##### 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, 2011
 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)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



PagePART I. Financial InformationItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010
    
    
    3Consolidated Statements of Operations for the three months ended
March 31, 2011 and 2010
    
    
    4Consolidated Statement of Changes in Stockholders Equity
for the three months ended March 31, 2011 and 2010
    
    
    5Consolidated Statements of Cash Flows for the three months ended
March 31, 2011 and 2010
    
    
    7Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    40Item 4. Controls and Procedures
    
    
    60PART II. Other InformationItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    61Item 6. Exhibits
    
    
    61Signatures
    
    
    62Exhibit 11.1Exhibit 31.1Exhibit 31.2Exhibit 32.1




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##### Table of Contents



March 31,
    
    
    December 31,2011
    
    
    2010(unaudited)ASSETSCash and cash equivalents
    
    $
    69,558
    
    
    $
    34,275Securities available for sale
    
    
    25,896
    
    
    
    28,798Loans held for sale
    
    
    1,361
    
    
    
    1,953Loans, net of allowance of $9,417 and $9,758
    
    
    178,972
    
    
    
    190,767FHLB stock
    
    
    1,942
    
    
    
    1,942Loan servicing rights
    
    
    54
    
    
    
    57Foreclosed assets, net
    
    
    3,509
    
    
    
    4,509Premises and equipment, net
    
    
    5,903
    
    
    
    6,016Assets held for sale
    
    
    535
    
    
    
    535Other intangible assets
    
    
    119
    
    
    
    129Bank owned life insurance
    
    
    4,175
    
    
    
    4,143Accrued interest receivable and other assets
    
    
    2,082
    
    
    
    2,108$
    294,106
    
    
    $
    275,232LIABILITIES AND STOCKHOLDERS EQUITYDepositsNoninterest bearing
    
    $
    18,886
    
    
    $
    20,392Interest bearing
    
    
    229,999
    
    
    
    206,989Total deposits
    
    
    248,885
    
    
    
    227,381Long-term FHLB advances
    
    
    21,742
    
    
    
    23,942Other borrowings
    
    
    1,500
    
    
    
    Advances by borrowers for taxes and insurance
    
    
    141
    
    
    
    213Accrued interest payable and other liabilities
    
    
    2,552
    
    
    
    2,552Subordinated debentures
    
    
    5,155
    
    
    
    5,155Total liabilities
    
    
    279,975
    
    
    
    259,243Stockholders equityPreferred stock, Series A, $.01 par value; aggregate
liquidation value $7,408 in 2011, $7,225 in 2010
1,000,000 shares authorized; 7,225 shares issued
    
    
    7,082
    
    
    
    7,069Common stock, $.01 par value,
shares authorized; 12,000,000
shares issued; 4,686,331 in 2011 and 2010
    
    
    47
    
    
    
    47Common stock warrant
    
    
    217
    
    
    
    217Additional paid-in capital
    
    
    27,554
    
    
    
    27,542Accumulated deficit
    
    
    (18,131
    )
    
    
    (16,313
    )Accumulated other comprehensive income
    
    
    607
    
    
    
    672Treasury stock, at cost; 558,533 shares
    
    
    (3,245
    )
    
    
    (3,245
    )Total stockholders equity
    
    
    14,131
    
    
    
    15,989$
    294,106
    
    
    $
    275,232
   3




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##### Table of Contents



Three months endedMarch 31,2011
    
    
    2010Interest and dividend incomeLoans, including fees
    
    $
    2,442
    
    
    $
    3,146Securities
    
    
    155
    
    
    
    196FHLB stock dividends
    
    
    22
    
    
    
    22Federal funds sold and other
    
    
    30
    
    
    
    82,649
    
    
    
    3,372Interest expenseDeposits
    
    
    702
    
    
    
    919Long-term FHLB advances and other debt
    
    
    167
    
    
    
    184Subordinated debentures
    
    
    41
    
    
    
    40910
    
    
    
    1,143Net interest income
    
    
    1,739
    
    
    
    2,229Provision for loan losses
    
    
    1,419
    
    
    
    748Net interest income after provision for loan losses
    
    
    320
    
    
    
    1,481Noninterest incomeService charges on deposit accounts
    
    
    61
    
    
    
    70Net gains on sales of loans
    
    
    40
    
    
    
    150Loan servicing fees, net
    
    
    8
    
    
    
    8Net gain on sales of securities
    
    
    
    
    
    
    240Earnings on bank owned life insurance
    
    
    32
    
    
    
    33Other
    
    
    15
    
    
    
    9156
    
    
    
    510Noninterest expenseSalaries and employee benefits
    
    
    1,041
    
    
    
    1,053Occupancy and equipment
    
    
    85
    
    
    
    68Data processing
    
    
    144
    
    
    
    155Franchise taxes
    
    
    66
    
    
    
    93Professional fees
    
    
    301
    
    
    
    206Director fees
    
    
    46
    
    
    
    26Postage, printing and supplies
    
    
    48
    
    
    
    59Advertising and promotion
    
    
    10
    
    
    
    28Telephone
    
    
    22
    
    
    
    24Loan expenses
    
    
    10
    
    
    
    27Foreclosed assets, net
    
    
    33
    
    
    
    Depreciation
    
    
    114
    
    
    
    131FDIC premiums
    
    
    175
    
    
    
    149Amortization of intangibles
    
    
    10
    
    
    
    10OTS assessment
    
    
    37
    
    
    
    23Other
    
    
    48
    
    
    
    542,190
    
    
    
    2,106Loss before income taxes
    
    
    (1,714
    )
    
    
    (115
    )Income tax benefit
    
    
    
    
    
    
    (20
    )Net loss
    
    
    (1,714
    )
    
    
    (95
    )Preferred stock dividends and accretion of
discount on preferred stock
    
    
    (104
    )
    
    
    (102
    )Net loss attributable to common stockholders
    
    $
    (1,818
    )
    
    $
    (197
    )Loss per common share:Basic
    
    $
    (0.44
    )
    
    $
    (0.05
    )Diluted
    
    $
    (0.44
    )
    
    $
    (0.05
    )
   4




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AccumulatedCommon
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalPreferred
    
    
    Common
    
    
    Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Treasury
    
    
    StockholdersStock
    
    
    Stock
    
    
    Warrant
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Stock
    
    
    EquityBalance at January 1, 2011
    
    $
    7,069
    
    
    $
    47
    
    
    $
    217
    
    
    $
    27,542
    
    
    $
    (16,313
    )
    
    $
    672
    
    
    $
    (3,245
    )
    
    $
    15,989Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,714
    )
    
    
    
    
    
    
    
    
    
    
    (1,714
    )Change in unrealized gain (loss) on securities available for sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65
    )
    
    
    
    
    
    
    (65
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,779
    )Accretion of discount on preferred stock
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    Release of 3,314 stock based incentive plan shares, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8Stock option expense, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    
    
    
    
    (91
    )Balance at March 31, 2011
    
    $
    7,082
    
    
    $
    47
    
    
    $
    217
    
    
    $
    27,554
    
    
    $
    (18,131
    )
    
    $
    607
    
    
    $
    (3,245
    )
    
    $
    14,131
   5




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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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (95
    )
    
    
    
    
    
    
    
    
    
    
    (95
    )Change in unrealized gain (loss) on securities available
for sale,
net of reclassification and tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (286
    )
    
    
    
    
    
    
    (286
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (381
    )Accretion of discount on preferred stock
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    Release of 1,372 stock based incentive plan shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7Tax effect from vesting of stock based incentive plan shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (90
    )
    
    
    
    
    
    
    
    
    
    
    (90
    )Balance at March 31, 2010
    
    $
    7,033
    
    
    $
    47
    
    
    $
    217
    
    
    $
    27,506
    
    
    $
    (9,231
    )
    
    $
    418
    
    
    $
    (3,245
    )
    
    $
    22,745
   6




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Three months ended March 31,2011
    
    
    2010Net loss
    
    $
    (1,714
    )
    
    $
    (95
    )Adjustments to reconcile net loss to net cash from operating activities:Provision for loan losses
    
    
    1,419
    
    
    
    748Valuation gain on mortgage servicing rights
    
    
    (2
    )
    
    
    Depreciation
    
    
    114
    
    
    
    131Amortization, net
    
    
    192
    
    
    
    57Net realized gain on sale of securities
    
    
    
    
    
    
    (240
    )Originations of loans held for sale
    
    
    (12,499
    )
    
    
    (15,802
    )Proceeds from sale of loans held for sale
    
    
    13,130
    
    
    
    16,141Net gain on sale of loans
    
    
    (40
    )
    
    
    (150
    )Stock-based compensation expense
    
    
    13
    
    
    
    9Change in deferred income taxes (net of change in valuation allowance)
    
    
    
    
    
    
    (20
    )Net change in:Bank owned life insurance
    
    
    (32
    )
    
    
    (33
    )Accrued interest receivable and other assets
    
    
    26
    
    
    
    (58
    )Accrued interest payable and other liabilities
    
    
    (103
    )
    
    
    (164
    )Net cash from operating activities
    
    
    504
    
    
    
    524Cash flows from investing activitiesAvailable-for-sale securities:Sales
    
    
    
    
    
    
    9,031Maturities, prepayments and calls
    
    
    2,671
    
    
    
    1,445Purchases
    
    
    
    
    
    
    (12,572
    )Loan originations and payments, net
    
    
    10,396
    
    
    
    2,624Proceeds from sale of portfolio loans
    
    
    
    
    
    
    4,302Additions to premises and equipment
    
    
    (1
    )
    
    
    (15
    )Proceeds from the sale of foreclosed assets
    
    
    1,000
    
    
    
    Net cash from investing activities
    
    
    14,066
    
    
    
    4,815Cash flows from financing activitiesNet change in deposits
    
    
    21,485
    
    
    
    23,636Net change in short-term borrowings from the FHLB and other debt
    
    
    1,500
    
    
    
    (2,065
    )Repayments on long-term FHLB advances and other debt
    
    
    (2,200
    )
    
    
    (6,000
    )Net change in advances by borrowers for taxes and insurance
    
    
    (72
    )
    
    
    (86
    )Cash dividends paid on preferred stock
    
    
    
    
    
    
    (90
    )Net cash from financing activities
    
    
    20,713
    
    
    
    15,395Net change in cash and cash equivalents
    
    
    35,283
    
    
    
    20,734Beginning cash and cash equivalents
    
    
    34,275
    
    
    
    2,973Ending cash and cash equivalents
    
    $
    69,558
    
    
    $
    23,707Supplemental cash flow information:Interest paid
    
    $
    823
    
    
    $
    1,105
   7




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
   Reclassifications
 Earnings (Loss) Per Common Share
 Three months ended March 31,2011
    
    
    2010BasicNet loss
    
    $
    (1,714
    )
    
    $
    (95
    )Less: Preferred dividends and accretion of discount on preferred stock
    
    
    (104
    )
    
    
    (102
    )Net loss allocated to unvested share-based payment awards
    
    
    13
    
    
    
    Net loss allocated to common stockholders
    
    $
    (1,805
    )
    
    $
    (197
    )Weighted average common shares outstanding
    
    
    4,098,266
    
    
    
    4,095,217Basic loss per common share
    
    $
    (0.44
    )
    
    $
    (0.05
    )DilutedNet loss allocated to common stockholders
    
    $
    (1,805
    )
    
    $
    (197
    )Weighted average common shares outstanding for basic loss per common
share
    
    
    4,098,266
    
    
    
    4,095,217Add: Dilutive effects of assumed exercises of stock options
    
    
    
    
    
    
    Add: Dilutive effects of assumed exercises of stock warrant
    
    
    
    
    
    
    Average shares and dilutive potential common shares
    
    
    4,098,266
    
    
    
    4,095,217Diluted loss per common share
    
    $
    (0.44
    )
    
    $
    (0.05
    )
  8




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Three months ended March 31,2011
    
    
    2010Stock options
    
    
    273,246
    
    
    
    300,220Stock warrant
    
    
    336,568
    
    
    
    336,568
 Adoption of New Accounting Standards:
 Improving Disclosures About
Fair Value Measurements.
 Disclosures about the Credit
Quality of Financing Receivables and the Allowance for Credit Losses
 Effect of Newly Issued But Not Yet Effective Accounting Standards:
 A Creditorss Determination
of Whether a Restructuring is a Troubled debt Restructuring.
  9




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##### Table of Contents



NOTE 2  SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueMarch 31, 2011Issued by U.S. government-sponsored entities and agencies:Mortgage-backed securities  residential
    
    $
    1,739
    
    
    $
    223
    
    
    $
    
    
    
    $
    1,962Collateralized mortgage obligations
    
    
    23,550
    
    
    
    385
    
    
    
    1
    
    
    
    23,934Total
    
    $
    25,289
    
    
    $
    608
    
    
    $
    1
    
    
    $
    25,896
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2010Issued by U.S. government-sponsored entities and agencies:Mortgage-backed securities  residential
    
    $
    1,884
    
    
    $
    223
    
    
    $
    
    
    
    $
    2,107Collateralized mortgage obligations
    
    
    26,242
    
    
    
    463
    
    
    
    14
    
    
    
    26,691Total
    
    $
    28,126
    
    
    $
    686
    
    
    $
    14
    
    
    $
    28,798
   Three monthsendedMarch 31, 2010Proceeds
    
    $
    9,031Gross gains
    
    
    240Gross losses
    
    
    
   10




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##### Table of Contents



NOTE 2  SECURITIES (continued)
   March 31,
    
    
    December 31,2011
    
    
    2010Pledged as collateral for:FHLB advances
    
    $
    10,409
    
    
    $
    10,657Public deposits
    
    
    3,954
    
    
    
    4,210Customer repurchase agreements
    
    
    4,925
    
    
    
    2,465Interest-rate swaps
    
    
    1,499
    
    
    
    1,589Total
    
    $
    20,787
    
    
    $
    18,921
   Less than 12 Months
    
    
    12 Months or More
    
    
    TotalMarch 31, 2011
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    LossIssued by U.S. government-sponsored
entities and agencies:Collateralized mortgage obligations
    
    $
    2,089
    
    
    $
    1
    
    
    $
    
    
    
    $
    
    
    
    $
    2,089
    
    
    $
    1Total temporarily impaired
    
    $
    2,089
    
    
    $
    1
    
    
    $
    
    
    
    $
    
    
    
    $
    2,089
    
    
    $
    1
 Less than 12 Months
    
    
    12 Months or More
    
    
    TotalDecember 31, 2010
    
    
    
    
    
    UnrealizedDescription of Securities
    
    Fair Value
    
    
    Loss
    
    
    Fair Value
    
    
    Unrealized Loss
    
    
    Fair Value
    
    
    Unrealized LossIssued by U.S. government-sponsored
entities and
agencies:Collateralized mortgage obligations
    
    $
    2,091
    
    
    $
    14
    
    
    $
    
    
    
    $
    
    
    
    $
    2,091
    
    
    $
    14Total temporarily impaired
    
    $
    2,091
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,091
    
    
    $
    14
   11




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##### Table of Contents



NOTE 3  LOANS
  March 31,
    
    
    December 31,2011
    
    
    2010Commercial
    
    $
    35,523
    
    
    $
    38,194Real estate:Single-family residential
    
    
    21,966
    
    
    
    23,273Multi-family residential
    
    
    33,240
    
    
    
    35,308Commercial
    
    
    77,444
    
    
    
    80,725Construction
    
    
    2,550
    
    
    
    4,919ConsumerHome equity lines of credit
    
    
    16,158
    
    
    
    16,316Other
    
    
    1,508
    
    
    
    1,790Subtotal
    
    
    188,389
    
    
    
    200,525Less: ALLL
    
    
    (9,417
    )
    
    
    (9,758
    )Loans, net
    
    $
    178,972
    
    
    $
    190,767
   12




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##### Table of Contents



NOTE 3  LOANS (continued)
   Real Estate
    
    
    ConsumerSingle-
    
    
    Multi-
    
    
    
    
    
    
    
    
    
    
    Home 
equity linesCommercial
    
    
    family
    
    
    family
    
    
    Commercial
    
    
    Construction
    
    

of credit
    
    
    Other
    
    
    TotalBeginning balance
    
    $
    1,879
    
    
    $
    241
    
    
    $
    2,520
    
    
    $
    4,719
    
    
    $
    74
    
    
    $
    303
    
    
    $
    22
    
    
    $
    9,758Provision for loan losses
    
    
    1,705
    
    
    
    (3
    )
    
    
    218
    
    
    
    (372
    )
    
    
    (40
    )
    
    
    (104
    )
    
    
    15
    
    
    
    1,419Charge-offs
    
    
    (500
    )
    
    
    (7
    )
    
    
    (800
    )
    
    
    (500
    )
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    (1,825
    )Recoveries
    
    
    71
    
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    2
    
    
    
    79Reclass of ALLL on
loan-related
commitments(1)
    
    
    (14
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Ending balance
    
    $
    3,141
    
    
    $
    233
    
    
    $
    1,939
    
    
    $
    3,848
    
    
    $
    34
    
    
    $
    201
    
    
    $
    21
    
    
    $
    9,417
  Beginning balance
    
    $
    7,090Provision for loan losses
    
    
    748Reclass of ALLL on loan-related commitments (1)
    
    
    (12
    )Loans charged-off
    
    
    (523
    )Recoveries
    
    
    93Ending balance
    
    $
    7,396
 
 (1)
    
    Reclassified to accrued interest payable and other liabilities in the consolidated
balance sheet.  13




---



##### Table of Contents



NOTE 3  LOANS (continued)
  Real Estate
    
    
    ConsumerHome equityCommercial
    
    
    Single-family
    
    
    Multi-family
    
    
    Commercial
    
    
    Construction
    
    
    lines of credit
    
    
    Other
    
    
    TotalALLL:Ending allowance balance
attributable to loans:Individually evaluated for impairment
    
    $
    728
    
    
    $
    
    
    
    $
    759
    
    
    $
    1,450
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,937Collectively evaluated for impairment
    
    
    2,413
    
    
    
    233
    
    
    
    1,180
    
    
    
    2,398
    
    
    
    34
    
    
    
    201
    
    
    
    21
    
    
    
    6,480Total ending allowance balance
    
    $
    3,141
    
    
    $
    233
    
    
    $
    1,939
    
    
    $
    3,848
    
    
    $
    34
    
    
    $
    201
    
    
    $
    21
    
    
    $
    9,417Loans:Individually evaluated for impairment
    
    $
    1,639
    
    
    $
    
    
    
    $
    3,186
    
    
    $
    3,741
    
    
    $
    
    
    
    $
    136
    
    
    $
    
    
    
    $
    8,702Collectively evaluated for impairment
    
    
    33,884
    
    
    
    21,966
    
    
    
    30,054
    
    
    
    73,703
    
    
    
    2,550
    
    
    
    16,022
    
    
    
    1,508
    
    
    
    179,687Total ending loan balance
    
    $
    35,523
    
    
    $
    21,966
    
    
    $
    33,240
    
    
    $
    77,444
    
    
    $
    2,550
    
    
    $
    16,158
    
    
    $
    1,508
    
    
    $
    188,389
  14




---



##### Table of Contents



NOTE 3  LOANS (continued)
  Real Estate
    
    
    ConsumerHome equitylines ofCommercial
    
    
    Single-family
    
    
    Multi-family
    
    
    Commercial
    
    
    Construction
    
    
    credit
    
    
    Other
    
    
    TotalALLL:Ending allowance balance attributable to loans:Individually evaluated for impairment
    
    $
    332
    
    
    $
    
    
    
    $
    1,296
    
    
    $
    1,276
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    2,904Collectively evaluated for impairment
    
    
    1,547
    
    
    
    241
    
    
    
    1,224
    
    
    
    3,443
    
    
    
    74
    
    
    
    303
    
    
    
    22
    
    
    
    6,854Total ending allowance balance
    
    $
    1,879
    
    
    $
    241
    
    
    $
    2,520
    
    
    $
    4,719
    
    
    $
    74
    
    
    $
    303
    
    
    $
    22
    
    
    $
    9,758Loans:Individually evaluated for impairment
    
    $
    2,223
    
    
    $
    142
    
    
    $
    3,985
    
    
    $
    4,250
    
    
    $
    
    
    
    $
    138
    
    
    $
    
    
    
    $
    10,738Collectively evaluated for impairment
    
    
    35,971
    
    
    
    23,131
    
    
    
    31,323
    
    
    
    76,475
    
    
    
    4,919
    
    
    
    16,178
    
    
    
    1,790
    
    
    
    189,787Total ending loan balance
    
    $
    38,194
    
    
    $
    23,273
    
    
    $
    35,308
    
    
    $
    80,725
    
    
    $
    4,919
    
    
    $
    16,316
    
    
    $
    1,790
    
    
    $
    200,525
  15




---



##### Table of Contents



NOTE 3  LOANS (continued)
  Unpaid
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    InterestPrincipal
    
    
    Recorded
    
    
    ALLL
    
    
    Recorded
    
    
    IncomeBalance
    
    
    Investment
    
    
    Allocated
    
    
    Investment
    
    
    RecognizedWith no related allowance recorded:Commercial
    
    $
    194
    
    
    $
    144
    
    
    $
    
    
    
    $
    144
    
    
    $
    Real estate:Single-family residential
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    Commercial:Non-owner occupied
    
    
    76
    
    
    
    76
    
    
    
    
    
    
    
    77
    
    
    
    Land
    
    
    806
    
    
    
    694
    
    
    
    
    
    
    
    694
    
    
    
    10Consumer:Home equity lines of credit:Originated for portfolio
    
    
    136
    
    
    
    136
    
    
    
    
    
    
    
    137
    
    
    
    Total with no allowance recorded
    
    
    1,212
    
    
    
    1,050
    
    
    
    
    
    
    
    1,147
    
    
    
    10With an allowance recorded:Commercial
    
    
    2,643
    
    
    
    1,495
    
    
    
    728
    
    
    
    1,862
    
    
    
    Real estate:Multi-family residential
    
    
    3,996
    
    
    
    3,186
    
    
    
    759
    
    
    
    3,719
    
    
    
    Commercial:Non-owner occupied
    
    
    2,549
    
    
    
    1,920
    
    
    
    1,128
    
    
    
    2,253
    
    
    
    Owner occupied
    
    
    1,054
    
    
    
    1,051
    
    
    
    322
    
    
    
    1,051
    
    
    
    Total with an allowance recorded
    
    
    10,242
    
    
    
    7,652
    
    
    
    2,937
    
    
    
    8,885
    
    
    
    Total
    
    $
    11,454
    
    
    $
    8,702
    
    
    $
    2,937
    
    
    $
    10,032
    
    
    $
    10
  16




---



##### Table of Contents



NOTE 3  LOANS (continued)
  Unpaid Principal
    
    
    RecordedBalance
    
    
    Investment
    
    
    ALLL AllocatedWith no related allowance recorded:Commercial
    
    $
    937
    
    
    $
    587
    
    
    $
    Real estate:Single-family residential
    
    
    461
    
    
    
    142
    
    
    
    Commercial:Owner occupied
    
    
    78
    
    
    
    78
    
    
    
    Land
    
    
    695
    
    
    
    700
    
    
    
    Consumer:Home equity lines of credit:Originated for portfolio
    
    
    138
    
    
    
    138
    
    
    
    Total with no allowance recorded
    
    
    2,309
    
    
    
    1,645
    
    
    
    With an allowance recorded:Commercial
    
    
    2,035
    
    
    
    1,636
    
    
    
    332Real estate:Multi-family residential
    
    
    3,996
    
    
    
    3,985
    
    
    
    1,296Commercial:Non-owner occupied
    
    
    2,551
    
    
    
    2,419
    
    
    
    1,244Owner occupied
    
    
    1,055
    
    
    
    1,053
    
    
    
    32Total with an allowance recorded
    
    
    9,637
    
    
    
    9,093
    
    
    
    2,904Total
    
    $
    11,946
    
    
    $
    10,738
    
    
    $
    2,904
 Three months endedMarch 31, 2010Average of individually impaired loans during the period
    
    $
    13,191Interest income recognized during impairment
    
    
    3Cash-basis interest income recognized
    
    
    
  17




---



##### Table of Contents



NOTE 3  LOANS (continued)
  March 31, 2011
    
    
    December 31, 2010Commercial
    
    $
    1,639
    
    
    $
    2,084Real estate:Single-family residential
    
    
    331
    
    
    
    266Multi-family residential
    
    
    3,186
    
    
    
    3,986Commercial:Non-owner occupied
    
    
    1,996
    
    
    
    2,419Owner occupied
    
    
    1,051
    
    
    
    1,131Consumer:Home equity lines of credit:Originated for portfolio
    
    
    136
    
    
    
    161Other consumer
    
    
    2
    
    
    
    10Total
    
    $
    8,341
    
    
    $
    10,057
   Nonaccrual30 - 59 Days
    
    
    60 - 89 Days
    
    
    Greater than 90
    
    
    
    
    
    
    Loans Not Past
    
    
    Loans Not PastPast Due
    
    
    Past Due
    
    
    Days Past Due
    
    
    Total Past Due
    
    
    Due
    
    
    DueCommercial
    
    $
    76
    
    
    $
    
    
    
    $
    414
    
    
    $
    490
    
    
    $
    35,033
    
    
    $
    1,225Real estate:Single-family residential
    
    
    1,103
    
    
    
    285
    
    
    
    327
    
    
    
    1,715
    
    
    
    20,251
    
    
    
    Multi-family residential
    
    
    2,427
    
    
    
    
    
    
    
    3,186
    
    
    
    5,613
    
    
    
    27,627
    
    
    
    Commercial:Non-owner occupied
    
    
    277
    
    
    
    603
    
    
    
    1,920
    
    
    
    2,800
    
    
    
    37,630
    
    
    
    76Owner occupied
    
    
    
    
    
    
    
    
    
    
    1,051
    
    
    
    1,051
    
    
    
    30,150
    
    
    
    Land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,813
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,550
    
    
    
    Consumer:Home equity lines of
credit:Originated for portfolio
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,857
    
    
    
    136Purchased for portfolio
    
    
    224
    
    
    
    
    
    
    
    
    
    
    
    224
    
    
    
    3,077
    
    
    
    Other
    
    
    31
    
    
    
    
    
    
    
    2
    
    
    
    33
    
    
    
    1,475
    
    
    
    Total
    
    $
    4,138
    
    
    $
    888
    
    
    $
    6,900
    
    
    $
    11,926
    
    
    $
    176,463
    
    
    $
    1,437
  18




---



##### Table of Contents



NOTE 3  LOANS (continued)
  30 - 59 Days
    
    
    60 - 89 Days
    
    
    Greater than 90
    
    
    
    
    
    
    Loans Not Past
    
    
    Nonaccrual LoansPast Due
    
    
    Past Due
    
    
    Days Past Due
    
    
    Total Past Due
    
    
    Due
    
    
    Not Past DueCommercial
    
    $
    449
    
    
    $
    
    
    
    $
    
    
    
    $
    449
    
    
    $
    37,745
    
    
    $
    1,635Real estate:Single-family residential
    
    
    1,104
    
    
    
    444
    
    
    
    266
    
    
    
    1,814
    
    
    
    21,459
    
    
    
    Multi-family residential
    
    
    
    
    
    
    
    
    
    
    1,242
    
    
    
    1,242
    
    
    
    34,066
    
    
    
    2,744Commercial:Non-owner occupied
    
    
    1,188
    
    
    
    
    
    
    
    2,419
    
    
    
    3,607
    
    
    
    36,687
    
    
    
    Owner occupied
    
    
    
    
    
    
    
    
    
    
    1,053
    
    
    
    1,053
    
    
    
    33,516
    
    
    
    78Land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,862
    
    
    
    Construction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,919
    
    
    
    Consumer:Home equity lines of credit:Originated for portfolio
    
    
    1
    
    
    
    54
    
    
    
    
    
    
    
    55
    
    
    
    12,850
    
    
    
    161Purchased for portfolio
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,411
    
    
    
    Other
    
    
    23
    
    
    
    41
    
    
    
    
    
    
    
    64
    
    
    
    1,726
    
    
    
    Total
    
    $
    2,765
    
    
    $
    539
    
    
    $
    4,980
    
    
    $
    8,284
    
    
    $
    192,241
    
    
    $
    4,618
   March 31, 2011
    
    
    December 31, 2010Commercial
    
    $
    1,163
    
    
    $
    1,597Real estate:Single-family residential
    
    
    
    
    
    
    142Multi-family residential
    
    
    2,743
    
    
    
    2,744Total
    
    $
    3,906
    
    
    $
    4,483
    19




---



##### Table of Contents



NOTE 3  LOANS (continued)
   Special Mention
 Substandard
 Doubtful
  20




---



##### Table of Contents



NOTE 3  LOANS (continued)
  Not Rated
    
    
    Pass
    
    
    Special Mention
    
    
    Substandard
    
    
    TotalCommercial
    
    $
    574
    
    
    $
    25,379
    
    
    $
    4,673
    
    
    $
    4,897
    
    
    $
    35,523Real estate:Single-family residential
    
    
    21,635
    
    
    
    
    
    
    
    
    
    
    
    331
    
    
    
    21,966Multi-family residential
    
    
    
    
    
    
    19,702
    
    
    
    4,602
    
    
    
    8,936
    
    
    
    33,240Commercial:Non-owner occupied
    
    
    88
    
    
    
    28,495
    
    
    
    3,833
    
    
    
    8,014
    
    
    
    40,430Owner occupied
    
    
    464
    
    
    
    23,566
    
    
    
    5,451
    
    
    
    1,720
    
    
    
    31,201Land
    
    
    1,088
    
    
    
    1,260
    
    
    
    
    
    
    
    3,465
    
    
    
    5,813Construction
    
    
    
    
    
    
    2,550
    
    
    
    
    
    
    
    
    
    
    
    2,550Consumer:Home equity lines of
credit:Originated for portfolio
    
    
    12,721
    
    
    
    
    
    
    
    
    
    
    
    136
    
    
    
    12,857Purchased for portfolio
    
    
    2,497
    
    
    
    
    
    
    
    804
    
    
    
    
    
    
    
    3,301Other
    
    
    1,506
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    1,508$
    40,573
    
    
    $
    100,952
    
    
    $
    19,363
    
    
    $
    27,501
    
    
    $
    188,389
  21




---



##### Table of Contents



NOTE 3  LOANS (continued)
  Not Rated
    
    
    Pass
    
    

Special Mention
    
    
    Substandard
    
    
    TotalCommercial
    
    $
    473
    
    
    $
    26,102
    
    
    $
    6,281
    
    
    $
    5,338
    
    
    $
    38,194Real estate:Single-family residential
    
    
    23,007
    
    
    
    
    
    
    
    
    
    
    
    266
    
    
    
    23,273Multi-family residential
    
    
    
    
    
    
    21,021
    
    
    
    4,529
    
    
    
    9,758
    
    
    
    35,308Commercial:Non-owner occupied
    
    
    91
    
    
    
    27,412
    
    
    
    4,247
    
    
    
    8,544
    
    
    
    40,294Owner occupied
    
    
    499
    
    
    
    27,253
    
    
    
    5,090
    
    
    
    1,727
    
    
    
    34,569Land
    
    
    1,089
    
    
    
    1,985
    
    
    
    
    
    
    
    2,788
    
    
    
    5,862Construction
    
    
    
    
    
    
    4,919
    
    
    
    
    
    
    
    
    
    
    
    4,919Consumer:Home equity lines of credit:Originated for portfolio
    
    
    12,744
    
    
    
    
    
    
    
    
    
    
    
    161
    
    
    
    12,905Purchased for portfolio
    
    
    2,572
    
    
    
    
    
    
    
    839
    
    
    
    
    
    
    
    3,411Other
    
    
    1,780
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    1,790$
    42,255
    
    
    $
    108,692
    
    
    $
    20,986
    
    
    $
    28,592
    
    
    $
    200,525
   22




---



##### Table of Contents



NOTE 4  FORECLOSED ASSETS
 March 31, 2011
    
    
    December 31, 2010Commercial
    
    $
    
    
    
    $
    1,000Commercial real estate
    
    
    3,509
    
    
    
    3,509$
    3,509
    
    
    $
    4,509
   23




---



##### Table of Contents



NOTE 5  FAIR VALUE
      Securities available for sale
 Derivatives
 Impaired loans
 Loan servicing rights
 Loans held for sale
  24




---



##### Table of Contents



NOTE 5  FAIR VALUE (continued)
 Assets and Liabilities Measured on a Recurring Basis
  Fair ValueMeasurements atMarch 31, 2011Using Significant OtherObservable Inputs(Level 2)Financial Assets:Securities available for sale:Issued by U.S. government-sponsored entities and agencies:Mortgage-backed securities  residential
    
    $
    1,962Collateralized mortgage obligations
    
    
    23,934Total securities available for sale
    
    $
    25,896Loans held for sale
    
    $
    1,361Yield maintenance provisions (embedded derivatives)
    
    $
    673Interest rate lock commitments
    
    $
    25Financial Liabilities:Interest-rate swaps
    
    $
    673
 Fair ValueMeasurements atDecember 31, 2010Using Significant OtherObservable Inputs(Level 2)Financial Assets:Securities available for sale:Issued by U.S. government-sponsored entities and agencies:Mortgage-backed securities  residential
    
    $
    2,107Collateralized mortgage obligations
    
    
    26,691Total securities available for sale
    
    $
    28,798Loans held for sale
    
    $
    1,953Yield maintenance provisions (embedded derivatives)
    
    $
    686Interest rate lock commitments
    
    $
    41Financial Liabilities:Interest-rate swaps
    
    $
    686
  25




---



##### Table of Contents



NOTE 5  FAIR VALUE (continued)
  Assets Measured on a Non-Recurring Basis
  Fair Value Measurements at March 31, 2011 UsingSignificant Other
    
    
    SignificantObservable Inputs
    
    
    Unobservable Inputs(Level 2)
    
    
    (Level 3)Loan servicing rights
    
    $
    16Impaired loans:Commercial
    
    
    
    
    
    $
    756Real estate:Multi-family residential
    
    
    
    
    
    
    2,427Commercial:Non-owner occupied
    
    
    
    
    
    
    792Owner occupied
    
    
    
    
    
    
    728Land
    
    
    
    
    
    
    252Total impaired loans
    
    
    
    
    
    $
    4,955
 Fair Value Measurements at December 31, 2010 UsingSignificant Other
    
    
    SignificantObservable Inputs
    
    
    Unobservable Inputs(Level 2)
    
    
    (Level 3)Loan servicing rights
    
    $
    17Impaired loans:Commercial
    
    
    
    
    
    $
    1,591Real estate:Single-family residential
    
    
    
    
    
    
    142Multi-family residential
    
    
    
    
    
    
    2,690Commercial:Non-owner occupied
    
    
    
    
    
    
    1,176Owner occupied
    
    
    
    
    
    
    1,020Total impaired loans
    
    
    
    
    
    $
    6,619
   26




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##### Table of Contents



NOTE 5  FAIR VALUE (continued)
     March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assetsCash and cash equivalents
    
    $
    69,558
    
    
    $
    69,558
    
    
    $
    34,275
    
    
    $
    34,275Securities available for sale
    
    
    25,896
    
    
    
    25,896
    
    
    
    28,798
    
    
    
    28,798Loans held for sale
    
    
    1,361
    
    
    
    1,361
    
    
    
    1,953
    
    
    
    1,953Loans, net
    
    
    178,972
    
    
    
    182,657
    
    
    
    190,767
    
    
    
    194,970FHLB stock
    
    
    1,942
    
    
    
    n/a
    
    
    
    1,942
    
    
    
    n/aAccrued interest receivable
    
    
    111
    
    
    
    111
    
    
    
    119
    
    
    
    119Yield maintenance provisions
(embedded derivatives)
    
    
    673
    
    
    
    673
    
    
    
    686
    
    
    
    686Interest rate lock commitments
    
    
    25
    
    
    
    25
    
    
    
    41
    
    
    
    41Financial liabilitiesDeposits
    
    $
    (248,885
    )
    
    $
    (250,087
    )
    
    $
    (227,381
    )
    
    $
    (228,859
    )FHLB advances
    
    
    (21,742
    )
    
    
    (22,350
    )
    
    
    (23,942
    )
    
    
    (24,656
    )Other borrowings
    
    
    (1,500
    )
    
    
    (1,500
    )
    
    
    
    
    
    
    Subordinated debentures
    
    
    (5,155
    )
    
    
    (2,690
    )
    
    
    (5,155
    )
    
    
    (2,653
    )Accrued interest payable
    
    
    (278
    )
    
    
    (278
    )
    
    
    (191
    )
    
    
    (191
    )Interest-rate swaps
    
    
    (673
    )
    
    
    (673
    )
    
    
    (686
    )
    
    
    (686
    )
  27




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##### Table of Contents



NOTE 5  FAIR VALUE (continued)
   NOTE 6 FHLB ADVANCES
  March 31,
    
    
    December 31,Rate
    
    
    2011
    
    
    2010Fixed-rate advances:Maturing March 2011
    
    
    1.90
    %
    
    $
    
    
    
    $
    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
    
    
    
    
    
    $
    21,742
    
    
    $
    23,942
   March 31,
    
    
    December 31,2011
    
    
    2010First mortgage loans under a blanket lien arrangement
    
    $
    13,742
    
    
    $
    14,922Multi-family mortgage loans
    
    
    10,594
    
    
    
    10,670Commercial real estate loans
    
    
    1,968
    
    
    
    1,985Securities
    
    
    10,409
    
    
    
    10,657Cash
    
    
    800
    
    
    
    800Total
    
    $
    37,513
    
    
    $
    39,034
   28




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##### Table of Contents



NOTE 6 FHLB ADVANCES (continued)
 Payment information
  March 31, 2012
    
    $
    6,000March 31, 2013
    
    
    5,742March 31, 2014
    
    
    5,000March 31, 2015
    
    
    5,000Total
    
    $
    21,742
 NOTE 7  OTHER BORROWINGS
   March 31, 2011
    
    
    December 31, 2010Commercial loans
    
    $
    9,694
    
    
    $
    13,131Commercial real estate loans
    
    
    22,732
    
    
    
    26,214$
    32,426
    
    
    $
    39,345
    29




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NOTE 8  SUBORDINATED DEBENTURES
      30




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##### Table of Contents



NOTE 9  STOCK-BASED COMPENSATION
   Stock Options
    Three months endedMarch 31,2011Risk-free interest rate
    
    
    2.98
    %Expected term (years)
    
    
    7Expected stock price volatility
    
    
    46
    %Dividend yield
    
    
    1.41
    %
   31




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##### Table of Contents



NOTE 9  STOCK-BASED COMPENSATION (continued)
  WeightedAverageRemainingWeighted
    
    
    ContractualAverage Exercise
    
    
    Term
    
    
    IntrinsicShares
    
    
    Price
    
    
    (Years)
    
    
    ValueOutstanding at beginning of period
    
    
    269,776
    
    
    $
    6.04Granted
    
    
    6,300
    
    
    
    1.70Exercised
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Canceled or forfeited
    
    
    (2,830
    )
    
    
    7.08Outstanding at end of period
    
    
    273,246
    
    
    $
    5.93
    
    
    
    6.6
    
    
    $
    Expected to vest
    
    
    109,420
    
    
    $
    1.20
    
    
    
    8.5
    
    
    $
    Exercisable at end of period
    
    
    163,826
    
    
    $
    9.08
    
    
    
    4.7
    
    
    $
    
   Three months ended March 31,2011
    
    
    2010Weighted average fair value of options granted
    
    $
    0.75
    
    
    
    n/a
  Restricted Stock Awards
   32




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##### Table of Contents



NOTE 9  STOCK-BASED COMPENSATION (continued)
  Weighted AverageGrant-Date FairShares
    
    
    ValueNonvested at January 1, 2011
    
    
    38,418
    
    
    $
    1.54Granted
    
    
    
    
    
    
    Vested
    
    
    (2,418
    )
    
    
    4.03Forfeited
    
    
    
    
    
    
    Nonvested at March 31, 2011
    
    
    36,000
    
    
    $
    1.38
   33




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NOTE 10  PREFERRED STOCK
      NOTE 11  COMMON STOCK WARRANT
   34




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##### Table of Contents



NOTE 12  REGULATORY MATTERS
      35




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NOTE 12  REGULATORY MATTERS (continued)
  To Be WellCapitalized UnderFor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action RegulationsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioMarch 31, 2011Total Capital to risk
weighted assets
    
    $
    18,827
    
    
    
    10.60
    %
    
    $
    14,203
    
    
    
    8.00
    %
    
    $
    17,753
    
    
    
    10.00
    %Tier 1 (Core) Capital to risk
weighted assets
    
    
    16,555
    
    
    
    9.32
    %
    
    
    7,101
    
    
    
    4.00
    %
    
    
    10,652
    
    
    
    6.00
    %Tier 1 (Core) Capital to
adjusted total assets
    
    
    16,555
    
    
    
    5.68
    %
    
    
    11,664
    
    
    
    4.00
    %
    
    
    14,581
    
    
    
    5.00
    %Tangible Capital to
adjusted total assets
    
    
    16,555
    
    
    
    5.68
    %
    
    
    4,374
    
    
    
    1.50
    %
    
    
    N/A
    
    
    
    N/A
  36




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##### Table of Contents



NOTE 12  REGULATORY MATTERS (continued)
 To Be WellCapitalized UnderFor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action RegulationsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioDecember 31, 2010Total Capital to risk
weighted assets
    
    $
    20,428
    
    
    
    10.68
    %
    
    $
    15,296
    
    
    
    8.0
    %
    
    $
    19,120
    
    
    
    10.0
    %Tier 1 (Core) Capital to risk
weighted assets
    
    
    17,983
    
    
    
    9.41
    %
    
    
    7,648
    
    
    
    4.0
    %
    
    
    11,472
    
    
    
    6.0
    %Tier 1 (Core) Capital to
adjusted total assets
    
    
    17,983
    
    
    
    6.59
    %
    
    
    10,909
    
    
    
    4.0
    %
    
    
    13,637
    
    
    
    5.0
    %Tangible Capital to
adjusted total assets
    
    
    17,983
    
    
    
    6.59
    %
    
    
    4,091
    
    
    
    1.5
    %
    
    
    N/A
    
    
    
    N/A
   Dividend Restrictions
    37




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NOTE 12  REGULATORY MATTERS (continued)
   38




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NOTE 13  OTHER COMPREHENSIVE INCOME (LOSS)
  Three months ended March 31,2011
    
    
    2010Change in unrealized holding gains on securities available for sale
    
    $
    (65
    )
    
    $
    (46
    )Reclassification adjustment for gains realized in income
    
    
    
    
    
    
    (240
    )Net change in unrealized gains
    
    
    (65
    )
    
    
    (286
    )Tax effect
    
    
    
    
    
    
    Net of tax amount
    
    $
    (65
    )
    
    $
    (286
    )
  Balance at
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    Current period
    
    
    March 31,2010
    
    
    change
    
    
    2011Unrealized gains (losses) on securities available for sale
    
    $
    672
    
    
    $
    (65
    )
    
    $
    607
  39




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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;
    
    our ability to maintain sufficient liquidity to continue to fund our
operations;
    
    changes in market rates and prices, including real estate values, which may
adversely impact the value of financial products including securities, loans
and deposits;
    
    the possibility of other-than-temporary impairment of securities held in the
Companys securities portfolio;
    
    results of examinations of the Holding Company and Bank by the regulators,
including the possibility that the regulators may, among other things, require
the Company to curtail its asset growth, increase its capital levels, increase
its allowance for loan losses or write-down assets;
    
    the uncertainties arising from the Companys participation in the TARP
Capital Purchase Program, including the impacts on employee recruitment and
retention and other business and practices, and uncertainties concerning the
potential redemption by us of Treasurys preferred stock investment under the
program, including the timing of, regulatory approvals for, and conditions
placed upon, any such redemption;
    
    changes in tax laws, rules and regulations;
    
    various monetary and fiscal policies and regulations, including those
determined by the Federal Reserve Board, the Federal Deposit Insurance
Corporation (FDIC), the Office of the Controller of the Currency (OCC) and the
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.
   40




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Business Overview
   General
      41




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##### Table of Contents



Financial Condition
 General.
 Cash and cash equivalents.
 Securities.
 Loans.
  42




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##### Table of Contents



Allowance for loan losses.
      43




---



##### Table of Contents



March 31, 2011
    
    
    December 31, 2010Number of
    
    
    
    
    
    
    Number ofloans
    
    
    Balance
    
    
    loans
    
    
    Balance(Dollars in thousands)Commercial
    
    
    6
    
    
    $
    1,639
    
    
    
    5
    
    
    $
    2,084Single-family residential real estate
    
    
    5
    
    
    
    331
    
    
    
    3
    
    
    
    266Multi-family residential real estate
    
    
    3
    
    
    
    3,186
    
    
    
    3
    
    
    
    3,986Commercial real estate
    
    
    5
    
    
    
    3,047
    
    
    
    5
    
    
    
    3,550Home equity lines of credit
    
    
    1
    
    
    
    136
    
    
    
    2
    
    
    
    161Other consumer loans
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    10Total
    
    
    21
    
    
    $
    8,341
    
    
    
    19
    
    
    $
    10,057
     44




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##### Table of Contents



®
  45




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##### Table of Contents



Foreclosed assets
  46




---



##### Table of Contents



Deposits
  ®
   Long-term FHLB advances.
 Subordinated debentures.   .
  47




---



##### Table of Contents



Stockholders equity.
   .
  Comparison of the Results of Operations for the Three Months Ended March 31, 2011 and 2010
 General.
    Net interest income. Average Balances, Interest Rates and Yields Rate/Volume
Analysis of Net Interest Income
  48




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##### Table of Contents



Interest income.
    Interest expense.
  49




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##### Table of Contents



. Deposits
  Provision for loan losses Allowance for loan losses
 For the three months ended March 31,2011
    
    
    2010(Dollars in thousands)Commercial
    
    $
    429
    
    
    $
    (50
    )Single-family residential real estate
    
    
    5
    
    
    
    (24
    )Multi-family residential real estate
    
    
    799
    
    
    
    74Commercial real estate
    
    
    499
    
    
    
    178Home equity lines of credit
    
    
    (2
    )
    
    
    202Other consumer loans
    
    
    16
    
    
    
    50Total
    
    $
    1,746
    
    
    $
    430
 Noninterest income.
  50




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##### Table of Contents



Noninterest expense.
       51




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##### Table of Contents



Income taxes.
  52




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##### Table of Contents



Average Balances, Interest Rates and Yields.
 For Three Months Ended March 31,2011
    
    
    2010Average
    
    
    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)
    
    $
    26,841
    
    
    $
    155
    
    
    
    2.37
    %
    
    $
    21,877
    
    
    $
    196
    
    
    
    3.70
    %Loans and loans held for sale (3)
    
    
    183,837
    
    
    
    2,442
    
    
    
    5.31
    %
    
    
    227,827
    
    
    
    3,146
    
    
    
    5.52
    %Other earning assets
    
    
    48,579
    
    
    
    30
    
    
    
    0.25
    %
    
    
    12,327
    
    
    
    8
    
    
    
    0.26
    %FHLB stock
    
    
    1,942
    
    
    
    22
    
    
    
    4.53
    %
    
    
    1,942
    
    
    
    22
    
    
    
    4.53
    %Total interest-earning assets
    
    
    261,199
    
    
    
    2,649
    
    
    
    4.07
    %
    
    
    263,973
    
    
    
    3,372
    
    
    
    5.12
    %Noninterest-earning assets
    
    
    25,102
    
    
    
    
    
    
    
    
    
    
    
    20,032Total assets
    
    $
    286,301
    
    
    
    
    
    
    
    
    
    
    $
    284,005Interest-bearing liabilities:Deposits
    
    $
    220,818
    
    
    
    702
    
    
    
    1.27
    %
    
    $
    208,996
    
    
    
    919
    
    
    
    1.76
    %FHLB advances and other borrowings
    
    
    28,864
    
    
    
    208
    
    
    
    2.88
    %
    
    
    29,764
    
    
    
    224
    
    
    
    3.01
    %Total interest-bearing liabilities
    
    
    249,682
    
    
    
    910
    
    
    
    1.46
    %
    
    
    238,760
    
    
    
    1,143
    
    
    
    1.91
    %Noninterest-bearing liabilities
    
    
    21,575
    
    
    
    
    
    
    
    
    
    
    
    21,773Total liabilities
    
    
    271,257
    
    
    
    
    
    
    
    
    
    
    
    260,533Equity
    
    
    15,044
    
    
    
    
    
    
    
    
    
    
    
    23,472Total liabilities and equity
    
    $
    286,301
    
    
    
    
    
    
    
    
    
    
    $
    284,005Net interest-earning assets
    
    $
    11,517
    
    
    
    
    
    
    
    
    
    
    $
    25,213Net interest income/interest rate spread
    
    
    
    
    
    $
    1,739
    
    
    
    2.61
    %
    
    
    
    
    
    $
    2,229
    
    
    
    3.21
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    2.67
    %
    
    
    
    
    
    
    
    
    
    
    3.39
    %Average interest-earning assets
to average interest-bearing liabilities
    
    
    104.61
    %
    
    
    
    
    
    
    
    
    
    
    110.56
    %
 
 (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)
    
    Average balance is computed using the recorded investment in loans net of the ALLL
and includes nonperforming loans.  53




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##### Table of Contents



Rate/Volume Analysis of Net Interest Income.
 Three Months EndedMarch 31, 2011Compared to Three Months EndedMarch 31, 2010Increase (decrease)due toRate
    
    
    Volume
    
    
    Net(Dollars in thousands)Interest-earning assets:Securities (1)
    
    $
    (251
    )
    
    $
    210
    
    
    $
    (41
    )Loans and loans held for sale
    
    
    (116
    )
    
    
    (588
    )
    
    
    (704
    )Other earning assets
    
    
    (3
    )
    
    
    25
    
    
    
    22Total interest-earning assets
    
    
    (370
    )
    
    
    (353
    )
    
    
    (723
    )Interest-bearing liabilities:Deposits
    
    
    (526
    )
    
    
    309
    
    
    
    (217
    )FHLB advances and other borrowings
    
    
    (9
    )
    
    
    (7
    )
    
    
    (16
    )Total interest-bearing liabilities
    
    
    (535
    )
    
    
    302
    
    
    
    (233
    )Net change in net interest income
    
    $
    165
    
    
    $
    (655
    )
    
    $
    (490
    )
 
 (1)
    
    Securities amounts are presented on a fully taxable equivalent basis.  54




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##### Table of Contents



Critical Accounting Policies
   Determination of the allowance for loan losses.  Allowance for loan
losses Form 10-K.
 Valuation of the deferred tax asset.
  55




---



##### Table of Contents



Fair value of financial instruments.
 Liquidity and Capital Resources
     56




---



##### Table of Contents



March 31, 2011
    
    
    December 31, 2010(Dollars in thousands)Cash and unpledged securities
    
    $
    73,867
    
    
    $
    43,352Additional borrowing capacity at the FHLB
    
    
    3,126
    
    
    
    426Additional borrowing capacity at the FRB
    
    
    18,200
    
    
    
    25,977Unused commercial bank line of credit
    
    
    
    
    
    
    3,000Total
    
    $
    95,193
    
    
    $
    72,755
     57




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##### Table of Contents



58




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##### Table of Contents



59




---



##### Table of Contents



Evaluation of disclosure controls and procedures.
 Changes in internal control over financial reporting.
  60




---



##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 6.
    
    Exhibits.
   61




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##### Table of Contents



CENTRAL FEDERAL CORPORATIONDated:  May 16, 2011
    By:
    /s/ Eloise L. MackusEloise L. Mackus, Esq.Chief Executive Officer, General
Counsel and Corporate Secretary Dated:  May 16, 2011
    By:
    /s/ Therese Ann LiutkusTherese Ann Liutkus, CPAPresident, Treasurer and Chief Financial Officer  62




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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 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
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