    $
    2,091Income taxes paid
    
    
    16
    
    
    
    10
  7.




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Earnings Per Share
   Three months ended March 31,2008
    
    
    2007BasicNet income
    
    $
    124
    
    
    $
    85Weighted average common shares outstanding
    
    
    4,429,487
    
    
    
    4,532,596Basic earnings per common share
    
    $
    0.03
    
    
    $
    0.02DilutedNet income
    
    $
    124
    
    
    $
    85Weighted average common shares outstanding for
basic earnings per share
    
    
    4,429,487
    
    
    
    4,532,596Add: Dilutive effects of assumed exercises of
stock options and stock based incentive plan
shares
    
    
    426
    
    
    
    42Average shares and dilutive potential common shares
    
    
    4,429,913
    
    
    
    4,532,638Diluted earnings per common share
    
    $
    0.03
    
    
    $
    0.02
 8.




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Three months ended March 31,2008
    
    2007Stock options
    
    
    294,622
    
    
    
    280,389Stock based incentive plan shares
    
    
    19,209
    
    
    
    19,664
 Operating Segments:
  Adoption of New Accounting Standards:
 Fair Value Option and Fair Value Measurements
 Fair Value Measurements. Effective Date of FASB Statement No. 157.
 The Fair Value Option for Financial Assets
and Financial Liabilities.
 9.




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
           10.




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Fair Value Measurements at March 31, 2008 UsingQuoted Prices inActive Markets
    
    
    
    
    
    
    Significantfor Identical
    
    
    Significant Other
    
    
    UnobservableAssets
    
    
    Observable Inputs
    
    
    InputsMarch 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Available for sale securities
    
    $
    27,607
    
    
    $
    
    
    
    $
    27,607
    
    
    $
    $
    27,607
    
    
    $
    
    
    
    $
    27,607
    
    
    $
    
  Fair Value Measurements at March 31, 2008 UsingQuoted Prices inActive Markets
    
    
    
    
    
    
    Significantfor Identical
    
    
    Significant Other
    
    
    UnobservableAssets
    
    
    Observable Inputs
    
    
    InputsMarch 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Loan servicing rights
    
    $
    146
    
    
    $
    
    
    
    $
    146
    
    
    $
    $
    146
    
    
    $
    
    
    
    $
    146
    
    
    $
    
  11.




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NOTE 2  LOANS
  March 31,
    
    
    December 31,2008
    
    
    2007Commercial
    
    $
    35,911
    
    
    $
    35,334Real estate:Single-family residential
    
    
    31,029
    
    
    
    31,082Multi-family residential
    
    
    43,255
    
    
    
    43,789Commercial
    
    
    90,766
    
    
    
    95,088Consumer
    
    
    26,890
    
    
    
    28,248Subtotal
    
    
    227,851
    
    
    
    233,541Less: Net deferred loan fees
    
    
    (374
    )
    
    
    (382
    )Allowance for loan losses
    
    
    (2,729
    )
    
    
    (2,684
    )Loans, net
    
    $
    224,748
    
    
    $
    230,475
   Three months endedMarch 31,2008
    
    
    2007Beginning balance
    
    $
    2,684
    
    
    $
    2,109Provision for loan losses
    
    
    224
    
    
    
    35Loans charged-off
    
    
    (180
    )
    
    
    (8
    )Recoveries
    
    
    1
    
    
    
    14Ending balance
    
    $
    2,729
    
    
    $
    2,150
  March 31,
    
    
    December 31,2008
    
    
    2007Period-end loans with no allocated allowance
for loan losses
    
    $
    1,264
    
    
    $
    Period-end loans with allocated allowance
for loan losses
    
    
    
    
    
    
    Total
    
    $
    1,264
    
    
    $
    
 12.




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NOTE 2  LOANS (continued)
 Three months endedMarch 31,
    
    March 31,2008
    
    2007Average of individually impaired loans during the period
    
    $
    843
    
    
    $
    Interest income recognized during impairment
    
    
    
    
    
    
    Cash-basis interest income recognized
    
    
    
    
    
    
    
  March 31,
    
    December 31,2008
    
    2007Loans past due over 90 days still on accrual
    
    $
    131
    
    
    $
    97Nonaccrual loans
    
    
    1,492
    
    
    
    391
  NOTE 3  STOCK COMPENSATION PLANS
   Stock Options
  13.




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NOTE 3  STOCK COMPENSATION PLANS (continued)
   Three monthsended March 31,2008
    
    
    2007Risk-free interest rate
    
    
    2.36
    %
    
    
    4.68
    %Expected term (years)
    
    
    6
    
    
    
    6Expected stock price volatility
    
    
    23
    %
    
    
    23
    %Dividend yield
    
    
    4.96
    %
    
    
    4.90
    %
  Three months ended March 31, 2008WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    Contractual TermShares
    
    
    Exercise Price
    
    
    (Years)
    
    
    Intrinsic ValueOptions
outstanding,
beginning of period
    
    
    299,622
    
    
    $
    10.94
    
    
    
    6.0
    
    
    $
    Granted
    
    
    37,975
    
    
    
    4.03Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (5,000
    )
    
    
    10.42Options
outstanding, end of
period
    
    
    332,597
    
    
    $
    10.16
    
    
    
    6.2
    
    
    $
    Options
exercisable, end of
period
    
    
    280,388
    
    
    $
    11.13
    
    
    
    5.3
    
    
    $
    
 14.




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NOTE 3  STOCK COMPENSATION PLANS (continued)
  Three monthsended March 31,2008
    
    
    2007Intrinsic value of options exercised
    
    $
    
    
    
    $
    Cash received from option exercises
    
    
    
    
    
    
    Related tax benefit realized from
option exercises
    
    
    
    
    
    
    Weighted average fair value of options
granted
    
    
    0.49
    
    
    
    1.19
  Restricted Stock Awards
   Three monthsended March 31, 2008Weighted-AverageGrant-DateShares
    
    
    Fair ValueNonvested shares outstanding at beginning of period
    
    
    32,525
    
    
    $
    8.79Granted
    
    
    32,875
    
    
    
    4.03Vested
    
    
    (10,692
    )
    
    
    8.28Forfeited
    
    
    
    
    
    
    Nonvested shares outstanding at end of period
    
    
    54,708
    
    
    $
    6.03
  15.




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NOTE 4  FEDERAL HOME LOAN BANK ADVANCES
  March 31, 2008
    
    
    December 31, 2007Maturity April 2008 at 2.30% floating rate
    
    $
    36,950
    
    
    $
    Maturity January 2008 at 4.00% floating rate
    
    
    
    
    
    
    38,250Maturities September 2008 thru March 2010,
fixed at rates from 2.48% to 5.60%,
averaging 4.14% at March 31, 2008, and
maturities March 2008 thru March 2010,
fixed at rates from 2.90% to 5.60%,
averaging 4.89% at December 31, 2007
    
    
    18,200
    
    
    
    11,200Total
    
    $
    55,150
    
    
    $
    49,450
   March 31, 2008
    
    
    December 31, 2007First mortgage loans under a blanket lien arrangement
    
    $
    26,500
    
    
    $
    26,649Second mortgage loans
    
    
    569
    
    
    
    577Multi-family mortgage loans
    
    
    20,692
    
    
    
    15,227Home equity lines of credit
    
    
    10,119
    
    
    
    9,918Commercial real estate loans
    
    
    58,913
    
    
    
    62,287Securities
    
    
    14,981
    
    
    
    15,401Total
    
    $
    131,774
    
    
    $
    130,059
  Payment information
  March 31, 2009
    
    $
    40,150March 31, 2010
    
    
    15,000Total
    
    $
    55,150
 16.




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Forward-Looking Statements
  Business Overview
   General
   Financial Condition
 General
 17.




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Cash and Cash Equivalents
 Securities
 Loans
 Deposits
 Federal Home Loan Bank advances
 Shareholders equity
 Comparison
of the Results of Operations for the Three Months Ended
March 31, 2008 and 2007
 General
 Net interest income
  18.




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Provision
for loan losses
  Noninterest income
 Noninterest expense
 19.




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Critical Accounting Policies
    Liquidity and Capital Resources
   20.




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21.




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Evaluation
of disclosure controls and procedures
 Changes
in internal control over financial reporting
 22.




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Item 1.
Legal Proceedings
  
 Item 6.
Exhibits
 (a)
    ExhibitNumber
    
    Exhibit3.1*
    
    Certificate of Incorporation3.2**
    
    Amendment to Certificate of Incorporation of the registrant3.2***
    
    Second Amended and Restated Bylaws of the registrant4.0*
    
    Form of Common Stock Certificate11.1
    
    Statement Re: Computation of Per Share Earnings31.1
    
    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 to the Exhibits included with the registrants
Registration Statement on Form
SB-2 No. 333-64089, filed with the Commission on September 23, 1998**
    
    Incorporated by reference to the Exhibits included with the registrants Registration
Statement on Form S-2 No. 333-129315 filed with the Commission on October 28, 2005***
    
    Incorporated by reference to Exhibit 3.3 to the registrants Form 10-K for the fiscal year
ended December 31, 2007 23.




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CENTRAL FEDERAL CORPORATIONDated: May 14, 2008
    By:
    /s/ Mark S. AllioMark S. AllioChairman of the Board, President
and
Chief Executive OfficerDated: May 14, 2008
    By:
    /s/ Therese Ann LiutkusTherese Ann Liutkus, CPATreasurer and Chief Financial Officer 24.