##### 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, 2006
 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.)
 
 
 (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 þ o
 o þ
  Class:
    
    Outstanding at October 31, 2006Common stock, $0.01 par value
    
    4,543,662 shares
 o þ




---



##### 



PagePART I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005
    
    
    3Consolidated Statements of Operations for the three and nine months ended
September 30, 2006 and 2005
    
    
    4Consolidated Statement of Changes in Shareholders Equity for the nine months ended
September 30, 2006
    
    
    5Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended
September 30, 2006 and 2005
    
    
    6Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2006 and 2005
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis
    
    
    19Item 3. Controls and Procedures
    
    
    27PART II. Other InformationItem 1. Legal Proceedings
    
    
    28Item 6. Exhibits
    
    
    28Signatures
    
    
    29EX-11.1EX-31.1EX-31.2EX-32.1
  2.




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##### Table of Contents



September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCash and cash equivalents
    
    $
    8,775
    
    
    $
    2,972Securities available for sale
    
    
    29,626
    
    
    
    30,872Loans held for sale
    
    
    625
    
    
    
    178Loans, net of allowance of $2,032 and $1,495
    
    
    169,853
    
    
    
    124,026Federal Home Loan Bank stock
    
    
    2,772
    
    
    
    2,656Loan servicing rights
    
    
    211
    
    
    
    250Foreclosed assets, net
    
    
    75
    
    
    
    Premises and equipment, net
    
    
    3,806
    
    
    
    2,934Bank owned life insurance
    
    
    3,626
    
    
    
    3,531Loan sales proceeds receivable
    
    
    1,935
    
    
    
    2,241Deferred tax asset
    
    
    2,069
    
    
    
    1,978Accrued interest receivable and other assets
    
    
    1,740
    
    
    
    1,383$
    225,113
    
    
    $
    173,021LIABILITIES AND SHAREHOLDERS EQUITYDepositsNon-interest bearing
    
    $
    10,842
    
    
    $
    7,509Interest bearing
    
    
    151,713
    
    
    
    120,079Total deposits
    
    
    162,555
    
    
    
    127,588Federal Home Loan Bank advances
    
    
    26,270
    
    
    
    22,995Advances by borrowers for taxes and insurance
    
    
    94
    
    
    
    113Accrued interest payable and other liabilities
    
    
    1,717
    
    
    
    1,089Subordinated debentures
    
    
    5,155
    
    
    
    5,155Total liabilities
    
    
    195,791
    
    
    
    156,940Shareholders equityPreferred stock, 1,000,000 shares authorized;
none issued
    
    
    
    
    
    
    Common stock, $.01 par value; 6,000,000 shares
authorized; 2006 - 4,612,195 shares issued,
2005 - 2,312,195 shares issued
    
    
    46
    
    
    
    23Additional paid-in capital
    
    
    27,176
    
    
    
    12,787Retained earnings
    
    
    2,964
    
    
    
    4,315Accumulated other comprehensive income (loss)
    
    
    (81
    )
    
    
    28Unearned stock based incentive plan shares
    
    
    
    
    
    
    (289
    )Treasury stock, at cost (2006 - 68,533 shares,
2005 - 68,533 shares)
    
    
    (783
    )
    
    
    (783
    )Total shareholders equity
    
    
    29,322
    
    
    
    16,081$
    225,113
    
    
    $
    173,021
  3.




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest and dividend incomeLoans, including fees
    
    $
    3,226
    
    
    $
    1,724
    
    
    $
    8,394
    
    
    $
    5,274Securities
    
    
    386
    
    
    
    411
    
    
    
    1,231
    
    
    
    727Federal Home Loan Bank stock dividends
    
    
    40
    
    
    
    48
    
    
    
    116
    
    
    
    136Federal funds sold and other
    
    
    7
    
    
    
    4
    
    
    
    32
    
    
    
    863,659
    
    
    
    2,187
    
    
    
    9,773
    
    
    
    6,223Interest expenseDeposits
    
    
    1,425
    
    
    
    758
    
    
    
    3,609
    
    
    
    1,939Federal Home Loan Bank advances and other debt
    
    
    365
    
    
    
    119
    
    
    
    850
    
    
    
    415Subordinated debentures
    
    
    110
    
    
    
    83
    
    
    
    309
    
    
    
    2311,900
    
    
    
    960
    
    
    
    4,768
    
    
    
    2,585Net interest income
    
    
    1,759
    
    
    
    1,227
    
    
    
    5,005
    
    
    
    3,638Provision for loan losses
    
    
    120
    
    
    
    50
    
    
    
    702
    
    
    
    402Net interest income after provision for loan losses
    
    
    1,639
    
    
    
    1,177
    
    
    
    4,303
    
    
    
    3,236Noninterest incomeService charges on deposit accounts
    
    
    59
    
    
    
    46
    
    
    
    164
    
    
    
    142Net gains on sales of loans
    
    
    112
    
    
    
    54
    
    
    
    239
    
    
    
    361Loan servicing fees, net
    
    
    
    
    
    
    15
    
    
    
    45
    
    
    
    22Net gains (losses) on sales of securities
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    Earnings on bank owned life insurance
    
    
    32
    
    
    
    35
    
    
    
    95
    
    
    
    103Other
    
    
    11
    
    
    
    11
    
    
    
    73
    
    
    
    45214
    
    
    
    161
    
    
    
    611
    
    
    
    673Noninterest expenseSalaries and employee benefits
    
    
    967
    
    
    
    901
    
    
    
    2,802
    
    
    
    2,685Occupancy and equipment
    
    
    123
    
    
    
    117
    
    
    
    352
    
    
    
    350Data processing
    
    
    119
    
    
    
    117
    
    
    
    353
    
    
    
    360Franchise taxes
    
    
    35
    
    
    
    54
    
    
    
    127
    
    
    
    163Professional fees
    
    
    113
    
    
    
    145
    
    
    
    354
    
    
    
    376Director fees
    
    
    34
    
    
    
    46
    
    
    
    115
    
    
    
    127Postage, printing and supplies
    
    
    24
    
    
    
    31
    
    
    
    119
    
    
    
    128Advertising and promotion
    
    
    18
    
    
    
    16
    
    
    
    67
    
    
    
    114Telephone
    
    
    29
    
    
    
    28
    
    
    
    82
    
    
    
    94Loan expenses
    
    
    16
    
    
    
    6
    
    
    
    77
    
    
    
    25Foreclosed assets, net
    
    
    
    
    
    
    15
    
    
    
    3
    
    
    
    22Depreciation
    
    
    142
    
    
    
    99
    
    
    
    366
    
    
    
    311Amortization of intangibles
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    82Impairment loss on goodwill and intangibles
    
    
    
    
    
    
    1,966
    
    
    
    
    
    
    
    1,966Other
    
    
    105
    
    
    
    82
    
    
    
    297
    
    
    
    2801,725
    
    
    
    3,643
    
    
    
    5,114
    
    
    
    7,083Income (loss) before income taxes
    
    
    128
    
    
    
    (2,305
    )
    
    
    (200
    )
    
    
    (3,174
    )Income tax expense (benefit)
    
    
    34
    
    
    
    (237
    )
    
    
    (76
    )
    
    
    (547
    )Net income (loss)
    
    $
    94
    
    
    $
    (2,068
    )
    
    $
    (124
    )
    
    $
    (2,627
    )Earnings (loss) per share:Basic
    
    $
    0.02
    
    
    $
    (0.94
    )
    
    $
    (0.03
    )
    
    $
    (1.19
    )Diluted
    
    $
    0.02
    
    
    $
    (0.94
    )
    
    $
    (0.03
    )
    
    $
    (1.19
    )
  4.




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AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    Unearned Stock
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Based Incentive
    
    
    Treasury
    
    
    ShareholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Plan Shares
    
    
    Stock
    
    
    EquityBalance at January 1, 2006
    
    $
    23
    
    
    $
    12,787
    
    
    $
    4,315
    
    
    $
    28
    
    
    $
    (289
    )
    
    $
    (783
    )
    
    $
    16,081Reclassification of unearned stock based incentive
plan shares upon adoption of SFAS 123R, Share
Based Payment on January 1, 2006
    
    
    
    
    
    
    (289
    )
    
    
    
    
    
    
    
    
    
    
    289
    
    
    
    
    
    
    
    Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124
    )Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    (109
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (233
    )Issuance of common stock in public offering, net
of offering costs of $1,542 (2,300,000 shares)
    
    
    23
    
    
    
    14,535
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,558Release of 12,075 stock based incentive plan shares
    
    
    
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138Tax benefits from dividends on unvested
stock based incentive plan shares
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Cash dividends declared ($.27 per share)
    
    
    
    
    
    
    
    
    
    
    (1,227
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,227
    )Balance at September 30, 2006
    
    $
    46
    
    
    $
    27,176
    
    
    $
    2,964
    
    
    $
    (81
    )
    
    $
    
    
    
    $
    (783
    )
    
    $
    29,322
  5.




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net income (loss)
    
    $
    94
    
    
    $
    (2,068
    )
    
    $
    (124
    )
    
    $
    (2,627
    )Change in net unrealized gain (loss) on securities
available for sale
    
    
    380
    
    
    
    (75
    )
    
    
    (170
    )
    
    
    (142
    )Less: Reclassification adjustment for gains and
(losses) later recognized in net income
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    Net unrealized gain (loss)
    
    
    380
    
    
    
    (75
    )
    
    
    (165
    )
    
    
    (142
    )Initial unrealized gain on mortgage-backed
securities received in securitization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    530Tax effect
    
    
    (129
    )
    
    
    25
    
    
    
    56
    
    
    
    (133
    )Other comprehensive income (loss)
    
    
    251
    
    
    
    (50
    )
    
    
    (109
    )
    
    
    255Comprehensive income (loss)
    
    $
    345
    
    
    $
    (2,118
    )
    
    $
    (233
    )
    
    $
    (2,372
    )
  6.




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##### Table of Contents



Nine months endedSeptember 30,2006
    
    
    2005Cash flows from operating activities
    
    $
    602
    
    
    $
    (379
    )Cash flows from investing activitiesAvailable-for-sale securities:Sales
    
    
    4,395
    
    
    
    1,435Maturities, prepayments and calls
    
    
    4,140
    
    
    
    2,550Purchases
    
    
    (7,383
    )
    
    
    (5,037
    )Loan originations and payments, net
    
    
    (35,041
    )
    
    
    (17,677
    )Loans purchased
    
    
    (11,616
    )
    
    
    Additions to premises and equipment
    
    
    (1,239
    )
    
    
    (462
    )Proceeds from the sale of premises and equipment
    
    
    39
    
    
    
    Proceeds from the sale of foreclosed assets
    
    
    158
    
    
    
    69Net cash from investing activities
    
    
    (46,547
    )
    
    
    (19,122
    )Cash flows from financing activitiesNet change in deposits
    
    
    34,954
    
    
    
    19,111Net change in short-term borrowings from the
Federal Home Loan Bank and other
    
    
    2,275
    
    
    
    (27,474
    )Proceeds from Federal Home Loan Bank
advances and other debt
    
    
    5,000
    
    
    
    Repayments on Federal Home Loan Bank
advances and other debt
    
    
    (4,000
    )
    
    
    (2,000
    )Net change in advances by borrowers for
taxes and insurance
    
    
    (19
    )
    
    
    (252
    )Cash dividends paid
    
    
    (1,020
    )
    
    
    (599
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    375Proceeds from issuance of common stock in public offering
    
    
    14,558
    
    
    
    Net cash from financing activities
    
    
    51,748
    
    
    
    (10,839
    )Net change in cash and cash equivalents
    
    
    5,803
    
    
    
    (30,340
    )Beginning cash and cash equivalents
    
    
    2,972
    
    
    
    32,675Ending cash and cash equivalents
    
    $
    8,775
    
    
    $
    2,335Supplemental cash flow information:Interest paid
    
    $
    4,547
    
    
    $
    2,509Income taxes paid
    
    
    
    
    
    
    Supplemental noncash disclosures:Transfers from loans to repossessed assets
    
    $
    218
    
    
    $
    Securitization of single-family residential mortgage loans
    
    
    
    
    
    
    18,497
  7.




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  Share Based Payment
 Earnings Per Share
  8.




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Three months ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005BasicNet income (loss)
    
    $
    94
    
    
    $
    (2,068
    )
    
    $
    (124
    )
    
    $
    (2,627
    )Weighted average common shares outstanding
    
    
    4,527,194
    
    
    
    2,208,071
    
    
    
    4,425,953
    
    
    
    2,200,176Basic earnings (loss) per common share
    
    $
    0.02
    
    
    $
    (0.94
    )
    
    $
    (0.03
    )
    
    $
    (1.19
    )DilutedNet income (loss)
    
    $
    94
    
    
    $
    (2,068
    )
    
    $
    (124
    )
    
    $
    (2,627
    )Weighted average common shares
outstanding for basic earnings (loss) per
share
    
    
    4,527,194
    
    
    
    2,208,071
    
    
    
    4,425,953
    
    
    
    2,200,176Add: Dilutive effects of assumed
exercises of stock options and stock
based incentive plan shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average shares and dilutive potential
common shares
    
    
    4,527,194
    
    
    
    2,208,071
    
    
    
    4,425,953
    
    
    
    2,200,176Diluted earnings (loss) per common share
    
    $
    0.02
    
    
    $
    (0.94
    )
    
    $
    (0.03
    )
    
    $
    (1.19
    )
  Three months ended September 30,
    
    Nine months ended September 30,2006
    
    2005
    
    2006
    
    2005Stock options
    
    
    276,605
    
    
    
    297,539
    
    
    
    279,116
    
    
    
    261,550Stock based incentive plan shares
    
    
    13,501
    
    
    
    33,537
    
    
    
    16,878
    
    
    
    30,187
 Derivatives
  9.




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Stock-based Compensation
 Accounting for
Stock Issued to Employees Accounting for Stock-based Compensation.
 Share Based Payment Statement of Cash Flows,
    Three months
    
    
    Nine monthsended
    
    
    endedSeptember 30,
    
    
    September 30,2005
    
    
    2005Net loss as reported
    
    $
    (2,068
    )
    
    $
    (2,627
    )Deduct: Stock-based compensation expense
determined under fair value based method
    
    
    59
    
    
    
    358Pro forma net loss
    
    $
    (2,127
    )
    
    $
    (2,985
    )Basic loss per share as reported
    
    $
    (0.94
    )
    
    $
    (1.19
    )Pro forma basic loss per share
    
    
    (0.96
    )
    
    
    (1.36
    )Diluted loss per share as reported
    
    $
    (0.94
    )
    
    $
    (1.19
    )Pro forma diluted loss per share
    
    
    (0.96
    )
    
    
    (1.36
    )
 10.




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 The pro forma effects are computed using option pricing models, using the
following weighted-average assumptions as of grant date.
 Three months ended
    
    Nine months endedSeptember 30, 2005
    
    September 30, 2005Risk-free interest rate
    
    
    3.98
    %
    
    
    3.85
    %Expected option life (years)
    
    
    6
    
    
    
    6Expected stock price volatility
    
    
    26
    %
    
    
    27
    %Dividend yield
    
    
    3.62
    %
    
    
    3.46
    %Weighted average fair value of
options granted during the
period
    
    $
    2.03
    
    
    $
    2.27
 Reclassifications:
  11.




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##### Table of Contents



NOTE 2  LOANS
  September 30,
    
    
    December 31,2006
    
    
    2005Commercial
    
    $
    26,921
    
    
    $
    16,347Real estate:Single-family residential
    
    
    26,748
    
    
    
    23,627Multi-family residential
    
    
    44,686
    
    
    
    30,206Commercial
    
    
    42,236
    
    
    
    25,937Construction
    
    
    159
    
    
    
    Consumer
    
    
    31,393
    
    
    
    29,540Subtotal
    
    
    172,143
    
    
    
    125,657Less: Net deferred loan fees
    
    
    (258
    )
    
    
    (136
    )Allowance for loan losses
    
    
    (2,032
    )
    
    
    (1,495
    )Loans, net
    
    $
    169,853
    
    
    $
    124,026
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Beginning balance
    
    $
    1,988
    
    
    $
    1,242
    
    
    $
    1,495
    
    
    $
    978Provision for loan losses
    
    
    120
    
    
    
    50
    
    
    
    702
    
    
    
    402Loans charged-off
    
    
    (79
    )
    
    
    (83
    )
    
    
    (229
    )
    
    
    (200
    )Recoveries
    
    
    3
    
    
    
    16
    
    
    
    64
    
    
    
    45Ending balance
    
    $
    2,032
    
    
    $
    1,225
    
    
    $
    2,032
    
    
    $
    1,225
   September 30, 2006
    
    December 31, 2005Loans past due over 90 days still on accrual
    
    $
    
    
    
    $
    Nonaccrual loans
    
    
    332
    
    
    
    800
  12.




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##### Table of Contents



NOTE 3  FEDERAL HOME LOAN BANK ADVANCES
  September 30, 2006
    
    
    December 31, 2005Maturity October 2006 at 5.35% floating rate
    
    $
    15,000
    
    
    $
    Maturity January 2006 at 4.33% floating rate
    
    
    
    
    
    
    12,725Maturities March 2007 thru June 2009, fixed
at rates from 2.44% to 5.60%, averaging
4.16% at September 30, 2006, and maturities
March 2006 thru September 2008, fixed at
rates from 2.03% to 3.41%, averaging 2.91%
at December 31, 2005
    
    
    11,270
    
    
    
    10,270Total
    
    $
    26,270
    
    
    $
    22,995
   September 30, 2006
    
    
    December 31, 2005First mortgage loans under a blanket lien
arrangement
    
    $
    26,212
    
    
    $
    23,308Second mortgage loans
    
    
    772
    
    
    
    783Multi-family mortgage loans
    
    
    14,699
    
    
    
    8,885Home equity lines of credit
    
    
    11,322
    
    
    
    9,109Commercial real estate loans
    
    
    30,019
    
    
    
    18,014Securities
    
    
    14,084
    
    
    
    15,689Total
    
    $
    97,108
    
    
    $
    75,788
  Payment information
  September 30, 2007
    
    $
    19,270September 30, 2008
    
    
    2,000September 30, 2009
    
    
    5,000Total
    
    $
    26,270
 13.




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NOTE 4  STOCK COMPENSATION PLANS
   Nine months ended September 30, 2006Weighted AverageWeighted Average
    
    
    Grant-Date FairShares
    
    
    Exercise Price
    
    
    ValueOptions outstanding, beginning of
period
    
    
    290,872
    
    
    $
    11.32
    
    
    $
    3.68Granted
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (17,600
    )
    
    
    12.84
    
    
    
    3.12Options outstanding, end of period
    
    
    273,272
    
    
    $
    11.23
    
    
    $
    3.72Options exercisable, end of period
    
    
    273,272
    
    
    $
    11.23
    
    
    $
    3.72
  14.




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##### Table of Contents



NOTE 4  STOCK COMPENSATION PLANS (continued)
   Outstanding
    
    ExercisableWeightedAverageRemaining
    
    Weighted
    
    
    
    
    
    WeightedContractual
    
    Average
    
    
    
    
    
    AverageRange of Exercise Prices
    
    Number
    
    Life in Years
    
    Exercise Price
    
    Number
    
    Exercise Price$9.19  $10.42
    
    
    131,640
    
    
    
    6.6
    
    
    $
    10.00
    
    
    
    131,640
    
    
    $
    10.00$11.50  $12.70
    
    
    131,000
    
    
    
    7.1
    
    
    $
    12.26
    
    
    
    131,000
    
    
    $
    12.26$13.76  $13.94
    
    
    10,632
    
    
    
    7.5
    
    
    $
    13.76
    
    
    
    10,632
    
    
    $
    13.76
  Nine months ended September 30, 2006WeightedAverage Grant-Shares
    
    
    Date Fair ValueUnvested shares outstanding at beginning of period
    
    
    45,827
    
    
    $
    11.48Granted
    
    
    
    
    
    
    Vested
    
    
    (14,775
    )
    
    
    11.59Forfeited
    
    
    
    
    
    
    Unvested shares outstanding at end of period
    
    
    31,052
    
    
    $
    11.42
   15.




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NOTE 5  DERIVATIVES AND HEDGING ACTIVITIES
  ccounting for Derivatives and Hedging Activities
  September 30, 2006Notional amount
    
    $
    1,098Weighted average pay rate
    
    
    5.48
    %Weighted average receive rate
    
    
    5.32
    %Weighted average maturity (years)
    
    
    9.9
 16.




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##### Table of Contents



NOTE 6  SEGMENT INFORMATION
   ConsolidatedBanking
    
    
    Mortgage Banking
    
    
    Parent and Other
    
    
    TotalFor the three months ended September 30, 2006:Net interest income (expense)
    
    $
    1,843
    
    
    $
    26
    
    
    $
    (110
    )
    
    $
    1,759Provision for loan losses
    
    
    (120
    )
    
    
    
    
    
    
    
    
    
    
    (120
    )Net gain (loss) on sales of loans
    
    
    (16
    )
    
    
    128
    
    
    
    
    
    
    
    112Other revenue
    
    
    95
    
    
    
    (1
    )
    
    
    8
    
    
    
    102Depreciation and amortization
    
    
    (102
    )
    
    
    (40
    )
    
    
    
    
    
    
    (142
    )Other expense
    
    
    (1,385
    )
    
    
    (148
    )
    
    
    (50
    )
    
    
    (1,583
    )Income (loss) before income tax
    
    
    315
    
    
    
    (35
    )
    
    
    (152
    )
    
    
    128Income tax expense (benefit)
    
    
    98
    
    
    
    (12
    )
    
    
    (52
    )
    
    
    34Net income (loss)
    
    $
    217
    
    
    $
    (23
    )
    
    $
    (100
    )
    
    $
    94For the three months ended September 30, 2005:Net interest income (expense)
    
    $
    1,301
    
    
    $
    10
    
    
    $
    (84
    )
    
    $
    1,227Provision for loan losses
    
    
    (50
    )
    
    
    
    
    
    
    
    
    
    
    (50
    )Net gain (loss) on sales of loans
    
    
    (33
    )
    
    
    87
    
    
    
    
    
    
    
    54Other revenue
    
    
    100
    
    
    
    
    
    
    
    7
    
    
    
    107Depreciation and amortization
    
    
    (94
    )
    
    
    (25
    )
    
    
    
    
    
    
    (119
    )Impairment loss on goodwill and intangibles
    
    
    
    
    
    
    (1,966
    )
    
    
    
    
    
    
    (1,966
    )Other expense
    
    
    (1,335
    )
    
    
    (160
    )
    
    
    (63
    )
    
    
    (1,558
    )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
    )
 17.




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##### Table of Contents



NOTE 5  SEGMENT INFORMATION (continued)
 ConsolidatedBanking
    
    
    Mortgage Banking
    
    
    Parent and Other
    
    
    TotalFor the nine months ended September 30, 2006:Net interest income (expense)
    
    $
    5,240
    
    
    $
    74
    
    
    $
    (309
    )
    
    $
    5,005Provision for loan losses
    
    
    (702
    )
    
    
    
    
    
    
    
    
    
    
    (702
    )Net gain (loss) on sales of loans
    
    
    (70
    )
    
    
    309
    
    
    
    
    
    
    
    239Other revenue
    
    
    354
    
    
    
    (4
    )
    
    
    22
    
    
    
    372Depreciation and amortization
    
    
    (300
    )
    
    
    (66
    )
    
    
    
    
    
    
    (366
    )Other expense
    
    
    (4,077
    )
    
    
    (443
    )
    
    
    (228
    )
    
    
    (4,748
    )Income (loss) before income tax
    
    
    445
    
    
    
    (130
    )
    
    
    (515
    )
    
    
    (200
    )Income tax expense (benefit)
    
    
    143
    
    
    
    (44
    )
    
    
    (175
    )
    
    
    (76
    )Net income (loss)
    
    $
    302
    
    
    $
    (86
    )
    
    $
    (340
    )
    
    $
    (124
    )September 30, 2006Segment assets
    
    $
    221,389
    
    
    $
    2,517
    
    
    $
    1,207
    
    
    $
    225,113For the nine months ended September 30, 2005:Net interest income (expense)
    
    $
    3,847
    
    
    $
    22
    
    
    $
    (231
    )
    
    $
    3,638Provision for loan losses
    
    
    (402
    )
    
    
    
    
    
    
    
    
    
    
    (402
    )Net gain (loss) on sales of loans
    
    
    (33
    )
    
    
    394
    
    
    
    
    
    
    
    361Other revenue
    
    
    285
    
    
    
    
    
    
    
    27
    
    
    
    312Depreciation and amortization
    
    
    (295
    )
    
    
    (98
    )
    
    
    
    
    
    
    (393
    )Impairment loss on goodwill and intangibles
    
    
    
    
    
    
    (1,966
    )
    
    
    
    
    
    
    (1,966
    )Other expense
    
    
    (3,895
    )
    
    
    (583
    )
    
    
    (246
    )
    
    
    (4,724
    )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
 18.




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Forward-Looking Statements
   Business Overview
   Management Strategy
    19.




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##### Table of Contents



nd
  Comparison of the Results of Operations for the Three Months Ended September 30, 2006 and 2005
 General.
 Net interest income.
  20.




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Provision for loan losses.
  21.




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##### Table of Contents



Noninterest income.
 Noninterest expense.
  Income taxes.
 Comparison of the Results of Operations for the Nine Months Ended September 30, 2006 and 2005
 General.
 Net interest income.
 22.




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##### Table of Contents



st
    23.




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##### Table of Contents



Provision for loan losses.
 Noninterest income.
 Noninterest expense
  Income taxes.
 Financial Condition
 General.
 Loans.
 Deposits.
 24.




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##### Table of Contents



FHLB advances.
 Shareholders equity.
 Critical Accounting Policies
    Liquidity and Capital Resources
  25.




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26.




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##### Table of Contents



Evaluation of disclosure controls and procedures.
 Changes in internal control over financial reporting
 27.




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##### Table of Contents



(a)
    
    Exhibit
 Number
    
    Exhibit3.1*
    
    Certificate of Incorporation3.2*
    
    Bylaws4.0*
    
    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 28.




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##### Table of Contents



CENTRAL FEDERAL CORPORATIONDated: November 13, 2006
    
    By:
    
    /s/ Mark S. AllioMark S. AllioChairman of the Board, President andChief Executive OfficerDated: November 13, 2006
    
    By:
    
    /s/ Therese Ann LiutkusTherese Ann Liutkus, CPATreasurer and Chief Financial Officer
 29.