##### 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 June 30, 2010
 or
 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
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 (Address of principal executive offices) (Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 Yes þ No o
 Yes o No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 Yes o No þ




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##### 



PagePART I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009
    
    
    3Consolidated Statements of Operations for the three and six months ended June 30, 2010 and 2009
    
    
    4Consolidated Statement of Changes in Stockholders Equity for the six months ended June 30, 2010 and 2009
    
    
    5Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 4T. Controls and Procedures
    
    
    50PART II. Other InformationItem 6. Exhibits
    
    
    51Signatures
    
    
    52Exhibit 11.1Exhibit 22.1Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



June 30,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCash and cash equivalents
    
    $
    13,406
    
    
    $
    2,973Securities available for sale
    
    
    24,282
    
    
    
    21,241Loans held for sale
    
    
    10,069
    
    
    
    1,775Loans, net of allowance of $10,074 and $7,090
    
    
    208,238
    
    
    
    231,105Federal Home Loan Bank stock
    
    
    1,942
    
    
    
    1,942Loan servicing rights
    
    
    72
    
    
    
    88Foreclosed assets, net
    
    
    2,348
    
    
    
    Premises and equipment, net
    
    
    6,783
    
    
    
    7,003Other intangible assets
    
    
    149
    
    
    
    169Bank owned life insurance
    
    
    4,083
    
    
    
    4,017Accrued interest receivable and other assets
    
    
    3,729
    
    
    
    3,429$
    275,101
    
    
    $
    273,742LIABILITIES AND STOCKHOLDERS EQUITYDepositsNoninterest bearing
    
    $
    20,687
    
    
    $
    17,098Interest bearing
    
    
    205,568
    
    
    
    193,990Total deposits
    
    
    226,255
    
    
    
    211,088Short-term Federal Home Loan Bank advances
    
    
    
    
    
    
    2,065Long-term Federal Home Loan Bank advances
    
    
    23,942
    
    
    
    29,942Advances by borrowers for taxes and insurance
    
    
    48
    
    
    
    161Accrued interest payable and other liabilities
    
    
    2,549
    
    
    
    2,104Subordinated debentures
    
    
    5,155
    
    
    
    5,155Total liabilities
    
    
    257,949
    
    
    
    250,515Stockholders equityPreferred stock, Series A, $.01 par value; $7,225 aggregate
liquidation value, 1,000,000 shares authorized;
7,225 shares issued
    
    
    7,045
    
    
    
    7,021Common stock, $.01 par value; shares authorized;
12,000,000, shares issued; 4,651,372 in 2010 and
4,658,120 in 2009
    
    
    47
    
    
    
    47Common stock warrant
    
    
    217
    
    
    
    217Additional paid-in capital
    
    
    27,476
    
    
    
    27,517Retained earnings (accumulated deficit)
    
    
    (14,887
    )
    
    
    (9,034
    )Accumulated other comprehensive income
    
    
    499
    
    
    
    704Treasury stock, at cost; 558,533 shares
    
    
    (3,245
    )
    
    
    (3,245
    )Total stockholders equity
    
    
    17,152
    
    
    
    23,227$
    275,101
    
    
    $
    273,742
   3




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##### Table of Contents



Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest and dividend incomeLoans, including fees
    
    $
    3,074
    
    
    $
    3,326
    
    
    $
    6,220
    
    
    $
    6,723Securities
    
    
    172
    
    
    
    288
    
    
    
    368
    
    
    
    585Federal Home Loan Bank stock dividends
    
    
    21
    
    
    
    23
    
    
    
    43
    
    
    
    47Federal funds sold and other
    
    
    15
    
    
    
    7
    
    
    
    23
    
    
    
    193,282
    
    
    
    3,644
    
    
    
    6,654
    
    
    
    7,374Interest expenseDeposits
    
    
    890
    
    
    
    1,222
    
    
    
    1,809
    
    
    
    2,581Short-term Federal Home Loan Bank advances and other debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Long-term Federal Home Loan Bank advances and other debt
    
    
    170
    
    
    
    296
    
    
    
    354
    
    
    
    550Subordinated debentures
    
    
    41
    
    
    
    53
    
    
    
    81
    
    
    
    1091,101
    
    
    
    1,571
    
    
    
    2,244
    
    
    
    3,241Net interest income
    
    
    2,181
    
    
    
    2,073
    
    
    
    4,410
    
    
    
    4,133Provision for loan losses
    
    
    5,938
    
    
    
    1,357
    
    
    
    6,686
    
    
    
    1,907Net interest income after provision for loan losses
    
    
    (3,757
    )
    
    
    716
    
    
    
    (2,276
    )
    
    
    2,226Noninterest incomeService charges on deposit accounts
    
    
    74
    
    
    
    79
    
    
    
    144
    
    
    
    161Net gains on sales of loans
    
    
    181
    
    
    
    179
    
    
    
    331
    
    
    
    331Loan servicing fees, net
    
    
    2
    
    
    
    9
    
    
    
    10
    
    
    
    18Net gain on sales of securities
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    Earnings on bank owned life insurance
    
    
    33
    
    
    
    32
    
    
    
    66
    
    
    
    64Other
    
    
    3
    
    
    
    2
    
    
    
    12
    
    
    
    13293
    
    
    
    301
    
    
    
    803
    
    
    
    587Noninterest expenseSalaries and employee benefits
    
    
    1,060
    
    
    
    1,097
    
    
    
    2,113
    
    
    
    2,143Occupancy and equipment
    
    
    45
    
    
    
    139
    
    
    
    113
    
    
    
    284Data processing
    
    
    164
    
    
    
    151
    
    
    
    319
    
    
    
    307Franchise taxes
    
    
    85
    
    
    
    92
    
    
    
    178
    
    
    
    178Professional fees
    
    
    272
    
    
    
    105
    
    
    
    478
    
    
    
    442Director fees
    
    
    26
    
    
    
    17
    
    
    
    52
    
    
    
    51Postage, printing and supplies
    
    
    43
    
    
    
    53
    
    
    
    102
    
    
    
    112Advertising and promotion
    
    
    27
    
    
    
    2
    
    
    
    55
    
    
    
    14Telephone
    
    
    27
    
    
    
    28
    
    
    
    51
    
    
    
    52Loan expenses
    
    
    16
    
    
    
    19
    
    
    
    43
    
    
    
    32Foreclosed assets, net
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Depreciation
    
    
    133
    
    
    
    117
    
    
    
    264
    
    
    
    236FDIC Premiums
    
    
    101
    
    
    
    271
    
    
    
    250
    
    
    
    336Amortization of intangibles
    
    
    10
    
    
    
    
    
    
    
    20
    
    
    
    Other
    
    
    89
    
    
    
    91
    
    
    
    166
    
    
    
    1752,099
    
    
    
    2,182
    
    
    
    4,205
    
    
    
    4,362Loss before income taxes
    
    
    (5,563
    )
    
    
    (1,165
    )
    
    
    (5,678
    )
    
    
    (1,549
    )Income tax expense (benefit)
    
    
    (10
    )
    
    
    (403
    )
    
    
    (30
    )
    
    
    (541
    )Net loss
    
    
    (5,553
    )
    
    
    (762
    )
    
    
    (5,648
    )
    
    $
    (1,008
    )Preferred stock dividends and accretion of unearned
discount on preferred stock
    
    
    (102
    )
    
    
    (102
    )
    
    
    (204
    )
    
    
    (203
    )Net loss
attributable to common stockholders
    
    $
    (5,655
    )
    
    $
    (864
    )
    
    $
    (5,852
    )
    
    $
    (1,211
    )Loss per common share:Basic
    
    $
    (1.38
    )
    
    $
    (0.21
    )
    
    $
    (1.43
    )
    
    $
    (0.30
    )Diluted
    
    $
    (1.38
    )
    
    $
    (0.21
    )
    
    $
    (1.43
    )
    
    $
    (0.30
    )
   4




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##### Table of Contents



Retained
    
    
    AccumulatedCommon
    
    
    Additional
    
    
    Earnings
    
    
    Other
    
    
    
    
    
    
    TotalPreferred
    
    
    Common
    
    
    Stock
    
    
    Paid-In
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    Treasury
    
    
    StockholdersStock
    
    
    Stock
    
    
    Warrant
    
    
    Capital
    
    
    Deficit)
    
    
    Income
    
    
    Stock
    
    
    EquityBalance at January 1, 2010
    
    $
    7,021
    
    
    $
    47
    
    
    $
    217
    
    
    $
    27,517
    
    
    $
    (9,034
    )
    
    $
    704
    
    
    $
    (3,245
    )
    
    $
    23,227Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,648
    )
    
    
    
    
    
    
    
    
    
    
    (5,648
    )Change in unrealized gain (loss) on securities available for sale,
net of reclassification and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205
    )
    
    
    
    
    
    
    (205
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,853
    )Accretion of discount on preferred stock
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    
    
    
    
    Release of (2,277) stock based incentive plan shares, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7
    )Tax effect from vesting of stock based incentive plan shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )Stock option expense, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    (181
    )Balance at June 30, 2010
    
    $
    7,045
    
    
    $
    47
    
    
    $
    217
    
    
    $
    27,476
    
    
    $
    (14,887
    )
    
    $
    499
    
    
    $
    (3,245
    )
    
    $
    17,152
   5




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##### Table of Contents



AccumulatedCommon
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalPreferred
    
    
    Common
    
    
    Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury
    
    
    StockholdersStock
    
    
    Stock
    
    
    Warrant
    
    
    Capital
    
    
    Earnings
    
    
    Income
    
    
    Stock
    
    
    EquityBalance at January 1, 2009
    
    $
    6,989
    
    
    $
    47
    
    
    $
    217
    
    
    $
    27,455
    
    
    $
    1,262
    
    
    $
    350
    
    
    $
    (3,245
    )
    
    $
    33,075Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,008
    )
    
    
    
    
    
    
    
    
    
    
    (1,008
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    
    
    
    
    151Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (857
    )Preferred stock offering costs
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )Accretion of unearned discount on preferred stock
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    Release of 6,925 stock based incentive plan shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Forfeiture of 1,200 stock based incentive plan shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1Tax 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (181
    )
    
    
    
    
    
    
    
    
    
    
    (181
    )Balance at June 30, 2009
    
    $
    6,998
    
    
    $
    47
    
    
    $
    217
    
    
    $
    27,480
    
    
    $
    52
    
    
    $
    501
    
    
    $
    (3,245
    )
    
    $
    32,050
   6




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##### Table of Contents



Six months ended June 30,2010
    
    
    2009Cash flows from operating activities
    
    $
    (1,287
    )
    
    $
    (4,808
    )Cash flows from investing activities
Available-for-sale securities:Sales
    
    
    9,031
    
    
    
    Maturities, prepayments and calls
    
    
    2,556
    
    
    
    3,157Purchases
    
    
    (14,737
    )
    
    
    (2,031
    )Loan originations and payments, net
    
    
    3,830
    
    
    
    340Proceeds from sale of portfolio loans
    
    
    4,302
    
    
    
    Additions to premises and equipment
    
    
    (45
    )
    
    
    (22
    )Proceeds from the sale of premises and equipment
    
    
    
    
    
    
    1Proceeds from the sale of foreclosed assets
    
    
    
    
    
    
    28Net cash from investing activities
    
    
    4,937
    
    
    
    1,473Cash flows from financing activitiesNet change in deposits
    
    
    15,142
    
    
    
    7,250Net change in short-term borrowings from the FHLB and other debt
    
    
    (2,065
    )
    
    
    (5,850
    )Proceeds from long-term FHLB advances and other debt
    
    
    
    
    
    
    17,942Repayments on long-term FHLB advances and other debt
    
    
    (6,000
    )
    
    
    (7,200
    )Net change in advances by borrowers for taxes and insurance
    
    
    (113
    )
    
    
    (95
    )Cash dividends paid on common stock
    
    
    
    
    
    
    (205
    )Cash dividends paid on preferred stock
    
    
    (181
    )
    
    
    (161
    )Costs associated with issuance of preferred stock
    
    
    
    
    
    
    (13
    )Net cash from financing activities
    
    
    6,783
    
    
    
    11,668Net change in cash and cash equivalents
    
    
    10,433
    
    
    
    8,333Beginning cash and cash equivalents
    
    
    2,973
    
    
    
    4,177Ending cash and cash equivalents
    
    $
    13,406
    
    
    $
    12,510Supplemental cash flow information:Interest paid
    
    $
    2,186
    
    
    $
    3,265Supplemental noncash disclosures:Transfers from loans to repossessed assets
    
    $
    2,348
    
    
    $
    174Loans issued to finance the sale of repossessed assets
    
    
    
    
    
    
    162Loans transferred from portfolio to held for sale
    
    
    5,772
    
    
    
    
   7




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Reclassifications
 Earnings (Loss) Per Common Share
  Three months ended June 30,
    
    
    Six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009BasicNet loss
    
    $
    (5,553
    )
    
    $
    (762
    )
    
    $
    (5,648
    )
    
    $
    (1,008
    )Less: Preferred dividends and accretion of discount on preferred stock
    
    
    (102
    )
    
    
    (102
    )
    
    
    (204
    )
    
    
    (203
    )Net loss allocated to unvested share-based payment awards
    
    
    3
    
    
    
    3
    
    
    
    4
    
    
    
    4Net loss allocated to common stockholders
    
    $
    (5,652
    )
    
    $
    (861
    )
    
    $
    (5,848
    )
    
    $
    (1,207
    )Weighted average common shares outstanding
    
    
    4,095,993
    
    
    
    4,087,785
    
    
    
    4,095,607
    
    
    
    4,086,162Basic loss per common share
    
    $
    (1.38
    )
    
    $
    (0.21
    )
    
    $
    (1.43
    )
    
    $
    (0.30
    )DilutedNet loss allocated to common stockholders
    
    $
    (5,652
    )
    
    $
    (861
    )
    
    $
    (5,848
    )
    
    $
    (1,207
    )Weighted average common shares outstanding for basic loss per common share
    
    
    4,095,993
    
    
    
    4,087,785
    
    
    
    4,095,607
    
    
    
    4,086,162Add: Dilutive effects of assumed exercises of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Add: Dilutive effects of assumed exercises of stock warrant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average shares and dilutive potential common shares
    
    
    4,095,993
    
    
    
    4,087,785
    
    
    
    4,095,607
    
    
    
    4,086,162Diluted loss per common share
    
    $
    (1.38
    )
    
    $
    (0.21
    )
    
    $
    (1.43
    )
    
    $
    (0.30
    )
  8




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Three months ended June 30,
    
    
    Six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Stock options
    
    
    278,565
    
    
    
    414,177
    
    
    
    292,030
    
    
    
    415,410Stock warrants
    
    
    336,568
    
    
    
    336,568
    
    
    
    336,568
    
    
    
    336,568
 Adoption of New Accounting Standards:
 , Accounting for Transfers of Financial Assets, an Amendment of
FASB Statement No. 140
 Amendments to FASB Interpretation No. 46(R)
 Improving Disclosures About Fair Value Measurements.
  9




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Effect of newly issued but not yet effective Accounting Standards
 Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit
Losses
  10




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##### Table of Contents



NOTE 2  SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueJune 30, 2010Issued by U.S. government-sponsored entities and agencies:Mortgage-backed securities  residential
    
    $
    2,182
    
    
    $
    240
    
    
    $
    
    
    
    $
    2,422Collateralized mortgage obligations
    
    
    21,421
    
    
    
    446
    
    
    
    7
    
    
    
    21,860Total
    
    $
    23,603
    
    
    $
    686
    
    
    $
    7
    
    
    $
    24,282
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2009Issued by U.S. government-sponsored entities and agencies:Mortgage-backed securities  residential
    
    $
    5,171
    
    
    $
    390
    
    
    $
    
    
    
    $
    5,561Collateralized mortgage obligations
    
    
    13,551
    
    
    
    479
    
    
    
    
    
    
    
    14,030Collateralized mortgage obligations issued by private issuers
    
    
    1,635
    
    
    
    15
    
    
    
    
    
    
    
    1,650Total
    
    $
    20,357
    
    
    $
    884
    
    
    $
    
    
    
    $
    21,241
  Six monthsendedJune 30, 2010Proceeds
    
    $
    9,031Gross gains
    
    
    240Gross losses
    
    
    
   11




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##### Table of Contents



NOTE 2  SECURITIES (continued)
   June 30,
    
    
    December 31,2010
    
    
    2009Pledged as collateral for:FHLB advances
    
    $
    11,187
    
    
    $
    11,045Public deposits
    
    
    6,632
    
    
    
    4,038Customer repurchase agreements
    
    
    3,085
    
    
    
    3,088Interest-rate swaps
    
    
    1,032
    
    
    
    1,010Total
    
    $
    21,936
    
    
    $
    19,181
   Less than 12 Months
    
    
    12 Months or More
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    LossIssued by U.S. government-sponsored
agencies and entities:Collateralized mortgage obligations
    
    $
    2,157
    
    
    $
    7
    
    
    $
    
    
    
    $
    
    
    
    $
    2,157
    
    
    $
    7Total temporarily impaired
    
    $
    2,157
    
    
    $
    7
    
    
    $
    
    
    
    $
    
    
    
    $
    2,157
    
    
    $
    7
    12




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##### Table of Contents



NOTE 3  LOANS
 June 30,
    
    
    December 31,2010
    
    
    2009Commercial
    
    $
    44,008
    
    
    $
    42,769Real estate:Single-family residential
    
    
    26,835
    
    
    
    29,461Multi-family residential
    
    
    35,834
    
    
    
    37,679Commercial
    
    
    83,824
    
    
    
    96,443Construction
    
    
    7,743
    
    
    
    5,791Consumer
    
    
    20,068
    
    
    
    26,052Subtotal
    
    
    218,312
    
    
    
    238,195Less: Allowance for loan losses (ALLL)
    
    
    (10,074
    )
    
    
    (7,090
    )Loans, net
    
    $
    208,238
    
    
    $
    231,105
   Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Beginning balance
    
    $
    7,396
    
    
    $
    3,528
    
    
    $
    7,090
    
    
    $
    3,119Provision for loan losses
    
    
    5,938
    
    
    
    1,357
    
    
    
    6,686
    
    
    
    1,907Reclassification of
allowance for losses on
loan-related commitments
(1)
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    Loans charged-off
    
    
    (3,290
    )
    
    
    (893
    )
    
    
    (3,813
    )
    
    
    (1,036
    )Recoveries
    
    
    18
    
    
    
    4
    
    
    
    111
    
    
    
    6Ending balance
    
    $
    10,074
    
    
    $
    3,996
    
    
    $
    10,074
    
    
    $
    3,996
 (1)
    
    Reclassified from accrued interest payable and other liabilities in the consolidated balance
sheet.  13




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##### Table of Contents



NOTE 3  LOANS (continued)
  June 30,
    
    
    December 31,2010
    
    
    2009Period-end loans with no allocated allowance for loan losses
    
    $
    3,928
    
    
    $
    6,964Period-end loans with allocated allowance for loan losses
    
    
    7,500
    
    
    
    6,734Total
    
    $
    11,428
    
    
    $
    13,698Amount of the allowance for loan losses allocated to
individually impaired loans
    
    $
    2,811
    
    
    $
    2,033
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Average of individually impaired loans
during the period
    
    $
    10,932
    
    
    $
    5,675
    
    
    $
    12,062
    
    
    $
    3,900Interest income recognized during impairment
    
    
    12
    
    
    
    
    
    
    
    15
    
    
    
    Cash-basis interest income recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
  June 30,
    
    
    December 31,2010
    
    
    2009Loans past due over 90 days still on accrual
    
    $
    1
    
    
    $
    14Nonaccrual loans:Commercial
    
    $
    631
    
    
    $
    217Single-family residential real estate
    
    
    273
    
    
    
    426Multi-family residential real estate
    
    
    4,569
    
    
    
    4,406Commercial real estate
    
    
    5,016
    
    
    
    6,864Home equity lines of credit
    
    
    215
    
    
    
    1,307Total nonaccrual loans
    
    $
    10,704
    
    
    $
    13,220Foreclosed assets:Commercial real estate
    
    
    2,348
    
    
    
    Total nonperforming assets
    
    $
    13,052
    
    
    $
    13,220
   14




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##### Table of Contents



NOTE 3  LOANS (continued)
  June 30,
    
    
    December 31,2010
    
    
    2009Commercial
    
    $
    182
    
    
    $
    217Single-family residential real estate
    
    
    216
    
    
    
    261Commercial real estate
    
    
    
    
    
    
    854Home equity lines of credit
    
    
    
    
    
    
    496Total
    
    $
    398
    
    
    $
    1,828
    15




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##### Table of Contents



NOTE 4  FAIR VALUE
      Securities available for sale
 Derivatives
 Impaired loans
 Loan servicing rights
  16




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##### Table of Contents



NOTE 4  FAIR VALUE (continued)
 Assets and Liabilities Measured on a Recurring Basis
  Fair ValueMeasurements atJune 30, 2010Using SignificantOther Observable Inputs(Level 2)Assets:Securities available for sale:Issued by U.S. government-sponsored entities and agencies:Mortgage-backed securities  residential
    
    $
    2,422Collateralized mortgage obligations
    
    
    21,860Total securities available for sale
    
    $
    24,282Yield maintenance provisions (embedded derivatives)
    
    $
    874Liabilities:Interest-rate swaps
    
    $
    874
 Fair ValueMeasurements atDecember 31, 2009Using SignificantOther ObservableInputs(Level 2)Assets:Securities available for sale:Issued by U.S. government-sponsored agencies:Mortgage-backed securities  residential
    
    $
    5,561Collateralized mortgage obligations
    
    
    14,030Collateralized mortgage obligations issued by private issuers
    
    
    1,650Total securities available for sale
    
    $
    21,241Yield maintenance provisions (embedded derivatives)
    
    $
    480Liabilities:Interest-rate swaps
    
    $
    480
  17




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##### Table of Contents



NOTE 4  FAIR VALUE (continued)
 Assets Measured on a Non-Recurring Basis
  Fair Value Measurements at June 30, 2010 UsingSignificant Other
    
    
    SignificantObservable Inputs
    
    
    Unobservable Inputs(Level 2)
    
    
    (Level 3)Loan servicing rights
    
    $
    22
    
    
    $
    Impaired loans
    
    
    
    
    
    
    4,737
 Fair Value Measurements at December 31, 2009 UsingSignificant Other
    
    
    SignificantObservable Inputs
    
    
    Unobservable Inputs(Level 2)
    
    
    (Level 3)Loan servicing rights
    
    $
    16
    
    
    $
    Impaired loans
    
    
    
    
    
    
    6,757
     18




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##### Table of Contents



NOTE 4  FAIR VALUE (continued)
  June 30, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and cash equivalents
    
    $
    13,406
    
    
    $
    13,406
    
    
    $
    2,973
    
    
    $
    2,973Securities available for sale
    
    
    24,282
    
    
    
    24,282
    
    
    
    21,241
    
    
    
    21,241Loans held for sale
    
    
    10,069
    
    
    
    10,156
    
    
    
    1,775
    
    
    
    1,804Loans, net
    
    
    208,238
    
    
    
    210,441
    
    
    
    231,105
    
    
    
    232,595FHLB stock
    
    
    1,942
    
    
    
    n/a
    
    
    
    1,942
    
    
    
    n/aAccrued interest receivable
    
    
    882
    
    
    
    882
    
    
    
    984
    
    
    
    984Yield maintenance provisions
(embedded derivatives)
    
    
    874
    
    
    
    874
    
    
    
    480
    
    
    
    480Financial liabilities:Deposits
    
    $
    (226,255
    )
    
    $
    (227,442
    )
    
    $
    (211,088
    )
    
    $
    (212,306
    )FHLB advances
    
    
    (23,942
    )
    
    
    (24,731
    )
    
    
    (32,007
    )
    
    
    (32,443
    )Subordinated debentures
    
    
    (5,155
    )
    
    
    (1,972)
    
    
    
    (5,155
    )
    
    
    (1,955
    )Accrued interest payable
    
    
    (216
    )
    
    
    (216
    )
    
    
    (160
    )
    
    
    (160
    )Interest-rate swaps
    
    
    (874
    )
    
    
    (874
    )
    
    
    (480
    )
    
    
    (480
    )
    19




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##### Table of Contents



NOTE 5  FHLB ADVANCES
  June 30,
    
    
    December 31,Rate
    
    
    2010
    
    
    2009Fixed-rate advances:Maturing January 2010
    
    
    3.19
    %
    
    $
    
    
    
    $
    5,000Maturing March 2010
    
    
    4.96
    %
    
    
    
    
    
    
    1,000Maturing March 2011
    
    
    1.90
    %
    
    
    2,200
    
    
    
    2,200Maturing April 2011
    
    
    2.88
    %
    
    
    3,000
    
    
    
    3,000Maturing July 2011
    
    
    3.85
    %
    
    
    3,000
    
    
    
    3,000Maturing April 2012
    
    
    2.30
    %
    
    
    5,000
    
    
    
    5,000Maturing June 2012
    
    
    2.05
    %
    
    
    742
    
    
    
    742Maturing January 2014
    
    
    3.12
    %
    
    
    5,000
    
    
    
    5,000Maturing May 2014
    
    
    3.06
    %
    
    
    5,000
    
    
    
    5,000Total
    
    
    
    
    
    $
    23,942
    
    
    $
    29,942
   June 30,
    
    
    December 31,2010
    
    
    2009First mortgage loans under a blanket lien arrangement
    
    $
    22,601
    
    
    $
    25,053Second mortgages
    
    
    389
    
    
    
    938Multi-family mortgage loans
    
    
    10,807
    
    
    
    12,703Home equity lines of credit
    
    
    12,648
    
    
    
    13,331Commercial real estate loans
    
    
    2,383
    
    
    
    62,313Securities
    
    
    11,187
    
    
    
    11,045Total
    
    $
    60,015
    
    
    $
    125,383
  Payment information
 Payments over the next five years are as follows:June 30, 2011
    
    $
    5,200June 30, 2012
    
    
    8,742June 30, 2014
    
    
    10,000Total
    
    $
    23,942
  20




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##### Table of Contents



NOTE 6  OTHER BORROWINGS
   June 30,
    
    
    December 31,2010
    
    
    2009Commercial loans
    
    $
    15,957
    
    
    $
    18,407Commercial real estate loans
    
    
    32,753
    
    
    
    254$
    48,710
    
    
    $
    18,661
   21




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##### Table of Contents



NOTE 7  STOCK-BASED COMPENSATION
   Stock Options
   Six months endedJune 30,2009Risk-free interest rate
    
    
    1.64
    %Expected term (years)
    
    
    7Expected stock price volatility
    
    
    27
    %Dividend yield
    
    
    3.63
    %
  22




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##### Table of Contents



NOTE 7  STOCK-BASED COMPENSATION (continued)
  WeightedAverageRemainingWeighted
    
    
    ContractualAverage Exercise
    
    
    Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (Years)
    
    
    ValueOutstanding at beginning of period
    
    
    310,361
    
    
    $
    7.89Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (75,082
    )
    
    
    6.63Outstanding at end of period
    
    
    235,279
    
    
    $
    8.30
    
    
    
    5.9
    
    
    $
    Exercisable at end of period
    
    
    201,315
    
    
    $
    9.15
    
    
    
    5.5
    
    
    $
    
   Restricted Stock Awards
   23




---



##### Table of Contents



NOTE 7  STOCK-BASED COMPENSATION (continued)
  WeightedAverageGrant-DateShares
    
    
    Fair ValueNon-vested at beginning of period
    
    
    28,733
    
    
    $
    5.35Granted
    
    
    
    
    
    
    Vested
    
    
    (18,526
    )
    
    
    6.08Forfeited
    
    
    (6,748
    )
    
    
    4.03Non-vested at end of period
    
    
    3,459
    
    
    $
    4.03
   24




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##### Table of Contents



NOTE 8  PREFERRED STOCK
       25




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##### Table of Contents



NOTE 9  REGULATORY CAPITAL MATTERS
    To Be WellCapitalized UnderFor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action RegulationsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioJune 30, 2010Total Capital to risk
weighted assets
    
    $
    21,456
    
    
    
    10.0
    %
    
    $
    17,151
    
    
    
    8.0
    %
    
    $
    21,439
    
    
    
    10.0
    %Tier 1 (Core) Capital to risk
weighted assets
    
    
    18,720
    
    
    
    8.7
    %
    
    
    8,575
    
    
    
    4.0
    %
    
    
    12,863
    
    
    
    6.0
    %Tier 1 (Core) Capital to
adjusted total assets
    
    
    18,720
    
    
    
    6.9
    %
    
    
    10,905
    
    
    
    4.0
    %
    
    
    13,631
    
    
    
    5.0
    %Tangible Capital to
adjusted total assets
    
    
    18,720
    
    
    
    6.9
    %
    
    
    4,089
    
    
    
    1.5
    %
    
    
    N/A
    
    
    
    N/A
  26




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##### Table of Contents



NOTE 9  REGULATORY CAPITAL MATTERS (continued)
 To Be WellCapitalized UnderFor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action RegulationsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioDecember 31, 2009Total Capital to risk
weighted assets
    
    $
    26,978
    
    
    
    11.7
    %
    
    $
    18,417
    
    
    
    8.0
    %
    
    $
    23,021
    
    
    
    10.0
    %Tier 1 (Core) Capital to risk
weighted assets
    
    
    24,073
    
    
    
    10.5
    %
    
    
    9,208
    
    
    
    4.0
    %
    
    
    13,813
    
    
    
    6.0
    %Tier 1 (Core) Capital to
adjusted total assets
    
    
    24,073
    
    
    
    8.9
    %
    
    
    10,850
    
    
    
    4.0
    %
    
    
    13,563
    
    
    
    5.0
    %Tangible Capital to
adjusted total assets
    
    
    24,073
    
    
    
    8.9
    %
    
    
    4,069
    
    
    
    1.5
    %
    
    
    N/A
    
    
    
    N/A
   Dividend Restrictions
  27




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##### Table of Contents



NOTE 10  OTHER COMPREHENSIVE INCOME (LOSS)
  Three months ended June 30,
    
    
    Six months ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Change in unrealized holding gains
(losses) on securities available for
sale
    
    $
    81
    
    
    $
    (37
    )
    
    $
    35
    
    
    $
    229Reclassification adjustment for gains
realized in income
    
    
    
    
    
    
    
    
    
    
    (240
    )
    
    
    Net change in unrealized gains (losses)
    
    
    81
    
    
    
    (37
    )
    
    
    (205
    )
    
    
    229Tax effect
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    (78
    )Net of tax amount
    
    $
    81
    
    
    $
    (24
    )
    
    $
    (205
    )
    
    $
    151
  December 31,
    
    
    Current period2009
    
    
    change
    
    
    June 30, 2010Unrealized gains (losses) on securities available for sale
    
    $
    704
    
    
    $
    (205
    )
    
    $
    499
  28




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##### Table of Contents



Forward-Looking Statements
  
    
    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;
 
    
    changes in market rates and prices, including real estate values, which may
adversely impact the value of financial products including securities, loans and
deposits;
 
    
    changes in tax laws, rules and regulations;
 
    
    various monetary and fiscal policies and regulations, including those determined
by the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC) and
the Office of Thrift Supervision (OTS);
 
    
    competition with other local and regional commercial banks, savings banks, credit
unions and other non-bank financial institutions;
 
    
    our ability to grow our core businesses;
 
    
    technological factors which may affect our operations, pricing, products and
services;
 
    
    unanticipated litigation, claims or assessments; and
 
    
    managements ability to manage these and other risks.
   Business Overview
   29




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##### Table of Contents



General
      30




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##### Table of Contents



Financial Condition   General.
 Cash and cash equivalents.
 Securities.
 Loans held for sale.
 Loans.
  31




---



##### Table of Contents



Allowance for loan losses.
      32




---



##### Table of Contents



33




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##### Table of Contents



®
    34




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##### Table of Contents



June 30, 2010
    
    
    December 31, 2009(Dollars in thousands)Special mentionCommercial
    
    $
    10,703
    
    
    $
    3,892Multi-family residential real estate
    
    
    6,565
    
    
    
    3,143Commercial real estate
    
    
    10,337
    
    
    
    1,432Home equity lines of credit
    
    
    3,810
    
    
    
    3,894Total
    
    $
    31,415
    
    
    $
    12,361SubstandardCommercial
    
    $
    4,168
    
    
    $
    317Single-family residential real estate
    
    
    273
    
    
    
    426Multi-family residential real estate
    
    
    10,170
    
    
    
    5,671Commercial real estate
    
    
    9,972
    
    
    
    10,723Home equity lines of credit
    
    
    215
    
    
    
    1,307Other consumer loans
    
    
    1
    
    
    
    14Total
    
    $
    24,799
    
    
    $
    18,458
     35




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##### Table of Contents



Foreclosed assets
 Deposits
 ®
     Short-term FHLB advances.
 Long-term FHLB advances.
  36




---



##### Table of Contents



Stockholders equity.
  Comparison of the Results of Operations for the Three Months Ended June 30, 2010 and 2009
 General.
 Net interest income. Average Balances, Interest Rates and Yields Rate/Volume
Analysis of Net Interest Income
  Interest income. .
  37




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##### Table of Contents



Interest expense. .
 Provision for loan losses Allowance for loan losses
  Noninterest income.
  38




---



##### Table of Contents



Noninterest expense.
  Income taxes.
 Comparison of the Results of Operations for the Six Months Ended June 30, 2010 and 2009
 General.
  39




---



##### Table of Contents



Net interest income.
 Interest income.
 Interest expense.
  40




---



##### Table of Contents



Provision for loan losses. Allowance for
loan losses
  Noninterest income.
   41




---



##### Table of Contents



Noninterest expense.
  Income taxes.
  42




---



##### Table of Contents



Average Balances, Interest Rates and Yields.
 For the Three Months Ended June 30,2010
    
    
    2009Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    AverageOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(Dollars in thousands)Interest-earning assets:Securities (1) (2)
    
    $
    23,227
    
    
    $
    172
    
    
    
    3.05
    %
    
    $
    22,693
    
    
    $
    288
    
    
    
    5.27
    %Loans and loans held for sale (3)
    
    
    221,839
    
    
    
    3,074
    
    
    
    5.54
    %
    
    
    238,617
    
    
    
    3,326
    
    
    
    5.58
    %Other earning assets
    
    
    24,046
    
    
    
    15
    
    
    
    0.25
    %
    
    
    11,007
    
    
    
    7
    
    
    
    0.25
    %FHLB stock
    
    
    1,942
    
    
    
    21
    
    
    
    4.33
    %
    
    
    2,108
    
    
    
    23
    
    
    
    4.36
    %Total interest-earning assets
    
    
    271,054
    
    
    
    3,282
    
    
    
    4.86
    %
    
    
    274,425
    
    
    
    3,644
    
    
    
    5.33
    %Noninterest-earning assets
    
    
    16,098
    
    
    
    
    
    
    
    
    
    
    
    15,672Total assets
    
    $
    287,152
    
    
    
    
    
    
    
    
    
    
    $
    290,097Interest-bearing liabilities:Deposits
    
    $
    213,070
    
    
    
    890
    
    
    
    1.67
    %
    
    $
    198,360
    
    
    
    1,222
    
    
    
    2.46
    %FHLB advances and other borrowings
    
    
    29,097
    
    
    
    211
    
    
    
    2.90
    %
    
    
    41,100
    
    
    
    349
    
    
    
    3.35
    %Total interest-bearing liabilities
    
    
    242,167
    
    
    
    1,101
    
    
    
    1.82
    %
    
    
    239,460
    
    
    
    1,571
    
    
    
    2.62
    %Noninterest-bearing liabilities
    
    
    24,196
    
    
    
    
    
    
    
    
    
    
    
    18,287Total liabilities
    
    
    266,363
    
    
    
    
    
    
    
    
    
    
    
    257,747Equity
    
    
    20,789
    
    
    
    
    
    
    
    
    
    
    
    32,350Total liabilities and equity
    
    $
    287,152
    
    
    
    
    
    
    
    
    
    
    $
    290,097Net interest-earning assets
    
    $
    28,887
    
    
    
    
    
    
    
    
    
    
    $
    34,965Net interest income/interest rate spread
    
    
    
    
    
    $
    2,181
    
    
    
    3.04
    %
    
    
    
    
    
    $
    2,073
    
    
    
    2.71
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.23
    %
    
    
    
    
    
    
    
    
    
    
    3.03
    %Average interest-earning assets
to average interest-bearing liabilities
    
    
    111.93
    %
    
    
    
    
    
    
    
    
    
    
    114.60
    %
 
 (1)
    
    Average balance is computed using the carrying value of securities.
Average yield is computed using the historical amortized cost average balance for available for
sale securities.(2)
    
    Average yields and interest earned are stated on a fully taxable equivalent basis.(3)
    
    Balance is net of the ALLL, deferred loan origination fees, undisbursed proceeds of
construction loans and includes nonperforming loans.  43




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##### Table of Contents



Average Balances, Interest Rates and Yields  Continued
 For the Six Months Ended June 30,2010
    
    
    2009Average
    
    
    Interest
    
    
    Average
    
    
    Average
    
    
    Interest
    
    
    AverageOutstanding
    
    
    Earned/
    
    
    Yield/
    
    
    Outstanding
    
    
    Earned/
    
    
    Yield/Balance
    
    
    Paid
    
    
    Rate
    
    
    Balance
    
    
    Paid
    
    
    Rate(Dollars in thousands)Interest-earning assets:Securities (1) (2)
    
    $
    22,552
    
    
    $
    368
    
    
    
    3.37
    %
    
    $
    22,821
    
    
    $
    585
    
    
    
    5.31
    %Loans and loans held for sale (3)
    
    
    224,833
    
    
    
    6,220
    
    
    
    5.53
    %
    
    
    237,744
    
    
    
    6,723
    
    
    
    5.66
    %Other earning assets
    
    
    18,186
    
    
    
    23
    
    
    
    0.25
    %
    
    
    9,840
    
    
    
    19
    
    
    
    0.39
    %FHLB stock
    
    
    1,942
    
    
    
    43
    
    
    
    4.43
    %
    
    
    2,109
    
    
    
    47
    
    
    
    4.46
    %Total interest-earning assets
    
    
    267,513
    
    
    
    6,654
    
    
    
    4.99
    %
    
    
    272,514
    
    
    
    7,374
    
    
    
    5.43
    %Noninterest-earning assets
    
    
    18,065
    
    
    
    
    
    
    
    
    
    
    
    16,143Total assets
    
    $
    285,578
    
    
    
    
    
    
    
    
    
    
    $
    288,657Interest-bearing liabilities:Deposits
    
    $
    211,033
    
    
    
    1,809
    
    
    
    1.71
    %
    
    $
    200,587
    
    
    
    2,581
    
    
    
    2.57
    %FHLB advances and other borrowings
    
    
    29,431
    
    
    
    435
    
    
    
    2.96
    %
    
    
    37,487
    
    
    
    660
    
    
    
    3.52
    %Total interest-bearing liabilities
    
    
    240,464
    
    
    
    2,244
    
    
    
    1.87
    %
    
    
    238,074
    
    
    
    3,241
    
    
    
    2.72
    %Noninterest-bearing liabilities
    
    
    22,984
    
    
    
    
    
    
    
    
    
    
    
    17,873Total liabilities
    
    
    263,448
    
    
    
    
    
    
    
    
    
    
    
    255,947Equity
    
    
    22,130
    
    
    
    
    
    
    
    
    
    
    
    32,710Total liabilities and equity
    
    $
    285,578
    
    
    
    
    
    
    
    
    
    
    $
    288,657Net interest-earning assets
    
    $
    27,049
    
    
    
    
    
    
    
    
    
    
    $
    34,440Net interest income/interest rate spread
    
    
    
    
    
    $
    4,410
    
    
    
    3.12
    %
    
    
    
    
    
    $
    4,133
    
    
    
    2.71
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.31
    %
    
    
    
    
    
    
    
    
    
    
    3.04
    %Average interest-earning assets
to average interest-bearing liabilities
    
    
    111.25
    %
    
    
    
    
    
    
    
    
    
    
    114.47
    %
 (1)
    
    Average balance is computed using the carrying value of securities.
Average yield is computed using the historical amortized cost average balance for available for
sale securities.(2)
    
    Average yields and interest earned are stated on a fully taxable equivalent basis.(3)
    
    Balance is net of the ALLL, deferred loan origination fees, undisbursed proceeds of
construction loans and includes nonperforming loans.  44




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##### Table of Contents



Rate/Volume Analysis of Net Interest Income.
 Three Months Ended
    
    
    Six Months EndedJune 30, 2010
    
    
    June 30, 2010Compared to Three Months Ended
    
    
    Compared to Six Months EndedJune 30, 2009
    
    
    June 30, 2009Increase (decrease)
    
    
    
    
    
    
    Increase (decrease)due to
    
    
    
    
    
    
    due toRate
    
    
    Volume
    
    
    Net
    
    
    Rate
    
    
    Volume
    
    
    Net(Dollars in thousands)Interest-earning assets:Securities (1)
    
    $
    (163
    )
    
    $
    47
    
    
    $
    (116
    )
    
    $
    (210
    )
    
    $
    (7
    )
    
    $
    (217
    )Loans and loans held for sale
    
    
    (19
    )
    
    
    (233
    )
    
    
    (252
    )
    
    
    (144
    )
    
    
    (359
    )
    
    
    (503
    )Other earning assets
    
    
    (2
    )
    
    
    10
    
    
    
    8
    
    
    
    (17
    )
    
    
    21
    
    
    
    4FHLB stock
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Total interest-earning assets
    
    
    (184
    )
    
    
    (178
    )
    
    
    (362
    )
    
    
    (371
    )
    
    
    (349
    )
    
    
    (720
    )Interest-bearing liabilities:Deposits
    
    
    (859
    )
    
    
    527
    
    
    
    (332
    )
    
    
    (1,133
    )
    
    
    361
    
    
    
    (772
    )FHLB advances and other borrowings
    
    
    (43
    )
    
    
    (95
    )
    
    
    (138
    )
    
    
    (96
    )
    
    
    (129
    )
    
    
    (225
    )Total interest-bearing liabilities
    
    
    (902
    )
    
    
    432
    
    
    
    (470
    )
    
    
    (1,229
    )
    
    
    232
    
    
    
    (997
    )Net change in net interest income
    
    $
    718
    
    
    $
    (610
    )
    
    $
    108
    
    
    $
    858
    
    
    $
    (581
    )
    
    $
    277
 (1)
    
    Securities amounts are presented on a fully taxable equivalent basis.  45




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##### Table of Contents



Critical Accounting Policies
  Determination of the allowance for loan losses. " Allowance for loan losses
 Valuation of the deferred tax asset. Income taxes Income taxes
  46




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##### Table of Contents



Fair value of financial instruments.
 Liquidity and Capital Resources
    47




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##### Table of Contents



June 30,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Cash and unpledged securities
    
    $
    15,752
    
    
    $
    5,033Additional borrowing capacity at the FHLB
    
    
    3,446
    
    
    
    7,720Additional borrowing capacity at the FRB
    
    
    28,882
    
    
    
    12,129Unused commercial bank lines of credit
    
    
    8,000
    
    
    
    8,000Total
    
    $
    56,080
    
    
    $
    32,882
     48




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##### Table of Contents



49




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##### Table of Contents



Evaluation of disclosure controls and procedures.
 Changes in internal control over financial reporting.
  50




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##### Table of Contents



Item 6. Exhibits.
   51




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##### Table of Contents



CENTRAL FEDERAL CORPORATIONDated: August 16, 2010
    
    By:
    
    /s/ Eloise L. MackusEloise L. Mackus, Esq.Interim Chief Executive OfficerDated: August 16, 2010
    
    By:
    
    /s/ Therese Ann LiutkusTherese Ann Liutkus, CPAPresident, Treasurer and Chief Financial Officer
  52




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit3.1
    
    
    Certificate of Incorporation of the registrant (incorporated by reference to Exhibit
3.1 to the registrants Registration Statement on Form SB-2 No. 333-64089, filed with
the Commission on September 23, 1998)3.2
    
    
    Amendment to Certificate of Incorporation of the registrant (incorporated by
reference to Exhibit 3.2 to the registrants Registration Statement on Form S-2 No.
333-129315, filed with the Commission on October 28, 2005)3.3
    
    
    Second Amended and Restated Bylaws of the registrant (incorporated by reference to
Exhibit 3.3 to the registrants Form 10-K for the fiscal year ended December 31,
2007, filed with the Commission on March 27, 2008)3.4
    
    
    Amendment to Certificate of Incorporation of the registrant (incorporated by
reference to Exhibit 3.4 to the registrants Form 10-Q for the quarter ended June 30,
2009, filed with the Commission on August 14, 2009)4.1
    
    
    Form of Stock Certificate of Central Federal Corporation (incorporated by reference
to Exhibit 4.0 to the registrants Registration Statement on Form SB-2 No. 333-64089,
filed with the Commission on September 23, 1998)4.2
    
    
    Certificate of Designations of Fixed Rate Cumulative Perpetual Preferred Stock,
Series A, of Central Federal Corporation (incorporated by reference to Exhibit 3.1 to
the registrants Current Report on Form 8-K, filed with the Commission on December 5,
2008)4.3
    
    
    Warrant, dated December 5, 2008, to purchase shares of common stock of the Registrant
(incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form
8-K, filed with the Commission on December 5, 2008)11.1
    
    
    Statement Re: Computation of Per Share Earnings22.1
    
    
    Submission of Matters to a Vote of Security Holders31.1
    
    
    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
  53