8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 20, 2009

CENTRAL FEDERAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	0-25045	34-1877137
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2923 Smith Road, Fairlawn, Ohio	44333
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (330) 666-7979

Not Applicable

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On February 20, 2009, the registrant issued a press release announcing performance for the quarter and year ended December 31, 2008. A copy of the press release is included as Exhibit 99 to this report.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

99 Press release issued on February 20, 2009 announcing performance for the quarter and year ended December 31, 2008.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Central Federal Corporation
Date: February 20, 2009	By:	/s/ Therese Ann Liutkus
		Therese Ann Liutkus, CPA Treasurer and Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
99	Press release issued on February 20, 2009 announcing performance for the quarter and year ended December 31, 2008.

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EX-99

Exhibit 99

PRESS RELEASE

FOR IMMEDIATE RELEASE:		February 20, 2009
For Further Information:	Mark S. Allio, Chairman, President and CEO
	Phone: 330.576.1334
	Fax: 330.666.7959

CENTRAL FEDERAL CORPORATION ANNOUNCES 2008 EARNINGS

Fairlawn, Ohio — February 20, 2009 — Central Federal Corporation (Nasdaq: CFBK) announced that net income for the year ended December 31, 2008 increased $740,000 and totaled $723,000, or $.17 per diluted common share, compared to a net loss of $17,000, or $.00 per diluted common share, for the year ended December 31, 2007.

Net income for the quarter ended December 31, 2008 totaled $90,000, or $.01 per diluted common share, compared to net income of $297,000, or $.07 per diluted common share, for the quarter ended December 31, 2007.

Mark S. Allio, Chairman, President and CEO, commented, “Despite the recessionary economic environment and the near collapse of the credit markets in 2008, the Company was profitable. Our strategic plan to transition from a residentially focused savings and loan to a community and business bank has provided us the opportunity to conservatively expand our business based on a foundation of strong relationships with our clients. Our focus continues to be profitable growth through these relationships, with a watchful eye on credit quality and a strong stewardship of resources. The coming months will challenge us to continue that focus, with anticipated increased regulatory oversight, increased costs in areas such as FDIC insurance, and other operating costs associated with the current difficult financial environment.”

Highlights

• Net income increased $740,000 in 2008, compared to 2007.

• Net interest income increased $974,000, or 13%, in 2008 compared to 2007.

• Net interest margin improved to 3.35% in 2008, compared to 3.19% in 2007.

• The efficiency ratio improved to 80.75% in 2008, compared to 94.57% in 2007.

• The ratio of noninterest expense to average assets improved to 2.79% in 2008, compared to 3.08% in 2007.

• Deposit balances increased $13.3 million, or 6.9% in 2008.

• The Company issued $7.2 million of preferred stock under the U.S. Treasury Department’s Capital Purchase Program.

• CFBank continues to provide for loan losses in response to current economic conditions and their effect on the loan portfolio. The ratio of the allowance for loan losses to total loans totaled 1.32% at December 31, 2008, compared to 1.15% at December 31, 2007. Nonperforming loans totaled 1.02% of total loans at December 31, 2008, compared to 0.21% of total loans at December 31, 2007.

Net interest income

Net interest income increased $66,000, or 3.1%, to $2.2 million for the quarter ended December 31, 2008, compared to $2.1 million for the quarter ended December 31, 2007. The increase was primarily due to a decline in the average cost of interest-bearing liabilities to 3.20% in the fourth quarter of 2008, from 4.46% in the fourth quarter of 2007. The decline in the cost of interest-bearing liabilities resulted in a 29.3% decrease in interest expense. Interest income decreased 14.9% due to a decline in the average yield on interest-earning assets to 6.16% in the fourth quarter of 2008, from 7.27% in the fourth quarter of 2007.

During 2007, the management of CFBank, through its asset/liability strategies, positioned liabilities to be more sensitive to a reduction in short-term interest rates. The reductions in the Federal Funds rate, the prime rate and other market interest rates, beginning in September 2007 and continuing through December 2008, resulted in larger decreases in funding costs than in asset yields. The decline in funding costs positively impacted net interest margin in the year ended December 31, 2008. Net interest margin improved to 3.35% during the year ended December 31, 2008, from 3.19% during the year ended December 31, 2007. Due to the current historic low level of short term market rates, management has extended the terms of some liabilities to protect net interest margin should interest rates rise. However, future downward pressure on margins could occur should the contractual downward repricing on existing interest-earning assets be greater than the decrease in funding costs of interest-bearing liabilities.

Noninterest income

Noninterest income totaled $364,000 for the quarter ended December 31, 2008, compared to $149,000 for the quarter ended December 31, 2007. The increase in noninterest income was primarily due to an increase in service charges on deposit accounts associated with a third party payment processor. These accounts were active only during the fourth quarter of 2008. Because the accounts are no longer active, the increased income associated with these service charges will not continue. CFBank is currently investigating unusual return item activity with regard to the accounts. No losses have been incurred to date, but the investigation is on-going and the Company cannot at this time estimate whether any amounts may be at risk with regard to the accounts.

Noninterest income totaled $948,000 for the year ended December 31, 2008, compared to $728,000 for the year ended December 31, 2007. The increase in noninterest income was primarily due to an increase in service charges on deposit accounts, including the third party payment processor accounts referenced above, and gains on sales of securities, offset by lower net gains on sales of loans due to fewer mortgage loan originations.

Provision for loan losses

Provisions for loan losses are provided in relation to ascertainable credit risk information available on the loan portfolio, loan growth, portfolio composition, and current economic conditions and trends. The provision totaled $250,000 for the quarter ended December 31, 2008, compared to $104,000 for the quarter ended December 31, 2007. The provision totaled $917,000 for the year ended December 31, 2008, compared to $539,000 for the year ended December 31, 2007. The increase in the provision during 2008 was due to an increase in nonperforming loans and net loan charge-offs. The ratio of the allowance for loan losses to total loans was 1.32% at December 31, 2008 compared to 1.15% at December 31, 2007.

Nonperforming loans increased $1.9 million and totaled $2.4 million, or 1.02% of total loans, at December 31, 2008, compared to $488,000, or 0.21% of total loans, at December 31, 2007. The increase in nonperforming loans included: one commercial loan, totaling $646,000, and three multi-family loans to one borrower, totaling $1.3 million, which were past due and on nonaccrual status at December 31, 2008; and one commercial real estate loan totaling $347,000, which was 90 days past maturity and still accruing interest at December 31, 2008, as the borrower continues to make monthly payments on the loan. The amount of the allowance for loan losses specifically allocated to nonperforming loans totaled $514,000 at December 31, 2008. The Company believes that the remaining nonperforming loan balances are adequately secured by the underlying collateral at this time.

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Net charge-offs totaled $482,000, or 0.21% of average loans, in 2008, compared to net recoveries of $36,000, or .02% of average loans, in 2007. Net charge-offs in 2008 related to home equity lines of credit, single-family mortgages and auto loans.

The Company believes that the allowance for loan losses is adequate to absorb probable incurred credit losses in the loan portfolio at December 31, 2008. However, future additions to the allowance may be necessary based on factors such as changes in client business performance, economic conditions, and changes in real estate values. Management continues to diligently monitor credit quality in the existing portfolio and analyzes potential loan opportunities carefully in order to manage credit risk. The Company could experience an increase in loan losses should the economic conditions and factors which affect credit quality continue to worsen.

Noninterest expense

Noninterest expense for the quarter ended December 31, 2008 totaled $2.2 million, compared to $1.7 million in the prior year quarter. Current quarter expenses increased primarily due to increased occupancy and equipment expenses, professional fees and data processing costs. The increase in occupancy and equipment expenses was due to increased real estate taxes at the Worthington office and higher rent expense for additional space at the Fairlawn office. The increase in professional fees was due to legal fees associated with nonperforming loans and costs related to the evaluation of a potential new core processing system, which is tentatively planned for implementation in 2009. A new system would improve operational efficiency and support the requirements of our business banking strategy. Data processing expenses included costs associated with increased check clearing activity during the fourth quarter associated with the third party payment processor, which will not continue as described in the discussion of Noninterest Income. The ratio of noninterest expense to average assets was 3.13% for the fourth quarter of 2008, compared to 2.48% in the prior year quarter. The efficiency ratio was 85.89% for the quarter ended December 31, 2008, compared to 76.52% for the prior year quarter.

Noninterest expense totaled $7.7 million for the year ended December 31, 2008, compared to $8.0 million for 2007. The 2007 expense included $774,000 related to an arbitration loss and lease termination expense. The ratio of noninterest expense to average assets improved to 2.79% for the year ended December 31, 2008, compared to 3.08% in 2007. The efficiency ratio improved to 80.75% for the year ended December 31, 2008, compared to 94.57% in 2007.

Balance sheet activity

Assets totaled $277.8 million at December 31, 2008 and decreased $1.8 million, or 0.6%, from $279.6 million at December 31, 2007. The decrease in assets was due to the use of cash flows from the securities portfolio, which were not needed for loan growth, to repay borrowings.

Net loans totaled $233.9 million at December 31, 2008 and increased $3.4 million, or 1.5%, from $230.5 million at December 31, 2007. The increase in net loans was due to growth in the commercial, commercial real estate and multi-family loan portfolios, which totaled $181.8 million at December 31, 2008 and increased $7.9 million, or 4.5%, from $173.9 million at December 31, 2007. Originations of commercial, commercial real estate and multi-family loans totaled $33.9 million in 2008 and were offset by $32.9 million in payoffs on these loan types. Consumer loan balances decreased $1.8 million, or 6.4%, during 2008 primarily due to repayments on auto loans. Mortgage loan balances decreased $2.2 million, or 7.2%, during 2008 primarily due to prepayments.

Deposits totaled $207.6 million at December 31, 2008 and increased $13.3 million, or 6.9%, from $194.3 million at December 31, 2007. The increase in deposits was due to growth in certificate of deposit accounts, which increased $17.1 million during 2008. CFBank is a participant in the Certificate of Deposit Account Registry Service^® (CDARS) which allows the Bank to provide customers full FDIC insurance on certificate of deposit balances up to $50 million. Customer balances in the CDARS program increased $28.6 million during the year ended December 31, 2008.

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Federal Home Loan Bank (FHLB) advances totaled $29.1 million at December 31, 2008, a decrease of $20.4 million, or 41.3%, compared to $49.5 million at December 31, 2007. FHLB advances were repaid with funds from the increase in deposits and cash flows from the securities portfolio.

Shareholders’ equity totaled $33.1 million at December 31, 2008, a increase of $5.7 million, or 20.8%, compared to $27.4 million at December 31, 2007. The increase in shareholders’ equity was due to the issuance of $7.2 million of preferred stock to the U.S. Treasury Department under the Capital Purchase Program (which was part of the government’s Troubled Asset Relief Program), and current year net income, partially offset by the repurchase of 365,000 shares of CFBK stock, which totaled $1.6 million, and cash dividends paid to common shareholders, which totaled $843,000. The $7.2 million in proceeds from the sale of the preferred stock are currently held in short-term investments pending approval from regulators to contribute it as additional capital to CFBank, and pending the Company’s review of The American Recovery and Reinvestment Act of 2009, which was signed by President Obama on February 17, 2009. The Company will be analyzing the provisions of the new statute and considering whether to continue its participation in the Capital Purchase Program in light of the additional restrictions imposed under the new legislation.

About Central Federal Corporation and CFBank

Central Federal Corporation is the holding company for CFBank, a federally chartered savings association formed in Ohio in 1892. CFBank has four full-service banking offices in Fairlawn, Calcutta, Wellsville and Worthington, Ohio. Additional information about CFBank’s banking services and the Company is available at www.CFBankOnline.com.

Forward-Looking Information

Certain statements contained in this earnings release which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying those statements. Forward-looking statements involve risks and uncertainties. Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including: (i) changes in political, economic or other factors such as inflation rates, recessionary or expansive trends, and taxes; (ii) competitive pressures; (iii) fluctuations in interest rates; (iv) the level of defaults and prepayments on loans made by CFBank; (v) unanticipated litigation, claims or assessments; (vi) fluctuations in the cost of obtaining funds to make loans; and (vii) regulatory changes. Further information on these risk factors is included in the Company’s filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made to reflect unanticipated events.

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Consolidated Statements of Operations
($ in thousands, except share data)
(unaudited)

	Three months ended							Year ended
	December 31,							December 31,
	2008		2007		% change			2008			2007			% change
Total interest income	$	4,010	$	4,710		-15	%	$	16,637		$	17,523			-5	%
Total interest expense		1,844		2,610		-29	%		7,935			9,795			-19	%
Net interest income		2,166		2,100		3	%		8,702			7,728			13	%
Provision for loan losses		250		104		140	%		917			539			70	%
Net interest income after provision for loan losses		1,916		1,996		-4	%		7,785			7,189			8	%
Noninterest income
Service charges on deposit accounts		284		84		238	%		544			287			90	%
Net gain on sales of loans		29		26		12	%		159			233			-32	%
Net gain on sale of securities		—		—		n/m			54			—			n/m
Other		51		39		31	%		191			208			-8	%
Noninterest income		364		149		144	%		948			728			30	%
Noninterest expense
Salaries and employee benefits		1,022		970		5	%		4,058			4,601			-12	%
Occupancy and equipment		162		92		76	%		485			534			-9	%
Data processing		265		138		92	%		686			556			23	%
Franchise taxes		69		82		-16	%		308			293			5	%
Professional fees		233		64		264	%		558			358			56	%
Director fees		34		36		-6	%		136			148			-8	%
Postage, printing and supplies		32		30		7	%		159			162			-2	%
Advertising and promotion		6		27		-78	%		45			203			-78	%
Telephone		24		22		9	%		91			99			-8	%
Loan expenses		6		13		-54	%		20			23			-13	%
Foreclosed assets, net		7		8		-13	%		(3	)		(30	)		-90	%
Depreciation		165		154		7	%		683			619			10	%
Other		148		85		74	%		523			431			21	%
Noninterest expense		2,173		1,721		26	%		7,749			7,997			-3	%
Income (loss) before income taxes		107		424		n/m			984			(80	)		n/m
Income tax expense (benefit)		17		127		n/m			261			(63	)		n/m
Net income (loss)	$	90	$	297		n/m		$	723		$	(17	)		n/m
Net income (loss) available to common shareholders	$	61	$	297		n/m		$	694		$	(17	)		n/m
Share Data
Basic earnings per common share	$	0.01	$	0.07		n/m		$	0.17		$	—			n/m
Diluted earnings per common share	$	0.01	$	0.07		n/m		$	0.17		$	—			n/m
Cash dividends per common share	$	0.05	$	0.05				$	0.20		$	0.28
Average common shares outstanding — basic		4,078,409		4,421,255					4,200,504			4,467,750
Average common shares outstanding — diluted		4,080,082		4,421,255					4,202,070			4,467,750

n/m — not meaningful

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Consolidated Statements of Financial Condition
($ in thousands)
(unaudited)

	December 31,			September 30,			June 30,			March 31,			December 31,
	2008			2008			2008			2008			2007
Assets
Cash and cash equivalents	$	4,177		$	7,601		$	3,607		$	6,914		$	3,894
Securities available for sale		23,550			25,323			26,182			27,607			28,398
Loans held for sale		284			549			1,805			1,965			457
Loans
Mortgages		28,778			27,844			30,766			30,944			30,998
Commercial, commercial real estate and multi-family		181,818			180,191			176,696			169,649			173,916
Consumer		26,445			26,796			26,308			26,884			28,245
Total loans		237,041			234,831			233,770			227,477			233,159
Less allowance for loan losses		(3,119	)		(3,045	)		(2,947	)		(2,729	)		(2,684	)
Loans, net		233,922			231,786			230,823			224,748			230,475
Federal Home Loan Bank stock		2,109			2,109			2,081			2,054			1,963
Loan servicing rights		112			123			134			146			157
Foreclosed assets, net		—			—			123			—			86
Premises and equipment, net		5,246			5,304			5,404			5,544			5,717
Bank owned life insurance		3,892			3,863			3,832			3,798			3,769
Deferred tax asset		1,620			1,709			1,865			1,777			1,995
Accrued interest receivable and other assets		2,869			2,388			2,766			1,841			2,671
	$	277,781		$	280,755		$	278,622		$	276,394		$	279,582
Liabilities and Shareholders’ Equity
Deposits
Noninterest bearing	$	14,557		$	14,238		$	13,458		$	12,166		$	12,151
Interest bearing		193,090			195,189			185,485			174,192			182,157
Total deposits		207,647			209,427			198,943			186,358			194,308
Federal Home Loan Bank advances		29,050			38,200			46,775			55,150			49,450
Advances by borrowers for taxes and insurance		167			79			94			71			154
Accrued interest payable and other liabilities		2,687			2,064			1,689			2,109			3,136
Subordinated debentures		5,155			5,155			5,155			5,155			5,155
Total liabilities		244,706			254,925			252,656			248,843			252,203
Shareholders’ equity		33,075			25,830			25,966			27,551			27,379
	$	277,781		$	280,755		$	278,622		$	276,394		$	279,582

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Consolidated Financial Highlights
($ in thousands except per share data)
(unaudited)

	At or for the three months ended															At or for the year ended
	December 31,			September 30,			June 30,			March 31,			December 31,			December 31,
	2008			2008			2008			2008			2007			2008			2007
Earnings
Net interest income	$	2,166		$	2,273		$	2,219		$	2,044		$	2,100		$	8,702		$	7,728
Provision for loan losses	$	250		$	183		$	260		$	224		$	104		$	917		$	539
Noninterest income	$	364		$	176		$	217		$	191		$	149		$	948		$	728
Noninterest expense	$	2,173		$	1,864		$	1,866		$	1,846		$	1,721		$	7,749		$	7,997
Net income (loss)	$	90		$	285		$	224		$	124		$	297		$	723		$	(17	)
Net income (loss) available to common shareholders	$	61		$	285		$	224		$	124		$	297		$	694		$	(17	)
Basic earnings per common share	$	0.01		$	0.07		$	0.05		$	0.03		$	0.07		$	0.17		$	—
Diluted earnings per common share	$	0.01		$	0.07		$	0.05		$	0.03		$	0.07		$	0.17		$	—
Performance Ratios (annualized)
Return on average assets		0.13	%		0.41	%		0.32	%		0.18	%		0.43	%		0.26	%		(0.01	%)
Return on average equity		1.27	%		4.43	%		3.43	%		1.79	%		4.34	%		2.68	%		(0.06	%)
Average yield on interest-earning assets		6.16	%		6.36	%		6.33	%		6.77	%		7.27	%		6.41	%		7.23	%
Average rate paid on interest-bearing liabilities		3.20	%		3.17	%		3.20	%		3.96	%		4.46	%		3.38	%		4.50	%
Average interest rate spread		2.96	%		3.19	%		3.13	%		2.81	%		2.81	%		3.03	%		2.73	%
Net interest margin, fully taxable equivalent		3.33	%		3.47	%		3.43	%		3.18	%		3.24	%		3.35	%		3.19	%
Efficiency ratio		85.89	%		76.42	%		77.27	%		83.45	%		76.52	%		80.75	%		94.57	%
Noninterest expense to average assets		3.13	%		2.66	%		2.70	%		2.68	%		2.48	%		2.79	%		3.08	%
Capital
Equity to total assets at end of period		11.91	%		9.20	%		9.32	%		9.97	%		9.79	%		11.91	%		9.79	%
Tangible equity to tangible assets		11.91	%		9.20	%		9.32	%		9.97	%		9.79	%		11.91	%		9.79	%
Book value per common share	$	6.36		$	6.30		$	6.19		$	6.17		$	6.17		$	6.36		$	6.17
Tangible book value per common share	$	6.36		$	6.30		$	6.19		$	6.17		$	6.17		$	6.36		$	6.17
Period-end market value per common share	$	2.98		$	3.50		$	3.74		$	4.50		$	3.86		$	2.98		$	3.86
Dividends declared per common share	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05		$	0.20		$	0.28
Period-end common shares outstanding		4,101,537			4,102,662			4,192,662			4,467,662			4,434,787			4,101,537			4,434,787
Average basic common shares outstanding		4,078,409			4,082,000			4,298,000			4,429,487			4,421,255			4,200,504			4,467,750
Average diluted common shares outstanding		4,080,082			4,082,000			4,302,154			4,429,913			4,421,255			4,202,070			4,467,750
Asset Quality
Nonperforming loans	$	2,412		$	2,007		$	1,972		$	1,623		$	488		$	2,412		$	488
Nonperforming loans to total loans		1.02	%		0.85	%		0.84	%		0.71	%		0.21	%		1.02	%		0.21	%
Nonperforming assets to total assets		0.87	%		0.71	%		0.75	%		0.59	%		0.21	%		0.87	%		0.21	%
Allowance for loan losses to total loans		1.32	%		1.30	%		1.26	%		1.20	%		1.15	%		1.32	%		1.15	%
Allowance for loan losses to nonperforming loans		129.31	%		151.72	%		149.44	%		168.15	%		550.00	%		129.31	%		550.00	%
Net charge-offs (recoveries)	$	176		$	86		$	41		$	179		$	3		$	482		$	(36	)
Annualized net charge-offs (recoveries) to average loans		0.30	%		0.15	%		0.07	%		0.32	%		0.01	%		0.21	%		-0.02	%
Average Balances
Loans	$	233,245		$	233,444		$	229,051		$	226,893		$	227,943		$	230,658		$	209,070
Assets	$	277,561		$	280,093		$	276,438		$	275,811		$	277,094		$	277,476		$	259,586
Shareholders’ equity	$	28,296		$	25,729		$	26,133		$	27,677		$	27,363		$	26,959		$	28,052

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