NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

The consolidated financial statements include Central Federal Corporation (the Holding Company) and its wholly owned subsidiaries, CFBank, Ghent Road, Inc., and Smith Ghent LLC (together with the Holding Company referred to as the Company). The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) and in compliance with U.S. generally accepted accounting principles (GAAP). Because this report is based on an interim period, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted.

In the opinion of the management of the Company, the accompanying unaudited interim consolidated financial statements include all adjustments necessary for a fair presentation of the Company’s financial condition and the results of operations for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed in this Form 10-Q. The financial performance reported for the Company for the three and six months ended June 30, 2013 is not necessarily indicative of the results that may be expected for the full year. This information should be read in conjunction with the Company’s latest Annual Report to Stockholders and Form 10-K. Reference is made to the accounting policies of the Company described in Note 1 of the Notes to Consolidated Financial Statements contained in the Company’s 2012 Annual Report that was filed as Exhibit 13.1 to the Company’s Form 10-K for the year ended December 31, 2012. The Company has consistently followed those policies in preparing this Form 10-Q.

Reclassifications and Reverse Stock Split: Some items in the prior period financial statements were reclassified to conform to the current presentation. Reclassifications did not impact prior period net loss or total stockholders' equity. On May 4, 2012, the Company completed a 1-for-5 reverse stock split, whereby every 5 shares of the Company’s common stock were reclassified into one share of common stock. All share and per share amounts for all periods presented have been adjusted to reflect the reverse split as though it had occurred prior to the earliest period presented.

Earnings (Loss) Per Common Share: The two-class method is used in the calculation of basic and diluted earnings per share. Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities (unvested share-based payment awards) according to dividends declared (or accumulated) and participation rights in undistributed earnings. The factors used in the earnings per share computation follow:



	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Basic
Net loss	$	(554)	$	(684)	$	(1,364)	$	(1,423)
Less: Preferred dividends and accretion of discount on preferred stock		-		(111)		-		(221)
Less: Net loss allocated to unvested share-based payment awards		-		3		-		6
Net loss allocated to common stockholders	$	(554)	$	(792)	$	(1,364)	$	(1,638)

Weighted average common shares outstanding including unvested share-based payment awards		15,823,677		825,491		15,823,869		825,469
Less: Unvested share-based payment awards		(133)		(2,700)		(299)		(3,000)
Average shares		15,823,544		822,791		15,823,570		822,469

Basic loss per common share	$	(0.04)	$	(0.96)	$	(0.09)	$	(1.99)

Diluted
Net loss allocated to common stockholders	$	(554)	$	(792)	$	(1,364)	$	(1,638)

Weighted average common shares outstanding for basic loss per common share		15,823,544		822,791		15,823,570		822,469
Add: Dilutive effects of assumed exercises of stock options		-		-		-		-
Add: Dilutive effects of assumed exercises of stock warrant		-		-		-		-
Average shares and dilutive potential common shares		15,823,544		822,791		15,823,570		822,469

Diluted loss per common share	$	(0.04)	$	(0.96)	$	(0.09)	$	(1.99)

The following stock options and warrant were not considered in computing diluted earnings (loss) per common share because the options or warrant were anti-dilutive or the Company reported a net loss for the periods presented.



	Three months ended June 30,		Six months ended June 30,
	2013	2012	2013	2012
Stock options	240,406	42,116	240,406	42,116
Stock warrant	-	67,314	-	67,314

Adoption of New Accounting Standards:

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220); Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The objective of this Update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this Update require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this ASU did not have a material impact on the Company, however, disclosures have been presented as part of notes to the financial statements.